<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 2, 1996
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------
COBBLESTONE GOLF GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 7997 954391248
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION
INCORPORATION OR NO.)
ORGANIZATION)
--------------
<TABLE>
<S> <C> <C>
Escondido Consulting,
Inc. California 95-4287458
Cobblestone Texas, Inc. Texas 33-0586820
Pecan Grove Golf Club,
Inc. Texas 76-0419898
Foothills Holding
Company, Inc. Nevada 33-0597846
Bellows Golf Group, Inc. Arizona 75-2321399
Carmel Mountain Ranch
Golf Club, Inc. California 33-0571226
OVLC Management Corp. California 33-0556136
OVLC Financial Corp. California 33-0556137
CSR Golf Group, Inc. Texas 75-2560373
Lakeway Golf Clubs, Inc. Texas 74-2738449
Woodcrest Golf Club,
Inc. Texas 75-2563494
</TABLE>
<TABLE>
<S> <C> <C>
Virginia Golf Country
Club, Inc. Virginia 54-1732348
Ocean Vista Land Company California 95-1968275
Golf Course Inns of
America, Inc. California 95-2582278
Oceanside Golf
Management Corp. California 33-0586045
Whispering Palms Country
Club Joint Venture California 95-6485317
Lakeway Clubs, Inc. Texas 74-2751365
The Liquor Club at Pecan
Grove, Inc. Texas 74-2062932
TGFC Corporation Texas 01-1766263
C-RHK, Inc. California 33-0677567
CEL Golf Group, Inc. Georgia 58-2192268
SWC Golf Club, Inc. Texas 76-0504558
</TABLE>
3702 VIA DE LA VALLE, SUITE 202
DEL MAR, CALIFORNIA 92014
(619) 794-2602
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
--------------
MR. JAMES A. HUSBAND
CHIEF EXECUTIVE OFFICER
COBBLESTONE HOLDINGS, INC.
3702 VIA DE LA VALLE, SUITE 202
DEL MAR, CALIFORNIA 92014
(619) 794-2602
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
--------------
Copies to:
ELIZABETH A. BLENDELL, ESQ.
ANDREW D. HUTTON, ESQ.
LATHAM & WATKINS
633 W. FIFTH STREET, SUITE 4000
LOS ANGELES, CALIFORNIA 90071
(213) 485-1234
--------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration
Statement.
If any of the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED MAXIMUM
PROPOSED MAXIMUM AGGREGATE
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER NOTE(1) PRICE(1) REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
11 1/2% Series B Senior Notes due
2003................................ $70,000,000 100% $70,000,000 $24,138
- ------------------------------------------------------------------------------------------------------
Subsidiary Guarantees of the 11 1/2%
Series B Senior Notes due 2003...... -- -- -- (2)
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457.
(2) Pursuant to Rule 457(n), no separate registration fee is payable with
respect to the subsidiary guarantees.
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>
CROSS REFERENCE SHEET
PURSUANT TO RULE 404(A) AND ITEM 501(B) OF REGULATION S-K
SHOWING LOCATION IN PROSPECTUS OF THE INFORMATION
REQUIRED BY PART I OF FORM S-4
<TABLE>
<C> <S> <C>
1. Forepart of Registration
Statement and Outside Front Outside Front Cover Page; Cross Reference
Cover Page of Prospectus... Sheet; Inside Front Cover Page
2. Inside Front and Outside
Back Cover Pages of Inside Front Cover Page; Outside Back Cover
Prospectus................. Page
3. Risk Factors, Ratio of
Earnings to Fixed Charges Prospectus Summary; Risk Factors; Selected
and Other Information...... Consolidated Financial Information
4. Terms of the Transaction.... The Exchange Offer; Certain Federal Income
Tax Consequences; Description of Notes
5. Pro Forma Financial
Information................ Consolidated Financial Statements
6. Material Contacts with the
Company Being Acquired..... Not Applicable
7. Additional Information
Required for Reoffering by
Persons and Parties Deemed
to be Underwriters......... Not Applicable
8. Interests of Named Experts
and Counsel................ Legal Matters
9. Disclosure of Commission
Position on Indemnification
for Securities Act
Liabilities................ Not Applicable
10. Information with Respect to
S-3 Registrants............ Not Applicable
11. Incorporation of Certain
Information by Reference... Not Applicable
12. Information with Respect to
S-2 or S-3 Registrants Not Applicable
13. Incorporation of Certain
Information by Reference... Not Applicable
14. Information with Respect to
Registrants Other Than S-3 Prospectus Summary; Consolidated
or S-2 Registrants......... Capitalization; Selected Consolidated
Financial Information; Management's
Discussion and Analysis of Financial
Condition and Results of Operations;
Business; Management; Certain
Relationships and Related Transactions;
Description of Notes
15. Information with Respect to
S-3 Companies.............. Not Applicable
16. Information with Respect to
S-2 or S-3 Companies....... Not Applicable
17. Information with Respect to
Companies Other Than S-2 or
S-3 Companies.............. Not Applicable
18. Information if Proxies,
Consents or Authorizations
are to be Solicited........ Not Applicable
19. Information if Proxies,
Consents or Authorizations
are not to be Solicited or Management; The Exchange Offer; Certain
in an Exchange Offer....... Relationships and Related Transactions
</TABLE>
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED AUGUST 2, 1996
PROSPECTUS
OFFER TO EXCHANGE
11 1/2% SERIES B SENIOR NOTES DUE 2003
FOR ALL OUTSTANDING 11 1/2% SERIES A SENIOR NOTES DUE 2003
OF
COBBLESTONE GOLF GROUP, INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M, NEW YORK CITY TIME ON , 1996
UNLESS EXTENDED.
-----------
Cobblestone Golf Group, Inc. ("Cobblestone" or the "Company") is hereby
offering (the "Exchange Offer"), upon the terms and subject to the conditions
set forth in this Prospectus and the accompanying Letter of Transmittal (the
"Letter of Transmittal"), to exchange $1,000 principal amount of its 11 1/2%
Series B Senior Notes due 2003 (the "Exchange Notes"), which exchange has been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
pursuant to a registration statement of which this Prospectus is a part (the
"Registration Statement"), for each $1,000 principal amount of its outstanding
11 1/2% Series A Senior Notes due 2003 (the "Private Notes"), of which
$70,000,000 in aggregate principal amount was issued on June 4, 1996 and is
outstanding as of the date hereof. The form and terms of the Exchange Notes are
the same as the form and terms of the Private Notes except that (i) the
exchange will have been registered under the Securities Act, and, therefore,
the Exchange Notes will not bear legends restricting the transfer thereof and
(ii) holders of the Exchange Notes will not be entitled to certain rights of
holders of the Private Notes under the Registration Rights Agreement (as
defined), which rights will terminate upon the consummation of the Exchange
Offer. The Exchange Notes will evidence the same indebtedness as the Private
Notes (which they replace) and will be entitled to the benefits of an indenture
dated as of June 4, 1996 governing the Private Notes and the Exchange Notes.
The Private Notes and the Exchange Notes are sometimes referred to herein
collectively as the "Notes." See "The Exchange Offer" and "Description of
Notes."
The Exchange Notes will bear interest at the same rate and on the same terms
as the Private Notes. Consequently, the Exchange Notes will bear interest at
the rate of 11 1/2% per annum and the interest thereon will be payable semi-
annually in arrears on June 1 and December 1 of each year, commencing December
1, 1996. The Exchange Notes will bear interest from and including the date of
issuance of the Private Notes (June 4, 1996). Holders whose Private Notes are
accepted for exchange will be deemed to have waived the right to receive any
interest accrued on the Private Notes.
-----------
SEE "RISK FACTORS" BEGINNING ON PAGE 14 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH THE EXCHANGE OFFER AND AN
INVESTMENT IN THE EXCHANGE NOTES.
-----------
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 COMPANY WILL ACCEPT FOR EXCHANGE ANY AND ALL VALIDLY
TENDERED PRIVATE NOTES NOT WITHDRAWN PRIOR TO 5:00 P.M.,
NEW YORK CITY TIME, ON , 1996, UNLESS THE EXCHANGE
OFFER IS EXTENDED BY THE COMPANY IN ITS SOLE DISCRETION
(THE "EXPIRATION DATE"). TENDERS OF PRIVATE NOTES MAY
BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK
CITY TIME, ON THE EXPIRATION DATE. THE EXCHANGE OFFER
IS NOT CONDITIONED UPON ANY MINIMUM PRINCIPAL AMOUNT
OF PRIVATE NOTES BEING TENDERED FOR EXCHANGE. PRIVATE
NOTES MAY BE TENDERED ONLY IN INTEGRAL MULTIPLES OF
$1,000. IN THE EVENT THE COMPANY TERMINATES THE
EXCHANGE OFFER AND DOES NOT ACCEPT FOR EXCHANGE ANY
PRIVATE NOTES, THE COMPANY WILL PROMPTLY RETURN
ALL PREVIOUSLY TENDERED PRIVATE NOTES TO THE
HOLDERS THEREOF.
-----------
The date of this Prospectus is , 1996.
<PAGE>
The Exchange Notes will be senior unsecured general obligations of the
Company and will rank pari passu in right of payment to all other senior
indebtedness of the Company, including borrowings under the New Credit
Facility (as defined). The Exchange Notes will be effectively subordinated to
any secured indebtedness of the Company to the extent of any collateral
therefor. The New Credit Facility is secured by substantially all of the
Company's assets, including the capital stock of the Company's existing and
future Subsidiaries (as defined), and is guaranteed by Holdings and such
Subsidiaries, which guarantees are secured by substantially all of Holdings'
and such Subsidiaries' assets. The Exchange Notes will be guaranteed (the
"Guarantees") by all of the Company's existing and future Subsidiaries (the
"Guarantors"). The Guarantees will be senior unsecured general obligations of
the Guarantors and will rank pari passu in right of payment to all other
senior indebtedness of the Guarantor's, including the Guarantor's guarantees
of borrowings under the New Credit Facility. As of March 31, 1996, on a pro
forma basis after giving effect to the Offerings (as defined) and the
application of the net proceeds therefrom (including trade payables and
capitalized lease obligations), the Company and the Guarantors on a
consolidated basis would have outstanding approximately $90.5 million of
senior indebtedness (including trade payables and capitalized lease
obligations), approximately $7.3 million of which would have been secured
indebtedness. The Indenture (as defined) permits the Company and its
Subsidiaries to incur additional indebtedness, including senior and secured
indebtedness, subject to certain limitations. See "Description of Notes."
On or after June 1, 1999, the Company may redeem the Exchange Notes, in
whole or in part, at the redemption prices set forth herein, plus Liquidated
Damages (as defined), if any, to the date of redemption. Notwithstanding the
foregoing, at any time on or before June 1, 1999, the Company may, at its
option and subject to certain requirements, use the net cash proceeds from one
or more Public Equity Offerings or issuances of Qualified Capital Stock to
Strategic Investors (each as defined) to redeem all of the Exchange Notes
originally issued at a redemption price equal to 110.5% of the principal
amount thereof, plus Liquidated Damages, if any, to the date of redemption. In
addition, upon a Change of Control (as defined), each holder of Exchange Notes
will have the right to require the Company to repurchase all or any part of
such Holder's Exchange Notes at a price equal to 101% of the principal amount
thereof, plus Liquidated Damages, if any, to the date of purchase.
Based on an interpretation by the staff of the Securities and Exchange
Commission (the "Commission") set forth in no-action letters issued to third
parties, the Company believes that the Exchange Notes issued pursuant to the
Exchange Offer in exchange for Private Notes may be offered for resale, resold
and otherwise transferred by a holder thereof (other than (i) a broker-dealer
who purchases such Exchange Notes directly from the Company to resell pursuant
to Rule 144A or any other available exemption under the Securities Act or (ii)
a person that is an affiliate of the Company within the meaning of Rule 405
under the Securities Act), without compliance with the registration and
prospectus delivery provisions of the Securities Act; provided that the holder
is acquiring the Exchange Notes in the ordinary course of its business and is
not participating, and had no arrangement or understanding with any person to
participate, in the distribution of the Exchange Notes. Holders of Private
Notes wishing to accept the Exchange Offer must represent to the Company, as
required by the Registration Rights Agreement, that such conditions have been
met. Each broker-dealer that receives Exchange Notes for its own account in
exchange for Private Notes, where such Private Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. The Company believes that none of the
registered holders of the Private Notes is an affiliate (as such term is
defined in Rule 405 under the Securities Act) of the Company.
Prior to the Exchange Offer, there has been no public market for the Notes.
The Company does not intend to list the Notes on any securities exchange or to
seek approval for quotation through any automated quotation system. There can
be no assurance that an active market for the Notes will develop. To the
extent that a market for the Notes does develop, the market value of the Notes
will depend on market conditions (such as yields on alternative investments),
general economic conditions, the Company's financial condition and certain
other factors. Such conditions might cause the Notes, to the extent that they
are traded, to trade at a significant discount from face value. See "Risk
Factors--Absence of Public Market."
2
<PAGE>
Each broker-dealer that receives Exchange Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. The Letter of Transmittal
states that by so acknowledging and by delivering a prospectus, a broker-
dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for Private Notes where
such Private Notes were acquired by such broker-dealer as a result of market-
making activities or other trading activities. The Company has indicated its
intention to make this Prospectus (as it may be amended or supplemented)
available to any broker-dealer for use in connection with any such resale for
a period of 180 days after the Expiration Date. See "Plan of Distribution."
The Company will not receive any proceeds from, and has agreed to bear the
expenses of, the Exchange Offer. No underwriter is being used in connection
with this Exchange Offer.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF PRIVATE NOTES IN ANY JURISDICTION IN
WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
NO PERSON IS AUTHORIZED IN CONNECTION WITH THE EXCHANGE OFFER TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS OR
THE ACCOMPANYING LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS OR THE
ACCOMPANYING LETTER OF TRANSMITTAL, NOR ANY EXCHANGE MADE HEREUNDER SHALL
UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
UNTIL , 1996 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
OFFERING TRANSACTIONS IN THE EXCHANGE NOTES, WHETHER OR NOT PARTICIPATING IN
THE EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A PROSPECTUS IN CONNECTION
THEREWITH. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
The Exchange Notes will be available initially only in book-entry form. The
Company expects that the Exchange Notes issued pursuant to the Exchange Offer
will be issued in the form of one or more fully registered global notes that
will be deposited with, or on behalf of, the Depository Trust Company ("DTC"
or the "Depositary") and registered in its name or in the name of Cede & Co.,
as its nominee. Beneficial interests in the global note representing the
Exchange Notes will be shown on, and transfers thereof will be effected only
through, records maintained by the Depositary and its participants. After the
initial issuance of such global note, Exchange Notes in certificated form will
be issued in exchange for the global note only in accordance with the terms
and conditions set forth in the Indenture. See "Description of Notes--Book
Entry, Delivery and Form."
----------------
3
<PAGE>
SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial data, including
the financial statements and notes thereto, included elsewhere in this
Prospectus. Market data used throughout this Prospectus were obtained from
internal Company surveys and industry publications, including publications by
the National Golf Foundation, a non-profit industry organization ("NGF"). The
industry publications consulted generally indicate that the information
contained therein has been obtained from sources believed to be reliable, but
the accuracy and completeness of such information is not guaranteed. The
Company has not independently verified this market data. Similarly, internal
Company surveys, while believed by the Company to be reliable, have not been
verified by any independent sources. Unless otherwise stated in this Prospectus
or the context otherwise requires, references to "Holdings" include Cobblestone
Holdings, Inc., the Company, and each of the Company's Subsidiaries and
references to the "Company" include the Company and each of its Subsidiaries.
Unless otherwise indicated, references to a fiscal year mean the twelve months
ended September 30 of the year indicated.
THE COMPANY
Cobblestone is one of the leading golf course owners and operators in the
United States, with a current portfolio of 22 golf properties including both
private country clubs and public (or daily fee) courses. The Company's courses
are concentrated in clusters near metropolitan areas in the Sunbelt states
(including Arizona, California and Texas) which have large golfing populations
and attractive climates. This clustering strategy enables the Company to
efficiently manage its portfolio of courses and improve the profitability of
its courses by sharing many administrative functions and capitalizing on joint
marketing opportunities and economies of scale.
The Company's business consists primarily of operating golf courses and
related facilities, with revenue generated from initiation fees and membership
dues at private country clubs, greens fees, food and beverage concessions, golf
cart rentals, retail merchandise sales, driving range fees and lodging fees.
The Company owns and operates 16 courses, leases four courses (subject to long-
term leases in excess of 20 years, including extension options), leases one
driving range and pro shop facility and manages one additional course. The
Company's portfolio includes nine private country clubs, eight public
facilities and five semi-private facilities.
There are approximately 15,000 golf courses in the United States, which
generate approximately $15 billion in annual revenue. The ownership and
operation of golf courses in the United States is highly fragmented, with less
than 5% of golf courses owned and operated by multi-course management
companies. The Company believes that the majority of golf course operators,
including real estate developers and municipalities, are generally involved in
golf course management because the golf course is an important component of
their development or community, but that such operators frequently do not have
professional golf course management experience. As a result, owners are often
interested in selling the golf facilities to third-party operators such as the
Company. These owners frequently place significant emphasis on experience and
reputation for quality management in selecting an owner/operator, and the
Company believes that its reputation in these areas has provided it with a
steady supply of attractive acquisition opportunities.
The Company believes certain demographic characteristics of the United States
will increase the demand for golf in the future, thereby benefitting golf
course operators. The Company believes that total rounds played will increase
as the golfing population ages. The highest golf participation rates are found
among individuals aged 18 to 49, which had average participation rates of
approximately 13.6% in 1995, as compared to 11.6% for the population as a
whole. However, individuals over 50 played a substantially greater number of
rounds of golf per year relative to individuals in younger age brackets.
Accordingly, assuming that golf participation rates remain at current levels,
the Company believes that these 18 to 49 year old golfers will increase the
number of rounds played per year as they age. See "Risk Factors--Factors
Affecting Golf Participation" and "Business--
4
<PAGE>
Industry Overview." The Company believes that, despite recent golf course
construction in some of its markets, golf course construction in its markets
generally has been constrained as a result of several factors, including the
lack of capital available for real estate development, the significant land
required to build a golf course and related facilities (approximately 150
acres) and increasing environmental regulation, particularly with regard to the
availability of water in Arizona and California, two of the Company's primary
markets.
The Company's strategy is to grow its revenue and cash flows by (i)
continuing to improve the financial performance of its existing courses and
(ii) acquiring courses located in attractive markets which management believes
will benefit from the Company's golf course management expertise. Key elements
of the Company's operating strategy include:
. INCREASING MEMBERSHIP REVENUES/IMPROVING UTILIZATION OF THE
FACILITIES. The Company increases its golf-related revenue through
several means, including (i) increasing membership through aggressive
marketing and innovative membership programs, (ii) raising membership
dues and greens fees to market levels, (iii) implementing premium prices
for prime time play and discounting prices for less utilized times (e.g.,
twilight play), (iv) starting golfers on both the first and tenth tee
simultaneously, thereby increasing the number of rounds played per day
and (v) booking tournaments into less popular time slots. At its private
courses, the Company positions the golf course and related facilities as
an integral social center of the surrounding community in order to
attract non-golfing members. The Company frequently offers a number of
ancillary services in an effort to appeal to every member of the
household, such as meeting, tennis and fitness facilities for those who
do not play golf.
. CONTROLLING OPERATING COSTS. As its golf course portfolio has grown, the
Company has improved its cash flow margins by consolidating
administrative functions, capitalizing on its increased buying power and,
within clusters, sharing certain services and capital equipment. In
addition, the Company closely monitors its course level operations in
order to manage expenses.
. UPGRADING GOLF COURSE AND RELATED FACILITIES. Following its acquisition
of a golf course, the Company generally upgrades or improves a facility
in order to enhance its appeal to customers and members and to generate
additional revenues and cash flow. Where appropriate, the Company adds
additional courses (including nine hole additions) to existing facilities
to increase capacity and invests in major clubhouse renovations to
support increased dues and fees. These expenditures are generally non-
recurring. In addition, the Company implements strategic capital
expenditure programs which enable it to reduce course level operating
costs and improve the efficiency of the operations, such as improving the
irrigation system and acquiring more efficient maintenance equipment.
. APPEAL TO CORE GOLFING POPULATION. The Company targets core golfers
(defined by the NGF to be golfers who play more than eight rounds per
year). These golfers represent approximately 46% of the golfers in the
United States but play approximately 87% of the total rounds. The Company
believes that core golfers represent a stable demand for golf and are
generally more willing to make a significant investment in a golf club
membership and pay higher greens fees than the golfing population as a
whole. These golfers also tend to spend more time at a golf facility and
therefore generate higher ancillary revenues.
Key elements of the Company's acquisition strategy include:
. CLUSTERING OF COURSES. The Company seeks to acquire golf courses in
clusters near densely populated metropolitan markets. This strategy
enables the Company to more efficiently manage its portfolio of courses
and to improve the profitability of its courses by sharing many
administrative expenses and capital equipment and by capitalizing on
joint marketing opportunities and economies of scale.
. FOCUS ON PRIVATE COUNTRY CLUBS AND HIGH-END DAILY FEE COURSES. The
Company focuses on acquiring private country clubs and high-end daily fee
courses which attract core golfers in middle and
5
<PAGE>
upper income brackets who are less price sensitive than the typical public
course player. Revenue and cash flows of private country clubs are
generally more stable and predictable than those of public courses because
the receipt of membership dues is independent of the level of course
utilization. In addition, private courses have an easily identifiable
target population which permits a highly-focused marketing effort,
particularly if the course is part of a larger residential development.
The Company's daily fee courses typically command higher greens fees than
the average municipal course in its markets and provide the golfer a
higher level of service and better playing conditions than do standard
municipal courses.
. REPUTATION WITH REAL ESTATE DEVELOPERS. The Company has focused on
acquiring courses from developers who have built golf courses primarily
as an enhancement to their residential real estate developments. The
Company believes that its experience and reputation for quality
management provide it with a steady supply of attractive acquisition
opportunities from developers seeking third party owner/operators to
professionally manage the facilities.
. FOCUS ON FAVORABLE GOLF MARKETS. The Company targets golf courses in
markets with characteristics which it believes are favorable to golf
course ownership and management. For example, the Company concentrates on
acquiring courses convenient to metropolitan areas with dense populations
but with relatively few golf courses in relation to the size of the
golfing population. In addition, the Company focuses on markets with a
high number of playable days per year, enabling the Company to maximize
revenue and course utilization and thereby capitalize on the operating
leverage inherent in golf course management.
CORPORATE BACKGROUND
The Company is a wholly-owned subsidiary of Cobblestone Holdings, Inc.
("Holdings"). The Company was formed in 1992 by Brentwood Golf Partners, L.P.
(the "Partnership"), a partnership organized by Brentwood Associates
("Brentwood"), and James A. Husband, to build a leading golf course ownership
and management company. In its approximately four years of operation, the
Company has become one of the leading golf course management companies in the
United States. Mr. Husband, the Company's President and Chief Executive
Officer, has more than 20 years experience in the golf industry, and prior to
joining the Company, had been Chairman and Chief Executive Officer of GolfCorp.
(a subsidiary of Club Corporation International), which he founded and built
into one of the largest public-course management companies in the United
States.
Founded in 1972, Brentwood is a private investment firm specializing in
private equity and growth-oriented venture capital investments. Other than the
Partnership, Holdings' stockholders include The Northwestern Mutual Life
Insurance Company and Wilmington Interstate Corporation, an indirect wholly-
owned subsidiary of The Hillman Company.
The Company is incorporated in Delaware; its executive offices are located at
3702 Via de la Valle, Suite 202, Del Mar, California, 92014; and its telephone
number is (619) 794-2602.
6
<PAGE>
THE EXCHANGE OFFER
The Exchange Offer.......... The Company is hereby offering to exchange $1,000
principal amount of Exchange Notes for each
$1,000 principal amount of Private Notes that are
properly tendered and accepted. The Company will
issue Exchange Notes on or promptly after the
Expiration Date. As of the date hereof, there is
$70,000,000 aggregate principal amount of Private
Notes outstanding. See "The Exchange Offer."
Based on an interpretation by the staff of the
Commission set forth in no-action letters issued
to third parties, the Company believes that the
Exchange Notes issued pursuant to the Exchange
Offer in exchange for Private Notes may be
offered for resale, resold and otherwise
transferred by a holder thereof (other than (i) a
broker-dealer who purchases such Exchange Notes
directly from the Company to resell pursuant to
Rule 144A or any other available exemption under
the Securities Act or (ii) a person that is an
affiliate of the Company within the meaning of
Rule 405 under the Securities Act), without
compliance with the registration and prospectus
delivery provisions of the Securities Act;
provided that the holder is acquiring Exchange
Notes in the ordinary course of its business and
is not participating, and had no arrangement or
understanding with any person to participate, in
the distribution of the Exchange Notes. Each
broker-dealer that receives Exchange Notes for
its own account in exchange for Private Notes,
where such Private Notes were acquired by such
broker-dealer as a result of market-making
activities or other trading activities, must
acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange
Notes. See "The Exchange Offer--Resale of the
Exchange Notes."
Registration Rights The Private Notes were sold by the Company on
Agreement................... June 4, 1996 to Donaldson, Lufkin & Jenrette
Securities Corporation and BA Securities, Inc.
(the "Initial Purchasers") pursuant to a Purchase
Agreement, dated May 29, 1996, by and among the
Company and the Initial Purchasers (the "Purchase
Agreement"). Pursuant to the Purchase Agreement,
the Company and the Initial Purchasers entered
into a Registration Rights Agreement, dated as of
May 29, 1996 (the "Registration Rights
Agreement"), which grants the holders of the
Private Notes certain exchange and registration
rights. The Exchange Offer is intended to satisfy
such rights, which will terminate upon the
consummation of the Exchange Offer. The holders
of the Exchange Notes will not be entitled to any
exchange or registration rights with respect to
the Exchange Notes. See "The Exchange Offer--
Termination of Certain Rights."
Expiration Date............. The Exchange Offer will expire at 5:00 p.m., New
York City time, on , 1996, unless the Exchange
Offer is extended by the Company in its sole
discretion, in which case the term "Expiration
Date" shall mean the latest date and time to
which the Exchange
7
<PAGE>
Offer is extended. See "The Exchange Offer--
Expiration Date; Extensions; Amendments."
Accrued Interest on the
Exchange Notes and the The Exchange Notes will bear interest from and
Private Notes............... including the date of issuance of the Private
Notes (June 4, 1996). Holders whose Private Notes
are accepted for exchange will be deemed to have
waived the right to receive any interest accrued
on the Private Notes. See "The Exchange Offer--
Interest on the Exchange Notes."
Conditions to the Exchange The Exchange Offer is subject to certain
Offer....................... customary conditions that may be waived by the
Company. The Exchange Offer is not conditioned
upon any minimum aggregate principal amount of
Private Notes being tendered for exchange. See
"The Exchange Offer--Conditions."
Procedures for Tendering
Private Notes..............
Each holder of Private Notes wishing to accept
the Exchange Offer must complete, sign and date
the Letter of Transmittal, or a facsimile
thereof, in accordance with the instructions
contained herein and therein, and mail or
otherwise deliver such Letter of Transmittal, or
such facsimile, together with such Private Notes
and any other required documentation to Norwest
Bank Minnesota, National Association, as exchange
agent (the "Exchange Agent"), at the address set
forth herein. By executing the Letter of
Transmittal, the holder will represent to and
agree with the Company that, among other things,
(i) the Exchange Notes to be acquired by such
holder of Private Notes in connection with the
Exchange Offer are being acquired by such holder
in the ordinary course of its business, (ii) such
holder has no arrangement or understanding with
any person to participate in a distribution of
the Exchange Notes, (iii) that if such holder is
a broker-dealer registered under the Exchange Act
or is participating in the Exchange Offer for the
purposes of distributing the Exchange Notes, such
holder will comply with the registration and
prospectus delivery requirements of the
Securities Act in connection with a secondary
resale transaction of the Exchange Notes acquired
by such person and cannot rely on the position of
the staff of the Commission set forth in no-
action letters (see "The Exchange Offer--Resale
of Exchange Notes"), (iv) such holder understands
that a secondary resale transaction described in
clause (iii) above and any resales of Exchange
Notes obtained by such holder in exchange for
Private Notes acquired by such holder directly
from the Company should be covered by an
effective registration statement containing the
selling securityholder information required by
Item 507 or Item 508, as applicable, of
Regulation S-K of the Commission and (v) such
holder is not an "affiliate," as defined in Rule
405 under the Securities Act, of the Company. If
the holder is a broker-dealer that will receive
Exchange Notes for its own account in exchange
for Private Notes that were acquired as a result
of market-making activities or other trading
activities, such holder will be required to
8
<PAGE>
acknowledge in the Letter of Transmittal that
such holder will deliver a prospectus in
connection with any resale of such Exchange
Notes; however, by so acknowledging and by
delivering a prospectus, such holder will not be
deemed to admit that it is an "underwriter"
within the meaning of the Securities Act. See
"The Exchange Offer--Procedures for Tendering."
Special Procedures for
Beneficial Owners.......... Any beneficial owner whose Private Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee
and who wishes to tender such Private Notes in
the Exchange Offer should contact such registered
holder promptly and instruct such registered
holder to tender on such beneficial owner's
behalf. If such beneficial owner wishes to tender
on such owner's own behalf, such owner must,
prior to completing and executing the Letter of
Transmittal and delivering such owner's Private
Notes, either make appropriate arrangements to
register ownership of the Private Notes in such
owner's name or obtain a properly completed bond
power from the registered holder. The transfer of
registered ownership may take considerable time
and may not be able to be completed prior to the
Expiration Date. See "The Exchange Offer--
Procedures for Tendering."
Guaranteed Delivery Holders of Private Notes who wish to tender their
Procedures.................. Private Notes and whose Private Notes are not
immediately available or who cannot deliver their
Private Notes, the Letter of Transmittal or any
other documentation required by the Letter of
Transmittal to the Exchange Agent prior to the
Expiration Date must tender their Private Notes
according to the guaranteed delivery procedures
set forth under "The Exchange Offer--Guaranteed
Delivery Procedures."
Acceptance of the Private
Notes and Delivery of the Subject to the satisfaction or waiver of the
Exchange Notes............. conditions to the Exchange Offer, Holdings will
accept for exchange any and all Private Notes
that are properly tendered in the Exchange Offer
prior to the Expiration Date. The Exchange Notes
issued pursuant to the Exchange Offer will be
delivered on the earliest practicable date
following the Expiration Date. See "The Exchange
Offer--Terms of the Exchange Offer."
Withdrawal Rights........... Tenders of Private Notes may be withdrawn at any
time prior to the Expiration Date. See "The
Exchange Offer--Withdrawal of Tenders."
Certain Federal Income Tax
Considerations............. The exchange of Private Notes for Exchange Notes
will be treated as a "non-event" for federal
income tax purposes because the Exchange Notes
will not be considered to differ materially in
kind or extent from the Private Notes. As a
result, no material federal income tax
consequences will result to holders exchanging
Private Notes for Exchange Notes. See "Certain
Federal Income Tax Considerations."
Exchange Agent.............. Norwest Bank Minnesota, National Association is
serving as the Exchange Agent in connection with
the Exchange Offer.
9
<PAGE>
THE EXCHANGE NOTES
The Exchange Offer applies to the entire aggregate principal amount of the
Private Notes. The form and terms of the Exchange Notes are the same as the
form and terms of the Private Notes except that (i) the exchange will have been
registered under the Securities Act and, therefore, the Exchange Notes will not
bear legends restricting the transfer thereof and (ii) holders of the Exchange
Notes will not be entitled to certain rights of holders of the Private Notes
under the Registration Rights Agreement, which rights will terminate upon
consummation of the Exchange Offer. The Exchange Notes will evidence the same
indebtedness as the Private Notes (which they replace) and will be issued
under, and be entitled to the benefits of, the Indenture. For further
information and for definitions of certain capitalized terms used below, see
"Description of Notes."
Maturity Date............... June 1, 2003.
Interest Payment Dates...... June 1 and December 1 of each year, commencing
December 1, 1996.
Optional Redemption......... On or after June 1, 1999, the Company may redeem
the Exchange Notes, in whole or in part, at the
redemption prices set forth herein, plus accrued
and unpaid interest and Liquidated Damages, if
any, to the date of redemption. Notwithstanding
the foregoing, at any time on or before June 1,
1999, the Company may, at its option and subject
to certain requirements, use the net cash pro-
ceeds from one or more Public Equity Offerings or
issuances of Qualified Capital Stock to Strategic
Investors to redeem up to an aggregate 25% of the
principal amount of the Exchange Notes originally
issued, at a redemption price equal to 110.5% of
the principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages, if any,
to the date of redemption. See "Description of
Notes--Optional Redemption."
Change of Control........... Upon a Change of Control, each holder of Exchange
Notes will have the right to require the Company
to repurchase all or any part of such holder's
Exchange Notes at a price equal to 101% of the
principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages, if any, to the
date of purchase. There can be no assurance that
the Company will have the financial resources
necessary to repurchase the Exchange Notes upon a
Change of Control.
Guarantees.................. The Exchange Notes will be guaranteed on a senior
unsecured basis by each of the Guarantors. The
Guarantees will rank pari passu to the Guaran-
tors' guarantees of the New Credit Facility.
Ranking..................... The Exchange Notes will be senior unsecured gen-
eral obligations of the Company and will rank
pari passu in right of payment to all other se-
nior indebtedness of the Company, including
borrowings under the New Credit Facility. The Ex-
change Notes will be effectively subordinated to
any secured indebtedness of the Company to the
extent of any collateral therefor. The New Credit
Facility is secured by substantially all of the
Company's assets, including the capital stock of
the Company's existing and future Subsidiaries,
10
<PAGE>
and is guaranteed by Holdings and such Subsidiar-
ies, which guarantees are secured by substan-
tially all of Holdings' and such Subsidiaries'
assets. The Guarantees will be senior unsecured
general obligations of the Guarantors and will
rank pari passu in the right of payment to all
other senior indebtedness of the Guarantors, in-
cluding the Guarantor's guarantees of borrowings
under the New Credit Facility. As of March 31,
1996, on a pro forma basis after giving effect to
the Offerings and the application of the net pro-
ceeds therefrom, the Company and the Guarantors
on a consolidated basis would have had outstand-
ing approximately $90.5 million of senior indebt-
edness (including trade payables and capitalized
lease obligations), approximately $7.3 million of
which would have been secured indebtedness. The
Indenture permits the Company and its Subsidiar-
ies to incur additional indebtedness, including
senior and secured indebtedness, subject to cer-
tain limitations.
Certain Covenants...........
The Indenture contains covenants that will, among
other things, limit the ability of the Company
and its Subsidiaries to (i) make restricted pay-
ments, (ii) incur additional indebtedness and is-
sue disqualified capital stock, (iii) create
liens, (iv) enter into agreements that would re-
strict the Subsidiaries' ability to make distri-
butions, loans and other payments to the Company,
(v) enter into consolidations or mergers or sell
all, or substantially all, of their assets,
(vi) make asset sales and (vii) enter into trans-
actions with affiliates. See "Description of
Notes--Certain Covenants."
RISK FACTORS
See "Risk Factors" for a discussion of certain factors that should be
considered by holders of the Private Notes in evaluating the Exchange Offer.
11
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS)
The consolidated financial data set forth below with respect to the Company's
statements of operations for each of the years in the three-year period ended
September 30, 1995 are derived from the consolidated financial statements that
have been audited by Ernst & Young LLP, independent auditors, which are
included elsewhere in this Prospectus. The statement of operations data for the
six months ended March 31, 1995 and 1996 and the balance sheet data at March
31, 1996 are derived from unaudited financial statements which contain all
adjustments, consisting only of normal recurring adjustments, which the Company
considers necessary for a fair presentation of the financial position and
results of operations for such periods. Operating results for the six months
ended March 31, 1996 are not necessarily indicative of the results that are
expected for the entire year ended September 30, 1996. The selected financial
data set forth below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Company's financial statements and notes thereto included herein.
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS
SEPTEMBER 30, ENDED MARCH 31,
-------------------------- ------------------
1993 1994 1995 1995 1996
------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA(1):
Operating revenues............ $ 6,507 $24,893 $ 49,863 $ 16,969 $ 27,007
Course-level operating
expenses(2).................. 4,184 16,818 34,427 11,860 19,085
General and administrative
expenses..................... 1,620 1,997 2,517 1,160 1,724
Depreciation and amortization
expense...................... 825 3,469 6,145 2,405 3,518
------- ------- -------- -------- --------
Income (loss) from
operations................... (122) 2,609 6,774 1,544 2,680
Interest expense, net......... (530) (3,515) (8,019) (3,206) (5,118)
Gain on insurance settlement.. -- -- 747 -- --
Minority interest............. (195) -- -- -- --
------- ------- -------- -------- --------
Loss before income taxes and
extraordinary item........... (847) (906) (498) (1,662) (2,438)
Provision for income taxes.... 6 72 208 27 24
------- ------- -------- -------- --------
Loss before extraordinary
item......................... (853) (978) (706) (1,689) (2,462)
Extraordinary item............ -- (428) -- -- --
------- ------- -------- -------- --------
Net loss...................... $ (853) $(1,406) $ (706) $ (1,689) $ (2,462)
======= ======= ======== ======== ========
OTHER OPERATING DATA:
EBITDA(3)..................... $ 703 $ 6,078 $ 12,919 $ 3,949 $ 6,198
Golf facility investments(4).. 41,212 34,623 55,643 46,886 3,960
Cumulative golf facility
investments(5)............... 41,212 75,835 131,478 122,721 135,438
Number of golf properties(6).. 7 12 19 19 20
</TABLE>
<TABLE>
<CAPTION>
AT MARCH 31, 1996
--------------------
AS
ACTUAL ADJUSTED(7)
-------- -----------
<S> <C> <C>
BALANCE SHEET DATA:
Cash....................................................... $ 1,591 $ 7,867
Total assets............................................... 151,894 157,317
Total long-term debt and capital leases.................... 96,211 77,519
Total liabilities.......................................... 110,986 90,512
Total stockholder's equity................................. 40,908 66,804
</TABLE>
(Footnotes appear on the following page)
12
<PAGE>
- --------------------
(1) The Company acquired or leased seven courses in fiscal 1993, an additional
five in fiscal 1994, an additional seven in fiscal 1995 and entered into a
management contract to operate one course in the six months ended March 31,
1996 (fiscal 1996). The Company's results of operations include the results
of acquired courses from their dates of acquisition and not for any periods
prior to acquisition. As a result, the Company's historical results of
operations for any particular period do not generally represent the full
revenue and cash flow generating capability of its golf course portfolio as
of the end of such period. The Company's results of operations for the year
ended September 30, 1995 include the results of three courses for six
months, one course for seven months, three courses for ten months and 12
courses for the full fiscal year.
(2) Course-level operating expenses include cost of golf course operations
(e.g., salaries, taxes, utilities), cost of food and beverages and cost of
pro shop sales.
(3) EBITDA represents net income before interest expense, income taxes,
extraordinary item, gain on insurance settlement, minority interest and
non-cash charges of depreciation and amortization. EBITDA is presented
because it is a widely accepted financial indicator of a company's ability
to service and/or incur indebtedness. However, EBITDA should not be
considered as an alternative to net income as a measure of the Company's
operating results or to operating cash flow as a measure of liquidity. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Private Membership Clubs; Accounting Treatment of Initiation
Fees."
(4) Golf facility investments consist of the aggregate purchase price
(including cash and principal amount of promissory notes) paid by the
Company to acquire its golf course portfolio, including non-recurring
upgrade capital expenditures.
(5) Cumulative since the Company's formation in October 1992.
(6) Of such 20 properties at March 31, 1996, 15 courses were owned by the
Company, three courses were operated under long-term leases, one driving
range/pro shop facility was leased and one course was managed by the
Company pursuant to a management contract. In addition, the Company
acquired one course and entered into a long term lease with respect to a
second course subsequent to March 31, 1996. See "Business--Recently
Completed Acquisitions."
(7) As adjusted to give effect to the Offerings and the use of the estimated
net proceeds therefrom. See "The Offerings" and "Consolidated
Capitalization."
13
<PAGE>
RISK FACTORS
Prospective investors should consider carefully the following factors in
addition to the other information contained in this Offering Memorandum before
making an investment in any of the Exchange Notes offered hereby. This
Prospectus contains forward-looking statements within the meaning of Section
27A of the Securities Act. Discussions containing such forward-looking
statements may be found in the material set forth under "Summary,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and "Business," as well as within
the Prospectus generally. In addition, when used in this Prospectus, the words
"believes," "anticipates," "expects" and similar expressions are intended to
identify forward-looking statements. Such statements are subject to a number
of risks and uncertainties. Actual results in the future could differ
materially from those described in the forward-looking statements as a result
of the risk factors set forth below and the matters set forth in the
Prospectus generally. The Company undertakes no obligation to publicly release
the result of any revisions to these forward-looking statements that may be
made to reflect any future events or circumstances. The Company cautions the
reader, however, that this list of risk factors may not be exhaustive.
FAILURE TO EXCHANGE PRIVATE NOTES
Exchange Notes will be issued in exchange for Private Notes only after
timely receipt by the Exchange Agent of such Private Notes, a properly
completed and duly executed Letter of Transmittal and all other required
documentation. Therefore, holders of Private Notes desiring to tender such
Private Notes in exchange for Exchange Notes should allow sufficient time to
ensure timely delivery. Neither the Exchange Agent nor the Company is under
any duty to give notification of defects or irregularities with respect to
tenders of Private Notes for exchange. Private Notes that are not tendered or
are tendered but not accepted will, following consummation of the Exchange
Offer, continue to be subject to the existing restrictions upon transfer
thereof. In addition, any holder of Private Notes who tenders in the Exchange
Offer for the purpose of participating in a distribution of the Exchange Notes
will be required to comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Private Notes, where such Private Notes were acquired by such
broker-dealer as a result of market-making activities or any other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. To the extent that Private Notes are
tendered and accepted in the Exchange Offer, the trading market for untendered
and tendered but unaccepted Private Notes could be adversely affected due to
the limited amount, or "float," of the Private Notes that are expected to
remain outstanding following the Exchange Offer. Generally, a lower "float" of
a security could result in less demand to purchase such security and could,
therefore, result in lower prices for such security. For the same reason, to
the extent that a large amount of Private Notes are not tendered or are
tendered and not accepted in the Exchange Offer, the trading market for the
Exchange Notes could be adversely affected. See "Plan of Distribution" and
"The Exchange Offer."
LEVERAGE AND ABILITY TO SERVICE DEBT
The Company is highly leveraged. As of March 31, 1996, after giving effect
to the Offerings and the use of a portion of the estimated net proceeds
therefrom to repay certain outstanding indebtedness, the Company would have
had consolidated long-term debt of approximately $77.5 million and
stockholder's equity of approximately $66.8 million, resulting in a debt-to-
equity ratio of approximately 1.2 to 1. The Company's earnings were
insufficient to cover its fixed charges for each of the fiscal years ended
September 30, 1993, 1994 and 1995 and for the twelve months and six months
ended March 31, 1996. See Note (7) to Selected Consolidated Financial
Information. In addition, the Company would have an additional $50 million of
borrowing availability under the New Credit Facility. See "Consolidated
Capitalization" and "Description of New Credit Facility."
The Company's ability to make scheduled payments of principal of, or to pay
interest on, or to refinance its indebtedness (including the Notes) will
depend on its future performance, which, to a certain extent, is subject to
general economic, financial, competitive, legislative, regulatory and other
factors beyond its control. Based upon
14
<PAGE>
the current level of operations and anticipated growth, the Company believes
that cash flow from operations, together with available borrowings under the
New Credit Facility and other sources of liquidity, will be adequate to meet
the Company's anticipated future requirements for working capital, capital
expenditures and scheduled payments of principal and interest on its
indebtedness, including the Notes. There can be no assurance, however, that
the Company's business will generate sufficient cash flow from operations or
that future working capital borrowings will be available in an amount
sufficient to enable the Company to service its indebtedness, including the
Notes, or make necessary capital expenditures. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."
LIMITED OPERATING HISTORY; VARIABILITY OF QUARTERLY OPERATING RESULTS AND NET
LOSSES
Since its organization in October 1992, the Company has been in an early
development stage in which its activities have been concentrated on the
acquisition, lease and management of its golf course properties. Seasonal
weather conditions as well as the timing of new course purchases or leases may
cause the Company's results of operations to vary significantly from quarter
to quarter and the second half (April through September) of the Company's
fiscal year generally accounts for a greater portion of the Company's
operating revenue and operating income than does the first half. The Company
has experienced net losses since its inception. Net losses for the fiscal
years ended September 30, 1993, 1994 and 1995 were approximately $0.9 million,
$1.4 million and $0.7 million, respectively, and net losses for the twelve
months and the six months ended March 31, 1996 were $1.5 million and $2.5
million, respectively. There can be no assurance that the Company's future
operations will generate operating income or net income or sufficient cash
flow to pay its obligations. See "Selected Consolidated Financial Information"
and "Management's Discussion and Analysis of Financial Condition and Results
of Operations."
CORPORATE STRUCTURE; EFFECTS OF ASSET ENCUMBRANCES
Substantially all of the Company's operating income is generated by its
Subsidiaries. As a result, the Company will rely on cash received from its
Subsidiaries to provide a portion of the funds necessary to meet its debt
service obligations, including the payment of principal and interest on the
Notes. The Notes are guaranteed on a senior unsecured basis by the Guarantors,
and should the Company fail to satisfy any payment obligation under the Notes,
the holders would have a direct claim against the Guarantors pursuant to such
Guarantees. However, the Guarantors have guaranteed the Company's obligations
under the New Credit Facility on a senior secured basis, and the capital stock
of, and substantially all of the assets of, the Guarantors were pledged to
secure the obligations of the Company and such Subsidiaries under the New
Credit Facility and other secured obligations. The Indenture limits, but does
not prohibit, the ability of the Company and its Subsidiaries to incur
additional indebtedness, including secured indebtedness. In the event of a
default under the New Credit Facility (or any other secured indebtedness), the
lenders thereunder would be entitled to a claim on the assets securing such
indebtedness which is prior to any claim of the holders of the Notes.
Accordingly, there may be insufficient assets remaining after payment of prior
secured claims (including claims of lenders under the New Credit Facility) to
pay amounts due on the Notes. The Indenture also limits the ability of the
Company and its Subsidiaries to incur additional indebtedness and to enter
into agreements that would restrict the ability of any Subsidiary to make
distributions, loans or other payments to the Company. However, these
limitations are subject to certain exceptions. See "--Fraudulent Transfer
Risks," "Description of Notes" and "Description of New Credit Facility."
ACQUISITION STRATEGY AND RISKS RELATED TO RAPID GROWTH
The Company is continually involved in the investigation and evaluation of
potential golf course acquisitions and at any time may be discussing possible
transactions, conducting due diligence investigations or otherwise pursuing
acquisition opportunities. Since its inception in October 1992, the Company
has made acquisitions for an aggregate purchase price of approximately $135.4
million, including upgrade capital expenditures. The Company historically has
financed its acquisitions through a combination of the borrowings
15
<PAGE>
under bank credit facilities, seller-provided financing, internally-generated
cash flow and the issuance of equity securities. The Company's future growth
and financial success will be dependent upon a number of factors, including,
among others, its ability to identify acceptable acquisition candidates,
consummate the acquisitions of such golf facilities on favorable terms,
promptly and profitably improve the financial performance of acquired
properties and integrate them into the Company's operations and attract and
retain customers and members. Managing this growth and integrating acquired
businesses requires a significant amount of management time and skill. There
can be no assurance (i) that the Company will be effective in managing its
future growth or in assimilating acquisitions, or (ii) that any failure to
manage growth or assimilate an acquisition will not have a material adverse
effect on the Company's business, operating results or financial condition. In
addition, the Company has generally been able to implement significant
increases in initiation fees, membership dues and greens fees to market levels
following acquisition of a golf facility. The Company believes that any
subsequent increases in initiation fees, membership dues and greens fees at
acquired courses are likely to occur on a smaller magnitude.
The Company's ability to execute its growth strategy depends to a
significant degree on its ability to obtain additional long-term debt and
equity capital. Other than the New Credit Facility, the Company has no
commitments for additional borrowings or sales of equity, and there can be no
assurance that the Company will be successful in consummating any such future
financing transactions on terms favorable to the Company or that any such
acquisition will not result in the incurrence of additional indebtedness. The
Company's ability to repay the Notes or any other indebtedness at maturity may
depend on refinancing, which could be adversely affected if the Company does
not have access to the capital markets for the sale of additional debt or
equity through public offerings or private placements on terms acceptable to
the Company. Factors which could affect the Company's access to the capital
markets, or the cost of such capital, include changes in interest rates,
general economic conditions, the perception in the capital markets of the
Company's business, results of operations, leverage, financial condition and
business prospects. In addition, the New Credit Facility and the covenants
with respect to the Notes significantly restrict the Company's ability to
incur additional indebtedness. See "Description of Notes."
COMPETITION
The Company intends to continue to acquire golf courses in order to expand
its operations and increase its portfolio. There can be no assurance that
suitable golf course acquisition opportunities will be available or that,
because of competition from other purchasers or other reasons, the Company
will be able to consummate acquisitions on satisfactory terms or to obtain
necessary acquisition financing. In addition, the acquisition of golf courses
may become more expensive in the future if demand for properties increases.
The Company competes for the purchase, lease and management of golf courses
with several national and regional golf course companies. Several of the
Company's national competitors have larger staffs and more golf courses
currently owned, leased or under management than does the Company. In
addition, several of the national competitors and certain of the smaller,
regional companies have significantly greater capital resources than the
Company.
Golf courses are also subject to competition for players and members from
other golf courses located in the same geographic areas. The number and
quality of golf courses in a particular area could have a material effect on
the revenue of a golf course. The availability of sufficient acreage often
limits the number of competing courses, particularly in metropolitan areas.
However, the parts of Arizona and Texas in which many of Cobblestone's
existing properties are clustered have significant open land available, and
there has been continued construction of both public and private golf
facilities in those areas. The Company carefully evaluates these and other
factors before acquiring a golf course, and tailors its marketing strategy to
fit the demographic and competitive characteristics of the community. In
addition, revenue will be affected by a number of factors including the demand
for golf and the availability of other forms of recreation.
16
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RELIANCE ON KEY PERSONNEL
The success of the Company is dependent upon the experience and abilities of
its senior management as well as its ability to attract and retain qualified
golf course general managers and superintendents. There is significant
competition in the golf course management industry for qualified personnel,
and there can be no assurance that the Company will be able to retain its
existing senior management or golf course personnel or recruit new personnel
to support its acquisition plans. See "Management."
RESTRICTIVE COVENANTS AND FINANCIAL RATIOS UNDER NEW CREDIT FACILITY
The New Credit Facility contains covenants which limit the ability of the
Company to, among other things, (i) incur indebtedness or issue guarantees,
(ii) create or permit to exist liens, or enter into negative pledge
agreements, (iii) make investments, including by purchase of assets or equity
interests, unless the Company meets certain financial tests and after such
investment provides the lenders thereunder with liens on the assets acquired
and secured guarantees of any new Subsidiary, (iv) pay dividends or make
distributions (other than dividends to the Company), repurchase equity
interests or prepay or redeem the Notes, (v) make asset sales or merge or
consolidate with other entities, (vi) enter into transactions with affiliates,
or (vii) amend certain agreements, including the Indenture or the Notes. In
addition, under the New Credit Facility, the Company is required to comply
with certain financial covenants, including net worth, minimum interest and
fixed charge coverage ratios and maximum Funded Debt (as defined in the New
Credit Facility) to Adjusted EBITDA and Bank Debt (as defined in the New
Credit Facility) to Adjusted EBITDA ratios (calculated as provided therein).
Under the New Credit Facility, the occurrence of certain events (including,
without limitation, failure to make payments when due, breach of covenants or
representations and warranties, default under other indebtedness or
obligations, bankruptcy, dissolution or insolvency, change of control, the
occurrence of a material adverse change and material judgments) in certain
cases after notice and/or grace periods would constitute an event of default
permitting the acceleration of the indebtedness and exercise of remedies,
including foreclosure on the security interests granted to secure such
indebtedness. The limitations imposed on the Company by the New Credit
Facility are substantial, and failure to comply with such limitations or the
occurrence of any event of default could have a material adverse effect on the
Company. See "Description of New Credit Facility."
GOVERNMENTAL REGULATION; LEASES WITH MUNICIPALITIES
Operations at the Company's golf courses involve the use and storage of
various hazardous materials such as herbicides, pesticides, fertilizers, motor
oil and gasoline. Under various federal, state and local laws, ordinances and
regulations, an owner or operator of real property may become liable for the
costs of removing such hazardous substances that are released on or in its
property and for remediation of its property. Such laws often impose liability
regardless of whether a property owner or operator knew of, or was responsible
for, the release of hazardous materials. In addition, the presence of such
hazardous substances, or the failure to remediate the surrounding soil when
such substances are released, may adversely affect the ability of a property
owner to sell such real estate or to pledge such property as collateral for a
loan. See "Business--Governmental Regulation."
The Company's leases with municipalities at the Saticoy and Escondido
courses are subject to provisions which restrict the Company's ability to
increase greens fees and other charges. Such restrictions may have an adverse
effect on the Company's ability to increase revenue and improve operating cash
flow at those courses. It is probable that any new leases with municipalities
will also include similar restrictions.
FACTORS AFFECTING GOLF PARTICIPATION
The success of efforts to attract and retain members at a private country
club and the number of rounds played at a public golf course have historically
been dependent upon discretionary spending by consumers, which may be
adversely affected by general and regional economic conditions, particularly
those that affect southern California, Phoenix, Dallas and Houston. See
"Business--Summary of Golf Course Portfolio." Golf
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participation has increased significantly since 1970. Although the Company
believes that demographic trends indicate that it is well positioned to grow
its business and improve its financial performance, a decrease in the number
of golfers or their rates of participation or in consumer spending on golf
could have an adverse effect on the Company's financial condition and results
of operations.
COURSE CONDITIONS
General turf grass conditions must be satisfactory to attract play on the
Company's courses. Severe weather or other factors, including disease, could
cause unexpected problems with turf grass conditions at any golf course or at
courses located in the same geographic region. Turf grass conditions at each
of the Company's golf courses also depend to a large extent on the quality and
quantity of available water. The availability of sufficient water is affected
by various factors, many of which are not under the Company's control. The
Company believes that it has access to sufficient water to operate its courses
in the manner in which they are currently operated. However, there can be no
assurance that certain conditions, including weather, government regulation or
environmental concerns, which could adversely affect the supply of water to a
particular golf course, may not arise in the future.
The Company operates golf courses in four states and has experienced natural
conditions which are beyond its control (such as periods of extraordinarily
dry, wet, hot or cold weather, or unforeseen natural events such as storms,
hurricanes, fires, floods or earthquakes). These conditions may occur at any
time and may have a significant impact on the condition and availability of
one or more golf courses for play and on the number of customers a golf course
can attract. Except for fire insurance, the Company does not carry insurance
against the effect of such conditions, which the Company believes to be
consistent with standard practice in the industry. However, the occurrence or
re-occurrence of any such conditions may require increased capital
expenditures by the Company to the extent the Company is not insured and could
have a material adverse effect on the Company's financial condition and
results of operations.
LIMITATIONS ON REPURCHASE OF NOTES UPON CHANGE OF CONTROL
Upon a Change of Control, each holder of Notes will have certain rights to
require the Company to repurchase all or a portion of such holder's Notes. See
"Description of Notes." If a Change of Control were to occur, there can be no
assurance that the Company would have sufficient funds to pay the repurchase
price for all Notes tendered by the holders thereof. In addition, a Change of
Control would constitute a default under the New Credit Facility. The
Company's repurchase of Notes as a result of the occurrence of a Change of
Control is restricted by the New Credit Facility and may be prohibited or
limited by, or create an event of default under, the terms of other agreements
relating to borrowings which the Company may enter into from time to time,
including other agreements relating to secured indebtedness. If the Company's
obligations under the New Credit Facility were accelerated due to a default
thereunder, the lenders thereunder would have a priority claim on the proceeds
from the sale of the collateral securing the New Credit Facility. See "--
Corporate Structure; Effects of Asset Encumbrances."
FRAUDULENT TRANSFER RISKS
The obligations of the Company under the Notes may be subject to review
under state or Federal fraudulent transfer laws in the event of the bankruptcy
or other financial difficulty of the Company. Under those laws, if a court, in
a lawsuit by an unpaid creditor or representative of creditors of the Company,
such as a trustee in bankruptcy or the Company as debtor in possession were to
find that at the time the Company issued the Notes, it either (i) was
insolvent, (ii) was rendered insolvent, (iii) was engaged in a business or
transaction for which its remaining unencumbered assets constituted
unreasonably small capital, or (iv) intended to incur or believed that it
would incur debts beyond its ability to pay as such debts matured, such court
could avoid the Notes and the Company's obligations thereunder, and direct the
return of any amounts paid thereunder to the Company or to a fund for the
benefit of its creditors. Moreover, regardless of the factors identified in
the foregoing clauses (i) through (iv), the court could avoid the Notes and
direct such repayment if it found that such Notes were issued with actual
intent to hinder, delay, or defraud the Company's creditors.
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The Company's obligations under the Notes will be guaranteed by the
Guarantors, and the Guarantees may also be subject to review under federal or
state fraudulent transfer law. If a court were to determine that at the time a
Guarantor became liable under its Guarantee, it satisfied any of clauses (i)
through (iv) in the foregoing paragraph, or if such Guarantee was incurred
with actual intent to hinder, delay or defraud such Guarantor's creditors, the
court could avoid the Guarantee and direct the repayment of amounts paid
thereunder.
To the extent any Guarantees were avoided as a fraudulent conveyance or held
unenforceable for any other reason, holders of the Notes would cease to have
any claim in respect of such Subsidiary Guarantor and would be creditors
solely of the Company and any Guarantor whose Guarantee was not avoided or
held unenforceable. In such event, the claims of the holders of the Notes
against the issuer of an invalid Guarantee would be subject to the prior
payment of all liabilities and preferred stock claims of such Guarantor. There
can be no assurance that, after providing for all prior claims and preferred
stock interests, if any, there would be sufficient assets to satisfy the
claims of the holders of the Notes relating to any voided portions of any of
the Guarantees.
The measure of insolvency for purposes of the foregoing will vary depending
on the law of the jurisdiction being applied. Generally, however, an entity
would be considered insolvent if the sum of its debts (including contingent or
unliquidated debts) is greater than all of its property at a fair valuation or
if the present fair salable value of its assets is less than the amount that
will be required to pay its probable liability on its existing debts as they
become absolute and matured.
ABSENCE OF PUBLIC MARKET
There is currently no established trading market for the Notes and the
Company does not intend to apply for listing of the Notes on any securities
exchange or on any automated dealer quotation system. The Company has been
advised by the Initial Purchasers that they presently intend to make a market
in the Notes, but the Initial Purchasers are under no obligation to do so, and
any such market-making may be discontinued at any time without notice, at the
sole discretion of the Initial Purchasers. Accordingly, no assurance can be
given as to the prices or liquidity of, or trading markets for, the Notes. The
liquidity of any market for the Notes will depend upon the number of holders
of the Notes, the interest of securities dealers in making a market in the
Notes, prevailing interest rates, the market for similar securities and other
factors, including general economic conditions and the financial condition and
performance of, and prospects for, the Company. The absence of an active
market for the Notes could adversely affect the market price and liquidity of
the Notes. Although the Company does not intend to list the Notes on any
securities exchange or to seek approval for quotation of the Notes through any
automated quotation system, the Notes are expected to be eligible for trading
in the Private Offerings, Resales and Trading through Automatic Linkages
("PORTAL") market of the National Association of Securities Dealers, Inc.
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THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The Private Notes were sold by the Company on June 4, 1996 (the "Closing
Date") to the Initial Purchasers pursuant to the Purchase Agreement. The
Initial Purchasers subsequently sold the Private Notes to "qualified
institutional buyers" ("QIBs"), as defined in Rule 144A under the Securities
Act ("Rule 144A"), in reliance on Rule 144A. As a condition to the sale of the
Private Notes, the Company and the Initial Purchasers entered into the
Registration Rights Agreement on May 29, 1996. Pursuant to the Registration
Rights Agreement, the Company agreed that, unless the Exchange Offer is not
permitted by applicable law or Commission policy, it would file with the
Commission a registration statement under the Securities Act (a "Registration
Statement") with respect to the Exchange Notes within 60 days after the
Closing Date and use its best efforts to cause such Registration Statement to
become effective under the Securities Act within 120 days after the Closing
Date. A copy of the Registration Rights Agreement has been filed as an exhibit
to the Registration Statement. The Registration Statement is intended to
satisfy certain of the Company's obligations under the Registration Rights
Agreement and the Purchase Agreement.
RESALE OF THE EXCHANGE NOTES
With respect to the Exchange Notes, based upon an interpretation by the
staff of the Commission set forth in certain no-action letters issued to third
parties, the Company believes that a holder (other than (i) a broker-dealer
who purchases such Exchange Notes directly from the Company to resell pursuant
to Rule 144A or any other available exemption under the Securities Act or (ii)
any such holder that is an "affiliate" of the Company within the meaning of
Rule 405 under the Securities Act) who exchanges Private Notes for Exchange
Notes in the ordinary course of business and who is not participating, does
not intend to participate, and has no arrangement with any person to
participate, in a distribution of the Exchange Notes, will be allowed to
resell Exchange Notes to the public without further registration under the
Securities Act and without delivering to the purchasers of the Exchange Notes
a prospectus that satisfies the requirements of Section 10 of the Securities
Act. However, if any holder acquires Exchange Notes in the Exchange Offer for
the purpose of distributing or participating in the distribution of the
Exchange Notes or is a broker-dealer, such holder cannot rely on the position
of the staff of the Commission enumerated in certain no-action letters issued
to third parties and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction,
unless an exemption from registration is otherwise available. Each broker-
dealer that receives Exchange Notes for its own account in exchange for
Private Notes, where such Private Notes were acquired by such broker-dealer as
a result of market-making activities or other trading activities, must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. The Letter of Transmittal states that by so acknowledging
and by delivering a prospectus, a broker-dealer will not be deemed to admit
that it is an "underwriter" within the meaning of the Securities Act. This
Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of Exchange Notes received
in exchange for Private Notes where such Private Notes were acquired by such
broker-dealer as a result of market-making or other trading activities.
Pursuant to the Registration Rights Agreement, the Company has agreed to make
this Prospectus, as it may be amended or supplemented from time to time,
available to broker-dealers for use in connection with any resale for a period
of 180 days after the Expiration Date. See "Plan of Distribution."
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Private
Notes validly tendered and not withdrawn prior to the Expiration Date. The
Company will issue $1,000 principal amount of Exchange Notes in exchange for
each $1,000 principal amount of outstanding Private Notes surrendered pursuant
to the Exchange Offer. Private Notes may be tendered only in integral
multiples of $1,000.
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The form and terms of the Exchange Notes are the same as the form and terms
of the Private Notes except that (i) the exchange will be registered under the
Securities Act and, therefore, the Exchange Notes will not bear legends
restricting the transfer thereof and (ii) holders of the Exchange Notes will
not be entitled to any of the rights of holders of Private Notes under the
Registration Rights Agreement, which rights will terminate upon the
consummation of the Exchange Offer. The Exchange Notes will evidence the same
indebtedness as the Private Notes (which they replace) and will be issued
under, and be entitled to the benefits of, the Indenture, which also
authorized the issuance of the Private Notes, such that both series of Notes
will be treated as a single class of debt securities under the Indenture.
As of the date of this Prospectus, $70,000,000 in aggregate principal amount
of the Private Notes are outstanding and registered in the name of Cede & Co.,
as nominee for DTC. Only a registered holder of the Private Notes (or such
holder's legal representative or attorney-in-fact) as reflected on the records
of the Trustee under the Indenture may participate in the Exchange Offer.
There will be no fixed record date for determining registered holders of the
Private Notes entitled to participate in the Exchange Offer.
Holders of the Private Notes do not have any appraisal or dissenters' rights
under the Indenture in connection with the Exchange Offer. The Company intends
to conduct the Exchange Offer in accordance with the provisions of the
Registration Rights Agreement and the applicable requirements of the
Securities Act, the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations of the Commission thereunder.
The Company shall be deemed to have accepted validly tendered Private Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
of Private Notes for the purposes of receiving the Exchange Notes from the
Company.
Holders who tender Private Notes in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Private
Notes pursuant to the Exchange Offer. The Company will pay all charges and
expenses, other than certain applicable taxes described below, in connection
with the Exchange Offer. See "--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time on ,
1996, unless the Company, in its sole discretion, extends the Exchange Offer,
in which case the term "Expiration Date" shall mean the latest date and time
to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will (i) notify the
Exchange Agent of any extension by oral or written notice, (ii) mail to the
registered holders an announcement thereof and (iii) issue a press release or
other public announcement which shall include disclosure of the approximate
number of Private Notes deposited to date, each prior to 9:00 a.m., New York
City time, on the next business day after the previously scheduled Expiration
Date. Without limiting the manner in which the Company may choose to make a
public announcement of any delay, extension, amendment or termination of the
Exchange Offer, the Company shall have no obligation to publish, advertise, or
otherwise communicate any such public announcement, other than by making a
timely release to an appropriate news agency.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Private Notes, (ii) to extend the Exchange Offer or (iii) if any
conditions set forth below under "--Conditions" shall not have been satisfied,
to terminate the Exchange Offer by giving oral or written notice of such
delay, extension or termination to the Exchange Agent. Any such delay in
acceptance, extension, termination or amendment will be followed as promptly
as practicable by oral or written notice thereof to the registered holders. If
the Exchange Offer is amended in a manner determined by the Company to
constitute a material change, the Company will promptly disclose such
amendment by means of a prospectus supplement that will be distributed to the
registered holders, and the Company will extend the Exchange Offer for a
period of five to ten business days, depending upon the
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significance of the amendment and the manner of disclosure to the registered
holders, if the Exchange Offer would otherwise expire during such five to ten
business day period.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest at a rate equal to 11 1/2% per annum.
Interest on the Exchange Notes will be payable semi-annually in arrears on
June 1 and December 1 of each year, commencing December 1, 1996. Holders of
Exchange Notes will receive interest from the date of initial issuance of the
Exchange Notes, plus an amount equal to the accrued interest on the Private
Notes from the date of initial delivery to the date of exchange for Exchange
Notes. Holders of Private Notes that are accepted for exchange will be deemed
to have waived the right to receive any interest accrued on the Private Notes.
PROCEDURES FOR TENDERING
Only a registered holder of Private Notes may tender such Private Notes in
the Exchange Offer. To tender in the Exchange Offer, a holder of Private Notes
must complete, sign and date the Letter of Transmittal, or a facsimile
thereof, have the signatures thereon guaranteed if required by the Letter of
Transmittal, and mail or otherwise deliver such Letter of Transmittal or such
facsimile to the Exchange Agent at the address set forth below under "--
Exchange Agent" for receipt prior to the Expiration Date. In addition, either
(i) certificates for such Private Notes must be received by the Exchange Agent
along with the Letter of Transmittal, (ii) a timely confirmation of a book-
entry transfer (a "Book-Entry Confirmation") of such Private Notes, if such
procedure is available, into the Exchange Agent's account at the Depositary
pursuant to the procedure for book-entry transfer described below, must be
received by the Exchange Agent prior to the Expiration Date or (iii) the
holder must comply with the guaranteed delivery procedures described below.
The tender by a holder that is not withdrawn prior to the Expiration Date
will constitute an agreement between such holder and the Company in accordance
with the terms and subject to the conditions set forth herein and in the
Letter of Transmittal.
THE METHOD OF DELIVERY OF PRIVATE NOTES AND THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK
OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE
AN OVERNIGHT OR HAND DELIVERY SERVICE, PROPERLY INSURED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT
BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR PRIVATE NOTES SHOULD
BE SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS,
COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS
FOR SUCH HOLDERS.
Any beneficial owner(s) of the Private Notes whose Private Notes are
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee and who wishes to tender should contact the registered holder
promptly and instruct such registered holder to tender on such beneficial
owner's behalf. If such beneficial owner wishes to tender on such owner's own
behalf, such owner must, prior to completing and executing the Letter of
Transmittal and delivering such owner's Private Notes, either make appropriate
arrangements to register ownership of the Private Notes in such owner's name
or obtain a properly completed bond power from the registered holder. The
transfer of registered ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal described
below (see "--Withdrawal of Tenders"), as the case may be, must be guaranteed
by an Eligible Institution (as defined below) unless the Private Notes
tendered pursuant thereto are tendered (i) by a registered holder who has not
completed the box entitled "Special Issuance Instructions" or the box entitled
"Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution. In the event that signatures on a Letter
of Transmittal or a notice of withdrawal, as the case may be, are required to
be guaranteed, such guarantee must be made by a
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member firm of a registered national securities exchange or of the National
Association of Securities Dealers, Inc., a commercial bank or trust company
having an office or correspondent in the United States or an "eligible
guarantor institution" within the meaning of Rule 17Ad-15 under the Exchange
Act which is a member of one of the recognized signature guarantee programs
identified in the Letter of Transmittal (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the registered
holder of any Private Notes listed therein, such Private Notes must be
endorsed or accompanied by a properly completed bond power, signed by such
registered holder as such registered holder's name appears on such Private
Notes.
If the Letter of Transmittal or any Private Notes or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity,
such persons should so indicate when signing, and unless waived by the
Company, evidence satisfactory to the Company of their authority to so act
must be submitted with the Letter of Transmittal.
The Exchange Agent and the Depositary have confirmed that any financial
institution that is a participant in the Depositary's system may utilize the
Depositary's Automated Tender Offer Program to tender Private Notes.
All questions as to the validity, form, eligibility (including time of
receipt), compliance with conditions, acceptance and withdrawal of tendered
Private Notes will be determined by the Company in its sole discretion, which
determination will be final and binding. The Company reserves the absolute
right to reject any and all Private Notes not properly tendered or any Private
Notes the Company's acceptance of which would, in the opinion of counsel for
the Company, be unlawful. The Company also reserves the right to waive any
defects, irregularities or conditions of tender as to particular Private
Notes. The Company's interpretation of the terms and conditions of the
Exchange Offer (including the instructions in the Letter of Transmittal) will
be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of Private Notes must be cured
within such time as the Company shall determine. Although the Company intends
to notify holders of defects or irregularities with respect to tenders of
Private Notes, neither the Company, the Exchange Agent nor any other person
shall incur any liability for failure to give such notification. Tenders of
Private Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived.
While the Company has no present plan to acquire any Private Notes that are
not tendered in the Exchange Offer or to file a registration statement to
permit resales of any Private Notes that are not tendered pursuant to the
Exchange Offer, the Company reserves the right in its sole discretion to
purchase or make offers for any Private Notes that remain outstanding
subsequent to the Expiration Date or, as set forth below under "--Conditions,"
to terminate the Exchange Offer and, to the extent permitted by applicable
law, purchase Private Notes in the open market, in privately negotiated
transactions or otherwise. The terms of any such purchases or offers could
differ from the terms of the Exchange Offer.
By tendering, each holder of Private Notes will represent to the Company
that, among other things, (i) Exchange Notes to be acquired by such holder of
Private Notes in connection with the Exchange Offer are being acquired by such
holder in the ordinary course of business of such holder, (ii) such holder has
no arrangement or understanding with any person to participate in the
distribution of the Exchange Notes, (iii) such holder acknowledges and agrees
that any person who is a broker-dealer registered under the Exchange Act or is
participating in the Exchange Offer for the purposes of distributing the
Exchange Notes must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction of the Exchange Notes acquired by such person and cannot rely on
the position of the staff of the Commission set forth in certain no-action
letters, (iv) such holder understands that a secondary resale transaction
described in clause (iii) above and any resales of Exchange Notes obtained by
such holder in exchange for Private Notes acquired by such holder directly
from the Company should be covered by an effective registration statement
containing the selling securityholder information required by Item 507 or Item
508, as applicable, of Regulation S-K of the Commission and (v) such holder is
not an "affiliate," as defined in Rule 405 under the Securities Act, of the
Company. If the holder is a broker-dealer that will receive Exchange Notes for
such holder's own account in exchange for Private Notes that were acquired as
a result of market-making activities or other trading activities, such holder
will be required to acknowledge in the Letter of Transmittal that such holder
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will deliver a prospectus in connection with any resale of such Exchange
Notes; however, by so acknowledging and by delivering a prospectus, such
holder will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
RETURN OF PRIVATE NOTES
If any tendered Private Notes are not accepted for any reason set forth in
the terms and conditions of the Exchange Offer or if Private Notes are
withdrawn or are submitted for a greater principal amount than the holders
desire to exchange, such unaccepted, withdrawn or non-exchanged Private Notes
will be returned without expense to the tendering holder thereof (or, in the
case of Private Notes tendered by book-entry transfer into the Exchange
Agent's account at the Depositary pursuant to the book-entry transfer
procedures described below, such Private Notes will be credited to an account
maintained with the Depositary) as promptly as practicable.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Private Notes at the Depositary for purposes of the Exchange Offer
within two business days after the date of this Prospectus, and any financial
institution that is a participant in the Depositary's systems may make book-
entry delivery of Private Notes by causing the Depositary to transfer such
Private Notes into the Exchange Agent's account at the Depositary in
accordance with the Depositary's procedures for transfer. However, although
delivery of Private Notes may be effected through book-entry transfer at the
Depositary, the Letter of Transmittal or facsimile thereof, with any required
signature guarantees and any other required documents, must, in any case, be
transmitted to and received by the Exchange Agent at the address set forth
below under "--Exchange Agent" on or prior to the Expiration Date or pursuant
to the guaranteed delivery procedures described below.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Private Notes and (i) whose Private Notes
are not immediately available or (ii) who cannot deliver their Private Notes,
the Letter of Transmittal or any other required documents to the Exchange
Agent prior to the Expiration Date, may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery substantially in the form provided by the Company
setting forth the name and address of the holder, the certificate number(s)
of such Private Notes and the principal amount of Private Notes tendered,
stating that the tender is being made thereby and guaranteeing that, within
five New York Stock Exchange trading days after the Expiration Date, the
Letter of Transmittal (or a facsimile thereof), together with the
certificate(s) representing the Private Notes in proper form for transfer
or a Book-Entry Confirmation, as the case may be, and any other documents
required by the Letter of Transmittal, will be deposited by the Eligible
Institution with the Exchange Agent; and
(c) Such properly executed Letter of Transmittal (or facsimile thereof),
as well as the certificate(s) representing all tendered Private Notes in
proper form for transfer and all other documents required by the Letter of
Transmittal are received by the Exchange Agent within five New York Stock
Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Private Notes according to the
guaranteed delivery procedures set forth above.
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WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Private Notes may be
withdrawn at any time prior to the Expiration Date.
To withdraw a tender of Private Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to the Expiration Date.
Any such notice of withdrawal must (i) specify the name of the person having
deposited the Private Notes to be withdrawn (the "Depositor"), (ii) identify
the Private Notes to be withdrawn (including the certificate number or numbers
and principal amount of such Private Notes) and (iii) be signed by the holder
in the same manner as the original signature on the Letter of Transmittal by
which such Private Notes were tendered (including any required signature
guarantees). All questions as to the validity, form and eligibility (including
time of receipt) of such notices will be determined by the Company in its sole
discretion, whose determination shall be final and binding on all parties. Any
Private Notes so withdrawn will be deemed not to have been validly tendered
for purposes of the Exchange Offer and no Exchange Notes will be issued with
respect thereto unless the Private Notes so withdrawn are validly retendered.
Properly withdrawn Private Notes may be retendered by following one of the
procedures described above under "The Exchange Offer--Procedures for
Tendering" at any time prior to the Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or exchange the Exchange Notes for, any
Private Notes, and may terminate the Exchange Offer as provided herein before
the acceptance of such Private Notes, if the Exchange Offer violates
applicable law, rules or regulations or an applicable interpretation of the
staff of the Commission.
If the Company determines in its sole discretion that any of these
conditions are not satisfied, the Company may (i) refuse to accept any Private
Notes and return all tendered Private Notes to the tendering holders,
(ii) extend the Exchange Offer and retain all Private Notes tendered prior to
the expiration of the Exchange Offer, subject, however, to the rights of
holders to withdraw such Private Notes (see "--Withdrawal of Tenders") or
(iii) waive such unsatisfied conditions with respect to the Exchange Offer and
accept all properly tendered Private Notes that have not been withdrawn. If
such waiver constitutes a material change to the Exchange Offer, the Company
will promptly disclose such waiver by means of a prospectus supplement that
will be distributed to the registered holders of the Private Notes, and the
Company will extend the Exchange Offer for a period of five to ten business
days, depending upon the significance of the waiver and the manner of
disclosure to the registered holders, if the Exchange Offer would otherwise
expire during such five to ten business day period.
LIQUIDATED DAMAGES
If (a) the Company fails to file the Registration Statement or a shelf
registration statement covering resale of the Private Notes (a "Shelf
Registration Statement") on or before the date specified for such filing, (b)
neither of such registration statements is declared effective by the
Commission on or prior to the date specified for such effectiveness (the
"Effectiveness Target Date"), (c) the Registration Statement becomes
effective, and the Company fails to consummate the Exchange Offer within 45
days of the earlier of the effectiveness of the Registration Statement or the
Effectiveness Target Date, or (d) the Shelf Registration Statement is declared
effective but thereafter ceases to be effective or usable in connection with
resales of Private Notes during the period specified in the Registration
Rights Agreement (each such event referred to in clauses (a) through (d)
above, a "Registration Default"), the Company is required to pay as liquidated
damages ("Liquidated Damages"), to each holder of Private Notes, with respect
to the first 90-day period immediately following the occurrence of such
Registration Default in an amount equal to $.05 per week per $1,000 principal
amount of Private Notes held by such holder. Upon a Registration Default,
Liquidated Damages will accrue at the rate specified above until such
Registration Default is cured, and the amount of the Liquidated Damages will
increase by an additional $.05 per week per $1,000 principal amount of Private
Notes for each subsequent 90-day period
25
<PAGE>
until all Registration Defaults have been cured, up to a maximum amount of
Liquidated Damages of $.25 per week per $1,000 principal amount of Private
Notes. All accrued Liquidated Damages will be paid by the Company on June 1
and December 1 of each year and on each other payment date provided in the
Indenture including, without limitation, whether upon redemption, maturity (by
acceleration or otherwise), purchase upon a change of control or purchase upon
a sale of assets to the holders of Private Notes by wire transfer of
immediately available funds or by mailing checks to their registered addresses
if no such accounts have been specified. Following the cure of all
Registration Defaults, the payment of Liquidated Damages will cease. The
filing and effectiveness of the Registration Statement of which this
Prospectus is a part and the consummation of the Exchange Offer within the
time periods specified above will eliminate all rights of the holders of
Private Notes eligible to participate in the Exchange Offer to receive the
Liquidated Damages described in this section.
TERMINATION OF CERTAIN RIGHTS
All rights under the Registration Rights Agreement (including registration
rights) of holders of the Private Notes eligible to participate in the
Exchange Offer will terminate upon consummation of the Exchange Offer except
with respect to the Company's continuing obligations (i) to indemnify such
holders (including any broker-dealers) and certain parties related to such
holders against certain liabilities (including liabilities under the
Securities Act), (ii) to provide, upon the request of any holder of a
transfer-restricted Private Note, the information required by Rule 144A(d)(4)
under the Securities Act in order to permit resales of such Private Notes
pursuant to Rule 144A and (iii) to provide copies of the latest version of the
Prospectus to broker-dealers upon their request for a period of up to 180 days
after the Expiration Date.
EXCHANGE AGENT
Norwest Bank Minnesota, National Association has been appointed as Exchange
Agent of the Exchange Offer. Questions and requests for assistance, requests
for additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notice of Guaranteed Delivery should be directed to the Exchange
Agent addressed as follows:
<TABLE>
<S> <C>
By Registered or Certified Mail: In Person:
Norwest Bank Minnesota, Northstar East Bldg.
National Association 608 2nd Ave S.
Corporate Trust Operations 12th Floor
P.O. Box 1517 Corporate Trust Ser.
Minneapolis, MN 55480-1517 Minneapolis, MN
By Hand or Overnight Courier: By Facsimile (for Eligible Institutions only):
Norwest Bank Minnesota, (612) 667-4927
National Association
Corporate Trust Operations Confirm Receipt of Notice of
Norwest Center Guaranteed Delivery by Telephone:
Sixth and Marquette
Minneapolis, MN 55479-0113 (612) 667-9764
</TABLE>
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION VIA A
FACSIMILE NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID
DELIVERY.
26
<PAGE>
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telephone or in person by officers and regular
employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay
the Exchange Agent reasonable and customary fees for its services and will
reimburse it for its reasonable out-of-pocket expenses in connection
therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company and are estimated in the aggregate to be approximately
$100,000. Such expenses include registration fees, fees and expenses of the
Exchange Agent and the Trustee, accounting and legal fees and printing costs,
among others.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Private Notes pursuant to the Exchange Offer. If, however, a transfer tax
is imposed for any reason other than the exchange of the Private Notes
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or any other persons) will be
payable by the tendering holder. If satisfactory evidence of payment of such
taxes or exemption therefrom is not submitted with the Letter of Transmittal,
the amount of such transfer taxes will be billed directly to such tendering
holder.
CONSEQUENCE OF FAILURES TO EXCHANGE
Participation in the Exchange Offer is voluntary. Holders of the Private
Notes are urged to consult their financial and tax advisors in making their
own decisions on what action to take.
The Private Notes that are not exchanged for the Exchange Notes pursuant to
the Exchange Offer will remain restricted securities. Accordingly, such
Private Notes may be resold only (i) to a person whom the seller reasonably
believes is a QIB in a transaction meeting the requirements of Rule 144A, (ii)
in a transaction meeting the requirements of Rule 144 under the Securities
Act, (iii) outside the United States to a foreign person in a transaction
meeting the requirements of Rule 904 under the Securities Act, (iv) in
accordance with another exemption from the registration requirements of the
Securities Act (and based upon an opinion of counsel if the Company so
requests), (v) to the Company or (vi) pursuant to an effective registration
statement and, in each case, in accordance with any applicable securities laws
of any state of the United States or any other applicable jurisdiction.
ACCOUNTING TREATMENT
For accounting purposes, the Company will recognize no gain or loss as a
result of the Exchange Offer. The expenses of the Exchange Offer will be
amortized over the term of the Exchange Notes.
27
<PAGE>
THE OFFERINGS
On the Closing Date, the Company consummated the offering (the "Senior Note
Offering") of $70,000,000 aggregate principal amount of the Private Notes. The
Senior Note Offering was conducted concurrently with, and was conditioned
upon, the offering by Holdings (the "Unit Offering," and together with the
Senior Note Offering, the "Offerings") of 86,000 units, each consisting of
$1,000 principal amount at maturity of its 13 1/2% Series A Senior Zero-Coupon
Notes due 2004 (the "Zero-Coupon Notes") and one share (collectively, the
"Shares") of common stock, par value $.01 per share, of Holdings ("Holdings
Common Stock").
THE RECAPITALIZATION
In connection with the closing of the Unit Offering, Holdings issued
additional shares of its capital stock to its existing shareholders, pro rata,
pursuant to a recapitalization to eliminate the necessity of issuing
fractional shares of Holdings Common Stock to purchasers of the Units (the
"Recapitalization").
USE OF PROCEEDS
The Company will not receive any proceeds from the Exchange Offer. In
consideration for issuing the Exchange Notes as contemplated in this
Prospectus, the Company will receive in exchange Private Notes in like
principal amount, the terms of which are identical to the Exchange Notes
except that (i) the exchange will have been registered under the Securities
Act, and, therefore, the Exchange Notes will not bear legends restricting the
transfer thereof and (ii) holders of the Exchange Notes will not be entitled
to certain rights of holders of the Private Notes under the Registration
Rights Agreement, which rights will terminate upon the consummation of the
Exchange Offer. The Private Notes surrendered in exchange for Exchange Notes
will be retained by the Company and the Exchange Offer will not result in any
increase in the indebtedness of the Company.
28
<PAGE>
CONSOLIDATED CAPITALIZATION
The following table sets forth, as of March 31, 1996, the unaudited
consolidated capitalization of the Company on an actual basis and as adjusted
to give effect to the Offerings and the application of the estimated net
proceeds therefrom. This table should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the historical financial statements of the Company and the
related notes thereto included elsewhere in this Prospectus. See "The
Offerings," "The Recapitalization" and "Selected Consolidated Financial
Information."
<TABLE>
<CAPTION>
AS OF MARCH 31, 1996
---------------------
ACTUAL AS ADJUSTED
-------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Cash and cash equivalents................. $ 1,591 $ 7,867
======== ========
Long-term debt:
New Credit Facility(1).................. -- --
Old Credit Facility
Revolving loan facility................ $ 4,600 --
Term loan facility..................... 77,444 --
11 1/2% Series A Senior Notes due 2003.. -- $ 70,000
Capital lease obligations............... 4,820 1,000
Other indebtedness (2).................. 9,347 6,519
-------- --------
Total long-term debt.................. 96,211 77,519
Stockholder's equity:
Parent's equity......................... 6 6
Additional paid-in capital.............. 46,329 75,393 (3)
Accumulated deficit..................... (5,427) (8,595)
-------- --------
Total stockholder's equity............ 40,908 66,804
-------- --------
Total capitalization................ $137,119 $144,323
======== ========
</TABLE>
- ---------------------
(1) Concurrently with the closing of the Offerings, the Company entered into
the New Credit Facility under which the Company has the ability to borrow
up to $50 million aggregate principal amount, consisting of $45 million
under a reducing revolving credit facility and up to $5 million under a
revolving working capital facility. No borrowings were outstanding under
the New Credit Facility upon the closing of the Offerings. See
"Description of New Credit Facility."
(2) Excludes the deferred purchase price on golf courses acquired of $1.2
million. The amounts are payable upon the achievement of operating
milestones at the acquired courses.
(3) Reflects Holdings' contribution to the Company of the estimated net
proceeds from the Unit Offering.
29
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS)
The consolidated financial data set forth below with respect to the
Company's statements of operations for each of the years in the three-year
period ended September 30, 1995 and with respect to the balance sheets at
September 30, 1994 and 1995, are derived from the consolidated financial
statements that have been audited by Ernst & Young LLP, independent auditors,
which are included elsewhere in this Prospectus. The balance sheet data at
September 30, 1993 are derived from audited financial statements not included
in this Prospectus. The statement of operations data for the six months ended
March 31, 1995 and 1996 and the balance sheet data at March 31, 1996 are
derived from unaudited financial statements which contain all adjustments,
consisting only of normal recurring adjustments, which the Company considers
necessary for a fair presentation of the financial position and results of
operations for such periods. Operating results for the six months ended March
31, 1996 are not necessarily indicative of the results that are expected for
the entire year ended September 30, 1996. The selected financial data set
forth below should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Company's
financial statements and the notes thereto included herein.
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS
SEPTEMBER 30, ENDED MARCH 31,
-------------------------- ------------------
1993 1994 1995 1995 1996
------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA(1):
Operating revenues............ $ 6,507 $24,893 $ 49,863 $ 16,969 $ 27,007
Course-level operating
expenses(2).................. 4,184 16,818 34,427 11,860 19,085
General and administrative
expenses..................... 1,620 1,997 2,517 1,160 1,724
Depreciation and amortization
expense...................... 825 3,469 6,145 2,405 3,518
------- ------- -------- -------- --------
Income (loss) from operations
............................. (122) 2,609 6,774 1,544 2,680
Interest expense, net......... (530) (3,515) (8,019) (3,206) (5,118)
Gain on insurance settlement.. -- -- 747 -- --
Minority interest............. (195) -- -- -- --
------- ------- -------- -------- --------
Loss before income taxes and
extraordinary item........... (847) (906) (498) (1,662) (2,438)
Provision for income taxes.... 6 72 208 27 24
------- ------- -------- -------- --------
Loss before extraordinary
item......................... (853) (978) (706) (1,689) (2,462)
Extraordinary item............ -- (428) -- -- --
------- ------- -------- -------- --------
Net loss...................... $ (853) $(1,406) $ (706) $ (1,689) $ (2,462)
======= ======= ======== ======== ========
OTHER OPERATING DATA:
EBITDA(3)..................... $ 703 $ 6,078 $ 12,919 $ 3,949 $ 6,198
Golf facility investments(4).. 41,212 34,623 55,643 46,886 3,960
Cumulative golf facility
investments(5)............... 41,212 75,835 131,478 122,721 135,438
Number of golf properties(6).. 7 12 19 19 20
Ratio of earnings to fixed
charges(7)................... -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
------------------------ AT MARCH 31,
1993 1994 1995 1996
------- ------- -------- ------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash.................................. $ 1,359 $ 1,299 $ 821 $ 1,591
Total assets.......................... 46,258 86,097 146,990 151,894
Total long-term debt and capital
leases............................... 14,412 45,301 86,918 96,211
Total liabilities..................... 19,885 54,635 103,620 110,986
Total stockholder's equity............ 26,373 31,462 43,370 40,908
</TABLE>
(Footnotes appear on the following page)
30
<PAGE>
- ---------------------
(1) The Company acquired or leased seven courses in fiscal 1993, an
additional five in fiscal 1994, an additional seven in fiscal 1995 and
entered into a management contract to operate one course in the six
months ended March 31, 1996 (fiscal 1996). The Company's results of
operations include the results of acquired courses from their dates of
acquisition and not for any periods prior to acquisition. As a result,
the Company's historical results of operations for any particular period
do not generally represent the full revenue and cash flow generating
capability of its golf course portfolio as of the end of such period. The
Company's results of operations for the year ended September 30, 1995
include the results of three courses for six months, one course for seven
months, three courses for ten months and 12 courses for the full year.
(2) Course-level operating expenses include cost of golf course operations
(e.g., salaries, taxes, utilities), cost of food and beverages and cost
of pro shop sales.
(3) EBITDA represents net income before interest expense, income taxes,
extraordinary item, gain on insurance settlement, minority interest and
non-cash charges of depreciation and amortization. EBITDA is presented
because it is a widely accepted financial indicator of a company's
ability to service and/or incur indebtedness. However, EBITDA should not
be considered as an alternative to net income as a measure of the
Company's operating results or to operating cash flow as a measure of
liquidity. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Private Membership Clubs; Accounting
Treatment of Initiation Fees."
(4) Golf facility investments consist of the aggregate purchase price
(including cash and principal amount of promissory notes) paid by the
Company to acquire its golf course portfolio, including non-recurring
upgrade capital expenditures.
(5) Cumulative since the Company's formation in October 1992.
(6) Of such 20 properties at March 31, 1996, 15 courses were owned by the
Company, three courses were operated under long-term leases, one driving
range/pro shop facility was leased and one course was managed by the
Company pursuant to a management contract. In addition, the Company
acquired one course and entered into a long term lease with respect to a
second course subsequent to March 31, 1996. See "Business--Recently
Completed Acquisitions."
(7) In calculating the ratio of earnings to fixed charges, earnings consist
of loss before income taxes and extraordinary item plus fixed charges.
Fixed charges consist of interest expense and amortization of debt
issuance costs. The ratio of earnings to fixed charges was less than 1.0
to 1.0 for each of the Company's last three fiscal years, for the six
months ended March 31, 1995 and March 31, 1996 and for the twelve months
ended March 31, 1996. Earnings available for fixed charges were thus
inadequate to cover fixed charges. The amount of the coverage
deficiencies for the years ended September 30, 1993, September 30, 1994
and September 30, 1995, were $846,102, $906,461 and $497,812,
respectively. The amount of the coverage deficiencies for the six months
ended March 31, 1995 and March 31, 1996 were $1,661,663 and $2,438,480,
respectively.
31
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
"Selected Consolidated Financial Information" as well as the consolidated
financial statements of the Company and notes thereto contained elsewhere in
this Prospectus.
INTRODUCTION
The Company owns and operates 16 courses, leases four courses, leases one
driving range and pro shop facility and manages one additional course. Since
its inception in October 1992, the Company has acquired or leased seven
courses in fiscal 1993, five in fiscal 1994, seven in fiscal 1995 and entered
into a management agreement to operate one course in the six months ended
March 31, 1996. In addition, the Company acquired one course and entered into
a long term lease with respect to a second course subsequent to March 31,
1996. See "Business--Recently Completed Acquisitions." The Company's audited
financials include the results of acquired courses from their dates of
acquisition but not any period prior to such acquisition. As a result, the
Company's historical financials for any particular period do not generally
represent the full revenue and cash flow generating capability of its golf
course portfolio as of the end of such period. At March 31, 1996, 19 of the
Company's facilities had been owned or leased by the Company for the prior
twelve months.
The Company's portfolio includes nine private country clubs, eight public
facilities and five semi-private facilities. The Company seeks to achieve
continued growth in revenue and operating cash flow by continuing to improve
the financial performance of its existing courses and acquiring courses
located in attractive markets which management believes will benefit from the
Company's golf course management expertise. The Company's business consists
primarily of operating golf courses and related facilities, with revenues
generated from several golf and non-golf related activities. "Golf revenues"
primarily include initiation fees and membership dues at private country clubs
and semi-private courses, greens fees, golf cart rentals and driving range
fees. "Non-golf revenues" primarily include food and beverage concessions,
retail merchandise sales and lodging fees. Golf revenues tend to produce
higher operating income margins than non-golf revenues.
SEASONALITY
Seasonal weather conditions reduce the playing season at certain of the
Company's golf courses. As a result the second half of the Company's fiscal
year tends to account for a greater portion of the Company's operating revenue
and EBITDA than does the first half. This seasonal pattern, as well as the
timing of new course purchases or leases, may cause the Company's results of
operations to vary significantly from quarter to quarter.
CAPITAL INVESTMENT PROGRAMS
The Company frequently implements capital investment programs at its courses
in order to upgrade the facilities and complement its marketing strategy.
These programs generally consist of improvements to the golf course (e.g.
replacement of greens, remodeling, addition of nine holes) and related
facilities. These programs require up-front capital expenditures intended to
generate additional revenue and cash flow once the programs are complete.
During the last 18 months, the Company has invested approximately $19.9
million to upgrade its facilities. For example, at Morgan Run, the Company has
invested approximately $9.4 million to remodel the clubhouse, the lodge and
eighteen of the twenty-seven holes at the facility. As a result, portions of
this facility were closed from December 1994 until April 1996. The Company
completed this capital project in April 1996, and as a result, expects to
generate incremental revenues and cash flows from this facility in the future.
PRIVATE MEMBERSHIP CLUBS; ACCOUNTING TREATMENT OF INITIATION FEES
The Company's private clubs generate revenues from initiation fees, monthly
membership dues and ancillary services such as golf carts, driving range, food
and beverage and lessons. As a club increases its membership base, the monthly
membership dues stream represents a significant percentage of its revenues and
32
<PAGE>
profitability as there are no fixed cost increases and limited variable costs
associated with these incremental membership dues. During periods in which a
club is substantially increasing its members, initiation fees will represent a
greater percentage of revenues.
The Company has designed its membership programs to maximize the long-term
profitability of its clubs. A key component of this strategy is structuring
the initiation fee to have a club's members make a meaningful investment in
the club. As a result, at five of the Company's private clubs, the Company has
designed a program under which a new member will make an initial minimum
deposit of at least 25% of the initiation fee upon joining a club, with the
remaining balance to be paid in equal monthly installments over a five-year
period pursuant to a note secured by the membership. The Company has full
recourse against the member under the note.
The Company recognizes as revenue the amount of the deposit plus the amount
of the note, less a provision for doubtful accounts at the time the membership
is sold. These promissory notes generally do not bear market interest rates
and are recorded at net present value using the effective interest method. The
Company periodically reviews the collectibility of these receivables and
provides an appropriate allowance for credit losses. As a result, as of March
31, 1996, the Company has estimated a reserve of $1.8 million for possible
future bad debts. For fiscal 1995, the twelve months ended March 31, 1996 and
the six months ended March 31, 1996, non-cash initiation fees constituted
approximately 8.4%, 9.2% and 4.9%, respectively, of revenues. See "--Sources
of Revenue--Golf Related Revenue--Initiation Fees."
SOURCES OF REVENUE
The following summarizes the primary components of the Company's revenue:
GOLF RELATED REVENUE
Membership Dues. The Company's private country clubs generate a significant
percentage of their revenue from the collection of monthly membership dues
from the members. These monthly membership dues (which vary by facility)
generally represent a stable and predictable source of income because they are
independent of golf course (or other facilities) utilization, do not vary
seasonally and are derived from a loyal customer base. The Company typically
offers several different memberships, including golf and non-golf programs.
For fiscal 1995, the Company had $13.5 million in revenue from membership
dues, representing approximately 27% of total fiscal 1995 revenue.
Initiation Fees. The Company also generates a significant percentage of its
revenue from initiation fees received from new members. For fiscal 1995, the
Company had $9.6 million in revenue from initiation fees, representing
approximately 19% of total fiscal 1995 revenue. See "--Private Membership
Clubs; Accounting Treatment of Initiation Fees."
Daily Greens Fees. The Company derives revenue at public courses, semi-
private and private clubs (guest greens fees) from the payment of daily greens
fees. At public courses, these fees range from $11 to $100. At those private
courses where a daily fee is required, the fee ranges from $30 to $75. For
fiscal 1995, the Company had $9.2 million in revenue from greens fees,
representing approximately 18% of total fiscal 1995 revenue.
Golf Cart Rentals. At all of the Company's golf courses, golf carts are
available for rent for fees ranging from $9 to $12. For fiscal 1995, the
Company had $5.6 million in revenue from golf cart rentals, representing
approximately 11% of total fiscal 1995 revenue.
Driving Range Fees. The Company operates a driving range at 17 of its golf
facilities. For fiscal 1995, the Company had $1.0 million in revenue from
driving range fees, representing approximately 2% of total fiscal 1995
revenue.
33
<PAGE>
NON-GOLF RELATED REVENUES
Food and Beverage Sales. The Company's golf facilities offer food and
beverage concessions (ranging from snack bars to dining rooms, catering and
meeting and banquet facilities). For fiscal 1995, the Company had $7.0 million
in revenue from food and beverage sales, representing approximately 14% of
total fiscal 1995 revenue.
Pro Shop Sales. At each of the Company's golf courses, the Company operates
a retail pro shop. For fiscal 1995, the Company had $3.3 million in revenue
from pro shop sales, representing approximately 7% of total fiscal 1995
revenue.
Lodging Fees. The Company operates an 89-room lodge at Morgan Run Resort and
Club and a four-room lodge at Stonebridge Country Club. For fiscal 1995, the
Company had $0.7 million in revenue from lodging fees, representing
approximately 1% of total fiscal 1995 revenue.
RESULTS OF OPERATIONS
SIX MONTHS ENDED MARCH 31, 1996 COMPARED TO SIX MONTHS ENDED MARCH 31, 1995
Operating Revenues. Operating revenues increased to $27.0 million for the
six months ended March 31, 1996 from $17.0 million for the comparable period,
an increase of $10.0 million or 59.2%. Of this increase, $7.1 million is
attributable to the effect of a full six months of operations of the seven
courses acquired in the six months ended March 31, 1995 and approximately $0.9
million is associated with the operation of Morgan Run Resort and Club which
had been closed for most of that same period. The remaining $2.0 million is
attributable to increased revenues from the Company's other courses.
Course-level Operating Expenses. Course-level operating expenses, which
include costs of golf course operations (e.g., salaries, taxes and utilities),
cost of food and beverage and costs of pro shop sales increased to $19.1
million for the six months ended March 31, 1996 from $11.9 million for the
comparable period, an increase of $7.2 million or 60.9%. Course-level
operating expenses attributable to courses acquired in the six months ended
March 31, 1995 but owned for all of the six month period ended March 31, 1996
accounted for $4.8 million of this increase. Of the remaining $2.5 million,
approximately $0.8 million is attributable to costs associated with the
operation of Morgan Run Resort and Club, a portion of which had been closed
for most of the six months ended March 31, 1995, and approximately $0.4
million is attributable to increased operating lease expenses from the
sale/leaseback of Carmel Mountain Ranch Country Club during the six months
ended March 31, 1996.
General and Administrative Expenses. General and administrative expenses
primarily consist of corporate salaries and related expenses and legal and
accounting fees. General and administrative expenses increased to $1.7 million
for the six months ended March 31, 1996 from $1.2 million for the comparable
period, an increase of $0.6 million or 48.6%. General and administrative
expenses as a percentage of operating revenues decreased to 6.4% from 6.8% for
the six months ended March 31, 1996 and March 31, 1995, respectively.
Depreciation and Amortization Expense. Depreciation and amortization
expenses increased to $3.5 million for the six months ended March 31, 1996
from $2.4 million in the comparable period, an increase of $1.1 million or
46.3%. Of this increase, approximately $0.9 million is attributable to the
effect of a full six months of operations of the seven courses acquired in the
six months ended March 31, 1995.
Income from Operations. Income from operations increased to $2.7 million in
the six months ended March 31, 1996 from $1.5 million in the comparable
period, due primarily to the factors described above. Income from operations
as a percentage of operating revenues increased to 9.9% from 9.1% in the six
months ended March 31, 1996, and March 31, 1995, respectively.
34
<PAGE>
Interest Expense, Net. Interest expense, net, increased to $5.1 million for
the six months ended March 31, 1996 from $3.2 million for the comparable
period, an increase of $1.9 million or 59.7% due to the increase in the level
of outstanding bank debt resulting from a full six months of interest charges
on debt incurred to finance acquisitions during the six months ended March 31,
1995.
Provision for Income Taxes. The Company recorded a $23,400 provision for
income taxes, which reflects the fact that certain subsidiaries generate
taxable income in individual states and localities notwithstanding the
Company's consolidated loss for financial reporting purposes.
Net loss. Net loss increased to $2.5 million in the six months ended March
31, 1996 from $1.7 million in the six months ended March 31, 1995 primarily
due to the factors described above.
FISCAL YEAR ENDED SEPTEMBER 30, 1995 COMPARED TO FISCAL YEAR ENDED SEPTEMBER
30, 1994
Operating Revenues. Operating revenues increased to $49.9 million in fiscal
1995 from $24.9 million in fiscal 1994, an increase of $25.0 million or
100.3%. Of this increase, $18.2 million is attributable to the addition of
seven courses during fiscal 1995. The remaining $6.8 million increase is
attributable to the effect of a full year of operation of the five courses
acquired in fiscal 1994 and increased revenues from the Company's other
courses.
Course-level Operating Expenses. Course-level operating expenses increased
to $34.4 million in fiscal 1995 from $16.8 million in fiscal 1994, an increase
of $17.6 million or 104.7%. Of this increase, $11.9 million is attributable to
course-level operating expenses for the seven courses acquired by the Company
in fiscal 1995. Course-level operating expenses attributable to courses
acquired in fiscal 1994 but owned for all of fiscal 1995 accounted for $3.9
million of this increase. Of the remaining $1.8 million increase,
approximately $0.4 million is attributable to increased operating lease
expense from the sale/leaseback of Carmel Mountain Ranch Country Club during
1995 and approximately $0.8 million is attributable to costs associated with
the operation of Morgan Run Resort and Club, portions of which had been closed
for most of fiscal 1994.
General and Administrative Expenses. General and administrative expenses
increased to $2.5 million in fiscal 1995 from $2.0 million in fiscal 1994, an
increase of $0.5 million or 26.1%. This increase is primarily attributable to
added personnel costs and other costs associated with the acquisition of seven
courses during fiscal 1995. General and administrative expenses as a
percentage of operating revenues were 5.0% in fiscal 1995, a decrease from
8.0% in fiscal 1994.
Depreciation and Amortization Expenses. Depreciation and amortization
expenses increased to $6.1 million in fiscal 1995 from $3.5 million in fiscal
1994, an increase of $2.7 million or 77.2%. Of this increase, $1.4 million is
attributable to the addition of seven courses during fiscal 1995 and $0.6
million is attributable to the inclusion of the five courses acquired during
fiscal 1994 for a full fiscal year.
Income from Operations. Income from operations increased to $6.8 million in
fiscal 1995 from $2.6 million in fiscal 1994, primarily due to the factors
described above. Income from operations as a percentage of operating revenues
was 13.6% in fiscal 1995, an increase from 10.5% in fiscal 1994.
Interest Expense, Net. Interest expense, net, increased to $8.0 million in
fiscal 1995 from $3.5 million in fiscal 1994, an increase of $4.5 million or
128.1%, due to the increase in the level of outstanding bank debt related to
expansion through the addition of seven new courses during fiscal 1995.
Provision for Income Taxes. The Company recorded a $0.2 million provision
for income taxes, which reflects the fact that certain subsidiaries generate
taxable income in individual states and localities notwithstanding the
Company's consolidated loss for financial reporting purposes.
Net loss. Net loss decreased to $0.7 million in fiscal 1995 from $1.4
million in fiscal 1994, primarily due to the factors described above and a
$0.7 million gain on insurance settlement, representing recoveries associated
with a fire at Pecan Grove Plantation C.C. in fiscal 1995.
35
<PAGE>
FISCAL YEAR ENDED SEPTEMBER 30, 1994 COMPARED TO FISCAL YEAR ENDED SEPTEMBER
30, 1993
Operating Revenues. Operating revenues increased to $24.9 million in fiscal
1994 from $6.5 million in fiscal 1993, an increase of $18.4 million or 282.5%.
Of this increase, $8.7 million is attributable to the addition of five courses
during fiscal 1994. The remaining $9.7 million increase is attributable to the
effect of a full year of operation of the seven courses acquired in fiscal
1993.
Course-level Operating Expenses. Course-level operating expenses increased
to $16.8 million in fiscal 1994 from $4.2 million in fiscal 1993, an increase
of $12.6 million or 302.0%. Of this increase, $5.6 million is attributable to
course-level operating expenses for the five courses acquired by the Company
in fiscal 1994. Course-level operating expenses attributable to courses
acquired in 1993 but owned for all of fiscal 1994 accounted for $7.0 million
of this increase.
General and Administrative Expenses. General and administrative expenses
increased to $2.0 million in fiscal 1994 from $1.6 million in fiscal 1993, an
increase of $0.4 million or 23.3%. This increase is primarily attributable to
added personnel costs and other costs associated with the acquisition of five
courses during fiscal 1994. General and administrative expenses as a
percentage of operating revenues was 8.0% in fiscal 1994, a decrease from
24.9% in fiscal 1993.
Depreciation and Amortization Expenses. Depreciation and amortization
expenses increased to $3.5 million in fiscal 1994 from $0.8 million in fiscal
1993, an increase of $2.6 million or 320.3%. Of this increase, $1.1 million is
attributable to the addition of five courses during fiscal 1994 and $1.2
million is attributable to the inclusion of the seven courses acquired during
fiscal 1993 for a full fiscal year.
Income from Operations. Income from operations increased to $2.6 million in
fiscal 1994 from a loss of $0.1 million in fiscal 1993, primarily due to the
factors described above. Income from operations as a percentage of operating
revenues was 10.5% in fiscal 1994.
Interest Expense, Net. Interest expense, net, increased to $3.5 million in
fiscal 1994 from $0.5 million in fiscal 1993, an increase of $3.0 million or
563.7%, due to the increase in the level of outstanding bank debt related to
expansion through the addition of five new courses during fiscal 1994.
Provision for Income Taxes. The Company recorded a $71,931 provision for
income taxes, which reflects the fact that certain subsidiaries generate
taxable income in individual states and localities notwithstanding the
Company's consolidated loss for financial reporting purposes.
Net loss. Net loss increased to $1.4 million in fiscal 1994 from $0.9
million in fiscal 1993, primarily due to the factors described above.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary uses of cash are to fund debt service and maintenance
capital expenditures at its existing facilities (such as landscaping and
purchasing golf cart fleets). The Company also implements one-time upgrade and
renovation capital expenditures at its existing facilities in order to enhance
its appeal to customers and members and to generate additional revenues and
cash flow. Examples of these expenditures are the addition of courses
(including nine hole additions) to existing facilities to increase capacity
and major clubhouse renovations to support increased dues and fees. These
expenditures are generally of a non-recurring nature. In addition, the Company
implements strategic capital expenditure programs which enable it to reduce
course level operating costs and improve the efficiency of operations, such as
improving the irrigation system, acquiring more efficient maintenance
equipment and other programs which enhance the marketability and/or reduce the
operating expenses of existing facilities. As part of its business strategy,
the Company will require cash to continue to acquire, lease or manage
additional golf courses and the related facilities and to complete any
targeted renovations. As of March 31, 1996, the Company had approximately $3.0
million of long-term commitments for one-time capital expenditures with
respect to one recently acquired golf course. The Company's capital
expenditures budget for fiscal 1996 is $8.0 million, excluding acquisitions
and related capital expenditures, of which $4.8 million had been spent through
March 31, 1996.
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<PAGE>
Based upon the current level of operations and anticipated growth, the
Company believes that cash flow from operations, together with available
borrowings under the New Credit Facility and other sources of liquidity, will
be adequate to meet the Company's anticipated future requirements for working
capital, capital expenditures and scheduled payments of principal and interest
on its indebtedness, including the Notes. There can be no assurance, however,
that the Company's business will generate sufficient cash flow from operations
or that future working capital borrowings will be available in an amount
sufficient to enable the Company to service its indebtedness, including the
Notes, or make necessary capital expenditures.
The Company intends to fund these expenditures primarily with operating cash
flow and borrowings under the New Credit Facility. The New Credit Facility
provides for borrowings of up to $50.0 million, of which $45.0 million is
available to fund future acquisitions of golf courses and capital expenditures
at such courses and certain capital improvements at existing courses, and
$5.0 million of which is available for general working capital purposes. The
total borrowing availability under the $45.0 million portion of the New Credit
Facility will decrease over the term of the facility beginning September 30,
1998. The New Credit Facility provides that the Company may not make any
acquisitions or upgrade capital expenditures when Funded Debt plus certain
projected upgrade capital expenditures is greater than 6.5x of Adjusted EBITDA
(each as defined in the New Credit Facility), with certain adjustments for
notes receivable, reducing over time. This 6.5x Funded Debt to Adjusted EBITDA
test is reduced in subsequent years. The New Credit Facility also imposes
other limitations on the ability of the Company with respect to borrowings. In
addition, as set forth under "Consolidated Capitalization," as adjusted for
the Offerings and the application of the estimated net proceeds therefrom, the
Company had approximately $7.9 million of cash on hand to meet its working
capital and other needs. See "Description of New Credit Facility" and
"Consolidated Capitalization."
Historically, the Company has financed its operations through borrowings
under the Old Credit Facility and equity contributions by its stockholders. As
of March 31, 1996, the Partnership and Holdings' other stockholders have
invested a total of $46.3 million of equity to fund the expansion of the
Company and its golf course portfolio. Proceeds of the Unit Offering were
contributed by Holdings to the Company as equity, increasing the total equity
raised by the Company and Holdings since inception to approximately $75.4
million.
For the six months ended March 31, 1996, net cash used by operating
activities was $1.2 million versus $3.5 million provided from operations in
the prior comparable period. The largest components of this change are changes
in accounts payable and accrued liabilities related to income tax payments,
trade payables payments and retiring construction-related liabilities. The
Company generated $2.3 million and $1.9 million of cash from operations in
fiscal 1995 and 1994, respectively. During fiscal 1995, changes in notes
receivable and accounts receivable resulted in a $5.2 million use of funds.
Approximately $4.2 million is attributable to increases in notes receivable,
and the remainder is due to increases in accounts receivable. See "--Private
Membership Clubs; Accounting Treatment of Initiation Fees." In fiscal 1994,
the largest non-cash charges were depreciation and amortization and the loss
resulting from the Company's early retirement of debt obligations.
During the six months ended March 31, 1996, the Company made $4.8 million in
capital expenditures compared with $8.7 million in the prior comparable
period. In the six months ended March 31, 1995 and fiscal 1995, the Company
expended $41.2 million on the acquisition of a total of seven facilities. In
addition, the Company expended $17.7 million and $7.7 million in fiscal 1995
and fiscal 1994, respectively, for one-time upgrades at courses designed to
generate increased revenues and cash flows. The Company expended over
$23.9 million in fiscal 1994 on the acquisition of five facilities.
The Company relied upon bank borrowings of $8.3 million, $31.1 million,
$37.6 million and $46.3 million to finance its expansion in the six months
ended March 31, 1996, the six months ended March 31, 1995, fiscal 1995 and
fiscal 1994, respectively. Holdings contributed to the Company $12.6 million
of the proceeds of a private placement of equity securities in March 1995. The
Company also relies upon capital leases when consistent with its financing
objectives.
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<PAGE>
BUSINESS
GENERAL
The Company is one of the leading golf course owners and operators in the
United States, with a current portfolio of 22 golf properties including both
private country clubs and public (or daily fee) courses. The Company's courses
are concentrated in clusters near metropolitan areas in the Sunbelt states
(including Arizona, California and Texas) which have large golfing populations
and attractive climates. This clustering strategy enables the Company to
efficiently manage its portfolio of courses and improve the profitability of
its courses by sharing many administrative functions and capitalizing on joint
marketing opportunities and economies of scale.
The Company's business consists primarily of operating golf courses and
related facilities, with revenue generated from initiation fees and dues at
private country clubs and semi-private courses, greens fees, food and beverage
concessions, golf cart rentals, retail merchandise sales, driving range fees
and lodging fees. The Company owns and operates 16 courses, leases four
courses (subject to long-term leases in excess of 20 years, including
extension options), leases one driving/range and pro shop facility and manages
one additional course. The Company's portfolio includes nine private country
clubs, eight public facilities and five semi-private facilities.
There are approximately 15,000 golf courses in the United States, which
generate approximately $15 billion in annual revenue. The ownership and
operation of golf courses in the United States is highly fragmented, with less
than 5% of golf courses owned and operated by multi-course management
companies. The Company believes that the majority of golf course operators,
including real estate developers and municipalities, are generally involved in
golf course management because the golf course is an important component of
their development or community, but that such operators do not have
professional golf course management experience. As a result, owners are often
interested in selling the golf facilities to third-party operators such as the
Company. These owners frequently place significant emphasis on experience and
reputation for quality management in selecting an owner/operator, and the
Company believes that its reputation in these areas has provided it with a
steady supply of attractive acquisition opportunities.
INDUSTRY OVERVIEW
There are three general types of golf courses: daily fee courses, private
country clubs and resort courses. Approximately two-thirds of the courses in
the United States are public, or daily fee, courses, and approximately one-
third are private country club or resort courses. Public courses derive
revenue primarily from greens fees, golf cart rentals, retail (pro shop) sales
and food and beverage sales. Because the majority of golf course operating
costs are fixed, revenue and operating profit are generally maximized at
public courses by generating the maximum number of golf rounds played. Private
courses derive revenue primarily from initiation fees, monthly membership
dues, guest greens fees and food and beverage sales. Revenue and operating
profit are maximized at private courses by maximizing the number of membership
sales and the associated monthly dues cash flow stream. In addition, certain
semi-private courses offer limited access to the golf facilities to the public
in order to maximize revenue.
The Company believes certain demographic characteristics will increase the
demand for golf in the future, thereby benefitting golf course operators.
Accordingly, the Company believes that total rounds played will increase as
the golfing population ages. The highest golf participation rates are found
among individuals aged 18 to 49, which had average participation rates of
approximately 13.6% in 1995, as compared to 11.6% for the population as a
whole. However, individuals over 50 played a substantially greater number of
rounds of golf per year relative to individuals in other age brackets.
Accordingly, assuming that golf participation rates of 18 to 49 year old
golfers remain at current levels, the Company believes that these 18 to 49
year old golfers will increase
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<PAGE>
the number of rounds played per year as they age. See "Risk Factors--Factors
Affecting Golf Participation." The following table summarizes the breakdown of
all golfers during 1995 by certain key demographic categories:
<TABLE>
<CAPTION>
ANNUAL
NUMBER OF GOLF AVERAGE
GOLFERS % OF TOTAL PARTICIPATION IN ROUNDS % OF TOTAL
AGE GROUP (YEARS) (IN THOUSANDS) GOLFERS CATEGORY PER GOLFER ROUNDS
----------------- -------------- ---------- ---------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
12-17 2,001 8.0% 8.6% 13.9 5.7%
18-29 5,263 21.0 12.1 11.8 12.7
30-39 6,748 27.0 15.2 13.3 18.3
40-49 4,762 19.0 13.0 17.1 16.6
50-59 2,694 10.8 11.1 25.3 13.9
60-64 933 3.7 9.2 38.4 7.3
65+ 2,621 10.5 7.8 47.8 25.5
</TABLE>
According to the NGF, the 25.0 million golfers in the United States played
approximately 490 million rounds of golf during 1995. A substantial majority
of these rounds were played by core golfers (those that play more than eight
rounds per year). Core golfers represented approximately 46% of total golfers
in 1995 but played approximately 87% of the total rounds. The Company targets
these core golfers. The following table summarizes the breakdown of the core
and other golfers during 1995:
<TABLE>
<CAPTION>
NUMBER OF
GOLFERS ROUNDS PLAYED
(IN THOUSANDS) (IN MILLIONS) ROUNDS/GOLFER
--------------- -------------- -------------
<S> <C> <C> <C>
Core Golfers................. 11,581 425.5 36.7
Other Golfers................ 13,431 64.7 4.8
</TABLE>
Core golfer participation is also more constant across age categories. The
following table summarizes core golfer participation in 1995 by age category:
<TABLE>
<CAPTION>
NUMBER OF
CORE GOLFERS PERCENTAGE OF
AGE GROUP (YEARS) (IN THOUSANDS) CORE GOLFERS
----------------- -------------- -------------
<S> <C> <C>
18-29 2,126 18.4%
30-39 2,908 25.1
40-49 2,256 19.5
50-59 1,631 14.1
60-64 675 5.8
65+ 1,985 17.1
</TABLE>
The Company believes that, despite recent golf course construction in some
of its markets, golf course construction in its markets generally has been
constrained as a result of several factors, including the lack of capital
available for real estate development, the significant land required to build
a golf course and related facilities (approximately 150 acres) and increasing
environmental regulation, particularly with regard to the availability of
water in Arizona and California, two of the Company's primary markets.
BUSINESS STRATEGY
The Company's strategy is to grow its revenue and cash flow by (i) improving
operations and financial performance of its existing portfolio golf courses by
increasing revenue, controlling operating costs and selectively upgrading the
facilities and (ii) identifying and acquiring courses which will benefit from
the Company's management expertise. Key elements of the Company's operating
strategy include:
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<PAGE>
INCREASE REVENUE
Attracting New Members. The Company aggressively markets its courses within
the local community in order to increase memberships at its private clubs. The
Company positions the golf course and related facilities as an integral social
center of the surrounding community by hosting social, educational and
recreational events, in order to attract non-golfing members. In order to
attract these "social" members, the Company often provides facilities for
community events and charitable organizations, as well as swimming, tennis and
fitness facilities, particularly at those courses that are part of a real
estate development. The Company also tailors the membership program to the
facility, including offering multiple types of memberships (e.g., senior,
junior, weekday golf only, tennis, swimming, social, etc.). For example, at
the Hills of Lakeway, the Company created a new category of membership called
the "Premier Sports Membership," which allows the member to use the facility
for social purposes and limited golf play. This membership entitles the member
to 12 rounds of golf a year at non-prime tee times for a reduced guest fee.
The Premier Sports Membership is designed to appeal to the occasional golfer
who wants to join a private country club without paying the full initiation
fee and membership dues typically associated with such clubs.
Maximizing Tee Time Utilization. The Company seeks to increase revenue by
expanding the capacity of its public facilities. The Company frequently
implements several simple measures, such as opening seven days a week, opening
earlier in the morning or starting golfers on both the first and tenth holes
simultaneously. The Company also attempts to schedule tournament play into
less popular tee times; provide incentives for members of semi-private courses
to play on weekdays, thereby opening up prime weekend time for fully-priced
public play; and charge premium prices for prime tee times while discounting
prices for less utilized times (e.g., twilight play). For example, at Carmel
Mountain Ranch, the tournament salesperson has financial incentives to
schedule tournaments during non-prime tee times (e.g., weekend afternoon),
thereby increasing course utilization while minimizing inconvenience to
regular weekend golfers.
Market Positioning. The Company undertakes a comprehensive review of local
competition, identifying market rates for initiation fees and membership dues,
greens fees, guest and cart fees, private cart policies, and other key revenue
generators. In many cases, the Company is able to increase revenue merely by
raising prices to reflect market conditions and the course improvements
implemented by the Company's management. For example, at Morgan Run, the
Company has raised monthly dues from $195 to $300 over two years, resulting in
an increase in annual membership dues revenue of approximately $400,000.
Appeal to Core Golfing Population. The Company targets core golfers in its
markets (defined by the NGF to be golfers who play more than eight rounds per
year). These golfers represent approximately 46% of the golfers in the United
States but play approximately 87% of the rounds. The Company believes that
core golfers represent a stable demand for golf and are generally more willing
to make a significant investment in a golf club membership and pay higher
greens fees than the golfing population as a whole. These golfers also tend to
spend more time at a golf facility and therefore generate higher ancillary
revenues.
Facilities Upgrades. Following its acquisition of a golf course, the Company
generally upgrades or improves the facility in order to significantly improve
its appeal to customers and members. Where appropriate, the Company adds
additional courses (including nine hole additions) to existing facilities to
increase course capacity and utilization and invests in major clubhouse
renovations to support increased dues and fees. These expenditures are
generally non-recurring. For example, the Company re-engineered the water flow
at Woodcrest Country Club so that heavy rains would not soak certain areas of
the course. In the past, a heavy rain could close Woodcrest for thirty days or
more, but since the re-engineering, rain has not closed the course for more
than four consecutive days. Additionally, in November 1994 the Company
completed the addition of nine holes to The Trophy Club, bringing the facility
to 36 holes. The Company believes that this addition increases golf membership
capacity from 900 to 1,200 members.
Focus on Non-Golf Operations. The Company also focuses significant effort on
non-golf operations. The Company offers non-golf memberships where additional
facilities (such as swimming, tennis or fitness facilities)
40
<PAGE>
are available, promotes merchandise sales, provides on-course concessions to
boost food and beverage sales, and offers catering and meeting and banquet
facilities for members.
REDUCE OPERATING COSTS
Reducing Administrative Overhead. The Company continually seeks
opportunities to improve its margins by consolidating administrative functions
and eliminating duplicative personnel at its courses in order to reduce
operating costs. For example, after acquiring Pecan Grove, the Company reduced
the general and administrative staff, thereby reducing operating expenses by
approximately $75,000 per year.
Economies of Scale. As a multi-course operator, the Company is able to
achieve overhead and operating savings not available to owners of individual
properties. For example, the Company employs regional marketing staffs to
serve the courses in a cluster group, and is often able to eliminate an
accounting position at the course level by substituting a corporate controller
who has responsibility for multiple courses. In addition, insurance policies
for many properties, particularly those that are part of a geographical
cluster, can be consolidated under a master insurance policy. The Company's
volume purchasing ability also enables it to achieve savings not available to
smaller buyers in the purchase of almost all retail merchandise and
maintenance equipment.
Facilities Upgrades. In addition to implementing facilities improvements in
order to generate increased revenues, the Company also makes capital versus
operating expense decisions based on known economic trade-offs. The Company
attempts to identify strategic opportunities to invest relatively small
amounts of capital in maintenance equipment in order to improve the facility
and simultaneously reduce labor or other operating expenses. For example, at
Carmel Mountain Ranch, the Company invested approximately $100,000 to upgrade
the irrigation control system, resulting in a better maintained course and the
realization of approximately $30,000 in annual operating savings.
Managing Water Costs. At many of its courses, water is a significant
component of operating costs. The Company ensures that its irrigation systems
are as efficient as possible, and explores alternatives to reduce the cost of
water. For example, where possible, the Company uses treated effluent water or
constructs wells, rather than utilize more expensive municipal water for
course irrigation. For example, concurrently with the closing of the
acquisitions of Foothills and Ahwatukee, the Company acquired additional water
rights that allow the Company to use wells to provide substantially all the
required water for such courses.
ACQUISITIONS
The Company is continually involved in the investigation and evaluation of
potential golf course acquisitions and at any time may be discussing possible
transactions, conducting due diligence investigations or otherwise pursuing
acquisition opportunities. The Company's growth strategy is partly driven by
its ability to expand its portfolio of courses.
The Company conducts extensive due diligence when considering acquisition
candidates in order to evaluate the potential financial performance of a given
golf course. The principal criteria considered in the evaluation include
course location, the population size and demographics of the surrounding area,
the number of tourists visiting a market per year and the number of rounds of
golf played by these tourists, course condition, reputation among customers
and/or members, current operating efficiency and local competition.
During the evaluation of a potential acquisition, the Company considers
carefully the ease of access to the course, the conditions and appeal of the
immediately surrounding land, the proximity of the competition and the
climatic conditions which affect both potential revenue as well as the cost of
maintaining the course. The population base of the surrounding metropolitan
area must be large enough to support both the potential acquisition as well as
its competition. If the acquisition candidate is a resort-oriented course, the
Company also evaluates the size of and trends in the tourist population. The
demographic make-up of the population must be such that a sufficient number
and density of golfers are present. In its evaluation of the operating
potential of a
41
<PAGE>
course, the Company looks for correctable operational deficiencies, potential
facility improvements which can be made with a moderate amount of capital
investment and which have a high likelihood of enhancing revenue and reducing
costs, as well as deficiencies in the course's position and reputation in the
market which can benefit from a cohesive marketing program. The competition is
evaluated by examining the condition and appeal of the local courses, the
position and reputation in the local market and the likely potential
clientele, and finally, the price points at which the competition operates. In
addition, prior to acquiring a given course, the Company meets with private
club members or forms public course focus groups to discuss the potential
acquisition and major anticipated changes in order to ensure a smooth
transition in ownership.
In addition to the criteria outlined above, the Company incorporates
specific analyses which are dependent upon whether the course is private or
public. At a private course, the set of considerations revolves around the
type of members the course targets, and the potential to increase dues or
offer valuable additional facilities such as banquet rooms, meeting rooms,
tennis, fitness facilities and child-care in order to expand membership. At a
daily fee course, a course may be significantly improved by adjusting greens
fees to market level, by adding amenities such as golf cart rental facilities,
improving the pro shop, implementing marketing programs or by promoting
tournament play.
The following summarizes the primary components of the Company's acquisition
strategy:
Clustering of Courses. The Company seeks to acquire courses in its existing
geographic clusters, or to form new clusters near densely populated
metropolitan markets. The clustering strategy is designed to facilitate
management and marketing and improve the profitability of each course because
of the ability to share administrative and operating expenses. In addition,
clustering allows the Company to operate facilities with fewer on-site
management personnel by consolidating several course-level management jobs or
eliminating them altogether in favor of a single regional or headquarters
position. For example, a cluster provides cross-marketing opportunities such
as exchanging play privileges, advertising multiple properties in a single
campaign and promoting tournament play at a course within the cluster.
Focus on Private Country Clubs and High-End Daily Fee Courses. The Company
focuses on acquiring private country clubs and high-end daily fee courses
which attract core golfers in middle and upper-income brackets who are less
price sensitive than the typical public course player. Revenue and cash flows
of private country clubs are generally more stable and predictable than those
of public courses because the receipt of membership dues is independent of the
level of course utilization. In addition, private courses have an easily
identifiable target population which enables a targeted and efficient
marketing effort, particularly if the course is part of a larger residential
development. The typical Cobblestone daily fee course commands higher greens
fees than the average municipal course in its market.
Reputation with Real Estate Developers. Cobblestone has focused on acquiring
courses from real estate developers who have built golf courses primarily as
an enhancement to their residential real estate developments. The Company
believes that its experience and reputation for quality management provide it
with a steady supply of attractive acquisition opportunities from developers
seeking third party owner/operators to professionally manage the facilities.
Focus on Favorable Golf Markets. The Company targets golf courses in markets
with characteristics which it believes are favorable to golf course ownership
and management. For example, the Company concentrates on acquiring courses
convenient to metropolitan areas with dense populations but relatively few
golf courses in relation to the size of the golfing population. In addition,
the Company focuses on markets with a high number of playable days per year,
enabling the Company to maximize revenue and course utilization and thereby
capitalize on the operating leverage inherent in golf course management.
To date, the Company primarily has targeted acquisitions in the Sunbelt
markets. Maximizing revenue is an important component of profitability due to
the high fixed cost nature of golf course operation, and these markets
typically have minimal weather risks and a high number of playable days per
year (i.e. high capacity). For
42
<PAGE>
instance, the number of playable days in Southern California averages
approximately 350, as compared to approximately 200 in the upper Midwest.
Thus, average rounds played per course in the Arizona and California markets
are substantially greater than the national average of approximately 33,000
rounds. Additionally, greens fee pricing in these markets tends to be higher
than the national average because of shortages of supply relative to demand
and the impact of tourists on pricing. Seasonal tourists have fairly inelastic
demand because greens fees represent only a relatively small portion of
overall vacation expenses. Furthermore, age demographics in the Sunbelt
markets and the abundance of retirees with ample leisure time contribute to a
high demand for golf.
RECENTLY COMPLETED ACQUISITIONS
Subsequent to March 31, 1996, the Company completed two additional
acquisitions as a part of its ongoing acquisition strategy. On June 28, 1996,
the Company acquired Eagle Crest Golf Club in the San Diego, California area.
Eagle Crest is a daily fee golf facility with an 18-hole David Rainville-
designed course, as well as a clubhouse, food and beverage facilities and pro
shop. Eagle Crest is located in a master plan development which is expected to
include over 700 single family homes at completion. In addition, on July 1,
1996, the Company entered into a 15 year lease of the Sweetwater Country Club
near Houston, Texas. Sweetwater is a private country club with a 36-hole Roger
Packard-designed course, as well as a clubhouse, food and beverage facilities,
pro shop, indoor and outdoor swimming pools, fitness center (including indoor
basketball and squash courts) and both indoor and outdoor tennis courts.
MARKETING/MEMBERSHIP PROGRAMS
The Company's marketing programs are designed to capitalize on the economies
of scale provided by its clustering strategy. Marketing efforts for daily fee
properties primarily consist of co-op advertising directed at maximizing tee-
time utilization. Special promotions such as junior programs and special event
sales are geared toward attracting new customers and maximizing utilization at
off-peak hours. The Company also utilizes on-line reservation systems to
create greater accessibility for its customers, including allowing a customer
to reserve a tee-time at any of the Company's public courses within a cluster
through a central reservation number. Additionally, the Company has created an
interactive web-site on the Internet that enables customers to e-mail tee-time
requests within a given cluster market.
Private country club marketing programs are implemented by professional
sales personnel focusing on goal-oriented sales plans. Proactive membership
sales efforts are targeted at local developers, realtors and corporations
within specific cluster markets together with more traditional member referral
sales programs. The Company also uses its initiation fee structure to target
residents of its golf communities. This initiation fee structure allows
members to make a meaningful investment in the club while amortizing the
payment of the balance of the membership fee over a five-year period. The
Company also strives to increase other private club revenues by positioning
the club as a center of social and recreational activity for the entire
family. For example, the Company provides extensive activities calendars to
ensure a wide range of activities and increased participation from family
members in all areas of the club.
COMPETITION
The Company competes for members and players with existing golf courses.
Where the Company's courses are membership courses which are part of a housing
development project, competition is often limited. At those courses where
there is significant competition from other golf courses, the Company believes
that it competes less on the basis of price than on the overall quality of its
facilities, which is a function of customer service, the quality and the state
of maintenance of the facilities as well as available amenities.
The Company believes it and its management enjoy a favorable reputation in
the industry. The Company principally competes for the acquisition of golf
courses on a national level with a small number of national golf course
management companies, which include National Golf Properties, Inc. (a
publicly-traded real estate investment trust) and Club Corporation
International and for the lease and/or management of golf courses on a
national level with American Golf Corporation and Club Corporation
International. The Company also competes on a local level with several
smaller, regional companies.
43
<PAGE>
SUMMARY OF GOLF COURSE PORTFOLIO
Market and Design Data. The following tables set forth certain information
regarding the Company's golf course properties, including a description of
each course, a summary of the facilities and services available and a
comparison of operations data for each course.
<TABLE>
<CAPTION>
DATE
ACQUIRED
TYPE OF GOLF COURSE BY
COURSE NAME LOCATION OPERATION TYPE OF COURSE ARCHITECT COBBLESTONE(1)
- ----------------------- ------------------- --------- -------------------- -------------------------- --------------
<S> <C> <C> <C> <C> <C>
Southern California
Courses
Balboa Park G.C. San Diego, CA Leased (2) William Park Bell 3/93
Carmel Mountain Ranch
C.C. San Diego, CA Leased 18 Hole public Ron Fream 7/93
Morgan Run Resort and
Club Rancho Santa Fe, CA Owned 27 Hole semi-private David Rainville/Jay Morish 6/93
El Camino C.C. Oceanside, CA Owned 18 Hole private William Park Bell 6/93
Red Hawk G.C. Temecula, CA Managed 18 Hole public Ron Fream 10/95
Saticoy Regional G.C. Ventura, CA Leased 9 Hole municipal George Thomas 3/93
The Vineyard at
Escondido Escondido, CA Leased 18 Hole municipal David Rainville 12/93(3)
Eagle Crest Golf Club Escondido, CA Owned 18 Hole public David Rainville 6/96
Phoenix Courses
Ahwatukee C.C. Phoenix, AZ Owned 18 Hole semi-private Gary Panks 7/94
The Lakes at Ahwatukee Phoenix, AZ Owned 18 Hole public Gary Panks 7/94
The Foothills G.C. Phoenix, AZ Owned 18 Hole public Tom Weiskopf/Jay Morish 1/93
Red Mountain Ranch C.C. Mesa, AZ Owned 18 Hole semi-private Pete Dye 12/94
Texas-Austin Courses
Hills of Lakeway(4) Austin, TX Owned 18 Hole private Jack Nicklaus 3/95
Live Oak Golf Course(4) Austin, TX Owned 18 Hole semi-private Leon Howard 3/95
Yaupon Golf Course(4) Austin, TX Owned 18 Hole semi-private Leon Howard 3/95
Texas-Dallas Courses
Stonebridge C.C. Mc Kinney, TX Owned 18 Hole private Pete Dye 12/94
The Ranch C.C. Mc Kinney, TX Owned 18 Hole private Arthur Hills 12/94
The Trophy Club Trophy Club, TX Owned 36 Hole private Ben Hogan/Arthur Hills 12/93
Woodcrest C.C. Dallas, TX Owned 18 Hole private Don January 3/93
Other Courses
Brandermill C.C. Richmond, VA Owned 18 Hole private Gary Player 2/95
Pecan Grove Plantation
C.C. Richmond, TX Owned 27 Hole private Carlton Gipson 2/94
Sweetwater C.C. Sugar Land, TX Leased 36 Hole private Roger Packard 7/96
</TABLE>
- ---------------------
(1) Represents the date acquired by Cobblestone or, if different, the date
Cobblestone commenced operations of the courses.
(2) The Company operates a driving range, pro shop and golf cart rental
facility in connection with an 18-hole public course operated by the City
of San Diego.
(3) The Vineyard at Escondido was constructed by the Company and commenced
operations in December 1993.
(4) The Company owns a tennis facility (the World of Tennis) and a golf
practice and instruction facility (the Academy of Golf) which are
components of these Austin facilities.
44
<PAGE>
Facilities and Services
<TABLE>
<CAPTION>
DRIVING FOOD & FITNESS
COURSE NAME RANGE CARTS CLUBHOUSE BEVERAGE PRO SHOP POOL TENNIS LODGING CENTER
- ----------------------- ------- ----- --------- -------- -------- ---- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Southern California
Courses
Balboa Park G.C. Yes Yes Yes Yes Yes
Carmel Mountain Ranch
C.C. Yes Yes Yes Yes Yes
Morgan Run Resort and
Club Yes Yes Yes Yes Yes Yes Yes Yes Yes
El Camino C.C. Yes Yes Yes Yes Yes Yes Yes Yes
Red Hawk G.C. Yes Yes Yes Yes
Saticoy Regional G.C. Yes Yes Yes Yes
The Vineyard at
Escondido Yes Yes Yes Yes Yes
Eagle Crest Golf Club Yes Yes Yes Yes Yes
Phoenix Courses
Ahwatukee C.C. Yes Yes Yes Yes Yes
The Lakes at Ahwatukee Yes Yes Yes
The Foothills G.C. Yes Yes Yes Yes Yes
Red Mountain Ranch C.C. Yes Yes Yes Yes Yes Yes Yes Yes
Texas-Austin Courses
Hills of Lakeway Yes Yes Yes Yes Yes Yes Yes Yes
Live Oak Golf Course Yes Yes Yes Yes Yes
Yaupon Golf Course Yes Yes Yes
Texas-Dallas Courses
Stonebridge C.C. Yes Yes Yes Yes Yes Yes Yes Yes Yes
The Ranch C.C. Yes Yes Yes Yes Yes Yes Yes
The Trophy Club Yes Yes Yes Yes Yes Yes Yes
Woodcrest C.C. Yes Yes Yes Yes Yes Yes
Other Courses
Brandermill C.C.,
Richmond, VA Yes Yes Yes Yes Yes Yes Yes
Pecan Grove Plantation
C.C., Richmond, TX Yes Yes Yes Yes Yes Yes Yes Yes
Sweetwater C.C., Sugar
Land, TX Yes Yes Yes Yes Yes Yes Yes Yes
</TABLE>
ORGANIZATIONAL STRUCTURE
The Company generally owns and operates each of its facilities through a
separate subsidiary. All of the Company's subsidiaries are directly or
indirectly wholly-owned except for (i) Cobblestone Texas, Inc., (which owns
and operates The Trophy Club) which is 95% owned by the Company and 5% owned
by a former owner, (ii) Ocean Vista Land Company, (which is a holding company
whose sole assets are (a) 100% of the capital stock of Oceanside Golf
Management Corp., which owns and operates El Camino Country Club, and (b) a
50% equity interest in Whispering Palms Country Club Joint Venture, which owns
and operates Morgan Run Resort and Club) which is 96% owned by the Company and
4% owned by former owners, and (iii) Golf Course Inns of America Inc., (which
is a holding company whose sole asset is a 50% equity interest in Whispering
Palms Country Club Joint Venture) which is 96% owned by the Company and 4%
owned by former owners.
EMPLOYEES
As of March 31, 1996 the Company employed approximately 1,395 persons. The
Company believes that its employee relations are good. None of the Company's
employees are represented by a labor union.
GOVERNMENTAL REGULATION
Environmental Matters. Operations at the Company's golf courses involve the
use and storage of various hazardous materials such as herbicides, pesticides,
fertilizers, motor oil and gasoline. Under various federal, state and local
laws, ordinances and regulations, an owner or operator of real property may
become liable for the costs of removing such hazardous substances that are
released on or in its property and for remediation of its property.
45
<PAGE>
Such laws often impose liability regardless of whether a property owner or
operator knew of, or was responsible for, the release of hazardous materials.
In addition, the presence of such hazardous substances, or the failure to
remediate the surrounding soil when such substances are released, may
adversely affect the ability of a property owner to sell such real estate or
to pledge such property as collateral for a loan. Prior to acquiring golf
courses, it is the Company's practice to commission preliminary environmental
assessments ("Phase I assessments") to evaluate the environmental condition
of, and potential environmental liabilities associated with, such properties.
Phase I assessments generally consist of an investigation of environmental
conditions at the subject property (not including soil or groundwater sampling
or analysis), as well as a review of available information regarding the site
and conditions at other sites in the vicinity. The Phase I assessments have
not revealed any environmental liability that the Company's management
believes would have a material adverse effect on the Company's business,
assets or results of operation, and the Company believes that it is in
material compliance with all environmental laws, ordinances and regulations
applicable to its properties and operations. No assurance, however, can be
given that the Phase I assessments reveal all potential environmental
liabilities or that such environmental liabilities, whether or not material,
may not arise in the future.
General. The Company is subject to the Fair Labor Standards Act and various
state laws governing such matters as minimum wage requirements, overtime and
other working conditions and citizenship requirements. A significant number of
the Company's golf course personnel receive the federal minimum wage, and
increases in the minimum wage would increase the Company's labor costs. In
addition, the Company is subject to certain state "dram-shop" laws, which
provide a person injured by an intoxicated individual the right to recover
damages from an establishment that wrongfully served alcoholic beverages to
the intoxicated individual. The Company is also subject to the Americans with
Disabilities Act of 1990, which, among other things, may require certain minor
renovations to various clubhouses at the Company's properties to meet
federally mandated access and use requirements. The cost of these renovations
is not expected to be material to the Company. The Company believes it is
operating in substantial compliance with applicable laws and regulations
governing its operations.
LEGAL PROCEEDINGS; INSURANCE
From time to time, lawsuits are filed against the Company in the ordinary
course of business. The Company is not a party to any litigation that, in the
judgment of management after consultation with counsel, is likely to have a
material adverse effect on the Company or its business. The Company carries
property and casualty insurance and insurance under umbrella policies in such
amounts and with such coverages as the Company believes to be adequate.
46
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the names, ages as of April 30, 1996, and a
brief account of the business experience of each person who is a director or
executive officer of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
James A. Husband........ 46 Director, President and Chief Executive Officer
Stefan C. Karnavas...... 33 Vice President, Chief Financial Officer, Treasurer and Secretary
Gary L. Dee............. 48 Vice President, Operations
Joseph H. Champ......... 38 Vice President, Acquisitions
Andrew Crosson.......... 35 Vice President, Acquisitions
Norm Goodmanson......... 47 Vice President, Development
Robert S. West, Jr. .... 52 Vice President, Golf Operations
Thomas Delaney, Jr. .... 38 Vice President, Design & Construction
Frederick J. Warren..... 56 Director
David H. Wong........... 32 Director
P.L. Davies III......... 34 Director
Martin R. Reid.......... 53 Director
John M. Sullivan........ 60 Director
</TABLE>
JAMES A. HUSBAND founded the Company in October 1992. From October 1992 to
the present, Mr. Husband has served as the Company's President and Chief
Executive Officer and as a Director. Mr. Husband has 20 years of golf course
operations and acquisitions experience. Prior to founding the Company and
since April 1, 1977, Mr. Husband was a founder, Chairman and Chief Executive
Officer of a company which ultimately became known as CCA GolfCorp, which
became the public golf operations subsidiary of Club Corporation of America
(now known as Club Corporation International). Mr. Husband has been a Class A
member of the PGA of America since 1977 and was a PGA Tour member in 1978 and
1979. While at GolfCorp, Mr. Husband served on the Board of Directors of
ClubCorp of America. Mr. Husband graduated from California State University in
Northridge in 1972 with a Bachelor of Science degree in Business
Administration.
STEFAN C. KARNAVAS joined the Company as Vice President, Chief Financial
Officer, Treasurer and Secretary in April 1996. Prior to joining the Company
and since August 1993, Mr. Karnavas was Treasurer and Director of Development
of Horizon Cellular Telephone Company, L.P. ("Horizon"). From December 1992 to
August 1993, he served as Horizon's Assistant Treasurer. From April 1991 to
December 1992, he was Horizon's Manager of Mergers and Acquisitions. Prior to
that time, he was a Senior Loan Officer at Fidelity Bank.
GARY L. DEE has served as Vice President, Operations of the Company since
November 1992. Mr. Dee has 18 years of golf course operations experience. From
February 1989 to November 1992, Mr. Dee was the Director of Operations for the
PGA Tour Public Golf, Inc. Prior to this position, Mr. Dee was a general
manager for the PGA tour at the TPC at Piper Glen in Charlotte, North
Carolina, from 1988-1989 and was a principal in GolfTexas, a golf facility
development and management company from 1986-1988. Mr. Dee also served as a
golf management professional at various facilities from 1974-1986. Mr. Dee
graduated from Drake University in 1972 with a Bachelor of Science in
management.
JOSEPH H. CHAMP has served as Vice President, Acquisitions of the Company
since December 1993. From August 1993 to December 1993, Mr. Champ was Vice
President, Acquisitions for National Golf Properties, Inc., a real estate
investment trust. From September 1992 to August 1993, Mr. Champ was Vice
President of Acquisitions (Western Region) at American Golf Corporation. Prior
to joining American Golf, Mr. Champ was
47
<PAGE>
vice president of real estate and business development for Interstate Hotels
Corporation from January 1990 to August 1992 and was a director of development
at Aircoa Hospitality Services, Inc. from 1987 to January 1990.
ANDREW CROSSON has served as Vice President, Acquisitions of the Company
since October 1992. From 1988 to 1992, Mr. Crosson was the head of the
Development and Acquisitions Department for GolfCorp, a subsidiary of Club
Corporation International. Mr. Crosson graduated from the University of Utah
in 1986.
NORM GOODMANSON has served as Vice President, Development of the Company
since June 1993. Mr. Goodmanson has over 25 years of experience in the golf
course industry. From January 1988 to June 1993, Mr. Goodmanson served as Vice
President of Development at CCA GolfCorp.
ROBERT S. WEST, JR. has served as Vice President, Golf Operations since
December 1993. From 1989 to 1993, Mr. West served as a Regional Manager with
Golf Enterprises, Inc. In addition to being involved in the golf business for
30 years and a PGA professional for 25 years, Mr. West owned and operated his
own golf course, retail golf clothing store and worked as an operations
consultant for several other courses. Additionally, from 1972 to 1980 Mr. West
served as the Director of Golf and was Tournament Chairman at Walt Disney
World in Orlando, Florida.
THOMAS L. DELANEY, JR. has served as Vice President, Design & Construction
of the Company since November 1993. Prior to joining the Company, Mr. Delaney
worked in the real estate development industry as a construction manager for a
variety of commercial projects, including the Aventine Complex, a $250 million
multi-use development in La Jolla, California. Mr. Delaney received his
Bachelor of Building Construction degree from the University of Florida in
1984 and his MBA from the Wharton School at the University of Pennsylvania in
May 1993.
FREDERICK J. WARREN has served as Chairman of the Board of the Company since
October 1992. He is presently a general partner of Brentwood Golf Partners,
L.P., Brentwood Buyout Management Partners, L.P. and Brentwood Buyout
Partners, L.P. Mr. Warren is a director of Horizon Cellular Telephone Company,
L.P., Rental Service Corporation, Tuboscope Vetco International ("Tuboscope")
and Digital Sound Corporation.
DAVID H. WONG has served as a director of the Company since October 1992. He
is presently a general partner of Brentwood Golf Partners, L.P., Brentwood
Buyout Management Partners, L.P. and Brentwood Buyout Partners, L.P. Mr. Wong
is a director of Cardinal Business Media, Inc. ("Cardinal") and Horizon
Finance Corporation. Prior to joining Brentwood he worked in the investment
banking division of Dillon, Read & Co., Inc.
P.L. DAVIES III has served as a director of the Company since February 1995.
He is presently Managing Principal of Cambria Group, LLC, a private equity
investment firm. From January 1995 to December 1995, Mr. Davies served as a
Principal of Fremont Group, Inc. Mr. Davies also serves on the board of
Lakeside Corporation. Prior to joining Fremont, Mr. Davies was a Principal at
Brentwood from April 1993 to December 1994 and held a variety of positions at
Bechtel Group, Inc. from 1987 to 1993.
MARTIN R. REID has served as director of the Company since January 1994. He
is presently Chairman of the Board and Chief Executive Officer of Rental
Service Corporation and has held such position since September 1995. From June
1994 to September 1995, Mr. Reid was Chairman of the Board and Chief Executive
Officer of Acme Holdings, Inc., which filed a voluntary petition under Chapter
11 of the United States Bankruptcy Code on July 13, 1995. Since October 1990,
Mr. Reid has been a director of Tuboscope. Mr. Reid also served as Chief
Executive Officer of Tuboscope from May 1991 to October 1993. Mr. Reid has
been a General Partner in MDR Associates, a private investment concern, since
November 1990. From September 1986 to June 1990, he was Chief Executive
Officer of Eastman Christensen Co., a provider of oil and gas drilling
systems. Mr. Reid was also Vice Chairman of Eastman Christensen Co. from
August 1989 to June 1990. Prior to September 1986, he was Senior Vice
President of Operations of Norton Christensen, the predecessor to Eastman
Christensen Co.
48
<PAGE>
JOHN M. SULLIVAN has served as a director of the Company since September
1993. He is presently a director of The Scotts Company and Cardinal. From
October 1987 to January 1993, Mr. Sullivan was Chairman of the Board and Chief
Executive Officer of Prince Holdings, Inc. ("Prince"). Prior to that and since
September 1984, Mr. Sullivan was President of Prince and Vice President of
Chesebrough-Pond's, Inc.
DIRECTOR COMPENSATION
Neither Holdings nor the Company pays any fees or remuneration to their
directors for service on their respective board of directors or any board
committee, but Holdings and the Company reimburse directors for their out-of-
pocket expenses incurred in connection with attending meetings of the board.
In addition, in connection with becoming a director, each of Messrs. Davies,
Reid and Sullivan was offered the opportunity to acquire shares (or options to
purchase shares) of Holdings' capital stock.
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table provides certain summary
information concerning compensation paid or accrued by the Company to or on
behalf of the Company's President and Chief Executive Officer and the four
other most highly compensated executive officers of the Company who earned
more than $100,000 (salary and bonus) (the "Named Executive Officers") for all
services rendered in all capacities to Holdings and the Company during the
fiscal year ended September 30, 1995:
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------------- ------------
FISCAL ALL OTHER LTIP
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) PAYOUTS(2)
- --------------------------- ------ -------- -------- --------------- ------------
<S> <C> <C> <C> <C> <C>
James A. Husband......... 1995 $223,144 $135,638 $21,459 $370,000
(President and Chief
Executive Officer)
Steven L. Holmes(3)...... 1995 134,601 68,527 9,416 74,000
(Vice President,
Treasurer, Secretary and
Chief Financial Officer)
Gary L. Dee.............. 1995 120,556 60,458 10,812 37,000
(Vice
President/Operations)
Joseph H. Champ.......... 1995 127,652 65,352 9,898 55,500
(Vice
President/Acquisitions)
Robert S. West, Jr....... 1995 106,859 55,072 9,428 14,800
(Vice President/Golf
Operations)
</TABLE>
- ---------------------
(1) Represents (i) car allowance, (ii) dollar value of health benefits and
(iii) 401(k) matching contributions by the Company. The respective amounts
paid for Messrs. Husband, Holmes, Dee, Champ and West are as follows: (A)
car allowance: $16,560, $5,867, $8,207, $5,867 and $5,867; (B) health
benefits: $4,683, $3,336, $2,283, $3,336 and $3,336; and (C) 401(k)
matching contributions: $216, $213, $322, $695 and $225.
(2) Represents the dollar value of all the shares of Holdings Common Stock as
to which ownership vested in the fiscal year ended September 30, 1995. See
"Principal Stockholders."
(3) In April 1996, Mr. Holmes resigned his positions at the Company.
49
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
RELATIONSHIP WITH BRENTWOOD ASSOCIATES
Corporate Development and Administrative Services Agreement. Pursuant to a
Corporate Development and Administrative Services Agreement, dated as of
September 30, 1992, as amended, between Brentwood Buyout Partners, L.P.
("BBP") (an affiliate of Brentwood Associates) and the Company (the "Brentwood
Agreement"), BBP has agreed to assist in the corporate development activities
of the Company by providing services to the Company, including (i) assistance
in analyzing, structuring and negotiating the terms of investments and
acquisitions, (ii) researching, identifying, contacting, meeting and
negotiating with prospective sources of debt and equity financing, (iii)
preparing, coordinating and conducting presentations to prospective sources of
debt and equity financing, (iv) assistance in structuring and establishing the
terms of debt and equity financing and (v) assistance and advice in connection
with the preparation of the Company's financial and operating plans. Pursuant
to the Brentwood Agreement, BBP is entitled to receive (i) a service fee in an
amount equal to 1% per annum of the aggregate amount of debt and equity
investment in the Company of or by BBP or any person or entity associated with
BBP, which is payable semi-annually in advance, (ii) financial advisory fees
equal to 1.5% of the acquisition cost of the Company's completed acquisitions
and (iii) reimbursement of its reasonable fees and expenses incurred from time
to time (a) in performing the services rendered thereunder and (b) in
connection with any investment in, financing of, or sale, distribution or
transfer of any interest in the Company by BBP or any person or entity
associated with BBP. For the Company's fiscal year ended September 30, 1995,
BBP was paid compensation of $1,112,472 (including reimbursement of fees and
expenses) pursuant to the Brentwood Agreement.
TRANSACTIONS WITH JAMES A. HUSBAND
In connection with the formation of the Company in September 1992, Balboa
Park Management Co., Inc. ("Balboa"), a corporation owned by James A. Husband,
contributed to the Company the lease of the Balboa Park facility, associated
leasehold improvements and other assets, including driving range equipment,
golf carts, golf shop inventory and accounts receivable in exchange for (i)
2,087 shares of Series A Preferred Stock of Holdings and (ii) $235,270 in
cash, of which 2,087 shares and $160,270 have been paid. The consideration
paid to Balboa in exchange for the lease of the Balboa Park facility and the
associated assets acquired from Balboa was determined by arm's-length
negotiations between the Company and Balboa to represent the fair market value
of such lease and assets. In addition, if one of the Company's facilities
meets certain financial performance targets in a specified time frame, Mr.
Husband shall receive the remaining $75,000 from the Company.
The lease of the Balboa facility originally was acquired by Balboa in
January 1988 at no initial cost. However, rent is currently payable based upon
specified percentages of gross revenue, subject to a minimum rental floor.
In addition, in connection with the formation of the Company, Mr. Husband
contributed shares of stock representing his 50% interest in Escondido
Consulting, Inc. ("Escondido"), a corporation that held the lease of the
Escondido facility, associated contract rights, permits and other assets in
exchange for 2,460 shares of Series A Preferred Stock of Holdings.
Simultaneously, Escondido redeemed a portion of Mr. Husband's shares by
issuing him a subordinated promissory note in the principal amount of
$250,000, upon which interest accrues at a rate of 5% per annum and is payable
in arrears on the last date of each calendar quarter commencing December 31,
1992 and continuing through October 19, 1999. The Company also acquired the
remaining shares of Escondido from the other shareholder for $400,000 cash. In
all cases, the consideration paid for shares of Escondido stock was determined
by the Company, Mr. Husband and Escondido's other shareholder to represent the
fair market value of such stock.
Escondido was formed in 1990 by Mr. Husband and a partner. The lease of the
Escondido facility was acquired by Escondido in August 1990 at no initial
cost. However, rent is currently payable based upon specified percentages of
gross revenue, subject to a minimum rental floor.
In connection with the formation of the Company, Mr. Husband also agreed to
bring to the Company all future opportunities to acquire golf facilities of
which he became aware, including his then-existing options to acquire a
portion of the entity which owned the Foothills Country Club and to acquire
the leasehold interest in the Saticoy Regional Golf Club, as well as his
opportunity to acquire all or a portion of the entity which owned both El
Camino Country Club and an interest in Morgan Run Resort and Club. Mr. Husband
subsequently assigned all of such rights to the Company for no additional
consideration, and the Company completed such acquisitions.
50
<PAGE>
PRINCIPAL STOCKHOLDERS
The information in the following table sets forth, as of June 30, 1996,
certain information regarding the beneficial ownership of Holdings Common
Stock and Series A Preferred Stock by: (i) each person who to the knowledge of
the Company owns 5% or more of Holdings' outstanding voting stock, (ii) each
person who is a director or named executive officer of the Company and (iii)
all directors and officers of the Company as a group. The Company is a wholly-
owned subsidiary of Holdings. The following table assumes no other changes in
beneficial ownership since June 30, 1996.
<TABLE>
<CAPTION>
SERIES A
COMMON STOCK PREFERRED STOCK PERCENTAGE PERCENTAGE
-------------- ---------------- OF TOTAL OF ALL
NUMBER OF NUMBER OF VOTING OUTSTANDING
BENEFICIAL OWNER(1) SHARES % SHARES % POWER STOCK
------------------- --------- ---- ---------------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Brentwood Golf Partners, 1,075,081 62.5% 3,928,729 75.3% 72.1% 72.1%
L.P.(2)................
11150 Santa Monica
Blvd.
Suite 1200
Los Angeles, California
90025
James A. Husband(3)(4).. 137,648 8.0% 55,106 1.1% 2.8% 2.8%
Stefan C. Karnavas...... -- -- -- -- -- --
Gary L. Dee(4).......... 12,725 * -- -- * *
Joseph H. Champ(4)...... 18,179 1.1% -- -- * *
Robert S. West, Jr.(4).. 4,848 * -- -- * *
P.L. Davies III(5)(6)... 24,445 1.4% 80,470 1.5% 1.5% 1.5%
Martin R. Reid(6)....... 5,745 * 12,119 * * *
John M. Sullivan(6)..... 9,066 * 24,238 * * *
The Northwestern Mutual
Life Insurance 116,053 6.7% 424,167 8.1% 7.8% 7.8%
Company(7).............
720 E. Wisconsin Avenue
Milwaukee, Wisconsin
53202
HLH Trust(8)............ 81,234 4.7% 296,916 5.7% 5.4% 5.4%
1800 Grant Building
Pittsburgh,
Pennsylvania 16219
All directors and
officers as a group (13
persons)(2)............ 1,331,133 77.4% 4,100,662 78.6% 78.2% 78.2%
</TABLE>
- ---------------------
* Less than 1%
(1) Except as otherwise indicated, each beneficial owner has the sole power to
vote, as applicable, and to dispose of all shares of Holdings Common Stock
or Series A Preferred Stock owned by such beneficial owners.
(2) Frederick J. Warren and David H. Wong, directors of the Company, are
general partners of the general partner of Brentwood Golf Partners, L.P.,
and as such may be deemed to beneficially own the shares of stock held by
Brentwood Golf Partners, L.P.
(3) Includes 25,293 shares of Series A Preferred Stock owned of record by
Balboa Park Management Co., Inc., a corporation controlled by Mr. Husband.
See "Certain Relationships and Related Transactions--Transactions with
James A. Husband."
(4) Includes shares of Holdings Common Stock that are subject to vesting based
on continued employment, subject to acceleration of the vesting of a
portion of such shares if performance targets are met. Unvested shares are
subject to repurchase by Holdings at their initial purchase price. The
number of shares indicated assumes that all shares are vested.
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<PAGE>
(5) Includes 485 shares of Holdings Common Stock purchasable pursuant to
options held by Mr. Davies exercisable within 60 days of the date of the
Prospectus. Other than such 485 shares, the shares of Holdings Common
Stock beneficially owned by Mr. Davies are owned of record by Pacific Golf
Enterprises, L.P., a limited partnership of which Mr. Davies is general
partner.
(6) Includes shares of Holdings Common Stock that are subject to vesting based
on continued service as a director over a period of time. Unvested shares
are subject to repurchase by Holdings at their initial purchase price. The
number of shares indicated assumes that all shares are vested.
(7) Does not include any shares owned by Brentwood Golf Partners, L.P., of
which the Northwestern Mutual Life Insurance Company is a limited partner
but as to which it has no voting or dispositive power.
(8) Includes 14,919 shares of Holdings Common Stock and 54,536 shares of
Series A Preferred Stock owned by a trust for the benefit of Henry L.
Hillman (the "HLH Trust"), and 66,316 shares of Holdings Common Stock and
242,381 shares of Series A Preferred Stock owned by Wilmington Interstate
Corporation ("Wilmington Interstate"). Wilmington Interstate is a Delaware
private investment company indirectly owned by The Hillman Company, a
Pittsburgh, Pennsylvania firm engaged in diversified investments and
operations, which is controlled by the HLH Trust. The trustees of the HLH
Trust are Henry L. Hillman, Elsie Hilliard Hillman and C. G. Grefenstette
(the "HLH Trustees"). The HLH Trustees share voting power and dispositive
power of the stock of The Hillman Company. Does not include 19,900 shares
of Holdings Common Stock and 72,715 shares of Series A Preferred Stock
owned by four irrevocable trusts for the benefit of members of the Hillman
family, as to which shares the HLH Trustees disclaim beneficial ownership.
Does not include 14,919 shares of Holdings Common Stock and 54,536 shares
of Series A Preferred Stock owned by Venhill Limited Partnership
("Venhill"), as to which shares the HLH Trustees disclaim beneficial
ownership. Venhill is a Delaware limited partnership, of which the limited
partners are trusts for the benefit of members of the Hillman family.
Howard B. Hillman, a step-brother of Henry L. Hillman, is the general
partner of Venhill. Does not include any shares owned by Brentwood Golf
Partners, L.P., of which the HLH Trust, Wilmington Interstate and the four
irrevocable trusts for the benefit of members of the Hillman family are
limited partners, and as to which they disclaim beneficial ownership.
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DESCRIPTION OF NOTES
Set forth below is a summary of certain provisions of the Notes and the
Guarantees in respect thereof. The Senior Notes will be issued pursuant to an
indenture (the "Indenture") to be dated as of June 4, 1996, by and among the
Company, the Guarantors and Norwest Bank Minnesota, National Association, as
trustee (the "Trustee"). The form and terms of the Exchange Notes will be the
same as the form and terms of the Private Notes except that (i) the exchange
will be registered under the Securities Act, and hence the Exchange Notes will
not bear legends restricting the transfer thereof, and (ii) holders of the
Exchange Notes will not be entitled to certain rights of holders of the
Private Notes under the Registration Rights Agreement, which rights will
terminate upon the consummation of the Exchange Offer. For purposes of this
summary, the term the "Company" refers to Cobblestone Golf Group, Inc.,
exclusive of its subsidiaries. The terms of the Indenture will also be
governed by certain provisions contained in the Trust Indenture Act of 1939,
as amended. The following summaries of certain provisions of the Indenture are
summaries only, do not purport to be complete and are qualified in their
entirety by reference to all of the provisions of the Indenture. Capitalized
terms used herein and not otherwise defined shall have the meanings assigned
to them in the Indenture. Wherever particular provisions of the Indenture are
referred to in this summary, such provisions are incorporated by reference as
a part of the statements made and such statements are qualified in their
entirety by such reference. A copy of the form of Indenture is available upon
request.
GENERAL
The Notes are senior, unsecured, general obligations of the Company, limited
in aggregate principal amount to $70.0 million. The Notes rank pari passu in
right of payment with all existing and future unsubordinated indebtedness of
the Company (including borrowings under the New Credit Facility) and rank
senior in right of payment to all existing and future subordinated
indebtedness of the Company. The Notes are guaranteed on a senior basis by all
present and future Subsidiaries of the Company (the "Guarantors"). The term
"Subsidiaries" as used in this "Description of Notes," however, does not
include Unrestricted Subsidiaries. The Guarantees are senior, unsecured,
general obligations of the Guarantors and rank pari passu in right of payment
with all existing and future unsubordinated indebtedness of the respective
Guarantors (including their guarantees of borrowings under the New Credit
Facility) and rank senior in right of payment to all existing and future
subordinated indebtedness of the respective Guarantors. Borrowings under the
New Credit Facility are secured by substantially all of the Company's assets,
including the capital stock of the Company's existing and future Subsidiaries
and are guaranteed by Holdings and such Subsidiaries, which guarantees are
secured by substantially all of Holdings' and such Subsidiaries' assets. The
Notes and the Guarantees will, to the extent of such collateral, be
effectively subordinated to such borrowings and to any other secured
indebtedness of the Company and the Guarantors, as applicable, to the extent
of the collateral secured thereby. As of March 31, 1996, on a pro forma basis
after giving effect to the Offerings and the application of the estimated net
proceeds therefrom, the Company and the Guarantors would have had outstanding
approximately $90.5 million of senior indebtedness on a consolidated basis
(including trade payables and capitalized lease obligations), approximately
$7.3 million of which would have been secured indebtedness. See "Risk
Factors--Leverage and Ability to Service Debt" and "--Corporate Structure;
Effects of Asset Encumbrances." The Notes will be issued only in fully
registered form, without coupons, in denominations of $1,000 and integral
multiples thereof.
The Notes will mature on June 1, 2003. The Notes will bear interest at the
rate per annum stated on the cover page hereof from the date of issuance or
from the most recent Interest Payment Date to which interest has been paid or
provided for, payable semi-annually on June 1 and December 1 of each year,
commencing December 1, 1996, to the persons in whose names such Notes are
registered at the close of business on the May 15 or November 15 immediately
preceding such Interest Payment Date. Interest will be calculated on the basis
of a 360-day year consisting of twelve 30-day months.
Principal of, premium and Liquidated Damages, if any, and interest on the
Notes will be payable, and the Notes may be presented for registration of
transfer or exchange, at the office or agency of the Company maintained for
such purpose, which office or agency shall be maintained in the Borough of
Manhattan, The City
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of New York. At the option of the Company, payment of interest may be made by
check mailed to the Holders of the Notes at the addresses set forth upon the
register of Holders of Notes. No service charge will be made for any
registration of transfer or exchange of Notes, but the Company may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith. Until otherwise designated by the Company,
the Company's office or agency will be the corporate trust office of the
Trustee.
OPTIONAL REDEMPTION
Except as set forth below, the Company will not have the right to redeem any
Notes prior to June 1, 1999. The Notes will be redeemable at the option of the
Company, in whole or in part, at any time on or after June 1, 1999 at the
following redemption prices (expressed as percentages of the principal amount)
if redeemed during the 12-month period commencing June 1 of the years
indicated below, in each case together with Liquidated Damages and accrued and
unpaid interest thereon, if any, to the redemption date:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
1999........................................................... 105.750%
2000........................................................... 103.833%
2001........................................................... 101.917%
2002 and thereafter............................................ 100.000%
</TABLE>
Notwithstanding the foregoing, until June 1, 1999, upon one or more Public
Equity Offerings or issuances of Qualified Capital Stock to Strategic
Investors, up to $17.5 million aggregate principal amount of the Notes may be
redeemed at the option of the Company within 120 days of such Public Equity
Offering or issuance to Strategic Investors, with the Net Cash Proceeds
thereof in the case of such an offering by the Company, or from such proceeds
invested by Holdings in Qualified Capital Stock in the case of such an
offering by Holdings, at 110.5% of the principal amount, together with
Liquidated Damages and accrued and unpaid interest, if any, to the date of
redemption; provided, however, that immediately following each such redemption
not less than $52.5 million aggregate principal amount of the Notes is
outstanding.
In the case of a partial redemption, the Trustee shall select the Notes or
portions thereof for redemption on a pro rata basis, by lot or in such other
manner it deems appropriate and fair. The Notes may be redeemed in part in
multiples of $1,000 only.
The Notes will not have the benefit of any sinking fund.
Notice of any redemption will be sent, by first class mail, at least 30 days
and not more than 60 days prior to the date fixed for redemption to the Holder
of each Note to be redeemed to such Holder's last address as then shown upon
the registry books of the Registrar. Any notice which relates to a Note to be
redeemed in part only must state the portion of the principal amount equal to
the unredeemed portion thereof and must state that on and after the date of
redemption, upon surrender of such Note, a new Note or Notes in a principal
amount equal to the unredeemed portion thereof will be issued. On and after
the date of redemption, interest will cease to accrue on the Notes called for
redemption, unless the Company defaults in the payment thereof.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
Repurchase of Notes at the Option of the Holder Upon a Change of Control
The Indenture provides that in the event that a Change of Control has
occurred, each Holder of Notes will have the right, at such Holder's option,
pursuant to an offer by the Company (the "Change of Control Offer"), to
require the Company to repurchase all or any part of such Holder's Notes
(provided, however, that the principal amount of such Notes must be $1,000 or
an integral multiple thereof) on a date (the "Change of Control Purchase
Date") that is no later than 90 days after the occurrence of such Change of
Control, at a cash price (the
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"Change of Control Purchase Price") equal to 101% of the principal amount
thereof, together with Liquidated Damages and accrued and unpaid interest, if
any, to the Change of Control Purchase Date. The Change of Control Offer shall
be made within 30 days following a Change of Control and shall remain open for
20 Business Days following its commencement (the "Change of Control Offer
Period"). Upon expiration of the Change of Control Offer Period, the Company
shall purchase all Notes or portions thereof properly tendered in response to
the Change of Control Offer. If required by applicable law, the Change of
Control Purchase Date and the Change of Control Offer Period may be extended
as so required; however, if so extended, it shall nevertheless constitute an
Event of Default if the Change of Control Purchase Date does not occur within
90 days of the Change of Control (or within 120 days of the Change of Control
if, during any such extension beyond 90 days following the Change of Control,
the Company is diligently pursuing all commercially reasonable steps to
consummate the Change of Control Offer as promptly as practicable).
As used herein, a "Change of Control" means (i) the Investor Group is no
longer the "beneficial owner," directly or indirectly, of more than 50% of the
total voting power in the aggregate normally entitled to vote in the election
of directors, managers, or trustees, as applicable, of the Company and (ii)
any "person" or "group" (as such terms are used for purposes of Sections 13(d)
and 14(d) of the Exchange Act, whether or not applicable) is or becomes the
"beneficial owner," directly or indirectly, of more of the total voting power
in the aggregate outstanding normally entitled to vote in elections of
directors of the Company than is owned collectively by Brentwood and James A.
Husband.
On or before the Change of Control Purchase Date, the Company will (i)
accept for payment Notes or portions thereof properly tendered pursuant to the
Change of Control Offer, (ii) deposit with the Paying Agent Cash sufficient to
pay the Change of Control Purchase Price (together with accrued and unpaid
interest) of all Notes or portions thereof so tendered and (iii) deliver to
the Trustee Notes so accepted together with an Officers' Certificate listing
the Notes or portions thereof being purchased by the Company. The Paying Agent
will promptly mail to the Holders of Notes so accepted payment in an amount
equal to the Change of Control Purchase Price (together with Liquidated
Damages, if any, and accrued and unpaid interest), and the Trustee will
promptly authenticate and mail or deliver to such Holders a new Note equal in
principal amount to any unpurchased portion of the Note surrendered. Any Notes
not so accepted will be promptly mailed or delivered by the Company to the
Holder thereof. The Company will publicly announce the results of the Change
of Control Offer on or as soon as practicable after the Change of Control
Purchase Date.
The Company's ability to repurchase Notes upon a Change of Control may be
limited by, among other factors, the financial resources of the Company at the
time of repurchase. The New Credit Facility prohibits the Company from
purchasing any Notes prior to their stated maturity and also will provide that
certain Change of Control events would constitute a default thereunder. In
addition, any future credit or other borrowing agreements may contain similar
restrictions. See "Risk Factors--Limitations on Repurchase of Notes." If a
Change of Control occurs at a time when the Company is prohibited from
purchasing the Notes, the Company could seek the consent of its lender(s) to
such purchase or could attempt to refinance the borrowings that contain such
prohibition. If the Company does not obtain such a consent or repay such
borrowings, the Company would remain prohibited from purchasing Notes. In such
case, the Company's failure to purchase tendered Notes would constitute an
Event of Default under the Indenture.
Any Change of Control Offer will be made in compliance with all applicable
laws, rules and regulations, including, if applicable, Regulation 14E under
the Exchange Act and the rules thereunder and all other applicable Federal and
state securities laws.
Limitation on Restricted Payments
The Indenture provides that the Company and the Guarantors will not, and
will not permit any of their Subsidiaries to, directly or indirectly, make any
Restricted Payment if, immediately prior thereto or after giving effect to
such Restricted Payment on a pro forma basis, (1) a Default or an Event of
Default shall have occurred and be continuing, (2) the Company is not
permitted to incur at least $1.00 of additional Indebtedness pursuant
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<PAGE>
to the Debt Incurrence Ratio in paragraph (a) of the covenant "Limitation on
Incurrence of Additional Indebtedness and Disqualified Capital Stock," or (3)
the aggregate amount of all Restricted Payments made by the Company, the
Guarantors and their Subsidiaries, including after giving effect to such
proposed Restricted Payment, from and after the Issue Date, would exceed the
sum of (a) the amount determined by subtracting (i) 2.0 times the aggregate
Consolidated Fixed Charges of the Company and its consolidated Subsidiaries
for the period (taken as one accounting period), commencing on the first day
of the first full fiscal quarter commencing after the Issue Date, to and
including the last day of the fiscal quarter ended immediately prior to the
date of each such calculation (the "Computation Period") from (ii)
Consolidated EBITDA of the Company and its Consolidated Subsidiaries for the
Computation Period, plus (b) 100% of the aggregate Net Cash Proceeds received
by the Company from the sale of its Qualified Capital Stock (other than (i) to
a Subsidiary or Unrestricted Subsidiary of the Company and (ii) to the extent
applied in connection with a Qualified Exchange, but including the Net Cash
Proceeds received by the Company upon the exercise, exchange or conversion of
securities into Qualified Capital Stock other than in connection with a
Qualified Exchange) after the Issue Date and on or prior to the date of such
Restricted Payment. The full amount of any Restricted Payment made pursuant to
the immediately following paragraph (other than clause (w), (x) or (y)
thereof), however, will be deducted in the calculation of the aggregate amount
of Restricted Payments available to be made referred to in clause (3) of the
immediately preceding sentence.
Notwithstanding the foregoing, the provisions in the immediately preceding
paragraph will not prohibit (r) dividends by the Company to Holdings to the
extent promptly applied by Holdings to pay (i) liquidated damages due on the
Zero-Coupon Notes, (ii) amounts due in respect of Capital Stock of Holdings
required to be repurchased upon the exercise of "put" rights held prior to the
Issue Date by lenders under the Old Credit Facility and (iii) reasonable
general and administrative expenses of Holdings not to exceed $250,000 in any
consecutive four-quarter period, (s) Investments by the Company or any
Guarantor in Unrestricted Subsidiaries in an aggregate amount not to exceed
the sum of (i) $5.0 million and (ii) to the extent not otherwise applied to a
Restricted Payment, 100% of the aggregate Net Cash Proceeds received by the
Company from the sale of its Qualified Capital Stock after the Issue Date
(other than (i) to a Subsidiary or Unrestricted Subsidiary of the Company and
(ii) to the extent applied in connection with a Qualified Exchange, but
including the Net Cash Proceeds received by the Company upon the exercise,
exchange or conversion of securities into Qualified Capital Stock other than
in connection with a Qualified Exchange), (t) repurchases of Capital Stock
from employees, officers and directors of the Company or its Subsidiaries (or
payments to Holdings for such a purpose) upon the death, disability or
termination of employment in an aggregate amount to all employees not to
exceed $300,000 per year or $2.1 million in the aggregate on and after the
Issue Date, (u) payments by Ocean Vista Land Company of dividends on its
preferred stock outstanding prior to the Issue Date, in accordance with the
terms thereof, (v) Investments in non-wholly-owned Subsidiaries of the Company
not to exceed $5.0 million in the aggregate, (w) payments to Holdings under
the Tax Sharing Agreement, (x) payments of up to $1.25 million in the
aggregate to repurchase Capital Stock of Subsidiaries held by minority
stockholders outstanding prior to the Issue Date and not beneficially owned by
the Company or any of its Affiliates, (y) a Qualified Exchange, or (z) the
payment of any dividend on Qualified Capital Stock within 60 days after the
date of its declaration if such dividend could have been made on the date of
such declaration in compliance with the foregoing provisions. Notwithstanding
any other provision hereof, the foregoing clauses (r)(iii), (s), (x) and (z)
will not be deemed to permit the respective Restricted Payments otherwise
contemplated to be made pursuant thereto if, immediately prior thereto or
after giving effect to such Restricted Payment on a pro forma basis, a Default
or an Event of Default shall have occurred or be continuing.
Limitation on Dividends and Other Payment Restrictions Affecting
Subsidiaries
The Indenture provides that the Company and the Guarantors will not, and
will not permit any of their Subsidiaries to, directly or indirectly, create,
assume or suffer to exist any consensual restriction on the ability of any
Subsidiary of the Company to pay dividends or make other distributions to, or
to pay any obligation to, or otherwise to transfer assets or property to, or
make or pay loans or advances to, the Company or any Subsidiary of the
Company, except (a) restrictions imposed by the Notes, the Indenture, the
Zero-Coupon Notes and the
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<PAGE>
indenture pursuant to which the Zero-Coupon Notes are issued, (b) customary
provisions restricting subletting or assignment of any lease (including a
Capitalized Lease Obligation), (c) restrictions imposed by applicable law, (d)
existing restrictions under Indebtedness outstanding, (e) restrictions under
any Acquired Indebtedness not incurred in violation of the Indenture or under
any agreement relating to any property, asset, or business acquired by the
Company or any of its Subsidiaries, which restrictions existed at the time of
acquisition, were not put in place in connection with or in anticipation of
such acquisition and are not applicable to any person, other than the person
acquired, or to any property, asset or business, other than the property,
assets and business so acquired, (f) restrictions with respect solely to a
Subsidiary of the Company imposed pursuant to a binding agreement which has
been entered into for the sale or disposition of all or substantially all of
the Capital Stock or assets of such Subsidiary, provided, such restrictions
apply solely to the Capital Stock or assets of such Subsidiary,
(g) restrictions pursuant to the New Credit Facility (h) restrictions pursuant
to Indebtedness, other than Subordinated Indebtedness, incurred in compliance
with clause (a) of the covenant "Limitation on Incurrence of Additional
Indebtedness and Disqualified Capital Stock" (including refinancings permitted
to be incurred under clause (c) thereof), (i) Liens specified under "Permitted
Liens" other than clauses (b), (c) and (e) thereof and (j) in connection with
and pursuant to permitted Refinancings, replacements of restrictions that are
not more restrictive than those being replaced and do not apply to any other
person or assets than those that would have been covered by the restrictions
in the Indebtedness so refinanced.
Limitations on Liens
The Indenture provides that the Company and the Guarantors will not, and
will not permit any of their Subsidiaries to, directly or indirectly, create,
incur, suffer to exist or become effective any Lien upon any of its property
or assets, whether now owned or hereafter acquired, or any income or profits
therefrom, or assign or convey any right to receive income therefrom, unless
all payments due under the Indenture and the Notes are secured on an equal and
ratable basis with the obligations so secured until such time as such
obligation is no longer secured by a Lien, provided, however, that Permitted
Liens may be created or incurred or may exist or become effective without any
requirement that all payments under the Indenture and the Notes be equally and
ratably secured.
Limitation on Incurrence of Additional Indebtedness and Disqualified Capital
Stock
The Indenture provides that, except as set forth below in this covenant, the
Company and the Guarantors will not, and will not permit any of their
Subsidiaries to, directly or indirectly, issue, assume, guaranty, incur,
become directly or indirectly liable with respect to (including as a result of
an Acquisition), extend the maturity of, or otherwise become responsible for,
contingently or otherwise (individually and collectively, to "incur" or, as
appropriate, an "incurrence"), any Indebtedness or any Disqualified Capital
Stock from and after the Issue Date. Notwithstanding the foregoing:
(a) if (i) no Default or Event of Default shall have occurred and be
continuing at the time of, or would occur after giving effect on a pro
forma basis to, such incurrence of Indebtedness or Disqualified Capital
Stock and (ii) on the date of such incurrence (the "Incurrence Date"), the
Consolidated Cash Flow Ratio of the Company for the Reference Period
immediately preceding the Incurrence Date, after giving effect on a pro
forma basis to such incurrence of such Indebtedness or Disqualified Capital
Stock and, to the extent set forth in the definition of Consolidated Cash
Flow Ratio, the use of proceeds thereof, would be no greater than 6 to l
for Incurrence Dates prior to June 1, 1998 and no greater than 5 to 1
thereafter (the "Debt Incurrence Ratio"), then the Company and the
Guarantors may incur such Indebtedness or Disqualified Capital Stock,
provided, however, that Indebtedness incurred by a Guarantor shall be
subordinated in right of payment to such Guarantor's Guarantee of the
Senior Notes, except for Non-recourse Purchase Money Indebtedness of such
Guarantor and Indebtedness of such Guarantor in the form of a guarantee
which is in respect of Indebtedness of the Company that is pari passu in
right of payment with the Senior Notes, in which case that guarantee may be
pari passu in right of payment with such Guarantor's Guarantee of the
Notes;
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(b) the Company and the Guarantors may incur Indebtedness evidenced by
the Notes and the Guarantees and represented by the Indenture up to the
amounts specified therein as of the Issue Date;
(c) the Company and the Guarantors may incur Refinancing Indebtedness
with respect to any Indebtedness or Disqualified Capital Stock, as
applicable, described in clauses (a) and (b) of this covenant or which is
outstanding on the Issue Date after giving effect to the implementation of
the New Credit Facility;
(d) the Company and the Guarantors may incur Permitted Indebtedness;
(e) the Company and the Guarantors may incur Indebtedness pursuant to the
New Credit Facility on or after the Issue Date up to an aggregate amount
outstanding (including any Indebtedness issued to Refinance, refund or
replace such Indebtedness) at any time of $50.0 million, plus accrued
interest, fees incurred in connection with the New Credit Facility and such
additional amounts as may be deemed to be outstanding in the form of
Interest Swap and Hedging Obligations with lenders party to the New Credit
Facility, reduced by the amount of any such Indebtedness permanently
retired with Net Cash Proceeds from any Asset Sale (other than a sale of
Assets to Be Disposed of) or assumed by a transferee in an Asset Sale; and
(f) the Company and the Guarantors may incur Indebtedness on or after the
Issue Date up to an aggregate amount outstanding (including any
Indebtedness issued to Refinance, refund or replace such Indebtedness) at
any time of $7.5 million.
Limitation on Sale of Assets and Subsidiary Stock
The Indenture provides that the Company and the Guarantors will not, and
will not permit any of their Subsidiaries to, in one or a series of related
transactions, convey, sell, transfer, assign or otherwise dispose of, directly
or indirectly, any of its property, business or assets, including by merger or
consolidation and including upon any sale or other transfer or issuance of any
Capital Stock of any Subsidiary of the Company or any sale and leaseback
transaction, whether by the Company or a Subsidiary or through the issuance,
sale or transfer of Capital Stock by a Subsidiary of the Company (an "Asset
Sale"), unless (l)(a) within 405 days after the date of such Asset Sale, the
Net Cash Proceeds therefrom (the "Asset Sale Offer Amount") are applied to the
optional redemption of the Notes in accordance with the terms of the Indenture
or to the repurchase of the Notes pursuant to an irrevocable, unconditional
offer by the Company (the "Asset Sale Offer") to repurchase Notes at a
purchase price (the "Asset Sale Offer Price") of 100% of principal amount,
plus accrued and unpaid interest and Liquidated Damages, if any, to the date
of payment, made within 360 days of such Asset Sale or (b) within 360 days of
such Asset Sale, the Asset Sale Offer Amount is (i) invested (or committed,
pursuant to a binding commitment subject only to reasonable, customary closing
conditions, to be invested, and in fact is so invested, within an additional
90 days) in fixed assets and real property which in the good faith judgment of
the Board constitute or are a part of a Related Business of the Company, or in
100% of the issued and outstanding Capital Stock of a person the assets of
which are principally comprised of such fixed assets and real property, or
(ii) used to retire Indebtedness outstanding under the New Credit Facility,
except with respect to the use of proceeds from the sale of Assets to Be
Disposed of, and to permanently reduce the amount of such Indebtedness
permitted to be incurred in compliance with paragraph (e) of the covenant
"Limitation on Incurrence of Additional Indebtedness and Disqualified Capital
Stock" (including that in the case of a revolver or similar arrangement that
makes credit available, such commitment is so reduced by such amount), (2)
with respect to any transaction or related series of transactions of
securities, property or assets with an aggregate fair market value in excess
of $1.0 million, at least 85% of the consideration for such Asset Sale
(excluding the amount of (A) any Indebtedness (other than Notes) that is
required to be repaid or assumed (and is either repaid or assumed by the
transferee of the related assets) by virtue of such Asset Sale and which is
secured by a Lien on the property or assets sold and (B) property received by
the Company or any such Subsidiary from the transferee that within 30 days of
such Asset Sale is converted into Cash or Cash Equivalents) consists of Cash
or Cash Equivalents, (3) no Default or Event of Default shall have occurred
and be continuing at the time of, or would occur after giving effect, on a
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pro forma basis, to, such Asset Sale, and (4) the Board of Directors of the
Company determines in good faith that the Company or such Subsidiary, as
applicable, receives fair market value for such Asset Sale. The Indenture will
provide that an Asset Sale Offer may be deferred until the accumulated Net
Cash Proceeds from Asset Sales not applied to the uses set forth in (1)(b)
above (or committed for use as permitted thereunder) exceeds $10.0 million and
that each Asset Sale Offer shall remain open for 20 Business Days following
its commencement (the "Asset Sale Offer Period"). Upon expiration of the Asset
Sale Offer Period, the Company shall apply the Asset Sale Offer Amount, plus
an amount equal to accrued and unpaid interest, to the purchase of all Notes
properly tendered (on a pro rata basis if the Asset Sale Offer Amount is
insufficient to purchase all Notes so tendered) at the Asset Sale Offer Price
(together with accrued and unpaid interest). If required by applicable law,
the Asset Sale Offer Period may be extended as so required; however, if so
extended it shall nevertheless constitute an Event of Default if within 90
days of its commencement the Asset Sale Offer is not consummated or the
properly tendered Notes are not purchased pursuant thereto (or within 120 days
of the commencement of the Asset Sale Offer if, during any such extension
beyond 90 days following the commencement, the Company is diligently pursuing
all commercially reasonable steps to consummate the Asset Sale Offer or to
purchase properly tendered Notes pursuant thereto as promptly as practicable).
Notwithstanding clause (1)(a) above, if an Asset Sale Offer is commenced and
securities of the Company ranking pari passu in right of payment with the
Notes are outstanding at the date of commencement thereof, the terms of which
provide that a substantially similar offer must be made with respect thereto,
then the Asset Sale Offer shall be made concurrently with such other offer,
and securities of each issue which the holders of securities of such issue
elect to have purchased will be accepted pro rata in proportion to the
aggregate principal amount thereof; provided, that in so repurchasing such
other securities the Company is in compliance with the provisions of
"Limitation on Restricted Payments." In addition, notwithstanding the
foregoing provisions of the prior paragraph:
(i) the Company and its Subsidiaries may (A) convey, sell, lease,
transfer, assign or otherwise dispose of assets in the ordinary course of
business or (B) exchange assets for assets in a Related Business, provided,
however, in the case of this clause (B) that (1) the Company, prior to the
consummation of any such proposed exchange or series of related exchanges
having a fair market value in excess of $2.5 million, obtains a written
favorable opinion as to the fairness of such transaction to the Company
from a financial point of view from an independent investment banking firm
of national reputation, (2) no Default or an Event of Default shall have
occurred and be continuing and (3) after giving effect to such proposed
exchange on a pro forma basis, either (x) the Company is permitted to incur
at least $1.00 of additional Indebtedness pursuant to the Debt Incurrence
Ratio in paragraph (a) of the covenant "Limitation on Incurrence of
Additional Indebtedness and Disqualified Capital Stock" or (y) the
Company's Debt Incurrence Ratio is no greater than it was immediately prior
to such proposed exchange;
(ii) the Company and its Subsidiaries may convey, sell, lease, transfer,
assign or otherwise dispose of assets pursuant to and in accordance with
the limitation on mergers, sales or consolidations provisions in the
Indenture;
(iii) the Company and its Subsidiaries may (A) sell or dispose of
damaged, worn out or other obsolete property in the ordinary course of
business so long as such property is no longer necessary for the proper
conduct of the business of the Company or such Subsidiary, as applicable,
or (B) abandon such property if it cannot, through reasonable efforts, be
sold; and
(iv) the Company and its Subsidiaries may convey, sell, lease, transfer,
assign or otherwise dispose of assets to the Company or any of its wholly
owned Subsidiaries.
Any Asset Sale Offer shall be made in compliance with all applicable laws,
rules, and regulations, including, if applicable Regulation 14E of the
Exchange Act and the rules and regulations thereunder and all other applicable
Federal and state securities laws.
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Limitation on Transactions with Affiliates
The Indenture provides that neither the Company nor any of its Subsidiaries
or Unrestricted Subsidiaries will be permitted after the Issue Date to enter
into any contract, agreement, arrangement or transaction with any Affiliate
(an "Affiliate Transaction"), or any series of related Affiliate Transactions
unless (1) the terms of such Affiliate Transaction are fair and reasonable to
the Company, such Subsidiary or such Unrestricted Subsidiary, as the case may
be, and no less favorable to the Company, such Subsidiary or such Unrestricted
Subsidiary, as the case may be, than could have been obtained in comparable
arm's length transaction with a non-Affiliate, (2) involving consideration to
either party in excess of $1.0 million, unless such transaction is evidenced
by an Officers' Certificate addressed and delivered to the Trustee stating
that the terms of such Affiliate Transaction are fair and reasonable to the
Company, such Subsidiary or such Unrestricted Subsidiary, as the case may be,
and no less favorable to the Company, such Subsidiary or such Unrestricted
Subsidiary, as the case may be, than could have been obtained in comparable
arm's length transaction with a non-Affiliate, and (3) involving consideration
to either party in excess of $5.0 million, unless the Company, prior to the
consummation thereof, obtains a written favorable opinion as to the fairness
of such transaction to the Company from a financial point of view from an
independent investment banking firm of national reputation. The foregoing
restriction will not apply to (1) pro rata dividends or distributions paid in
cash on any class of Capital Stock and not prohibited under "Limitation on
Restricted Payments," (2) payments to Holdings made in accordance with the Tax
Sharing Agreement, (3) indemnification payments on behalf of directors,
officers or employees of the Company or a Guarantor made or incurred by such
persons in such capacities (4) payments made in accordance with the Brentwood
Agreement as in effect on the Issue Date, so long as no Event of Default shall
have occurred and be continuing (5) repurchases of Capital Stock not
prohibited under clause (t) of the "Limitation on Restricted Payments"
covenant and (6) transactions between the Company and any Wholly Owned
Subsidiary Guarantor of the Company or between Wholly Owned Subsidiary
Guarantors of the Company.
Limitation on Lines of Business
Neither the Company nor any of its Subsidiaries or Unrestricted Subsidiaries
will directly or indirectly engage to any substantial extent in any line or
lines of business activity other than a Related Business.
Limitation on Merger, Sale or Consolidation
The Indenture provides that the Company will not, directly or indirectly,
consolidate with or merge with or into another person or sell, lease, convey
or transfer all or substantially all of its assets (computed on a consolidated
basis), whether in a single transaction or a series of related transactions,
to another Person or group of affiliated Persons, unless (i) either (a) the
Company is the continuing entity or (b) the resulting, surviving or transferee
entity is a corporation organized under the laws of the United States, any
state thereof or the District of Columbia and expressly assumes by
supplemental indenture all of the obligations of the Company in connection
with the Notes and the Indenture; (ii) no Default or Event of Default shall
exist or shall occur immediately after giving effect on a pro forma basis to
such transaction; and (iii) other than in the case of a transaction solely
between the Company and any wholly owned Guarantor, immediately after giving
effect to such transaction on a pro forma basis, the consolidated surviving or
transferee entity would immediately thereafter be permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Debt Incurrence Ratio set
forth in paragraph (a) of the covenant "Limitation on Incurrence of Additional
Indebtedness and Disqualified Capital Stock."
Upon any consolidation or merger or any transfer of all or substantially all
of the assets in accordance with the foregoing, the successor corporation
formed by such consolidation or into which the Company is merged or to which
such transfer is made, shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under the Indenture with the
same effect as if such successor corporation had been named therein as such,
and the Company shall be released from the obligations under the Notes and the
Indenture except with respect to any obligations that arise from, or are
related to, such transaction.
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Restriction on Sale and Issuance of Subsidiary Stock
The Indenture provides that from and after the Issue Date, the Company and
the Guarantors will not sell, and will not permit any of their Subsidiaries to
issue or sell, any shares of Capital Stock of any Subsidiary of the Company to
any person other than the Company or a wholly owned Subsidiary of the Company.
The Indenture provides that all of the Capital Stock of a Subsidiary of the
Company may be sold if such Asset Sale complies with the covenant "Limitation
on Sale of Assets and Subsidiary Stock." In such case, that Subsidiary will be
released from its obligations under its Guarantee in respect of the Notes and
the Indenture.
Future Subsidiary Guarantors
The Indenture provides that all present and future direct or indirect
Subsidiaries of the Company jointly and severally will guarantee irrevocably
and unconditionally all principal, Liquidated Damages and premium, if any, and
interest on the Senior Notes on a senior basis.
Limitation on Status as Investment Company
The Indenture prohibits the Company and its Subsidiaries from being required
to register as an "investment company" (as that term is defined in the
Investment Company Act of 1940, as amended), or from otherwise becoming
subject to regulation under the Investment Company Act.
REPORTS
The Indenture provides that whether or not the Company or Holdings is
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, each of the Company and Holdings shall deliver to the Trustee, to each
Holder and to prospective purchasers of Notes identified to the Company by an
Initial Purchaser, within 15 days after it is or would have been required to
file such with the Commission, (i) annual and quarterly financial statements
substantially equivalent to financial statements that would have been included
in reports filed with the Commission, if the Company and Holdings were subject
to the requirements of Section 13 or 15(d) of the Exchange Act, including,
with respect to annual information only, a report thereon by the Company's and
Holdings' certified independent public accountants as such would be required
in such reports to the Commission, and, in each case, together with a
management's discussion and analysis of financial condition and results of
operations which would be so required; and (ii) all reports that would be
required to be filed with the Commission on Form 8-K. In addition, whether or
not required by the rules and regulations of the Commission, the Company will
file a copy of all such information and reports with the Commission for public
availability (unless the Commission will not accept such a filing) and make
such information available to securities analysts and prospective investors
upon request for so long as any Notes remain outstanding. Furthermore, the
Company has agreed that, for so long as any Notes remain outstanding, it will
furnish to the Holders and to securities analysts and prospective investors,
upon their request, the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act.
EVENTS OF DEFAULT AND REMEDIES
The Indenture defines an Event of Default as (i) the failure by the Company
to pay any installment of interest on the Notes as and when the same becomes
due and payable and the continuance of any such failure for 30 days, (ii) the
failure by the Company to pay all or any part of the principal, or premium, if
any, on the Notes when and as the same becomes due and payable at maturity,
redemption, by acceleration or otherwise, including, without limitation,
payment of the Change of Control Purchase Price or the Asset Sale Offer Price,
or otherwise, (iii) the making by the Company or any of its Subsidiaries of a
Restricted Payment not permitted by the Indenture, (iv) the failure by the
Company or any Guarantor to observe or perform any other covenant or agreement
contained in the Notes or the Indenture and, subject to certain exceptions,
the continuance of such failure for a period of 60 days after written notice
is given to the Company by the Trustee or to the Company and the Trustee by
the Holders of at least 25% in aggregate principal amount of the Notes
outstanding, (v) certain
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events of bankruptcy, insolvency or reorganization in respect of the Company
or any of its Significant Subsidiaries, (vi) a default in any Indebtedness of
the Company or any of its Subsidiaries with an aggregate principal amount in
excess of $5.0 million (a) resulting from the failure to pay principal at
maturity or (b) as a result of which the maturity of such Indebtedness has
been accelerated prior to its stated maturity, (vii) final unsatisfied
judgments not covered by insurance aggregating in excess of $5.0 million, at
any one time rendered against the Company or any of its Subsidiaries and not
stayed, bonded or discharged within 90 days, and (viii) except as permitted by
the Indenture and the Notes, the cessation of effectiveness of any Guarantee
in any material respect or the finding by any judicial proceeding that any
Guarantee is unenforceable or invalid in any material respect or the denial or
disaffirmation by any Guarantor in writing of its obligations under its
Guarantee. The Indenture provides that if a Default occurs and is continuing,
the Trustee must, within 90 days after the occurrence of such default, give to
the Holders notice of such default.
If an Event of Default occurs and is continuing (other than an Event of
Default specified in clause (v) above, relating to the Company or any
Significant Subsidiary), then in every such case, unless the principal of all
of the Notes shall have already become due and payable, either the Trustee or
the Holders of 25% in aggregate principal amount of the Notes then
outstanding, by notice in writing to the Company (and to the Trustee if given
by Holders) (an "Acceleration Notice"), may declare all principal, determined
as set forth below, and accrued interest thereon to be due and payable
immediately. In the event a declaration of acceleration resulting from an
Event of Default described in clause (vi) above has occurred and is
continuing, such declaration of acceleration shall be automatically annulled
if such default is cured or waived or the holders of the Indebtedness which is
the subject of such default have rescinded their declaration of acceleration
in respect of such Indebtedness within 60 days thereof and the Trustee has
received written notice of such cure, waiver or rescission and no other Event
of Default described in clause (vi) above has occurred that has not been cured
or waived within 60 days of the declaration of such acceleration in respect of
such Indebtedness. If an Event of Default specified in clause (v), above,
relating to the Company or any Significant Subsidiary occurs, all principal
and accrued interest thereon and Liquidated Damages, if any, will be
immediately due and payable on all outstanding Notes without any declaration
or other act on the part of the Trustee or the Holders. The Holders of a
majority in aggregate principal amount of Notes generally are authorized to
rescind such acceleration if all existing Events of Default, other than the
non-payment of the principal of, premium, if any, and interest on the Notes
which have become due solely by such acceleration, have been cured or waived.
Prior to the declaration of acceleration of the maturity of the Notes, the
Holders of a majority in aggregate principal amount of the Notes at the time
outstanding may waive on behalf of all the Holders any default, except a
default in the payment of principal of or interest on any Note not yet cured,
or a default with respect to any covenant or provision which cannot be
modified or amended without the consent of the Holder of each outstanding Note
affected. Subject to the provisions of the Indenture relating to the duties of
the Trustee, the Trustee will be under no obligation to exercise any of its
rights or powers under the Indenture at the request, order or direction of any
of the Holders, unless such Holders have offered to the Trustee reasonable
security or indemnity. Subject to all provisions of the Indenture and
applicable law, the Holders of a majority in aggregate principal amount of the
Notes at the time outstanding will have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred on the Trustee.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides that the Company may, at its option and at any time,
elect to have its obligations discharged with respect to the outstanding Notes
("Legal Defeasance"). Such Legal Defeasance means that the Company shall be
deemed to have paid and discharged the entire indebtedness represented, and
the Indenture shall cease to be of further effect as to all outstanding Notes
and Guarantees, except as to (i) rights of Holders to receive payments in
respect of the principal of, premium, if any, and interest on such Notes when
such payments are due from the trust funds; (ii) the Company's obligations
with respect to such Notes concerning issuing temporary Notes, registration of
Notes, mutilated, destroyed, lost or stolen Notes, and the maintenance of an
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office or agency for payment and money for security payments held in trust;
(iii) the rights, powers, trust, duties, and immunities of the Trustee, and
the Company's obligations in connection therewith; and (iv) the Legal
Defeasance provisions of the Indenture. In addition, the Company may, at its
option and at any time, elect to have the obligations of the Company and the
Guarantors released with respect to certain covenants that are described in
the Indenture ("Covenant Defeasance") and thereafter any omission to comply
with such obligations shall not constitute a Default or Event of Default with
respect to the Notes. In the event Covenant Defeasance occurs, certain events
(not including non-payment, bankruptcy, receivership, rehabilitation and
insolvency events) described under "Events of Default" will no longer
constitute an Event of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the holders of the Notes, U.S. legal tender, non-callable government
securities or a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public accountants,
to pay the principal of, premium, if any, and interest on such Notes on the
stated date for payment thereof or on the redemption date of such principal or
installment of principal of, premium, if any, or interest on such Notes, and
the holders of Notes must have a valid, perfected, exclusive security interest
in such trust; (ii) in the case of the Legal Defeasance, the Company shall
have delivered to the Trustee a written opinion of counsel in the United
States reasonably acceptable to Trustee confirming that (A) the Company has
received from, or there has been published by the Internal Revenue Service, a
ruling or (B) since the date of the Indenture, there has been a change in the
applicable Federal income tax law, in either case to the effect that, and
based thereon such opinion of counsel shall confirm that, the holders of such
Notes will not recognize income, gain or loss for Federal income tax purposes
as a result of such Legal Defeasance and will be subject to Federal income tax
on the same amounts, in the same manner and at the same times as would have
been the case if such Legal Defeasance had not occurred; (iii) in the case of
Covenant Defeasance, the Company shall have delivered to the Trustee a written
opinion of counsel in the United States reasonably acceptable to such Trustee
confirming that the holders of such Notes will not recognize income, gain or
loss for Federal income tax purposes as a result of such Covenant Defeasance
and will be subject to Federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Covenant
Defeasance had not occurred; (iv) no Default or Event of Default shall have
occurred and be continuing on the date of such deposit or insofar as Events of
Default from bankruptcy or insolvency events are concerned, at any time in the
period ending on the 91st day after the date of deposit; (v) such Legal
Defeasance or Covenant Defeasance shall not result in a breach or violation
of, or constitute a default under the Indenture or any other material
agreement or instrument to which the Company or any of its Subsidiaries is a
party or by which the Company or any of its Subsidiaries is bound; (vi) the
Company shall have delivered to the Trustee an Officers' Certificate stating
that the deposit was not made by the Company with the intent of preferring the
holders of such Notes over any other creditors of the Company or with the
intent of defeating, hindering, delaying or defrauding any other creditors of
the Company or others; and (vii) the Company shall have delivered to the
Trustee an Officers' Certificate and an opinion of counsel, each stating that
all conditions precedent provided for or relating to the Legal Defeasance or
the Covenant Defeasance have been complied with.
If the funds deposited with the Trustee to effect Legal Defeasance or
Covenant Defeasance are insufficient to pay the principal of, premium, if any,
and interest on the Notes when due, then the obligations of the Company and
the Guarantors under the Indenture will be revived, and no such defeasance
will be deemed to have occurred.
AMENDMENTS AND SUPPLEMENTS
The Indenture contains provisions permitting the Company, the Guarantors and
the Trustee to enter into a supplemental indenture for certain limited
purposes without the consent of the Holders. With the consent of the Holders
of not less than a majority in aggregate principal amount of the Notes at the
time outstanding, the Company, the Guarantors and the Trustee are permitted to
amend or supplement the Indenture or any supplemental indenture or modify the
rights of the Holders; provided, that no such modification may, without the
consent of each Holder affected thereby: (i) change the Stated Maturity of or
the Change of Control Purchase
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Date or the Asset Sale Offer Period on any Note, or reduce the principal
amount thereof or the rate (or extend the time for payment) of interest
thereon or any premium payable upon the redemption thereof, or change the
place of payment where, or the coin or currency in which, any Note or any
premium or the interest thereon is payable, or impair the right to institute
suit for the enforcement of any such payment on or after the Stated Maturity
thereof (or, in the case of redemption, on or after the Redemption Date), or
reduce the Change of Control Purchase Price or the Asset Sale Offer Price or
alter the redemption provisions or the provisions of the "Repurchase of Notes
at the Option of the Holder Upon a Change of Control" covenant in a manner
adverse to the Holders, or (ii) reduce the percentage in principal amount of
the outstanding Notes, the consent of whose Holders is required for any such
amendment, supplemental indenture or waiver provided for in the Indenture, or
(iii) change the ranking of the Notes or the Guarantees to anything other than
pari passu in right of payment to all unsubordinated Indebtedness of the
Company or the applicable Guarantor or (iv) modify any of the waiver
provisions, except to increase any required percentage or to provide that
certain other provisions of the Indenture cannot be modified or waived without
the consent of the Holder of each outstanding Note affected thereby.
NO PERSONAL LIABILITY OF PARTNERS, STOCKHOLDERS, OFFICERS, DIRECTORS
The Indenture provides that no individual who serves as a direct or indirect
stockholder, partner, employee, officer or director, as such, past, present or
future of the Company, the Guarantors or any successor entity shall have any
personal liability in respect of the obligations of the Company or the
Guarantors under the Indenture or the Notes by reason of his or her status as
such stockholder, partner, employee, officer or director.
GOVERNING LAW
The Indenture, the Notes and the Guarantees are governed by the laws of the
State of New York.
CERTAIN DEFINITIONS
"Acquired Indebtedness" means Indebtedness of any person existing at the
time such person becomes a subsidiary of such person or is merged or
consolidated into or with such person or one of its subsidiaries, and not
incurred in connection with or in anticipation of, such merger or
consolidation or of such person becoming a subsidiary of such person.
"Acquisition" means the purchase or other acquisition of any person or
substantially all the assets of any person by any other person, whether by
purchase, merger, consolidation, or other transfer, and whether or not for
consideration.
"Affiliate" means (i) any person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company or
any of the Guarantors, (ii) any spouse, immediate family member, or other
relative who has the same principal residence of any person described in
clause (i) above, and (iii) any trust in which any person described in clause
(i) or (ii) above has a beneficial interest. For purposes of this definition,
the term "control" means the power to direct the management and policies of a
person, directly or through one or more intermediaries, whether through the
ownership of voting securities, by contract, or otherwise, provided, that a
beneficial owner of 10% or more of the total voting power normally entitled to
vote in the election of directors, managers or trustees, as applicable, shall
for such purposes be deemed to constitute control. Notwithstanding the
foregoing, the term Affiliate shall not include Subsidiary Guarantors.
"Assets to Be Disposed of" means assets identified in an Officers'
Certificate at the time of an Acquisition as assets the Company or the
acquiring Subsidiary intends to dispose of within 180 days of such
Acquisition.
"Average Life" means, as of the date of determination, with respect to any
security or instrument, the quotient obtained by dividing (i) the sum of (a)
the product of the number of years from the date of determination to the date
or dates of each successive scheduled principal (or redemption) payment of
such security or
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instrument and (b) the amount of each such respective principal (or
redemption) payment by (ii) the sum of all such principal (or redemption)
payments.
"beneficial owner" for purposes of the definition of Change of Control has
the meaning attributed to it in Rules 13d-3 and 13d-5 under the Exchange Act
(as in effect on the Issue Date), whether or not applicable, except that a
"person" shall be deemed to have "beneficial ownership" of all shares that any
such person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time or (unless not within the
control of such person) upon the occurrence of certain events.
"Brentwood" means Brentwood Golf Partners, L.P. and/or any of its
Affiliates.
"Brentwood Agreement" means the Corporate Development and Administrative
Services Agreement dated September 30, 1992 between the Company and Brentwood
Buyout Partners, L.P., as amended as of the Issue Date.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in New York, New York are
authorized or obligated by law or executive order to close.
"Capital Stock" means, with respect to any person, any capital stock of such
person and shares, interests, participations or other ownership interests
(however designated) of any person and any rights (other than debt securities
convertible into corporate stock), warrants and options to purchase any of the
foregoing, including (without limitation) each class of common stock and
preferred stock of such person if such person is a corporation and each
general and limited partnership interest of such person if such person is a
partnership.
"Capitalized Lease Obligation" means rental obligations under a lease that
are required to be capitalized for financial reporting purposes in accordance
with GAAP, and the amount of Indebtedness represented by such obligations
shall be the capitalized amount of such obligations, as determined in
accordance with GAAP.
Cash Equivalent" means (i) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof), (ii) time deposits and
certificates of deposit and commercial paper issued by the parent corporation
of any domestic commercial bank of recognized standing having capital and
surplus in excess of $500 million and commercial paper issued by others rated
at least A-2 or the equivalent thereof by Standard & Poor's Corporation or at
least P-2 or the equivalent thereof by Moody's Investors Service, Inc. and in
each case maturing within one year after the date of acquisition and (iii)
investments in money market funds substantially all of whose assets comprise
securities of the types described in clauses (i) and (ii) above.
"Consolidated Cash Flow Ratio" of any person on any date of determination
(the "Transaction Date") means the ratio, on a pro forma basis, of (a) the
aggregate amount of consolidated Indebtedness of such person on the
Transaction Date to (b) the aggregate amount of Consolidated EBITDA of such
person (exclusive of amounts attributable to operations and businesses
permanently discontinued or disposed of) during the Reference Period;
provided, however, that for purposes of such calculation, (i) Acquisitions
which occurred during the Reference Period or subsequent to the Reference
Period and on or prior to the Transaction Date shall be assumed to have
occurred on the first day of the Reference Period, (ii) transactions giving
rise to the need to calculate the Consolidated Cash Flow Ratio shall be
assumed to have occurred on the first day of the Reference Period and (iii)
the incurrence of any Indebtedness or issuance of any Disqualified Capital
Stock during the Reference Period or subsequent to the Reference Period and on
or prior to the Transaction Date (and the application of the proceeds
therefrom to the extent used to refinance or retire other Indebtedness) shall
be assumed to have occurred on the first day of such Reference Period.
"Consolidated EBITDA" means, with respect to any person, for any period, the
Consolidated Net Income of such person for such period adjusted to add thereto
(to the extent deducted from net revenues in determining
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Consolidated Net Income), without duplication, the sum of (i) consolidated
income tax expense, (ii) consolidated depreciation and amortization expense
(including any accelerations thereof) and (iii) Consolidated Fixed Charges.
"Consolidated Fixed Charges" of any person means, for any period, the
aggregate amount (without duplication and determined in each case in
accordance with GAAP) of (a) interest expensed or capitalized, paid, accrued,
or scheduled to be paid or accrued (including, in accordance with the
following sentence, interest attributable to Capitalized Lease Obligations) of
such person and its Consolidated Subsidiaries during such period, including
(i) original issue discount and non-cash interest payments or accruals on any
Indebtedness, (ii) the interest portion of all deferred payment obligations,
and (iii) all commissions, discounts and other fees and charges owed with
respect to bankers' acceptances and letters of credit financings and currency
and Interest Swap and Hedging Obligations, in each case to the extent
attributable to such period, (b) one-third of rental expense for such period
attributable to operating leases of such person and its Consolidated
Subsidiaries, and (c) the amount of dividends accrued or payable by such
person or any of its Consolidated Subsidiaries in respect of Disqualified
Capital Stock (other than by Subsidiaries of such person to such person or
such person's wholly owned Subsidiaries). For purposes of this definition, (x)
interest on a Capitalized Lease Obligation shall be deemed to accrue at an
interest rate reasonably determined by the Company to be the rate of interest
implicit in such Capitalized Lease Obligation in accordance with GAAP and (y)
interest expense attributable to any Indebtedness represented by the guarantee
by such person or a Subsidiary of such person of an obligation of another
person shall be deemed to be the interest expense attributable to the
Indebtedness guaranteed.
"Consolidated Net Income" means, with respect to any person for any period,
the net income (or loss) of such person and its Consolidated Subsidiaries
(determined on a consolidated basis in accordance with GAAP) for such period,
adjusted to exclude (only to the extent included in computing such net income
(or loss) and without duplication): (a) all gains (but not losses) which are
either extraordinary (as determined in accordance with GAAP) or are either
unusual or nonrecurring (including without limitation any gain from the sale
or other disposition of assets outside the ordinary course of business or from
the issuance or sale of any Capital Stock), (b) the net income, if positive,
of any person, other than a wholly owned Consolidated Subsidiary, in which
such person or any of its Consolidated Subsidiaries has an interest, except to
the extent of the amount of any dividends or distributions actually paid in
cash to such person or a wholly owned Consolidated Subsidiary of such person
during such period, but in any case not in excess of such person's pro rata
share of such person's net income for such period, (c) the net income or loss
of any person acquired in a pooling of interests transaction for any period
prior to the date of such acquisition and (d) the net income, if positive, of
any of such person's Consolidated Subsidiaries to the extent that the
declaration or payment of dividends or similar distributions is not at the
time permitted by operation of the terms of its charter or bylaws or any other
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to such Consolidated Subsidiary.
"Consolidated Subsidiary" means, for any person, each Subsidiary of such
person (whether now existing or hereafter created or acquired) the financial
statements of which shall be (or should have been) consolidated for financial
statement reporting purposes with the financial statements of such person in
accordance with GAAP.
"Consolidated Tangible Net Worth" of any person at any date means the total
assets of such person and its Consolidated Subsidiaries, as would be shown on
the consolidated balance sheet of such person prepared in accordance with
GAAP, less (a) the total liabilities appearing on such balance sheet, and (b)
intangible assets. For purposes hereof, "intangible assets" means the value
(net of any applicable reserves), as shown on or reflected in such balance
sheet, of: (i) all trade names, trademarks, licenses, patents, copyrights and
goodwill; (ii) organizational and development costs; and (iii) unamortized
debt discount and expense, less unamortized premium.
"Disqualified Capital Stock" means (a) except as set forth in (b), with
respect to any person, Capital Stock of such person that, by its terms or by
the terms of any security into which it is convertible, exercisable or
exchangeable, is, or upon the happening of an event or the passage of time
would be, required to be redeemed or repurchased (including at the option of
the holder thereof) by such person or any of its Subsidiaries, in whole or
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in part, on or prior to the Stated Maturity of the Notes and (b) with respect
to any Subsidiary of such person (including with respect to any Subsidiary of
the Company), any Capital Stock other than any common stock with no special
rights and no preference, privileges, or redemption or repayment provisions.
"Existing Assets" means assets of the Company and its Subsidiaries existing
at the Issue Date (other than cash, Cash Equivalents or inventory held for
resale in the ordinary course of business) and including proceeds of any sale
of such assets and assets acquired in whole or in part with proceeds from the
sale from any such assets.
"GAAP" means United States generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession as in effect on the Issue Date.
"Indebtedness" of any person means, without duplication, (a) all liabilities
and obligations, contingent or otherwise, of any such person, (i) in respect
of borrowed money (whether or not the recourse of the lender is to the whole
of the assets of such person or only to a portion thereof), (ii) evidenced by
bonds, notes, debentures or similar instruments, (iii) representing the
balance deferred and unpaid of the purchase price of any property or services,
except (other than accounts payable or other obligations to trade creditors
which have remained unpaid for greater than 90 days past their original due
date, or for which adequate reserves have been established while such amounts
are being contested in good faith) those incurred in the ordinary course of
its business that would ordinarily constitute a trade payable to trade
creditors, (iv) evidenced by bankers' acceptances or similar instruments
issued or accepted by banks, (v) in respect of Capitalized Lease Obligations,
or (vi) evidenced by a letter of credit or a reimbursement obligation of such
person with respect to any letter of credit; (b) all net obligations of such
person under Interest Swap and Hedging Obligations; (c) all liabilities of
others of the kind described in the preceding clauses (a) and (b) that such
person has guaranteed or that is otherwise its legal liability and all
obligations to purchase, redeem or acquire any Capital Stock; (d) all
obligations secured by a Lien to which the property or assets (including,
without limitation, leasehold interests and any other tangible or intangible
property rights) of such person are subject, whether or not the obligations
secured thereby shall have been assumed by or shall otherwise be such person's
legal liability, provided, that the amount of such obligations shall be
limited to the lesser of the fair market value of the assets or property to
which such Lien attaches and the amount of the obligation so secured; and (e)
any and all deferrals, renewals, extensions, refinancings and refundings
(whether direct or indirect) of, or amendments, modifications or supplements
to, any liability of the kind described in any of the preceding clauses (a),
(b), (c) or (d), or this clause (e), whether or not between or among the same
parties.
"Interest Swap and Hedging Obligation" means any obligation of any person
pursuant to any interest rate swap agreement, interest rate cap agreement,
interest rate collar agreement, interest rate exchange agreement, currency
exchange agreement or any other agreement or arrangement designed to protect
against fluctuations in interest rates or currency values, including, without
limitation, any arrangement whereby, directly or indirectly, such person is
entitled to receive from time to time periodic payments calculated by applying
either a fixed or floating rate of interest on a stated notional amount in
exchange for periodic payments made by such person calculated by applying a
fixed or floating rate of interest on the same notional amount.
"Investment" by any person in any other person means (without duplication)
(a) the acquisition by such person (whether for cash, property, services,
securities or otherwise) of capital stock, bonds, notes, debentures,
partnership or other ownership interests or other securities, including any
options or warrants, of such other person or any agreement to make any such
acquisition; (b) the making by such person of any deposit with, or advance,
loan or other extension of credit to, such other person (including the
purchase of property from another person subject to an understanding or
agreement, contingent or otherwise, to resell such property from another
person subject to an understanding or agreement, contingent or otherwise, to
resell such property to such other person) or any commitment to make any such
advance, loan or extension (but excluding accounts receivable or deposits
arising in the ordinary course of business); (c) other than the Guarantees of
the Notes, the entering into
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by such person of any guarantee of, or other credit support or contingent
obligation with respect to, Indebtedness or other liability of such other
person; (d) the making of any capital contribution by such person to such
other person; and (e) the designation by the Board of Directors of the Company
of any person to be an Unrestricted Subsidiary. The Company shall be deemed to
make an "Investment" in an amount equal to the fair market value of the net
assets of any person (or, if neither the Company nor any of its Subsidiaries
has theretofore made an Investment in such person, in an amount equal to the
Investments being made), at the time that such person is designated an
Unrestricted Subsidiary or, if such designation is made pursuant to clause
(i)(c) of the definition of Unrestricted Subsidiary, in an amount equal to the
sum of the Investments being made and the consideration paid by the Company
and its Subsidiaries to effect such Acquisition (excluding, for this purpose
only, Qualified Capital Stock of the Company issued in connection therewith).
Any property transferred to an Unrestricted Subsidiary from the Company or a
Subsidiary of the Company, shall be deemed an "Investment" valued at its fair
market value at the time of such transfer.
"Investor Group" means any one or more of the stockholders of Holdings
immediately prior to the Issue Date and any one or more Affiliates of such
persons.
"Issue Date" means the date of first issuance of the Notes under the
Indenture.
"Net Cash Proceeds" means the aggregate amount of cash or Cash Equivalents
received by the Company in the case of a sale of Qualified Capital Stock and
by the Company and its Subsidiaries in respect of an Asset Sale plus, in the
case of an issuance of Qualified Capital Stock upon any exercise, exchange or
conversion of securities (including options, warrants, rights and convertible
or exchangeable debt) of the Company that were issued for cash on or after the
Issue Date, the amount of cash originally received by the Company upon the
issuance of such securities (including options, warrants, rights and
convertible or exchangeable debt) less, in each case, the sum of all payments,
fees, commissions and (in the case of Asset Sales, reasonable and customary),
expenses (including, without limitation, the fees and expenses of legal
counsel and investment banking fees and expenses) incurred in connection with
such Asset Sale or sale of Qualified Capital Stock, and, in the case of an
Asset Sale only, less the amount (estimated reasonably and in good faith by
the Company) of income, franchise, sales and other applicable taxes required
to be paid by the Company or any of its respective Subsidiaries in the current
or next succeeding taxable year of sale in connection with such Asset Sale.
"New Credit Facility" means the credit agreement to be dated as of June 4,
1996 by and among the Company, Holdings, Bank of America NT & SA, individually
and as agent, and certain financial institutions, providing for (A) an
aggregate $45.0 million reducing revolving loan facility, and (B) an aggregate
$5.0 million working capital revolving credit facility, including any related
notes, guarantees, collateral documents, instruments and agreements executed
in connection therewith, as such credit agreement and/or related documents may
be amended, restated, supplemented, renewed, replaced or otherwise modified
from time to time whether or not with the same agent, trustee, representative
lenders or holders, and, subject to the proviso to the next succeeding
sentence, irrespective of any changes in the terms and conditions thereof.
Without limiting the generality of the foregoing, the term "New Credit
Facility" shall include agreements in respect of Interest Swap and Hedging
Obligations with lenders party to the New Credit Facility and shall also
include any amendment, amendment and restatement, renewal, extension,
restructuring, supplement or modification to the New Credit Facility and all
refundings, refinancings and replacements of the New Credit Facility,
including any agreement (i) extending the maturity of any Indebtedness
incurred thereunder or contemplated thereby, (ii) adding or deleting borrowers
or guarantors thereunder, so long as borrowers and issuers include one or more
of the Company and its Subsidiaries and their respective successors and
assigns, or (iii) increasing the amount of Indebtedness incurred thereunder or
available to be borrowed thereunder, provided, however, that on the date such
Indebtedness is incurred it would not be prohibited by the covenant
"Limitation on Incurrence of Additional Indebtedness and Disqualified Capital
Stock."
"Non-recourse Purchase Money Indebtedness" means Indebtedness of the Company
or its Subsidiaries to the extent that (i) under the terms thereof or pursuant
to law, no personal recourse may be had against the Company or its
Subsidiaries for the payment of the principal of or interest or premium on
such Indebtedness (or
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such portion), and enforcement of obligations on such Indebtedness (or such
portion) (except with respect to fraud, willful misconduct, misrepresentation,
misapplication of funds, reckless damage to assets and undertakings with
respect to environmental matters or construction defects) is limited only to
recourse against interests in specified assets and property (the "Subject
Assets"), accounts and proceeds arising therefrom, and rights under purchase
agreements or other agreements with respect to such Subject Assets; (ii) such
Indebtedness is incurred in connection with the acquisition of such Subject
Asset for the business of the Company or such Subsidiaries, including
Indebtedness assumed which Indebtedness existed at the time of the acquisition
of such Subject Asset; (iii) such Indebtedness was incurred at the time of
such acquisition of such Subject Asset; and (iv) no proceeds from the sale of
Existing Assets were used to acquire such Subject Asset.
"Permitted Indebtedness" means any of the following:
(a) the Company and the Guarantors may incur Indebtedness in respect of
Capitalized Lease Obligations and Non-recourse Purchase Money Indebtedness
in the ordinary course of business, in amounts and for the purposes
customary in the Company's industry; provided, however, that the aggregate
principal amount outstanding of such Indebtedness (including any
Indebtedness issued to Refinance, refund or replace such Indebtedness)
shall at no time exceed $10.0 million;
(b) the Company may incur Indebtedness to any wholly owned Subsidiary
Guarantor, and any Subsidiary Guarantor may incur Indebtedness to any
wholly owned Subsidiary Guarantor or to the Company; provided, that such
obligations shall be subordinated in all respects to the Company's or such
Guarantor's obligations pursuant to its Guarantee of the Company's
obligations pursuant to the Indenture and the Notes and
(c) Indebtedness outstanding on the Issue Date after giving effect to the
New Credit Facility.
"Permitted Liens" means any of the following
(a) Liens existing on the Issue Date (including Liens in favor of the
Trustee arising under the Indenture and Liens securing Indebtedness
permitted to be incurred pursuant to the New Credit Facility in compliance
with paragraph (e) of the covenant "Limitation on Incurrence of Additional
Indebtedness and Disqualified Capital Stock"), after giving effect to the
implementation of the New Credit Facility, and any extension, renewal,
replacement or refinancing, in whole or in part, of any such Lien so long
as (1) the amount of security is not increased thereby, (2) the aggregate
amount secured by such Lien after such extension, renewal, replacement or
refinancing does not exceed (after deduction of reasonable and customary
fees and expenses incurred in connection therewith) the aggregate amount
secured thereby prior thereto and (3) the Indebtedness secured by such
Lien, if any, is permitted under the covenant "Limitation on Incurrence of
Additional Indebtedness and Disqualified Capital Stock;"
(b) Liens for taxes, assessments or other governmental charges or claims
not yet due or which are being contested in good faith and by appropriate
proceedings by a person if adequate reserves or other appropriate
provisions with respect thereto are maintained on the books of such person
to the extent required in accordance with GAAP;
(c) statutory Liens of carriers, warehousemen, mechanics, landlords,
materialmen, repairmen or other like Liens arising by operation of law and
Liens on deposits made to obtain the release of such Liens if (i) the
underlying obligations are not overdue for a period of more than 60 days or
(ii) such Liens are being contested in good faith and by appropriate
proceedings by such person and adequate reserves with respect thereto are
maintained on the books of such person in accordance with GAAP;
(d) Liens securing the performance of bids, trade contracts (other than
in connection with any borrowing of money or any commitment to loan any
money or to extend any credit), leases, statutory obligations, surety and
appeal bonds and other obligations of a like nature, and pledges or
deposits in connection with workers' compensation, unemployment insurance
and other types of social security legislation, in each case made or
incurred in the ordinary course of business consistent with industry
practices;
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(e) easements, rights-of-ways, zoning and similar restrictions and other
similar encumbrances or title defects which, in the aggregate, are not
substantial in amount, and which do not in any case materially detract from
the value of the property subject thereto (as such property is used by such
person) or interfere with the ordinary conduct of the business of such
person; provided, that any such Liens are not incurred for the benefit of
any borrowing of money or any commitment to loan any money or to extend any
credit;
(f) Liens arising by operation of law in connection with judgments to the
extent, for an amount and for a period not resulting in an Event of Default
with respect thereto;
(g) Liens securing Non-recourse Purchase Money Indebtedness permitted to
be incurred under the Indenture, provided, that each such Lien relates only
to the property which is subject to such Non-recourse Purchase Money
Indebtedness;
(h) any customary retention of title by the lessor under a Capitalized
Lease Obligation incurred in compliance with the covenant "Limitation on
Incurrence of Additional Indebtedness and Disqualified Capital Stock;"
(i) Liens that secure Acquired Indebtedness, provided, in each case, that
such Liens do not secure any other property or assets and were not put in
place in connection with or in anticipation of such acquisition, merger or
consolidation, and any extension, renewal, replacement or refinancing, in
whole or in part, of any such Lien so long as (1) the amount of security is
not increased thereby, (2) the aggregate amount secured by such Lien after
such extension, renewal, replacement or refinancing does not exceed (after
deduction of reasonable and customary fees and expenses incurred in
connection therewith) the aggregate amount secured thereby prior thereto
and (3) the Indebtedness secured by such Lien, if any, is permitted under
the covenant "Limitation on Incurrence of Additional Indebtedness and
Disqualified Capital Stock;"
(j) Liens that secure Indebtedness incurred pursuant to clause (a) of the
"Limitation on Incurrence of Additional Indebtedness and Disqualified
Capital Stock" covenant, provided that (i) after giving effect on a pro-
forma basis to such Incurrence and the use of proceeds thereof, the Debt
Incurrence Ratio is no greater than 5 to 1 and (ii) that the aggregate
amount secured by any such Lien does not exceed the aggregate amount of
such Indebtedness; and
(k) Liens that secure Indebtedness incurred under the New Credit Facility
either (i) pursuant to clause (e) of the covenant "Limitation on Incurrence
of Additional Indebtedness and Disqualified Capital Stock" and/or (ii)
pursuant to clause (a) of the "Limitation on Incurrence of Additional
Indebtedness and Disqualified Capital Stock" covenant, provided that (i)
after giving effect on a pro forma basis to such Incurrence and the use of
proceeds thereof, the Debt Incurrence Ratio is no greater than 5 to 1.
"Public Equity Offering" means an underwritten offering of common stock of
the Company or Holdings pursuant to an effective registration statement under
the Securities Act after which the common stock of the Company or Holdings, as
applicable, is listed on a national securities exchange or quoted on the
Nasdaq National Market.
"Qualified Capital Stock" means any Capital Stock of the Company that is not
Disqualified Capital Stock.
"Qualified Exchange" means any defeasance, redemption, retirement,
repurchase or other acquisition of Capital Stock or Indebtedness of the
Company issued on or after the Issue Date with the Net Cash Proceeds received
by the Company from the substantially concurrent sale of Qualified Capital
Stock.
"Reference Period" with regard to any person means the four full fiscal
quarters (or such lesser period during which such person has been in
existence) ended immediately preceding any date upon which any determination
is to be made pursuant to the terms of the Notes or the Indenture; provided,
however, that the Consolidated Fixed Charges of such person, to the extent
such person has been in existence for a shorter period than four full fiscal
quarters, shall be computed on an annualized basis.
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"Refinancing Indebtedness" means Indebtedness or Disqualified Capital Stock
(a) issued in exchange for, or the proceeds from the issuance and sale of
which are used substantially concurrently to repay, redeem, defease, refund,
refinance, discharge or otherwise retire for value, in whole or in part, or
(b) constituting an amendment, modification or supplement to, or a deferral or
renewal of ((a) and (b) above are, collectively, a "Refinancing"), any
Indebtedness or Disqualified Capital Stock in a principal amount or, in the
case of Disqualified Capital Stock, liquidation preference, not to exceed
(after deduction of reasonable and customary fees and expenses incurred in
connection with the Refinancing) the lesser of (i) the principal amount or, in
the case of Disqualified Capital Stock, liquidation preference, of the
Indebtedness or Disqualified Capital Stock so Refinanced and (ii) if such
Indebtedness being Refinanced was issued with an original issue discount, the
accreted value thereof (as determined in accordance with GAAP) at the time of
such Refinancing; provided, however, that (A) such Refinancing Indebtedness of
any Subsidiary of the Company shall only be used to Refinance outstanding
Indebtedness or Disqualified Capital Stock of such Subsidiary, (B) Refinancing
Indebtedness shall (x) not have an Average Life shorter than the Indebtedness
or Disqualified Capital Stock to be so refinanced at the time of such
Refinancing and (y) in all respects, be no less subordinated, if applicable,
to the rights of Holders of the Notes than was the Indebtedness or
Disqualified Capital Stock to be refinanced and (C) such Refinancing
Indebtedness shall have no installment of principal (or redemption payment)
scheduled to come due earlier than the scheduled maturity of any installment
of principal of the Indebtedness or Disqualified Capital Stock to be so
refinanced which was scheduled to come due prior to the Stated Maturity.
"Related Business" means the business conducted by the Company and its
Subsidiaries as of the Issue Date and any and all businesses that in the good
faith judgment of the Board of Directors of the Company are materially related
businesses.
"Restricted Investment" means, in one or a series of related transactions,
any Investment, other than (a) in Cash Equivalents, (b) intercompany notes to
the extent permitted under "Permitted Indebtedness," (c) Investments in
existence on the Issue Date and (d) Investments in wholly owned Subsidiary
Guarantors (including Investments as a direct result of which the surviving
entity is or becomes the Company or a direct wholly owned Subsidiary
Guarantor).
"Restricted Payment" means, with respect to any person, (a) the declaration
or payment of any dividend or other distribution in respect of Capital Stock
of such person or any Subsidiary of such person, (b) any payment on account of
the purchase, redemption or other acquisition or retirement for value of
Capital Stock of such person or any Subsidiary of such person, (c) any
purchase, redemption, or other acquisition or retirement for value of, any
payment in respect of any amendment of the terms of or any defeasance of, any
Subordinated Indebtedness, directly or indirectly, by such person or a
Subsidiary of such person prior to the scheduled maturity, any scheduled
repayment of principal, or scheduled sinking fund payment, as the case may be,
of such Indebtedness and (d) any Restricted Investment by such person;
provided, however, that the term "Restricted Payment" does not include (i) any
dividend, distribution or other payment on or with respect to Capital Stock of
an issuer to the extent payable solely in shares of Qualified Capital Stock of
such issuer; (ii) any dividend, distribution or other payment to the Company
or to any of its Subsidiaries by the Company or any of its Subsidiaries,
provided, however, that such payment by a Subsidiary which is not wholly owned
by the Company and/or its wholly owned Subsidiaries shall constitute a
"Restricted Payment" to the extent not paid on a pro rata basis in accordance
with its organizational documents as in effect on the later of the Issue Date
and the time such person first became a Subsidiary of the Company; or (iii)
loans or advances to any Subsidiary Guarantor the proceeds of which are used
by such Subsidiary Guarantor in a Related Business activity of such Subsidiary
Guarantor.
"Significant Subsidiary," with respect to any person, means a Subsidiary of
such person which, as of the end of such person's most recent fiscal quarter,
had a Consolidated Tangible Net Worth equal to at least 5% of the Consolidated
Tangible Net Worth of such person as of such date.
"Stated Maturity," when used with respect to any Note, means June 1, 2003.
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"Strategic Investors" means any person whose principal line of business
activity is a Related Business and (a) whose total market capitalization is in
excess of $500.0 million as measured by the sum of the aggregate principal
dollar amount of its Indebtedness and the aggregate dollar value of its
Capital Stock (as measured by the per share price of its Capital Stock
multiplied by the number of outstanding shares of such Capital Stock) or (b)
in the case of a person without publicly traded Capital Stock whose private
market value, as determined by the Board of Directors of the Company
consistent with advice obtained from an independent, nationally recognized
investment banking firm, is in excess of $500.0 million.
"Subordinated Indebtedness" means Indebtedness of the Company or a
Subsidiary that is subordinated in right of payment to the Notes or, if
applicable, a Guarantee in respect thereof in any respect, or has a stated
maturity on or after the Stated Maturity.
"Subsidiary," with respect to any person, means (i) a corporation a majority
of whose Capital Stock with voting power, under ordinary circumstances, to
elect directors is at the time, directly or indirectly, owned by such person,
by such person and one or more Subsidiaries of such person or by one or more
Subsidiaries of such person, (ii) a partnership in which a person or a
subsidiary of such person is, at the date of determination, a general partner
of such partnership and in which such person or a subsidiary of such person
has a majority of the economic interests or (iii) any other person (other than
a corporation) in which such person, one or more Subsidiaries of such person,
or such person and one or more Subsidiaries of such person, directly or
indirectly, at the date of determination thereof has at least majority
ownership interest. Notwithstanding the foregoing, an Unrestricted Subsidiary
shall not be a Subsidiary of the Company or of any Subsidiary of the Company.
"Tax Sharing Agreement" means any agreements between the Company and
Holdings pursuant to which the Company may make payments to Holdings with
respect to the Company's Federal, state, or local income or franchise tax
liabilities where the Company is included in a consolidated, unitary or
combined return filed by Holdings; provided, however, that the payment by the
Company under such agreement may not exceed the liability of the Company for
such taxes if it had filed its income tax returns as a separate company.
"Unrestricted Subsidiary" means any subsidiary of the Company that does not
own any Capital Stock of, or own or hold any Lien on any property of, the
Company or any Subsidiary of the Company and that, at the time of
determination, shall be an Unrestricted Subsidiary (as designated by the Board
of Directors of the Company); provided, however, that such subsidiary shall
not engage, to any substantial extent, in any line or lines of business
activity other than a Related Business, and immediately prior thereto and
after giving pro forma effect to such designation (i) either (a) the Company
could incur at least $1.00 of Indebtedness pursuant to the Debt Incurrence
Ratio in paragraph (a) of the covenant "Limitation on Incurrence of Additional
Indebtedness and Disqualified Capital Stock," (b) such subsidiary, at the time
of designation, has no assets or (c) such subsidiary is designated an
"Unrestricted Subsidiary" at the time of Acquisition by the Company or its
Subsidiaries and (ii) there would not exist a Default or Event of Default. The
Board of Directors of the Company may designate any Unrestricted Subsidiary to
be a Subsidiary, provided, that (i) no Default or Event of Default is existing
or will occur as a consequence thereof and (ii) immediately after giving
effect to such designation, on a pro forma basis, the Company could incur at
least $1.00 of Indebtedness pursuant to the Debt Incurrence Ratio in paragraph
(a) of the covenant "Limitation on Incurrence of Additional Indebtedness and
Disqualified Capital Stock." Each such designation shall be evidenced by
filing with the Trustee a certified copy of the resolution giving effect to
such designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions.
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth below, the Exchange Notes will initially be issued in
the form of one or more registered notes in global form (the "Global
Securities"). Each Global Security will be deposited on the Issue Date of the
Exchange Notes, with, or on behalf of, The Depository Trust Company (the
"Depositary"), and registered in the name of Cede & Co., as nominee of the
Depositary. Interests in Global Exchange Notes will be available for purchase
only by "qualified institutional buyers," as defined in Rule 144A under the
Securities Act ("QIBs").
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Exchange Notes that are (i) originally issued to or transferred to
institutional "accredited investors," as defined in Rule 501(a)(1), (2), (3)
or (7) under the Securities Act, who are not QIBs or to any other persons who
are not QIBs or (ii) issued as described below under "Certificated
Securities," will be issued in registered form (the "Certificated
Securities"). Upon the transfer to a QIB of Certificated Securities, such
Certificated Securities will, unless the Global Security has previously been
exchanged for Certificated Securities, be exchanged for an interest in the
Global Security representing the principal amount of Exchange Notes being
transferred. For a description of the restrictions on the transfer of
Certificated Securities, see "Plan of Distribution."
The Depositary is a limited-purpose trust company organized under the New
York Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Securities
Exchange Act of 1934. The Depositary holds securities that its participants
("Participants") deposit with Depositary. The Depositary also facilitates the
settlement among Participants of securities transactions, such as transfers
and pledges, in deposited securities through electronic computerized book-
entry changes in Participants' accounts, thereby eliminating the need for
physical movement of securities certificates. Direct Participants include
securities brokers and dealers, banks, trust companies, clearing corporations,
and certain other organizations. The Depositary is owned by a number of its
Direct Participants and by the New York Stock Exchange, Inc., the American
Stock Exchange, Inc., and the National Association of Securities Dealers, Inc.
Access to the Depositary's system is also available to others such as
securities brokers and dealers, banks, and trust companies that clear through
or maintain a custodial relationship with a Direct Participant, either
directly or indirectly ("Indirect Participants"). The Rules applicable to the
Depositary and its Participants are on file with the Commission.
The issuance of Exchange Notes under the Depositary's system must be made by
or through Direct Participants, which will receive a credit for the Exchange
Notes on the Depositary's records. The ownership interest of each QIB that
purchases an Exchange Note ("Beneficial Owner") is in turn to be recorded on
the Direct and Indirect Participants' records. Beneficial Owners will not
receive written confirmation from DTC of their purchase, but Beneficial Owners
are expected to receive written confirmations providing details of the
transaction, as well as periodic statements of their holdings, from the Direct
or Indirect Participant through which the Beneficial Owner entered into the
transaction. Transfers of ownership interests in the securities are to be
accomplished by entries made on the books of Participants acting on behalf of
Beneficial Owners. Beneficial Owners will not receive certificates
representing their ownership interests in the Exchange Notes, except in the
event that use of the book-entry system for the Exchange Notes is
discontinued.
To facilitate subsequent transfers, all Exchange Notes deposited by
Participants with the Depositary are registered in the name of the
Depositary's partnership nominee, Cede & Co. The deposit of Exchange Notes
with the Depositary and their registration in the name of Cede & Co. effect no
change in beneficial ownership. The Depositary has no knowledge of the actual
Beneficial Owners of the Exchange Notes; the Depositary's records reflect only
the identity of the Direct Participants to whose accounts such Exchange Notes
are credited, which may or may not be the Beneficial Owners. The Participants
will remain responsible for keeping account of their holdings on behalf of
their customers.
Conveyance of notices and other communications by the Depositary to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed
by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
Exchange Notes are being redeemed, the Depositary's practice is to determine
by lot the amount of the interest of each Direct Participant in such issue to
be redeemed.
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Neither the Depositary nor Cede & Co. will consent or vote with respect to
the Exchange Notes. Under its usual procedures, the Depositary mails an
Omnibus Proxy to the Company as soon as possible after the record date. The
Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct
Participants to whose accounts the Securities are credited on the record date
(identified in a listing attached to the Omnibus Proxy).
Principal, interest and premium payments on the Exchange Notes will be made
to the Depositary. The Depositary's practice is to credit Direct Participants
accounts on payable date in accordance with their respective holdings shown on
the Depositary's records unless the Depositary has reason to believe that it
will not receive payment on payable date. Payments by Participants to
Beneficial Owners will be governed by standing instructions and customary
practices, as is the case with securities held for the accounts of customers
in bearer form or registered in "street name," and will be the responsibility
of such Participant and not of the Depositary, Agent or the Company, subject
to any statutory or regulatory requirements as may be in effect from time to
time. Payment of principal and interest to the Depositary is the
responsibility of the Company or Agent, disbursement of such payments to
Direct Participants shall be the responsibility of the Depositary, and
disbursement of such payments to the Beneficial Owners shall be the
responsibility of Direct and Indirect Participants.
A Beneficial Owner shall give notice to elect to have its Exchange Notes
purchased or tendered, through its Participant, to any Tender Agent, and shall
effect delivery of such Securities by causing the Direct Participant to
transfer the Participant's interest in the Exchange Notes, on the Depositary's
records, to the Tender Agent. The requirement for physical delivery of
Exchange Notes in connection with an optional tender or a mandatory purchase
will be deemed satisfied when the ownership rights in the Exchange Notes are
transferred by Direct Participants on the Depositary's records and followed by
a book-entry credit of rendered Securities to the Tender Agent's account.
The Depository may discontinue providing its services as securities
depository with respect to the Exchange Notes at any time by giving reasonable
notice to the Company or its Agent. Under such circumstances, in the event
that a successor securities depository is not obtained, Certificated
Securities are required to be printed and delivered.
The Company may decide to discontinue use of the system of book-entry
transfers through the Depositary (or a successor securities depository). In
that event, Certificated Securities will be printed and delivered.
The information in this section concerning the Depositary and the
Depositary's book-entry system has been obtained from sources that the Company
believes to be reliable, but the Company takes no responsibility for the
accuracy thereof.
Certificated Securities
If (i) the Company notifies the Trustee in writing that the Depositary is no
longer willing or able to act as a depository and the Company is unable to
locate a qualified successor within 90 days or (ii) the Company, at its
option, notifies the Trustee in writing that it elects to cause the issuance
of Exchange Notes in definitive form under the Indenture, then, upon surrender
by the Depositary of its Global Security, Certificated Securities will be
issued to each person that the Depositary identifies as the beneficial owner
of the Exchange Notes represented by the Global Note. In addition, subject to
certain conditions, any person having a beneficial interest in a Global
Security may, upon request to the Trustee, exchange such beneficial interest
for Certificated Securities. Upon any such issuance, the Trustee is required
to register such Certificated Securities in the name of such person or persons
(or the nominee of any thereof), and cause the same to be delivered thereto.
Neither the Company nor the Trustee shall be liable for any delay by the
Depositary or any Participant or Indirect Participant in identifying the
beneficial owners of the related Exchange Notes and each such person may
conclusively rely on, and shall be protected in relying on, instructions from
the Depositary for all purposes (including with respect to the registration
and delivery, and the respective principal amounts, of the Exchange Notes to
be issued).
74
<PAGE>
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources the Company believes to be reliable. The
Company will have no responsibility for the performance by DTC or its
Participants of their respective obligations as described hereunder and under
the rules and procedures governing their respective obligations.
Same-Day Funds Settlement and Payment
The Indenture requires that payments in respect of the Exchange Notes
represented by the Global Note (including principal, premium, if any, interest
and Liquidated Damages, if any) be made by wire transfer of immediately
available funds to the accounts specified by the registered holder of the
Global Note. With respect to Certificated Securities, the Company will make
all payments of principal, premium, if any, interest and Liquidated Damages,
if any, by wire transfer of immediately available funds to the accounts
specified by the holders thereof or, if no such account is specified, by
mailing a check to each such holder's registered address. Secondary trading in
long-term notes and debentures of corporate issuers is generally settled in
clearing-house or next-day funds. In contrast, the Exchange Notes represented
by the Global Note are expected to be eligible to trade in the PORTAL market
and to trade in the Depositary's Same-Day Funds Settlement System, and any
permitted secondary market trading activity in such Exchange Notes will,
therefore, be required by the Depositary to be settled in immediately
available funds. The Company expects that secondary trading in the
Certificated Securities will also be settled in immediately available funds.
75
<PAGE>
DESCRIPTION OF NEW CREDIT FACILITY
Simultaneously with the consummation of the Offerings, the Company entered
into credit agreement dated as of June 4, 1996 (the "New Credit Facility")
with a syndicate of financial institutions for whom Bank of America NT & SA is
acting as agent. The New Credit Facility provides for (i) a six-year reducing
revolving credit facility with aggregate availability of $45 million (the
"Reducing Revolver Commitment") and (ii) a $5 million six-year working capital
revolving credit facility (the "Working Capital Revolver"). The following
description is a summary of the material terms and conditions of the New
Credit Facility. This summary does not purport to be a complete description of
the New Credit Facility and is subject to the detailed provisions of the loan
agreement and various related documents entered into in connection with the
New Credit Facility.
Borrowings under the New Credit Facility will be secured by substantially
all of the assets of the Company and its Subsidiaries, including their equity
interests, and by the stock of the Company and are guaranteed by such
Subsidiaries and by Holdings. Borrowings under the Reducing Revolver
Commitment may be used to fund future acquisitions of golf courses and to fund
upgrade capital expenditures at such courses and certain capital improvements
at existing courses. Borrowings under the Working Capital Revolver may be used
for maintenance, capital expenditures and other general corporate purposes,
including working capital and certain dividends to Holdings. In addition, the
New Credit Facility provides that the Company may not make any acquisitions or
upgrade capital expenditures, when Funded Debt plus certain projected upgrade
capital expenditures are initially greater than 6.5x of Adjusted EBITDA (each
such term as defined in the New Credit Facility), calculated as provided
therein.
Amounts borrowed will bear interest at rates, selected at the Company's
option from time to time, based on a base rate or the Eurodollar rate, in each
case plus a fluctuating percentage based on the Company's ratio of Funded Debt
plus certain projected upgrade capital expenditures to Adjusted EBITDA (each
such term as defined in the New Credit Facility), calculated as provided
therein.
Beginning on September 30, 1998, the Reducing Revolver Commitment will
reduce quarterly, with annual reductions of approximately $4.4 million in
1998, approximately $12.1 million in 1999, approximately $15.4 million in
2000, approximately $15.4 million in 2001 and approximately $7.7 million in
2002. In addition, the New Credit Facility provides for mandatory prepayments
of (i) all net proceeds of certain asset sales, subject to certain exceptions,
(ii) all net proceeds of certain debt issuances, subject to certain exceptions
and (iii) 50% of the net proceeds from certain equity issuances. Such
mandatory prepayments will be applied first to permanently reduce the Reducing
Revolver Commitment (and outstanding loans) and secondly to permanently reduce
the Working Capital Revolver (and outstanding loans).
The obligations of the lenders under the New Credit Facility to advance
funds are subject to certain conditions customary in secured credit
facilities. In addition, the Company is subject to certain customary
affirmative and negative covenants contained in the New Credit Facility,
including without limitation covenants that restrict, subject to specified
exceptions, (i) the incurrence of additional indebtedness and other
obligations, (ii) a merger or acquisition, (iii) asset sales, (iv) the
granting of liens, (v) prepayment or repurchase of other indebtedness, (vi)
the granting of guarantees, (vii) the payments of dividends and other
restricted payments, (viii) certain upgrade capital expenditures and (ix)
modifications of certain material agreements. Certain of these covenants may
be more restrictive than those in favor of holders of the Notes as described
herein and as set forth in the Indenture. In addition, the New Credit Facility
requires that the Company maintain certain specified financial covenants,
including minimum interest and fixed charge coverage ratios, a minimum net
worth and maximum Funded Debt plus certain upgrade capital expenditures to
Adjusted EBITDA and Bank Debt to Adjusted EBITDA ratios (calculated as
provided therein).
The New Credit Facility provides for customary events of default, including
without limitation events of default relating to (i) failure to pay principal,
interest or fees, (ii) breach of covenants, representations or warranties,
(iii) cross default to other indebtedness (including the Senior Notes) or
material contracts, (iv) bankruptcy, (v) change in control, (vi) material
adverse effect and (vii) material judgments. The occurrence of any of such
events of default could result in acceleration of the Company's obligations
under the New Credit Facility and foreclosure on the collateral securing such
obligations, which would have material adverse results to holders of the
Notes.
76
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of Latham & Watkins, counsel to the Company, the following
discussion describes the material federal income tax consequences expected to
result to holders whose Private Notes are exchanged for Exchange Notes in the
Exchange Offer. Such opinion is based upon current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), applicable Treasury
regulations, judicial authority and administrative rulings and practice. There
can be no assurance that the Internal Revenue Service ("the Service") will not
take a contrary view, and no ruling from the Service has been or will be
sought with respect to the Exchange Offer. Legislative, judicial or
administrative changes or interpretations may be forthcoming that could alter
or modify the statements and conclusions set forth herein. Any such changes or
interpretations may or may not be retroactive and could affect the tax
consequences to holders. Certain holders (including insurance companies, tax-
exempt organizations, financial institutions, broker-dealers, foreign
corporations and persons who are not citizens or residents of the United
States) may be subject to special rules not discussed below. EACH HOLDER OF
PRIVATE NOTES SHOULD CONSULT ITS OWN TAX ADVISOR AS TO THE PARTICULAR TAX
CONSEQUENCES OF EXCHANGING PRIVATE NOTES FOR EXCHANGE NOTES, INCLUDING THE
APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN LAWS.
The exchange of Private Notes for Exchange Notes will be treated as a "non-
event" for federal income tax purposes because the Exchange Notes will not be
considered to differ materially in kind or extent from the Private Notes. As a
result, no material federal income tax consequences will result to holders
exchanging Private Notes for Exchange Notes.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. This Prospectus, as it may
be amended or supplemented from time to time, may be used by a broker-dealer
in connection with the resales of Exchange Notes received in exchange for
Private Notes where such Private Notes were acquired as a result of market-
making activities or other trading activities. The Company has agreed that for
a period of up to 180 days after the Expiration Date, it will make this
Prospectus, as amended or supplemented, available to any broker-dealer that
requests such document in the Letter of Transmittal for use in connection with
any such resale.
The Company will not receive any proceeds from any sale of Exchange Notes by
broker-dealers or any other persons. Exchange Notes received by broker-dealers
for their own account pursuant to the Exchange Offer may be sold from time to
time in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the Exchange Notes or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer and/or the purchasers of any such
Exchange Notes. Any broker-dealer that resells Exchange Notes that were
received by it for its own account pursuant to the Exchange Offer and any
broker or dealer that participates in a distribution of such Exchange Notes
may be deemed to be an "underwriter" within the meaning of the Securities Act
and any profit on any such resale of Exchange Notes and any commissions or
concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that
by acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act.
The Company has agreed to pay all expenses incident to the Company's
performance of, or compliance with, the Registration Rights Agreement and will
indemnify the holders of Private Notes (including any broker-dealers), and
certain parties related to such holders, against certain liabilities,
including liabilities under the Securities Act.
77
<PAGE>
LEGAL MATTERS
The validity of the Exchange Notes offered hereby will be passed upon for
the Company by Latham & Watkins, Los Angeles, California. Certain partners of
Latham & Watkins, members of their respective families, related persons and
others have an indirect interest, through Brentwood, in less than 1% of the
outstanding stock of Holdings, but do not have the power to vote or dispose of
such interests.
EXPERTS
The consolidated financial statements of Cobblestone Golf Group, Inc. as of
September 30, 1994 and 1995 and for each of the three years in the period
ended September 30, 1995, the statements of operations of the Lakeway Country
Club for the year ended December 31, 1993 and 1994 and for the three months
ended March 31, 1995, the combined statements of operations of the Stonebridge
Country Club and the Ranch Country Club for the year ended December 31, 1993
and the eleven and a half months ended December 31, 1994, the statements of
operations of the Brandermill Country Club for the year ended December 31,
1994 and the two months ended February 28, 1995, the statements of operations
of the Pecan Grove Country Club for the year ended December 31, 1993 and the
month ended January 31, 1994, the statement of operations of the Ocean Vista
Land Company for the five months ended May 31, 1993, and the statement of
operations of the Saticoy Regional Golf Course for the two and a half months
ended March 12, 1993, appearing in this Registration Statement have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
reports thereon appearing elsewhere herein, and are included in reliance upon
such report given upon the authority of said firm as experts in accounting and
auditing.
The financial statements of Sweetwater Golf Partnership as of December 31,
1994 and 1995 and for each of the three years in the period ended December 31,
1995 included in this Prospectus have been so included in reliance on the
report of Price Waterhouse LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
The financial statements of Brandermill Country Club, L.P. at December 31,
1993, and for the year then ended, included in this Prospectus and in the
Registration Statement have been audited by BDO Seidman, LLP, independent
certified public accountants, as set forth in their report appearing elsewhere
herein and in the Registration Statement, and are included in reliance upon
such report given upon the authority of said firm as experts in auditing and
accounting.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 under the Securities Act with respect to the Exchange Notes offered
hereby. As permitted by the rules and regulations of the Commission, this
Prospectus omits certain information, exhibits and undertakings contained in
the Registration Statement. For further information with respect to the
Company and the Exchange Notes offered hereby, reference is made to the
Registration Statement, including the exhibits thereto and the financial
statements, notes and schedules filed as a part thereof. As a result of the
Exchange Offer, the Company will become subject to the informational
requirements of the Exchange Act. The Registration Statement (and the exhibits
and schedules thereto), as well as the periodic reports and other information
filed by the Company with the Commission, may be inspected and copied at the
Public Reference Section of the Commission at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549 and at the regional offices of the
Commission located at Room 1400, 75 Park Place, New York, New York 10007 and
Suite 1400, Northwestern Atrium Center, 500 West Madison Street, Chicago,
Illinois 6061-2511. Copies of such materials may be obtained from the Public
Reference Section of the Commission, Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and its public reference facilities in
New York, New York and Chicago, Illinois at the prescribed rates. Statements
contained in this Prospectus as to the contents of any contract or other
document are not necessarily complete, and in each instance reference is made
to the copy of such contract or document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference.
78
<PAGE>
Pursuant to the Indenture, the Company has agreed to furnish to the Trustee
and to registered holders of the Notes, without cost to the Trustee or such
registered holders, copies of all reports and other information that would be
required to be filed by the Company with the Commission under the Exchange
Act, whether or not the Company is then required to file reports with the
Commission. As a result of this Exchange Offer, the Company will become
subject to the periodic reporting and other informational requirements of the
Exchange Act. In the event that the Company ceases to be subject to the
informational requirements of the Exchange Act, the Company has agreed that,
so long as any Notes remain outstanding, it will file with the Commission (but
only if the Commission at such time is accepting such voluntary filings) and
distribute to holders of the Notes copies of the financial information that
would have been contained in such annual reports and quarterly reports,
including a "Management's Discussion and Analysis of Financial Condition and
Results of Operations," that would have been required to be filed with the
Commission pursuant to the Exchange Act. The Company will also furnish such
other reports as it may determine or as may be required by law.
The principal address of the Company is 3702 Via de la Valle, Suite 202, Del
Mar, California 92104, and the Company's telephone number is (619) 794-2602.
79
<PAGE>
COBBLESTONE GOLF GROUP, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Consolidated Financial Statements of Cobblestone Golf Group, Inc.
Report of Ernst & Young LLP, Independent Auditors....................... F-2
Consolidated Balance Sheets--September 30, 1994 and 1995 and March 31,
1996 (unaudited)....................................................... F-3
Consolidated Statements of Operations--for the years ended September 30,
1993, 1994 and 1995, and for the six months ended March 31, 1995 and
1996 (unaudited)....................................................... F-4
Consolidated Statements of Stockholders' Equity--for the years ended
September 30, 1992, 1993, 1994, and 1995, and for the six months ended
March 31, 1996 (unaudited)............................................. F-5
Consolidated Statements of Cash Flows--for the years ended September 30,
1993, 1994 and 1995, and for the six months ended March 31, 1995 and
1996 (unaudited)....................................................... F-6
Notes to Consolidated Financial Statements--September 30, 1995 and March
31, 1996 (unaudited)................................................... F-7
Financial Statements of Sweetwater Golf Partnership
Report of Independent Accountants....................................... F-16
Balance Sheet--December 31, 1994, December 31, 1995 and June 30, 1996
(unaudited)............................................................ F-17
Statement of Operations--For the three years ended December 31, 1995,
and the six months ended June 30, 1995 and 1996 (unaudited)............ F-18
Statement of Partners' Capital (Deficit)--For the two years ended
December 31, 1995, and the six months ended June 30, 1996 (unaudited).. F-19
Statement of Cash Flows--For the three years ended December 31, 1995,
and the six months ended June 30, 1995 and 1996 (unaudited)............ F-20
Notes to Financial Statements........................................... F-22
Financial Statements of Lakeway Country Club
Report of Ernst & Young LLP, Independent Auditors....................... F-26
Statements of Operations--For the years ended December 31, 1993 and 1994
and for the three months ended March 31, 1995.......................... F-27
Note to Statements of Operations........................................ F-28
Combined Financial Statements of Stonebridge Country Club and The Ranch
Country Club
Report of Ernst & Young LLP, Independent Auditors....................... F-29
Statements of Operations--For the year ended December 31, 1993 and the
eleven and a half months ended December 15, 1994....................... F-30
Notes to Statements of Operations....................................... F-31
Financial Statements of Brandermill Country Club
Report of Ernst & Young LLP, Independent Auditors....................... F-32
Statements of Operations--For the year ended December 31, 1994 and the
two months ended February 28, 1995..................................... F-33
Note to Statements of Operations........................................ F-34
Financial Statements of Brandermill Country Club
Report of Independent Auditors.......................................... F-35
Balance Sheet--December 31, 1993........................................
Statement of Operations for the year ended December 31, 1993............ F-37
Statement of Partners' Deficit for the year ended December 31, 1993..... F-38
Statement of Cash Flows for the year ended December 31, 1993............ F-39
Summary of Accounting Policies.......................................... F-40
Notes to Financial Statements........................................... F-41
Financial Statements of Pecan Grove Plantation Country Club
Report of Ernst & Young LLP, Independent Auditors....................... F-43
Statements of Income--For the year ended December 31, 1993 and the month
ended January 31, 1994................................................. F-44
Notes to Statements of Income........................................... F-45
Financial Statements of Ocean Vista Land Company
Report of Ernst & Young LLP, Independent Auditors....................... F-47
Statement of Income--For the five months ended May 31, 1993............. F-48
Note to Statement of Income............................................. F-49
Financial Statements of Saticoy Regional Golf Course
Report of Ernst & Young LLP, Independent Auditors....................... F-50
Statement of Operations--For the two and a half months ended March 12,
1993................................................................... F-51
Note to Statement of Operations......................................... F-52
Unaudited Pro Forma Consolidated Financial Information.................... F-53
Unaudited Pro Forma Consolidated Statement of Operations--for the year
ended September 30, 1995............................................... F-54
Notes to Unaudited Pro Forma Consolidated Statement of Operations--for
the year ended September 30, 1995...................................... F-55
Unaudited Pro Forma Consolidated Statement of Operations--for the six
months ended March 31, 1996............................................ F-56
Notes to Unaudited Pro Forma Consolidated Statement of Operations--for
the six months ended March 31, 1996.................................... F-57
Unaudited Pro Forma Consolidated Balance Sheet--March 31, 1996.......... F-58
Notes to Unaudited Pro Forma Consolidated Balance Sheet--March 31,
1996................................................................... F-59
</TABLE>
F-1
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors
Cobblestone Golf Group, Inc.
We have audited the accompanying consolidated balance sheets of Cobblestone
Golf Group, Inc. as of September 30, 1994 and 1995, and the related
consolidated statements of operations, stockholders' equity (net capital
deficiency) and cash flows for each of the three years in the period ended
September 30, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Cobblestone
Golf Group, Inc. at September 30, 1994 and 1995, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended September 30, 1995, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
San Diego, California
December 8, 1995
F-2
<PAGE>
COBBLESTONE GOLF GROUP, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------------- MARCH 31,
1994 1995 1996
----------- ------------ -----------------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........ $ 1,298,671 $ 820,608 $ 1,590,803
Accounts receivable, net of
allowance for doubtful accounts
of $67,000 and $76,000 at
September 30, 1994 and 1995 and
$112,000 at March 31, 1996
(unaudited)..................... 1,261,015 2,542,122 2,137,192
Current portion of notes
receivables, net................ -- 862,922 1,228,331
Inventory........................ 723,102 1,439,063 1,842,978
Prepaid expenses and other
current assets.................. 283,463 585,398 334,980
----------- ------------ ------------
Total current assets........... 3,566,251 6,250,113 7,134,284
Property, equipment and leasehold
interests, net................... 73,734,237 128,000,304 131,290,980
Notes receivable, net............. -- 3,315,393 4,282,072
Intangible assets, net of
accumulated amortization of
$508,000 and $910,000 at
September 30, 1994 and 1995 and
$1,053,000 at March 31, 1996
(unaudited)...................... 4,603,066 4,190,860 4,047,367
Other assets, net................. 4,193,215 5,233,473 5,139,453
----------- ------------ ------------
$86,096,769 $146,990,143 $151,894,156
=========== ============ ============
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable................. $ 1,182,439 $ 2,788,114 $ 1,509,590
Accrued payroll and related
expenses........................ 835,426 1,092,232 1,266,467
Accrued interest expense......... 154,576 628,344 609,262
Accrued property taxes........... 520,667 1,038,856 525,237
Deferred revenue................. 965,890 1,221,305 2,369,680
Current portion of long-term debt
and capital lease obligations... 895,406 1,686,275 6,435,608
Current portion of deferred
purchase price.................. -- 441,427 188,329
Income taxes payable............. -- 842,241 382,853
Other current liabilities........ 269,450 479,541 507,633
----------- ------------ ------------
Total current liabilities...... 4,823,854 10,218,335 13,794,659
Long-term debt and capital lease
obligations...................... 44,194,386 85,013,950 89,554,422
Note payable to
stockholder/officer.............. 211,310 217,754 221,194
Deferred purchase price........... -- 1,108,573 984,692
Long-term deferred revenue........ 790,000 2,777,481 2,591,626
Deferred income taxes............. 4,184,000 3,877,000 3,458,583
Minority interest................. 431,675 407,175 380,985
Commitments
Stockholders' equity:
Redeemable preferred stock, $.01
par value
Authorized shares--450,000
Issued and outstanding shares--
343,625 and 430,757 at
September 30, 1994 and 1995 and
430,757 at March 31, 1996
(unaudited)
Liquidation preference of
$43,075,700 at September 30,
1995 and March 31, 1996......... 3,436 4,307 4,307
Common stock, $.01 par value:
Authorized shares--200,000
Issued and outstanding shares--
109,090 and 134,829 at
September 30, 1994 and 1995 and
134,829 at March 31, 1996
(unaudited)..................... 1,091 1,348 1,348
Paid-in capital.................. 33,715,908 46,328,923 46,328,923
Accumulated deficit.............. (2,258,891) (2,964,703) (5,426,583)
----------- ------------ ------------
Total stockholders' equity........ 31,461,544 43,369,875 40,907,995
----------- ------------ ------------
$86,096,769 $146,990,143 $151,894,156
=========== ============ ============
</TABLE>
See accompanying notes.
F-3
<PAGE>
COBBLESTONE GOLF GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED SEPTEMBER 30, MARCH 31,
------------------------------------ ------------------------
1993 1994 1995 1995 1996
---------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Operating revenues:
Green fees, cart
rental fees, practice
facility fees, dues
and initiation fees.. $3,778,299 $18,512,784 $38,043,441 $12,561,381 $19,738,164
Food and beverage
revenues............. 1,553,739 3,677,988 7,034,407 2,697,120 4,094,965
Pro shop sales........ 617,958 1,758,423 3,311,062 1,299,475 2,134,053
Other................. 557,109 943,559 1,473,869 411,233 1,039,499
---------- ----------- ----------- ----------- -----------
Total operating
revenues........... 6,507,105 24,892,754 49,862,779 16,969,209 27,006,681
Operating expenses:
Golf course
operations........... 3,520,135 14,341,609 29,591,886 10,087,490 16,256,240
Cost of food and
beverage............. 531,252 1,312,960 2,613,295 942,370 1,415,715
Cost of pro shop
sales................ 132,704 1,163,546 2,221,330 830,545 1,413,254
General and
administrative....... 1,620,166 1,996,991 2,517,423 1,160,137 1,723,545
Depreciation and
amortization......... 825,245 3,468,357 6,144,430 2,404,984 3,518,380
---------- ----------- ----------- ----------- -----------
Total operating
expenses........... 6,629,502 22,283,463 43,088,364 15,425,526 24,327,134
---------- ----------- ----------- ----------- -----------
Income (loss) from oper-
ations................. (122,397) 2,609,291 6,774,415 1,543,683 2,679,547
Interest expense, net... (529,720) (3,515,752) (8,019,072) (3,205,346) (5,118,027)
Gain on insurance
settlement............. -- -- 746,845 -- --
Minority interest....... (193,985) -- -- -- --
---------- ----------- ----------- ----------- -----------
Loss before income taxes
and extraordinary
item................... (846,102) (906,461) (497,812) (1,661,663) (2,438,480)
Provision for income
taxes.................. 6,400 71,931 208,000 27,332 23,400
---------- ----------- ----------- ----------- -----------
Loss before extraordi-
nary item.............. (852,502) (978,392) (705,812) (1,688,995) (2,461,880)
Extraordinary item...... -- (427,997) -- -- --
---------- ----------- ----------- ----------- -----------
Net loss................ $ (852,502) $(1,406,389) $ (705,812) $(1,688,995) $(2,461,880)
========== =========== =========== =========== ===========
</TABLE>
See accompanying notes.
F-4
<PAGE>
COBBLESTONE GOLF GROUP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
REDEEMABLE
PREFERRED STOCK COMMON STOCK TOTAL
---------------- -------------- PAID-IN ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT EQUITY
-------- ------- ------- ------ ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at September 30,
1992................... -- $ -- -- $ -- $ -- $ -- $ --
Issuance of Series A
preferred stock for
cash, net of issuance
costs of $623,075..... 254,178 2,542 -- -- 24,792,183 -- 24,794,725
Issuance for Series A
preferred stock for
assets and for
ownership interest in
consolidated
subsidiary............ 4,547 45 -- -- 380,755 -- 380,800
Issuance of Series B
preferred stock for
cash, net of issuance
costs of $54,180...... 20,000 200 -- -- 1,945,620 -- 1,945,820
Issuance of common
stock for cash........ -- -- 104,250 1,043 103,207 -- 104,250
Net loss............... -- -- -- -- -- (852,502) (852,502)
-------- ------- ------- ------ ----------- ----------- -----------
Balance at September 30,
1993................... 278,725 2,787 104,250 1,043 27,221,765 (852,502) 26,373,093
Issuance of Series A
preferred stock for
cash.................. 64,900 649 -- -- 6,489,351 -- 6,490,000
Issuance of common
stock for cash........ -- -- 4,840 48 4,792 -- 4,840
Net loss............... -- -- -- -- -- (1,406,389) (1,406,389)
-------- ------- ------- ------ ----------- ----------- -----------
Balance at September 30,
1994................... 343,625 3,436 109,090 1,091 33,715,908 (2,258,891) 31,461,544
Issuance of Series A
preferred stock for
cash, net of $83,376
in issuance costs..... 87,132 871 -- -- 8,628,953 -- 8,629,824
Issuance of common
stock for cash........ -- -- 25,739 257 3,984,062 -- 3,984,319
Net loss............... -- -- -- -- -- (705,812) (705,812)
-------- ------- ------- ------ ----------- ----------- -----------
Balance at September 30,
1995................... 430,757 4,307 134,829 1,348 46,328,923 (2,964,703) 43,369,875
Net loss (unaudited)... -- -- -- -- -- (2,461,880) (2,461,880)
-------- ------- ------- ------ ----------- ----------- -----------
Balance at March 31,
1996 (unaudited)....... 430,757 $ 4,307 134,829 $1,348 $46,328,923 $(5,426,583) $40,907,995
======== ======= ======= ====== =========== =========== ===========
</TABLE>
See accompanying notes.
F-5
<PAGE>
COBBLESTONE GOLF GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED SEPTEMBER 30, MARCH 31,
---------------------------------------- -------------------------
1993 1994 1995 1995 1996
------------ ------------ ------------ ------------ -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss................ $ (852,502) $ (1,406,389) $ (705,812) $ (1,688,995) $(2,461,880)
Adjustments to reconcile
net loss to net cash
provided by (used in)
operating activities:
Depreciation and amor-
tization.............. 830,652 3,840,186 6,728,092 2,162,473 3,907,432
Gain on insurance set-
tlement............... -- -- (746,845) -- --
Loss on disposal of as-
sets.................. -- -- 322,834 -- --
Loss on early extin-
guishment of debt..... -- 427,997 -- -- --
Provision for doubtful
accounts.............. -- 12,084 2,125,458 4,219 (232,575)
Minority interest...... 193,985 -- -- -- --
Changes in assets and
liabilities:
Notes and accounts re-
ceivable.............. (252,133) (804,047) (7,321,947) 172,379 (694,583)
Inventory.............. (53,317) (246,253) (229,801) (212,570) (403,915)
Intangible assets...... (338,791) -- -- -- --
Prepaid expenses and
other assets.......... (340,936) 3,784 (57,476) 256,606 202,332
Accounts payable,
accrued liabilities
and deferred revenue.. 967,139 55,511 2,179,909 2,805,979 (1,502,928)
------------ ------------ ------------ ------------ -----------
Net cash provided by
(used in) operating ac-
tivities............... 154,097 1,882,873 2,294,412 3,500,091 (1,186,117)
INVESTING ACTIVITIES
Acquisitions, net of
cash acquired.......... (19,691,733) (23,924,305) (41,245,470) (41,245,470) --
Additions to property,
equipment and leasehold
interests.............. (5,761,983) (7,708,037) (17,716,295) (8,723,880) (4,811,024)
Insurance proceeds...... -- -- 1,941,917 1,122,963 --
Due to affiliate........ -- (699,356) -- -- --
Intangibles and other
assets................. -- (638,305) -- -- --
------------ ------------ ------------ ------------ -----------
Net cash used in invest-
ing activities......... (25,453,716) (32,970,003) (57,019,848) (48,846,387) (4,811,024)
FINANCING ACTIVITIES
Proceeds from long-term
debt................... 72,532 46,338,471 37,560,573 31,060,573 8,300,000
Debt issuance costs and
other debt-related
costs.................. -- (4,008,901) (2,118,618) (1,832,969) (186,221)
Principal payments on
long-term debt and cap-
ital leases............ (258,417) (17,797,900) (1,219,252) (580,811) (969,464)
Payments on deferred
purchase price......... -- -- -- -- (376,979)
Proceeds from sale and
leaseback.............. -- -- 7,410,527 7,410,527 --
Proceeds from issuance
of stock............... 26,844,795 6,494,840 12,614,143 12,614,143 --
------------ ------------ ------------ ------------ -----------
Net cash provided by fi-
nancing activities..... 26,658,910 31,026,510 54,247,373 48,671,463 6,767,336
Net increase (decrease)
in cash and cash equiv-
alents................. 1,359,291 (60,620) (478,063) 3,325,167 770,195
Cash and cash equiva-
lents at beginning of
period................. -- 1,359,291 1,298,671 1,298,671 820,608
------------ ------------ ------------ ------------ -----------
Cash and cash equiva-
lents at end of peri-
od..................... $ 1,359,291 $ 1,298,671 $ 820,608 $ 4,623,838 $ 1,590,803
============ ============ ============ ============ ===========
SUPPLEMENTARY
DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid during the pe-
riod for:
Interest............... $ 549,956 $ 3,595,926 $ 6,464,811 $ 3,047,043 $ 4,728,552
============ ============ ============ ============ ===========
Income taxes........... $ 800 $ 55,264 $ 48,417 $ 27,332 $ 903,400
============ ============ ============ ============ ===========
NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Preferred stock issued
for acquisitions....... $ 380,800 $ -- $ -- $ -- $ --
============ ============ ============ ============ ===========
Capital leases entered
into................... $ 1,049,122 $ 2,342,870 $ 2,395,859 $ 903,001 $ 1,834,017
============ ============ ============ ============ ===========
</TABLE>
See accompanying notes.
F-6
<PAGE>
COBBLESTONE GOLF GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1995 AND PERTAINING TO THE SIX MONTHS
ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization and Description of Business
Cobblestone Golf Group, Inc. (the "Company"), a Delaware corporation, was
incorporated on August 10, 1992. The Company is a wholly-owned subsidiary of
Cobblestone Holdings, Inc. ("Holdings"). Holdings is controlled by Brentwood
Golf Partners, L.P., a partnership organized by Brentwood Associates and the
Company's President. The Company owns and operates golf courses in the United
States, with a current portfolio of 20 golf properties including private
country clubs, semi-private clubs and public (or daily fee) courses. The
Company's courses are concentrated in clusters near metropolitan areas in the
Sunbelt states (including Arizona, California and Texas) which have large
golfing populations and attractive climates.
The Company's business consists primarily of operating golf courses and
related facilities, with revenue generated from membership fees and dues at
private country clubs, greens fees, food and beverage services, golf cart
rentals, retail merchandise sales, driving range fees and lodging fees. The
Company owns 15 courses, leases three courses (subject to long-term leases in
excess of 20 years, including extension options), leases one driving range and
pro shop facility and manages one additional course. The Company's portfolio
includes eight private country clubs, seven public facilities and five semi-
private facilities.
Seasonal weather conditions as well as the timing of new course purchases or
leases may cause the Company's results of operations to vary significantly
from quarter to quarter. The second half (April through September) of the
Company's fiscal year tends to account for a greater portion of the Company's
operating revenue and operating income than does the first half.
Principles of Consolidation
The Company has acquired certain golf facilities through its wholly-owned
and majority-owned subsidiaries. The consolidated financial statements include
the accounts of the Company and such subsidiaries. Intercompany balances and
transactions have been eliminated.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash and time deposits with original
maturities of less than 90 days.
Concentration of Credit Risk
Management places the Company's cash investments with what they consider to
be high credit-quality financial institutions and routinely assesses the
financial strength of these institutions. Management believes no significant
concentration of credit risk exists with respect to these cash investments.
Concentration of credit risk with respect to accounts receivable is limited
due to the geographic dispersion of golf courses and the large number of golf
course members and others from whom the receivables are to be collected.
Inventories
Inventories are carried at lower of cost (first-in, first-out) or market.
F-7
<PAGE>
COBBLESTONE GOLF GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1995 AND PERTAINING
TO THE SIX MONTHS ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)
Property, Equipment and Leasehold Interests
Property and equipment are recorded at cost. Depreciation is provided using
the straight-line method over the estimated useful lives of the related assets
which are generally as follows:
<TABLE>
<S> <C>
Depreciable land improvements................................ 20 years
Buildings and improvements................................... 30 years
Equipment, furniture and fixtures............................ 3 to 10 years
</TABLE>
Leasehold improvements, equipment recorded under capital leases and property
and equipment related to leased facilities are depreciated and amortized using
the straight-line method over the shorter of the lease term or the estimated
useful lives of the related assets. Costs associated with the acquisition of
leasehold interests in golf facilities have been capitalized and are amortized
over the remaining life of the related lease (4 to 35 years).
Golf course facility construction in progress is carried at cost. All costs
associated with, or allocable to golf course facility construction in progress
are capitalized until construction is completed.
Intangible Assets
Costs in excess of net assets of businesses acquired are amortized over 20
years which is consistent with the depreciation of land improvements. Other
intangible assets are amortized over their estimated useful lives (5 to 14
years).
Debt Issuance Cost
Costs associated with the issuance of long-term debt are capitalized and
amortized over the term of the related debt using the interest method. Such
costs and related accumulated amortization included in other assets totaled
$3,721,404 and $307,725, respectively, at September 30, 1994, $5,840,022 and
$1,168,155, respectively, at September 30, 1995, and $5,885,094 and
$1,429,449, respectively, at March 31, 1996.
Fair Value of Financial Instruments
To meet the reporting requirements of Statement of Financial Accounting
Standards ("SFAS") No. 107, Disclosures about Fair Value of Financial
Instruments, the Company calculates the fair value of financial instruments
and includes this additional information in the notes to financial statements
when the fair value is different than the carrying value of those financial
instruments. When the fair value reasonably approximates the carrying value,
no additional disclosure is made. The Company uses quoted market prices and
management's estimates to calculate these fair values.
Revenue and Deferred Revenue
Operating revenue is recognized when received except for dues and fees paid
in advance which are recognized over the period which the dues and fees allow
the members access to the facilities. The Company recognizes revenue on
initiation fees for the amount of the deposit and the amount of the note
receivable, less the provision for doubtful accounts and imputed interest, at
the time the membership is sold.
Long-term deferred revenue relates to the Company's obligation to provide
memberships to residential developers of properties adjacent to the golf
facility and is recognized when individual homeowners apply for membership.
Reliance on Estimates
The financial statements have been prepared in accordance with generally
accepted accounting principles and have required management to make estimates
and assumptions that affect the reported amounts of assets and
F-8
<PAGE>
COBBLESTONE GOLF GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1995 AND PERTAINING
TO THE SIX MONTHS ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)
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.
New Accounting Standards
In March 1995, the Financial Accounting Standards Board issued SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of ("SFAS 121"), effective for fiscal years beginning after
December 15, 1995. SFAS 121 requires impairment losses to be recorded on long-
lived assets used in operations when indicators of impairment are present and
the undiscounted cash flows estimated to be generated by those assets are less
than the assets' carrying amount. SFAS 121 also addresses the accounting for
long-lived assets that are expected to be disposed of. The Company believes,
based on current circumstances, the effect of adopting SFAS 121 will not have
a material effect on the Company's financial position or results of
operations.
In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, Accounting for Stock-Based Compensation ("SFAS 123"), effective for
fiscal years beginning after December 15, 1995. SFAS 123 established the fair
value-based method of accounting for stock-based compensation arrangements
under which compensation cost is determined using the fair value of the stock
option at the grant date and the number of options vested, and is recognized
over the periods in which the related services are rendered. The Company has
elected to continue with the current intrinsic value-based method, as allowed
by SFAS 123, and will disclose the pro forma effect of adopting the fair value
based method in future fiscal years beginning with the fiscal year ending
September 30, 1997.
Interim Financial Information
The financial statements for the six months ended March 31, 1995 and 1996
are unaudited, but include all adjustments (consisting only of normal
recurring adjustments) which the Company considers necessary for a fair
statement of the financial position and the operating results and cash flows
for the interim periods. Results for the interim periods are not necessarily
indicative of results to be expected for the entire year.
2. ACQUISITIONS
Since inception, the Company has acquired the property and equipment or
leasehold interest in nineteen golf course facilities in transactions that
have been recorded under the purchase method of accounting. Accordingly, the
acquired facilities have been reported in the consolidated financial
statements of the Company since the date of the respective acquisitions.
The 1993 acquisitions include: The Golf Course Construction and Lease
Agreement for The Vineyard at Escondido acquired in October, 1992 (lease
effective December 1993), The Foothills Golf Course acquired in January, 1993,
Balboa Park Municipal Golf Course, Saticoy Regional Golf Course and Woodcrest
Country Club acquired in February, 1993, Morgan Run Resort and Club and El
Camino Country Club acquired in June, 1993, and Carmel Mountain Ranch Country
Club acquired in July, 1993.
The 1994 acquisitions include: The Club at Trophy Club acquired in December,
1993, Pecan Grove Country Club acquired in January, 1994, and Ahwatukee
Country Club and The Lakes at Ahwatukee acquired in June, 1994.
F-9
<PAGE>
COBBLESTONE GOLF GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1995 AND PERTAINING
TO THE SIX MONTHS ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)
The 1995 acquisitions include: The Ranch Country Club and Stonebridge
Country Club acquired in December, 1994, Red Mountain Ranch Country Club
acquired in January, 1995, The Hills of Lakeway, Live Oak Golf Course, Yaupon
Golf Course and Brandermill Country Club acquired in March, 1995.
In conjunction with the purchase of The Hills of Lakeway, the Company is
required to pay a deferred purchase price equal to the greater of $4,150 per
membership or 25% of Initiation Fees, as defined, collected for the first
three hundred memberships sold.
A summary of the aggregate acquisition costs and allocation of the purchase
price to the assets and liabilities assumed is as follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------------
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
Total acquisition costs:
Cash paid and acquisition related costs.. $19,691,733 $23,924,305 $41,245,470
Long-term debt and assumption of liabili-
ties.................................... 16,888,762 2,325,934 7,379,667
Minority interest........................ 401,379 344,175 --
----------- ----------- -----------
$36,981,874 $26,594,414 $48,625,137
=========== =========== ===========
Allocated to assets as follows:
Current assets........................... $ 747,428 $ 152,452 $ 775,622
Property, equipment and leasehold inter-
ests.................................... 34,488,661 26,441,962 47,849,515
Other assets............................. 1,745,785 -- --
----------- ----------- -----------
$36,981,874 $26,594,414 $48,625,137
=========== =========== ===========
</TABLE>
The following pro forma results assume the acquisitions occurred at the
beginning of the fiscal year prior to the year in which the facility was
acquired. The unaudited pro forma results have been prepared utilizing the
historical financial statements of the Company and the acquired business.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------------
1993 1994 1995
----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Operating revenues....................... $23,481,269 $47,043,151 $54,407,767
Net loss................................. $ (910,992) $(1,158,708) $(1,153,012)
</TABLE>
This pro forma information is not necessarily indicative of the actual
results that would have been achieved had the acquisitions occurred at the
beginning of the fiscal year prior to the year in which the facility was
acquired, nor is it necessarily indicative of future results.
3. NOTES RECEIVABLE
Notes receivable consists of promissory notes made by golf club members for
the payment of initiation fees. The notes carry below market or no interest
rates, amortize monthly and generally have a term of five years. Management
periodically analyzes the collectability of the notes receivable and reserves
for the portion that is doubtful of being collected. The notes are secured by
the underlying golf club membership and the Company has full recourse against
the member. The Company's notes receivable balance was composed of the
following:
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
1995 1996
------------- -----------
(UNAUDITED)
<S> <C> <C>
Gross receivables $ 7,538,182 $ 8,772,155
Less allowance for uncollectable accounts (2,117,000) (1,847,913)
Less valuation allowance for imputed interest........ (1,242,867) (1,413,839)
----------- -----------
4,178,315 5,510,403
Current portion...................................... 862,922 1,228,331
----------- -----------
$ 3,315,393 $ 4,282,072
=========== ===========
</TABLE>
F-10
<PAGE>
COBBLESTONE GOLF GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1995 AND PERTAINING
TO THE SIX MONTHS ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)
4. PROPERTY, EQUIPMENT AND LEASEHOLD INTERESTS
Property, equipment and leasehold interests consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------------
MARCH 31,
1994 1995 1996
----------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Land.............................. $ 8,458,701 $ 14,258,104 $ 14,258,104
Land improvements................. 43,471,346 74,172,889 77,531,612
Buildings and improvements........ 15,041,211 26,558,329 29,389,854
Equipment, furniture and fix-
tures............................ 6,689,814 12,777,828 15,832,826
Golf course facility construction
in progress...................... 1,059,305 6,009,124 3,408,918
Leasehold interests............... 2,799,714 2,799,714 2,840,556
----------- ------------ ------------
77,520,091 136,575,988 143,261,870
Less accumulated depreciation and
amortization..................... (3,785,854) (8,575,684) (11,970,890)
----------- ------------ ------------
Property, equipment and leasehold
interests, net................... $73,734,237 $128,000,304 $131,290,980
=========== ============ ============
Land improvements include $10,848,847, $21,214,449, and $22,027,199 at
September 30, 1994 and 1995, and March 31, 1996 respectively, of
nondepreciable golf course improvements consisting of tees, fairways, roughs,
trees, greens, bunkers and sandtraps.
5. LONG-TERM DEBT
Long-term debt consists of the following:
<CAPTION>
SEPTEMBER 30,
-------------------------
MARCH 31,
1994 1995 1996
----------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
8% note payable, due monthly
through 2007..................... $ 315,592 $ 301,104 $ 293,391
Variable rate note payable,
effective interest rate 11.02%,
due monthly, secured by the
assets of The Vineyard at
Escondido........................ 6,067,673 5,978,847 5,833,773
10% imputed interest note payable,
due monthly beginning
January 1996..................... -- 2,873,253 2,998,507
Bank term loan.................... 35,683,851 71,444,424 77,444,424
Bank revolving credit agreement... 500,000 2,300,000 4,600,000
Capital lease obligations, due at
various dates through 2000....... 2,522,676 3,802,597 4,819,935
----------- ------------ ------------
45,089,792 86,700,225 95,990,030
Less current portion.............. 895,406 1,686,275 6,435,608
----------- ------------ ------------
$44,194,386 $ 85,013,950 $ 89,554,422
=========== ============ ============ ===
</TABLE>
During 1994, certain loans were repaid in advance of maturity. Costs
associated with the early retirement of such loans amounted to $427,997 and
were recorded as an extraordinary item in the consolidated statement of
operations.
In 1994, the Company entered into a credit agreement (the "Credit
Agreement") with a consortium of banks. The Credit Agreement, amended in 1995,
provides for a $5,000,000 revolving credit facility to be used primarily for
working capital and an $85,000,000 term loan facility used for refinancing
existing debt, acquisitions and certain capital expenditures.
F-11
<PAGE>
COBBLESTONE GOLF GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1995 AND PERTAINING
TO THE SIX MONTHS ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)
The revolving credit facility expires September 30, 2001 at which time any
outstanding unpaid principal is payable in full. The revolving credit facility
provides that borrowings bear interest, which is payable quarterly, at the
Eurodollar rate or a Floating Rate, as defined, plus spreads ranging from 1%
to 4% depending upon the extent of utilization by the Company (9.875% and
9.550% at September 30, 1995 and March 31, 1996, respectively) and requires a
non-use fee on the unused portion equal to 1/2% per annum. The term loan
facility provides that borrowings are payable based on certain specified
percentages (ranging from 9.813% to 9.875% as of September 30, 1995 and 9.313%
to 9.500% as of March 31, 1996, respectively) in 20 quarterly installments
commencing December 1996 and ending September 2001.
The Credit Agreement requires mandatory reductions or prepayments of
principal as a result of certain events and provides for voluntary
prepayments. The Credit Agreement contains numerous covenants which, among
other things, require the Company to maintain defined leverage and interest
coverage ratios, as well as a minimum consolidated net worth and limits the
incurrance of debt, capital expenditures and payment of dividends. Borrowings
under the Credit Agreement are secured by substantially all assets of the
Company except for certain real property in Escondido, California and
equipment under capital leases. In addition, stock of CGGI and subsidiaries
has been pledged to the lenders. Holdings has guaranteed the borrowings under
the Credit Agreement.
In conjunction with the Credit Agreement, Holdings issued warrants to
purchase 20,000 shares of Holdings' Series A preferred stock at $100 per share
and 5,472 shares of Holdings' common stock at $1 per share. As of September
30, 1995, all warrants had been exercised.
Pursuant to the terms of the Credit Agreement and to reduce the impact of
interest-rate changes on future interest expense, the Company entered into
interest rate swap agreements during 1994 with one of the lender banks ("the
Bank"). The agreements effectively convert $20 million of the Company's
floating rate long-term debt to a fixed rate basis without an exchange of the
underlying principal amounts. At September 30, 1995 and March 31, 1996, the
Company was obligated to pay a fixed rate of 5.72% on $10 million and 6.13% on
$10 million and to receive the three-month LIBOR (6.00% and 5.87%,
respectively at September 30, 1995 and 5.48% and 5.62%, respectively, at March
31, 1996). The rate is reset every three months and the swap agreements expire
in March and April 1997, respectively. The differential to be paid or received
is accrued and recognized as an adjustment to interest expense related to the
debt. The related amount payable to, or receivable from, the Bank is included
in other liabilities or assets. The fair values of the swap agreements are not
recognized in the financial statements.
In conjunction with a purchase of two adjacent golf course facilities in
1995 (the "Clubs"), the Company issued a $3,500,000 non-interest bearing
promissory note (the "Note"). Interest on the Note has been imputed at a rate
of 10% and monthly principal payments on the Note are payable in an amount
equal to 50% of Initiation Fees (as defined) collected by the Clubs after
January 1, 1996. Any unpaid principal on the Note is payable on the earlier of
December 14, 2006 or upon the sale by the holder of the Note of a certain
number of residential homes in the communities adjacent to the golf courses.
Maturities of long-term debt (exclusive of capital lease obligations) for
each of the five years in the period ending September 30, 2000, are as
follows: 1996--$350,889; 1997--$7,778,119; 1998--$9,352,990; 1999--
$11,675,086; 2000--$13,738,176; thereafter--$40,002,368.
6. STOCKHOLDERS' EQUITY
The Company has two classes of preferred stock, Series A preferred stock and
Series B preferred stock. Both series have priority upon liquidation over the
Company's common stock, but have equal priority with respect to each other.
Both series are also entitled to vote along with the common stock on the basis
of one vote
F-12
<PAGE>
COBBLESTONE GOLF GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1995 AND PERTAINING
TO THE SIX MONTHS ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)
per share of preferred stock. Shares of Series A preferred stock are
redeemable by the Company at any time, at the discretion of the Board of
Directors, for the purchase price of $100 per share. Shares of Series B
preferred stock are redeemable by the Company at any time, at the discretion
of the Board of Directors, for the purchase price of $100 per share. At
September 30, 1995 and March 31, 1996 there were 410,757 shares of Series A
preferred stock outstanding and 20,000 shares of Series B preferred stock
outstanding.
Holdings, the Company's sole stockholder, has redeemable preferred stock
that provides for mandatory redemption upon the sale, consolidation or merger
of Holdings with or into another corporation, the sale of all or substantially
all of Holdings' assets, or the sale or exchange of stock representing 80% of
the voting power of the stock of Holdings. At September 30, 1995 and March 31,
1996, the redemption value of Holdings' redeemable preferred stock was $43
million.
Holdings' only asset is its investment in the Company. The assets of the
Company have not been pledged or assigned to satisfy Holdings' obligation, if
any, under the redemption features of its preferred stock.
7. INCOME TAXES
Income taxes are provided for in accordance with the provisions of SFAS No.
109, Accounting for Income Taxes. Under this method, the Company recognizes
deferred tax assets and liabilities for the expected future tax effects of
temporary differences between the carrying amounts and the tax bases of assets
and liabilities, as well as operating loss carryforwards.
The significant components of the Company's deferred tax assets and
liabilities are:
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------------
1994 1995
----------- -----------
<S> <C> <C>
Deferred tax liabilities:
Accounting basis in excess of tax basis of golf
properties........................................ $(4,184,000) $(4,184,000)
Depreciation....................................... (224,000) (472,000)
----------- -----------
Total deferred tax liabilities....................... (4,408,000) (4,656,000)
Deferred tax assets:
Net operating loss carryforwards................... 767,000 --
Reserve for notes receivable....................... -- 1,062,000
Deferred gain on sale and leaseback................ -- 320,000
Accrued liabilities................................ 298,000 262,000
Other, net......................................... -- 63,000
----------- -----------
Total deferred tax assets............................ 1,065,000 1,707,000
Valuation allowance for deferred tax assets.......... (841,000) (928,000)
----------- -----------
Net deferred tax assets.............................. 224,000 779,000
----------- -----------
Net deferred tax liabilities......................... $ 4,184,000 $ 3,877,000
=========== ===========
</TABLE>
F-13
<PAGE>
COBBLESTONE GOLF GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1995 AND PERTAINING
TO THE SIX MONTHS ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)
Significant components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------
1994 1995
------- ---------
<S> <C> <C>
Current:
Federal............................................... $ -- $ 307,000
State................................................. 71,931 208,000
------- ---------
71,931 515,000
Deferred:
Federal............................................... -- (307,000)
State................................................. -- --
------- ---------
-- (307,000)
------- ---------
Total provision......................................... $71,931 $ 208,000
======= =========
</TABLE>
The following is a reconciliation of the actual tax provision (benefit) to
the expected tax provision (benefit) computed by applying the statutory
federal income tax rate to income before income taxes:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------
1993 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
Income tax provision at statutory rate....... $(296,136) $(467,060) $(174,234)
State income tax provision, net of federal
tax benefit................................. 4,160 46,755 135,200
Permanent differences........................ -- -- 177,938
Increase in valuation allowance.............. 319,076 435,000 87,000
Other........................................ (20,700) 57,236 (17,904)
--------- --------- ---------
Total provision for income taxes............. $ 6,400 $ 71,931 $ 208,000
========= ========= =========
</TABLE>
8. COMMITMENTS
In March 1995, the Company entered into a sale and leaseback transaction for
one of its golf course facilities. The Company received proceeds of
approximately $7.4 million and entered into a lease for fifteen years with two
five year renewal options. Minimum rent was $60,939 and $61,975 per month at
September 30, 1995 and March 31, 1996, respectively, and is subject to annual
increases based upon changes in the Consumer Price Index. The deferred gain on
the sale and leaseback transaction of $499,000 is being amortized over the
term of the lease. The Company recorded $407,000 and $369,000 of rent expense
for the year ended September 30, 1995 and the six months ended March 31, 1996,
respectively, related to the lease.
The Company also leases three other golf facilities from the city or county
in which the facility is located. The leases expire in the years 1997, 2016
and 2029. The Company recorded an aggregate of $99,000, $138,000 and $639,000
in rent expense related to leased golf course facilities for the years ended
September 30, 1993, 1994 and 1995, respectively and $79,000 and $497,000 for
the six months ended March 31, 1995 and 1996, respectively.
The Company leases certain golf carts and maintenance equipment under
capital leases with terms of two to five years. Included in equipment,
furniture and fixtures in the accompanying consolidated balance sheets is
equipment under capital leases totaling $3,393,842, $5,806,693 and $7,640,712
at September 30, 1994 and 1995 and March 31, 1996, respectively. Accumulated
amortization of equipment under capital leases totaled $588,859, $1,490,214
and $2,152,977 at September 30, 1994 and 1995 and March 31, 1996,
respectively.
F-14
<PAGE>
COBBLESTONE GOLF GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
(INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1995 AND PERTAINING
TO THE SIX MONTHS ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)
Future minimum lease payments at September 30, 1995 are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
YEARS ENDING SEPTEMBER 30, LEASES LEASES
-------------------------- ---------- -----------
<S> <C> <C>
1996................................................. $1,655,582 $ 919,971
1997................................................. 1,202,848 815,265
1998................................................. 844,007 797,265
1999................................................. 569,326 797,265
2000................................................. 283,503 797,265
Thereafter........................................... -- 8,579,018
---------- -----------
Total minimum lease payments....................... 4,555,266 $12,706,049
===========
Amount representing interest......................... 752,669
----------
Present value of net minimum lease payments.......... 3,802,597
Current portion...................................... 1,335,386
----------
$2,467,211
==========
</TABLE>
In accordance with certain purchase agreements, the Company is required to
maintain the respective golf courses in good condition and make various
capital improvements. As of September 30, 1995, the Company had commitments to
build an additional nine holes at two facilities with an estimated aggregate
cost of $5.5 million.
9. RELATED PARTY TRANSACTIONS
In connection with the formation of the Company, an officer of the Company
contributed his interests in the leases of two golf course facilities in
exchange for 4,547 shares of Series A preferred stock, $160,270 cash and a
$250,000 note due in 1999. The officer also contributed his options to acquire
certain other golf course facilities at no cost to the Company.
An affiliate of the majority stockholder of Holdings provides investment
banking and consulting services to the Company. The Company is obligated to
pay a service fee to the affiliate semi-annually in advance in an amount equal
to 1% per annum of the affiliate's debt and equity investment in the Company
and to reimburse the reasonable fees and costs incurred by the affiliate in
providing services to the Company. The Company paid $677,255, $809,522 and
$1,076,416 in fees to the affiliate pursuant to these obligations during the
year ended September 30, 1993, 1994 and 1995; and $913,883 and $162,533 for
the six months ended March 31, 1995 and 1996, respectively.
F-15
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Sweetwater Golf Partnership
In our opinion, the accompanying balance sheet and the related statements of
operations, of partners' capital (deficit) and of cash flows present fairly,
in all material respects, the financial position of Sweetwater Golf
Partnership (the Partnership), formerly a division of Sugarland Properties
Incorporated (SPI) known as Sweetwater Country Club (the Division), at
December 31, 1994 and 1995, 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. 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 of these statements in accordance with
generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
As disclosed in the financial statements, there are extensive transactions
and relationships between the Partnership and SPI. Because of these
relationships, it is possible that the terms of these transactions are not the
same as those that would result from transactions among wholly unrelated
parties.
On July 1, 1996, essentially all of the assets and ongoing operations of the
Partnership were sold to a third party for approximately $12,100,000. The
third party also assumed certain current liabilities and the liability for
refundable member security deposits. In July 1996, the Partnership repaid the
notes payable and substantially all remaining current liabilities. The
partners intend to distribute the remaining net assets of the Partnership and
liquidate the Partnership.
PRICE WATERHOUSE LLP
Houston, Texas
July 26, 1996
F-16
<PAGE>
SWEETWATER GOLF PARTNERSHIP
(FORMERLY A DIVISION OF SUGARLAND PROPERTIES INCORPORATED)
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- JUNE 30,
1994 1995 1996
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash, including restricted cash of
$361,024, $365,281 and $2,698,
respectively.......................... $ 630,048 $ 952,252 $ 642,300
Accounts receivable.................... 912,099 984,355 1,081,436
Inventories............................ 281,299 206,470 220,144
Prepaid and other assets, net.......... 149,388 108,030 57,974
----------- ----------- -----------
Total current assets................. 1,972,834 2,251,107 2,001,854
Clubhouse, golf course and related
facilities, net of accumulated
depreciation............................ 20,947,134 17,656,030 17,571,980
Deferred loan costs, net of accumulated
amortization............................ 57,999 -- --
----------- ----------- -----------
$22,977,967 $19,907,137 $19,573,834
=========== =========== ===========
LIABILITIES AND PARTNERS' CAPITAL
(DEFICIT)
Current liabilities:
Notes payable.......................... $ 7,955,965 $ 7,923,604 $ 7,852,080
Accounts payable....................... 273,265 159,163 163,035
Accrued interest expense............... 36,939 37,193 33,571
Accrued property taxes................. 402,518 407,404 192,577
Other current liabilities.............. 230,050 404,739 187,081
Deferred revenues...................... 424,257 457,068 651,315
----------- ----------- -----------
Total current liabilities............ 9,322,994 9,389,171 9,079,659
Advances from SPI, net................... 7,378,179 7,263,652 7,156,899
Refundable member security deposits...... 6,260,601 6,102,651 6,075,638
----------- ----------- -----------
Total liabilities.................... 22,961,774 22,755,474 22,312,196
Partners' capital (deficit).............. 16,193 (2,848,337) (2,738,362)
----------- ----------- -----------
$22,977,967 $19,907,137 $19,573,834
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-17
<PAGE>
SWEETWATER GOLF PARTNERSHIP
(FORMERLY A DIVISION OF SUGARLAND PROPERTIES INCORPORATED)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
YEAR ENDED DECEMBER 31, 30,
---------------------------------- -----------------------
1993 1994 1995 1995 1996
---------- ---------- ----------- ----------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Operating revenues:
Membership dues....... $3,747,747 $3,889,271 $ 4,095,820 $2,007,058 $2,203,573
Initiation fees and
other................ 894,773 929,432 896,941 330,386 453,019
Food and beverage..... 1,687,086 1,723,432 1,891,668 830,856 930,196
Golf.................. 1,181,294 1,353,683 1,411,782 666,097 735,898
Merchandise........... 657,663 715,716 756,831 368,307 345,812
Other................. 722,795 598,397 555,339 279,204 296,414
---------- ---------- ----------- ---------- ----------
8,891,358 9,209,931 9,608,381 4,481,908 4,964,912
---------- ---------- ----------- ---------- ----------
Operating expenses:
Food and beverage..... 1,961,955 1,984,340 2,055,792 952,418 1,006,622
Golf.................. 1,589,170 1,750,181 1,955,559 995,622 1,002,050
Depreciation and
amortization......... 946,138 968,062 1,009,127 501,089 531,865
Merchandise........... 540,904 580,596 618,694 313,590 291,657
Property taxes........ 354,664 402,686 407,614 194,000 203,700
Membership............ 251,039 223,713 229,399 120,377 108,652
General and
administrative....... 1,570,385 1,560,970 1,608,071 764,362 767,935
Other................. 1,092,439 992,955 1,043,782 559,947 547,410
---------- ---------- ----------- ---------- ----------
8,306,694 8,463,503 8,928,038 4,401,405 4,459,891
---------- ---------- ----------- ---------- ----------
Income from operations.. 584,664 746,428 680,343 80,503 505,021
Loss on disposal of
assets................. 2,700,000
Interest expense........ 614,314 709,964 844,873 425,962 395,046
---------- ---------- ----------- ---------- ----------
Net income (loss)....... $ (29,650) $ 36,464 $(2,864,530) $ (345,459) $ 109,975
========== ========== =========== ========== ==========
</TABLE>
The accompanying notes are an integral part of this statement.
F-18
<PAGE>
SWEETWATER GOLF PARTNERSHIP
(FORMERLY A DIVISION OF SUGARLAND PROPERTIES INCORPORATED)
STATEMENT OF PARTNERS' CAPITAL (DEFICIT)
<TABLE>
<CAPTION>
SUGARLAND FIRST COLONY
PROPERTIES SPORTS
INCORPORATED PROPERTIES, INC. TOTAL
------------ ---------------- -----------
<S> <C> <C> <C>
Balance at December 31, 1993...... $ -- $ -- $ --
Capital contribution.............. 1,000 1,000
Net income for the period August
19 through December 31, 1994
(see Note 2)..................... 15,041 152 15,193
----------- -------- -----------
Balance at December 31, 1994...... 15,041 1,152 16,193
Net loss for 1995................. (2,835,885) (28,645) (2,864,530)
----------- -------- -----------
Balance at December 31, 1995...... (2,820,844) (27,493) (2,848,337)
Net income for the six month
period ended June 30, 1996
(unaudited)...................... 108,875 1,100 109,975
----------- -------- -----------
Balance at June 30, 1996
(unaudited)...................... $(2,711,969) $(26,393) $(2,738,362)
=========== ======== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-19
<PAGE>
SWEETWATER GOLF PARTNERSHIP
(FORMERLY A DIVISION OF SUGARLAND PROPERTIES INCORPORATED)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
--------------------------------- ---------------------------
1993 1994 1995 1995 1996
--------- --------- ----------- ------------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Net income (loss).... $ (29,650) $ 36,464 $(2,864,530) $ (345,459) $ 109,975
Adjustments to
reconcile net income
(loss) to net cash
provided by
operating
activities:
Loan on disposal of
assets............ 2,700,000
Depreciation and
amortization...... 946,138 968,062 1,009,127 501,089 531,865
Provision for
doubtful
accounts.......... 23,903 17,092 11,725 795 2,905
Gain on disposal of
equipment......... (12,190) (2,733)
Changes in:
Operating accounts
with SPI.......... (331,494) (12,554) (114,527) (17,011) (106,753)
Accounts
receivable........ (6,204) (44,007) (83,981) (24,684) (99,986)
Inventories........ (16,751) (59,989) 74,829 40,790 (13,674)
Prepaid expenses
and other assets.. 1,604 (226,607) (75) (49,245) 343
Accounts payable
and accrued
liabilities....... 1,059 26,616 65,727 (202,675) (432,235)
Deferred revenues.. 178,177 (129,444) 32,811 106,105 194,247
Security deposits.. (164,789) (203,369) (157,950) (60,568) (27,013)
--------- --------- ----------- ------------ ------------
Net cash provided
(used) by
operating
activities...... 601,993 360,074 670,423 (50,863) 159,674
--------- --------- ----------- ------------ ------------
Cash flows from
investing activities:
Capital
expenditures........ (293,839) (464,417) (318,591) (139,542) (398,102)
Proceeds from sale of
fixed assets........ 2,733
--------- --------- ----------- ------------ ------------
Net cash used by
investing
activities...... (293,839) (464,417) (315,858) (139,542) (398,102)
--------- --------- ----------- ------------ ------------
Cash flows from financ-
ing activities:
Advances from SPI,
net................. 555,207 187,334
Proceeds from capital
contribution........ 1,000
Repayment of notes
payable............. (701,689) (549,094) (32,361) (71,524)
Proceeds from notes
payable............. 1,902 654,135 39,134
--------- --------- ----------- ------------ ------------
Net cash provided
(used) by financing
activities............ (144,580) 293,375 (32,361) 39,134 (71,524)
--------- --------- ----------- ------------ ------------
Net increase (decrease)
in cash............... 163,574 189,032 322,204 (151,271) (309,952)
Cash at beginning of
period................ 277,442 441,016 630,048 630,048 952,252
--------- --------- ----------- ------------ ------------
Cash at end of period.. $ 441,016 $ 630,048 $ 952,252 $ 478,777 $ 642,300
========= ========= =========== ============ ============
</TABLE>
The accompanying notes are an integral part of this statement.
F-20
<PAGE>
SWEETWATER GOLF PARTNERSHIP
(FORMERLY A DIVISION OF SUGARLAND PROPERTIES INCORPORATED)
STATEMENT OF CASH FLOWS
(continued)
Supplemental disclosure of noncash transactions:
During 1994, the Partnership restructured a capital lease into an operating
lease resulting in the disposal of equipment with a net book value of $68,364
in lieu of the reduction of the remaining related note payable of $83,307.
Also during 1994, the Partnership refinanced its outstanding debt
commitments with various institutions, aggregating $7,343,799, with Texas
Commerce Bank.
The accompanying notes are an integral part of this statement.
F-21
<PAGE>
SWEETWATER GOLF PARTNERSHIP
(FORMERLY A DIVISION OF SUGARLAND PROPERTIES INCORPORATED)
NOTES TO FINANCIAL STATEMENTS
NOTE 1--ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION
Sweetwater Golf Partnership (the Partnership), formerly a division of
Sugarland Properties Incorporated (SPI) known as Sweetwater Country Club (the
Division), was formed on August 19, 1994 as discussed further in Note 2. The
Partnership owns and operates the clubhouse, golf course and related
facilities of the Sweetwater Country Club (the Club) located on 380 acres of
land in Sugar Land, Texas. The Club extends credit for merchandise and
services provided to its members who principally reside in Sugar Land and the
greater Houston Area. The Club commenced operations in June 1983.
On July 1, 1996, essentially all of the assets and ongoing operations of the
Partnership were sold to a third party for approximately $12,100,000. The
third party also assumed certain current liabilities and the liability for
refundable member security deposits. In July 1996, the Partnership repaid the
notes payable and substantially all remaining current liabilities. The
partners intend to distribute the remaining net assets of the Partnership and
liquidate the Partnership.
CLUBHOUSE, GOLF COURSE AND RELATED FACILITIES
Project development costs, including financing expenses, ad valorem taxes
and preoperating management fees incurred during the construction period of
the clubhouse, golf course and related facilities, were capitalized.
The clubhouse building, other buildings and improvements and land
development costs are depreciated using the straight-line method over 30
years. Furniture, fixtures and equipment are recorded at cost and are
depreciated using the straight-line method over their estimated useful lives
which range from three to eight years.
Effective January 1, 1996, the Partnership adopted Statement of Financial
Accounting Standards No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of ("SFAS 121"). Since the
clubhouse, golf course and related facilities were written down to their sales
value at December 31, 1995 (see Note 4), adoption of SFAS 121 had no material
effect on the Partnership's financial position or results of operations.
INVENTORIES
Inventories are valued at the lower of cost or market, cost being determined
on a first-in, first-out basis.
DEFERRED LOAN COSTS
Legal fees and other loan costs incurred in connection with the August 1994
refinancing of the Partnership's mortgages were capitalized and are being
amortized over the term of the related loans. For the year ended December 31,
1994 and 1995 and the six months ended June 30, 1996, amortization expense
relating to these costs equaled $41,429, $99,432 and $41,714, respectively.
MEMBERSHIP FEES AND DEPOSITS
Various membership classes are offered at the Club, all of which require
either a refundable security deposit or a nonrefundable initiation fee.
Refundable security deposits are recorded as liabilities when received;
nonrefundable initiation fees are recognized as income when received.
F-22
<PAGE>
SWEETWATER GOLF PARTNERSHIP
(FORMERLY A DIVISION OF SUGARLAND PROPERTIES INCORPORATED)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The by-laws of the Club outline the conditions under which refundable
security deposits are to be returned to members. For resigning members, these
conditions include 30 days' written notice, full payment of unpaid dues and
charges and the existence of a full membership complement in the resigning
member's class of membership. Upon existence of these conditions, one
resigning member's security deposit will be refunded for each new member
admitted. Notwithstanding these conditions, all membership deposits are
refundable to members 30 years from the date their respective membership
applications became effective.
INCOME TAXES
The Partnership is not subject to income tax as the individual partners are
responsible for reporting their pro rata share of the Partnership's taxable
income or loss. However, the Partnership's tax return is subject to
examination by the Internal Revenue Service. Consequently, the individual
partners' tax returns are subject to adjustment for any findings resulting
from such an examination.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Management has determined that the fair value of the Partnership's financial
instruments is equivalent to the carrying amount of such instruments as
presented or disclosed in the financial statements.
ESTIMATES
The preparation of the Partnership's financial statements requires
management to make estimates and assumptions that affect the reported amounts
of certain assets and liabilities and disclosure of contingent asset and
liabilities at the date of the financial statements and the related reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from these estimates. The Partnership's management believes that
the estimates made in connection with these financial statements are
reasonable.
NOTE 2--CHANGE IN STRUCTURE OF ORGANIZATION:
The Partnership, a Texas general partnership, was established and assumed
ownership of the Division from SPI on August 19, 1994. SPI owns a 99%
interest, and First Colony Sports Properties, Inc., a wholly-owned subsidiary
of SPI, owns a 1% interest in the Partnership. Therefore, common control by
SPI continues to exist; additionally, virtually no change in the operations of
the Club, or in the basis of accounting for its assets and liabilities, has
occurred as a result of this change in the structure of the organization.
NOTE 3--INVENTORIES:
Inventories are comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
----------------- -----------
1994 1995 1996
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Merchandise.................................... $211,209 $139,889 $154,831
Food and beverage.............................. 70,090 66,581 65,313
-------- -------- --------
$281,299 $206,470 $220,144
======== ======== ========
</TABLE>
F-23
<PAGE>
SWEETWATER GOLF PARTNERSHIP
(FORMERLY A DIVISION OF SUGARLAND PROPERTIES INCORPORATED)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 4--CLUBHOUSE, GOLF COURSE AND RELATED FACILITIES:
The clubhouse, golf course and related facilities are comprised of the
following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- JUNE 30,
1994 1995 1996
----------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Clubhouse building...... $10,330,357 $ 10,330,357 $ 10,330,357
Other buildings and
improvements........... 5,324,690 5,589,539 5,585,868
Land development........ 5,052,767 4,809,365 4,819,660
Furniture, fixtures and
equipment.............. 3,543,220 3,300,780 3,566,244
----------- ------------ ------------
24,251,034 24,030,041 24,302,129
Accumulated
depreciation........... (9,972,182) (10,342,293) (10,698,431)
----------- ------------ ------------
14,278,852 13,687,748 13,603,698
Land.................... 1,293,794 1,293,794 1,293,794
Golf course land........ 5,374,488 5,374,488 5,374,488
----------- ------------ ------------
20,947,134 20,356,030 20,271,980
Loss on disposal of
assets................. (2,700,000) (2,700,000)
----------- ------------ ------------
$20,947,134 $ 17,656,030 $ 17,571,980
=========== ============ ============
</TABLE>
On July 1, 1996, the partnership sold all of its operating assets to an
unrelated party. Under the terms of the sale, the price paid for the
clubhouse, golf course and related facilities was determined to be
substantially lower than their net book value at December 31, 1995;
accordingly, these assets were written down at December 31, 1995 to reflect
their sales value.
During 1993, 1994 and 1995 and the six months ended June 30, 1995 and 1996,
depreciation expense amounted to $923,924, $926,633, $909,695, $451,375 and
$482,152, respectively. Accumulated depreciation was reduced by $512,217 and
$539,584 in connection with the retirement of certain fixed assets during 1994
and 1995, respectively, and by $126,014 for the six months ended June 30,
1996.
NOTE 5--NOTES PAYABLE:
Notes payable are comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
--------------------- -----------
1994 1995 1996
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Texas Commerce Bank, interest at prime
plus 1.75% payable monthly, principal
due August 24, 1996, secured by
substantially all of the Partnership's
assets.................................. $6,609,614 $6,609,614 $6,609,614
Texas Commerce Bank, interest at prime
plus 1.75% payable monthly, principal
reduced by monthly instalment payments
of $11,860, remaining principal due
August 24, 1996, secured by a second
lien on substantially all of the
Partnership's assets.................... 1,340,880 1,313,432 1,242,272
Other notes, various interest rates,
payable monthly, secured by equipment... 5,471 558 194
---------- ---------- ----------
$7,955,965 $7,923,604 $7,852,080
========== ========== ==========
</TABLE>
F-24
<PAGE>
SWEETWATER GOLF PARTNERSHIP
(FORMERLY A DIVISION OF SUGARLAND PROPERTIES INCORPORATED)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 6--ADVANCES FROM SPI, NET:
Advances from SPI, net are noninterest-bearing, unsecured and consist mainly
of reimbursable costs that are incurred by one party on behalf of the other in
addition to SPI's funding of cumulative working capital shortfalls. Management
of SPI has represented that repayment of these advances will not be required
within the next year, and accordingly, these obligations have been classified
as long-term on the balance sheet.
F-25
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors
Cobblestone Golf Group, Inc.
We have audited the accompanying statements of operations of Lakeway Country
Club for the years ended December 31, 1993 and 1994, and for the three months
ended March 31, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
statements of operations 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 statements of operations are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the statements of
operations. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall statements of operations presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the statements of operations referred to above present
fairly, in all material respects, the results of operations of Lakeway Country
Club for the years ended December 31, 1993 and 1994, and for the three months
ended March 31, 1995, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
San Diego, California
July 3, 1996
F-26
<PAGE>
LAKEWAY COUNTRY CLUB
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
---------------------- THREE MONTHS ENDED
1993 1994 MARCH 31, 1995
---------- ---------- ------------------
<S> <C> <C> <C>
Operating revenues:
Green fees, cart rentals and
practice facility fees............ $4,592,525 $4,905,610 $1,250,549
Food and beverage.................. 589,293 621,563 152,099
Pro shop........................... 629,669 616,394 157,022
Other.............................. 389,195 376,833 50,812
---------- ---------- ----------
Total operating revenues............. 6,200,682 6,520,400 1,610,482
Operating expenses
Golf course and tennis center
operations........................ 3,548,790 3,650,040 865,257
Cost of food and beverage.......... 201,363 210,908 51,714
Cost of pro shop sales............. 436,529 425,400 108,345
General and administrative......... 1,783,988 1,627,991 307,572
Depreciation....................... 601,218 580,573 173,971
---------- ---------- ----------
Total operating expenses............. 6,571,888 6,494,912 1,506,859
---------- ---------- ----------
Income (loss) from operations........ (371,206) 25,488 103,623
Interest income, net................. 20,890 15,293 6,356
---------- ---------- ----------
Net income (loss).................... $ (350,316) $ 40,781 $ 109,979
========== ========== ==========
</TABLE>
See accompanying notes.
F-27
<PAGE>
LAKEWAY COUNTRY CLUB
NOTE TO STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1993 AND 1994 AND THREE MONTHS ENDED MARCH 31, 1995
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND DESCRIPTION OF BUSINESS
In 1991, the Federal Depository Insurance Corporation ("FDIC") took
possession of the assets of Lakeway Company. On January 31, 1995, Hillwood
Development Company ("Hillwood") purchased Lakeway Company from the FDIC.
In April 1995, Cobblestone Holdings, Inc. ("Cobblestone") purchased Live Oak
Golf Course, Yaupon Golf Course, The Hills of Lakesway Golf Course and their
related assets and a tennis center and its related assets from Hillwood. The
assets purchased by Cobblestone were only a portion of Lakeway Company. These
assets are being referred to as Lakeway Country Club (the "Company") herein.
Lakeway Country Club is located north of Austin, Texas near Lake Travis.
The accompanying statements of operations reflect the results of operations
from the assets acquired by Cobblestone. The statements of operations for the
years ended December 31, 1993 and 1994, and for the three month period ended
March 31, 1995 are not necessarily indicative of those that would have been
achieved by the Company had it operated on a stand-alone basis.
REVENUE
Operating revenue is recognized when received except for dues and fees paid
in advance which is recognized over the period during which the dues and fees
allow the members access to the facilities. The Company recognizes revenue on
initiation fees at the time the membership is sold.
PROPERTY, PLANT AND EQUIPMENT
The Company's property, plant and equipment is depreciated using the
straight line over the estimated useful lives of the asset.
RELIANCE ON ESTIMATES
The financial statements have been prepared in accordance with generally
accepted accounting principles and have required management to make estimates
and assumptions that affect the reported amounts of 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.
INCOME TAXES
Lakeway Country Club records income tax expense as if it would file tax
returns on a stand alone basis. No provision for income taxes has been made
due to the availability of the net operating loss carryforward to offset
taxable income.
F-28
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors
Cobblestone Golf Group, Inc.
We have audited the combined statements of operations of Stonebridge Country
Club, Inc. and The Ranch Country Club, Inc. for the year ended December 31,
1993 and the eleven and one-half months ended December 15, 1994. These
statements of operations 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 statements of operations are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the statements of
operations. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall statement of operations presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the statements of operations referred to above present
fairly, in all material respects, the combined results of operations of
Stonebridge Country Club, Inc. and The Ranch Country Club, Inc. in conformity
with generally accepted accounting principles.
ERNST & YOUNG LLP
San Diego, California
June 21, 1996
F-29
<PAGE>
STONEBRIDGE COUNTRY CLUB, INC.
THE RANCH COUNTRY CLUB, INC.
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
ELEVEN
AND ONE-
HALF
MONTHS
ENDED
YEAR ENDED DECEMBER
DECEMBER 31, 15,
1993 1994
------------ -----------
<S> <C> <C>
Operating revenues
Green fees, cart rental fees, practice facility
fees, dues and initiation fees.................... $3,319,483 $ 3,611,663
Food and beverage revenues......................... 1,149,343 1,151,130
Pro shop sales..................................... 672,279 658,308
Other.............................................. 344,256 189,881
---------- -----------
Total operating revenues............................. 5,485,361 5,610,982
Operating expenses:
Golf course operations............................. 1,451,871 1,551,028
Cost of food and beverage.......................... 1,553,489 1,543,889
Cost of pro shop sales............................. 1,262,266 1,145,852
General and administrative......................... 1,952,595 2,726,511
Depreciation and amortization...................... 104,532 104,530
---------- -----------
Total operating expenses............................. 6,324,753 7,071,810
---------- -----------
Net loss............................................. $ (839,392) $(1,460,828)
========== ===========
</TABLE>
See accompanying notes.
F-30
<PAGE>
STONEBRIDGE COUNTRY CLUB, INC.
THE RANCH COUNTRY CLUB, INC.
NOTES TO COMBINED STATEMENTS OF OPERATIONS
DECEMBER 31, 1993 AND THE ELEVEN AND ONE HALF MONTHS ENDED DECEMBER 15, 1994
1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
BUSINESS AND BASIS OF PRESENTATION
Stonebridge Country Club, Inc. and The Ranch Country Club, Inc. (the
"Companies") own and operate two private country clubs. The Companies' main
activities include golf, tennis, swimming and dining. In December 1994,
Cobblestone Golf Group, Inc. purchased substantially all of the assets of the
Companies. Therefore, the accompanying statements of operations reflect the
results of operations from the assets acquired by Cobblestone. The statements
of operations for the years ended December 31, 1993 and the eleven and one
half months ended December 15, 1994 are not necessarily indicative of those
that would have been achieved by the Company had it operated on a stand-alone
basis.
REVENUE
Operating revenue is recognized when received except for dues and fees paid
in advance which is recognized over the period which the dues and fees allow
the members access to the facilities. The Company recognizes revenue on
initiation fees at the time the membership is sold.
PROPERTY, PLANT AND EQUIPMENT
The Company's property, plant and equipment is depreciated using the
straight-line method over the estimated useful lives of the assets.
2. INCOME TAXES
As a result of the Company's net loss, the accompanying statements of
operations does not include any provision for income taxes. The Company has
recorded a valuation allowance on its deferred tax assets since the
realization of such assets is uncertain.
F-31
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors
Cobblestone Golf Group, Inc.
We have audited the accompanying statements of operations of Brandermill
Country Club, L.P. for the year ended December 31, 1994 and the two months
ended February 28, 1995. These statements of operations are the responsibility
of the Partnership's management. Our responsibility is to express an opinion
on these statements of operations 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 statements of operations are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the statements of
operations. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall statements of operations presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the statements of operations referred to above present
fairly, in all material respects, the results of operations of Brandermill
Country Club, L.P. for the year ended December 31, 1994 and the two months
ended February 28, 1995, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
San Diego, California
July 19, 1996
F-32
<PAGE>
BRANDERMILL COUNTRY CLUB, L.P.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
TWO MONTHS
YEAR ENDED ENDED
DECEMBER 31, FEBRUARY 28,
1994 1995
------------ ------------
<S> <C> <C>
Operating revenues:
Membership dues and initiation fees................. $2,194,861 $359,939
Food and beverage................................... 647,297 50,872
Pro shop sales...................................... 693,820 46,646
Other............................................... 24,465 4,299
---------- --------
Total operating revenues.............................. 3,560,443 461,756
Operating expenses:
Golf course, tennis and swimming pool operations.... 776,614 52,373
Cost of food and beverage........................... 806,432 95,872
Cost of pro shop sales.............................. 701,161 63,862
General and administrative.......................... 710,676 119,563
Depreciation........................................ 83,308 13,885
---------- --------
Total operating expenses.............................. 3,078,191 345,555
Income from operations................................ 482,252 116,201
Interest expense, net................................. (486,794) (72,574)
---------- --------
Net income (loss)..................................... $ (4,542) $ 43,627
========== ========
</TABLE>
See accompanying notes.
F-33
<PAGE>
BRANDERMILL COUNTRY CLUB, L.P.
NOTES TO STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1994 AND TWO MONTHS ENDED FEBRUARY 28, 1995
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND DESCRIPTION OF BUSINESS
Brandermill Country Club, L.P. ("BCC"), a limited partnership, owns and
operates a private country club in Midlothian, Virginia. The club's main
activities include golf, tennis, swimming and dining.
In March 1995, BCC sold its land, inventory, receivables, and other selected
assets to Cobblestone Golf Group, Inc. The accompanying statements of
operations reflect the results of operations from the assets acquired by
Cobblestone. The statements of operations for the years ended December 31,
1993 and 1994, and for the three month period ended March 31, 1995 are not
necessarily indicative of those that would have been achieved by the Company
had it operated on a stand-alone basis.
REVENUE
Operating revenue is recognized when received except for dues and fees paid
in advance which are recognized over the period which the dues and fees allow
the members access to the facilities. The Company recognizes revenue on
initiation fees for the amount of the deposit and the amount of the note
receivable at the time the membership is sold.
PROPERTY, PLANT AND EQUIPMENT
The Company's property, plant and equipment is depreciated using the
straight-line method over the estimated useful lives of the asset.
RELIANCE ON ESTIMATES
The financial statements have been prepared in accordance with generally
accepted accounting principles and have required management to make estimates
and assumptions that affect the reported amounts of 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.
2. INCOME TAXES
Under the provisions of the Internal Revenue Code, partnerships are not
subject to income taxes. For income tax purposes, any income or losses
realized are taxable to the individual partners.
F-34
<PAGE>
INDEPENDENT AUDITORS' REPORT
Brandermill Country Club, L.P.
Richmond, Virginia
We have audited the balance sheet of Brandermill Country Club, L.P. as of
December 31, 1993, and the related statements of operations, partners'
deficit, and cash flows for the year then ended. 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 audit.
We conducted our audit 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 audit provides 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 Brandermill Country Club,
L.P. at December 31, 1993, and the results of its operations and its cash
flows for the year then ended in conformity with generally accepted accounting
principles.
BDO Seidman, LLP
Richmond, Virginia
April 12, 1994
F-35
<PAGE>
BRANDERMILL COUNTRY CLUB, L.P.
BALANCE SHEET
DECEMBER 31, 1993
<TABLE>
<S> <C>
ASSETS
Current assets
Cash............................................................ $ 96,312
Accounts receivable (Note 2).................................... 55,166
Prepaids and other assets....................................... 2,580
-----------
Total current assets............................................. 154,058
-----------
Property and equipment, net of accumulated depreciation (Notes 1
and 2).......................................................... 1,415,609
-----------
Other assets..................................................... 440
-----------
$ 1,570,107
===========
LIABILITIES AND PARTNERS' DEFICIT
Current liabilities
Accounts payable................................................ $55,271
Current maturities of long-term debt (Note 2)................... 53,670
Other liabilities............................................... --
-----------
Total current liabilities........................................ 108,941
Long-term debt, less current maturities (Note 2)................. 4,541,874
-----------
Total liabilities................................................ 4,650,815
-----------
Commitments (Note 3).............................................
-----------
Partners' deficit
General partner................................................. (323,416)
Limited partners................................................ (2,757,292)
-----------
Total partners' deficit.......................................... (3,080,708)
-----------
$ 1,570,107
===========
</TABLE>
See accompanying independent auditors' report, summary of accounting policies
and notes to financial statements.
F-36
<PAGE>
BRANDERMILL COUNTRY CLUB, L.P.
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
REVENUES
<S> <C>
Membership dues.................................................... $1,976,682
Initiation fees.................................................... 217,936
Golf course revenue................................................ 398,084
Other income....................................................... 20,657
----------
Total revenues..................................................... 2,613,359
----------
OPERATING EXPENSES
Management fees (Note 4)........................................... 1,038,933
Depreciation and amortization...................................... 131,137
Repairs and maintenance............................................ 199,012
Supplies........................................................... 112,182
Utilities and telephone............................................ 124,344
Insurance.......................................................... 45,703
Rent (Note 3)...................................................... 88,913
Real estate tax.................................................... 46,242
Other expenses..................................................... 292,140
----------
Total operating expenses............................................ 2,078,606
----------
Operating income.................................................... 534,753
INTEREST EXPENSE, NET............................................... 517,407
----------
NET INCOME.......................................................... $ 17,346
==========
</TABLE>
See accompanying independent auditors' report, summary of accounting policies
and notes to financial statements.
F-37
<PAGE>
BRANDERMILL COUNTRY CLUB, L.P.
STATEMENT OF PARTNERS' DEFICIT
YEAR ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNER PARTNERS TOTAL
--------- ----------- -----------
<S> <C> <C> <C>
PARTNERS' DEFICIT, December 31, 1992...... $(322,054) $(2,749,949) $(3,072,003)
Distributions to partners................. (4,071) (21,980) (26,051)
Net income for the year................... 2,709 14,637 17,346
--------- ----------- -----------
PARTNERS' DEFICIT, December 31, 1993...... $(323,416) $(2,757,292) $(3,080,708)
========= =========== ===========
</TABLE>
See accompanying independent auditors' report, summary of accounting policies
and notes to financial statements.
F-38
<PAGE>
BRANDERMILL COUNTRY CLUB, L.P.
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1993
<TABLE>
<S> <C>
OPERATING ACTIVITIES
Net income.......................................................... $ 17,346
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation and amortization...................................... 131,137
Decrease in accounts receivable.................................... 6,834
Decrease in prepaids and other assets.............................. --
Increase (decrease) in accounts payable............................ (22,773)
Other.............................................................. (12,826)
--------
Net cash provided by operating activities............................ 119,718
--------
INVESTING ACTIVITIES
Purchase of property and equipment.................................. (47,500)
--------
Net cash absorbed by investing activities............................ (47,500)
--------
FINANCING ACTIVITIES
Payments on long-term debt.......................................... (47,866)
Distributions to partners........................................... (26,051)
--------
Net cash absorbed by financing activities............................ (73,917)
--------
INCREASE (DECREASE) IN CASH.......................................... (1,699)
CASH, beginning of year.............................................. 98,011
--------
CASH, end of year.................................................... $ 96,312
========
</TABLE>
See accompanying independent auditors' report, summary of accounting policies
and notes to financial statements.
F-39
<PAGE>
BRANDERMILL COUNTRY CLUB, L.P.
SUMMARY OF ACCOUNTING POLICIES
<TABLE>
<C> <S>
NATURE OF Brandermill Country Club, L.P. ("BCC"), a limited
BUSINESS partnership, owns and operates a private country club
in Midlothian, Virginia. The club's main activities
include golf, tennis, swimming and dining.
OTHER ASSETS Other assets consist primarily of deferred financing
costs related to the note payable to Crestar Bank,
and are being amortized over the term of the note,
(five years).
PROPERTY AND Property and equipment is stated at cost.
EQUIPMENT Expenditures for ordinary maintenance and repairs are
charged to expense as incurred. Cost of betterments,
renewals and major replacements are capitalized. At
the time properties are retired or otherwise disposed
of, the related costs and allowances for depreciation
are eliminated from the accounts and any gain or loss
on disposition is reflected in income.
Depreciation is computed using accelerated methods
over the estimated useful lives of the assets.
INCOME TAXES BCC is a partnership and, consequently, each partner
will report their proportional share of the income,
losses and credits on their individual tax return.
SUPPLEMENTAL DISCLOSURE Cash payments for interest amounted to $518,310 for
OF CASH FLOW INFORMATION the year ended December 31, 1993.
</TABLE>
See accompanying independent auditors' report.
F-40
<PAGE>
BRANDERMILL COUNTRY CLUB, L.P.
NOTES TO FINANCIAL STATEMENTS
1. PROPERTY AND EQUIPMENT
Property and equipment is comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1993
------------
<S> <C>
Land............................................................... $ 349,099
Buildings.......................................................... 823,579
Land improvements.................................................. 309,030
Furniture and fixtures............................................. 163,050
Machinery and equipment............................................ 151,331
Tennis courts...................................................... 29,070
Landscaping........................................................ 34,438
Shuffleboard courts................................................ 1,492
Parking lots....................................................... 10,229
----------
1,871,318
Less accumulated depreciation...................................... 455,709
----------
Net property and equipment......................................... $1,415,609
==========
</TABLE>
2. LONG-TERM DEBT
Long-term debt is comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1993
------------
<S> <C>
Note payable to Crestar Bank (Crestar), with interest at 11%,
collateralized by property and equipment with a book value of
approximately $1,416,000 at December 31, 1993, a first security
interest in accounts receivable, and personal guarantees of the
limited partners, due in 59 monthly installments (amortized on a
25-year basis) through March 1, 1995, with the final installment
equal to an amount to pay the loan in full due on April 1, 1995
(See below)..................................................... $4,595,544
Less current maturities.......................................... 53,670
----------
$4,541,874
==========
</TABLE>
On January 28, 1994, the Partnership entered into a new note agreement with
NationsBank in the principal amount of $5,550,000; proceeds of which were used
primarily to pay off the Crestar note. The new note bears interest at 7.70%.
Principal and interest are payable by the Partnership in monthly installments
of $45,757 through February 1997, on which date the entire remaining principal
balance is due.
Amounts maturing under the new note during each of its remaining years are as
follows: 1994--$110,552; 1995--$129,085; 1996--$139,531; 1997--$5,170,832.
3. COMMITMENTS
BCC leases certain equipment under operating leases expiring at various dates
through 1998. Future minimum rental payments required that have initial or
remaining noncancelable terms in excess of one year as of December 31, 1993 are
approximately $61,521 in 1994; $58,514 in 1995; $58,514 in 1996; $43,952 in
1997; and $39,601 in 1998. Total rental expense amounted to $88,913 for the
year ended December 31, 1993.
See accompanying independent auditors' report.
F-41
<PAGE>
BRANDERMILL COUNTRY CLUB, L.P.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
4. RELATED PARTY TRANSACTIONS
For the year ended December 31, 1993 BCC paid $1,038,933 to East West
Partners of Virginia, Inc., a related entity to BCC, for management and
administrative fees. This amount relates primarily to salary and employee
benefit costs incurred by employees of East West.
See accompanying independent auditors' report.
F-42
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors
Cobblestone Golf Group, Inc.
We have audited the accompanying statements of income for Pecan Grove
Plantation Country Club, Inc. (the "Club") for the year ended December 31,
1993 and the month ended January 31, 1994. These statements of income are the
responsibility of the Club'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 statements of income are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statements of income. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall statement of
income presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the statements of income referred to above present fairly,
in all material respects, the results of operations of Pecan Grove Plantation
Country Club, Inc. for the year ended December 31, 1993 and the month ended
January 31, 1994, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
San Diego, California
July 19, 1996
F-43
<PAGE>
PECAN GROVE PLANTATION COUNTRY CLUB, INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED MONTH ENDED
DECEMBER 31, JANUARY 31,
1993 1994
------------ -----------
<S> <C> <C>
Operating revenues:
Green fees, cart rental fees, practice facility
fees, dues and initiation fees..................... $2,282,397 $182,064
Food and beverage revenues.......................... 408,847 20,067
Pro shop sales...................................... 283,230 5,980
Other............................................... 26,522 1,177
---------- --------
Total operating revenues.............................. 3,000,996 209,288
Operating expenses:
Golf course operations.............................. 2,380,405 171,304
Cost of food and beverage........................... 177,772 7,151
Cost of pro shop sales.............................. 265,547 11,606
Depreciation and amortization....................... 79,295 6,125
---------- --------
Total operating expenses.............................. 2,903,019 196,186
Income from operations................................ 97,977 13,102
Provision for income taxes............................ 25,404 4,000
---------- --------
Net income............................................ $ 72,573 $ 9,102
========== ========
</TABLE>
See accompanying notes.
F-44
<PAGE>
PECAN GROVE PLANTATION COUNTRY CLUB
NOTES TO STATEMENTS OF INCOME
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND DESCRIPTION OF BUSINESS
Pecan Grove Plantation Country Club (the "Company") is located in Richmond,
Texas, and consists of a 27-hole private golf course, driving range, tennis
courts, pool, clubhouse and pro shop. In February, 1994 the Company sold its
land, inventory, receivables, and other selected assets to Cobblestone Golf
Group, Inc.
The accompanying statements of income reflect the results of operations from
the assets acquired by Cobblestone Golf Group, Inc.. The statements of
operations for the year ended December 31, 1993 and for the month ended
January 31, 1994 are not necessarily indicative of those that would have been
achieved by the Company had it operated on a stand alone basis.
REVENUE
Operating revenue is recognized when received except for dues and fees paid
in advance which are recognized over the period during which the dues and fees
allow the members access to the facilities. The Company recognizes revenue on
initiation fees at the time the membership is sold.
PROPERTY, PLANT AND EQUIPMENT
The Company's property, plant and equipment is depreciated using the
straight-line method over the estimated useful lives of the asset.
RELIANCE ON ESTIMATES
The statements of income have been prepared in accordance with generally
accepted accounting principles and have required management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the statements of income and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
2. INCOME TAXES
The provision (benefit) for income taxes at January 31, 1994 and December
31, 1993 consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 31,
1993 1994
------------ -----------
<S> <C> <C>
Current:
Federal........................................ $20,882 $3,280
State.......................................... 4,522 720
Deferred:
Federal........................................ -- --
State.......................................... -- --
------- ------
$25,404 $4,000
======= ======
</TABLE>
See accountants' review report.
F-45
<PAGE>
PECAN GROVE PLANTATION COUNTRY CLUB
NOTES TO STATEMENTS OF INCOME--(CONTINUED)
2. INCOME TAXES (CONTINUED)
A reconciliation of the effective tax rates and the statutory federal income
tax rates are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 31,
1993 1994
------------ -----------
<S> <C> <C>
Tax at federal rate..... $ 35,174 $ 4,717
State income tax, net of
federal tax benefits... 2,939 469
Benefit of graduated
rates.................. (12,709) (1,186)
-------- -------
$ 25,404 $ 4,000
======== =======
</TABLE>
See accountants' review report.
F-46
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors
Cobblestone Golf Group, Inc.
We have audited the accompanying statement of income of Ocean Vista Land
Company for the five months ended May 31, 1993. This statement of income is
the responsibility of Ocean Vista Land Company's management. Our
responsibility is to express an opinion on this statement of income based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statement of income is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statement of income. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall statement of
income presentation. We believe that our audit provides a reasonable basis for
our opinion.
In our opinion, the statement of income referred to above presents fairly,
in all material respects, the results of operations of Ocean Vista Land
Company for the five months ended May 31, 1993, in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
San Diego, California
July 19, 1996
F-47
<PAGE>
OCEAN VISTA LAND COMPANY
STATEMENT OF INCOME
FIVE MONTHS ENDED MAY 31, 1993
<TABLE>
<S> <C>
Operating revenues:
Green fees, cart rental fees, practice facility fees,
dues and initiation fees......................................... $1,815,550
Food and beverage revenues........................................ 482,836
Other............................................................. 260,631
----------
Total operating revenues............................................ 2,559,017
Operating expenses:
Golf course operations............................................ 619,879
Cost of food and beverage......................................... 483,235
General and administrative........................................ 1,020,490
----------
Total operating expenses............................................ 2,123,604
----------
Net income.......................................................... $ 435,413
==========
</TABLE>
See accompanying notes.
F-48
<PAGE>
OCEAN VISTA LAND COMPANY
NOTE TO STATEMENT OF INCOME
FIVE MONTHS ENDED MAY 31, 1993
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND DESCRIPTION OF BUSINESS
Ocean Vista Land Company owns and operates the El Camino Country Club ("El
Camino") and Whispering Palms Lodge and Country Club ("Whispering Palms"). El
Camino is located in Oceanside, California, and consists of an 18-hole private
golf course, driving range, tennis courts, pool, clubhouse and pro shop.
Whispering Palms is located in Rancho Santa Fe, California, and consists of a
27-hole semi-private golf course, lodge, tennis courts, swimming pool,
clubhouse and pro shop.
In June 1993, Cobblestone Golf Group, Inc. purchased substantially all of
the stock of Ocean Vista Land Company.
REVENUE
Operating revenue is recognized when received except for dues and fees paid
in advance which are recognized over the period during which the dues and fees
allow the members access to the facilities. The Company recognizes revenue on
initiation at the time the membership is sold.
RELIANCE ON ESTIMATES
The financial statements have been prepared in accordance with generally
accepted accounting principles and have required management to make estimates
and assumptions that affect the reported amounts of 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.
INCOME TAXES
The effective rate for income tax differs from the statutory rate as a
result of the change in deferred taxes related to the write off of notes
receivable and investments.
F-49
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors
Cobblestone Golf Group, Inc.
We have audited the accompanying statement of operations of Saticoy Regional
Golf Course for the two and a half months ended March 12, 1993. This statement
of operations is the responsibility of Saticoy Regional Golf Course's
management. Our responsibility is to express an opinion on this statement of
operations based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statement of operations is free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the statement of
operations. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall statement of operations presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the statement of operations referred to above presents
fairly, in all material respects, the results of operations of Saticoy
Regional Golf Course for the two and a half months ended March 12, 1993, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
San Diego, California
July 19, 1996
F-50
<PAGE>
SATICOY REGIONAL GOLF COURSE
STATEMENT OF OPERATIONS
FOR THE TWO AND A HALF MONTHS ENDED MARCH 12, 1993
<TABLE>
<S> <C>
Operating revenues:
Green fees, golf cart and range revenue............................ $ 77,538
Food and beverage.................................................. 7,249
Pro shop sales..................................................... 4,050
Other.............................................................. 4,205
--------
Total operating revenues............................................. 93,042
Operating expenses:
Golf course operations............................................. 43,302
Cost of food and beverage.......................................... 4,415
Cost of pro shop sales............................................. 3,911
General and administrative......................................... 21,687
Depreciation....................................................... 15,824
--------
Total operating expenses............................................. 89,139
Income from operations............................................... 3,903
Interest expense, net................................................ (14,499)
--------
Net income (loss).................................................... $(10,596)
========
</TABLE>
See accompanying notes.
F-51
<PAGE>
SATICOY REGIONAL GOLF COURSE
NOTES TO STATEMENT OF OPERATIONS
FOR THE TWO AND HALF MONTHS ENDED MARCH 12, 1993
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND DESCRIPTION OF BUSINESS
Saticoy Regional Golf Course (the "Company") is a public golf course located
in Ventura, California. The facility consists of a 9-hole municipal golf
course, driving range, and pro shop.
In March of 1993, Cobblestone Golf Group, Inc. acquired the leasehold
interest in the operations of the Company.
REVENUE
Operating revenue is recognized when received.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is depreciated using the straight-line method
over the estimated useful lives of the asset.
INCOME TAXES
As a result of the Company's net loss, the accompanying statement of
operations does not include any provision for income taxes. The Company has
recorded a valuation allowance on its deferred tax assets since the
realization of such assets is uncertain.
F-52
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma consolidated financial information of the
Company presents the uanudited pro forma consolidated statements of operations
for the year ended September 30, 1995, and the six months ended March 31,
1996, and the unaudited pro forma consolidated balance sheet at March 31,
1996. The pro forma combined consolidated statements of operations for the
year ended September 30, 1995, and the six months ended March 31, 1996, have
been adjusted to give effect to (i) the Company's acquisition of Red Mountain
Ranch Country Club (completed in January, 1995), the Hills of Lakeway
(completed in March, 1995), Live Oak Golf Course (completed in March, 1995),
Brandermill Country Club (completed in March, 1995), Yaupon Golf Course
(completed in March, 1995), the Ranch Country Club (completed in December,
1994), Stonebridge Country Club (completed in December, 1994), (ii) the
Company's acquisition of Eagle Crest Country Club (completed in June, 1996),
and Sweetwater Country Club (completed in July, 1996), in each case as if such
transactions had occurred on October 1, 1994. The pro forma consolidated
balance sheet at March 31, 1996, has been adjusted to give effect to the
acquisitions of Eagle Crest and Sweetwater, which occurred after March 31,
1996. Pro forma adjustments relating to the 1995 Acquisitions and the 1996
Acquisitions are referred to herein collectively as the "Pro Forma Acquisition
Adjustments."
The pro forma as adjusted consolidated statements of operations for the year
ended September 30, 1995 and for the six months ended March 31, 1996, give
additional effect to (i) the issuance by the Company of $70,000,000 aggregate
principal amount of its 11 1/2% Series A Senior Notes due 2003, (ii) the
issuance by Holdings of 86,000 units, each consisting of $1,000 principal
amount at maturity of its 13 1/2% Series A Senior Zero-Coupon Notes due 2004
and one share of its common stock, for $352.04 per unit, (iii) the increase in
interest expense as a result of the increase in indebtedness, (iv) the write-
off of the unamortized loan fees, in each case as if such transactions had
occurred on the first day of the period presented. The pro forma adjustments
relating to the transactions referred to in clauses (i) through (iv) are
referred to herein collectively as the "Pro Forma Offering Adjustments." The
pro forma as adjusted consolidated balance sheet gives additional effect to
the Pro Forma Offering Adjustments as if they had occurred at March 31, 1996.
See "Use of Proceeds."
The Pro Forma Acquisition Adjustments and Pro Forma Offering Adjustments
represent the Company's determination of all adjustments necessary to present
fairly the Company's pro forma results of operations and financial position
and are based upon available information and certain assumptions considered
reasonable under the circumstances. The pro forma consolidated financial
information presented herein does not purport to present what the Company's
financial position or results of operations would actually have been had such
events leading to the Pro Forma Acquisition Adjustments and Pro Forma Offering
Adjustments in fact occurred on the date or at the beginning of the periods
indicated or to project the Company's financial position or results of
operations for any future date or period.
The pro forma consolidated financial information should be read in
conjunction with the historical Consolidated Financial Statements of the
Company and the Notes thereto and management's discussion thereof contained
elsewhere in this Prospectus. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Company's Consolidated
Financial Statements and the Notes thereto.
F-53
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1995
(EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
HISTORICAL 1995 1996 ACQUISITIONS PRO FORMA OFFERING PRO FORMA
COMPANY ACQUISITIONS ACQUISITIONS ADJUSTMENTS COMBINED ADJUSTMENTS AS ADJUSTED
----------- ------------ ------------ ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating revenues:
Green fees, cart rental
fees, practice
facility fees, dues
and initiation fees... $38,043,441 $4,263,175 $ 7,766,082 $ -- $50,072,698 $ -- $50,072,698
Food and beverage
revenues.............. 7,034,407 857,275 2,074,500 -- 9,966,182 -- 9,966,182
Pro shop sales......... 3,311,062 705,421 840,810 -- 4,857,293 -- 4,857,293
Other.................. 1,473,869 172,703 557,146 -- 2,203,718 -- 2,203,718
----------- ---------- ----------- ---------- ----------- ----------- -----------
Total operating
revenues............... 49,862,779 5,998,574 11,238,538 -- 67,099,891 -- 67,099,891
Operating expenses:
Golf course
operations............ 29,591,886 2,313,558 2,967,097 -- 34,872,541 -- 34,872,541
Cost of food and
beverage.............. 2,613,295 799,046 2,124,723 -- 5,537,064 -- 5,537,064
Cost of pro shop
sales................. 2,221,330 717,656 681,019 -- 3,620,005 -- 3,620,005
General and
administrative........ 2,517,423 2,329,720 3,623,606 1,168,375 (1) 9,639,124 -- 9,639,124
Depreciation and
amortization.......... 6,144,430 422,824 1,084,719 (597,704)(2) 7,054,269 -- 7,054,269
----------- ---------- ----------- ---------- ----------- ----------- -----------
Total operating
expense................ 43,088,364 6,582,804 10,481,164 570,671 60,723,003 -- 60,723,003
----------- ---------- ----------- ---------- ----------- ----------- -----------
Income (loss) from
operations............. 6,774,415 (584,230) 757,374 (570,671) 6,376,888 -- 6,376,888
Interest expense, net... (8,019,072) (209,452) (844,873) (339,586)(3) (9,412,983) 903,231 (4) (8,509,752)
Loss on disposal of
assets................. -- -- (2,700,000) 2,700,000 (6) -- -- --
Gain on insurance
settlement............. 746,845 -- 746,845 -- 746,845
----------- ---------- ----------- ---------- ----------- ----------- -----------
Loss before income taxes
and extraordinary
item................... (497,812) (793,682) (2,787,499) 1,789,743 (2,289,250) 903,231 (1,386,019)
Provision for income
taxes.................. 208,000 -- -- -- 208,000 -- 208,000
----------- ---------- ----------- ---------- ----------- ----------- -----------
Loss before
extraordinary item..... (705,812) (793,682) (2,787,499) 1,789,743 (2,497,250) 903,231 (1,594,019)
Extraordinary item...... -- -- -- -- -- 2,998,986 (5) (2,998,986)
----------- ---------- ----------- ---------- ----------- ----------- -----------
Net loss................ $ (705,812) $ (793,682) $(2,787,899) $1,789,743 $(2,497,250) $(2,095,755) $ 4,593,005
=========== ========== =========== ========== =========== =========== ===========
</TABLE>
See accompanying notes.
F-54
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS AT SEPTEMBER
30, 1995
(1) Represents operating lease payments related to Sweetwater Country Club
assuming the lease on the property was acquired at the beginning of the
period.
(2) Represents the elimination of the historical depreciation and amortization
of 1995 and 1996 Acquisitions and the Company's estimate for depreciation
and amortization assuming the property, equipment and leasehold interests
acquired were stated at fair market value at the beginning of the period.
(3) Represents the net effect from the elimination of historical interest
expense for the 1995 and 1996 Acquisitions and the effect on interest
expense from the borrowings required to fund the 1995 and 1996
Acquisitions as if the transactions were consummated at the beginning of
the period.
(4) Represents the net effect from the elimination of historical interest
expense assuming all existing debt was repayed by the use of offering
proceeds at the beginning of the period and the effects on interest
expense related to the debt offering.
(5) Represents the write-off of the unamortized loan fees.
(6) Represents the elimination of the loss on disposal of assets related to
Sweetwater Country Club.
F-55
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1996
(EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
HISTORICAL 1996 ACQUISITIONS PRO FORMA OFFERING PRO FORMA
COMPANY ACQUISITIONS ADJUSTMENTS COMBINED ADJUSTMENTS AS ADJUSTED
----------- ------------ ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Operating revenues:
Green fees, cart rental
fees, practice
facility fees, dues
and initiation fees... $19,738,164 $3,847,446 $ -- $23,585,610 $ -- $23,585,610
Food and beverage
revenues.............. 4,094,965 1,103,201 -- 5,198,166 -- 5,198,166
Pro shop sales......... 2,134,053 379,023 -- 2,513,076 -- 2,513,076
Other.................. 1,039,499 268,434 -- 1,307,933 -- 1,307,933
----------- ---------- --------- ----------- -------- -----------
Total operating
revenues............... 27,006,681 5,598,104 -- 32,604,785 -- 32,604,785
Operating expenses:
Golf course
operations............ 16,256,240 1,957,474 -- 18,213,714 -- 18,213,714
Cost of food and
beverage.............. 1,415,715 1,073,712 -- 2,489,427 -- 2,489,427
Cost of pro shop
sales................. 1,413,254 307,682 -- 1,720,936 -- 1,720,936
General and
administrative........ 1,723,545 1,017,224 584,187 (1) 3,324,956 -- 3,324,956
Depreciation and
amortization.......... 3,518,380 600,420 (477,980)(2) 3,640,820 -- 3,640,820
----------- ---------- --------- ----------- -------- -----------
Total operating
expense................ 24,327,134 4,956,512 106,207 29,389,853 -- 29,389,853
----------- ---------- --------- ----------- -------- -----------
Income (loss) from
operations............. 2,679,547 641,592 (106,207) 3,214,932 -- 3,214,932
Interest expense, net... (5,118,027) (408,590) 106,122 (3) (5,420,495) 978,508 (4) (4,441,987)
Gain on insurance
settlement............. -- -- -- -- -- --
----------- ---------- --------- ----------- -------- -----------
Loss before income taxes
and extraordinary
item................... (2,438,480) 233,002 (85) (2,205,563) 978,508 (1,227,055)
Provision for income
taxes.................. 23,400 -- -- 23,400 -- 23,400
----------- ---------- --------- ----------- -------- -----------
Net loss................ $(2,461,880) $ 233,002 $ (85) $(2,228,963) $978,508 $(1,250,455)
=========== ========== ========= =========== ======== ===========
</TABLE>
See accompanying notes.
F-56
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS AT MARCH 31,
1996
(1) Represents operating lease payments related to Sweetwater Country Club
assuming the lease on the property was acquired at the beginning of the
period.
(2) Represents the elimination of the historical depreciation and amortization
of 1996 Acquisitions and the Company's estimate for depreciation and
amortization assuming the property, equipment and leasehold interests
acquired were stated at fair market value at the beginning of the period.
(3) Represents the net effect from the elimination of historical interest
expense for the 1996 Acquisitions and the effect on interest expense from
the borrowings required to fund the 1996 Acquisitions as if the
transactions were consummated at the beginning of the period.
(4) Represents the net effect from the elimination of historical interest
expense assuming all existing debt was repayed by the use of offering
proceeds at the beginning of the period and the effects on interest
expense related to the debt offering.
F-57
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET AT MARCH 31, 1996
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
HISTORICAL 1996 ACQUISITIONS PRO FORMA OFFERING PRO FORMA AS
COMPANY ACQUISITIONS ADJUSTMENTS COMBINED ADJUSTMENTS ADJUSTED
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents........... $ 1,590,803 $ 828,022 $ (245,527)(2) $ 2,173,298 $ 6,275,939 (6) $ 8,449,237
Accounts receivable,
net................... 2,137,192 1,127,510 (1,127,510)(3) 2,137,192 -- 2,137,192
Current portion of
notes receivable,
net................... 1,228,331 -- -- 1,228,331 -- 1,228,331
Inventory.............. 1,842,978 258,026 (73,760)(2) 2,027,244 -- 2,027,244
Prepaid expenses and
other current assets.. 334,980 70,945 41,171 (2) 447,096 -- 447,096
------------ ------------ ------------ ------------ ------------ ------------
Total current assets.... 7,134,284 2,284,503 (1,405,626) 8,013,161 6,275,939 14,289,100
Property, equipment and
leasehold interest,
net.................... 131,290,980 21,571,708 (15,200,361)(2) 137,662,327 -- 137,662,327
Notes receivable, net... 4,282,072 -- -- 4,282,072 -- 4,282,072
Intangibles assets,
net.................... 4,047,367 -- -- 4,047,367 (854,046)(7) 3,193,321
Other assets, net....... 5,139,453 74,168 (74,168)(3) 5,139,453 -- 5,139,453
------------ ------------ ------------ ------------ ------------ ------------
$151,894,156 $ 23,930,379 $(16,680,155) $159,144,380 $ 5,421,893 $164,566,273
============ ============ ============ ============ ============ ============
LIABILITIES AND NET
CAPITAL DEFICIENCY
Current liabilities:
Accounts payable....... $ 1,509,590 $ 234,555 $ (234,555)(3) $ 1,509,590 $ -- $ 1,509,590
Accrued payroll and
related expenses...... 1,266,467 -- -- 1,266,467 -- 1,266,467
Accrued interest
expense............... 609,262 -- -- 609,262 (609,262)(8) --
Accrued property
taxes................. 525,237 -- -- 525,237 -- 525,237
Deferred revenue....... 2,369,680 596,401 (66,900)(2) 2,899,181 -- 2,899,181
Current portion of
long-term debt and
capital lease
obligations........... 6,435,608 -- -- 6,435,608 (5,654,259)(8) 781,349
Current portion of
deferred purchase
price................. 188,329 -- -- 188,329 (188,329)(8) --
Income taxes payable... 382,853 -- -- 382,853 -- 382,853
Other current
liabilities........... 507,633 426,701 11,239 (2) 945,573 -- 945,573
------------ ------------ ------------ ------------ ------------ ------------
Total current
liabilities............ 13,794,659 1,257,657 (290,216) 14,762,100 (6,451,850) 8,310,250
Long term debt, security
deposits and capital
lease obligations...... 89,554,422 40,334,792 (34,052,009)(4) 95,837,205 (13,038,005)(9) 82,799,200
Note payable to
stockholder/officer.... 221,194 -- -- 221,194 -- 221,194
Deferred purchase
price.................. 984,692 -- -- 984,692 (984,692)(8) --
Long-term deferred
revenue................ 2,591,626 -- -- 2,591,626 -- 2,591,626
Deferred income taxes... 3,458,583 -- -- 3,458,583 -- 3,458,583
Minority interest....... 380,985 -- -- 380,985 -- 380,985
Commitments
Stockholders' equity:
Redeemable preferred
stock................. 4,307 -- -- 4,307 -- 4,307
Common stock........... 1,348 2,000 (2,000)(5) 1,348 67 (6) 1,415
Paid in capital........ 46,328,923 3,374,180 (3,374,180)(5) 46,328,923 29,064,493 (6) 75,393,416
Accumulated deficit.... (5,426,583) (21,038,250) 21,038,250 (5) (5,426,583) (3,168,120)(10) (8,594,703)
------------ ------------ ------------ ------------ ------------ ------------
Total stockholders'
equity................. 40,907,995 (17,662,070) 17,662,070 40,907,995 25,896,440 66,804,435
------------ ------------ ------------ ------------ ------------ ------------
$151,894,156 $ 23,930,379 $(16,680,155) $159,144,380 $ 5,421,893 $164,566,273
============ ============ ============ ============ ============ ============
</TABLE>
See accompanying notes.
F-58
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET AT MARCH 31, 1996
(1) The purchase method of accounting has been used in preparing the Unaudited
Pro Forma Consolidated Financial Statements of Holdings with respect to
the 1996 Acquisitions. Purchase accounting values have been assigned to
the 1996 Acquisitions on a preliminary basis in the Pro Forma Acquisition
Adjustments. Management expects the final purchase accounting valuation to
be completed before September 30, 1996.
(2) Represents preliminary estimates of fair market value for assets acquired
or liabilities assumed, net of assets not acquired or liabilities not
assumed in the 1996 Acquisitions.
(3) Represents assets not acquired or liabilities not assumed in the 1996
Acquisitions.
(4) Represents borrowings under the Company's bank term loan to fund 1996
Acquisitions, net of liabilities not assumed.
(5) Represents elimination of the equity accounts of the 1996 Acquisitions.
(6) Represents net proceeds from the offering after repayment of existing debt
and offering expenses.
(7) Represents offering expenses net of the write-off of existing loan fees.
(8) Represents repayment of existing debt.
(9) Represents repayment of existing debt and assumption of offering debt.
(10) Represents the loss from extinguishment of debt.
F-59
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER CON-
TAINED HEREIN 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 ANY SECURITY OTHER THAN THOSE TO
WHICH IT RELATES, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY ANY OF THE NOTES OFFERED HEREBY TO ANY PERSON IN ANY JURISDIC-
TION WHERE SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIV-
ERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUM-
STANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE SUCH DATE.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Summary.................................................................. 4
Risk Factors............................................................. 14
The Exchange Offer....................................................... 20
The Offerings............................................................ 28
The Recapitalization..................................................... 28
Use of Proceeds.......................................................... 28
Consolidated Capitalization.............................................. 29
Selected Consolidated Financial Information.............................. 30
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 32
Business................................................................. 38
Management............................................................... 47
Certain Relationships and Related Transactions........................... 50
Principal Stockholders................................................... 51
Description of Notes..................................................... 53
Description of New Credit Facility....................................... 76
Certain Federal Income Tax Considerations................................ 77
Plan of Distribution..................................................... 77
Legal Matters............................................................ 78
Experts.................................................................. 78
Available Information.................................................... 78
Index to Financial Statements............................................ F-1
</TABLE>
UNTIL , 1996, ALL DEALERS EFFECTING TRANSACTIONS IN THE EXCHANGE
NOTES, WHETHER OR NOT PARTICIPATING IN THE EXCHANGE OFFER, MAY BE REQUIRED TO
DELIVER A PROSPECTUS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
LOGO
COBBLESTONE GOLF GROUP, INC.
OFFER TO EXCHANGE
11 1/2% SERIES B SENIOR NOTES
DUE 2003
FOR ALL OUTSTANDING
11 1/2% SERIES A SENIOR NOTES
DUE 2003
----------------
PROSPECTUS
----------------
, 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company is a Delaware corporation and its Certificate of Incorporation
and Bylaws provide for indemnification of its officers and directors to the
fullest extent permitted by law. Section 102(b)(7) of the Delaware General
Corporation Law (the "DGCL") eliminates the liability of a corporation's
directors to a corporation or its stockholders, except for liabilities related
to breach of duty of loyalty, actions not in good faith, and certain other
liabilities.
Section 145 of the DGCL provides for the indemnification by a Delaware
corporation of its directors, officers, employees and agents in connection
with actions, suits or proceedings brought against them by a third party or in
the right of the corporation, by reason of the fact that they were or are such
directors, officers, employees or agents, against liabilities and expenses
incurred in any such action, suit or proceeding.
Escondido Consulting, Inc., Carmel Mountain Ranch Golf Club, Inc., OVLC
Management Corp., OVLC Financial Corp., Ocean Vista Land Company, Golf Course
Inns of America, Inc., Oceanside Golf Management Corp. and C-RHK, Inc. are
California corporations and their Articles of Incorporation and Bylaws provide
for indemnification of their officers and directors to the fullest extent
permitted by law. Section 204(10) of the California General Corporation Law
(the "CGCL") eliminates the liability of a corporation's directors for
monetary damages to the fullest extent permissible under California law.
Pursuant to Section 204(11) of the CGCL, a California corporation may
indemnify Agents (as defined in Section 317 of the CGCL), subject only to the
applicable limits set forth in Section 204 of the CGCL with respect to actions
for breach of duty to the corporation and its shareholders.
As permitted by Section 317 of the CGCL, indemnification may be provided by
a California corporation of its Agents (as defined in Section 317 of the
CGCL), to the maximum extent permitted by the CGCL, in connection with any
proceeding arising by reason of the fact that such person is or was such a
director or officer, against expenses, judgments, fines, settlements and other
amounts actually and reasonably incurred in any such proceeding.
Cobblestone Texas, Inc., Pecan Grove Golf Club, Inc., CSR Golf Group, Inc.,
Lakeway Golf Clubs, Inc., Woodcrest Golf Club, Inc., Lakeway Clubs, Inc., The
Liquor Club at Pecan Grove, Inc., TGFC Corporation and SWC Golf Club, Inc. are
Texas corporations and their Certificates of Incorporation and Bylaws provide
for indemnification of their officers and directors to the fullest extent
permitted by law. Article 2.02A(16) of the Texas Business Corporation Act (the
"TBCA") empowers a corporation to indemnify directors, officers, employees and
agents of the corporation and to purchase and maintain liability insurance for
those persons. Article 2.02-1 of the TBCA permits a corporation to indemnify a
person who was, is or is threatened to be made a named defendant or respondent
in a proceeding because the person is or was a director only if it is
determined that the person conducted himself in good faith, reasonably
believed that his official conduct was unlawful.
Under Article 2.02-1 of the TBCA, a corporation shall indemnify a director
or officer against reasonable expenses incurred by him in connection with a
proceeding in which he is a named defendant or respondent because he is or was
a director or officer if he has been wholly successful, on the merits or
otherwise, in the defense of the proceeding, and, in addition, such
indemnification may be ordered in a proper case by a court of law. In
addition, a corporation may indemnify and advance expenses to persons who are
not or were not officers, employees or agents of the corporation but who are
or were serving at the request of the corporation as a director, officer,
partner, venturer, proprietor, trustee, employee, agent, or similar
functionary of another foreign or domestic corporation, partnership, joint
venture, sole proprietorship, trust, employee benefit plan, or other
enterprise to the same extent that it may indemnify and advance expenses to
directors under this article. The statute provides that a corporation may
purchase and maintain insurance on behalf of a director, officer, employee
II-1
<PAGE>
or agent of the corporation or a person who is or was serving at the request
of the corporation as a director, officer, partner, venturer, proprietor,
trustee, employee, agent or similar functionary of another enterprise, against
any liability asserted against him in such capacity or arising out of such
status, whether or not the corporation would have the power to indemnify him
against that liability under this article.
Foothills Holding Company, Inc. is a Nevada corporation and its Bylaws
provide for mandatory indemnification of directors and officers to the fullest
extent now or hereafter permitted by law. Section 78.751 of the general
corporation law of Nevada (the "Nevada Law") permits a corporation to
indemnify any of its directors, officers, employees and agents against costs
and expenses arising from claims, suits and proceedings if such person acted
in good faith and in a manner reasonably believed to be in or not opposed to
the best interests of the corporation. No indemnification may be made in
respect of claims as to which such person is found liable for negligence or
misconduct in the performance of his duty to the corporation unless the court
determines that, notwithstanding the determination of liability,
indemnification would be appropriate. The indemnification provisions of the
Nevada Law expressly do not exclude any other rights a person may have to
indemnification under any bylaw, among other things.
Bellows Golf Group, Inc. is an Arizona corporation and its Bylaws provide
for mandatory indemnification of directors and officers to the fullest extent
now or hereafter permitted by law. Section 10-851 of the Arizona Business
Corporation Act permits a corporation to indemnify a director against
liability incurred in connection with a proceeding brought because such
individual is or was a director if such person's conduct was in good faith,
such individual reasonably believed, in the case of conduct in an official
capacity with the corporation, that the conduct was in its best interests and,
in all other cases, that the conduct was at least not opposed to the best
interests of the corporation and, in criminal proceedings, such individual had
no reasonable cause to believe the conduct was unlawful. Subject to certain
exceptions, no indemnification may be made in connection with a proceeding by
or in the right of the corporation in which the director was adjudged liable
to the corporation or in connection with any other proceeding charging
improper personal benefit to the director, whether or not involving action in
the director's official capacity, in which the director was adjudged liable on
the basis that personal benefit was improperly received by the director.
Virginia Golf Country Club, Inc. is a Virginia corporation and its Bylaws
provide for mandatory indemnification of directors and officers to the fullest
extent now or hereafter permitted by law. Section 13.1-697 of the Virginia
Stock Corporation Act permits a corporation to indemnify a director against
liability incurred in connection with a proceeding brought because such
individual is or was a director if such person conducted himself in good
faith, such individual believed, in the case of conduct in an official
capacity with the corporation, that the conduct was in its best interests and,
in all other cases, that the conduct was at least not opposed to the best
interests of the corporation and, in criminal proceedings, such individual had
no reasonable cause to believe the conduct was unlawful. Subject to certain
exceptions, no indemnification may be made in connection with a proceeding by
or in the right of the corporation in which the director was adjudged liable
to the corporation or in connection with any other proceeding charging
improper personal benefit to the director, whether or not involving action in
the director's official capacity, in which the director was adjudged liable on
the basis that personal benefit was improperly received by the director. The
indemnification provisions of the Virginia Law do not exclude any other rights
a person may have to indemnification under any bylaw, among other things.
CEL Golf Group, Inc. is a Georgia corporation and its Bylaws provide for
mandatory indemnification of directors and officers to the fullest extent now
or hereafter permitted by law. Section 14-2-851 of the Georgia Business
Corporation Code permits a corporation to indemnify a director against
liability incurred in a proceeding brought because such individual is or was a
director if such person acted in a manner he believed in good faith to be in
or not opposed to the best interests of the corporation and, in criminal
proceedings, such individual had no reasonable cause to believe his conduct
was unlawful. Subject to certain exceptions, no indemnification may be made in
connection with a proceeding by or in the right of the corporation in which
the director was adjudged liable to the corporation or in connection with any
other proceeding in which the director was adjudged liable on the basis that
personal benefit was improperly received by him.
II-2
<PAGE>
The Company and its subsidiaries maintain a liability insurance policy under
which officers and directors are generally indemnified against losses and
liability (including costs, expenses, settlements and judgments) incurred by
them in such capacities, individually or otherwise, other than specified
excluded losses. The insurance policy will pay on behalf of the Company or any
subsidiary all covered losses for which the Company or any subsidiary grants
indemnification of each officer or director as permitted by law which the
officer or director becomes legally obligated to pay on account of an
indemnifiable claim. The policy would generally cover, in addition to other
liabilities, liabilities arising under the federal securities law; however,
the subject of loss may not include any claim or claims arising out of or as a
result of the filing of a registration statement under the Securities Act of
1933 or any liability under Section 16(b) of the Securities Exchange Act of
1934.
In addition, the Company has entered into an indemnification agreement (an
"Indemnification Agreement") with each of its directors to provide its
directors with protection against losses and liabilities beyond those provided
by the Company's bylaws and liability insurance policy. The Indemnification
Agreement provides for indemnification of a director for certain costs and
expenses for which such director becomes legally obligated to pay in
connection with certain threatened, pending or completed claims, actions,
suits or proceedings if such person acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Company and, in the case of a criminal proceeding, in addition had no
reasonable cause to believe that his conduct was unlawful.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
A list of exhibits filed with this Registration Statement on Form S-4 is set
forth in the Index to Exhibits on page E-1 and is incorporated herein by
reference.
(b) Financial Statement Schedules:
Schedule II. Valuation of Qualifying Accounts.
SCHEDULES OMITTED
Schedules not listed above are omitted because of the absence of the
conditions under which they are required or because the information required
by such omitted schedules is set forth in the financial statements or the
notes thereto.
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrants hereby undertake that insofar as
indemnification for liabilities arising under the Securities Act of 1933, as
amended (the "Act"), may be permitted to directors, officers and controlling
persons of the Registrants pursuant to the foregoing provisions, or otherwise,
the Registrants have 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 of
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or the registrant in the successful defense of
any action, suit paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, each 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 issue.
(b) The undersigned registrants hereby undertake to respond to requests for
information that is incorporated by reference into this prospectus pursuant to
Item 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means.
II-3
<PAGE>
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding to
the request.
(c) The undersigned registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(d) (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; (ii) to reflect in the prospectus any facts or events
arising 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; (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 purposes of determining any liability under the Securities
Act of 1933, 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 a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Cobblestone Golf Group, Inc. has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Los Angeles, State of California, on July 31, 1996.
COBBLESTONE GOLF GROUP, INC.
/s/ Stefan C. Karnavas
By: _________________________________
Stefan C. Karnavas
Chief Financial Officer
(Principal Financial and
Accounting Officer)
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints James A.
Husband, Stefan C. Karnavas and David B. Wong, and each of them, with full
power to act without the other, such person's 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 this
Registration Statement, and any and all amendments thereto (including pre-and
post-effective amendments) or any registration statement for the same offering
that is to be effective upon filing pursuant to Rule 462(b) under the
Securities Act of 1933, as amended, and to file the same, with exhibits and
schedules thereto, and other documents in connection therewith, with the
Securities and Exchange 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 necessary or desirable 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 any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
/s/ James A. Husband Chief Executive Officer and July 31, 1996
- ------------------------------------ Director (Principal
James A. Husband Executive Officer)
/s/ David B. Wong Director July 31, 1996
- ------------------------------------
David B. Wong
/s/ Frederick J. Warren Director July 31, 1996
- ------------------------------------
Frederick J. Warren
/s/ P.L. Davies III Director July 31, 1996
- ------------------------------------
P.L. Davies III
/s/ Martin R. Reid Director July 31, 1996
- ------------------------------------
Martin R. Reid
/s/ John M. Sullivan Director July 31, 1996
- ------------------------------------
John M. Sullivan
</TABLE>
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
undersigned registrants have duly caused this Registration Statement to be
signed on their behalf by the undersigned, thereunto duly authorized, in the
City of Los Angeles, State of California, on July 31, 1996.
ESCONDIDO CONSULTING, INC. WOODCREST GOLF CLUB, INC.
COBBLESTONE TEXAS, INC. VIRGINIA GOLF COUNTRY CLUB, INC.
PECAN GROVE GOLF CLUB, INC. OCEAN VISTA LAND COMPANY
FOOTHILLS HOLDING COMPANY, INC. GOLF COURSE INNS OF AMERICA, INC.
BELLOWS GOLF GROUP, INC. OCEANSIDE GOLF MANAGEMENT CORP.
CARMEL MOUNTAIN RANCH GOLF CLUB, INC. THE LIQUOR CLUB AT PECAN GROVE, INC.
OVLC MANAGEMENT CORP. LAKEWAY CLUBS, INC.
OVLC FINANCIAL CORP. TGFC CORPORATION
CSR GOLF GROUP, INC. C-RHK, INC.
LAKEWAY GOLF CLUBS, INC. CEL GOLF GROUP, INC.
SWC GOLF CLUB, INC.
By: /s/ Stefan C. Karnavas
------------------------------
Stefan C. Karnavas
Chief Financial Officer
(Principal Financial and
Accounting Officer)
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints James A.
Husband, Stefan C. Karnavas and David B. Wong, and each of them, with full
power to act without the other, such person's 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 this
Registration Statement, and any and all amendments thereto (including pre- and
post-effective amendments) or any registration statement for the same offering
that is to be effective upon filing pursuant to Rule 462(b) under the
Securities Act of 1933, as amended, and to file the same, with exhibits and
schedules thereto, and other documents in connection therewith, with the
Securities and Exchange 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 necessary or desirable 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 any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
/s/ James A. Husband Chief Executive Officer and July 31, 1996
- ------------------------------------ Director (Principal
James A. Husband Executive Officer)
/s/ David B. Wong Director July 31, 1996
- ------------------------------------
David B. Wong
/s/ Frederick J. Warren Director July 31, 1996
- ------------------------------------
Frederick J. Warren
</TABLE>
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
undersigned registrant has duly caused this Registration Statement to be
signed on their behalf by the undersigned, thereunto duly authorized, in the
City of Los Angeles, State of California, on July 31, 1996.
WHISPERING PALMS COUNTRY CLUB JOINT
VENTURE
By: /s/ Stefan C. Karnavas
------------------------------
Stefan C. Karnavas
Managing Member (Principal
Financial and Accounting
Officer)
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints James A.
Husband, Stefan C. Karnavas and David B. Wong, and each of them, with full
power to act without the other, such person's 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 this
Registration Statement, and any and all amendments thereto (including pre- and
post-effective amendments) or any registration statement for the same offering
that is to be effective upon filing pursuant to Rule 462(b) under the
Securities Act of 1933, as amended, and to file the same, with exhibits and
schedules thereto, and other documents in connection therewith, with the
Securities and Exchange 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 necessary or desirable 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 any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
/s/ Gary L. Dee Managing Member July 31, 1996
- ------------------------------------
Gary L. Dee
/s/ James A. Husband Managing Member (Principal July 31, 1996
- ------------------------------------ Executive Officer)
James A. Husband
/s/ Stefan C. Karnavas Managing Member July 31, 1996
- ------------------------------------
Stefan C. Karnavas
</TABLE>
II-7
<PAGE>
COBBLESTONE GOLF GROUP, INC.
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
BALANCE AT CHARGES TO CHARGES TO BALANCE AT
BEGINNING OF COSTS AND OTHER END OF
YEAR EXPENSES ACCOUNTS ACQUISITIONS DEDUCTIONS YEAR
------------ ---------- ---------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED SEPTEMBER 30,
1993
Deducted from asset
accounts:
Allowance for doubtful
accounts receivable.. $ -- $ -- $ -- $55,000 $ -- $ 55,000
======= ======= ========== ======= ======= ==========
YEAR ENDED SEPTEMBER 30,
1994
Deducted from asset
accounts:
Allowance for doubtful
accounts receivable.. $55,000 $68,797 $ -- $ -- $56,797 $ 67,000
======= ======= ========== ======= ======= ==========
YEAR ENDED SEPTEMBER 30,
1995
Deducted from asset
accounts:
Allowance for doubtful
accounts receivable.. $67,000 $58,550 $ -- $ -- $49,550 $ 76,000
Allowance for
uncollectable notes
receivable........... -- -- 2,117,000 -- -- 2,117,000
Valuation allowance
for imputed
interest............. -- -- 1,242,867 -- -- 1,242,867
------- ------- ---------- ------- ------- ----------
Total................... $67,000 $58,550 $3,359,867 $ -- $49,550 $3,435,867
======= ======= ========== ======= ======= ==========
</TABLE>
S-1
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGES
------- ----------- ------------
<C> <S> <C>
3.1 Certificate of Incorporation of Cobblestone Golf Group,
Inc....................................................
3.2 Bylaws of Cobblestone Golf Group, Inc...................
3.3 Articles of Incorporation of Escondido Consulting,
Inc....................................................
3.4 Bylaws of: Escondido Consulting, Inc., Carmel Mountain
Ranch Golf Club, Inc., OVLC Management Corp., OVLC
Financial Corp., Ocean Vista Land Company, Golf Course
Inns of America, Inc., Oceanside Golf Management Corp.,
C-RHK, Inc.............................................
3.5 Articles of Incorporation of Cobblestone Texas, Inc.....
3.6 Bylaws of Cobblestone Texas, Inc........................
3.7 Articles of Incorporation of Pecan Grove Golf Club,
Inc....................................................
3.8 Bylaws of Pecan Grove Golf Club, Inc....................
3.9 Articles of Incorporation of The Liquor Club at Pecan
Grove, Inc.............................................
3.10 Bylaws of The Liquor Club at Pecan Grove, Inc...........
3.11 Articles of Incorporation of Foothills Holding Company,
Inc....................................................
3.12 Bylaws of Foothills Holding Company, Inc................
3.13 Articles of Incorporation of Bellows Golf Group, Inc....
3.14 Bylaws of Bellows Golf Group, Inc.......................
3.15 Articles of Incorporation of Carmel Mountain Ranch Golf
Club, Inc..............................................
3.16 Articles of Incorporation of OVLC Management Corp.......
3.17 Articles of Incorporation of Ocean Vista Land Company...
3.18 Articles of Incorporation of Golf Course Inns of
America, Inc...........................................
3.19 Articles of Incorporation of Oceanside Golf Management
Corp...................................................
3.20 Articles of Incorporation of OVLC Financial Corp........
3.21 Articles of Incorporation of CSR Golf Group, Inc........
3.22 Bylaws of CSR Golf Group, Inc...........................
3.23 Articles of Incorporation of Lakeway Golf Clubs, Inc....
3.24 Bylaws of Lakeway Golf Clubs, Inc.......................
3.25 Articles of Incorporation of Woodcrest Golf Club, Inc...
3.26 Bylaws of Woodcrest Golf Club, Inc......................
3.27 Articles of Incorporation of Virginia Golf Country Club,
Inc....................................................
3.28 Bylaws of Virginia Golf Country Club, Inc...............
3.29 Articles of Incorporation of Lakeway Clubs, Inc.........
3.30 Bylaws of Lakeway Clubs, Inc............................
3.31 Articles of Incorporation of TGFC Corporation...........
3.32 Bylaws of TGFC Corporation..............................
3.33 Articles of Incorporation of C-RHK, Inc.................
3.34 Certificate of Incorporation of CEL Golf Group, Inc.....
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGES
------- ----------- ------------
<C> <S> <C>
3.35 Bylaws of CEL Golf Group, Inc...........................
3.36 Amended and Restated Joint Venture Agreement of
Whispering Palms Country Club Joint Venture............
3.37 Articles of Incorporation of SWC Golf Club, Inc.........
3.38 Bylaws of SWC Golf Club, Inc............................
4.1 Indenture, dated as of June 4, 1996, among Cobblestone
Golf Group, Inc. and Norwest Bank Minnesota, National
Association, as trustee, relating to $70,000,000
aggregate principal amount of 11 1/2% Senior Notes due
2003...................................................
4.2 Specimen Certificate of 11 1/2% Senior Notes due 2003
(included in Exhibit 4.1 hereto).......................
5.1 Form of Opinion of Latham & Watkins regarding the
validity of the Exchange Notes.........................
8.1 Form of Opinion of Latham & Watkins regarding certain
federal income tax matters.............................
10.1 Second Amended and Restated Credit Agreement, dated as
of June 4, 1996, among Cobblestone Golf Group, Inc.,
Cobblestone Holdings, Inc., Bank of America NT & SA, as
agent and the various lending institutions thereto.....
10.2 Purchase Agreement, dated as of May 29, 1996, among
Cobblestone Golf Group, Inc., Donaldson, Lufkin &
Jenrette Securities Corporation and BA Securities,
Inc....................................................
10.3 Registration Rights Agreement, dated as of May 29, 1996,
among Cobblestone Golf Group, Inc., Donaldson, Lufkin &
Jenrette Securities Corporation and BA Securities,
Inc....................................................
10.4 Form of Indemnification Agreement.......................
10.5* Lease dated as of July 1, 1996 by and between National
Golf Operating Partnership, L.P., as Landlord, and
Cobblestone Golf Group, Inc., as tenant................
10.6* Letter Agreement dated as of July 1, 1996 by and between
National Golf Operating Partnership, L.P. and
Cobblestone Golf Group, Inc............................
12.1 Statement of Computation of Ratio of Earnings to Fixed
Charges................................................
21.1 Subsidiaries of Cobblestone Golf Group, Inc.............
23.1 Consent of Latham & Watkins (included in its opinions
filed as Exhibit 5.1 and Exhibit 8.1)..................
23.2 Consent of Ernst & Young, LLP...........................
23.3 Consent of Price Waterhouse, LLP........................
23.4 Consent of BDO Seidman, LLP.............................
24.1 Powers of Attorney of Registrants (included on signature
page to this Registration Statement on Form S-4).......
25.1 Statement of Eligibility and Qualification (Form T-1)
under the Trust Indenture Act of 1939 of Norwest Bank
Minnesota, National Association........................
99.1 Letter of Transmittal...................................
99.2 Notice of Guaranteed Delivery...........................
99.3 Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9
</TABLE>
- ---------------------
* To be filed by amendment.
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RELATIVE RIGHTS, QUALIFICATIONS,
LIMITATIONS AND RESTRICTIONS
OF THE
SERIES B PREFERRED STOCK
OF
COBBLESTONE GOLF GROUP, INC.
Cobblestone Golf Group, Inc., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of the Corporation, by written
-----
consent without a meeting, as of April 29, 1996, duly adopted a resolution
amending and restating the Certificate of Designations, Preferences and Relative
Rights, Qualifications, Limitations and Restrictions of the Series B Preferred
Stock of the Corporation (the "Certificate of Designations of Series B Preferred
Stock"), declaring said proposed amendment and restatement of the Certificate of
Designations of Series B Preferred Stock to be advisable and directing its
officers to submit said proposed amendment and restatement of the Certificate of
Designations of Series B Preferred Stock to the holders of Common Stock and
Series A Preferred Stock of the Corporation for consideration thereof. The
resolution setting forth the proposed amendment and restatement of the
Certificate of Designations of Series B Preferred Stock amends and restates in
its entirety the Certificate of Designations of Series B Preferred Stock filed
with the Secretary of State of Delaware on October 15, 1992 to read as follows:
WHEREAS, the Board of Directors of the Corporation is authorized,
within the limitations and restrictions stated in the Certificate of
Incorporation, to fix by resolution or resolutions the designation of each
series of Preferred Stock, par value $.01 per share (the "Preferred Stock"), and
the powers, preferences and relative, participating, optional or other special
rights and qualifications, limitations or restrictions thereof, including,
without limiting the generality of the foregoing, such provisions as may be
desired concerning voting, redemption, dividends, dissolution or the
distribution of assets, conversion or exchange, and such other subjects or
matters as may be fixed by resolution or resolutions of the Board of Directors
under the General Corporation Law of the State of Delaware; and
<PAGE>
WHEREAS, the Board of Directors of the Corporation, on October 13,
1992, fixed by resolution the designation of a series of Preferred Stock, par
value $.01 per share, designated as Series B Preferred Stock, and the
certificate of designations that sets forth the resolution and designation was
filed on October 15, 1992 with the Secretary of State of Delaware and became
effective in accordance with Section 103 of the General Corporation Law of the
State of Delaware; and
WHEREAS, it is the desire of the Board of Directors of the
Corporation, pursuant to its authority as aforesaid, to amend certain terms of
the Series B Preferred Stock and restate such amended terms in this certificate
of amendment of the Certificate of Designations of Series B Preferred Stock
("Certificate of Amendment");
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors hereby
amends and restates the number, designations, preferences, rights, voting rights
and limitations of the Series B Preferred Stock on the terms and with the
provisions herein set forth:
1. Designation. A series of the Preferred Stock of the Corporation
-----------
is hereby designated as "Series B Preferred Stock" (hereinafter called the
"Series B Preferred Stock") consisting initially of 50,000 shares. Shares of
the Series B Preferred Stock shall rank prior to the Corporation's Common Stock,
par value $.01 per share, upon liquidation, dissolution, winding up or
otherwise. Unless specifically designated as junior to ("Junior Stock") the
Series B Preferred Stock with respect to the payment of dividends or upon
liquidation, dissolution, winding up or otherwise, all other series of Preferred
Stock and other classes of preferred stock of the Corporation shall rank on
parity ("Parity Stock") with the Series B Preferred Stock with respect thereto.
2. Dividends. Except as otherwise set forth in this paragraph 2,
---------
the holders of the shares of Series B Preferred Stock shall not be entitled to
receive dividends or other distributions other than such dividends or other
distributions as are declared by the Board of Directors of the Corporation.
Each such dividend shall be paid to the holders of record of the Series B
Preferred Stock as they shall appear on the stock register of the Corporation on
such record date, not exceeding 45 days nor less than 10 days preceding a
dividend payment date, as shall be fixed by the Board of Directors of the
Corporation or a duly authorized committee thereof.
3. Liquidation Preference.
----------------------
(a) In the event of any liquidation, dissolution or winding up of the
affairs of the Corporation, whether voluntary or involuntary, after payment or
provisions for payment of the debts and other liabilities of the Corporation,
the holders of shares of the Series B Preferred Stock shall be entitled to
receive for each share of Series B Preferred Stock then held, out of the assets
of the Corporation, whether such assets are capital or surplus and whether or
not any dividends as such are declared, $100.00 per share of Series B Preferred
Stock on the date fixed for distribution, and no more, before any distribution
shall be made to the holders of the Common Stock or Junior Stock with respect to
the distribution of assets.
2
<PAGE>
If, upon any such liquidation, dissolution or other winding up of the
affairs of the Corporation, the assets of the Corporation distributable among
the holders of all outstanding shares of the Series B Preferred Stock and of any
Parity Stock shall be insufficient to permit the payment in full to such holders
of the preferential amounts to which they are entitled, then the entire assets
of the Corporation remaining after the payment or provision for payment of the
debts and other liabilities of the Corporation shall be distributed among the
holders of the Series B Preferred Stock and of any Parity Stock ratably in
proportion to the full amounts to which they would otherwise by respectively
entitled.
(b) Written notice of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation, stating a payment
date and the place where the distributive amounts shall be payable, shall be
given by mail, postage prepaid, not less than 30 days prior to the payment date
stated therein, to the holders of record of the Series B Preferred Stock at
their respective addresses as the same shall appear on the books of the
Corporation.
(c) No payment on account of such liquidation, dissolution or winding
up of the affairs of the Corporation shall be made to the holders of any Parity
Stock, unless there shall likewise be paid at the same time to the holders of
the Series B Preferred Stock like proportionate distributive amounts, ratably,
in proportion to the full distributive amounts to which they and the holders of
such Parity Stock are respectively entitled with respect to such preferential
distribution.
4. Voting Rights. Except as otherwise required by law, the holders
-------------
of the Series B Preferred Stock shall be entitled to vote along with the Common
Stock (and not as a separate class) on all matters and shall be entitled to one
vote per share of Series B Preferred Stock.
SECOND: That, thereafter, by unanimous written consent of the
------
holders of all outstanding shares of Common Stock and Preferred Stock of the
Corporation, in accordance with Section 228 of the General Corporation Law of
the State of Delaware, this Certificate of Amendment was duly adopted.
THIRD: That said Certificate of Amendment was duly adopted in
-----
accordance with the provisions of Section 242 of the General Corporation Law of
the State of Delaware.
3
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Certificate of
Amendment to be executed as of this 29th day of April, 1996.
COBBLESTONE GOLF GROUP, INC.,
a Delaware corporation
By: /s/ James A. Husband
--------------------------------------
James A. Husband,
President and Chief Executive Officer
of Cobblestone Golf Group, Inc.
4
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RELATIVE RIGHTS, QUALIFICATIONS,
LIMITATIONS AND RESTRICTIONS
OF THE
SERIES A PREFERRED STOCK
OF
COBBLESTONE GOLF GROUP, INC.
Cobblestone Golf Group, Inc., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of the Corporation, by written
-----
consent without a meeting, as of April 29, 1996, duly adopted a resolution
amending and restating the Certificate of Designations, Preferences and Relative
Rights, Qualifications, Limitations and Restrictions of the Series A Preferred
Stock of the Corporation (the "Certificate of Designations of Series A Preferred
Stock"), declaring said proposed amendment and restatement of the Certificate of
Designations of Series A Preferred Stock to be advisable and directing its
officers to submit said proposed amendment and restatement of the Certificate of
Designations of Series A Preferred Stock to the holders of Common Stock and
Series A Preferred Stock of the Corporation for consideration thereof. The
resolution setting forth the proposed amendment and restatement of the
Certificate of Designations of Series A Preferred Stock amends and restates in
its entirety the Certificate of Designations of Series A Preferred Stock filed
with the Secretary of State of Delaware on October 15, 1992 to read as follows:
WHEREAS, the Board of Directors of the Corporation is authorized,
within the limitations and restrictions stated in the Certificate of
Incorporation, to fix by resolution or resolutions the designation of each
series of Preferred Stock, par value $.01 per share (the "Preferred Stock"), and
the powers, preferences and relative, participating, optional or other special
rights and qualifications, limitations or restrictions thereof, including,
without limiting the generality of the foregoing, such provisions as may be
desired concerning voting, redemption, dividends, dissolution or the
distribution of assets, conversion or exchange, and such other subjects or
matters as may be fixed by resolution or resolutions of the Board of Directors
under the General Corporation Law of the State of Delaware; and
<PAGE>
WHEREAS, the Board of Directors of the Corporation, on October 13,
1992, fixed by resolution the designation of a series of Preferred Stock, par
value $.01 per share, designated as Series A Preferred Stock, and the
certificate of designations that sets forth the resolution and designation was
filed on October 15, 1992 with the Secretary of State of Delaware and became
effective in accordance with Section 103 of the General Corporation Law of the
State of Delaware; and
WHEREAS, it is the desire of the Board of Directors of the
Corporation, pursuant to its authority as aforesaid, to amend certain terms of
the Series A Preferred Stock and restate such amended terms in this certificate
of amendment of the Certificate of Designations of Series A Preferred Stock
("Certificate of Amendment");
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors hereby
amends and restates the number, designations, preferences, rights, voting rights
and limitations of the Series A Preferred Stock on the terms and with the
provisions herein set forth:
1. Designation. A series of the Preferred Stock of the Corporation
-----------
is hereby designated as "Series A Preferred Stock" (hereinafter called the
"Series A Preferred Stock") consisting initially of 400,000 shares. Shares of
the Series A Preferred Stock shall rank prior to the Corporation's Common Stock,
par value $.01 per share, upon liquidation, dissolution, winding up or
otherwise. Unless specifically designated as junior to ("Junior Stock") the
Series A Preferred Stock with respect to the payment of dividends or upon
liquidation, dissolution, winding up or otherwise, all other series of Preferred
Stock and other classes of preferred stock of the Corporation shall rank on
parity ("Parity Stock") with the Series A Preferred Stock with respect thereto.
2. Dividends. Except as otherwise set forth in this paragraph 2,
---------
the holders of the shares of Series A Preferred Stock shall not be entitled to
receive dividends or other distributions other than such dividends or other
distributions as are declared by the Board of Directors of the Corporation.
Each such dividend shall be paid to the holders of record of the Series A
Preferred Stock as they shall appear on the stock register of the Corporation on
such record date, not exceeding 45 days nor less than 10 days preceding a
dividend payment date, as shall be fixed by the Board of Directors of the
Corporation or a duly authorized committee thereof.
3. Liquidation Preference.
----------------------
(a) In the event of any liquidation, dissolution or winding up of the
affairs of the Corporation, whether voluntary or involuntary, after payment or
provisions for payment of the debts and other liabilities of the Corporation,
the holders of shares of the Series A Preferred Stock shall be entitled to
receive for each share of Series A Preferred Stock then held, out of the assets
of the Corporation, whether such assets are capital or surplus and whether or
not any dividends as such are declared, $100.00 per share of Series A Preferred
Stock on the date fixed for distribution, and nor more, before any distribution
shall be made to the holders of the Common Stock or Junior Stock with respect to
the distribution of assets.
2
<PAGE>
If, upon any such liquidation, dissolution or other winding up of the
affairs of the Corporation, the assets of the Corporation distributable among
the holders of all outstanding shares of the Series A Preferred Stock and of any
Parity Stock shall be insufficient to permit the payment in full to such holders
of the preferential amounts to which they are entitled, then the entire assets
of the Corporation remaining after the payment or provision for payment of the
debts and other liabilities of the Corporation shall be distributed among the
holders of the Series A Preferred Stock and of any Parity Stock ratably in
proportion to the full amounts to which they would otherwise by respectively
entitled.
(b) Written notice of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation, stating a payment
date and the place where the distributive amounts shall be payable, shall be
given by mail, postage prepaid, not less than 30 days prior to the payment date
stated therein, to the holders of record of the Series A Preferred Stock at
their respective addresses as the same shall appear on the books of the
Corporation.
(c) No payment on account of such liquidation, dissolution or winding
up of the affairs of the Corporation shall be made to the holders of any Parity
Stock, unless there shall likewise be paid at the same time to the holders of
the Series A Preferred Stock like proportionate distributive amounts, ratably,
in proportion to the full distributive amounts to which they and the holders of
such Parity Stock are respectively entitled with respect to such preferential
distribution.
4. Voting Rights. Except as otherwise required by law, the holders
-------------
of the Series A Preferred Stock shall be entitled to vote along with the Common
Stock (and not as a separate class) on all matters and shall be entitled to one
vote per share of Series A Preferred Stock.
SECOND: That, thereafter, by unanimous written consent of the
------
holders of all outstanding shares of Common Stock and Preferred Stock of the
Corporation, in accordance with Section 228 of the General Corporation Law of
the State of Delaware, this Certificate of Amendment was duly adopted.
THIRD: That said Certificate of Amendment was duly adopted in
-----
accordance with the provisions of Section 242 of the General Corporation Law of
the State of Delaware.
3
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Certificate of
Amendment to be executed as of this 29th day of April, 1996.
COBBLESTONE GOLF GROUP, INC.,
a Delaware corporation
By: /s/ James A. Husband
-----------------------------
James A. Husband,
President and Chief Executive Officer
of Cobblestone Golf Group, Inc.
4
<PAGE>
CERTIFICATE OF DESIGNATION, PREFERENCES,
AND RELATIVE RIGHTS,
QUALIFICATIONS, LIMITATIONS AND
RESTRICTIONS
OF THE
SERIES B PREFERRED STOCK
OF
COBBLESTONE GOLF GROUP, INC.
----------------
Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
----------------
COBBLESTONE GOLF GROUP, INC. (the "Corporation"), a corporation
organized and existing under and by virtue of the provisions of the General
Corporation Law of the State of Delaware (the "DGCL"), certifies as follows:
FIRST: The Certification of Incorporation of the Corporation, as
amended, authorizes the issuance of 450,000 shares of Preferred Stock, par value
$.01 per share (the "Preferred Stock"), and, further, authorizes the Board of
Directors of the Corporation, by resolution or resolutions, at any time and from
time to time, to divide and establish any or all of the unissued shares of
Preferred Stock not then allocated to any series of Preferred Stock into one or
more series and, without limiting the generality of the foregoing, to fix and
determine the designation of each such share, the number of shares which shall
constitute such series and certain powers, preferences and relative
participating, optional or other special rights and qualifications, limitations
and restrictions and voting rights of the shares of each series so established.
SECOND: By unanimous written consent of the Board of Directors of the
Corporation, dated October 13, 1992, the following resolutions were adopted
authorizing the creation and issuance of a series of said Preferred Stock to be
known Series B Preferred Stock.
RESOLVED: The Board of Directors of the Corporation hereby authorizes
and fixes the number, designations, preferences, rights, voting rights and
limitations of the series of Preferred Stock on the terms and with the
provisions herein set forth:
<PAGE>
1. Designation. A series of the Preferred Stock of the Corporation is
-----------
hereby designated as "Series B Preferred Stock" (hereinafter called the "Series
B Preferred Stock") consisting initially of 50,000 shares. Shares of the Series
B Preferred Stock shall rank prior to the Corporation's Common Stock , par value
$.01 per share, upon liquidation, dissolution, winding-up or otherwise. Unless
specifically designated as junior to ("Junior Stock") the Series B Preferred
Stock with respect to the payment of dividends or upon liquidation, dissolution,
winding-up or otherwise, all other series of Preferred Stock and other classes
of preferred stock of the Corporation shall rank on parity ("Parity Stock") with
the Series B Preferred Stock with respect thereto.
2. Dividends. Except as otherwise set forth in this paragraph 2 the
---------
holders of the shares of Series B Preferred Stock shall not be entitled to
receive dividends or other distributions other than such dividends or other
distributions as are declared by the Board of Directors of the Company. Each
such dividend shall be paid to the holders of record of the Series B Preferred
Stock as they shall appear on the stock register of the Corporation on such
record date, not exceeding 45 days nor less than 10 days preceding a dividend
payment date, as shall be fixed by the Board of Directors of the Corporation or
a duly authorized committee thereof.
3. Redemption.
----------
(a) Optional Redemption. The Series B Preferred Stock may be redeemed,
-------------------
in whole or in part, at any time at the election of the Corporation by
resolution of its Board of Directors, on notice as set forth in subparagraph
3(c) below, at the redemption price of $100.00 per share of Series B Preferred
Stock (the "Redemption Price"); provided, however, that, if at any time on or
-------- -------
prior to the date of such redemption (the "Redemption Date"), any Reduced Basis
Golf Course (as defined below) or Subsidiary (as defined below) is sold or
otherwise disposed of (in any such case, a "Disposition") such that the
Corporation or the Subsidiary (or the consolidated group of which they are
members), as applicable, has recognized gain for federal income tax purposes,
the Redemption Price per share of $100 shall be increased immediately prior to
redemption by an amount determined in accordance with the following formula:
A X W
-----
I = 1 - W
-------------
S
where:
I = The dollar amount by which the Redemption Price per share shall be
increased;
2
<PAGE>
A = The aggregate amount of federal and state income taxes on the
Dispositions, if any, of Reduced Basis Golf Courses or Subsidiaries by
the Corporation or Subsidiary, as applicable, through the Redemption Date
attributable to the reduced basis of such Courses or Subsidiaries, which
amount is the sum of the amounts determined in accordance with the
---
following formula for each of the Dispositions:
T = (C - B)
where:
T = The amount of federal and state income taxes on the
Disposition of the Reduced Basis Golf Course or Subsidiary
attributable to the reduced basis of such Course or Subsidiary;
C = The amount of federal and state income taxes recognized by the
Corporation or the Subsidiary (or the consolidated group of
which they are members), as applicable, on (i) the Disposition
of the Reduced Basis Golf Course or Subsidiary by the
Corporation or (ii) Disposition of the Reduced Basis Golf Course
by the Subsidiary; and
B = (1) In the event of a disposition of the Reduced Basis Golf
Course by the Subsidiary or in the event of a Disposition of the
Reduced Basis Golf Course by the Corporation (if the Corporation
initially acquired the stock of the Subsidiary and the
Subsidiary subsequently transferred the Reduced Basis Golf
Course to the Corporation), the amount of federal and state
income taxes that would have been recognized on the Disposition
of the Reduced Basis Golf Course by the Corporation or the
Subsidiary (or consolidated group of which they are members), as
applicable, if the Subsidiary had acquired the Reduced Basis
Golf Course in a fully taxable transaction (i.e., resulting in
---
the Subsidiary having an initial tax basis in the Reduced Basis
Golf Course equal to its then fair market value) on the
Acquisition Date (as defined below); or
(2) In the event of a Disposition of the Subsidiary or Reduced
Basis Golf Course (other than described in (1) above) by the
Corporation, the amount of federal and state income taxes that
would have been recognized on the Disposition of the Subsidiary
or
3
<PAGE>
Reduced Basis Golf Course by the Corporation (or
consolidated group of which the Corporation is a
member) if the Corporation had acquired the
Reduced Basis Golf Course or the Subsidiary, as
applicable, in a fully taxable transaction
(i.e., resulting in the Corporation having an
----
initial tax basis in the Reduced Basis Golf
Course or Subsidiary, as applicable, equal to
its then fair market value) on the Acquisition
Date;
W = The aggregate total percentage common equity ownership
in the Corporation on the Redemption Date of all
holders of the Series B Preferred Stock: and
S = The number of outstanding shares of the Series B
Preferred Stock on the Redemption Date.
For purposes hereof, a "Reduced Basis Golf Course" shall mean any golf course or
other golf facility, public or private (including, without limitation, any
driving range or any "pitch and putt" or "par three" golf course) or any
leasehold interest with respect to the same, that was acquired by the
Corporation or the Subsidiary, as applicable, with a tax basis to the
Corporation or the Subsidiary, as applicable, on the Acquisition Date less than
the total value of the consideration paid (including cash and the fair market
value of any property or stock) by (i) the Corporation or the Subsidiary, as
applicable, for such golf course or other golf facility or (ii) the Corporation
for the Subsidiary. "Subsidiary" shall mean any corporation, the stock of which
is acquired by the Corporation. "Acquisition Date" shall mean the date of the
Corporation's or Subsidiary's acquisition of a Reduced Basis Golf Course,
provided, however, if the Corporation acquires the stock of a Subsidiary which
owns the Reduced Basis Golf Course at the time of such acquisition, such term
shall refer to the date of the Corporation's acquisition of the Subsidiary.
If a Reduced Basis Golf Course or a Subsidiary is disposed of in
a transaction which results in a tax loss (or which would have resulted in a tax
loss under the assumptions set forth in "B" above), the above provisions shall
be applied to ensure that "A" above reflects the difference in such taxes caused
by the reduced basis in such Reduced Basis Golf Course or Subsidiary (i.e., so
----
"A" above is increased for the loss of any tax losses due to the reduced basis
in the Course or Subsidiary acquired).
In the event that at any time less than all of the Series B
Preferred Stock outstanding is to be redeemed, the shares to be redeemed will be
selected by lot or pro rata, except that if the redemption is pro rata, the
Corporation may redeem all shares of Series B Preferred Stock held by all
holders of 100 or fewer shares as may be specified by the Corporation.
4
<PAGE>
(b) Mandatory Redemption. Upon the sale of the Corporation,
---------------------
whether such sale is effected by the consolidation or merger of the
Corporation with or into another corporation or corporations, the sale of all or
substantially all of the Corporation's assets, or the sale or exchange of stock
representing at least eighty percent (80%) of the voting power of the stock of
the Corporation, in terms of number of votes for the election of directors, the
Corporation, if permitted by law and under the Corporation's agreements, shall
redeem all remaining outstanding shares of the Series B Preferred Stock at a
redemption price per share equal to the Redemption Price.
(c) Notice of Redemption. Notice of any redemption pursuant
---------------------
to this paragraph 3 shall be mailed, postage prepaid, at least 15 days but not
more than 60 days prior to said redemption date to each holder of record of the
Series B Preferred Stock to be redeemed at its address as the same shall appear
on the stock register of the Corporation. Each such notice shall state:
(i) the date fixed for such redemption, (ii) the place or places where
certificates for such shares of Series B Preferred Stock are to be surrendered
for payment and (iii) the Redemption Price. If less than all the shares of the
Series B Preferred Stock owned by such holder are then to be redeemed, such
notice shall also specify the number of shares thereof which are to be redeemed
and the numbers of the certificates representing such shares.
If such notice of redemption shall have been so mailed and if
prior to the date of redemption specified in such notice all said funds
necessary for such redemption shall have been irrevocably deposited in trust,
for the account of the holders of the shares of the Series B Preferred Stock to
be redeemed (and so as to be and continue to be available therefor), with a bank
or trust company named in such notice doing business in Los Angeles, California
and having capital surplus and undivided profits of at least $50,000,000,
thereupon, and without awaiting the redemption date, all shares of the Series B
Preferred Stock with respect to which such notice shall have been so mailed
and such deposit shall have been so made, shall, notwithstanding that any
certificate for shares of Series B Preferred Stock shall not have been
surrendered for cancellation, be deemed to be no longer outstanding and all
rights with respect to such shares of the Series B Preferred Stock shall
forthwith upon such deposit in trust cease to terminate, except only the right
of the holders thereof on or after the redemption date to receive from such
deposit the amount payable upon the redemption, but without interest. In case
the holders of shares of the Series B Preferred Stock which shall have been
called for redemption shall not within two years (or any longer period if
required by law) after the redemption date claim any amount so deposited in
trust for the redemption of such shares, such bank or trust company shall, if
permitted by applicable law, pay over to the Corporation any such unclaimed
amount so deposited with it, and shall thereupon be relieved of all
responsibility in respect thereof, and thereafter the holders of such shares
shall, subject
5
<PAGE>
to applicable escheat laws, look only to the Corporation for payment of the
redemption price thereof, but without interest.
(d) Status of Shares. Shares of Series B Preferred Stock redeemed,
----------------
purchased or otherwise acquired for value by the Corporation shall, after such
acquisition, have the status of authorized and unissued shares of Preferred
Stock and may be reissued by the Corporation at any time as shares of any series
of Preferred Stock, other than shares of Series B Preferred Stock.
4. Priority on Redemption. The Corporation shall not, directly or
----------------------
indirectly, redeem or purchase or otherwise acquire for value any Junior Stock
(except for Common Stock pursuant to the provisions of that certain Stock
Purchase and Stockholders Agreement dated as of September 30, 1992 among the
Corporation and the stockholders named therein) or Parity Stock unless, at the
time of making such redemption, purchase or other acquisition the Corporation
shall have redeemed, or shall contemporaneously redeem, all of the then
outstanding shares of Series B Preferred Stock at the applicable redemption
price (or shall have irrevocably committed to redeem all of the then outstanding
shares of Series B Preferred Stock and have set aside a sum sufficient for the
payment thereof at the applicable Redemption Price on the date of such
subsequent redemption).
5. Liquidation Preference.
----------------------
(a) In the event of any liquidation, dissolution or winding up of
the affairs of the Corporation, whether voluntary or involuntary, after payment
or provision for payment of the debts and other liabilities of the Corporation,
the holders of shares of the Series B Preferred Stock shall be entitled to
receive for each share of Series B Preferred Stock then held, out of the assets
of the Corporation, whether such assets are capital or surplus and whether or
not any dividends as such are declared, the applicable Redemption Price on the
date fixed for distribution, and no more, before any distribution shall be made
to the holders of the Common Stock or Junior Stock with respect to the
distribution of assets.
If, upon any such liquidation, dissolution or other winding up of the
affairs of the Corporation, the assets of the Corporation distributable among
the holders of all outstanding shares of the Series B Preferred Stock and of any
Parity Stock shall be insufficient to permit the payment in full to such holders
of the preferential amounts to which they are entitled, then the entire assets
of the Corporation remaining after the payment or provision for payment of the
debts and other liabilities of the Corporation shall be distributed among the
holders of the Series B Preferred Stock and of any Parity Stock ratably in
proportion to the full amounts to which they would otherwise be respectively
entitled.
6
<PAGE>
(b) Written notice of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation, stating a payment
date and the place where the distributive amounts shall be payable, shall be
given by mail, postage prepaid, not less than 30 days prior to the payment date
stated therein, to the holders of record of the Series B Preferred Stock at
their respective addresses as the same shall appear on the books of the
Corporation.
(c) No payment on account of such liquidation, dissolution or winding
up of the affairs of the Corporation shall be made to the holders of any Parity
Stock, unless there shall likewise be paid at the same time to the holders of
the Series B Preferred Stock like proportionate distributive amounts, ratably,
in proportion to the full distributive amounts to which they and the holders of
such Parity Stock are respectively entitled with respect to such preferential
distribution.
6. Voting Rights. Except as otherwise required by law, the holders of
-------------
the Series B Preferred Stock shall be entitled to vote along with the Common
Stock (and not as a separate class) on all matters and shall be entitled to one
vote per share of Series B Preferred Stock.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by Frederick J. Warren, its Chairman of the Board, and attested by
William M. Matthes, its Assistant Secretary, this 14th day of October, 1992.
Attest:
/s/ William M. Matthes /s/ Frederick J. Warren
- ------------------------- -------------------------
Assistant Secretary Chairman of the Board
<PAGE>
CERTIFICATE OF DESIGNATION, PREFERENCES,
AND RELATIVE RIGHTS,
QUALIFICATIONS, LIMITATIONS AND
RESTRICTIONS
OF THE
SERIES A PREFERRED STOCK
OF
COBBLESTONE GOLF GROUP, INC.
---------------
Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
---------------
COBBLESTONE GOLF GROUP, INC. (the "Corporation"), a corporation
organized and existing under and by virtue of the provisions of the General
Corporation Law of the State of Delaware (the "DGCL"), certifies as follows:
FIRST: The Certification of Incorporation of the Corporation, as
amended, authorizes the issuance of 450,000 shares of Preferred Stock, par value
$.01 per share (the "Preferred Stock"), and, further, authorizes the Board of
Directors of the Corporation, by resolution or resolutions, at any time and from
time to time to divide and establish any or all of the unissued shares of
Preferred Stock not then allocated to any series of Preferred Stock into one or
more series and, without limiting the generality of the foregoing, to fix and
determine the designation of each such share, the number of shares which shall
constitute such series and certain powers, preferences and relative
participating, optional or other special rights and qualifications, limitations
and restrictions and voting rights of the shares of each series so established.
SECOND: By unanimous written consent of the Board of Directors of the
Corporation, dated October 31, 1992, the following resolutions were adopted
authorizing the creation and issuance of a series of said Preferred Stock to be
known Series A Preferred Stock.
RESOLVED: The Board of Directors of the Corporation hereby authorizes
and fixes the number, designations, preferences, rights, voting rights and
limitations of the series of Preferred Stock on the terms and with the
provisions herein set forth:
<PAGE>
1. Designation. A series of the Preferred Stock of the Corporation is
-----------
hereby designated as "Series A Preferred Stock" (hereinafter called the "Series
A Preferred Stock") consisting initially of 400,000 shares. Shares of the Series
A Preferred Stock shall rank prior to the Corporation's Common Stock, par value
$.01 per share, upon liquidation, dissolution, winding-up or otherwise. Unless
specifically designated as junior to ("Junior Stock"), the Series A Preferred
Stock with respect to the payment of dividends or upon liquidation, dissolution,
winding-up or otherwise, all other series of Preferred Stock and other classes
of preferred stock of the Corporation shall rank on parity ("Parity Stock") with
the Series A Preferred Stock with respect thereto.
2. Dividends. Except as otherwise set forth in this paragraph 2 the
---------
holders of the shares of Series A Preferred Stock shall not be entitled to
receive dividends or other distributions other than such dividends or other
distributions as are declared by the Board of Directors of the Company. Each
such dividend shall be paid to the holders of record of the Series A Preferred
Stock as they shall appear on the stock register of the Corporation on such
record date, not exceeding 45 days nor less than 10 days preceding a dividend
payment date, as shall be fixed by the Board of Directors of the Corporation or
a duly authorized committee thereof.
3. Redemption.
----------
(a) Optional Redemption. The Series A Preferred Stock may be
-------------------
redeemed, in whole or in part, at any time at the election of the Corporation by
resolution of its Board of Directors, on notice as set forth in subparagraph
3(b), below, at the redemption price of $100.00 per share of Series A Preferred
Stock (the "Redemption Price").
In the event that at any time less than all of the Series A Preferred
Stock outstanding is to be redeemed, the shares to be redeemed will be selected
by lot or pro rata, except that if the redemption is pro rata, the Corporation
may redeem all shares of Series A Preferred Stock held by all holders of 100 or
fewer shares as may be specified by the Corporation.
(b) Mandatory Redemption. Upon the sale of the Corporation, whether
--------------------
such sale is effected by the consolidation or merger of the Corporation with or
into another corporation or corporations, the sale of all or substantially all
of the Corporation's assets, or the sale or exchange of stock representing at
least eighty percent (80%) of the voting power of the stock of the Corporation,
in terms of number of votes for the election of directors, the Corporation, if
permitted by law and under the Corporation's agreements, shall redeem all
remaining outstanding shares of the Series A Preferred Stock at a redemption
price per share equal to the Redemption Price.
2
<PAGE>
(c) Notice of Redemption. Notice of any redemption pursuant to this
--------------------
paragraph 3 shall be mailed, postage prepaid, at least 15 days but not more than
60 days prior to said redemption date to each holder of record of the Series A
Preferred Stock to be redeemed at its address as the same shall appear on the
stock register of the Corporation. Each such notice shall state: (i) the date
fixed for such redemption, (ii) the place or places where certificates for such
shares of Series A Preferred Stock are to be surrendered for payment and (iii)
the Redemption Price. If less than all the shares of the Series A Preferred
Stock owned by such holder are then to be redeemed, such notice shall also
specify the number of shares thereof which are to be redeemed and the numbers of
the certificates representing such shares.
If such notice of redemption shall have been so mailed and if prior to
the date of redemption specified in such notice all said funds necessary for
such redemption shall have been irrevocably deposited in trust, for the account
of the holders of the shares of the Series A Preferred Stock to be redeemed (and
so as to be and continue to be available therefor), with a bank or trust company
named in such notice doing business in Los Angeles, California and having
capital surplus and undivided profits of at least $50,000,000, thereupon, and
without awaiting the redemption date, all shares of the Series A Preferred Stock
with respect to which such notice shall have been so mailed and such deposit
shall have been so made, shall, notwithstanding that any certificate for shares
of Series A Preferred Stock shall not have been surrendered for cancellation, be
deemed to be no longer outstanding and all rights with respect to such shares of
the Series A Preferred Stock shall forthwith upon such deposit in trust cease
and terminate, except only the right of the holders thereof on or after the
redemption date to receive from such deposit the amount payable upon the
redemption, but without interest. In case the holders of shares of the Series A
Preferred Stock which shall have been called for redemption shall not within two
years (or any longer period if required by law) after the redemption date claim
any amount so deposited in trust for the redemption of such shares, such bank or
trust company shall, if permitted by applicable law, pay over to the Corporation
any such unclaimed amount so deposited with it, and shall thereupon be relieved
of all responsibility in respect thereof, and thereafter the holders of such
shares shall, subject to applicable escheat laws, look only to the Corporation
for payment of the redemption price thereof, but without interest.
(d) Status of Shares. Shares of Series A Preferred Stock redeemed,
----------------
purchased or otherwise acquired for value by the Corporation shall, after such
acquisition, have the status of authorized and unissued shares of Preferred
Stock and may be reissued by the Corporation at any time as shares of any series
of Preferred Stock, other than shares of Series A Preferred Stock.
3
<PAGE>
4. Priority on Redemption. The Corporation shall not, directly or
----------------------
indirectly, redeem or purchase or otherwise acquire for value any Junior Stock
(except for Common Stock pursuant to the provisions of that certain Stock
Purchase and Stockholders Agreement dated as of September 30, 1992 among the
Corporation and the Stockholders named therein) or Parity Stock unless, at the
time of making such redemption, purchase or other acquisition the Corporation
shall have redeemed, or shall contemporaneously redeem, all of the then
outstanding shares of Series A Preferred Stock at the applicable redemption
price (or shall have irrevocably committed to redeem all of the then outstanding
shares of Series A Preferred Stock and have set aside a sum sufficient for the
payment thereof at the applicable Redemption Price on the Date of such
subsequent redemption).
5. Liquidation Preference.
----------------------
(a) In the event of any liquidation, dissolution or winding up of the
affairs of the Corporation, whether voluntary or involuntary, after payment or
provision for payment of the debts and other liabilities of the Corporation, the
holders of shares of the Series A Preferred Stock shall be entitled to receive
for each share of Series A Preferred Stock then held, out of the assets of the
Corporation, whether such assets are capital or surplus and whether or not any
dividends as such are declared, the applicable Redemption Price on the date
fixed for distribution, and no more, before any distribution shall be made to
the holders of the Common Stock or Junior Stock with respect to the distribution
of assets.
If, upon any such liquidation, dissolution or other winding up of the
affairs of the Corporation, the assets of the Corporation distributable among
the holders of all outstanding shares of the Series A Preferred Stock and of any
Parity Stock shall be insufficient to permit the payment in full to such holders
of the preferential amounts to which they are entitled, then the entire assets
of the Corporation remaining after the payment or provision for payment of the
debts and other liabilities of the Corporation shall be distributed among the
holders of the Series A Preferred Stock and of any Parity Stock ratably in
proportion to the full amounts to which they would otherwise be respectively
entitled.
(b) Written notice of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation, stating a payment
date and the place where the distributive amounts shall be payable, shall be
given by mail, postage prepaid, not less than 30 days prior to the payment date
stated therein, to the holders of record of the Series A Preferred Stock at
their respective addresses as the same shall appear on the books of the
Corporation.
(c) No payment on account of such liquidation, dissolution or winding
up of the affairs of the Corporation shall
4
<PAGE>
be made to the holders of any Parity Stock, unless there shall likewise be paid
at the same time to the holders of the Series A Preferred Stock like
proportionate distributive amounts, ratably, in proportion to the full
distributive amounts to which they and the holders of such Parity Stock are
respectively entitled with respect to such preferential distribution.
6. Voting Rights. Except as otherwise required by law, the holders
-------------
of the Series A Preferred Stock shall be entitled to vote along with the Common
Stock (and not as a separate class) on all matters and shall be entitled to one
vote per share of Series A Preferred Stock.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by Frederick J. Warren, its Chairman of the Board, and attested by
William H. Matthes, its Assistant Secretary, this 14th day of October, 1992.
Attest:
/s/ William M. Matthes /s/ Frederick J. Warren
- ------------------------- ---------------------------
Assistant Secretary Chairman of the Board
6
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
THE STICKS GROUP, INC.
THE STICKS GROUP, INC., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY:
FIRST: That, by written consent of the Board of Directors of the
Corporation as of October 13, 1992, resolutions were duly adopted setting forth
proposed amendments to the Certificate of Incorporation of the Corporation,
declaring said amendments to be advisable and directing its officers to submit
said amendments to the sole stockholder of the Corporation for consideration
thereof. The resolutions setting forth the proposed amendments are as follows:
RESOLVED, that Article 1 of the Corporation's Certificate of
Incorporation be amended to read as follows:
"1. The name of the corporation is:
Cobblestone Golf Group, Inc."
RESOLVED FURTHER, that Article 4 of the Corporation's Certificate
of Incorporation be amended to read as follows:
"4. The total number of shares of all classes of stock which the
Corporation shall have authority to issue is Six Hundred Fifty Thousand
(650,000), consisting of Two Hundred Thousand (200,000) shares of
Common Stock, par value $.01 per share,and Four Hundred
<PAGE>
Fifty Thousand (450,000) shares of Preferred Stock, par value
$.01 per share.
The Preferred Stock may be divided into such number of
series as the Board of Directors may determine. The Board of
Directors is authorized to determine and alter the rights,
preferences, privileges and restrictions (including without
limitation voting rights) granted to and imposed upon the
Preferred Stock or any series thereof with respect to any
wholly unissued class or series of Preferred Stock, and to
fix the number of shares of any series of Preferred Stock and
the designation of any such series of Preferred Stock. The Board
of Directors, within the limits and restrictions stated in any
resolution or resolutions of the Board of Directors originally
fixing the number of shares constituting any series, may
increase or decrease (but not below the number of any series
then outstanding) the number of shares of any series subsequent
to the issue of shares of that series."
SECOND: That, thereafter, by written consent of the holder of all of the
issued and outstanding shares of Common Stock of the Corporation, the necessary
number of shares required by statute were voted in favor of the amendments. No
shares of Preferred Stock have been issued.
THIRD: That said amendments were duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
2
<PAGE>
IN WITNESS WHEREOF, THE STICKS GROUP, INC. has caused this certificate to
be signed by Frederick J. Warren, its Chairman of the Board, and attested by
William M. Matthes, its Assistant Secretary, this 13th day of October, 1992.
THE STICKS GROUP, INC.
By: /s/ Frederick J. Warren
-------------------------
Frederick J. Warren,
Chairman of the Board
ATTEST:
/s/ William M. Matthes
- ----------------------
William M. Matthes,
Assistant Secretary
3
<PAGE>
CERTIFICATE OF INCORPORATION
OF
THE STICKS GROUP, INC.
1. The name of the corporation is:
The Sticks Group, Inc.
2. The address of its registered office in the State of Delaware is
32 Loockerman Square, Suite L-100, in the City of Dover, County of Kent. The
name of its registered agent at such address is the Prentice-Hall Corporation
System, Inc.
3. The nature of the business or purposes to be conducted or promoted
is to engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
4. The total number of shares of all classes of stock which the
Corporation shall have authority to issue is Six Hundred Fifty Thousand
(650,000), consisting of Two Hundred Thousand (200,000) shares of common stock,
par value $.01 per share, and Four Hundred Fifty Thousand (450,000) shares of
Preferred Stock, par value $1.00 per share.
The Preferred Stock may be divided into such number of series as the
Board of Directors may determine. The Board of Directors is authorized to
determine and alter the rights, preferences, privileges and restrictions
(including without limitation voting rights) granted to and imposed upon the
Preferred Stock or any series thereof with respect to any wholly unissued class
or series of Preferred Stock, and to fix the
<PAGE>
number of shares of any series of Preferred Stock and the designation of any
such series of Preferred Stock. The Board of Directors, within the limits and
restrictions stated in any resolution or resolutions of the Board of Directors
originally fixing the number of shares constituting any series, may increase or
decrease (but not below the number of any series then outstanding) the number of
shares of any series subsequent to the issue of shares of that series.
5. The name and mailing address of the incorporator is:
Victoria C. Phelps
Latham & Watkins
633 West Fifth Street
Suite 4000
Los Angeles, California 90071
6. In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to adopt, amend or
repeal the bylaws of the corporation.
7. Election of directors need not be by written ballot unless the
bylaws of the corporation shall so provide.
8. No director of this corporation shall be personally liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of the law, (iii) under Section 174 of the General Corporation Law of
Delaware, or (iv) for any
2
<PAGE>
transaction from which the director derived an improper personal benefit.
I, THE UNDERSIGNED, being the sole incorporator hereinbefore named,
for the purpose of forming a corporation pursuant to the General Corporation Law
of the State of Delaware, do make this certificate, herein declaring and
certifying that this is my act and deed and the facts herein stated are true,
and accordingly have hereunto set my hand this 10th day of August, 1992.
/s/ Victoria C. Phelps
-------------------------------
Victoria C. Phelps
3
<PAGE>
EXHIBIT 3.2
BYLAWS
OF
THE STICKS GROUP, INC.
ARTICLE I
OFFICES
-------
Section 1. The registered office shall be in the City of Dover,
County of Kent, State of Delaware.
Section 2. The corporation may also have offices at such other places
both within and without the State of Delaware as the Board of Directors may from
time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
------------------------
Section 1. Meetings of stockholders shall be held at any place within
or outside the State of Delaware designated by the Board of Directors. In the
absence of any such designation, stockholders' meetings shall be held at the
principal executive office of the corporation.
Section 2. The annual meeting of stockholders shall be held each year
on a date and a time designated by the Board of Directors. At each annual
meeting directors shall be elected and any other proper business may be
transacted.
Section 3. A majority of the stock issued and outstanding and
entitled to vote at any meeting of stockholders, the holders of which are
present in person or represented by proxy, shall constitute a quorum for the
transaction of business except as otherwise provided by law, by the Certificate
of Incorporation, or by these Bylaws. A quorum, once established, shall not be
broken by the withdrawal of enough votes to leave less than a quorum and the
votes present may continue to transact business until adjournment. If, however,
such quorum shall not be present or represented at any meeting of the
stockholders, a majority of the voting stock represented in person or by proxy
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified. If the adjournment is for more than thirty days, or if
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote thereat.
Section 4. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless
<PAGE>
the question is one upon which by express provision of the statutes, or the
Certificate of Incorporation, or these Bylaws, a different vote is required in
which case such express provision shall govern and control the decision of such
question.
Section 5. At each meeting of the stockholders, each stockholder
having the right to vote may vote in person or may authorize another person or
persons to act for him by proxy appointed by an instrument in writing subscribed
by such stockholder and bearing a date not more than three years prior to said
meeting, unless said instrument provides for a longer period. All proxies must
be filed with the Secretary of the corporation at the beginning of each meeting
in order to be counted in any vote at the meeting. Each stockholder shall have
one vote for each share of stock having voting power, registered in his name on
the books of the corporation on the record date set by the Board of Directors as
provided in Article V, Section 6 hereof. All elections shall be had and all
questions decided by a plurality vote.
Section 6. Special meetings of the stockholders, for any purpose, or
purposes, unless otherwise prescribed by statute or by the Certificate of
Incorporation, may be called by the President and shall be called by the
President or the Secretary at the request in writing of a majority of the Board
of Directors, or at the request in writing of stockholders owning a majority in
amount of the entire capital stock of the corporation issued and outstanding,
and entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 7. Whenever stockholders are required or permitted to take
any action at a meeting, a written notice of the meeting shall be given which
notice shall state the place, date and hour of the meeting, and, in the case of
a special meeting, the purpose or purposes for which the meeting is called. The
written notice of any meeting shall be given to each stockholder entitled to
vote at such meeting not less than ten nor more than sixty days before the date
of the meeting. If mailed, notice is given when deposited in the United States
mail, postage prepaid, directed to the stockholder at his address as it appears
on the records of the corporation.
Section 8. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where
2
<PAGE>
the meeting is to be held. The list shall also be produced and kept at the time
and place of the meeting during the whole time thereof, and may be inspected by
any stockholder who is present.
Section 9. Unless otherwise provided in the Certificate of
Incorporation, any action required to be taken at any annual or special meeting
of stockholders of the corporation, or any action which may be taken at any
annual or special meeting of such stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted and shall be delivered to the corporation by delivery to
its registered office in Delaware, its principal place of business, or to an
officer or agent of the corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Every written consent
shall bear the date of signature of each stockholder who signs the consent and
no written consent shall be effective to take the corporate action referred to
therein unless, within sixty (60) days of the earliest dated consent delivered
in the manner required by this Section 9 to the corporation, written consents
signed by a sufficient number of holders to take action are delivered to the
corporation by delivery to its registered office in Delaware, its principal
place of business or to an officer or agent of the corporation having custody of
the book in which proceedings of meetings of stockholders are recorded. Delivery
made to a corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested. Prompt notice of the taking of the
corporate action without a meeting by less than unanimous written consent shall
be given to those stockholders who have not consented in writing.
ARTICLE III
DIRECTORS
---------
Section 1. The number of directors which shall constitute the whole
Board shall be not less than three (3) nor more than nine (9). The first Board
shall consist of three (3). The directors need not be stockholders. The
directors shall be elected at the annual meeting of the stockholders, except as
provided in Section 2 of this Article, and each director elected shall hold
office until his successor is elected and qualified; provided, however, that
unless otherwise restricted by the Certificate of Incorporation or by law, any
director or the entire Board of Directors may be removed, either with or without
cause, from the Board of Directors at any meeting of stockholders by a majority
of the stock represented and entitled to vote thereat.
Section 2. Vacancies on the Board of Directors by reason of death,
resignation, retirement, disqualification, removal from office, or otherwise,
and newly created directorships resulting from any increase in the authorized
number of
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<PAGE>
directors may be filled by a majority of the directors then in office, although
less than a quorum, or by a sole remaining director. The directors so chosen
shall hold office until the next annual election of directors and until their
successors are duly elected and shall qualify, unless sooner displaced. If there
are no directors in office, then an election of directors may be held in the
manner provided by statute. If, at the time of filling any vacancy or any newly
created directorship, the directors then in office shall constitute less than a
majority of the whole Board (as constituted immediately prior to any such
increase), the Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent of the total number of the shares at
the time outstanding having the right to vote for such directors, summarily
order an election to be held to fill any such vacancies or newly created
directorships, or to replace the directors chosen by the directors then in
office.
Section 3. The property and business of the corporation shall be
managed by or under the direction of its Board of Directors. In addition to the
powers and authorities by these Bylaws expressly conferred upon them, the Board
may exercise all such powers of the corporation and do all such lawful acts and
things as are not by statute or by the Certificate of Incorporation or by these
Bylaws directed or required to be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
----------------------------------
Section 4. The directors may hold their meetings and have one or more
offices, and keep the books of the corporation outside of the State of Delaware.
Section 5. Regular meetings of the Board of Directors may be held
without notice at such time and place as shall from time to time be determined
by the Board.
Section 6. Special meetings of the Board of Directors may be called
by the President on forty-eight hours' notice to each director, either
personally or by mail or by telegram; special meetings shall be called by the
President or the Secretary in like manner and on like notice on the written
request of two directors unless the Board consists of only one director; in
which case special meetings shall be called by the President or Secretary in
like manner or on like notice on the written request of the sole director.
Section 7. At all meetings of the Board of Directors a majority of
the authorized number of directors shall be necessary and sufficient to
constitute a quorum for the transaction of business, and the vote of a majority
of the directors present at any meeting at which there is a quorum, shall be the
act of the Board of Directors, except as may be otherwise specifically provided
by statute, by the Certificate of Incorporation or by these Bylaws. If a quorum
shall not be present at any meeting of the Board of Directors the directors
present thereat may adjourn the meeting from time to time, without notice
4
<PAGE>
other than announcement at the meeting, until a quorum shall be present. If only
one director is authorized, such sole director shall constitute a quorum.
Section 8. Unless otherwise restricted by the Certificate of
Incorporation or these Bylaws, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting, if all members of the Board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board or committee.
Section 9. Unless otherwise restricted by the Certificate of
Incorporation or these Bylaws, members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in a meeting of
the Board of Directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at such meeting.
COMMITTEES OF DIRECTORS
-----------------------
Section 10. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one or more committees, each such
committee to consist of one or more of the directors of the corporation. The
Board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. In the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member. Any such committee, to the extent
provided in the resolution of the Board of Directors, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the corporation, and may authorize the
seal of the corporation to be affixed to all papers which may require it; but no
such committee shall have the power or authority in reference to amending the
Certificate of Incorporation, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all or
substantially all of the corporation's property and assets, recommending to the
stockholders a dissolution of the corporation or a revocation of a dissolution,
or amending the Bylaws of the corporation; and, unless the resolution or the
Certificate of Incorporation expressly so provide, no such committee shall have
the power or authority to declare a dividend or to authorize the issuance of
stock.
Section 11. Each committee shall keep regular minutes of its meetings
and report the same to the Board of Directors when required.
5
<PAGE>
COMPENSATION OF DIRECTORS
-------------------------
Section 12. Unless otherwise restricted by the Certificate of
Incorporation or these Bylaws, the Board of Directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the Board of Directors and may be paid
a fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
INDEMNIFICATION
---------------
Section 13.(a) The corporation shall indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) The corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment in
its favor by reason of the fact that he is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation and except that no such indemnification shall
be made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the extent
6
<PAGE>
that the Court of Chancery of Delaware or the court in which such action or suit
was brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which such Court
of Chancery or such other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of the
corporation shall be successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in paragraphs (a) and (b), or in defense
of any claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
(d) Any indemnification under paragraphs (a) and (b) (unless ordered
by a court) shall be made by the corporation only as authorized in the specific
case upon a determination that indemnification of the director, officer,
employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in paragraphs (a) and (b). Such
determination shall be made (1) by the Board of Directors by a majority vote of
a quorum consisting of directors who were not parties to such action, suit or
proceeding, or (2) if such a quorum is not obtainable, or, even if obtainable a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, or (3) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the corporation as authorized in this Section 13. Such expenses (including
attorneys' fees) incurred by other employees and agents may be so paid upon such
terms and conditions, if any, as the Board of Directors deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other paragraphs of this Section 13 shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
(g) The Board of Directors may authorize, by a vote of a majority of
a quorum of the Board of Directors, the corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him and
7
<PAGE>
incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under the provisions of this Section 13.
(h) For the purposes of this Section 13, references to "the
corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, and employees
or agents, so that any person who is or was a director, officer, employee or
agent of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under the provisions of this Section with
respect to the resulting or surviving corporation as he would have with respect
to such constituent corporation if its separate existence had continued.
(i) For purposes of this section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the corporation" shall include service
as a director, officer, employee or agent of the corporation which imposes
duties on, or involves services by, such director, officer, employee or agent
with respect to an employee benefit plan, its participants or beneficiaries; and
a person who acted in good faith and in a manner he reasonably believed to be in
the interest of the participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in a manner "not opposed to the best interests of
the corporation" as referred to in this section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this Section 13 shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
ARTICLE IV
OFFICERS
--------
Section 1. The officers of this corporation shall be chosen by the
Board of Directors and shall include a Chairman or Vice-Chairman of the Board of
Directors or a President and a Secretary. The corporation may also have at the
discretion of the Board of Directors such other officers as are desired,
including a Chief Executive Officer, a Treasurer, one or more Vice Presidents,
one or more Assistant Secretaries and Assistant Treasurers, and such other
officers as may be appointed in accordance with the provisions of Section 3
hereof. In the event there are two or more Vice Presidents, then one or more
may be designated as Executive Vice President, Senior Vice President, or other
similar or dissimilar title. At the time
8
<PAGE>
of the election of officers, the directors may by resolution determine the order
of their rank. Any number of offices may be held by the same person, unless the
Certificate of Incorporation or these Bylaws otherwise provide.
Section 2. The Board of Directors, at its first meeting after each
annual meeting of stockholders, shall choose the officers of the corporation.
Section 3. The Board of Directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the Board.
Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the Board of Directors.
Section 5. The officers of the corporation shall hold office until
their successors are chosen and qualify in their stead. Any officer elected or
appointed by the Board of Directors may be removed at any time by the
affirmative vote of a majority of the Board of Directors. If the office of any
officer or officers becomes vacant for any reason, the vacancy shall be filled
by the Board of Directors.
CHAIRMAN OF THE BOARD
---------------------
Section 6. The Chairman of the Board, if such an officer be elected,
shall, if present, preside at all meetings of the Board of Directors and
exercise and perform such other powers and duties as may be from time to time
assigned to him by the Board of Directors or prescribed by these Bylaws. If
there is no President, the Chairman of the Board shall in addition be the Chief
Executive Officer of the corporation and shall have the powers and duties
prescribed in Section 7 of this Article IV.
PRESIDENT
---------
Section 7. Subject to such supervisory powers, if any, as may be
given by the Board of Directors to the Chairman of the Board, if there be such
an officer, the President shall be the Chief Executive Officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and officers of the
corporation. He shall preside at all meetings of the stockholders and, in the
absence of the Chairman of the Board, or if there be none, at all meetings of
the Board of Directors. He shall be an ex-officio member of all committees and
shall have the general powers and duties of management usually vested in the
office of President and Chief Executive Officer of corporations, and shall have
such other powers and duties as may be prescribed by the Board of Directors or
these Bylaws.
9
<PAGE>
VICE PRESIDENTS
---------------
Section 8. In the absence or disability of the President, the Vice
Presidents in order of their rank as fixed by the Board of Directors, or if not
ranked, the Vice President designated by the Board of Directors, shall perform
all the duties of the President, and when so acting shall have all the powers of
and be subject to all the restrictions upon the President. The Vice Presidents
shall have such other duties as from time to time may be prescribed for them,
respectively, by the Board of Directors.
SECRETARY AND ASSISTANT SECRETARY
---------------------------------
Section 9. The Secretary shall attend all sessions of the Board of
Directors and all meetings of the stockholders and record all votes and the
minutes of all proceedings in a book to be kept for that purpose; and shall
perform like duties for the standing committees when required by the Board of
Directors. He shall give, or cause to be given, notice of all meetings of the
stockholders and of the Board of Directors, and shall perform such other duties
as may be prescribed by the Board of Directors or these Bylaws. He shall keep
in safe custody the seal of the corporation, and when authorized by the Board,
affix the same to any instrument requiring it, and when so affixed it shall be
attested by his signature or by the signature of an Assistant Secretary. The
Board of Directors may give general authority to any other officer to affix the
seal of the corporation and to attest the affixing by his signature.
Section 10. The Assistant Secretary, or if there be more than one,
the Assistant Secretaries in the order determined by the Board of Directors, or
if there be no such determination, the Assistant Secretary designated by the
Board of Directors, shall, in the absence or disability of the Secretary,
perform the duties and exercise the powers of the Secretary and shall perform
such other duties and have such other powers as the Board of Directors may from
time to time prescribe.
TREASURER AND ASSISTANT TREASURER
---------------------------------
Section 11. The Treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all
moneys, and other valuable effects in the name and to the credit of the
corporation, in such depositories as may be designated by the Board of
Directors. He shall disburse the funds of the corporation as may be ordered by
the Board of Directors, taking proper vouchers for such disbursements, and shall
render to the Board of Directors, at its regular meetings, or when the Board of
Directors so requires, an account of all his transactions as Treasurer and of
the financial condition of the corporation. If required by the Board of
Directors, he shall give the corporation a bond, in such sum and with such
surety or sureties as shall be satisfactory to the Board of Directors, for the
faithful performance of the duties of his office and for the restoration to the
10
<PAGE>
corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
Section 12. The Assistant Treasurer, or if there shall be more than
one, the Assistant Treasurers in the order determined by the Board of Directors,
or if there be no such determination, the Assistant Treasurer designated by the
Board of Directors, shall, in the absence or disability of the Treasurer,
perform the duties and exercise the powers of the Treasurer and shall perform
such other duties and have such other powers as the Board of Directors may from
time to time prescribe.
ARTICLE V
CERTIFICATES OF STOCK
---------------------
Section 1. Every holder of stock of the corporation shall be entitled
to have a certificate signed by, or in the name of the corporation by, the
Chairman or Vice Chairman of the Board of Directors, or the President or a Vice
President, and by the Secretary or an Assistant Secretary, or the Treasurer or
an Assistant Treasurer of the corporation, certifying the number of shares
represented by the certificate owned by such stockholder in the corporation.
Section 2. Any or all of the signatures on the certificate may be a
facsimile. In case any officer, transfer agent, or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent, or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer, transfer agent, or registrar at the date of issue.
Section 3. If the corporation shall be authorized to issue more than
one class of stock or more than one series of any class, the powers,
designations, preferences and relative, participating, optional or other special
rights of each class of stock or series thereof and the qualification,
limitations or restrictions of such preferences and/or rights shall be set forth
in full or summarized on the face or back of the certificate which the
corporation shall issue to represent such class or series of stock, provided
that, except as otherwise provided in section 202 of the General Corporation Law
of Delaware, in lieu of the foregoing requirements, there may be set forth on
the face or back of the certificate which the corporation shall issue to
represent such class or series of stock, a statement that the corporation will
furnish without charge to each stockholder who so requests the powers,
designations, preferences and relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
11
<PAGE>
LOST, STOLEN OR DESTROYED CERTIFICATES
--------------------------------------
Section 4. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
and/or to give the corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
TRANSFERS OF STOCK
------------------
Section 5. Upon surrender to the corporation, or the transfer agent
of the corporation, of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation or authority to transfer, it shall be
the duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
FIXING RECORD DATE
------------------
Section 6. In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of the
stockholders, or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix a
record date which shall not be more than sixty nor less than ten days before the
date of such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
REGISTERED STOCKHOLDERS
-----------------------
Section 7. The corporation shall be entitled to treat the holder of
record of any share or shares of stock as the holder in fact thereof and
accordingly shall not be bound to recognize any equitable or other claim or
interest in such share on the part of any other person, whether or not it shall
have express or other notice thereof, save as expressly provided by the laws of
the State of Delaware.
12
<PAGE>
ARTICLE VI
GENERAL PROVISIONS
------------------
DIVIDENDS
---------
Section 1. Dividends upon the capital stock of the corporation,
subject to the provisions of the Certificate of Incorporation, if any, may be
declared by the Board of Directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property, or in shares of the capital
stock, subject to the provisions of the Certificate of Incorporation.
Section 2. Before payment of any dividend there may be set aside out
of any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve fund to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interests of the
corporation, and the directors may abolish any such reserve.
CHECKS
------
Section 3. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers as the Board of
Directors may from time to time designate.
FISCAL YEAR
-----------
Section 4. The fiscal year of the corporation shall be fixed by
resolution of the Board of Directors.
SEAL
----
Section 5. The corporate seal shall have inscribed thereon the name
of the corporation, the year of its organization and the words "Corporate Seal,
Delaware". Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
NOTICES
-------
Section 6. Whenever, under the provisions of the statutes or of the
Certificate of Incorporation or of these Bylaws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegram.
13
<PAGE>
Section 7. Whenever any notice is required to be given under the
provisions of the statutes or of the Certificate of Incorporation or of these
Bylaws, a waiver thereof in writing, signed by the person or persons entitled to
said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ANNUAL STATEMENT
----------------
Section 8. The Board of Directors shall present at each annual
meeting, and at any special meeting of the stockholders when called for by vote
of the stockholders, a full and clear statement of the business and condition of
the corporation.
ARTICLE VII
AMENDMENTS
----------
Section 1. These Bylaws may be altered, amended or repealed or new
Bylaws may be adopted by the stockholders or by the Board of Directors, when
such power is conferred upon the Board of Directors by the Certificate of
Incorporation, at any regular meeting of the stockholders or of the Board of
Directors or at any special meeting of the stockholders or of the Board of
Directors if notice of such alteration, amendment, repeal or adoption of new
Bylaws be contained in the notice of such special meeting. If the power to
adopt, amend or repeal Bylaws is conferred upon the Board of Directors by the
Certificate of Incorporation it shall not divest or limit the power of the
stockholders to adopt, amend or repeal Bylaws.
14
<PAGE>
BYLAWS
OF
THE STICKS GROUP, INC.
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - OFFICES................................................ 1
Section 1. Registered Office................................... 1
Section 2. Other Offices....................................... 1
ARTICLE II - MEETINGS OF STOCKHOLDERS.............................. 1
Section 1. Place of Meetings................................... 1
Section 2. Annual Meeting of Stockholders...................... 1
Section 3. Quorum; Adjourned Meetings and Notice
Thereof........................................ 1
Section 4. Voting.............................................. 2
Section 5. Proxies............................................. 2
Section 6. Special Meetings.................................... 3
Section 7. Notice of Stockholder's Meetings.................... 3
Section 8. Maintenance and Inspection of
Stockholder List............................... 4
Section 9. Stockholder Action by Written Consent
Without a Meeting.............................. 4
ARTICLE III - DIRECTORS............................................ 5
Section 1. The Number of Directors............................. 5
Section 2. Vacancies........................................... 6
Section 3. Powers.............................................. 6
Section 4. Place of Directors' Meetings........................ 7
Section 5. Regular Meetings.................................... 7
Section 6. Special Meetings.................................... 7
Section 7. Quorum.............................................. 7
Section 8. Action Without Meeting.............................. 7
Section 9. Telephonic Meetings................................. 8
Section 10. Committees of Directors............................. 8
Section 11. Minutes of Committee Meetings....................... 9
Section 12. Compensation of Directors........................... 9
Section 13. Indemnification..................................... 9
ARTICLE IV - OFFICERS.............................................. 14
Section 1. Officers............................................ 14
Section 2. Election of Officers................................ 14
Section 3. Subordinate Officers................................ 14
Section 4. Compensation of Officers............................ 14
Section 5. Term of Office; Removal and Vacancies............... 15
Section 6. Chairman of the Board............................... 15
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 7. President........................................... 15
Section 8. Vice President...................................... 16
Section 9. Secretary........................................... 16
Section 10. Assistant Secretaries............................... 17
Section 11. Treasurer........................................... 17
Section 12. Assistant Treasurer................................. 18
ARTICLE V - CERTIFICATES OF STOCK.................................. 18
Section 1. Certificates........................................ 18
Section 2. Signatures on Certificates.......................... 18
Section 3. Statement of Stock Rights,
Preferences, Privileges........................ 18
Section 4. Lost Certificates................................... 19
Section 5. Transfers of Stock.................................. 20
Section 6. Fixing Record Date.................................. 20
Section 7. Registered Stockholders............................. 20
ARTICLE VI - GENERAL PROVISIONS DIVIDENDS.......................... 21
Section 1. Dividends........................................... 21
Section 2. Payment of Dividends; Directors'
Duties......................................... 21
Section 3. Checks.............................................. 21
Section 4. Fiscal Year......................................... 22
Section 5. Corporate Seal...................................... 22
Section 6. Manner of Giving Notice............................. 22
Section 7. Waiver of Notice.................................... 22
Section 8. Annual Statement.................................... 23
ARTICLE VII - AMENDMENTS.......................................... 23
Section 1. Amendment by Directors or
Stockholders................................... 23
</TABLE>
ii
<PAGE>
BYLAWS
OF
THE STICKS GROUP, INC.
<PAGE>
EXHIBIT 3.3
ARTICLES OF INCORPORATION
OF
ESCONDIDO CONSULTING, INC.
ONE: The name of this corporation is:
ESCONDIDO CONSULTING, INC.
TWO: The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of California other than the banking business, the trust company business or
the practice of a profession permitted to be incorporated by the California
Corporations Code.
THREE: The name and address in the State of California of this
corporation's initial agent for service of process is:
James A. Husband, Jr.
15821 Ventura Boulevard
Suite 665
Encino, CA 91436
FOUR: This Corporation is authorized to issue only one class of shares of
stock; the total number of shares which this corporation is authorized to issue
is ten thousand (10,000).
DATED: June 27, 1990
/s/ JAMES A. HUSBAND, JR.
--------------------------------
JAMES A. HUSBAND, JR., Incorporator
I hereby declare that I am the person who executed the foregoing Articles
of Incorporation, and such execution is my act and deed.
/s/ JAMES A. HUSBAND, JR.
--------------------------------
JAMES A. HUSBAND, JR.
<PAGE>
EXHIBIT 3.4
BYLAWS
OF
ESCONDIDO CONSULTING, INC.
CARMEL MOUNTAIN RANCH GOLF CLUB, INC.
OVLC MANAGEMENT CORP.
OVLC FINANCIAL CORP.
OCEAN VISTA LAND COMPANY
GOLF COURSE INNS OF AMERICA, INC.
OCEANSIDE GOLF MANAGEMENT CORP.
C-RHK, INC.
ARTICLE I
OFFICES
Section 1. Principal Offices. The board of directors shall fix the
-----------------
location of the principal executive office of the corporation at any place
within or outside the State of California. If the principal executive office is
located outside this state, and the corporation has one or more business offices
in this state, the board of directors shall likewise fix and designate a
principal business office in the State of California.
Section 2. Other Offices. The board of directors or the officers
-------------
(subject to ratification by the board of directors) may at any time establish
branch or subordinate offices at any place or places.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. Place of Meetings. Meetings shareholders shall be held at
-----------------
any place within or outside the State of California designated by the board of
directors. In the absence of any such designation, shareholders' meetings shall
be held at the principal executive office of the corporation.
Section 2. Annual Meeting of Shareholders. The annual meeting of
------------------------------
shareholders shall be held each year on a date and at a time designated by the
board of directors. At each annual meeting, directors shall be elected and any
other proper business may be transacted.
Section 3. Special Meetings. A special meeting of the shareholders
----------------
may be called at any time by the board of directors, the president, or one or
more shareholders holding shares in the aggregate entitled to cast not less than
10% of the votes at any such meeting.
If a special meeting is called by any person or persons other than the
board of directors, the request shall be in writing, specifying the time of such
meeting and the general nature of the business proposed to be transacted, and
shall be delivered personally or sent by registered mail or by telegraphic or
other facsimile transmission to the chairman of the board, the
<PAGE>
president, any vice president or the secretary of the corporation. In
accordance with the provisions of Sections 4 and 5 of this Article II, the
officer receiving such request forthwith shall cause notice to be given to the
shareholders entitled to vote that a meeting will be held at the time requested
by the person or persons calling the meeting, not less than thirty-five (35) nor
more than sixty (60) days after the receipt of the request. If the notice is
not given within twenty (20) days after receipt of the request, the person or
persons requesting the meeting may give the notice. Nothing contained in this
paragraph or this Section 3 shall be construed as limiting, fixing or affecting
the time when a meeting of shareholders called by action of the board of
directors may be held.
Section 4. Notice of Shareholders' Meetings. All notices of meetings
--------------------------------
of shareholders shall be sent or otherwise given in accordance with Section 5 of
this Article II not less than ten (10) nor more than sixty (60) days before the
date of the meeting being noticed. The notice shall specify the place, date and
hour of the meeting and (i) in the case of a special meeting, the general nature
of the business to be transacted, or (ii) in the case of the annual meeting,
those matters which the board of directors, at the time of giving the notice,
intends to present for action by the shareholders. The notice of any meeting at
which directors are to be elected shall include the name of any nominee or
nominees whom, at the time of the notice, management intends to present for
election.
If action is proposed to be taken at any meeting for approval of (i) a
contract or transaction in which a director has a direct or indirect financial
interest, pursuant to Section 310 of the Corporations Code of California (the
"Code"), (ii) an amendment of the articles of incorporation, pursuant to Section
902 of the Code (iii) a reorganization of the corporation, pursuant to Section
1201 of the Code, (iv) a voluntary dissolution of the corporation, pursuant to
Section 1900 of the Code, or (v) a distribution in dissolution other than in
accordance with the rights of outstanding preferred shares pursuant to Section
2007 of the Code, the notice shall also state the general nature of such
proposal.
Section 5. Manner Of Giving Notice; Affidavit Of Notice. Notice of
--------------------------------------------
any meeting of shareholders shall be given either personally or by first-class
mail or telegraphic or other written communication, charges prepaid, addressed
to the shareholder at the address of such shareholder appearing on the books of
the corporation or given by the shareholder to the corporation for the purpose
of notice. If no such address is given or appears on the corporation's books,
notice shall be deemed to have been given if sent to that shareholder at the
corporation's principal executive office by first-class mail or telegraphic or
other written communication, or if published, at least once in a newspaper of
general circulation in the county where such office is located. Notice shall be
deemed to have been given at the time when delivered personally or deposited in
the mail or sent by telegram or other means of written communication.
If any notice addressed to a shareholder at the address of such
shareholder appearing on the books of the corporation is returned to the
corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice to the shareholder
at such address, all future notices or reports shall be deemed to have been duly
given without further mailing if the same shall be available to the shareholder
upon written demand of the shareholder at the principal executive office of the
corporation for a period of one year from the date of the giving of such notice.
Page 2 of 16
<PAGE>
An affidavit of the mailing or other means of giving any notice of any
shareholders' meeting shall be executed by the secretary, assistant secretary or
any transfer agent of the corporation giving such notice, and shall be filed and
maintained in the minute book of the corporation.
Section 6. Quorum. The presence in person or by proxy of the holders
------
of a majority of the shares entitled to vote at any meeting of shareholders
shall constitute a quorum for the transaction of business. The shareholders
present at a duly called or held meeting at which a quorum is present may
continue to do business until adjournment, notwithstanding the withdrawal of
enough shareholders to leave less than a quorum, if any action taken (other than
adjournment) is approved by at least a majority of the shares required to
constitute a quorum.
Section 7. Adjourned Meeting And Notice Thereof. Any shareholders'
------------------------------------
meeting, annual or special, whether or not a quorum is present, may be adjourned
from time to time by the vote of the majority of the shares represented at such
meeting, either in person or by proxy; but in the absence of a quorum, no other
business may be transacted at such meeting, except as provided in Section 6 of
this Article II.
When any meeting of shareholders, either annual or special, is
adjourned to another time or place, notice need not be given of the adjourned
meeting if the time and place thereof are announced at the meeting at which the
adjournment is taken, unless a new record date for the adjourned meeting is
fixed, or unless the adjournment is for more than forty-five (45) days from the
date set for the original meeting, in which case the board of directors shall
set a new record date. Notice of any such adjourned meeting, if required, shall
be given to each shareholder of record entitled to vote at the adjourned meeting
in accordance with the provisions of Sections 4 and 5 of this Article II. At
any adjourned meeting, the corporation may transact any business which might
have been transacted at the original meeting.
Section 8. Voting. The shareholders entitled to vote at any meeting
------
of shareholders shall be determined in accordance with the provisions of Section
11 of this Article II, subject to the provisions of Sections 702 to 704,
inclusive, of the Code (relating to voting shares held by a fiduciary, in the
name of a corporation or in joint ownership). The shareholders' vote may be by
voice vote or by ballot; provided, however, that any election for directors must
be by ballot upon demand by any shareholder before the voting has begun. On any
matter other than election of directors, any shareholder may vote part of the
shares in favor of the proposal and refrain from voting the remaining shares or
vote them against the proposal; however, if the shareholder fails to specify the
number of shares which the shareholder is voting affirmatively, it will be
conclusively presumed that the shareholder's approving vote is with respect to
all shares the shareholder is entitled to vote. If a quorum is present, the
affirmative vote of the majority of the shares represented at the meeting and
entitled to vote on any matter (other than the election of directors) shall be
the act of the shareholders, unless the vote of a greater number or voting by
classes is required by the California General Corporation Law or the articles of
incorporation.
At a shareholders' meeting at which directors are to be elected, no
shareholder shall be entitled to cumulate votes (i.e., cast for any one or more
candidates a number of votes greater than the number of the shareholder's
shares) unless such candidate or candidates' names have been placed in
nomination prior to commencement of the voting and a shareholder has given
notice prior to commencement of the voting of the shareholder's intention to
cumulate votes. If
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<PAGE>
any shareholder has given such notice, then every shareholder entitled to vote
may cumulate votes for candidates in nomination and give one candidate a number
of votes equal to the number of directors to be elected multiplied by the number
of votes to which such shareholder's shares are entitled, or distribute the
shareholder's votes on the same principle among any or all of the candidates, as
the shareholder thinks fit. The candidates receiving the highest number of
votes, up to the number of directors to be elected, shall be elected.
Section 9. Waiver Of Notice Or Consent By Absent Shareholders. The
--------------------------------------------------
transactions of any meeting of shareholders, either annual or special, however
called and noticed, and wherever held, shall be as valid as though had at a
meeting duly held after regular call and notice, if a quorum be present either
in person or by proxy, and if, either before or after the meeting, each person
entitled to vote, not present in person or by proxy, signs a written waiver of
notice or a consent to the holding of the meeting, or an approval of the minutes
thereof. The waiver of notice or consent need not specify either the business
to be transacted or the purpose of any annual or special meeting of
shareholders, except that if action is taken or proposed to be taken for
approval of any of those matters specified in the second paragraph of Section 4
of this Article II, the waiver of notice or consent shall state the general
nature of such proposal. All such waivers, consents or approvals shall be filed
with the corporate records or made a part of the minutes of the meeting.
Attendance of a person at a meeting shall also constitute a waiver of
notice of such meeting, except when the person objects, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened, and except that attendance at a meeting is not a waiver of
any right to object to the consideration of matters not included in the notice
of the meeting if such objection is expressly made at the meeting.
Section 10. Shareholder Action By Written Consent Without A Meeting.
-------------------------------------------------------
Any action which may be taken at any annual or special meeting of shareholders
may be taken without a meeting and without prior notice, if a consent in
writing, setting forth the action so taken, is signed by the holders of
outstanding shares having not less than the minimum number of votes that would
be necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted.
In the case of election of directors, such consent shall be effective
only if signed by the holders of all outstanding shares entitled to vote for the
election of directors; provided, however, that a director may be elected at any
time to fill a vacancy on the board of directors (that has not been filled by
the directors) by the written consent of the holders of a majority of the
outstanding shares entitled to vote for the election of directors.
All such consents shall be filed with the secretary of the corporation
and shall be maintained in the corporate records. Any shareholder giving a
written consent, or the shareholder's proxy holders, or a transferee of the
shares or a personal representative of the shareholder or their respective proxy
holder, may revoke the consent by a writing received by the secretary of the
corporation prior to the time that written consents of the number of shares
required to authorize the proposed action have been filed with the secretary.
If the consents of all shareholders entitled to vote have not been
solicited in writing, and if the unanimous written consent of all such
shareholders shall not have been received, the
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secretary shall give prompt notice of any corporate action approved by the
shareholders without a meeting. Such notice shall be given in the manner
specified in Section 5 of this Article II.
In the case of approval of (i) contracts or transactions in which a
director has a direct or indirect financial interest, pursuant to Section 310 of
the Code, (ii) indemnification of agents of the corporation, pursuant to Section
317 of the Code, (iii) a reorganization of the corporation, pursuant to Section
1201 of the Code, or (iv) a distribution in dissolution other than in accordance
with the rights of outstanding preferred shares pursuant to Section 2007 of the
Code, the notice shall be given at least ten (10) days before the consummation
of any action authorized by any such approval.
Section 11. Record Date For Shareholder Notice, Voting, And Giving
------------------------------------------------------
Consents. For purposes of determining the shareholders entitled to notice of
- --------
any meeting or to vote or entitled to give consent to corporate action without a
meeting, the board of directors may fix, in advance, a record date, which shall
not be more than sixty (60) days nor less than ten (10) days prior to the date
of any such meeting nor more than sixty (60) days prior to such action without a
meeting; and in this event, only shareholders of record at the close of business
on the date so fixed are entitled to notice and to vote or to give consents, as
the case may be, notwithstanding any transfer of any shares on the books of the
corporation after the record date, except as otherwise provided in the
California General Corporation Law.
If the board of directors does not so fix a record date:
(a) The record date for determining shareholders entitled to
notice of or to vote at a meeting of shareholders shall be at the close of
business on the business day next preceding the day on which notice is
given or, if notice is waived, at the close of business on the business day
next preceding the day on which the meeting is held.
(b) The record date for determining shareholders entitled to give
consent to corporate action in writing without a meeting, (i) when no prior
action by the board has been taken, shall be the day on which the first
written consent is given, or (ii) when prior action of the board has been
taken, shall be at the close of business on the day on which the board
adopts the resolution relating thereto, or the sixtieth (60th) day prior to
the date of such other action, whichever is later.
Section 12. Proxies. Every shareholder entitled to vote for
-------
directors or on any other matter shall have the right to do so either in person
or by one or more agents authorized by a written proxy signed by the shareholder
and filed with the secretary of the corporation. A proxy shall be deemed signed
if the shareholder's name is placed on the proxy (whether by manual signature,
typewriting, telegraphic transmission or otherwise) by the shareholder or the
shareholder's attorney in fact. A validly executed proxy which does not state
that it is irrevocable shall continue in full force and effect unless (i)
revoked by the person executing it, prior to the vote pursuant to that proxy, by
a writing delivered to the corporation stating that the proxy is revoked or by a
subsequent proxy executed by, or attendance at the meeting and voting in person
by, the person executing the proxy; or (ii) written notice of the death or
incapacity of the maker of such proxy is received by the corporation before the
vote pursuant to that proxy is counted; provided,
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however, that no such proxy shall be valid after the expiration of eleven (11)
months from the date of such proxy, unless otherwise provided in the proxy. The
revocability of a proxy that states on its face that it is irrevocable shall be
governed by the provisions of Section 705(e) and (f) of the Code.
Section 13. Inspectors Of Election. Before any meeting of
----------------------
shareholders, the board of directors may appoint any person other than nominees
for office to act as inspectors of election at the meeting or its adjournment.
If no inspectors of election are so appointed, the chairman of the meeting may,
and on the request of any shareholder or a shareholder's proxy shall, appoint
inspectors of election at the meeting. The number of inspectors shall be either
one (l) or three (3). If inspectors are appointed at a meeting on the request
of one or more shareholders or proxies, the holders of a majority of shares or
their proxies present at the meeting shall determine whether one (l) or three
(3) inspectors are to be appointed. If any person appointed as inspector fails
to appear or fails or refuses to act, the chairman of the meeting may, and upon
the request of any shareholder or a shareholder's proxy shall, appoint a person
to fill such vacancy.
These inspectors shall:
(a) Determine the number of shares outstanding and the voting
power of each, the shares represented at the meeting, the existence of a
quorum, and the authenticity, validity and effect of proxies;
(b) Receive votes, ballots or consents;
(c) Hear and determine all challenges and questions in any way
arising in connection with the right to vote;
(d) Count and tabulate all votes or consents;
(e) Determine when the polls shall close;
(f) Determine the result; and
(g) Do any other acts that may be proper to conduct the election
or vote with fairness to all shareholders.
ARTICLE III
DIRECTORS
Section 1. Powers. Subject to the provisions of the California
------
General Corporation Law and any limitations in the articles of incorporation and
these bylaws relating to action required to be approved by the shareholders or
by the outstanding shares, the business and affairs of the corporation shall be
managed and all corporate powers shall be exercised by or under the direction of
the board of directors.
Section 2. Number And Qualification Of Directors. The authorized
-------------------------------------
number of directors shall be three (3) until changed by a duly adopted amendment
to the articles of
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<PAGE>
incorporation or by an amendment to this bylaw adopted by the vote or written
consent of holders of a majority of the outstanding shares entitled to vote;
provided, however, that an amendment reducing the number of directors to a
number less than five (5) cannot be adopted if the votes cast against its
adoption at a meeting, or the shares not consenting in the case of action by
written consent, are equal to more than 16-2/3% of the outstanding shares
entitled to vote. The minimum number of authorized directors shall not be less
than three; provided, however, that (a) before shares are issued, the number may
be one or two, (b) so long as the corporation has only one shareholder, the
number may be one or two, and (c) so long as the corporation has only two
shareholders, the number may be two.
Section 3. Election And Term Of Office Of Directors. Directors shall
----------------------------------------
be elected at each annual meeting of the shareholders to hold office until the
next annual meeting. Each director, including a director elected to fill a
vacancy, shall hold office until the expiration of the term for which elected
and until a successor has been elected and qualified.
Section 4. Vacancies. Vacancies in the board of directors may be
---------
filled by a majority of the remaining directors, though less than a quorum, or
by a sole remaining director, except that a vacancy created by the removal of a
director by the vote or written consent of the shareholders or by court order
may be filled only by the vote of a majority of the shares entitled to vote
represented at a duly held meeting at which a quorum is present, or by the
written consent of holders of all outstanding shares entitled to vote. Each
director so elected shall hold office until the next annual meeting of the
shareholders and until a successor has been elected and qualified.
A vacancy or vacancies in the board of directors shall be determined
to exist in the event of the death, resignation or removal of any director, or
if the board of directors by resolution declares vacant the office of a director
who has been declared of unsound mind by an order of court or convicted of a
felony, or if the authorized number of directors is increased, or if the
shareholders fail, at any meeting of shareholders at which any director or
directors are elected, to elect the number of directors to be voted for at that
meeting.
The shareholders may elect a director or directors at any time to fill
any vacancy or vacancies not filled by the directors, but any such election by
written consent, shall require the consent of a majority of the outstanding
shares entitled to vote.
Any director may resign effective upon giving written notice to the
chairman of the board, the president, the secretary or the board of directors.
If the resignation of a director is effective at a future time, the board of
directors may elect a successor to take office when the resignation becomes
effective.
No reduction of the authorized number of directors shall have the
effect of removing any director before that director's term of office expires.
Section 5. Place Of Meetings And Telephonic Meetings. Regular
-----------------------------------------
meetings of the board of directors may be held at any place within or without
the State of California that has been designated from time to time by resolution
of the board. In the absence of such designation, regular meetings shall be
held at the principal executive office of the corporation. Special meetings of
the board shall be held at any place within or without the State of California
that has been designated in the notice of the meeting or, if not stated in the
notice or if there is no notice, at the
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<PAGE>
principal executive office of the corporation. Any meeting, regular or special,
may be held by conference telephone or similar communication equipment, so long
as all directors participating in such meeting can hear one another, and all
such directors shall be deemed to be present in person at such meeting.
Section 6. Annual Meetings. Immediately following each annual
---------------
meeting of shareholders, the board of directors shall hold a regular meeting for
the purpose of organization, any desired election of officers and the
transaction of other business. Notice of this meeting shall not be required.
Section 7. Other Regular Meetings. Other regular meetings of the
----------------------
board of directors shall be held without call at such time as shall from time to
time be fixed by the board of directors. Such regular meetings may be held
without notice.
Section 8. Special Meetings. Special meetings of the board of
----------------
directors for any purpose or purposes may be called at any time by the chairman
of the board or the president or any vice president or the secretary or any two
directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at his or her address as
it is shown upon the records of the corporation. In case the notice is mailed,
it shall be deposited in the United States mail at least four (4) days prior to
the time of the holding of the meeting. In case such notice is delivered
personally, or by telephone or telegram, it shall be delivered personally or by
telephone or to the telegraph company at least forty-eight (48) hours prior to
the time of the holding of the meeting. Any oral notice given personally or by
telephone may be communicated to either the director or to a person at the
office of the director who the person giving the notice has reason to believe
will promptly communicate it to the director. The notice need not specify the
purpose of the meeting nor the place if the meeting is to be held at the
principal executive office of the corporation.
Section 9. Quorum. A majority of the authorized number of directors
------
shall constitute a quorum for the transaction of business, except to adjourn as
provided in Section 11 of this Article III. Every act or decision done or made
by a majority of the directors present at a meeting duly held at which a quorum
is present shall be regarded as the act of the board of directors, subject to
the provisions of Section 310 of the Code (as to approval of contracts or
transactions in which a director has a direct or indirect material financial
interest), Section 311 of the Code (as to appointment of committees), and
Section 317 (e) of the Code (as to indemnification of directors). A meeting at
which a quorum is initially present may continue to transact business
notwithstanding the withdrawal of directors, if any action taken is approved by
at least a majority of the required quorum for such meeting.
Section 10. Waiver Of Notice. The transactions of any meeting of the
----------------
board of directors, however called and noticed or wherever held, shall be as
valid as though had at a meeting duly held after regular call and notice if a
quorum be present and if, either before or after the meeting, each of the
directors not present signs a written waiver of notice, a consent to holding the
meeting or an approval of the minutes. The waiver of notice or consent shall
need not specify the purpose of the meeting. All such waivers, consents and
approvals shall be filed with the corporate records or made a part of the
minutes of the meeting. Notice of a meeting shall also be
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<PAGE>
given to any director who attends the meeting without protesting (before or at
its commencement) the lack of notice to such director.
Section 11. Adjournment. A majority of the directors present,
-----------
whether or not constituting a quorum, may adjourn any meeting to another time
and place.
Section 12. Notice Of Adjournment. Notice of the time and place of
---------------------
holding an adjourned meeting need not be given, unless the meeting is adjourned
for more than twenty-four (24) hours, in which case notice of such time and
place shall be given prior to the time of the adjourned meeting, in the manner
specified in Section 8 of this Article III, to the directors who were not
present at the time of the adjournment.
Section 13. Action Without Meeting. Any action required or permitted
----------------------
to be taken by the board of directors may be taken without a meeting, if all
members of the board shall individually or collectively consent in writing to
such action. Such action by written consent shall have the same force and
effect as a unanimous vote of the board of directors. Such written consent or
consents shall be filed with the minutes of the proceedings of the board.
Section 14. Fees And Compensation Of Directors. Directors and
----------------------------------
members of committees may receive such compensation, if any, for their services,
and such reimbursement of expenses, as may be fixed or determined by resolution
of the board of directors. This Section 14 shall not be construed to preclude
any director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise, and receiving compensation for such services.
ARTICLE IV
COMMITTEES
Section 1. Committees Of Directors. The board of directors may, by
-----------------------
resolution adopted by a majority of the authorized number of directors,
designate one or more committees, each consisting of two or more directors, to
serve at the pleasure of the board. The board may designate one or more
directors as alternate members of any committee, who may replace any absent
member at any meeting of the committee. Any such committee, to the extent
provided in the resolution of the board, shall have all the authority of the
board, except with respect to:
(a) the approval of any action which, under the General
Corporation Law of California, also requires shareholders' approval or
approval of the outstanding shares;
(b) the filling of vacancies on the board of directors or in any
committee;
(c) the fixing of compensation of the directors for serving on
the board or on any committee;
(d) the amendment or repeal of bylaws or the adoption of new
bylaws;
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(e) the amendment or repeal of any resolution of the board of
directors which by its express terms is not so amendable or repealable;
(f) a distribution to the shareholders of the corporation, except
at a rate or in a periodic amount or within a price range determined by the
board of directors; or
(g) the appointment of any other committees of the board of
directors or the members of such committees.
Section 2. Meetings And Action Of Committees. Meetings and action of
---------------------------------
committees shall be governed by, and held and taken in accordance with, the
provisions of Article III of these bylaws, Sections 5 (place of meetings), 7
(regular meetings), 8 (special meetings and notice), 9 (quorum), 10 (waiver of
notice), 11 (adjournment), 12 (notice of adjournment) and 13 (action without
meeting), with such changes in the context of those bylaws as are necessary to
substitute the committee and its members for the board of directors and its
members, except that the time of regular meetings of committees may be
determined by resolution of the board of directors as well as the committee,
special meetings of committees may also be called by resolution of the board of
directors and notice of special meetings of committees shall also be given to
all alternate members, who shall have the right to attend all meetings of the
committee. The board of directors may adopt rules for the government of any
committee not inconsistent with the provisions of these bylaws.
ARTICLE V
OFFICERS
Section 1. Officers. The officers of the corporation shall be a
--------
president, a secretary and a chief financial officer. The corporation may also
have, at the discretion of the board of directors, a chairman of the board, one
or more vice presidents, one or more assistant secretaries, one or more
assistant treasurers, and such other officers as may be appointed in accordance
with the provisions of Section 3 of this Article V. Any number of offices may
be held by the same person.
Section 2. Election Of Officers. The officers of the corporation,
--------------------
except such officers as may be appointed in accordance with the provisions of
Section 3 or Section 5 of this Article V, shall be chosen by the board of
directors, and each shall serve at the pleasure of the board, subject to the
rights, if any, of an officer under any contract of employment (who shall not
require election or re-election).
Section 3. Subordinate Officers, Etc. The board of directors may
-------------------------
appoint, and may empower the president to appoint, such other officers as the
business of the corporation may require, each of whom shall hold office for such
period, have such authority and perform such duties as are provided in the
bylaws or as the board of directors may from time to time determine.
Section 4. Removal And Resignation Of Officers. Subject to the
-----------------------------------
rights, if any, of an officer under any contract of employment, any officer may
be removed, either with or without cause, by the board of directors, at any
regular or special meeting of the board, or, except
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<PAGE>
in case of an officer chosen by the board of directors, by any officer upon whom
such power of removal may be conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any such resignation shall take effect at the date of the receipt
of such notice or at any later time specified in such notice; and, unless
otherwise specified in such notice, the acceptance of such resignation shall not
be necessary to make it effective. Any such resignation is without prejudice to
the rights, if any, of the corporation under any contract to which the officer
is a party.
Section 5. Vacancies In Offices. A vacancy in any office because of
--------------------
death, resignation, removal, disqualification or any other cause shall be filled
in the manner prescribed in these bylaws for regular appointments to such
office.
Section 6. Chairman Of The Board. The chairman of the board, if such
---------------------
an officer be elected, shall, if present, preside at all meetings of the board
of directors and exercise and perform such other powers and duties as may be
from time to time assigned to him by the board of directors or prescribed by the
bylaws. If there is no president, the chairman of the board shall in addition
be the chief executive officer of the corporation and shall have the powers and
duties prescribed in Section 7 of this Article V.
Section 7. President. Subject to such supervisory powers, if any, as
---------
may be given by the board of directors to the chairman of the board, if there be
such an officer, the president shall be the chief executive officer of the
corporation and shall, subject to the control of the board of directors, have
general supervision, direction and control of the business and the officers of
the corporation. He shall preside at all meetings of the shareholders and, in
the absence of the chairman of the board, or if there be none, at all meetings
of the board of directors. He shall have the general powers and duties of
management usually vested in the office of president of a corporation, and shall
have such other powers and duties as may be prescribed by the board of directors
or the bylaws.
Section 8. Vice Presidents. In the absence or disability of the
---------------
president, the vice presidents, if any, in order of their rank as fixed by the
board of directors or, if not ranked, a vice president designated by the board
of directors, shall perform all the duties of the president, and when so acting
shall have all the powers of, and be subject to all the restrictions upon, the
president. The vice presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
board of directors, the bylaws, the president, or the chairman of the board.
Section 9. Secretary. The secretary shall keep or cause to be kept,
---------
at the principal executive office or such other place as the board of directors
may order, a book of minutes of all meetings and actions of directors,
committees of directors and shareholders, with the time and place of holding,
whether regular or special, and, if special, how authorized, the notice thereof
given, the names of those present at directors' and committee meetings, the
number of shares present or represented at shareholders' meetings, and the
proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office or at the office of the corporation's transfer agent or
registrar, as determined by resolution of the board of directors, a share
register, or a duplicate share register, showing the names of all
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shareholders and their addresses, the number and classes of shares held by each,
the number and date of certificates issued for the same, and the number and date
of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings
of the shareholders and of the board of directors required by the bylaws or by
law to be given, and he shall keep the seal of the corporation, if one be
adopted, in safe custody, and shall have such other powers and perform such
other duties as may be prescribed by the board of directors or by the bylaws.
Section 10. Chief Financial Officer. The chief financial officer
-----------------------
shall keep and maintain, or cause to be kept and maintained, adequate and
correct books and records of accounts of the properties and business
transactions of the corporation, including accounts of its assets, liabilities,
receipts, disbursements, gains, losses, capital, retained earnings and shares.
The books of account shall at all reasonable times be open to inspection by any
director.
The chief financial officer shall deposit all monies and other
valuables in the name and to the credit of the corporation with such
depositaries as may be designated by the board of directors. He shall disburse
the funds of the corporation as may be ordered by the board of directors, shall
render to the president and directors, whenever they request it, an account of
all of his transactions as chief financial officer and of the financial
condition of the corporation, and shall have other powers and perform such other
duties as may be prescribed by the board of directors or the bylaws.
ARTICLE VI
RECORDS AND REPORTS
Section 1. Maintenance And Inspection Of Share Register. The
--------------------------------------------
corporation shall keep at its principal executive office, or at the office of
its transfer agent or registrar, if either be appointed and as determined by
resolution of the board of directors, a record of its shareholders, giving the
names and addresses of all shareholders and the number and class of shares held
by each shareholder.
A shareholder or shareholders of the corporation holding at least five
percent (5%) in the aggregate of the outstanding voting shares of the
corporation may (i) inspect and copy the records of shareholders' names and
addresses and shareholdings during usual business hours upon five (5) business
days prior written demand upon the corporation, and (ii) obtain from the
transfer agent of the corporation, upon written demand and upon the tender of
such transfer agent's usual charges for such list, a list of the shareholders'
names and addresses, who are entitled to vote for the election of directors, and
their shareholdings, as of the most recent record date for which such list has
been compiled or as of a date specified by the shareholder after the date of
demand. Such list shall be made available to any such shareholder by the
transfer agent on or before the later of five (5) business days after the demand
is received or the date specified in the demand as the date as of which the list
is to be compiled. The record of shareholders shall also be open to inspection
upon the written demand of any shareholder or holder of a voting trust
certificate, at any time during usual business hours, for a purpose reasonably
related to such holder's interests as a shareholder or as the holder of a voting
trust certificate. Any inspection and copying under this
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Section l may be made in person or by an agent or attorney of the shareholder or
holder of a voting trust certificate making such demand.
Section 2. Maintenance And Inspection Of Bylaws. The corporation
------------------------------------
shall keep at its principal executive office, or if its principal executive
office is not in the State of California, at its principal business office in
this state, the original or a copy of the bylaws as amended to date, which shall
be open to inspection by the shareholders at all reasonable times during office
hours. If the principal executive office of the corporation is outside this
state and the corporation has no principal business office in this state, the
secretary shall, upon the written request of any shareholder, furnish to such
shareholder a copy of the bylaws as amended to date.
Section 3. Maintenance And Inspection Of Other Corporate Records.
-----------------------------------------------------
The accounting books and records and minutes of proceedings of the shareholders
and the board of directors and any committee or committees of the board of
directors shall be kept at such place or places designated by the board of
directors, or, in the absence of such designation, at the principal executive
office of the corporation. The minutes shall be kept in written form and the
accounting books and records shall be kept either in written form or in any
other form capable of being converted into written form. Such minutes and
accounting books and records shall be open to inspection upon the written demand
of any shareholder or holder of a voting trust certificate, at any reasonable
time during usual business hours, for a purpose reasonably related to such
holder's interests as a shareholder or as the holder of a voting trust
certificate. Such inspection may be made in person or by an agent or attorney,
and shall include the right to copy and make extracts. The foregoing rights of
inspection shall extend to the records of each subsidiary corporation of the
corporation.
Section 4. Inspection By Directors. Every director shall have the
-----------------------
absolute right at any reasonable time to inspect all books, records and
documents of every kind and the physical properties of the corporation and each
of its subsidiary corporations. Such inspection by a director may be made in
person or by agent or attorney and the right of inspection includes the right to
copy and make extracts.
Section 5. Annual Report To Shareholders. The annual report to
-----------------------------
shareholders referred to in Section 1501 of the California General Corporation
Law is expressly dispensed with, but nothing herein shall be interpreted as
prohibiting the board of directors from issuing annual or other periodic reports
to the shareholders of the corporations as they consider appropriate.
Section 6. Financial Statements. A copy of any annual financial
--------------------
statement and any income statement of the corporation for each quarterly period
of each fiscal year, and any accompanying balance sheet of the corporation as of
the end of each such period, that has been prepared by the corporation shall be
kept on file in the principal executive office of the corporation for twelve
(12) months, and each such statement shall be exhibited at all reasonable times
to any shareholder demanding an examination of any such statement or a copy
shall be mailed to any such shareholder.
If a shareholder or shareholders holding at least five percent (5%) of
the outstanding shares of any class of stock of the corporation make a written
request to the corporation for an income statement of the corporation for the
three-month, six-month or nine-month period of the current fiscal year ended
more than thirty (30) days prior to the date of the
Page 13 of 16
<PAGE>
request, and a balance sheet of the corporation as of the end of such period,
the chief financial officer shall cause such statement to be prepared, if not
already prepared, and shall deliver personally or mail such statement or
statements to the person making the request within thirty (30) days after the
receipt of such request. If the corporation has not sent to the shareholders
its annual report for the last fiscal year, this report shall likewise be
delivered or mailed to the shareholder or shareholders within thirty (30) days
after the request.
The corporation also shall, upon the written request of any
shareholder, mail to the shareholder a copy of the last annual, semi-annual or
quarterly income statement which it has prepared and a balance sheet as of the
end of such period.
The quarterly income statements and balance sheets referred to in this
section shall be accompanied by the report thereon, if any, of any independent
accountants engaged by the corporation or the certificate of an authorized
officer of the corporation that such financial statements were prepared without
audit from the books and records of the corporation.
Section 7. Annual Statement Of General Information. The corporation
---------------------------------------
shall timely file with the Secretary of State of the State of California, on the
prescribed form, a statement setting forth the information required by Section
1502 of the Code.
ARTICLE VII
GENERAL CORPORATE MATTERS
Section 1. Record Date For Purposes Other Than Notice And Voting.
-----------------------------------------------------
For purposes of determining the shareholders entitled to receive payment of any
dividend or other distribution or allotment of any rights or entitled to
exercise any rights in respect of any other lawful action, (other than action by
shareholders by written consent without a meeting) the board of directors may
fix, in advance, a record date, which shall not be more than sixty (60) days
prior to any such action, and in such case only shareholders of record on the
date so fixed are entitled to receive the dividend, distribution or allotment of
rights or to exercise the rights, as the case may be, notwithstanding any
transfer of any shares on the books of the corporation after the record date
fixed, except as otherwise provided in the California General Corporation Law.
If the board of directors does not so fix a record date, the record
date for determining shareholders for any such purpose shall be at the close of
business on the date on which the board adopts the applicable resolution or the
sixtieth (60th) day prior to the date of such action, whichever is later.
Section 2. Checks, Drafts, Evidences Of Indebtedness. All checks,
-----------------------------------------
drafts or other orders for payment of money, notes or other evidences of
indebtedness, issued in the name of or payable to the corporation, shall be
signed or endorsed by such person or persons and in such manner as, from time to
time, shall be determined by resolution of the board of directors.
Section 3. Corporate Contracts And Instruments; How Executed. The
-------------------------------------------------
board of directors, except as otherwise provided in these bylaws, may authorize
any officer or officers, agent or agents, to enter into any contract or execute
any instrument in the name of and on behalf of the corporation, and such
authority may be general or confined to specific instances; and, unless
Page 14 of 16
<PAGE>
so authorized or ratified by the board of directors or within the agency power
of an officer, no officer, agent or employee shall have any power or authority
to bind the corporation by any contract or engagement or to pledge its credit or
to render it liable for any purpose or to any amount.
Section 4. Certificates For Shares. A certificate or certificates
-----------------------
for shares of the capital stock of the corporation shall be issued to each
shareholder when any such shares are fully paid, and the board of directors may
authorize the issuance of certificates for shares as partly paid provided that
such certificates shall state the amount of the consideration to be paid
therefor and the amount paid. All certificates shall be signed in the name of
the corporation by the chairman of the board or vice chairman of the board or
the president or vice president and by the chief financial officer or an
assistant treasurer or the secretary or any assistant secretary, certifying the
number of shares and the class or series of shares owned by the shareholder.
Any or all of the signatures on the certificate may be facsimile. In case any
officer, transfer agent or registrar who has signed or whose facsimile signature
has been placed upon a certificate shall have ceased to be such officer,
transfer agent or registrar before such certificate is issued, it may be issued
by the corporation with the same effect as if such person were an officer,
transfer agent or registrar at the date of issue.
Section 5. Lost Certificates. Except as provided in this Section 5,
-----------------
no new certificates for shares shall be issued in lieu of an old certificate
unless the latter is surrendered to the corporation and cancelled at the same
time. The board of directors may, in case any share certificate or certificate
for any other security is lost, stolen or destroyed, authorize the issuance of a
replacement certificate on such terms and conditions as the board may require,
including provision for indemnification of the corporation secured by a bond or
other adequate security sufficient to protect the corporation against any claim
that may be made against it, including any expense or liability, on account of
the alleged loss, theft or destruction of such certificate or the issuance of
the replacement certificate.
Section 6. Representation Of Shares Of Other Corporations. The
----------------------------------------------
chairman of the board, the president, or any vice president, or any other person
authorized by resolution of the board of directors by any of the foregoing
designated officers, is authorized to vote on behalf of the corporation any and
all shares of any other corporation or corporations, foreign or domestic,
standing in the name of the corporation. The authority herein granted to said
officers to vote or represent on behalf of the corporation any and all shares
held by the corporation in any other corporation or corporations may be
exercised by any such officer in person or by any person authorized to do so by
proxy duly executed by said officer.
Section 7. Construction And Definitions. Unless the context requires
----------------------------
otherwise, the general provisions, rules of construction, and definitions in the
California General Corporation Law shall govern the construction of these
bylaws. Without limiting the generality of this provision, the singular number
includes the plural, the plural number includes the singular, and the term
"person" includes both a corporation and a natural person.
Page 15 of 16
<PAGE>
ARTICLE VIII
AMENDMENTS
Section 1. Amendment By Shareholders. New bylaws may be adopted or
-------------------------
these bylaws may be amended or repealed by the vote or written consent of
holders of a majority of the outstanding shares entitled to vote; provided,
however, that if the articles of incorporation of the corporation set forth the
number of authorized directors of the corporation, the authorized number of
directors may be changed only by an amendment of the articles of incorporation.
Section 2. Amendment By Directors. Subject to the rights of the
----------------------
shareholders as provided in Section 1 of this Article VIII, bylaws, other than a
bylaw or an amendment of a bylaw changing the authorized number of directors,
may be adopted, amended or repealed by the board of directors.
ARTICLE IX
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES
AND OTHER AGENTS
The corporation shall, to the maximum extent permitted by the
California General Corporation Law, indemnify each of its agents against
expenses, judgments, fines, settlements and other amounts actually and
reasonably incurred in connection with any proceeding arising by reason of the
fact any such person is or was an agent of the corporation and shall advance to
such agent expenses incurred in defending any such proceeding to the maximum
extent permitted by such law. For purposes of this Article IX, an "agent" of
the corporation includes any person who is or was a director, officer, employee,
or other agent of the corporation, or is or was serving at the request of the
corporation as a director, officer employee or other agent of another
corporation, partnership, joint venture, trust or other enterprise, or was a
director, officer, employee, or other agent of a corporation which was a
predecessor corporation of the corporation or of another enterprise at the
request of such predecessor corporation.
Page 16 of 16
<PAGE>
EXHIBIT 3.5
ARTICLES OF INCORPORATION
OF
COBBLESTONE TEXAS, INC.
I, the undersigned natural person of the age of eighteen (18) years or
more, being a citizen of the State of Texas, acting as an incorporator of a
corporation under the Texas Business Corporation Act, do hereby adopt the
following Articles of Incorporation for such corporation:
ARTICLE I
The name of the corporation is COBBLESTONE TEXAS, INC.
ARTICLE II
The period of its duration is perpetual.
ARTICLE III
The purpose or purposes for which the organization is organized shall be
the transaction of any or all lawful business or businesses for which
corporations may be incorporated under the Texas Business Corporation Act.
ARTICLE IV
The aggregate number of shares which the corporation shall have authority
to issue is twenty-five million (25,000,000) shares of common stock with a par
value of one-tenth cent ($0.001) per share.
At elections of directors each share of stock entitled to vote shall
constitute only one vote, and multiplication of votes by the number of directors
to be elected, or cumulative voting, is expressly prohibited.
No shareholder of this corporation shall, by reason of his holding shares
of any class
<PAGE>
have any pre-emptive or preferential right to purchase or subscribe to any
shares of any class of this corporation, now or hereafter to be authorized, or
any notes, debentures, bonds, or other securities convertible into or carrying
rights, options or warrants to purchase shares of any class, now or hereafter
authorized, whether or not the issuance of any such shares, or such notes,
bonds, debentures or other securities, would adversely affect the dividend or
voting rights of such shareholder other than such rights, if any, as the Board
of Directors in its discretion from time to time may grant and at such price as
the Board of Directors in its discretion may fix; and the Board of Directors may
issue shares of any class of this corporation, or any notes, debentures, bonds
or other securities convertible into or carrying rights, options or warrants to
purchase the shares of any class without offering any such shares of any class
either in whole or in part to the existing shareholders of any class.
ARTICLE V
The corporation will not commence business until it has received for the
issuance of its shares consideration of the value of One Thousand Dollars
($1,000.00) consisting of money, labor done or property actually received, which
sum is not less than One Thousand Dollars ($1,000.00).
ARTICLE VI
The post office address of its initial registered office is 1149 Regency
Plaza, 3710 Rawlins St., Dallas, Texas 75219, and the name of its initial
registered agent at such address is Clifford D. Harmon.
ARTICLE VII
The number of directors constituting the initial Board of Directors is
three (3), and
<PAGE>
the names and addresses of the persons who are to serve as directors until the
first annual meeting of shareholders or until their successors are elected and
qualified are:
Frederick Warren 3702 Via De La Valle
Suite 202
Del Mar, California 92014
James A. Husband 3702 Via De La Valle
Suite 202
Del Mar, California 92014
David Wong 3702 Via De La Valle
Suite 202
Del Mar, California 92014
ARTICLE VIII
The corporation may indemnify its officers and directors to the fullest
extent permitted by law.
ARTICLE IX
The corporation reserves the right to amend, alter or repeal any provision
contained in these Articles of Incorporation in the manner now or hereafter
prescribed by statute, and all rights conferred upon directors and shareholders
herein are granted subject to this reservation.
ARTICLE X
The name and address of the incorporator is Clifford D. Harmon, 1149
Regency Plaza, 3710 Rawlins, Dallas, Texas 75219.
IN WITNESS WHEREOF, I have hereunto set my hand this 20th day of October,
1993.
/s/ Clifford D. Harmon
------------------------------
Clifford D. Harmon
<PAGE>
ASSUMED NAME CERTIFICATE
1. The name of the corporation, limited liability company, limited partnership,
or registered limited liability partnership as stated in its articles of
incorporation, articles of organization, certificate of limited partnership,
application or comparable document is COBBLESTONE TEXAS, INC.
----------------------
2. The assumed name under which the business or professional service is or is to
be conducted or rendered is THE TROPHY CLUB.
---------------
3. The state, country, or other jurisdiction under the laws of which it was
incorporated, organized or associated is TEXAS, and the address of its
-----
registered or similar office in that jurisdiction is 3710 RAWLINS SUITE 1149,
DALLAS, TEXAS 75219. -----------------------
-------------------
4. The period, not to exceed 10 years, during which the assumed name will be
used is 10 YEARS.
--------
5. The entity is a (circle one): [business corporation], non-profit corporation,
professional corporation, professional association, limited liability
company, limited partnership, registered limited liability partnership or
some other type of incorporated business, professional or other association
(specify)
____________________________________________________________________________.
6. If the entity is required to maintain a registered office in Texas, the
address of the registered office is 3710 RAWLINS SUITE 1149, DALLAS, TEXAS
--------------------------------------
75219 and the name of its registered agent at such address is CLIFFORD D.
----- -----------
HARMON. The address of the principal office (if not the same as the
------
registered office) is 3702 VIA DE LA VALLE, SUITE 202, DEL MAR, CALIFORNIA
92014. ----------------------------------------------------
-----
7. If the entity is not required to or does not maintain a registered office in
Texas, the office address in Texas is ______________________________________
and if the entity is not incorporated, organized or associated under the laws
of Texas, the address of its place of business in Texas is
____________________________________________________________________________
and the office address elsewhere is ________________________________________.
8. The county or counties where business or professional services are being or
are to be conducted or rendered under such assumed name are (if applicable,
use the designation "ALL" or "ALL EXCEPT"): ALL.
---
(Certificate must be executed and notarized on the back of this form.)
<PAGE>
/s/ Gary Dee
________________________________________________
Signature of officer, general partner, manager,
representative or attorney-in-fact of the entity
Before me on this 21 day of December, 1993, personally appeared Gary Dee and
-- -------- -- --------
acknowledged to me that Gary Dee executed the foregoing certificate for the
--------
purposes therein expressed.
(Notary Seal)
/s/ Pauline Shaw
---------------------------
Notary Public Denton County
------
INSTRUCTIONS FOR FILING ASSUMED NAME CERTIFICATE
1. A corporation, limited liability company, limited partnership or registered
limited liability partnership, which regularly conducts business or renders a
professional service in this state under a name other than the name contained
in its articles of incorporation, articles of organization, certificate of
limited partnership or application, must file an assumed name certificate
with the the secretary of state and with the appropriate county clerk in
accordance with section 36.11 of the Texas Business and Commerce Code.
2. The information provided in paragraph 6 as regards the registered agent and
registered office address in Texas must match the information on file in this
office. To verify the information on file with this office, you may contact
our corporate information unit at (512) 463-5555. Forms to change the
registered agent/office are available from this office should you require to
update this information.
3. A certificate executed and acknowledged by an attorney-in-fact shall include
a statement that the attorney-in-fact has been duly authorized in writing by
his principal to execute and acknowledge the same.
4. For purposes of filing with the secretary of state, the assumed name
registrant should submit an originally executed assumed name certificate
accompanied by the filing fee of $25 to the Secretary of State, Statutory
Filings Division, Corporations Section, P.O. Box 13697, Austin, Texas 78711-
3697. The phone number is (512) 463-5582.
5. All assumed name certificates to be filed with the county clerk must be
forwarded directly to the appropriate county clerk by the assumed name
registrant.
6. Whenever an event occurs that causes the information in the assumed name
certificate to become materially misleading (eg. change of registered
agent/office or a change of name), a new certificate must be filed within 60
days after the occurrence of the events which necessitate the filing.
7. A registrant that ceases to transact business or render professional services
under an assumed name for which a certificate has been filed may file an
abandonment of use pursuant to the Texas Business and Commerce Code.
(S)36.14. Forms for this purposes are available from this office.
<PAGE>
ASSUMED NAME CERTIFICATE
1. The name of the corporation, limited liability company, limited
partnership, or registered limited liability partnership as stated in its
articles of incorporation, articles of organization, certificate of
limited partnership, application or comparable document is COBBLESTONE
-----------
TEXAS, INC.
----------
2. The assumed name under which the business or professional service is or is
to be conducted or rendered is THE CLUB AT TROPHY CLUB.
-----------------------
3. The state, country, or other jurisdiction under the laws of which it was
incorporated, organized or associated is TEXAS, and the address of its
-----
registered or similar office in that jurisdiction is 3710 RAWLINS
------------
SUITE 1149 DALLAS, TX 75219.
----------------------------
4. The period, not to exceed 10 years, during which the assumed name will be
used is 10 YRS.
------
5. The entry is a (circle one): [business corporation], non-profit
corporation, professional corporation, professional association, limited
liability company, limited partnership, registered limited liability
partnership or some other type of incorporated business, professional
or other association (specify)
_______________________________________________________________________ .
6. If the entity is required to maintain a registered office in Texas, the
address of the registered office is 3710 RAWLINS SUITE 1149 DALLAS,
---------------------------------
TEXAS 75219 and the name of its registered agent at such address is
-----------
CLIFFORD D. HARMON. The address of the principal office (if not the same
------------------
as the registered office) is 3702 VIA DE LA VALLE, SUITE 202 DEL MAR,
-----------------------------------------
CALIFORNIA 92014.
----------------
7. If the entity is not required to or does not maintain a registered office
in Texas, the office address in Texas is_________________________________
and if the entity is not incorporated, organized or associated under the
laws of Texas, the address of its place of business in Texas is
_________________________________________________________________________
and the office address elsewhere is____________________________________ .
8. The county or counties where business or professional services are being
or are to be conducted or rendered under such assumed name are (if
applicable, use the designation "ALL" or "ALL EXCEPT"): ALL.
---
(Certificate must be executed and notarized on the back of this form.)
<PAGE>
/s/ Lawrence Jasper
------------------------------------------------
Signature of officer, general partner, manager,
representative or attorney-in-fact of the entity
----------------
Before me on this 29th day of December, 1993, personally appeared Lawrence
---- -------- -- --------
Jasper and acknowledged to me that ____he executed the foregoing certificate for
- ------
the purposes therein expressed.
[NOTARY SEAL] /s/ Lisa Bufkin
-------------------------------
Notary Public DALLAS County
------------
INSTRUCTIONS FOR FILING ASSUMED NAME CERTIFICATE
1. A corporation, limited liability company, limited partnership or registered
limited liability partnership, which regularly conducts business or renders
a professional service in this state under a name other than the name
contained in its articles of incorporation, articles of organization,
certificate of limited partnership or application, must file an assumed
name certificate with the secretary of state and with the appropriate
county clerk in accordance with section 36.11 of the Texas Business and
Commerce Code.
2. The information provided in paragraph 6 as regards the registered agent and
registered office address in Texas must match the information on file in
this office. To verify the information on file with this office, you may
contact our corporate information unit at (512) 463-5555. Forms to change
the registered agent/office are available from this office should you
require to update this information.
3. A certificate executed and acknowledged by an attorney-in-fact shall
include a statement that the attorney-in-fact has been duly authorized in
writing by his principal to execute and acknowledge the same.
4. For purposes of filing with the secretary of state, the assumed name
registrant should submit an originally executed assumed name certificate
accompanied by the filing fee of $25 to the Secretary of State, Statutory
Filings Division, Corporations Section, P.O. Box 13697, Austin, Texas
78711-3697. The phone number is (512) 463-5582.
5. All assumed name certificates to be filed with the county clerk must be
forwarded directly to the appropriate county clerk by the assumed name
registrant.
6. Whenever an event occurs that causes the information in the assumed name
certificate to become materially misleading (eg. change of registered
agent/office or a change of name), a new certificate must be filed within
60 days after the occurrence of the events which necessitate the filing.
7. A registrant that ceases to transact business or render professional
services under an assumed name for which a certificate has been filed may
file an abandonment of use pursuant to the Texas Business and Commerce
Code. (S)36.14. Forms for this purposes are available from this office.
<PAGE>
ASSUMED NAME CERTIFICATE
1. The name of the corporation, limited liability company, limited
partnership, or registered limited liability partnership as stated in its
articles of incorporation, articles of organization, certificate of limited
partnership, application or comparable document is COBBLESTONE TEXAS, INC.
2. The assumed name under which the business or professional service if or is
to be conducted or rendered is TROPHY CLUB COUNTRY CLUB.
3. The state, country, or other jurisdiction under the laws of which it was
incorporated, organized or associated is TEXAS, and the address of its
registered or similar office in that jurisdiction is 500 TROPHY CLUB DRIVE,
TROPHY CLUB, TEXAS 76262.
4. The period, not to exceed 10 years, during which the assumed name will be
used is TEN (10) YEARS.
5. The entity is a BUSINESS CORPORATION.
6. If the entity is required to maintain a registered office in Texas, the
address of the registered office is 1149 REGENCY PLAZA, 3710 RAWLINS
STREET, DALLAS, TEXAS 75219 and the name of its registered agent at such
address CLIFFORD D. HARMON. The address of the principal office is SUITE
202, 3702 VIA DE LA VALLE, DEL MAR, CALIFORNIA 92014.
7. If the entity is not required to or does not maintain a registered office
in Texas, the office address in Texas is ______________________________
and if the entity is not incorporated, organized or associated under the
laws of Texas, the address of its place of business in Texas is ________
______________________________________ and the office address elsewhere
is _______________________________________________________________ .
8. The county or counties where business or professional services are being or
are to be conducted or rendered under such assumed name are (if
applicable, use the designation "ALL" or "ALL EXCEPT"): ALL.
/s/ Steve Holmes
------------------------------
Steve Holmes
Chief Financial Officer
Before me on this 30th day of JANUARY 30, 1995, personally appeared Steve
Holmes, Chief Financial Officer of Cobblestone Texas, Inc., and acknowledged to
me that he executed the foregoing certificate for the purposes therein expressed
and in the capacity therein stated.
/s/ David L. Serven
[Seal of David L. Serven] ------------------------------
Notary Public for SAN DIEGO County
In and For the State of California
Notary Public SAN DIEGO County
<PAGE>
EXHIBIT 3.6
AMENDED AND RESTATED BYLAWS FOR THE REGULATION, EXCEPT AS
OTHERWISE PROVIDED BY STATUTE OR ITS
ARTICLES OF INCORPORATION, OF
COBBLESTONE TEXAS, INC.
ARTICLE I
OFFICES
Section 1. Principal Office. The corporation will maintain offices for
----------------
the transaction of business of the corporation at 3702 Via de al Valle, Suite
202, Del Mar, California 92014.
Section 2. Other Offices. Branch or affiliate offices may at any time be
-------------
established by the Board of Directors at any place or places where the
corporation is qualified to do business.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. Place of Meetings. All meetings of shareholders shall be held
-----------------
at the principal office of the corporation or at any other place which may be
(i) designated by the Board of Directors, or (ii) consented to by the written
consent of all shareholders entitled to vote thereat, given either before or
after the meeting and filed with the Secretary of the corporation, or (iii) in
the city of residence of any shareholder holding over two-thirds of the capital
stock of the corporation.
Section 2. Annual Meetings. The annual meeting of shareholders shall be
---------------
on the 1st day of February in each year at 10:00 a.m.; provided, however, that
should said day fall upon a legal holiday, then any such annual meeting of
shareholders shall be held at the same time and place on the next day thereafter
ensuing which is not a legal holiday. At such meetings, Directors shall be
elected, reports of the affairs of the corporation shall be considered, and any
other business may be transacted which is within the power of the shareholders.
Section 3. Special Meetings. Special meetings of the shareholders for any
----------------
purpose whatsoever may be called at any time either by the President or by the
Board of Directors, to be held at such time as he or they may designate. In
addition, one or more shareholders holding not less than one-fifth of the voting
power of the corporation may call such a meeting by causing a written request to
be sent by registered mail or delivered personally to the President, Vice
President or Secretary. The officer forthwith shall cause notice to be given,
as provided below, that a meeting will be held at a time, fixed by the officer,
not less than ten (10) nor more than sixty (60) days after the receipt of the
request.
Amended and Restated Bylaws (Revised May 1, 1996)
- ----------------------------
Page 1
<PAGE>
Section 4. Notice of Meeting. Not less than ten (10) days prior to any
-----------------
meeting of shareholders, the Secretary or his delegate shall cause written
notice of such meeting to be given to all shareholders entitled to vote thereat.
If a shareholder gives no address, notice shall be deemed to have been duly
given if sent by mail or other means of written communication addressed to the
place where the principal office of the corporation is situated, or if published
at least once in a newspaper of general circulation in the county in which said
office is located.
The notice shall specify the place, the day and the hour of such meeting,
and, in the case of a special meeting, the general nature of the business to be
transacted. No action may be taken at any meeting of shareholders on any of the
following proposals unless the notice thereof specifies the general nature of
the proposal: (a) a proposal to sell, lease, convey, exchange, transfer or
otherwise dispose of all, or substantially all, of the property or assets of the
corporation, (b) a proposal to merge or consolidate with another corporation,
domestic or foreign, (c) a proposal to reduce the stated capital of the
corporation, (d) a proposal to amend the Articles of Incorporation, (e) a
proposal to wind up and dissolve the corporation, or (f) a proposal to adopt a
plan of distribution of shares, securities, or any other consideration (other
than money) in the process of winding up.
Section 5. Consent of Absentees. The transactions conducted at any
--------------------
meeting of shareholders, either annual or special, however called and noticed,
shall be as valid as though had at a meeting duly held after regular call and
notice, if a quorum be present either in person or by proxy, and if, either
before or after the meeting, each of the shareholders entitled to vote, not
present in person or by proxy, signs a written waiver of notice, a consent to
the holding of such meeting, or an approval of the minutes thereof. All such
waivers, consents or approvals shall be filed with the corporate records or
made a part of the minutes of the meeting.
Section 6. Quorum. The presence in person or by proxy of persons entitled
------
to vote a majority of the voting shares at any meeting shall constitute a quorum
for the transaction of business. The shareholders present at a duly called or
held meeting at which a quorum is present may continue to do business until
adjournment, notwithstanding the withdrawal of enough shareholders to leave less
than a quorum.
Section 7. Voting. Unless a record date for voting purposes be fixed, as
------
hereinafter provided, only persons in whose names shares entitled to vote stand
on the stock records of the corporation as of the date of such meeting shall be
entitled to vote thereat. Except as otherwise provided by law or the Articles
of Incorporation, every shareholder shall be entitled to one vote for each share
standing in his name on the record of shareholders of the corporation. Voting
rights shall be noncumulative. Except as otherwise provided herein or in the
Articles of Incorporation, all corporate actions shall be determined by vote of
a majority of the votes cast at a meeting of shareholders entitled to vote
thereat. Such vote may be viva voce or by ballot; provided, however, that all
---- ----
elections for Directors must be by ballot upon demand made by a shareholder at
any election and before the voting begins. The candidates receiving the highest
number of votes up to the number of Directors to be elected shall be elected.
Amended and Restated Bylaws (Revised May 1, 1996)
- ----------------------------
Page 2
<PAGE>
Section 8. Proxies. Every person entitled to vote or execute consents
-------
shall have the right to do so either in person or by one or more agents
authorized by a written proxy executed by such person or his duly authorized
agent and filed with the Secretary of the corporation.
Section 9. Adjourned Meetings and Notice Thereof. Any shareholders'
-------------------------------------
meeting, annual or special, whether or not a quorum is present, may be adjourned
from time to time by the vote of a majority of the shares, the holders of which
are either present in person or represented by proxy thereat, but in the absence
of a quorum, no other business may be transacted at such meeting.
When any shareholders' meeting, either annual or special, is adjourned for
thirty (30) days or more, notice of the adjourned meeting shall be given as in
the case of an original meeting. Except as provided above, it shall not be
necessary to give any notice of any adjournment or of the business to be
transacted at any adjourned meeting other than by announcement at the meeting at
which such adjournment is taken.
Section 10. Action Without Meeting. Any action which may be taken at a
----------------------
meeting of the shareholders may be taken without a meeting if authorized by a
writing signed by all of the persons who would be entitled to vote upon such
action at a meeting and filed with the Secretary of the corporation; provided,
however, a meeting shall be held for dissolution, transfer of all or
substantially all of the assets of the corporation, or for merger or
consolidation of the corporation with other corporations, if same is required
under applicable law.
ARTICLE III
DIRECTORS
Section 1. Powers. Subject to limitations imposed by law or by the
------
Articles of Incorporation, all corporate powers shall be exercised by or under
the authority of, and the business and affairs of the corporation shall be
controlled by, the Board of Directors. In the exercise of its powers, the Board
may appoint an Executive Committee and other committees and may delegate to the
Executive Committee any of the powers and authority of the Board in the
management of the business and affairs of the corporation, except the power to
declare dividends and to adopt, amend or repeal bylaws. The Executive Committee
shall be composed of two or more Directors.
Section 2. Number of Directors. The authorized number of Directors of the
-------------------
corporation shall be not less than one nor more than five until changed by
amendment of the Articles of Incorporation or by a bylaw duly adopted by the
shareholders amending this section. Directors need not be shareholders of the
corporation.
Section 3. Election and Term of Office. The Directors shall be elected at
---------------------------
the annual meeting of shareholders, but if any such annual meeting is not held
or the Directors are not elected thereat, Directors may be elected at any
special meeting of shareholders held for that
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<PAGE>
purpose. Directors shall hold office until the election and qualification of
their respective successors.
Section 4. Vacancies. Vacancies in the Board of Directors may be filled
---------
by a majority of the remaining Directors, though less than a quorum, or by a
sole remaining Director, and each Director so elected shall hold office until
his successor is elected at an annual or a special meeting of the shareholders.
If the entire Board of Directors resigns at one time, the shareholders shall,
within a reasonable time thereafter, at a regular or special meeting, as
provided herein, elect a new Board of Directors.
A vacancy in the Board of Directors shall be deemed to exist in the case of
the death, resignation or removal of any Director, or if at any annual or
special meeting of shareholders at which any Director is elected the authorized
number of Directors is increased or if the shareholders fail to elect the full
authorized number of Directors to be voted for at that meeting.
The shareholders may elect a Director or Directors at any time to fill any
vacancy or vacancies not filled by the remaining Director or Directors. If the
Board of Directors accepts the resignation of a Director tendered to take effect
at a future time, the Board or the shareholders shall have the power to elect a
successor to take office when the resignation is to become effective.
No reduction of the authorized number of Directors shall have the effect of
removing any Director prior to the expiration of his term of office.
Section 5. Quorum. A majority of the authorized number of Directors shall
------
be necessary to constitute a quorum of the Board for the transaction of
business. Every act or decision done or made by a majority of the Directors
present at a meeting duly held at which a quorum is present shall be regarded as
the act of the Board of Directors, unless a greater number be required by law.
Section 6. Place of Directors' Meetings. Meetings of the Board of
----------------------------
Directors shall be held at the principal office of the corporation, or at any
other location which has been designated by resolution of the Board, or by
written consent of all of the Directors.
Section 7. Regular Meetings. Immediately following each annual meeting
-----------------
of shareholders, the Board of Directors shall hold a regular meeting for the
purpose of electing officers and transacting any other business which may come
before them. No notice of such meeting need be given.
Section 8. Special Meetings. Special meetings of the Board of Directors
----------------
for any purpose or purposes shall be called by the President, or, if he is
absent or unable or refuses to act, by any Vice President or by any two
Directors.
Written notice of the time and place of special meetings shall be delivered
personally to each Director or sent to each Director by mail or other form of
written communication,
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<PAGE>
charges prepaid, addressed to him at his address as is shown upon the records of
the corporation, or, if it is not so shown and if it is not readily
ascertainable, addressed to him at the city or place where the meetings of the
Directors are regularly held. Notices mailed or telegraphed shall be deposited
in the United States mail or delivered to the telegraph company at the place
where the principal office of the corporation is located at least forty-eight
(48) hours prior to the time of the holding of the meeting, and notices
delivered personally shall be so delivered at least twenty-four (24) hours prior
to the time of the holding of the meeting.
Section 9. Notice of Adjournment. Notice of the time and place of holding
---------------------
an adjourned meeting need not be given to absent Directors if the time and place
are fixed at the meeting adjourned.
Section 10. Waiver of Notice: Consent to Meeting. The transactions
-------------------------------------
conducted at any meeting of the Board of Directors, however called or noticed or
wherever held, shall be as valid as though conducted at a meeting duly held
after regular call and notice if a quorum is present and if, either before or
after the meeting, each of the Directors signs a waiver of notice, a consent to
hold such a meeting, or an approval of the minutes thereof. All such waivers,
consents or approvals shall be filed with the corporate records and made a part
of the minutes of the meeting.
Section 11. Adjournment. A quorum of the Directors may adjourn to meet
-----------
again at a set day and hour, and in the absence of a quorum, a majority of the
Directors present may adjourn from time to time until the time fixed for the
next regular meeting of the Board.
Section 12. Action Without Meeting. Any action required or permitted to
----------------------
be taken by the Board of Directors may be taken without a meeting if all members
of the Board shall individually or collectively consent in writing to such
action. Such written consent or consents shall be filed with the minutes of the
proceedings of the Board. Such action by written consent shall have the same
force and effect as a unanimous vote of such Directors.
Section 13. Fees and Compensation. Directors shall not receive any stated
---------------------
salary for their services as Directors, but by resolution of the Board, a fee or
other remuneration, with or without expenses of attendance, may be allowed for
attendance at each meeting. Nothing herein contained shall be construed to
preclude any Director from serving the corporation in any other capacity as an
officer, agent or employee, or otherwise, and receiving compensation therefor.
Section 14. Indemnification of Directors, Officers
--------------------------------------
and Employees.
-------------
A. In the event a person is sued, either alone or with others, because he
is or was a Director, officer or employee of the corporation, in any proceeding
arising out of his alleged misfeasance or nonfeasance in the performance of his
duties as such Director, officer or employee, or out of any alleged wrongful act
by the corporation, he shall be indemnified for his reasonable expenses,
including attorneys' fees incurred in the defense of the proceeding, if both of
the following conditions exist: (i) the person sued is successful in whole or in
part,
Amended and Restated Bylaws (Revised May 1, 1996)
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<PAGE>
or the proceeding against him is settled with the approval of the court, and
(ii) the court finds that his conduct fairly and equitable merits such
indemnity.
The amount of such indemnity may be assessed against the corporation, its
receiver, its trustee, or any other proper party, by the court in the same or in
a separate proceeding and shall be so much of the expenses, including attorneys'
fees incurred in the defense of the action as the court determines and finds to
be reasonable. Application for such indemnity may be made either by a person
sued or by the attorney or other person rendering services to him in connection
with the defense, and the court may order fees and expenses to be paid directly
to the attorney or other person although he is not a party to the proceeding.
Notice of the application for such indemnity shall be served upon the
corporation, its receiver, or its trustee and upon the plaintiff and other
parties to the proceeding. The court may also order notice to be given to the
shareholders in the manner provided elsewhere in these bylaws for giving notice
of shareholders' meetings, in such form as the court directs.
B. Notwithstanding the foregoing provisions, the Board of Directors may
authorize the corporation to pay expenses incurred by or to satisfy a judgment
or fine rendered or levied against a present or former Director, officer or
employee of the corporation in an action brought by a third party against such
person (whether or not the corporation is joined as a party defendant) to impose
a liability or penalty on such person for an act alleged to have been committed
by such person in the performance of his duties as such Director, officer or
employee, or by the corporation, or by both, provided the Board of Directors
determines that such Director, officer or employee was acting in good faith
within what he reasonably believed to be the scope of his employment or
authority and for a purpose which he reasonably believed to be in the best
interests of the corporation or its shareholders. Payments authorized hereunder
include amounts paid and expenses incurred in settling any such action or
threatened action. This Paragraph does not apply to any action instituted or
maintained as the right of the corporation by a shareholder or holder of a
voting trust certificate representing shares of the corporation.
C. The provisions of this Section shall apply to the estate, executor,
administrator, heirs, legatees or devisees of any such present or former
Director, officer or employee of the corporation.
D. The Board of Directors may, at its discretion, authorize the purchase
of a policy or policies of insurance against any liability of the corporation to
indemnify any person pursuant to this Section, containing such terms and
conditions as the Board may deem appropriate. Such policy or policies may
include provisions for the direct indemnification of directors, officers or
other persons for expenses of a kind not subject to indemnification hereunder,
provided the premiums on such combined policy are, in the judgment of the Board,
fairly allocated between the corporation and the insured persons.
E. The foregoing provisions of this Section 14 shall not be considered as
limiting the right of indemnification permitted by the Texas Business
Corporation Act, Article 2.021, but indemnification shall be to the maximum
extent permitted under Texas Business Corporation Act, Article 2.02-1.
Amended and Restated Bylaws (Revised May 1, 1996)
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<PAGE>
ARTICLE IV
OFFICERS
Section 1. Officers. The corporation shall have a President, one or more
--------
Vice Presidents, a Secretary and a Treasurer. Such officers shall be elected
annually by the Board of Directors and each shall hold office until he shall
resign or shall be removed or otherwise disqualified to serve and until his
successor shall be elected.
Section 2. Other Officers. The corporation may also have, in the
--------------
discretion of the Board of Directors, a Chairman of the Board, one or more
Assistant Secretaries, one or more Assistant Treasurers, and such other officers
and agents shall hold office for such terms and have such authority and perform
such duties as the Board of Directors may from time to time specify, and shall
hold office until they shall resign or shall be removed or otherwise
disqualified to serve.
Section 3. Removal and Resignation. Any officer or agent may be removed,
-----------------------
either with or without cause, by a majority of the Directors at the time in
office at any regular or special meeting of the Board, or, except in case of an
office chosen by the Board of Directors, by any officer upon whom such power of
removal may be conferred by the Board of Directors.
Any officer or agent may resign at any time by giving written notice to the
Board of Directors, the President or the Secretary of the corporation. Any such
resignation shall take effect as of the date of the receipt of such notice or at
any later time specified therein, and unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
Section 4. Vacancies. A vacancy in any office because of death,
---------
resignation, removal, disqualification, or any other cause shall be filled in
the manner prescribed in these Bylaws for regular appointments to such office.
Section 5. Chairman of the Board. The Chairman of the Board, if there
---------------------
shall be such an officer, shall, if present, preside at all meetings of the
Board of Directors and exercise and perform such other powers and duties as may
from time to time be assigned to him by the Board of Directors.
Section 6. President. Subject to such supervisory powers, if any, as may
---------
be given by the Board of Directors to the Chairman of the Board, if there be
such an officer, the President shall be the chief executive officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and affairs of the
corporation. He shall preside at all meetings of the shareholders and, in the
absence of the Chairman of the Board, at all meetings of the Board of Directors.
He shall be an ex officio member of all the standing committees, including the
-- -------
Executive Committee, if any, and shall have the general powers and duties of
management usually vested in the office of the President of a corporation and
shall have such other powers and duties as may be prescribed by the Board of
Directors.
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<PAGE>
Section 7. Vice President. In the absence or disability of the President,
--------------
the Vice Presidents, in order of their rank as fixed by the Board of Directors,
or, if not ranked, the Vice President designated by the Board of Directors,
shall perform all the duties of the President, and when so acting, shall have
all the powers of and be subject to all the restrictions upon the President.
The Vice Presidents shall have such other powers and perform such other duties
as from time to time may be prescribed for them respectively by the Board of
Directors.
Section 8. Secretary. The Secretary shall keep, or cause to be kept, a
---------
book of minutes at the principal office of the corporation, or at such other
place as the Board of Directors may order, of all meetings of Directors and
shareholders, with the time and place of holding, whether regular or special,
and if special, how authorized, the notice thereof given, the names of those
present at Directors' meetings, the number of shares present or represented at
shareholders' meetings and the proceedings thereof.
The Secretary shall keep, or cause to be kept, at the principal office of
the corporation, or at the office of the corporation's transfer agent, a share
register, or a duplicate share register, showing the names of the shareholders
and their addresses, the number and classes of shares held by each, and the
number and date of cancellation of every certificate surrendered for
cancellation.
The Secretary shall give, or cause to be given, notice of all meetings of
the shareholders and of the Board of Directors required by these Bylaws or by
law to be given, and he shall keep the seal of the corporation in safe custody
and shall have such other powers and perform such other duties as may be
prescribed by the Board of Directors.
Section 9. Treasurer. The Treasurer shall keep and maintain, or cause to
---------
be kept and maintained, adequate and correct accounts of the properties and
business transactions of the corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital surplus and shares.
Any surplus, including earned surplus, paid-in surplus and surplus arising from
a reduction of stated capital, shall be classified according to source and shown
in a separate account. The books of account shall at all reasonable times be
open to inspection by any Director.
The Treasurer shall deposit all moneys and other valuables in the name and
to the credit of the corporation with such depositories as may be designated by
the Board of Directors. He shall disburse the funds of the corporation as may
be ordered by the Board of Directors, shall render to the President and Board,
whenever they request it, an account of all of his transactions as Treasurer and
of the financial condition of the corporation, and shall have such other powers
and perform such other duties as may be prescribed by the Board of Directors.
ARTICLE V
MISCELLANEOUS
Section 1. Record Date and Closing Stock Books. The Board of Directors
-----------------------------------
may fix a time as a record date for the determination of the shareholders
entitled to notice of and to vote
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<PAGE>
at any meeting of shareholders or entitled to receive any dividend or
distribution or any allotment of rights, or to exercise rights in respect to any
change, conversion or exchange of shares. The record date so fixed shall not be
more than fifty (50) days prior to the date of the meeting or event for the
purposes of which it is fixed. When a record date is so fixed, only shareholders
who are of record on that date are entitled to notice of and to vote at the
meeting or to receive the dividend, distribution or allotment of rights, or to
exercise the rights, as the case may be, notwithstanding any transfer of any
shares on the books of the corporation after the record date.
The Board of Directors may close the books of the corporation against
transfers of shares during the whole or any part of a period not more than fifty
(50) days prior to the date of a shareholders' meeting, the date when the right
to any dividend, distribution or allotment of rights vests, or the effective
date of any change, conversion or exchange of shares.
Section 2. Inspection of Corporate Records. The share register or
-------------------------------
duplicate share register, the books of account and minutes of proceedings of the
shareholders, the Board of Directors and the Executive Committee shall be open
to inspection upon the written demand of any shareholder, or the holder of a
voting trust certificate, at any reasonable time and for a purpose reasonably
related to his interests as a shareholder, or as the holder of such voting trust
certificate, and shall be exhibited at any time when required by demand at any
shareholders' meeting of ten percent (10%) of the shares represented at the
meeting. Such inspection may be made in person or by an agent or attorney and
shall include the right to make extracts. Demand of inspection, other than at a
shareholders' meeting, shall be made in writing upon the President, Secretary or
Assistant Secretary of the corporation.
Every Director shall have the right at any reasonable time to inspect the
books, records, documents of every kind, and the physical properties of the
corporation and of its subsidiary corporations, domestic or foreign.
Section 3. Certificates for Shares. A certificate or certificates for
-----------------------
shares of the corporation (in such form as may be approved from time to time by
the Board of Directors) shall be issued to each stockholder when such shares are
fully paid. The certificates shall be numbered and the holder's name, number of
shares and the date of issue shall be entered in the books of the corporation as
they are issued. The certificates shall exhibit the holder's name, the number
and class of shares evidenced thereby or a statement that the shares are without
par value, and such additional information as may be required by the Board of
Directors. They shall be signed by the President or a Vice President and the
Secretary or an Assistant Secretary, or be authenticated by facsimiles of the
signatures of the President and the Secretary. Every certificate authenticated
by a facsimile of a signature must be countersigned by a transfer clerk.
Section 4. Transfer of Stock. The corporation shall recognize the right
-----------------
of the person registered on its books as owner of shares to receive dividends
and to vote as such owner. Shares may be transferred on the books of the
corporation only by the person named in the certificate as the owner thereof, or
by his agent, attorney or legal representative, upon surrender to the Secretary
of the corporation of a certificate, duly endorsed or accompanied by proper
Amended and Restated Bylaws (Revised May 1, 1996)
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<PAGE>
evidence of succession, assignment or authority to transfer. The Secretary shall
thereupon cause a new certificate to be issued to the person entitled thereto
and shall cancel the old certificate and record the transaction upon the books
of the corporation.
Section 5. Lost Certificates. New certificates for shares or other
-----------------
securities of the corporation may be issued for and in place of any such
instrument theretofore issued which is alleged to have been lost or destroyed.
The Directors may, in their discretion, require the owner of such lost or
destroyed instrument, or his legal representative, to give the corporation a
bond or other security in an adequate amount as indemnity against any claim that
may be made against the corporation. A new instrument may be issued, however,
without requiring any bond or other security when in the judgment of the
Directors it is proper to do so.
Section 6. Corporate Seal. A corporate seal shall be provided and
--------------
adopted by the Board of Directors and shall contain the name of the corporation
and such other wording as the Board may deem suitable or as may be required by
law.
Section 7. Contracts - Execution of Documents. The Board of Directors may
----------------------------------
authorize any officer or officers, agent or agents to enter into any contract or
execute any instrument in the name of and on behalf of the corporation, and such
authority may be general or confined to specific instances, and unless so
authorized by the Board of Directors, no officer, agent or employee shall have
any power or authority to bind the corporation by any contract or engagement or
to pledge its credit or to render it liable for any purpose or in any amount;
except, however, the club membership secretary may execute membership
application agreements on behalf of the corporation.
All checks, drafts or other orders for payment of money, notes or other
evidences of indebtedness issued in the name of or payable to the corporation
shall be signed or endorsed by such person or persons and in such manner as from
time to time shall be determined by resolution of the Board of Directors.
Section 8. Representation of Shares of Other Corporations. The President
----------------------------------------------
or any Vice President and the Secretary or Assistant Secretary of this
corporation are authorized to vote, represent and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority herein
granted to said officers to vote or represent on behalf of this corporation any
and all shares held by this corporation in any other corporation or corporations
may be exercised either by such officers in person or by any person authorized
so to do by proxy or power of attorney duly executed by said officers.
Section 9. Inspection of Bylaws. The corporation shall keep in its
--------------------
principal office for the transaction of business the original or a copy of these
Bylaws, as amended or otherwise altered to date, certified by the Secretary,
which shall be open to inspection by the shareholders at all reasonable times
during office hours.
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<PAGE>
ARTICLE VI
AMENDMENTS
Section 1. Power of Shareholders. New Bylaws may be adopted or these
---------------------
Bylaws may be amended or repealed by the vote of shareholders entitled to
exercise a majority of the voting power of the corporation or by the written
consent of such shareholders, except as otherwise provided by the Articles of
Incorporation, provided that the vote of written consent of shareholders holding
more than seventy-five percent (75%) of the voting power of the corporation
shall be required to reduce the authorized number of Directors.
Section 2. Power of Directors. Subject to the right of shareholders to
------------------
adopt, amend or repeal these Bylaws, these Bylaws, other than a Bylaw or
amendment thereof changing the authorized number of Directors, may be adopted,
amended or repealed by the Board of Directors at any regular or special meeting
thereof.
Amended and Restated Bylaws (Revised May 1, 1996)
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<PAGE>
EXHIBIT 3.7
ARTICLES OF INCORPORATION
-------------------------
OF
--
PECAN GROVE GOLF CLUB, INC.
---------------------------
The undersigned natural person, of the age of eighteen (18) years or more,
acting as incorporator of a corporation under the Texas Business Corporation
Act, hereby adopts the following Articles of Incorporation for such corporation.
ARTICLE ONE
-----------
The name of the corporation is Pecan Grove Golf Club, Inc.
ARTICLE TWO
-----------
The period of its duration is perpetual.
ARTICLE THREE
-------------
The purpose for which the corporation is organized is to engage in the
businesses of establishing, developing, building, designing, constructing,
maintaining, managing, operating, buying, selling, acquiring, leasing, trading,
and dealing in one or more private clubs and/or restaurants for the providing of
refreshments, entertainment, exercise, health, and athletic facilities and
social diversions for their members and guests and to afford all customary
privileges and accommodations of a private club for profit, and to engage in
such other related activities and make such other investments as the Board of
Directors of the corporation may from time to time deem advisable, both within
and without the State of Texas, and to do all things incidental thereto or
connected therewith which are necessary, proper, advisable, or convenient in the
premises and are not forbidden by law.
ARTICLE FOUR
------------
The aggregate number of shares of capital stock which the corporation has
authority to issue is one thousand (1,000) shares of common stock of the par
value of One Dollar ($1.00). The shares shall be designated as common stock and
shall have identical rights, privileges, and powers in every respect. Cumulative
voting shall not be allowed and no shareholder shall have any preemptive rights.
Articles of Incorporation - Texas Page 1
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<PAGE>
ARTICLE FIVE
------------
The corporation will not commence business until it has received for the
issuance of its shares consideration of the value of One Thousand Dollars
($1,000.00), consisting of money, labor done, or property actually received.
ARTICLE SIX
-----------
The address of its initial registered office is 350 North St. Paul Street,
Dallas, Texas 75201, and the name of its initial registered agent at such
address is C T Corporation System.
ARTICLE SEVEN
-------------
The number of directors constituting the initial board of directors is
three (3), and the names and addresses of the persons who shall serve as
directors until the first annual meeting of the shareholders or until their
successors are elected and qualified are:
Murry E. Page 15770 Dallas Parkway,
5th Floor
Dallas, Texas 75248
Randolph D. Addison 15770 Dallas Parkway
5th Floor
Dallas, Texas 75248
Douglas C. Peter 15770 Dallas Parkway
5th Floor
Dallas, Texas 75248
ARTICLE EIGHT
-------------
The name and address of the incorporator is Linda Blanton-Myers, 15770
Dallas Parkway, 5th Floor, Dallas, Texas 75248.
/S/ Linda Blanton-Myers
______________________________
Linda Blanton-Myers
Articles of Incorporation - Texas Page 2
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<PAGE>
EXHIBIT 3.8
AMENDED AND RESTATED BYLAWS FOR THE REGULATION, EXCEPT AS
OTHERWISE PROVIDED BY STATUTE OR ITS
ARTICLES OF INCORPORATION, OF
PECAN GROVE GOLF CLUB, INC.
ARTICLE I
OFFICES
Section 1. Principal Office. The corporation will maintain offices for
----------------
the transaction of business of the corporation at 3702 Via de al Valle, Suite
202, Del Mar, California 92014.
Section 2. Other Offices. Branch or affiliate offices may at any time be
-------------
established by the Board of Directors at any place or places where the
corporation is qualified to do business.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. Place of Meetings. All meetings of shareholders shall be held
-----------------
at the principal office of the corporation or at any other place which may be
(i) designated by the Board of Directors, or (ii) consented to by the written
consent of all shareholders entitled to vote thereat, given either before or
after the meeting and filed with the Secretary of the corporation, or (iii) in
the city of residence of any shareholder holding over two-thirds of the capital
stock of the corporation.
Section 2. Annual Meetings. The annual meeting of shareholders shall be
---------------
on the 2nd Monday of December in each year at 10:00 a.m.; provided, however,
that should said day fall upon a legal holiday, then any such annual meeting of
shareholders shall be held at the same time and place on the next day thereafter
ensuing which is not a legal holiday. At such meetings, Directors shall be
elected, reports of the affairs of the corporation shall be considered, and any
other business may be transacted which is within the power of the shareholders.
Section 3. Special Meetings. Special meetings of the shareholders for any
----------------
purpose whatsoever may be called at any time either by the President or by the
Board of Directors, to be held at such time as he or they may designate. In
addition, one or more shareholders holding not less than one-fifth of the voting
power of the corporation may call such a meeting by causing a written request to
be sent by registered mail or delivered personally to the President, Vice
President or Secretary. The officer forthwith shall cause notice to be given,
as provided below, that a meeting will be held at a time, fixed by the officer,
not less than ten (10) nor more than sixty (60) days after the receipt of the
request.
Amended Bylaws (Revised May 1, 1996) page 1
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<PAGE>
Section 4. Notice of Meeting. Not less than ten (10) days prior to any
-----------------
meeting of shareholders, the Secretary or his delegate shall cause written
notice of such meeting to be given to all shareholders entitled to vote thereat.
If a shareholder gives no address, notice shall be deemed to have been duly
given if sent by mail or other means of written communication addressed to the
place where the principal office of the corporation is situated, or if published
at least once in a newspaper of general circulation in the county in which said
office is located.
The notice shall specify the place, the day and the hour of such meeting,
and, in the case of a special meeting, the general nature of the business to be
transacted. No action may be taken at any meeting of shareholders on any of the
following proposals unless the notice thereof specifies the general nature of
the proposal: (a) a proposal to sell, lease, convey, exchange, transfer or
otherwise dispose of all, or substantially all, of the property or assets of the
corporation, (b) a proposal to merge or consolidate with another corporation,
domestic or foreign, (c) a proposal to reduce the stated capital of the
corporation, (d) a proposal to amend the Articles of Incorporation, (e) a
proposal to wind up and dissolve the corporation, or (f) a proposal to adopt a
plan of distribution of shares, securities, or any other consideration (other
than money) in the process of winding up.
Section 5. Consent of Absentees. The transactions conducted at any
--------------------
meeting of shareholders, either annual or special, however called and noticed,
shall be as valid as though had at a meeting duly held after regular call and
notice, if a quorum be present either in person or by proxy, and if, either
before or after the meeting, each of the shareholders entitled to vote, not
present in person or by proxy, signs a written waiver of notice, a consent to
the holding of such meeting, or an approval of the minutes thereof. All such
waivers, consents or approvals shall be filed with the corporate records or
made a part of the minutes of the meeting.
Section 6. Quorum. The presence in person or by proxy of persons entitled
------
to vote a majority of the voting shares at any meeting shall constitute a quorum
for the transaction of business. The shareholders present at a duly called or
held meeting at which a quorum is present may continue to do business until
adjournment, notwithstanding the withdrawal of enough shareholders to leave less
than a quorum.
Section 7. Voting. Unless a record date for voting purposes be fixed, as
------
hereinafter provided, only persons in whose names shares entitled to vote stand
on the stock records of the corporation as of the date of such meeting shall be
entitled to vote thereat. Except as otherwise provided by law or the Articles
of Incorporation, every shareholder shall be entitled to one vote for each share
standing in his name on the record of shareholders of the corporation. Voting
rights shall be noncumulative. Except as otherwise provided herein or in the
Articles of Incorporation, all corporate actions shall be determined by vote of
a majority of the votes cast at a meeting of shareholders entitled to vote
thereat. Such vote may be viva voce or by ballot; provided, however, that all
---- ----
elections for Directors must be by ballot upon demand made by a shareholder at
any election and before the voting begins. The candidates receiving the highest
number of votes up to the number of Directors to be elected shall be elected.
Amended Bylaws (Revised May 1, 1996) page 2
- --------------
<PAGE>
Section 8. Proxies. Every person entitled to vote or execute consents
-------
shall have the right to do so either in person or by one or more agents
authorized by a written proxy executed by such person or his duly authorized
agent and filed with the Secretary of the corporation.
Section 9. Adjourned Meetings and Notice Thereof. Any shareholders'
-------------------------------------
meeting, annual or special, whether or not a quorum is present, may be adjourned
from time to time by the vote of a majority of the shares, the holders of which
are either present in person or represented by proxy thereat, but in the absence
of a quorum, no other business may be transacted at such meeting.
When any shareholders' meeting, either annual or special, is adjourned for
thirty (30) days or more, notice of the adjourned meeting shall be given as in
the case of an original meeting. Except as provided above, it shall not be
necessary to give any notice of any adjournment or of the business to be
transacted at any adjourned meeting other than by announcement at the meeting at
which such adjournment is taken.
Section 10. Action Without Meeting. Any action which may be taken at a
----------------------
meeting of the shareholders may be taken without a meeting if authorized by a
writing signed by all of the persons who would be entitled to vote upon such
action at a meeting and filed with the Secretary of the corporation; provided,
however, a meeting shall be held for dissolution, transfer of all or
substantially all of the assets of the corporation, or for merger or
consolidation of the corporation with other corporations, if same is required
under applicable law.
ARTICLE III
DIRECTORS
Section 1. Powers. Subject to limitations imposed by law or by the
------
Articles of Incorporation, all corporate powers shall be exercised by or under
the authority of, and the business and affairs of the corporation shall be
controlled by, the Board of Directors. In the exercise of its powers, the
Board may appoint an Executive Committee and other committees and may delegate
to the Executive Committee any of the powers and authority of the Board in the
management of the business and affairs of the corporation, except the power to
declare dividends and to adopt, amend or repeal bylaws. The Executive Committee
shall be composed of two or more Directors.
Section 2. Number of Directors. The authorized number of Directors of the
-------------------
corporation shall be not less than one nor more than five until changed by
amendment of the Articles of Incorporation or by a bylaw duly adopted by the
shareholders amending this section. Directors need not be shareholders of the
corporation.
Section 3. Election and Term of Office. The Directors shall be elected at
---------------------------
the annual meeting of shareholders, but if any such annual meeting is not held
or the Directors are not elected thereat, Directors may be elected at any
special meeting of shareholders held for that purpose. Directors shall hold
office until the election and qualification of their respective successors.
Amended Bylaws (Revised May 1, 1996) page 3
- --------------
<PAGE>
Section 4. Vacancies. Vacancies in the Board of Directors may be filled
---------
by a majority of the remaining Directors, though less than a quorum, or by a
sole remaining Director, and each Director so elected shall hold office until
his successor is elected at an annual or a special meeting of the shareholders.
If the entire Board of Directors resigns at one time, the shareholders shall,
within a reasonable time thereafter, at a regular or special meeting, as
provided herein, elect a new Board of Directors.
A vacancy in the Board of Directors shall be deemed to exist in the case of
the death, resignation or removal of any Director, or if at any annual or
special meeting of shareholders at which any Director is elected the authorized
number of Directors is increased or if the shareholders fail to elect the full
authorized number of Directors to be voted for at that meeting.
The shareholders may elect a Director or Directors at any time to fill any
vacancy or vacancies not filled by the remaining Director or Directors. If the
Board of Directors accepts the resignation of a Director tendered to take
effect at a future time, the Board or the shareholders shall have the power to
elect a successor to take office when the resignation is to become effective.
No reduction of the authorized number of Directors shall have the effect of
removing any Director prior to the expiration of his term of office.
Section 5. Quorum. A majority of the authorized number of Directors shall
------
be necessary to constitute a quorum of the Board for the transaction of
business. Every act or decision done or made by a majority of the Directors
present at a meeting duly held at which a quorum is present shall be regarded as
the act of the Board of Directors, unless a greater number be required by law.
Section 6. Place of Directors' Meetings. Meetings of the Board of
----------------------------
Directors shall be held at the principal office of the corporation, or at any
other location which has been designated by resolution of the Board, or by
written consent of all of the Directors.
Section 7. Regular Meetings. Immediately following each annual meeting
-----------------
of shareholders, the Board of Directors shall hold a regular meeting for the
purpose of electing officers and transacting any other business which may come
before them. No notice of such meeting need be given.
Section 8. Special Meetings. Special meetings of the Board of Directors
----------------
for any purpose or purposes shall be called by the President, or, if he is
absent or unable or refuses to act, by any Vice President or by any two
Directors.
Written notice of the time and place of special meetings shall be delivered
personally to each Director or sent to each Director by mail or other form of
written communication, charges prepaid, addressed to him at his address as is
shown upon the records of the corporation, or, if it is not so shown and if it
is not readily ascertainable, addressed to him at the city or place where the
meetings of the Directors are regularly held. Notices mailed or telegraphed
shall be deposited in the United States mail or delivered to the telegraph
company
Amended Bylaws (Revised May 1, 1996) page 4
- --------------
<PAGE>
at the place where the principal office of the corporation is located at
least forty-eight (48) hours prior to the time of the holding of the meeting,
and notices delivered personally shall be so delivered at least twenty-four (24)
hours prior to the time of the holding of the meeting.
Section 9. Notice of Adjournment. Notice of the time and place of holding
---------------------
an adjourned meeting need not be given to absent Directors if the time and place
are fixed at the meeting adjourned.
Section 10. Waiver of Notice: Consent to Meeting. The transactions
-------------------------------------
conducted at any meeting of the Board of Directors, however called or noticed or
wherever held, shall be as valid as though conducted at a meeting duly held
after regular call and notice if a quorum is present and if, either before or
after the meeting, each of the Directors signs a waiver of notice, a consent to
hold such a meeting, or an approval of the minutes thereof. All such waivers,
consents or approvals shall be filed with the corporate records and made a part
of the minutes of the meeting.
Section 11. Adjournment. A quorum of the Directors may adjourn to meet
-----------
again at a set day and hour, and in the ence of a quorum, a majority of the
Directors present may adjourn from time to time until the time fixed for the
next regular meeting of the Board.
Section 12. Action Without Meeting. Any action required or permitted to
----------------------
be taken by the Board of Directors may be taken without a meeting if all members
of the Board shall individually or collectively consent in writing to such
action. Such written consent or consents shall be filed with the minutes of the
proceedings of the Board. Such action by written consent shall have the same
force and effect as a unanimous vote of such Directors.
Section 13. Fees and Compensation. Directors shall not receive any stated
---------------------
salary for their services as Directors, but by resolution of the Board, a fee or
other remuneration, with or without expenses of attendance, may be allowed for
attendance at each meeting. Nothing herein contained shall be construed to
preclude any Director from serving the corporation in any other capacity as an
officer, agent or employee, or otherwise, and receiving compensation therefor.
Section 14. Indemnification of Directors, Officers
--------------------------------------
and Employees.
-------------
A. In the event a person is sued, either alone or with others, because he
is or was a Director, officer or employee of the corporation, in any proceeding
arising out of his alleged misfeasance or nonfeasance in the performance of his
duties as such Director, officer or employee, or out of any alleged wrongful act
by the corporation, he shall be indemnified for his reasonable expenses,
including attorneys' fees incurred in the defense of the proceeding, if both of
the following conditions exist: (i) the person sued is successful in whole or in
part, or the proceeding against him is settled with the approval of the court,
and (ii) the court finds that his conduct fairly and equitable merits such
indemnity.
The amount of such indemnity may be assessed against the corporation, its
receiver, its trustee, or any other proper party, by the court in the same or in
a separate proceeding and
Amended Bylaws (Revised May 1, 1996) page 5
- --------------
<PAGE>
shall be so much of the expenses, including attorneys' fees incurred in the
defense of the action as the court determines and finds to be reasonable.
Application for such indemnity may be made either by a person sued or by the
attorney or other person rendering services to him in connection with the
defense, and the court may order fees and expenses to be paid directly to the
attorney or other person although he is not a party to the proceeding. Notice of
the application for such indemnity shall be served upon the corporation, its
receiver, or its trustee and upon the plaintiff and other parties to the
proceeding. The court may also order notice to be given to the shareholders in
the manner provided elsewhere in these bylaws for giving notice of shareholders'
meetings, in such form as the court directs.
B. Notwithstanding the foregoing provisions, the Board of Directors may
authorize the corporation to pay expenses incurred by or to satisfy a judgment
or fine rendered or levied against a present or former Director, officer or
employee of the corporation in an action brought by a third party against such
person (whether or not the corporation is joined as a party defendant) to impose
a liability or penalty on such person for an act alleged to have been committed
by such person in the performance of his duties as such Director, officer or
employee, or by the corporation, or by both, provided the Board of Directors
determines that such Director, officer or employee was acting in good faith
within what he reasonably believed to be the scope of his employment or
authority and for a purpose which he reasonably believed to be in the best
interests of the corporation or its shareholders. Payments authorized hereunder
include amounts paid and expenses incurred in settling any such action or
threatened action. This Paragraph does not apply to any action instituted or
maintained as the right of the corporation by a shareholder or holder of a
voting trust certificate representing shares of the corporation.
C. The provisions of this Section shall apply to the estate, executor,
administrator, heirs, legatees or devisees of any such present or former
Director, officer or employee of the corporation.
D. The Board of Directors may, at its discretion, authorize the purchase
of a policy or policies of insurance against any liability of the corporation to
indemnify any person pursuant to this Section, containing such terms and
conditions as the Board may deem appropriate. Such policy or policies may
include provisions for the direct indemnification of directors, officers or
other persons for expenses of a kind not subject to indemnification hereunder,
provided the premiums on such combined policy are, in the judgment of the Board,
fairly allocated between the corporation and the insured persons.
E. The foregoing provisions of this Section 14 shall not be considered as
limiting the right of indemnification permitted by the Texas Business
Corporation Act, Article 2.021, but indemnification shall be to the maximum
extent permitted under Texas Business Corporation Act, Article 2.02-1.
ARTICLE IV
OFFICERS
Amended Bylaws (Revised May 1, 1996) page 6
- --------------
<PAGE>
Section 1. Officers. The corporation shall have a President, one or more
--------
Vice Presidents, a Secretary and a Treasurer. Such officers shall be elected
annually by the Board of Directors and each shall hold office until he shall
resign or shall be removed or otherwise disqualified to serve and until his
successor shall be elected.
Section 2. Other Officers. The corporation may also have, in the
--------------
discretion of the Board of Directors, a Chairman of the Board, one or more
Assistant Secretaries, one or more Assistant Treasurers, and such other officers
and agents shall hold office for such terms and have such authority and perform
such duties as the Board of Directors may from time to time specify, and shall
hold office until they shall resign or shall be removed or otherwise
disqualified to serve.
Section 3. Removal and Resignation. Any officer or agent may be removed,
-----------------------
either with or without cause, by a majority of the Directors at the time in
office at any regular or special meeting of the Board, or, except in case of an
office chosen by the Board of Directors, by any officer upon whom such power of
removal may be conferred by the Board of Directors.
Any officer or agent may resign at any time by giving written notice to the
Board of Directors, the President or the Secretary of the corporation. Any such
resignation shall take effect as of the date of the receipt of such notice or at
any later time specified therein, and unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
Section 4. Vacancies. A vacancy in any office because of death,
---------
resignation, removal, disqualification, or any other cause shall be filled in
the manner prescribed in these Bylaws for regular appointments to such office.
Section 5. Chairman of the Board. The Chairman of the Board, if there
---------------------
shall be such an officer, shall, if present, preside at all meetings of the
Board of Directors and exercise and perform such other powers and duties as may
from time to time be assigned to him by the Board of Directors.
Section 6. President. Subject to such supervisory powers, if any, as may
---------
be given by the Board of Directors to the Chairman of the Board, if there be
such an officer, the President shall be the chief executive officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and affairs of the
corporation. He shall preside at all meetings of the shareholders and, in the
absence of the Chairman of the Board, at all meetings of the Board of Directors.
He shall be an ex officio member of all the standing committees, including the
-- -------
Executive Committee, if any, and shall have the general powers and duties of
management usually vested in the office of the President of a corporation and
shall have such other powers and duties as may be prescribed by the Board of
Directors.
Section 7. Vice President. In the absence or disability of the President,
--------------
the Vice Presidents, in order of their rank as fixed by the Board of Directors,
or, if not ranked, the Vice President designated by the Board of Directors,
shall perform all the duties of the President, and when so acting, shall have
all the powers of and be subject to all the restrictions upon the
Amended Bylaws (Revised May 1, 1996) page 7
- --------------
<PAGE>
President. The Vice Presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
Board of Directors.
Section 8. Secretary. The Secretary shall keep, or cause to be kept, a
---------
book of minutes at the principal office of the corporation, or at such other
place as the Board of Directors may order, of all meetings of Directors and
shareholders, with the time and place of holding, whether regular or special,
and if special, how authorized, the notice thereof given, the names of those
present at Directors' meetings, the number of shares present or represented at
shareholders' meetings and the proceedings thereof.
The Secretary shall keep, or cause to be kept, at the principal office of
the corporation, or at the office of the corporation's transfer agent, a share
register, or a duplicate share register, showing the names of the shareholders
and their addresses, the number and classes of shares held by each, and the
number and date of cancellation of every certificate surrendered for
cancellation.
The Secretary shall give, or cause to be given, notice of all meetings of
the shareholders and of the Board of Directors required by these Bylaws or by
law to be given, and he shall keep the seal of the corporation in safe custody
and shall have such other powers and perform such other duties as may be
prescribed by the Board of Directors.
Section 9. Treasurer. The Treasurer shall keep and maintain, or cause to
---------
be kept and maintained, adequate and correct accounts of the properties and
business transactions of the corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital surplus and shares.
Any surplus, including earned surplus, paid-in surplus and surplus arising from
a reduction of stated capital, shall be classified according to source and shown
in a separate account. The books of account shall at all reasonable times be
open to inspection by any Director.
The Treasurer shall deposit all moneys and other valuables in the name and
to the credit of the corporation with such depositories as may be designated by
the Board of Directors. He shall disburse the funds of the corporation as may
be ordered by the Board of Directors, shall render to the President and Board,
whenever they request it, an account of all of his transactions as Treasurer and
of the financial condition of the corporation, and shall have such other powers
and perform such other duties as may be prescribed by the Board of Directors.
ARTICLE V
MISCELLANEOUS
Section 1. Record Date and Closing Stock Books. The Board of Directors
-----------------------------------
may fix a time as a record date for the determination of the shareholders
entitled to notice of and to vote at any meeting of shareholders or entitled to
receive any dividend or distribution or any allotment of rights, or to exercise
rights in respect to any change, conversion or exchange of shares. The record
date so fixed shall not be more than fifty (50) days prior to the date of the
meeting or event for the purposes of which it is fixed. When a record date is
so fixed, only shareholders who are of record on that date are entitled to
notice of and to vote at the meeting
Amended Bylaws (Revised May 1, 1996) page 8
- --------------
<PAGE>
or to receive the dividend, distribution or allotment of rights, or to exercise
the rights, as the case may be, notwithstanding any transfer of any shares on
the books of the corporation after the record date.
The Board of Directors may close the books of the corporation against
transfers of shares during the whole or any part of a period not more than fifty
(50) days prior to the date of a shareholders' meeting, the date when the right
to any dividend, distribution or allotment of rights vests, or the effective
date of any change, conversion or exchange of shares.
Section 2. Inspection of Corporate Records. The share register or
-------------------------------
duplicate share register, the books of account and minutes of proceedings of the
shareholders, the Board of Directors and the Executive Committee shall be open
to inspection upon the written demand of any shareholder, or the holder of a
voting trust certificate, at any reasonable time and for a purpose reasonably
related to his interests as a shareholder, or as the holder of such voting trust
certificate, and shall be exhibited at any time when required by demand at any
shareholders' meeting of ten percent (10%) of the shares represented at the
meeting. Such inspection may be made in person or by an agent or attorney and
shall include the right to make extracts. Demand of inspection, other than at a
shareholders' meeting, shall be made in writing upon the President, Secretary or
Assistant Secretary of the corporation.
Every Director shall have the right at any reasonable time to inspect the
books, records, documents of every kind, and the physical properties of the
corporation and of its subsidiary corporations, domestic or foreign.
Section 3. Certificates for Shares. A certificate or certificates for
-----------------------
shares of the corporation (in such form as may be approved from time to time by
the Board of Directors) shall be issued to each stockholder when such shares are
fully paid. The certificates shall be numbered and the holder's name, number of
shares and the date of issue shall be entered in the books of the corporation as
they are issued. The certificates shall exhibit the holder's name, the number
and class of shares evidenced thereby or a statement that the shares are without
par value, and such additional information as may be required by the Board of
Directors. They shall be signed by the President or a Vice President and the
Secretary or an Assistant Secretary, or be authenticated by facsimiles of the
signatures of the President and the Secretary. Every certificate authenticated
by a facsimile of a signature must be countersigned by a transfer clerk.
Section 4. Transfer of Stock. The corporation shall recognize the right
-----------------
of the person registered on its books as owner of shares to receive dividends
and to vote as such owner. Shares may be transferred on the books of the
corporation only by the person named in the certificate as the owner thereof, or
by his agent, attorney or legal representative, upon surrender to the Secretary
of the corporation of a certificate, duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer. The Secretary
shall thereupon cause a new certificate to be issued to the person entitled
thereto and shall cancel the old certificate and record the transaction upon the
books of the corporation.
Section 5. Lost Certificates. New certificates for shares or other
-----------------
securities of the corporation may be issued for and in place of any such
instrument theretofore issued which
Amended Bylaws (Revised May 1, 1996) page 9
- --------------
<PAGE>
is alleged to have been lost or destroyed. The Directors may, in their
discretion, require the owner of such lost or destroyed instrument, or his legal
representative, to give the corporation a bond or other security in an adequate
amount as indemnity against any claim that may be made against the corporation.
A new instrument may be issued, however, without requiring any bond or other
security when in the judgment of the Directors it is proper to do so.
Section 6. Corporate Seal. A corporate seal shall be provided and
--------------
adopted by the Board of Directors and shall contain the name of the corporation
and such other wording as the Board may deem suitable or as may be required by
law.
Section 7. Contracts - Execution of Documents. The Board of Directors may
----------------------------------
authorize any officer or officers, agent or agents to enter into any contract or
execute any instrument in the name of and on behalf of the corporation, and such
authority may be general or confined to specific instances, and unless so
authorized by the Board of Directors, no officer, agent or employee shall have
any power or authority to bind the corporation by any contract or engagement or
to pledge its credit or to render it liable for any purpose or in any amount;
except, however, the club membership secretary may execute membership
application agreements on behalf of the corporation.
All checks, drafts or other orders for payment of money, notes or other
evidences of indebtedness issued in the name of or payable to the corporation
shall be signed or endorsed by such person or persons and in such manner as from
time to time shall be determined by resolution of the Board of Directors.
Section 8. Representation of Shares of Other Corporations. The President
----------------------------------------------
or any Vice President and the Secretary or Assistant Secretary of this
corporation are authorized to vote, represent and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority herein
granted to said officers to vote or represent on behalf of this corporation any
and all shares held by this corporation in any other corporation or corporations
may be exercised either by such officers in person or by any person authorized
so to do by proxy or power of attorney duly executed by said officers.
Section 9. Inspection of Bylaws. The corporation shall keep in its
--------------------
principal office for the transaction of business the original or a copy of these
Bylaws, as amended or otherwise altered to date, certified by the Secretary,
which shall be open to inspection by the shareholders at all reasonable times
during office hours.
ARTICLE VI
AMENDMENTS
Section 1. Power of Shareholders. New Bylaws may be adopted or these
---------------------
Bylaws may be amended or repealed by the vote of shareholders entitled to
exercise a majority of the voting power of the corporation or by the written
consent of such shareholders, except as otherwise provided by the Articles of
Incorporation, provided that the vote of written consent of
Amended Bylaws (Revised May 1, 1996) page 10
- --------------
<PAGE>
shareholders holding more than seventy-five percent (75%) of the voting power of
the corporation shall be required to reduce the authorized number of Directors.
Section 2. Power of Directors. Subject to the right of shareholders to
------------------
adopt, amend or repeal these Bylaws, these Bylaws, other than a Bylaw or
amendment thereof changing the authorized number of Directors, may be adopted,
amended or repealed by the Board of Directors at any regular or special meeting
thereof.
Amended Bylaws (Revised May 1, 1996) page 11
- --------------
<PAGE>
EXHIBIT 3.9
ARTICLES OF INCORPORATION
OF
THE LIQUOR CLUB AT PECAN GROVE, INC.
We, the undersigned natural persons of the age of twenty-one (21)
years or more, at least two (2) of whom are citizens of the State of Texas,
acting as incorporators of a corporation under the Texas Business Corporation
Act, do hereby adopt the following Articles of Incorporation for such
corporation:
ARTICLE I
The name of the corporation is:
THE LIQUOR CLUB AT PECAN GROVE, INC.
ARTICLE II
The period of its duration is perpetual.
ARTICLE III
The purpose or purposes for which the corporation is organized is,
generally, to buy, sell, and deal in personal property, real property and
services subject to Part Four of the Texas Miscellaneous Corporation Laws Act;
to buy and sell alcoholic beverages; and, to do any other act permitted or
allowed by law.
This corporation shall have the power to do everything necessary,
proper, advisable, or convenient for the accomplishment of any of the purposes
stated above; provided, however, that nothing herein shall be construed to
authorize the corporation to carry on any business, exercise any power or to do
any act which the corporation may not under the Texas Business Corporation Act
lawfully carry on, exercise or do.
ARTICLE IV
The aggregate number of shares which the corporation shall have the
authority to issue is 500,000 shares of Common stock with a par value of $1.00
per share, each share of which has full voting rights with respect to the
election of Directors and other matters of corporation business.
<PAGE>
ARTICLE V
The corporation will not commence business until it has received for
the issuance of its shares consideration of the value of One Thousand and no/100
Dollars ($1,000.00) consisting of money, labor done, or property actually
received.
ARTICLE VI
The post office address of its initial registered office is 1900 St.
James Place, Suite 120, Houston, Texas 77056; the name of its initial registered
agent at such address is Morris Hamm.
ARTICLE VII
The number of directors constituting the initial Board of Directors is
three (3), and the names and addresses of the persons who are to serve as
directors until the first annual meeting of shareholders or until their
successors are elected and qualified are:
M.D. Belin 1900 St. James Place
Suite 120
Houston, Texas 77056
Morris Hamm 1900 St. James Place
Suite 120
Houston, Texas 77056
Greg White 1900 St. James Place
Suite 120
Houston, Texas 77056
ARTICLE VIII
The names and addresses of the incorporators are:
Jane Edgeworth 1900 St. James Place
Suite 120
Houston, Texas 77056
Morris Hamm 1900 St. James Place
Suite 120
Houston, Texas 77056
Greg White 1900 St. James Place
Suite 120
Houston, Texas 77056
-2-
<PAGE>
ARTICLE IX
To the fullest extent permitted by law, each Director or officer of
the corporation and each member of any committee of the Board of Directors of
the corporation shall, in the performance of any duty imposed or in the exercise
of any power conferred upon him by the corporation or by applicable law, be
fully protected and excused from liability if, in the exercise of ordinary care,
he acted in good faith.
IN WITNESS WHEREOF, we have hereunto set our hands, this ___ day of
August, 1979.
/s/ JANE EDGEWORTH
-------------------
Jane Edgeworth
/s/ MORRIS HAMM
-------------------
Morris Hamm
/s/ GREG WHITE
-------------------
Greg White
STATE OF TEXAS
COUNTY OF HARRIS
I, Carol Elliott, a Notary Public, do hereby certify that on this
6th day of August, 1979, personally appeared before me Jane Edgeworh, Morris
Hamm and Greg White, who each being by me first duly sworn, severally declare
that they are the persons who signed the foregoing document as incorporators,
and that the statements contained herein are true.
/s/ CAROL ELLIOTT
--------------------
Notary Public in and for
Harris County, Texas
[NOTARY SEAL]
<PAGE>
STATEMENT OF CHANGE OF REGISTERED OFFICE OR REGISTERED AGENT
OR BOTH BY A PROFIT CORPORATION
1. The name of the corporation is THE LIQUOR CLUB AT PECAN GROVE,INC.
-----------------------------------
2. The address, including street and number, of its present registered office
as shown in the records of the Secretary of State of Texas before filing
this statement is 1900 ST. JAMES PLACE, STE 120, HOUSTON TX.
-----------------------------------------
3. The address, including street and number, to which its registered
office is to be changed is 2777 ALLEN PARKWAY, HOUSTON TX 77019.
-------------------------------------
(Give new name or state "no change")
4. The name of its present registered agent, as shown in the records of the
Secretary of State of Texas, before filing this statement is MORRIS HAMM.
-----------
5. The name of its new registered agent is DONALD H. NICHOLAS.
------------------
(Give new name or state "no change")
6. The address of its registered office and the address of the office
of its registered agent, as changed, will be identical.
7. Such change was authorized by: (Check One)
A. The Board of Directors
---
X B. An officer of the corporation so authorized by the Board of
--- Directors.
/s/ DON R. CLAPSADDLE
---------------------
An Authorized Officer
Don R. Clapsaddle
Vice President
<PAGE>
FILED
In the Office of the
Secretary of State of Texas
STATEMENT OF CHANGE OF REGISTERED
OFFICE OR REGISTERED AGENT OR BOTH
BY A TEXAS DOMESTIC CORPORATION
1. The name of the corporation is The Liquor Club at Pecan Grove, Inc.
------------------------------------
2. The post office address, including street and number, of its present
registered office as shown in the records of the Secretary of State of the
State of Texas prior to filing this statement is 2777 Allen Parkway,
Houston, Texas 77019. ------------------
--------------------
3. The post office address, including street and number, to which its
registered office is to be changed is 2929 Allen Parkway, Houston Texas
77019. ---------------------------------
-----
4. The name of its present registered agent, as shown in the records of the
Secretary of State of the State of Texas, prior to filing this statement is
Donald H. Nicholas.
------------------
5. The name of its new registered agent is No Change.
---------
(Give new name or state "no change")
6. The post office address of its registered office and the post office address
of the business office of its registered agent, as changed, will be
identical.
7. Such change was authorized by: (Check one)
X A. The Board of Directors
---
B. An officer of the corporation so authorized by the Board of
--- Directors.
Dated: October 26, 1993
THE LIQUOR CLUB AT PECAN GROVE, INC.
BY: /s/ DON CLAPSADDLE
-------------------------------------
Don Clapsaddle
Vice President
<PAGE>
EXHIBIT 3.10
AMENDED AND RESTATED BYLAWS FOR THE REGULATION, EXCEPT AS
OTHERWISE PROVIDED BY STATUTE OR ITS
ARTICLES OF INCORPORATION, OF
THE LIQUOR CLUB AT PECAN GROVE, INC.
ARTICLE I
OFFICES
Section 1. Principal Office. The corporation will maintain offices for
----------------
the transaction of business of the corporation at 3702 Via de al Valle, Suite
202, Del Mar, California 92014.
Section 2. Other Offices. Branch or affiliate offices may at any time be
-------------
established by the Board of Directors at any place or places where the
corporation is qualified to do business.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. Place of Meetings. All meetings of shareholders shall be held
-----------------
at the principal office of the corporation or at any other place which may be
(i) designated by the Board of Directors, or (ii) consented to by the written
consent of all shareholders entitled to vote thereat, given either before or
after the meeting and filed with the Secretary of the corporation, or (iii) in
the city of residence of any shareholder holding over two-thirds of the capital
stock of the corporation.
Section 2. Annual Meetings. The annual meeting of shareholders shall be
---------------
on the 1st day of February in each year at 10:00 a.m.; provided, however, that
should said day fall upon a legal holiday, then any such annual meeting of
shareholders shall be held at the same time and place on the next day
thereafter ensuing which is not a legal holiday. At such meetings, Directors
shall be elected, reports of the affairs of the corporation shall be considered,
and any other business may be transacted which is within the power of the
shareholders.
Section 3. Special Meetings. Special meetings of the shareholders for any
----------------
purpose whatsoever may be called at any time either by the President or by the
Board of Directors, to be held at such time as he or they may designate. In
addition, one or more shareholders holding not less than one-fifth of the voting
power of the corporation may call such a meeting by causing a written request
to be sent by registered mail or delivered personally to the President, Vice
President or Secretary. The officer forthwith shall cause notice to be given,
as provided below, that a meeting will be held at a time, fixed by the
Amended Bylaws (Revised May 1, 1996) - A4009.6.33.34B page 1
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<PAGE>
officer, not less than ten (10) nor more than sixty (60) days after the receipt
of the request.
Section 4. Notice of Meeting. Not less than ten (10) days prior to any
-----------------
meeting of shareholders, the Secretary or his delegate shall cause written
notice of such meeting to be given to all shareholders entitled to vote thereat.
If a shareholder gives no address, notice shall be deemed to have been duly
given if sent by mail or other means of written communication addressed to the
place where the principal office of the corporation is situated, or if published
at least once in a newspaper of general circulation in the county in which said
office is located.
The notice shall specify the place, the day and the hour of such meeting,
and, in the case of a special meeting, the general nature of the business to be
transacted. No action may be taken at any meeting of shareholders on any
of the following proposals unless the notice thereof specifies the general
nature of the proposal: (a) a proposal to sell, lease, convey, exchange,
transfer or otherwise dispose of all, or substantially all, of the property or
assets of the corporation, (b) a proposal to merge or consolidate with another
corporation, domestic or foreign, (c) a proposal to reduce the stated capital of
the corporation, (d) a proposal to amend the Articles of Incorporation, (e) a
proposal to wind up and dissolve the corporation, or (f) a proposal to adopt a
plan of distribution of shares, securities, or any other consideration (other
than money) in the process of winding up.
Section 5. Consent of Absentees. The transactions conducted at any
--------------------
meeting of shareholders, either annual or special, however called and noticed,
shall be as valid as though had at a meeting duly held after regular call and
notice, if a quorum be present either in person or by proxy, and if, either
before or after the meeting, each of the shareholders entitled to vote, not
present in person or by proxy, signs a written waiver of notice, a consent to
the holding of such meeting, or an approval of the minutes thereof. All such
waivers, consents or approvals shall be filed with the corporate records or made
a part of the minutes of the meeting.
Section 6. Quorum. The presence in person or by proxy of persons
------
entitled to vote a majority of the voting shares at any meeting shall constitute
a quorum for the transaction of business. The shareholders present at a duly
called or held meeting at which a quorum is present may continue to do business
until adjournment, notwithstanding the withdrawal of enough shareholders to
leave less than a quorum.
Section 7. Voting. Unless a record date for voting purposes be fixed, as
------
hereinafter provided, only persons in whose names shares entitled to vote stand
on the stock records of the corporation as of the date of such meeting shall be
entitled to vote thereat. Except as otherwise provided by law or the
Amended Bylaws (Revised May 1, 1996) - A4009.6.33.34B page 2
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<PAGE>
Articles of Incorporation, every shareholder shall be entitled to one vote for
each share standing in his name on the record of shareholders of the
corporation. Voting rights shall be noncumulative. Except as otherwise
provided herein or in the Articles of Incorporation, all corporate actions shall
be determined by vote of a majority of the votes cast at a meeting of
shareholders entitled to vote thereat. Such vote may be viva voce or by ballot;
---- ----
provided, however, that all elections for Directors must be by ballot upon
demand made by a shareholder at any election and before the voting begins. The
candidates receiving the highest number of votes up to the number of Directors
to be elected shall be elected.
Section 8. Proxies. Every person entitled to vote or execute consents
-------
shall have the right to do so either in person or by one or more agents
authorized by a written proxy executed by such person or his duly authorized
agent and filed with the Secretary of the corporation.
Section 9. Adjourned Meetings and Notice Thereof. Any shareholders'
-------------------------------------
meeting, annual or special, whether or not a quorum is present, may be adjourned
from time to time by the vote of a majority of the shares, the holders of which
are either present in person or represented by proxy thereat, but in the absence
of a quorum, no other business may be transacted at such meeting.
When any shareholders' meeting, either annual or special, is adjourned for
thirty (30) days or more, notice of the adjourned meeting shall be given as in
the case of an original meeting. Except as provided above, it shall not be
necessary to give any notice of adjournment or of the business to be transacted
at any adjourned meeting other than by announcement at the meeting at which such
adjournment is taken.
Section 10. Action Without Meeting. Any action which may be taken at a
----------------------
meeting of the shareholders may be taken without a meeting if authorized by a
writing signed by all of the persons who would be entitled to vote upon such
action at a meeting and filed with the Secretary of the corporation; provided,
however, a meeting shall be held for dissolution, transfer of all or
substantially all of the assets of the corporation, or for merger or
consolidation of the corporation with other corporations, if same is required
under applicable law.
ARTICLE III
DIRECTORS
Section. Powers. Subject to limitations imposed by law or by the Articles
------
of Incorporation, all corporate powers shall be exercised by or under the
authority of, and the business and affairs of the corporation shall be
controlled by, the Board of Directors. In the exercise of its powers, the Board
may appoint an Executive Committee and other committees and may delegate to
Amended Bylaws (Revised May 1, 1996) - A4009.6.33.34B page 3
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<PAGE>
the Executive Committee any of the powers and authority of the Board in the
management of the business and affairs of the corporation, except the power to
declare dividends and to adopt, amend or repeal bylaws. The Executive Committee
shall be composed of two or more Directors.
Section 2. Number of Directors. The authorized number of Directors of the
-------------------
corporation shall be not less than one or more than five until changed by
amendment of the Articles of Incorporation or by a bylaw duly adopted by the
shareholders amending this section. Directors need not be shareholders of the
corporation.
Section 3. Election and Term of Office. The Directors shall be elected at
---------------------------
the annual meeting of shareholders, but if any such annual meeting is not held
or the Directors are not elected thereat, Directors may be elected at any
special meeting of shareholders held for that purpose. Directors shall hold
office until the election and qualification of their respective successors.
Section 4. Vacancies. Vacancies in the Board of Directors may be filled
---------
by a majority of the remaining Directors, though less than a quorum, or by a
sole remaining Director, and each Director so elected shall hold office until
his successor is elected at an annual or a special meeting of the shareholders.
If the entire Board of Directors resigns at one time, the shareholders shall,
within a reasonable time thereafter, at a regular or special meeting, as
provided herein, elect a new Board of Directors.
A vacancy in the Board of Directors shall be deemed to exist in the case of
the death, resignation or removal of any Director, or if at any annual or
special meeting of shareholders at which any Director is elected the authorized
number of Directors is increased or if the shareholders fail to elect the full
authorized number of Directors to be voted for at the meeting.
The shareholders may elect a Director or Directors at any time to fill any
vacancy or vacancies not filled by the remaining Director or Directors. If the
Board of Directors accepts the resignation of a Director tendered to take effect
at a future time, the Board or the shareholders shall have the power to elect a
successor to take office when the resignation is to become effective.
No reduction of the authorized number of Directors shall have the effect of
removing any Director prior to the expiration of his term of office.
Section 5. Quorum. A majority of the authorized number of Directors shall
------
be necessary to constitute a quorum of the Board for the transaction of
business. Every act or decision done or made by a majority of the Directors
present at a meeting duly
Amended Bylaws (Revised May 1, 1996) - A4009.6.33.34B page 4
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<PAGE>
held at which a quorum is present shall be regarded as the act of the Board of
Directors, unless a greater number be required by law.
Section 6. Place of Directors' Meetings. Meetings of the Board of
----------------------------
Directors shall be held at the principal office of the corporation, or at any
other location which has been designated by resolution of the Board, or by
written consent of all of the Directors.
Section 7. Regular Meetings. Immediately following each annual meeting of
----------------
shareholders, the Board of Directors shall hold a regular meeting for the
purpose of electing officers and transacting any other business which may come
before them. No notice of such meeting need be given.
Section 8. Special Meetings. Special meetings of the Board of Directors
----------------
for any purpose or purposes shall be called by the President, or, if he is
absent or unable or refuses to act, by any Vice President or by any two
Directors.
Written notice of the time and place of special meetings shall be delivered
personally to each Director or sent to each Director by mail or other form of
written communication, charges prepaid, addressed to him at his address as is
shown upon the records of the corporation, or, if it is not so shown and if it
is not readily ascertainable, addressed to him at the city or place where the
meetings of the Directors are regularly held. Notices mailed or telegraphed
shall be deposited are regularly held. Notices mailed or telegraphed shall be
deposited in the United States mail or delivered to the telegraph company at the
place where the principal office of the corporation is located at least
forty-eight (48) hours prior to the time of the holding of the meeting, and
notices delivered personally shall be so delivered at least twenty-four (24)
hours prior to the time of the holding of the meeting.
Section 9. Notice of Adjournment. Notice of the time and place of holding
---------------------
an adjourned meeting need not be given to absent Directors if the time and place
are fixed at the meeting adjourned.
Section 10. Waiver of Notice: Consent to Meeting. The transactions
-------------------------------------
conducted at any meeting of the Board of Directors, however called or noticed or
wherever held, shall be as valid as though conducted at a meeting duly held
after regular call and notice if a quorum is present and if, either before or
after the meeting, each of the Directors signs a waiver of notice, a consent to
hold such a meeting, or an approval of the minutes thereof. All such waivers,
consents or approvals shall be filed with the corporate records and made a part
of the minutes of the meeting.
Amended Bylaws (Revised May 1, 1996) - A4009.6.33.34B page 5
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<PAGE>
Section 11. Adjournment. A quorum of the Directors may adjourn meet
-----------
again at a set day and hour, and in the presence of a quorum, a majority of the
Directors present may adjourn from time to time until the time fixed for the
next regular meeting of the Board.
Section 12. Action Without Meeting. Any action required or permitted to
----------------------
be taken by the Board of Directors may be taken without a meeting if all members
of the Board shall individually or collectively consent in writing to such
action. Such written consent or consents shall be filed with the minutes of the
proceedings of the Board. Such action by written consent shall have the same
force and effect as a unanimous vote of such Directors.
Section 13. Fees and Compensation. Directors shall not receive any stated
---------------------
salary for their services as Directors, but by resolution of the Board, a fee or
other remuneration, with or without expenses of attendance, may be allowed for
attendance at each meeting. Nothing herein contained shall be construed to
preclude any Director from serving the corporation in any other capacity as an
officer, agent or employee, or otherwise, and receiving compensation therefor.
Section 14. Indemnification of Directors, Officers and Employees.
----------------------------------------------------
A. In the event a person is sued, either alone or with others, because he
is or was a Director, officer or employee of the corporation, in any proceeding
arising out of his alleged misfeasance or nonfeasance in the performance of his
duties as such Director, officer or employee, or out of any alleged wrongful act
by the corporation, he shall be indemnified for his reasonable expenses,
including attorneys' fees incurred in the defense of the proceeding, if both of
the following conditions exist: (i) the person sued is successful in whole or
in part or the proceeding against him is settled with the approval of the court,
and (ii) the court finds that his conduct fairly and equitable merits such
indemnity.
The amount of such indemnity may be assessed against the corporation, its
receiver, its trustee, or any other proper party, by the court in the same or in
a separate proceeding and shall be so much of the expenses, including attorneys'
fees incurred in the defense of the action as the court determines and finds to
be reasonable. Application for such indemnity may be made either by a person
sued or by the attorney or other person rendering services to him in connection
with the defense, and the court may order fees and expenses to be paid directly
to the attorney or other person although he is not a party to the proceeding.
Notice of the application for such indemnity shall be served upon the
corporation, its receiver, or its trustee and upon the plaintiff and other
parties to the proceeding. The court may also order notice to be given to the
shareholders in
Amended Bylaws (Revised May 1, 1996) - A4009.6.33.34B page 6
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<PAGE>
the manner provided elsewhere in these by laws for giving notice of
shareholders' meetings, in such form as the court directs.
B. Notwithstanding the foregoing provisions, the Board of Directors may
authorize the corporation to pay expenses incurred by or to satisfy a judgment
or fine rendered or levied against a present or former Director, officer or
employee of the corporation in an action brought by a third party against such
person (whether or not the Corporation is joined as a party defendant) to
impose a liability or penalty on such person for an act alleged to have been
committed by such person in the performance of his duties as such Director,
officer or employee, or by the corporation, or by both, provided the Board of
Directors determines that such Director, officer or employee was acting in good
faith within what he reasonably believed to be the scope of his employment or
authority and for a purpose which he reasonably believed to be in the best
interests of the corporation or its shareholders. Payments authorized hereunder
include amounts paid and expenses incurred in settling any such action or
threatened action. This Paragraph does not apply to any action instituted or
maintained as the right of the corporation by a shareholder or holder of a
voting trust certificate representing shares of the corporation.
C. The provisions of this Section shall apply to the estate, executor
administrator, heirs, legatees or devisees of any such present or former
Director, officer or employee of the corporation.
D. The Board of Directors may, at its discretion, authorize the purchase
of a policy or policies of insurance against any liability of the corporation to
indemnify any person pursuant to this Section, containing such terms and
conditions as the Board may deem appropriate. Such policy or policies may
include provisions for the direct indemnification of directors, officers or
other persons for expenses of a kind not subject to indemnification hereunder,
provided the premiums on such combined policy are, in the judgment of the Board,
fairly allocated between corporation and the insured persons.
E. The foregoing provisions of this Section 14 shall not be considered as
limiting the right of indemnification permitted by the Texas Business
Corporation Act, Article 2.02-1.
ARTICLE IV
OFFICERS
Section 1. Officers. The corporation shall have a President, one or more
--------
Vice Presidents, a Secretary and a Treasurer. Such officers shall be elected
annually by the Board
Amended Bylaws (Revised May 1, 1996) - A4009.6.33.34B page 7
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<PAGE>
of Directors and each shall hold office until he shall resign or shall be
removed or otherwise disqualified to serve and until his successor shall be
elected.
Section 2. Other Officers. The corporation may also have, in the discretion
--------------
of the Board of Directors, a Chairman of the Board, one or more Assistant
Secretaries, one or more Assistant Treasurers, and such other officers and
agents shall hold office for such terms and have such authority and perform such
duties as the Board of Directors may from time to time specify, and shall hold
office until they shall resign or shall be removed or otherwise disqualified to
serve.
Section 3. Removal and Resignation. Any officer or agent may be removed,
-----------------------
either with or with without cause, by a majority of the Directors at the time in
office at any regular or special meeting of the Board, or, except in case of an
office chosen by the Board of Directors, by any officer upon whom such power of
removal may be conferred by the Board of Directors.
Any officer or agent may resign at any time by giving written notice to the
Board of Directors, the President or the Secretary of the corporation. Any such
resignation shall take effect as of the date of the receipt of such notice or at
any later time specified therin, and unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
Section 4. Vacancies. A vacancy in any officer because of death,
----------
resignation, removal, disqualification, or any other cause shall be filled in
the manner prescribed in these Bylaws for regular appointments to such office.
Section 5. Chairman of the Board. The Chairman of the Board, if there
---------------------
shall be such an officer, shall, if present, preside at all meetings of the
Board of Directors and exercise and perform such other powers and duties as may
from time to time be assigned to him by the Board of Directors.
Section 6. President. Subject to such supervisory powers, if any, as may
---------
be given by the Board of Directors to the Chairman of the Board, if there be
such an officer, the President shall be the chief executive officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and affairs of the
corporation. He shall preside at all meetings of the shareholders and, in the
absence of the chairman of the Board, at all meetings of the Board of Directors.
He shall be an ex officio member of all the standing committees, including the
----------
Executive Committee, if any, and shall have the general powers and duties of
management usually vested in the office of the President of a corporation and
shall have such other powers and duties as may be prescribed by the Board of
Directors.
Amended Bylaws (Revised May 1, 1996) - A4009.6.33.34B Page 8
- --------------
<PAGE>
Section 7. Vice President. In the absence or disability of the President,
--------------
the Vice Presidents, in order of their rank as fixed by the Board of Directors,
or, if not ranked, the Vice President designated by the Board of Directors,
shall perform all the duties of the President, and when so acting, shall have
all the powers of and be subject to all the restrictions upon the President.
The Vice Presidents shall have such other powers and perform such other duties
as from time to time may be prescribed for them respectively by the Board of
Directors.
Section 8. Secretary. The Secretary shall keep, or cause to be kept, a
---------
book of minutes at the principal office of the corporation, or at such other
place as the Board of Directors may order, of all meetings of Directors and
shareholders, with the time and place of holding, whether regular or special,
and if special, how authorized, the notice thereof given, the names of those
present at Directors' meetings, the number of shares present or represented at
shareholders' meetings and the proceedings thereof.
The Secretary shall keep, or cause to be kept, at the principal office of
the corporation, or at the office of the corporation's transfer agent, a share
register, or a duplicate share register, showing the names of the shareholders
and their addresses, the number and classes of shares held by each, and the
number and date of cancellation of every certificate surrendered for
cancellation.
The Secretary shall give, or cause to be given, notice of all meetings of
the shareholders and of the Board of Directors required by these Bylaws or by
law to be given, and he shall keep the seal of the corporation in safe custody
and shall have such other powers and perform such other duties as may be
prescribed by the Board of Directors.
Section 9. Treasurer. The Treasurer shall keep and maintain, or cause to
---------
be kept and maintained, adequate and correct accounts of the properties and
business transactions of the corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital surplus and shares.
Any surplus, including earned surplus, paid-in surplus and surplus arising from
a reduction of stated capital, shall be classified according to source and shown
in a separate account. The books of account shall at all reasonable times be
open to inspection by any Director.
The Treasurer shall deposit all moneys and other valuables in the name and
to the credit of the corporation with such depositories as may be designated by
the Board of Directors. He shall disburse the funds of the corporation as may
be ordered by the BOard of Directors, shall render to the President and Board,
whenever they request it, an account of all of his transactions
Amended Bylaws (Revised May 1, 1996) - A4009.6.33.34B Page 9
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<PAGE>
as Treasurer and of the financial condition of the corporation, and shall have
such other powers and perform such other duties as may be prescribed by the
Board of Directors.
ARTICLE V
MISCELLANEOUS
Section 1. Record Date and Closing Stock Books. The Board of Directors
-----------------------------------
may fix a time as a record date for the determination of the shareholders
entitled to notice of and to vote at any meeting of shareholders or entitled to
receive any dividend or distribution or any allotment of rights, or to exercise
rights in respect to any change, conversion or exchange of shares. The record
date so fixed shall not be more than fifty (50) days prior to the date of the
meeting or event for the purposes of which it is fixed. When a record date is so
fixed, only shareholders who are of record on that date are entitled to notice
of and to vote at the meeting or to receive the dividend, distribution or
allotment of rights, or to exercise the rights, as the case may be,
notwithstanding any transfer of any shares on the books of the corporation after
the record date.
The Board of Directors may close the books of the corporation against
transfers of shares during the whole or any part of a period not more than fifty
(50) days prior to the date of a shareholders' meeting, the date when the right
to any dividend, distribution or allotment of rights vests, or the effective
date of any change, conversion or exchange of shares.
Section 2. Inspection of Corporate Records. The share register or
-------------------------------
duplicate share register, the books of account and minutes of proceedings of the
shareholders, the Board of Directors and the Executive Committee shall be open
to inspection upon the written demand of any shareholder, or the holder of a
voting trust certificate, at any reasonable time and for a purpose reasonably
related to his interests as a shareholder, or as the holder of such voting trust
certificate, and shall be exhibited at any time when required by demand at any
shareholders' meeting of ten percent (10%) of the shares represented at the
meeting. Such inspection may be made in person or by an agent or attorney and
shall include the right to make extracts. Demand of inspection, other than at a
shareholders' meeting, shall be made in writing upon the President, Secretary or
Assistant Secretary of the corporation.
Every Director shall have the right at any reasonable time to inspect the
books, records, documents of every kind, and the physical properties of the
corporation and of its subsidiary corporations, domestic or foreign.
Amended Bylaws (Revised May 1, 1996) - A4009.6.33.34B page 10
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<PAGE>
Section 3. Certificates for Shares. A certificate or certificates for
-----------------------
shares of the corporation (in such form as may be approved from time to time by
the Board of Directors) shall be issued to each stockholder when such shares are
fully paid. The certificates shall be numbered and the holder's name, number of
shares and the date of issue shall be entered in the books of the corporation as
they are issued. The certificates shall exhibit the holder's name, the number
and class of shares evidenced thereby or a statement that the shares are without
par value, and such additional information as may be required by the Board of
Directors. They shall be signed by the President or a Vice President and the
Secretary or an Assistant Secretary, or be authenticated by facsimiles of the
signatures of the President and the Secretary. Every certificate authenticated
by a facsimile of a signature must be countersigned by a transfer clerk.
Section 4. Transfer of Stock. The corporation shall recognize the right
-----------------
of the person registered on its books as owner of shares to receive dividends
and to vote as such owner. Shares may be transferred on the books of the
corporation only by the person named in the certificate as the owner thereof, or
by his agent, attorney or legal representative, upon surrender to the Secretary
of the corporation of a certificate, duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer. The Secretary shall
thereupon cause a new certificate to be issued to the person entitled thereto
and shall cancel the old certificate and record the transaction upon the books
of the corporation.
Section 5. Lost Certificates. New certificates for shares or other
-----------------
securities of the corporation may be issued for and in place of any such
instrument theretofore issued which is alleged to have been lost or destroyed.
The Directors may, in their discretion, require the owner of such lost or
destroyed instrument, or his legal representative, to give the corporation a
bond or other security in an adequate amount as indemnity against any claim that
may be made against the corporation. A new instrument may be issued, however,
without requiring any bond or other security when in the judgment of the
Directors it is proper to do so.
Section 6. Corporate Seal. A corporate seal shall be provided and adopted
--------------
by the Board of Directors and shall contain the name of the corporation and such
other wording as the Board may deem suitable or as may be required by law.
Section 7. Contracts - Execution of Documents. The Board of Directors may
----------------------------------
authorize any officer or officers, agent or agents to enter into any contract or
execute any instrument in the name of and on behalf of the corporation, and such
authority may be general or confined to specific instances, and unless so
Amended Bylaws (Revised May 1, 1996) - A4009.6.33.34B page 11
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<PAGE>
authorized by the Board of Directors, no officer, agent or employee shall have
any power or authority to bind the corporation by any contract or engagement or
to pledge its credit or to render it liable for any purpose or in any amount;
except, however, the club membership secretary may execute membership
application agreements on behalf of the corporation.
All checks, drafts or other orders for payment of money, notes or other
evidences of indebtedness issued in the name of or payable to the corporation
shall be signed or endorsed by such person or persons and in such manner as from
time to time shall be determined by resolution of the Board of Directors.
Section 8. Representation of Shares of Other Corporations. the President or
----------------------------------------------
any Vice President and the Secretary or Assistant Secretary of this corporation
are authorized to vote, represent and exercise on behalf of this corporation all
rights incident to any and all shares of any other corporation or corporations
standing in the name of this corporation. The authority herein granted to said
officers to vote or represent on behalf of this corporation any and all shares
held by this corporation in any other corporation or corporations may be
exercised either by such officers in person or by any person authorized so to do
by proxy or power of attorney duly executed by said officers.
Section 9. Inspection of Bylaws. The corporation shall keep in its
--------------------
principal office for the transaction of business the original or a copy of these
Bylaws, as amended or otherwise altered to date, certified by the Secretary,
which shall be open to inspection by the shareholders at all reasonable times
during office hours.
ARTICLE VI
AMENDMENTS
Section 1. Power of Shareholders. New Bylaws may be adopted or these Bylaws
---------------------
may be amended or repealed by the vote of shareholders entitled to exercise a
majority of the voting power of the corporation or by the written consent of
such shareholders, except as otherwise provided by the Articles of
Incorporation, provided that the vote of written consent of shareholders holding
more than seventy-five percent (75%) of the voting power of the corporation
shall be required to reduce the authorized number of Directors.
Section 2. Power of Directors. Subject to the right of shareholders to
------------------
adopt, amend or repeal these Bylaws, these Bylaws, other than a Bylaw or
amendment thereof changing the authorized number of Directors, may be adopted,
amended or repealed by the Board of Directors at any regular or special meeting
thereof.
Amended Bylaws (Revised May 1, 1996) - A4009.6.33.34B page 12
<PAGE>
EXHIBIT 3.11
ARTICLES OF INCORPORATION
-------------------------
OF
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FOOTHILLS HOLDING COMPANY, INC.
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I, the undersigned, for the purpose of forming a corporation under and
pursuant to the laws of the State of Nevada, do hereby certify that:
ARTICLE I
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The name of this corporation is FOOTHILLS HOLDING COMPANY, INC.
ARTICLE II
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The principal office and place of business in Nevada of this corporation
shall be located at One East First Street, Reno, Nevada 89501, in the County of
Washoe.
Offices for the transaction of any business of this corporation, and where
meetings of the Board of Directors and of the stockholders may be held, may be
established and maintained in any other part of the State of Nevada, or in any
other state, territory, or possession of the United States of America, or in any
foreign country.
ARTICLE III
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The nature of the business and objects and purposes proposed to be
transacted, promoted ,or carried on by the corporation are to engage in any
lawful activity.
ARTICLE IV
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The total authorized capital stock of the corporation shall consist of one
thousand (1,000) shares, with a par value of One Dollar ($1.00) per share, all
of which shall be entitled to voting power.
ARTICLE V
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The members of the governing board of the corporation shall be styled
Directors, and the number thereof at the inception of this corporation shall be
three (3) or more. The number of Directors may from time to time be increased
or decreased in such manner as shall be provided by the bylaws of the
corporation and the statutes of the State of Nevada. Directors need not be
shareholders, but shall be full age and at least one shall be a citizen of the
United States. The names and post office addresses of the first Board of
Directors, which shall consist of three (3) persons, and who shall hold office
until their successors are duly elected and qualified are as follows:
Articles of Incorporation - Nevada page 1
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<PAGE>
Murry E. Page 14651 Dallas Parkway
Suite 700
Dallas, Texas 75240
Richard T. Cassidy 14651 Dallas Parkway
Suite 700
Dallas, Texas 75240
Sol S. Reifer 14651 Dallas Parkway
Suite 700
Dallas, Texas 75240
ARTICLE VI
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The capital stock of the corporation, after the amount of the subscription
price has been paid in money, property, or services, as the Directors shall
determine, shall not be subject to assessment to pay the debts of the
corporation, nor for any other purpose, and no stock issued as fully paid up
shall ever be assessable or assessed, and the Articles of Incorporation shall
not be amended in this particular.
ARTICLE VII
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This corporation shall have perpetual existence.
ARTICLE VIII
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The name and address of the incorporator signing these Articles of
Incorporation is as follows:
Linda L. Blanton 14651 Dallas Parkway
Suite 700
Dallas, Texas 75240
IN WITNESS WHEREOF, the undersigned incorporator has executed these
Articles of Incorporation this 16th day of July, 1990.
/s/ Linda L. Blanton
______________________________
Linda L. Blanton
Articles of Incorporation - Nevada page 2
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<PAGE>
STATE OF TEXAS }
}
COUNTY OF DALLAS }
BEFORE ME, the undersigned authority, on this day personally appeared Linda
L. Blanton, L. BLANTON, known to me to be the person whose name is subscribed to
the foregoing instrument and acknowledged to me that she executed the same for
the purposes and consideration therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 16th day of July, 1990.
/s/ Linda M. McGuire
______________________________
Notary Public, State of Texas
Articles of Incorporation - Nevada page 3
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<PAGE>
EXHIBIT 3.12
BYLAWS FOR THE REGULATION, EXCEPT AS
OTHERWISE PROVIDED BY STATUTE OR ITS
ARTICLES OF INCORPORATION, OF
FOOTHILLS HOLDING COMPANY, INC.
ARTICLE I
OFFICES
Section 1. Principal Office. The corporation will maintain offices for
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the transaction of business of the corporation at Tri-West Plaza, 3030 LBJ
Freeway, Dallas, Texas 75234.
Section 2. Other Offices. Branch or affiliate offices may at any time be
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established by the Board of Directors at any place or places where the
corporation is qualified to do business.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. Place of Meetings. All meetings of shareholders shall be held
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at the principal office of the corporation or at any other place which may be
(i) designated by the Board of Directors, or (ii) consented to by the written
consent of all shareholders entitled to vote thereat, given either before or
after the meeting and filed with the Secretary of the corporation, or (iii) in
the city of residence of any shareholder holding over two-thirds of the capital
stock of the corporation.
Section 2. Annual Meetings. The annual meeting of shareholders shall be
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on the 3rd Tuesday of July in each year at 10:00 a.m.; provided, however, that
should said day fall upon a legal holiday, then any such annual meeting of
shareholders shall be held at the same time and place on the next day thereafter
ensuing which is not a legal holiday. At such meetings, Directors shall be
elected, reports of the affairs of the corporation shall be considered, and any
other business may be transacted which is within the power of the shareholders.
Section 3. Special Meetings. Special meetings of the shareholders for any
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purpose whatsoever may be called at any time either by the President or by the
Board of Directors, to be held at such time as he or they may designate. In
addition, one or more shareholders holding not less than one-fifth of the voting
power of the corporation may call such a meeting by causing a written request to
be sent by registered mail or delivered personally to the President, Vice
President or Secretary. The officer forthwith shall cause notice to be given,
as provided below, that a meeting will be held at a time, fixed by the officer,
not less than ten (10) nor more than sixty (60) days after the receipt of the
request.
Section 4. Notice of Meeting. Not less than ten (10) days prior to any
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meeting of shareholders, the Secretary or his delegate shall cause written
notice of such meeting to be
Bylaws page 1
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<PAGE>
given to all shareholders entitled to vote thereat. If a shareholder gives no
address, notice shall be deemed to have been duly given if sent by mail or other
means of written communication addressed to the place where the principal office
of the corporation is situated, or if published at least once in a newspaper of
general circulation in the county in which said office is located.
The notice shall specify the place, the day and the hour of such meeting,
and, in the case of a special meeting, the general nature of the business to be
transacted. No action may be taken at any meeting of shareholders on any of the
following proposals unless the notice thereof specifies the general nature of
the proposal: (a) a proposal to sell, lease, convey, exchange, transfer or
otherwise dispose of all, or substantially all, of the property or assets of the
corporation, (b) a proposal to merge or consolidate with another corporation,
domestic or foreign, (c) a proposal to reduce the stated capital of the
corporation, (d) a proposal to amend the Articles of Incorporation, (e) a
proposal to wind up and dissolve the corporation, or (f) a proposal to adopt a
plan of distribution of shares, securities, or any other consideration (other
than money) in the process of winding up.
Section 5. Consent of Absentees. The transactions conducted at any
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meeting of shareholders, either annual or special, however called and noticed,
shall be as valid as though had at a meeting duly held after regular call and
notice, if a quorum be present either in person or by proxy, and if, either
before or after the meeting, each of the shareholders entitled to vote, not
present in person or by proxy, signs a written waiver of notice, a consent to
the holding of such meeting, or an approval of the minutes thereof. All such
waivers, consents or approvals shall be filed with the corporate records or made
a part of the minutes of the meeting.
Section 6. Quorum. The presence in person or by proxy of persons entitled
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to vote a majority of the voting shares at any meeting shall constitute a quorum
for the transaction of business. The shareholders present at a duly called or
held meeting at which a quorum is present may continue to do business until
adjournment, notwithstanding the withdrawal of enough shareholders to leave less
than a quorum.
Section 7. Voting. Unless a record date for voting purposes be fixed, as
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hereinafter provided, only persons in whose names shares entitled to vote stand
on the stock records of the corporation as of the date of such meeting shall be
entitled to vote thereat. Except as otherwise provided by law or the Articles
of Incorporation, every shareholder shall be entitled to one vote for each share
standing in his name on the record of shareholders of the corporation. Voting
rights shall be noncumulative. Except as otherwise provided herein or in the
Articles of Incorporation, all corporate actions shall be determined by vote of
a majority of the votes cast at a meeting of shareholders entitled to vote
thereat. Such vote may be viva voce or by ballot; provided, however, that all
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elections for Directors must be by ballot upon demand made by a shareholder at
any election and before the voting begins. The candidates receiving the highest
number of votes up to the number of Directors to be elected shall be elected.
Section 8. Proxies. Every person entitled to vote or execute consents
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shall have the right to do so either in person or by one or more agents
authorized by a written proxy executed by such person or his duly authorized
agent and filed with the Secretary of the corporation.
Bylaws page 2
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<PAGE>
Section 9. Adjourned Meetings and Notice Thereof. Any shareholders'
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meeting, annual or special, whether or not a quorum is present, may be adjourned
from time to time by the vote of a majority of the shares, the holders of which
are either present in person or represented by proxy thereat, but in the absence
of a quorum, no other business may be transacted at such meeting.
When any shareholders' meeting, either annual or special, is adjourned for
thirty (30) days or more, notice of the adjourned meeting shall be given as in
the case of an original meeting. Except as provided above, it shall not be
necessary to give any notice of any adjournment or of the business to be
transacted at any adjourned meeting other than by announcement at the meeting at
which such adjournment is taken.
Section 10. Action Without Meeting. Any action which may be taken at a
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meeting of the shareholders may be taken without a meeting if authorized by a
writing signed by all of the persons who would be entitled to vote upon such
action at a meeting and filed with the Secretary of the corporation; provided,
however, a meeting shall be held for dissolution, transfer of all or
substantially all of the assets of the corporation, or for merger or
consolidation of the corporation with other corporations, if same is required
under applicable law.
ARTICLE III
DIRECTORS
Section 1. Powers. Subject to limitations imposed by law or by the
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Articles of Incorporation, all corporate powers shall be exercised by or under
the authority of, and the business and affairs of the corporation shall be
controlled by, the Board of Directors. In the exercise of its powers, the Board
may appoint an Executive Committee and other committees and may delegate to
the Executive Committee any of the powers and authority of the Board in the
management of the business and affairs of the corporation, except the power to
declare dividends and to adopt, amend or repeal bylaws. The Executive Committee
shall be composed of two or more Directors.
Section 2. Number of Directors. The authorized number of Directors of the
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corporation shall be not less than one nor more than five until changed by
amendment of the Articles of Incorporation or by a bylaw duly adopted by the
shareholders amending this section. Directors need not be shareholders of the
corporation.
Section 3. Election and Term of Office. The Directors shall be elected at
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the annual meeting of shareholders, but if any such annual meeting is not held
or the Directors are not elected thereat, Directors may be elected at any
special meeting of shareholders held for that purpose. Directors shall hold
office until the election and qualification of their respective successors.
Section 4. Vacancies. Vacancies in the Board of Directors may be filled
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by a majority of the remaining Directors, though less than a quorum, or by a
sole remaining Director, and each Director so elected shall hold office until
his successor is elected at an annual or a special
Bylaws page 3
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<PAGE>
meeting of the shareholders. If the entire Board of Directors resigns at one
time, the shareholders shall,within a reasonable time thereafter, at a regular
or special meeting, as provided herein, elect a new Board of Directors.
A vacancy in the Board of Directors shall be deemed to exist in the case of
the death, resignation or removal of any Director, or if at any annual or
special meeting of shareholders at which any Director is elected the authorized
number of Directors is increased or if the shareholders fail to elect the full
authorized number of Directors to be voted for at that meeting.
The shareholders may elect a Director or Directors at any time to fill any
vacancy or vacancies not filled by the remaining Director or Directors. If the
Board of Directors accepts the resignation of a Director tendered to take effect
at a future time, the Board or the shareholders shall have the power to elect a
successor to take office when the resignation is to become effective.
No reduction of the authorized number of Directors shall have the effect of
removing any Director prior to the expiration of his term of office.
Section 5. Quorum. A majority of the authorized number of Directors shall
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be necessary to constitute a quorum of the Board for the transaction of
business. Every act or decision done or made by a majority of the Directors
present at a meeting duly held at which a quorum is present shall be regarded as
the act of the Board of Directors, unless a greater number be required by law.
Section 6. Place of Directors' Meetings. Meetings of the Board of
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Directors shall be held at the principal office of the corporation, or at any
other location which has been designated by resolution of the Board, or by
written consent of all of the Directors.
Section 7. Regular Meetings. Immediately following each annual meeting of
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shareholders, the Board of Directors shall hold a regular meeting for the
purpose of electing officers and transacting any other business which may come
before them. No notice of such meeting need be given.
Section 8. Special Meetings. Special meetings of the Board of Directors
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for any purpose or purposes shall be called by the President, or, if he is
absent or unable or refuses to act, by any Vice President or by any two
Directors.
Written notice of the time and place of special meetings shall be delivered
personally to each Director or sent to each Director by mail or other form of
written communication, charges prepaid, addressed to him at his address as is
shown upon the records of the corporation, or, if it is not so shown and if it
is not readily ascertainable, addressed to him at the city or place where the
meetings of the Directors are regularly held. Notices mailed or telegraphed
shall be deposited in the United States mail or delivered to the telegraph
company at the place where the principal office of the corporation is located at
least forty-eight (48) hours prior to the time of the holding of the meeting,
and notices delivered personally shall be so delivered at least twenty-four (24)
hours prior to the time of the holding of the meeting.
Bylaws page 4
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<PAGE>
Section 9. Notice of Adjournment. Notice of the time and place of holding
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an adjourned meeting need not be given to absent Directors if the time and place
are fixed at the meeting adjourned.
Section 10. Waiver of Notice: Consent to Meeting. The transactions
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conducted at any meeting of the Board of Directors, however called or noticed or
wherever held, shall be as valid as though conducted at a meeting duly held
after regular call and notice if a quorum is present and if, either before or
after the meeting, each of the Directors signs a waiver of notice, a consent to
hold such a meeting, or an approval of the minutes thereof. All such waivers,
consents or approvals shall be filed with the corporate records and made a part
of the minutes of the meeting.
Section 11. Adjournment. A quorum of the Directors may adjourn to meet
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again at a set day and hour, and in the absence of a quorum, a majority of the
Directors present may adjourn from time to time until the time fixed for the
next regular meeting of the Board.
Section 12. Action Without Meeting. Any action required or permitted to
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be taken by the Board of Directors may be taken without a meeting if all members
of the Board shall individually or collectively consent in writing to such
action. Such written consent or consents shall be filed with the minutes of the
proceedings of the Board. Such action by written consent shall have the same
force and effect as a unanimous vote of such Directors.
Section 13. Fees and Compensation. Directors shall not receive any stated
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salary for their services as Directors, but by resolution of the Board, a fee or
other remuneration, with or without expenses of attendance, may be allowed for
attendance at each meeting. Nothing herein contained shall be construed to
preclude any Director from serving the corporation in any other capacity as an
officer, agent or employee, or otherwise, and receiving compensation therefor.
Section 14. Indemnification of Directors, Officers
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and Employees.
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A. In the event a person is sued, either alone or with others, because he
is or was a Director, officer or employee of the corporation, in any proceeding
arising out of his alleged misfeasance or nonfeasance in the performance of his
duties as such Director, officer or employee, or out of any alleged wrongful act
by the corporation, he shall be indemnified for his reasonable expenses,
including attorneys' fees incurred in the defense of the proceeding, if both of
the following conditions exist: (i) the person sued is successful in whole or in
part, or the proceeding against him is settled with the approval of the court,
and (ii) the court finds that his conduct fairly and equitable merits such
indemnity.
The amount of such indemnity may be assessed against the corporation, its
receiver, its trustee, or any other proper party, by the court in the same or in
a separate proceeding and shall be so much of the expenses, including attorneys'
fees incurred in the defense of the action as the court determines and finds to
be reasonable. Application for such indemnity may be made either by a person
sued or by the attorney or other person rendering services to him in connection
with the defense, and the court may order fees and expenses to be paid directly
to
Bylaws page 5
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<PAGE>
the attorney or other person although he is not a party to the proceeding.
Notice of the application for such indemnity shall be served upon the
corporation, its receiver, or its trustee and upon the plaintiff and other
parties to the proceeding. The court may also order notice to be given to the
shareholders in the manner provided elsewhere in these bylaws for giving notice
of shareholders' meetings, in such form as the court directs.
B. Notwithstanding the foregoing provisions, the Board of Directors may
authorize the corporation to pay expenses incurred by or to satisfy a judgment
or fine rendered or levied against a present or former Director, officer or
employee of the corporation in an action brought by a third party against such
person (whether or not the corporation is joined as a party defendant) to impose
a liability or penalty on such person for an act alleged to have been committed
by such person in the performance of his duties as such Director, officer or
employee, or by the corporation, or by both, provided the Board of Directors
determines that such Director, officer or employee was acting in good faith
within what he reasonably believed to be the scope of his employment or
authority and for a purpose which he reasonably believed to be in the best
interests of the corporation or its shareholders. Payments authorized hereunder
include amounts paid and expenses incurred in settling any such action or
threatened action. This Paragraph does not apply to any action instituted or
maintained as the right of the corporation by a shareholder or holder of a
voting trust certificate representing shares of the corporation.
C. The provisions of this Section shall apply to the estate, executor,
administrator, heirs, legatees or devisees of any such present or former
Director, officer or employee of the corporation.
D. The Board of Directors may, at its discretion, authorize the purchase
of a policy or policies of insurance against any liability of the corporation to
indemnify any person pursuant to this Section, containing such terms and
conditions as the Board may deem appropriate. Such policy or policies may
include provisions for the direct indemnification of directors, officers or
other persons for expenses of a kind not subject to indemnification hereunder,
provided the premiums on such combined policy are, in the judgment of the Board,
fairly allocated between the corporation and the insured persons.
ARTICLE IV
OFFICERS
Section 1. Officers. The corporation shall have a President, one or more
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Vice Presidents, a Secretary and a Treasurer. Such officers shall be elected
annually by the Board of Directors and each shall hold office until he shall
resign or shall be removed or otherwise disqualified to serve and until his
successor shall be elected.
Section 2. Other Officers. The corporation may also have, in the
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discretion of the Board of Directors, a Chairman of the Board, one or more
Assistant Secretaries, one or more Assistant Treasurers, and such other officers
and agents shall hold office for such terms and have such authority and perform
such duties as the Board of Directors may from time to time
Bylaws page 6
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<PAGE>
specify, and shall hold office until they shall resign or shall be removed or
otherwise disqualified to serve.
Section 3. Removal and Resignation. Any officer or agent may be removed,
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either with or without cause, by a majority of the Directors at the time in
office at any regular or special meeting of the Board, or, except in case of an
office chosen by the Board of Directors, by any officer upon whom such power of
removal may be conferred by the Board of Directors.
Any officer or agent may resign at any time by giving written notice to the
Board of Directors, the President or the Secretary of the corporation. Any such
resignation shall take effect as of the date of the receipt of such notice or at
any later time specified therein, and unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
Section 4. Vacancies. A vacancy in any office because of death,
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resignation, removal, disqualification, or any other cause shall be filled in
the manner prescribed in these Bylaws for regular appointments to such office.
Section 5. Chairman of the Board. The Chairman of the Board, if there
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shall be such an officer, shall, if present, preside at all meetings of the
Board of Directors and exercise and perform such other powers and duties as may
from time to time be assigned to him by the Board of Directors.
Section 6. President. Subject to such supervisory powers, if any, as may
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be given by the Board of Directors to the Chairman of the Board, if there be
such an officer, the President shall be the chief executive officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and affairs of the
corporation. He shall preside at all meetings of the shareholders and, in the
absence of the Chairman of the Board, at all meetings of the Board of Directors.
He shall be an ex officio member of all the standing committees, including the
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Executive Committee, if any, and shall have the general powers and duties of
management usually vested in the office of the President of a corporation and
shall have such other powers and duties as may be prescribed by the Board of
Directors.
Section 7. Vice President. In the absence or disability of the President,
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the Vice Presidents, in order of their rank as fixed by the Board of Directors,
or, if not ranked, the Vice President designated by the Board of Directors,
shall perform all the duties of the President, and when so acting, shall have
all the powers of and be subject to all the restrictions upon the President.
The Vice Presidents shall have such other powers and perform such other duties
as from time to time may be prescribed for them respectively by the Board of
Directors.
Section 8. Secretary. The Secretary shall keep, or cause to be kept, a
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book of minutes at the principal office of the corporation, or at such other
place as the Board of Directors may order, of all meetings of Directors and
shareholders, with the time and place of holding, whether regular or special,
and if special, how authorized, the notice thereof given, the names of those
present at Directors' meetings, the number of shares present or represented at
shareholders' meetings and the proceedings thereof.
Bylaws page 7
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<PAGE>
The Secretary shall keep, or cause to be kept, at the principal office of
the corporation, or at the office of the corporation's transfer agent, a share
register, or a duplicate share register, showing the names of the shareholders
and their addresses, the number and classes of shares held by each, and the
number and date of cancellation of every certificate surrendered for
cancellation.
The Secretary shall give, or cause to be given, notice of all meetings of
the shareholders and of the Board of Directors required by these Bylaws or by
law to be given, and he shall keep the seal of the corporation in safe custody
and shall have such other powers and perform such other duties as may be
prescribed by the Board of Directors.
Section 9. Treasurer. The Treasurer shall keep and maintain, or cause to
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be kept and maintained, adequate and correct accounts of the properties and
business transactions of the corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital surplus and shares.
Any surplus, including earned surplus, paid-in surplus and surplus arising from
a reduction of stated capital, shall be classified according to source and shown
in a separate account. The books of account shall at all reasonable times be
open to inspection by any Director.
The Treasurer shall deposit all moneys and other valuables in the name and
to the credit of the corporation with such depositories as may be designated by
the Board of Directors. He shall disburse the funds of the corporation as may
be ordered by the Board of Directors, shall render to the President and Board,
whenever they request it, an account of all of his transactions as Treasurer and
of the financial condition of the corporation, and shall have such other powers
and perform such other duties as may be prescribed by the Board of Directors.
ARTICLE V
MISCELLANEOUS
Section 1. Record Date and Closing Stock Books. The Board of Directors
-----------------------------------
may fix a time as a record date for the determination of the shareholders
entitled to notice of and to vote at any meeting of shareholders or entitled to
receive any dividend or distribution or any allotment of rights, or to exercise
rights in respect to any change, conversion or exchange of shares. The record
date so fixed shall not be more than fifty (50) days prior to the date of the
meeting or event for the purposes of which it is fixed. When a record date is
so fixed, only shareholders who are of record on that date are entitled to
notice of and to vote at the meeting or to receive the dividend, distribution or
allotment of rights, or to exercise the rights, as the case may be,
notwithstanding any transfer of any shares on the books of the corporation after
the record date.
The Board of Directors may close the books of the corporation against
transfers of shares during the whole or any part of a period not more than fifty
(50) days prior to the date of a shareholders' meeting, the date when the right
to any dividend, distribution or allotment of rights vests, or the effective
date of any change, conversion or exchange of shares.
Bylaws page 8
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<PAGE>
Section 2. Inspection of Corporate Records. The share register or
-------------------------------
duplicate share register, the books of account and minutes of proceedings of the
shareholders, the Board of Directors and the Executive Committee shall be open
to inspection upon the written demand of any shareholder, or the holder of a
voting trust certificate, at any reasonable time and for a purpose reasonably
related to his interests as a shareholder, or as the holder of such voting trust
certificate, and shall be exhibited at any time when required by demand at any
shareholders' meeting of ten percent (10%) of the shares represented at the
meeting. Such inspection may be made in person or by an agent or attorney and
shall include the right to make extracts. Demand of inspection, other than at a
shareholders' meeting, shall be made in writing upon the President, Secretary or
Assistant Secretary of the corporation.
Every Director shall have the right at any reasonable time to inspect the
books, records, documents of every kind, and the physical properties of the
corporation and of its subsidiary corporations, domestic or foreign.
Section 3. Certificates for Shares. A certificate or certificates for
-----------------------
shares of the corporation (in such form as may be approved from time to time by
the Board of Directors) shall be issued to each stockholder when such shares are
fully paid. The certificates shall be numbered and the holder's name, number of
shares and the date of issue shall be entered in the books of the corporation as
they are issued. The certificates shall exhibit the holder's name, the number
and class of shares evidenced thereby or a statement that the shares are without
par value, and such additional information as may be required by the Board of
Directors. They shall be signed by the President or a Vice President and the
Secretary or an Assistant Secretary, or be authenticated by facsimiles of the
signatures of the President and the Secretary. Every certificate authenticated
by a facsimile of a signature must be countersigned by a transfer clerk.
Section 4. Transfer of Stock. The corporation shall recognize the right
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of the person registered on its books as owner of shares to receive dividends
and to vote as such owner. Shares may be transferred on the books of the
corporation only by the person named in the certificate as the owner thereof, or
by his agent, attorney or legal representative, upon surrender to the Secretary
of the corporation of a certificate, duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer. The Secretary
shall thereupon cause a new certificate to be issued to the person entitled
thereto and shall cancel the old certificate and record the transaction upon the
books of the corporation.
Section 5. Lost Certificates. New certificates for shares or other
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securities of the corporation may be issued for and in place of any such
instrument theretofore issued which is alleged to have been lost or destroyed.
The Directors may, in their discretion, require the owner of such lost or
destroyed instrument, or his legal representative, to give the corporation a
bond or other security in an adequate amount as indemnity against any claim that
may be made against the corporation. A new instrument may be issued, however,
without requiring any bond or other security when in the judgment of the
Directors it is proper to do so.
Section 6. Corporate Seal. A corporate seal shall be provided and
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adopted by the Board of Directors and shall contain the name of the corporation
and such other wording as the Board may deem suitable or as may be required by
law.
Bylaws page 9
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<PAGE>
Section 7. Contracts - Execution of Documents. The Board of Directors may
----------------------------------
authorize any officer or officers, agent or agents to enter into any contract or
execute any instrument in the name of and on behalf of the corporation, and such
authority may be general or confined to specific instances.
All checks, drafts or other orders for payment of money, notes or other
evidences of indebtedness issued in the name of or payable to the corporation
shall be signed or endorsed by such person or persons and in such manner as from
time to time shall be determined by resolution of the Board of Directors.
Section 8. Representation of Shares of Other Corporations. The President
----------------------------------------------
or any Vice President and the Secretary or Assistant Secretary of this
corporation are authorized to vote, represent and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority herein
granted to said officers to vote or represent on behalf of this corporation any
and all shares held by this corporation in any other corporation or corporations
may be exercised either by such officers in person or by any person authorized
so to do by proxy or power of attorney duly executed by said officers.
Section 9. Inspection of Bylaws. The corporation shall keep in its
--------------------
principal office for the transaction of business the original or a copy of these
Bylaws, as amended or otherwise altered to date, certified by the Secretary,
which shall be open to inspection by the shareholders at all reasonable times
during office hours.
ARTICLE VI
AMENDMENTS
Section 1. Power of Shareholders. New Bylaws may be adopted or these
---------------------
Bylaws may be amended or repealed by the vote of shareholders entitled to
exercise a majority of the voting power of the corporation or by the written
consent of such shareholders, except as otherwise provided by the Articles of
Incorporation, provided that the vote of written consent of shareholders holding
more than seventy-five percent (75%) of the voting power of the corporation
shall be required to reduce the authorized number of Directors.
Section 2. Power of Directors. Subject to the right of shareholders to
------------------
adopt, amend or repeal these Bylaws, these Bylaws, other than a Bylaw or
amendment thereof changing the authorized number of Directors, may be adopted,
amended or repealed by the Board of Directors at any regular or special meeting
thereof.
Bylaws page 10
- ------
<PAGE>
EXHIBIT 3.13
ARTICLES OF INCORPORATION
OF
BELLOWS GOLF GROUP, INC.
KNOW ALL MEN BY THESE PRESENTS:
That we, the undersigned, hereby associate ourselves together for the
purpose of forming a corporation under the laws of the State of Arizona, and for
such purpose hereby adopt Articles of Incorporation as follows:
ARTICLE I
The name of the corporation shall be: Bellows Golf Group, Inc.
ARTICLE II
A. The purpose for which this corporation is organized is the transaction
of any or all lawful business for which corporations may be incorporated under
the laws of the State of Arizona, as they may be amended from time to time.
B. The corporation initially intends to engage in business to own, operate
and manage golf course properties and to provide affiliated services.
ARTICLE III
The corporation shall have authority to issue 100,000 shares of common
stock, no par value per share.
ARTICLE IV
The holders from time to time of the common stock of the corporation shall
have pre-emptive rights as to the common stock then or thereafter authorized to
be issued, including treasury stock. The holders of the common stock of the
corporation shall also have pre-emptive rights as to any new or existing classes
of stock that may be authorized by amendment to the Articles of Incorporation
increasing authorized capital and thereafter authorized by the Board of
Directors to be issued. No resolution of the Board of Directors authorizing the
issuance of stock to which pre-emptive rights shall attach may require such
rights to be exercised within less than sixty (60) days.
<PAGE>
ARTICLE V
The name and address of the initial statutory agent of the corporation is:
James F. Polese; Polese, Hiner & Nolan, 3003 North Central, Suite 1900, Phoenix,
Arizona 85012.
ARTICLE VI
The known place of business of the corporation shall be located at 5456 E.
Kings Avenue, Scottsdale, Arizona 85254.
The initial Board of Directors shall consist of two directors. The persons
who are to serve as directors until the first annual meeting of shareholders or
until a successor is elected and qualified are:
James A. Bellows
5456 E. Kings Avenue
Scottsdale, Arizona 85254
James A. Husband
15821 Ventura Blvd. #665
Encino, California 91436
The number of directors to serve on the Board of Directors shall be fixed
by the shareholders at the annual meeting or any special meeting called for that
purpose, except that the Board of Directors shall always consist of not fewer
than two (2) persons nor more than ten (10) persons.
No director who has submitted his or her resignation from the Board of
Directors effective at a future time shall be permitted to vote upon the filling
of a vacancy or vacancies on the Board of Directors, including the vacancy to be
created by his or her resignation.
ARTICLE VII
The incorporators of the corporation are:
James A. Bellows
5456 E. Kings Avenue
Scottsdale, Arizona 85254
James A. Husband
15821 Ventura Blvd. #665
Encino, California 91436
<PAGE>
All powers, duties, and responsibilities of the incorporators shall cease
immediately following the adoption of the initial Bylaws of the corporation.
ARTICLE VIII
Subject to the further provisions hereof, the corporation shall indemnity
any and all of its existing and former directors and officers against all
expenses incurred by them and each of them, including, but not limited to, legal
fees, judgments, penalties, and amounts paid in settlement or compromise which
may arise or be incurred, rendered or levied in any legal action brought or
threatened against any of them for or on account of any action or omission
alleged to have been committed while acting within the scope of employment as
director and officer of the corporation, whether or not any settlement or
compromise is approved by a court. Indemnification shall be made by the
corporation whether the legal action brought or threatened is by or in the right
of the corporation or by any other person. Whenever any existing or former
director or officer shall report to the President of the corporation or the
Chairman of the Board of Directors that he or she has incurred or may incur
expenses, including, but not limited to, legal fees, judgments, penalties, and
amounts paid in settlement or compromise in a legal action brought or threatened
against him or her for or on account of any action or omission alleged to have
been committed by him or her while acting within the scope of his or her
employment as a director or officer of the corporation, the Board of Directors
shall, at its next regular meeting or at a special meeting held within a
reasonable time thereafter, determine in good faith whether in regard to the
matter involved in the action or contemplated action such person acted, failed
to act, or refused to act willfully or with gross negligence, or with fraudulent
or criminal intent. If the Board of Directors determines in good faith that such
person did not act, failed to act, or refused to act willfully or with gross
negligence, or with fraudulent or criminal intent in regard to the matter
involved in the action or contemplated action, indemnification shall be
mandatory and shall be automatically extended as specified herein. The
corporation shall have the right to refuse indemnification in any instance in
which the person to whom
3
<PAGE>
indemnification would otherwise have been applicable shall have unreasonably
refused to permit the corporation, at its own expense and through counsel of its
own choosing to defend him or her in the action.
ARTICLE IX
The Board of Directors may authorize the payment of dividends to the
holders of shares of any class of stock payable in shares of any other class.
ARTICLE X
The Board of Directors of the corporation may, from time to time, cause the
corporation to purchase its own shares to the extent of the unreserved and
unrestricted earned capital surplus of the corporation.
ARTICLE XI
This Corporation may create and issue, whether or not in connection with
the issuance and sale of any of its shares or other securities, rights or
options entitling the holders thereof to purchase from this Corporation shares
of any class or classes, and such rights or options may be issued to directors,
officers or employees as such of this Corporation or any affiliate thereof,
whether or not such rights or options are issued to shareholders generally by
resolution of the Board of Directors or this Corporation without the approval or
ratification of shareholders.
IN WITNESS WHEREOF, we, the undersigned, have hereunto set our hands this
7th day of March, 1990.
/s/ James A. Bellows
------------------------------
James A. Bellows
/s/ James A. Husband
------------------------------
James A. Husband
4
<PAGE>
STATE OF ARIZONA )
) ss.
County of Maricopa )
On this, the 7th day of March, 1990, before me, the undersigned notary
public, personally appeared James A. Bellows and James A. Husband, known to me
to be the persons whose names are subscribed to the foregoing instrument, and
acknowledged that they executed the same for the purposes therein set forth.
WITNESS my hand and official seal.
/s/
------------------------------
Notary Public
My Commission Expires:
May 21, 1990
<PAGE>
ARTICLES OF AMENDMENT TO
ARTICLES OF INCORPORATION
OF
BELLOWS GOLF GROUP, INC.
Pursuant to the provisions of the Business Corporation Act, the undersigned
corporation adopts the following Articles of Amendment which amend Article III
of the Articles of Incorporation.
1. The name of the corporation is BELLOWS GOLF GROUP, INC.
2. The following amendment to the Articles of Incorporation was adopted
by the shareholders of the corporation on the 7th day of August, 1990.
2.1. Article III is hereby revoked in its entirety and in lieu thereof, the
following is inserted as Article III:
"ARTICLE III
The corporation shall have authority to issue only 1,000 shares of
common stock, no par value per share, all of which 1,000 shares
have been duly issued and are currently outstanding. No other stock
(of any type or class), stock options, stock warrants, treasury
stock or other equity interests of the corporation, including but
not limited to bonds, debentures or other securities that may be
convertible into or exchangeable for stock of the corporation, are
either outstanding or are authorized to be issued."
2.2. Articles IV, IX and XI are hereby revoked in their entirety.
3. The number of shares of the corporation outstanding at the time of
such adoption was 1,000 shares; and the number of shares entitled to vote
thereon was 1,000 shares.
4. The number of shares voting for such amendment was 1,000 shares; and
the number of shares voting against such amendment was zero (0).
DATED this 7th day of August, 1990.
Attest: BELLOWS GOLF GROUP, INC.
/s/ James A. Husband /s/ James A. Bellows
- ------------------------------- -------------------------------
James A. Husband, Secretary James A. Bellows, President
Articles of Amendment - Arizona
- -------------------------------
Page 1
<PAGE>
EXHIBIT 3.14
BYLAWS
OF
BELLOWS GOLF GROUP, INC.
Section 1. Identification.
1.1 Name. The name of the corporation is Bellows Golf Group, Inc.
----
1.2 Principal Office. The principal office of the corporation shall be
----------------
5456 E. Kings Avenue, Scottsdale, Arizona 85254, and additional offices may
be maintained at such other places within or without the State of Arizona as
the Board of Directors may from time to time designate.
1.3 Fiscal Year. The fiscal year of the corporation shall end
December 31.
Section 2. Meetings of Shareholders.
- --------- ------------------------
2.1 Annual Meeting. A meeting of the shareholders shall be held
--------------
annually at such place as the Board of Directors shall designate, either within
or without the State of Arizona, at 10:00 a.m. on the last Thursday of October
of each year, for the purpose of electing directors and for the transaction of
any other business which may properly come before it.
2.2 Notice. No notice of the annual meeting need be given. Unless
------
properly waived, notice of any special meeting shall be mailed to the last known
address of each shareholder as the same appears on the records of the
corporation, at least ten (10) days and not more than fifty (50) days prior to
such meeting, and shall state (in general) the purposes for which it is called.
Notice to shareholders shall not be necessary for any adjourned annual or
special meeting except the statement at such meeting in making adjournment.
2.3 Presiding Officer. The President, or in his absence, a chairman
-----------------
appointed by the shareholders present, shall call meetings of the shareholders
to order, and shall act as chairman thereof.
2.4 Quorum. A majority of the voting stock issued and outstanding,
------
represented by the holders thereof either in person or by proxy, appointed by an
instrument in writing, subscribed by such shareholder, shall be a quorum at all
meetings of shareholders.
2.5 Adjournment. If at any annual or special meeting of shareholders a
-----------
quorum shall fail to attend in person or by proxy, a majority in interest of the
shareholders attending in person or by proxy at the time of such meeting may, at
the end of an hour, adjourn the meeting from time to time without further notice
until a quorum shall attend, and thereupon any business may be transacted which
might have been transacted at the meeting as originally called had the same been
held.
2.6 Special Meetings. Special meetings of the shareholders for any
----------------
purpose shall be held whenever called by the President, or by the vote of the
majority of the Board of Directors, and shall be called whenever shareholders
owning one-tenth of the capital stock issued and outstanding shall, in writing,
make application therefor to the President, stating the object of such meeting.
Notice thereof shall be given as provided in Section 2.2.
2.7 Voting. At all annual and special meetings of shareholders, every
------
holder of voting shares of stock may appear and vote either in person or by
proxy in writing, and shall
1
<PAGE>
have one vote for each share of voting stock so held and represented at such
meeting, with the right to cumulate such votes for the election of directors.
All proxies shall be filed with the Secretary of the Corporation prior to any
meeting for which they are to be effective. Upon demand of any shareholders,
voting upon any question at any meeting shall be by ballot.
2.8 Order of Business and Rules of Procedure. The order of the business and
----------------------------------------
the rules of procedure used at any meeting of the shareholders shall be as
determined by the chairman.
2.9 Closing of Transfer Books and Fixing Record Date. For the purpose of
------------------------------------------------
determining shareholders entitled to notice of or to vote at any meeting of
shareholders, or any adjournment thereof, or entitled to receive payment of any
dividend, or in order to make a determination of shareholders for any other
purpose, the Board of Directors of the corporation may provide that the stock
transfer books shall be closed for a stated period but not to exceed, in any
case, fifty (50) days. If the stock transfer books shall be closed for the
purpose of determining shareholders entitled to notice of or to vote at a
meeting of the shareholders, the books shall be closed for at least ten (10)
days immediately preceding the meeting. In lieu of closing the stock transfer
books, the Board of Directors may fix in advance a date as the record date for
any such determination of shareholders, such date, in any case, to be not more
than fifty (50) days nor less than ten (10) days prior to the date on which the
particular action, requiring this determination of shareholders, is to be taken.
If the stock transfer books are not closed and no record date is fixed for any
such purpose, the date on which notice of the meeting is mailed or the date on
which the resolution of the Board of Directors declaring the dividend is
adopted, as the case may be, shall be the record date for the determination of
shareholders. When a determination of shareholders entitled to vote at any
meeting of shareholders has been made as provided in this section, the
determination shall apply to any adjournment thereof.
2.10 Voting List. The Secretary of the corporation shall make from the
-----------
stock transfer books a complete record of the shareholders entitled to vote at
the meeting or any adjournment thereof, arranged in alphabetical order with the
address of and the number of shares held by each. Such record shall be produced
and kept open at the time and place of the meeting and shall be subject to the
inspection of any shareholder during the whole time of the meeting for the
purposes thereof. Failure to comply with the requirements of this section shall
not affect the validity of any action taken at the meeting.
2.11 Action Without a Meeting. Any action required to be taken at a
------------------------
meeting of the shareholders of the corporation, or any action that may be taken
at a meeting of the shareholders, may be taken without a meeting if a consent
in writing setting forth the action so taken shall be signed by all of the
shareholders entitled to vote with respect to the subject matter thereof. This
consent shall have the same effect as a unanimous vote of shareholders and may
be stated as such in any document.
Section 3. Board of Directors.
------------------
3.1 Number. The business and affairs of the corporation shall be managed
------
and controlled by a board of not less than two (2) nor more than ten (10)
directors, as voted upon from time to time by the shareholders, who need not be
shareholders of the corporation or residents of this State.
3.2 Terms. Each director shall serve for a term of one (1) year, or until
-----
his successor shall have been elected and duly qualified, unless properly
removed from office. At a meeting of shareholders called expressly for that
purpose, any director or the entire
2
<PAGE>
Board of Directors may be removed, with or without cause, by a vote of the
holders of a majority of the shares then entitled to vote at an election of
directors. Provided, however, that if less than the entire board is to be
removed, no one of the directors may be removed if the votes cast against his
removal would be sufficient to elect him if then cumulatively voted at an
election of the entire Board of Directors.
3.3 Annual Meeting. On last Thursday of October of each year, immediately
--------------
after the annual meeting of shareholders, the newly elected directors shall meet
for the purpose of organization, and the election of officers, and the
transaction of other business.
3.4 Special Meeting. Special meetings of the Board may be held after
---------------
proper notice has been given, unless properly waived. Unless otherwise specified
in the notice thereof, any and all business may be transacted at a special
meeting.
3.5 Notice of Meetings. No notice of the annual meeting of the Board of
------------------
Directors need be given. Unless properly waived, notice of any special meeting
of the Board of Directors, stating the time and in general terms the purpose or
purposes thereof, shall be given to all of the directors at least one (1) day
prior to such meeting, to the last known address of each director as the same
appear on the records of the corporation, by mail, telegram or by telephone.
3.6 Place of Meeting. The directors shall hold their meetings, have an
----------------
office and keep the books of the corporation at such place or places within or
without the State of Arizona as the Board of Directors from time to time may
determine. Unless otherwise determined, such place shall be at the principal
office of the corporation, as stated in Section 1.2 hereof.
3.7 Quorum. A majority of the Board of Directors shall constitute a quorum
------
for the transaction of business. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors unless the act of a greater number is required by statute, the
Articles of Incorporation or the Bylaws.
3.8 Chairman. At all meetings of the Board of Directors the President, or
--------
in his absence a chairman chosen by the directors present, shall preside.
3.9 Committees. From time to time the Board may appoint committees for any
----------
purpose, who shall have such power as shall be specified in the resolution of
appointment.
3.10 Compensation. The directors of the corporation and all members of
------------
committees shall serve without salary, unless ordered by the directors; however,
they shall be paid the necessary expenses incurred in the execution of their
duties. Nothing herein shall preclude the paying by the corporation of a salary
or other compensation to an officer or employee who is also a director.
3.11 Vacancies. In case of any vacancy among the directors through death,
---------
resignation, disqualification, or other cause, the remaining directors, by
affirmative vote of a majority thereof, may elect a successor to hold office for
the unexpired portion of the term of the director whose place shall be vacant,
and until election of and qualification of his successor.
3.12 Action Without A Meeting. Any action that may be taken at a meeting
------------------------
of the directors or of a committee, may be taken without a meeting if a consent
in writing, setting forth the action shall be signed by all of the directors or
all of the members of the committee, as the case may be.
3
<PAGE>
SECTION 4. OFFICERS.
4.1 Executive. The executive officers of the corporation shall be a
---------
President, Vice President, Secretary and Treasurer, and other officers as may
from time to time be appointed, each of whom shall hold his office during the
pleasure of the Board of Directors. The President shall be a member and the
Chairman of the Board of Directors.
4.2 Tenure of Office. All officers shall be subject to removal at any
----------------
time, with or without cause, by the affirmative vote of a majority of the Board
of Directors.
4.3 President. The President shall be the executive officer of the company
---------
and shall preside at all meetings of the shareholders and of the directors. He
may, from time to time, call special meetings of the Board of Directors whenever
he shall deem it proper to do so and shall do so when a majority of the Board of
Directors shall request him in writing to do so. The President may sign and
execute all authorized contracts, other instruments or obligations in the name
of the company. The President may sign all authorized checks in the name of the
company. Subject to the Board of Directors, he shall have general charge of the
business and affairs of the company. The President shall do and perform such
other duties and have such other powers as from time to time may be assigned to
him by the Board of Directors.
4.4 Vice President. The Vice President shall, in the event of the
--------------
President's absence or inability to act, have all of the powers of the
President. He shall perform such other duties as the Board of Directors shall
delegate to him.
4.5 Secretary. The Secretary shall keep the minutes of all proceedings of
---------
the Board and the minutes of all meetings of shareholders. He shall attend to
the giving and serving of all notices for the corporation when directed by the
President. He may sign with the President, in the name of the corporation, all
contracts authorized by the Board, and shall have authority to affix the seal of
the corporation thereto. He shall have charge of all certificate books and such
other books and papers as the Board may direct; he shall sign, with the
President, certificates of stock. He shall, in general, perform all the duties
incident to the office of Secretary, subject to the control of the Board.
4.6 Treasurer. The Treasurer shall have the custody of all the funds and
---------
securities of the corporation which may come into his hands. He may endorse on
behalf of the corporation for collection, checks, notes and other obligations,
and shall deposit the same to the credit of the corporation in such bank or
banks or depositories as the Board of Directors may designate. He may sign
receipts and vouchers for payments made to the corporation. He may sign checks
made by the corporation and pay out and dispose of the same under direction of
the Board. He may sign, with the President, or such other person or persons as
may be designated by the Board, all authorized promissory notes and bills of
exchange of the corporation; whenever required by the Board he shall render a
statement of his cash accounts. He shall enter regularly in books of the
corporation, to be kept by him for that purpose, full and accurate accounts of
all monies received and paid by him on account of the corporation. He shall
perform all duties incident to the position of Treasurer subject to the control
of the Board. The powers and duties of the Treasurer may be exercised and
performed by any of the other officers, as the Board may direct.
4.7 Miscellaneous. Assistant Secretaries and Assistant Treasurers may be
-------------
selected by the Board of Directors at any meeting. They shall perform any and
all duties of the Secretary and of the Treasurer in the absence or incapacity of
either, and such other duties as the Board of Directors may require.
4
<PAGE>
Any two or more offices can be held by the same person, except the offices
of President and Secretary.
SECTION 5. CAPITAL STOCK.
5.1 Payment for Shares. The consideration for the issuance of shares
------------------
may be paid, in whole or in part, in money, on other property, tangible or
intangible, or in labor or services actually performed for the corporation. When
payment of the consideration for which shares are to be issued shall have been
received by the corporation, such shares shall be deemed to be fully paid and
nonassessable. Future services shall not constitute payment or part payment for
the issuance of shares. In the absence of fraud in the transaction, the judgment
of the Board of Directors as to the value of the consideration received for
shares shall be conclusive. No certificate shall be issued for any share until
the share is fully paid.
5.2 Certificates Representing Shares. Each holder of capital stock of
--------------------------------
the corporation shall be entitled to a certificate signed by the President and
the Secretary of the corporation, and sealed with the corporate seal, certifying
the number of shares owned by him in the corporation.
5.3 Lost, Stolen or Destroyed Certificates. The corporation shall issue
--------------------------------------
a new stock certificate in place of any certificate theretofore issued where the
holder of record of the certificate:
(a) Makes proof in affidavit form that the certificate has been
lost, destroyed or wrongfully taken;
(b) Requests the issuance of a new certificate before the
corporation has notice that the certificate has been acquired by a
purchaser for value in good faith and without notice of any adverse claim;
(c) Gives a bond in such form and with such surety as the
corporation may direct, to indemnify the corporation against any claim
that may be made on account of the alleged loss, destruction or theft of
the certificate; and
(d) Satisfies any other reasonable requirement imposed by the
corporation.
When a certificate has been lost, apparently destroyed, or wrongfully
taken and the holder of record fails to notify the corporation within a
reasonable time after he has notice of it, and the corporation registers a
transfer of the shares represented by this certificate before receiving such
notification, the holder of record is precluded from making any claim against
the corporation for the transfer or for a new certificate.
5.4 Purchase of Its Own Shares. The corporation may purchase its own
--------------------------
shares of stock from the holders thereof subject to the limitations imposed by
the Articles of Incorporation with respect thereto.
5.5 Dividends. The Board, in its discretion, may from time to time
---------
declare dividends upon the capital stock from the surplus or net profits of the
corporation when and in the manner it deems advisable, so long as no rule of law
is thereby violated.
5
<PAGE>
Section 6. Waiver of Notice.
- --------- ----------------
Any shareholder, director or officer may waive any notice required to be
given by these Bylaws, of any meeting otherwise prescribed hereunder. Any
meeting at which all shareholders or directors are present or with respect to
which notice is waived by any absent shareholder or director may be held at any
time for any purpose and at any place and shall be deemed to have been validly
called and held, and all acts performed and all business conducted at such
meeting shall be valid in all respects.
Section 7. Amendment and Repeal.
- --------- --------------------
These Bylaws may be amended or repealed or new Bylaws may be adopted by the
Board of Directors in such instance as they deem advisable. No notice need be
given of any action concerning these Bylaws previous to any such meeting, if the
proposed amendment, repeal or adoption of new Bylaws is one of necessity arising
at such meeting, and is in furtherance of the legitimate aims of the
corporation. In all other situations, unless properly waived, notice of any
meeting at which any action concerning the Bylaws is proposed shall be mailed to
all directors at least ten (10) days prior to such meeting, and in the same
manner prescribed for giving notice of special meetings of the Board of
Directors. Such notice shall state in general terms the nature of any proposed
action concerning the Bylaws.
These Bylaws are adopted as of the 7th day of March, 1990.
/s/ James A. Bellows
---------------------------------
James A. Bellows
/s/ James A. Husband
---------------------------------
James A. Husband
<PAGE>
EXHIBIT 3.15
ARTICLES OF INCORPORATION
-------------------------
OF
--
CARMEL MOUNTAIN RANCH GOLF CLUB, INC.
-------------------------------------
FIRST: The name of the corporation is Carmel Mountain Ranch Golf Club,
Inc.
SECOND: The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of California other than the banking business, the trust company business,
or the practice of a profession permitted to be incorporated by the California
Corporations Code.
THIRD: The name of this corporation's initial agent for service of process
in the State of California is James A. Husband, whose address is 15821 Ventura
Boulevard, Suite 550, Encino, California 91436.
FOURTH: The total number of shares which the corporation is authorized to
issue is one thousand (1,000) common shares of the par value of One Dollar
($1.00) each.
FIFTH: This corporation is a close corporation. All of the corporation's
issued shares shall be held of record by not more than thirty-five (35) persons.
IN WITNESS WHEREOF, the undersigned have executed these articles this 18th
day of June, 1993.
INCORPORATOR:
/s/ Linda L. Blanton
___________________________________
Linda L. Blanton
Articles of Incorporation - California solo page
- --------------------------------------
<PAGE>
EXHIBIT 3.16
ARTICLES OF INCORPORATION
-------------------------
OF
--
OVLC MANAGEMENT CORP.
---------------------
FIRST: The name of the corporation is OVLC Management Corp.
SECOND: The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of California other than the banking business, the trust company business,
or the practice of a profession permitted to be incorporated by the California
Corporations Code.
THIRD: The name of this corporation's initial agent for service of process
in the State of California is James A. Husband.
FOURTH: The total number of shares which the corporation is authorized to
issue is one thousand (1,000) common shares of the par value of One Dollar
($1.00) each.
FIFTH: This corporation is a close corporation. All of the corporation's
issued shares shall be held of record by not more than thirty-five (35) persons.
IN WITNESS WHEREOF, the undersigned have executed these articles this 16th
day of March, 1993.
INCORPORATOR:
/s/ Linda L. Blanton
___________________________________
Linda L. Blanton
Articles of Incorporation - California solo page
- --------------------------------------
<PAGE>
EXHIBIT 3.17
ARTICLES OF INCORPORATION
OF
OCEAN VISTA LAND COMPANY
----
KNOW ALL MEN BY THESE PRESENTS:
That we, the undersigned, have this day associated ourselves together
for the purpose of forming a corporation under the Corporations Code of the
State of California,
AND THAT WE HEREBY CERTIFY:
FIRST: That the name of the corporation is
OCEAN VISTA LAND COMPANY
SECOND: The primary business in which the corporation intends initally
to engage is:
To purchase, acquire, own, develop, operate, lease, or dispose of,
land or property for golf course purposes, and to furnish, equip, operate,
maintain, conduct and carry on any business, occupation or activities needful,
necessary or required in the maintaining and servicing thereof.
In addition to the primary business, the corporation shall have the
following general purpose or powers:
To establish, conduct, cary on, maintain, equip, service, buy, sell,
acquire and dispose of, a golf course or courses, and all of the buildings and
equipment thereof, facilities for and equipment of, all types of sports or other
activities that may be found from time to time to be necessary, required or
desirable in the carrying out of any of the objects of this corporation; to
establish, conduct and maintain, buy, sell and dispose of, all equipment for,
and to conduct and carry on a general restaurant, cafe, cocktail lounge, bar,
amusement facilities of all types, kinds and character that may be lawful and
deemed to be needful, necessary or desired in the conducting of any of the
operations or businesses of this corporation; to provide, buy, sell, and in any
lawful manner acquire or dispose of, golf, tennis, swimming, and any and all
equipment or facilities therefor, or for any other sport or form of
entertainment.
To buy, sell, deal in, lease, operate, hold or improve real estate,
and the fixtures and personal property incidental thereto or connected
therewith, and with that end in view, to acquire by purchase, lease, hire or
otherwise, lands, tenements, hereditaments or interest therein, and to improve
the same, and generally to hold, manage, deal with and improve the property of
the company; and to sell, lease, mortgage, pledge, or otherwise dispose of the
lands, tenements and hereditaments or other property of the company.
To carry on the business of hotel, restaurant, cafe,
-1-
<PAGE>
tavern, refreshment room and lodging housekeepers, licensed victualers,
purveyors, caterers for public amusement generally; automobile, coach, cab and
carriage proprietors; farmers, dairymen, ice merchants, importers and brokers of
food, meat and poultry, and domestic and foreign produce of all descriptions;
hairdressers, perfumers, chemists, proprietors of clubs, baths, dressing rooms,
laundries, reading, writing and newspaper rooms, libraries, grounds and places
of amusements, recreation, sport, entertainment and instruction of all kinds,
tobacco and cigar merchants, agents for railway and shipping companies and
carriers, theatrical and opera box office proprietors entrepreneurs and general
agents, furnishing amusement and recreation facilities to the public and
individuals and of operating any and all kinds of concessions, amusements,
pavilions, halls, parlors, gardens and the like, and doing any and all things
incidental thereto, or connected therewith.
To manage land, buildings and other property as aforesaid, whether
belonging to the corporation or not, and to collect rents and income, and to
supply tenants and occupiers and others refreshments, attendance, messengers,
light, waiting rooms, reading rooms, meeting rooms, lavatories, laundry
conveniences, electric conveniences, stables and other advantages.
To acquire and take over any business or undertaking carried on, upon,
or in connection with any land or building which the company may desire to
acquire as aforesaid, or become interested in, and the whole or any of the
assets and liabilities of such business or undertaking, and to carry on the
same, or to dispose of, remove, or put an end thereto, or otherwise deal with
the same as may seem expedient.
To establish and carry on, and to promote the establishment and
carrying on, upon any property in which the company is interested, of any
business which may conveniently be carried on, upon or in connection with such
property, and the establishment of which may seem calculated to enhance the
value of the company's interest in such property, or to facilitate the disposal
thereof.
To carry on any other business whether manufacturing or otherwise
which can be conveniently carried on with any of the company's objects; to
enter into partnership or into any arrangement for sharing profits, union of
interests, reciprocal concessions, or cooperate with any person or company
carrying on or about to carry on any business which this company is authorized
to carry on, or any business or transaction capable of being conducted so as,
directly or indirectly, to benefit this company; to purchase, buy or otherwise
acquire, sell, convey, transfer or otherwise deal in concessions of all kinds.
To form, promote and assist financially or otherwise, companies,
syndicates, partnerships and associations of all kinds, and to give any
guarantee in connection therewith or otherwise for the payment of money or for
the performance of any obligation or undertaking.
To conduct a general brokerage, agency and commission business for
others in the purchase, sale and management of goods, wares and merchandise and
real and/or personal property of all kinds, character and description.
To manufacture, buy, sell, deal in, and to engage in, conduct and
carry on the business of manufacturing, buying,
-2-
<PAGE>
selling and dealing in goods, wares and merchandise of every class and
description.
To engage in, carry on, and operate anywhere and everywhere, any and
all business, affairs, enterprises, and undertakings which any citizen of the
United States of America might engage in, carry on, and operate, including any
and all powers and rights of any such citizen to acquire, own, hold, deal in,
and dispose of any and all kinds of property, real, personal, and mixed, and
tangible and intangible, including powers and rights to mortgage and sell and
otherwise dispose of any part of or all or its own corporate assets and
property, subject only to any specific restrictions imposed by the laws of the
State of California or the laws of the United States of America, unless
specifically prohibited by the laws of the State of California or the laws of
the United States of America; and further, in addition to the foregoing powers
which any such citizen of the United States of America might have in engaging
in, carrying on, and operating any such business, affairs, enterprise or
undertaking, to enjoy, exercise and hold any and all powers and rights which a
corporation may enjoy, exercise, and hold, including the holding and use of
franchises, licenses and rights of acquiring property by eminent domain, subject
to any specific restrictions imposed by the laws of the State of California or
the laws of the United States of America.
To borrow money, and to make and issue notes, bonds, debentures,
obligations and evidences of indebtedness of all kinds, whether secured by
mortgage, pledge or otherwise, without limit as to amount, and to secure the
same by mortgage, pledge or otherwise; and generally to make and perform
agreements and contracts of every kind and description.
To apply for, obtain, register, purchase, lease or otherwise to
acquire and to hold, own, use, develop, operate and introduce, and to sell,
assign, grant licenses or territorial rights in respect to, or otherwise to
turn to account or dispose of, any copyrights, trade-marks, trade names,
brands, labels, patent rights, letters patent of the United States or of any
other country or government, inventions, improvements and processes, whether
used in connection with or secured under letters patent or otherwise.
To do all and everything necessary, suitable and proper for the
accomplishment of any of the purposes or the attainment of any of the objects or
the furtherance of any of the powers hereinbefore set forth, either alone or in
association with other corporations, firms or individuals, and to do every other
act or acts, thing or things incidental or appurtenant to or growing out of or
connected with the aforesaid business or powers or any part or parts thereof,
provided the same be not inconsistent with the laws under which this corporation
is organized.
To acquire by purchase, subscription or otherwise, and to hold for
investment or otherwise, and to use, sell, assign, transfer, mortgage, pledge or
otherwise deal with or dispose of stocks, bonds, or any other obligations or
securities of any corporation or corporations; to merge or consolidate with any
corporation in such manner as may be permitted by law; to aid in any manner any
corporation whose stock, bonds, or other obligations are held or in any manner
guaranteed by the company, or in which the company is in any way interested; and
to do any other acts or things for the preservation, protection, improvement or
enhance-
-3-
<PAGE>
ment of the value of any such stock, bonds or other obligations, or to do
any acts or things designed for any such purpose; and, while the owner of any
such stock, bonds or other obligations, to exercise all the rights, powers and
privileges of ownership thereof, and to exercise any and all voting powers
thereon; to guarantee the payment of dividends upon any stock, or the principal
or interest or both of any bonds or other obligations and the performance of
any contracts.
The business or purpose of the company is from time to time to do any
one or more of the acts and things hereinabove set forth, and it shall have
power to conduct and carry on its said business, or any part thereof, and to
have one or more offices, and to exercise all or any of its corporate powers
and rights, in the State of California, and in the various other states,
territories, colonies and dependencies of the United States, in the District of
Columbia, and all or any foreign countries.
The foregoing clauses shall be construed both as objects and powers,
and it is hereby expressly provided that the foregoing enumeration of specific
powers shall not be held to limit or restrict in any manner the powers of this
corporation.
THIRD: That the County in the State of California where the principal
office for the transaction of the business of the corporation is to be located
is San Diego.
FOURTH: This corporation is authorized to issue two (2) classes of
shares of stock to be designated respectively, Preferred and Common; the total
number of shares which this corporation shall have authority to issue is Ten
Thousand (10,000), and the aggregate par value of all shares that are to have a
par value shall be One Million Dollars ($1,000,000.00); the number of Preferred
shares that are to have a par value shall be Five Thousand (5,000), and the par
value of each share of such class shall be One Hundred Dollars ($100.00), and
the number of Common shares that are to have a par value shall be Five Thousand
(5,000), and the par value of each share of such class shall be One Hundred
Dollars ($100.00).
The holders of Preferred shares shall he entitled to receive out of any
funds of this corporation at the time legally available for the declaration of
dividends, dividends at the rate of Five Per cent (5%) per annum of the par
value thereof, and no more, payable in cash, on the 1st of September of each
year
-4-
<PAGE>
commencing with the year 1957; or as such intervals as the Board of
Directors may from time to time determine. Such dividends shall accrue from the
date of issuance of the respective Preferred shares and shall accrue from day to
day, whether or not earned or declared. Such dividends shall be payable before
any dividends shall be declared or paid upon or set apart for the Common shares,
and shall be cumulative, so that if in any year or years dividends upon the
outstanding Preferred shares at the rate of Five Per cent (5%) per annum of the
par value thereof shall not have been paid thereon or declared or set apart
therefor, the amount of dividends shall be fully paid or declared and set apart
for payment, but without interest, before any distribution, whether by way of
dividend or otherwise, shall be declared upon, or set apart for, the Common
shares.
In the event of the dissolution, liquidation or winding up of this
corporation, whether voluntary or involuntary, the holders of Preferred shares
shall be entitled to receive out of the assets of this corporation, whether such
assets are capital or surplus, of any nature, an amount equal to the par value
of such Preferred shares, and a further amount equal to any dividends unpaid and
accumulated thereon to the date of distribution, and no more, before any payment
shall be made or any assets distributed to the holders of the Common shares.
If, upon such liquidation, dissolution, or winding up, whether
voluntary or involuntary, the remaining assets of the corporation applicable to
the shareholders thereof, shall be insufficient to permit the payment of the
full preferential amounts aforesaid, then the entire amount thereof shall be
distributed ratably among the holders of Preferred shares. After payment to the
Preferred shareholders of the full preferential amounts aforesaid, any
remaining assets of the corporation shall be payable and distributable to the
holders of Common shares only.
-5-
<PAGE>
A consolidation or merger of this corporation with or into any other
corporation or corporations shall not be deemed to be a liquidation, dissolution
or winding up, within the meaning of this clause.
The corporation at the option of the Board of Directors may redeem the
whole or from time to time may redeem any part of the Preferred shares by paying
in cash therefor the par value thereof, and in addition thereto an amount in
cash equal to all dividends on Preferred shares unpaid and accumulated thereon.
In case of the redemption of a part only of the outstanding Preferred shares,
this corporation shall designate by lot, in such manner as the Board of
Directors may determine, the shares to be redeemed, or shall effect such
redemption pro-rata. Less than all of the Preferred shares at any time
outstanding may not be redeemed until all dividends aforesaid and any arrears
upon all Preferred shares outstanding shall have been paid for all past dividend
periods and until the full dividends for the current period on all Preferred
shares then outstanding, other than the shares to be redeemed, shall have been
paid or declared, and the full amount thereof set apart for payment. The Board
of Directors shall have authority to fix and determine the time, place, manner
and method of such redemption. If due notice of redemption shall have been duly
given, and if on the date fixed for redemption funds necessary for the
redemption shall be available therefor, then, notwithstanding that the
certificates evidencing any Preferred shares so called for redemption shall not
have been surrendered, the dividends, with respect to the shares so called for
redemption, shall cease to accrue after the date fixed for redemption, and all
rights with respect to the shares so called for redemption shall forthwith,
after such date, cease and determine, except only the right of the holders to
receive the redemption price without interest upon surrender of the Preferred
shares
-6-
<PAGE>
therefor.
So long as any of the Preferred shares shall be outstanding, the Board
of Directors shall have authority before the payment of any dividends upon
either the Preferred or Common shares to set aside from the surplus or net
profits of the corporation such sum or sums as in their discretion shall be
deemed advisable or required to provide for the redemption of the Preferred
shares in such separate fund as they shall determine. Such sum or sums shall be
deposited with such bank or trust company as may be determined by the Board of
Directors, and the Board of Directors shall have authority from time to time to
apply any moneys then in the said fund to the purchase of Preferred shares, if
obtainable at a price or prices not exceeding the par value plus an amount equal
to all accrued and unpaid dividends thereon to the date of purchase. Such
purchases may be made at public or private sale, with or without advertisement,
in such manner, from a person or persons, and at such prices as the corporation
in its discretion may determine. When no Preferred shares shall remain
outstanding, any balance remaining in the said fund shall become part of the
general fund of the corporation.
The Preferred stock shall not be entitled to vote upon the questions
affecting the management or affairs of the corporation, nor shall the holders
thereof be entitled to notice of shareholders meetings, except as otherwise
provided by law, the exclusive voting power being vested in the Common shares;
provided, however, that in the event the corporation shall fail to declare and
pay cumulative dividends at the dividend rate upon the Preferred shares and
shall fail to do so for a period of twenty-four (24) months, whether consecutive
or not, then and in that event the Preferred shares shall be entitled to elect a
majority of the Board of Directors of this corporation, and upon
-7-
<PAGE>
such happening a meeting of shareholders shall be forthwith called, at which
meeting the Preferred shares voting as a class shall be entitled to elect a
majority of the Board of Directors, and the Common shares voting as a class
shall be entitled to elect the minority of the Board of Directors. Upon the
payment to the Preferred shares of all dividends accumulated and unpaid thereon,
or the setting aside of the funds for the payment thereof, the voting rights of
the Preferred stock shall thereupon cease and a meeting of shareholders shall
forthwith be called, at which meeting only the Common shares shall be entitled
to vote, and so on from time to time as such contingencies may occur or be
terminated.
FIFTH: That the number of directors is five (5) and the names and
addresses of the persons who are hereby appointed to act as the first directors
of this corporation are as follows:
NAMES ADDRESSES
----- ---------
Wilson Atkins Newport Beach, California
W. H. Atkins, Jr. Twain Harte, California
Tom W. Henderson Newport Beach, California
H. E. Higginson Los Angeles, California
G. L. Brock Los Angeles, California
SIXTH: Authority is hereby granted to the holders of shares of this
corporation, entitled to vote, to change from time to time the authorized number
of directors of this corporation by a duly adopted amendment of the By-Laws of
this corporation.
SEVENTH: That the capital stock of this corporation shall not be
subject to assessment.
That the private property of the shareholders shall not be subject to
the payment of corporate debts or liabilities, except to the extent provided by
law.
IN WITNESS WHEREOF, we, the incorporators and the persons hereinbefore
listed as directors, have hereunto set our
-8-
<PAGE>
hands and seals this 15th day of May, 1956.
/s/ Wilson Atkins
---------------------------
Wilson Atkins
/s/ W. H. Atkins, Jr.
---------------------------
W. H. Atkins, Jr.
/s/ Tom W. Henderson
---------------------------
Tom W. Henderson
/s/ H. E. Higginson
---------------------------
H. E. Higginson
/s/ C. L. Brock
---------------------------
C. L. Brock
STATE OF CALIFORNIA )
) SS.
COUNTY OF ORANGE )
On this 18th day of May, 1956, before me, a Notary Public in and for
Orange County, State of California, residing therein, duly commissioned and
sworn, personally appeared WILSON ATKINS and W.H. ATKINS, JR., personally known
to me to be the persons whose names are subscribed to the foregoing Articles of
Incorporation, as incorporators, and who are also named therein as directors,
and who acknowledged to me that they executed the said instrument.
IN WITNESS WHEREOF, I have hereunto affixed my hand and official seal
this 18th day of May, 1956.
[SIGNATURE]
---------------------------------------------
Notary Public in and for the County of Orange,
State of California
My Commission Expires:
(NOTARIZED SEAL)
-9-
<PAGE>
STATE OF CALIFORNIA )
) SS.
COUNTY OF ORANGE )
On this 18th day of May, 1956, before me, a Notary Public in and for
Orange County, State of California, residing therein, duly commissioned and
sworn, personally appeared TOM W. HENDERSON, personally known to me to be the
person whose name is subscribed to the foregoing Articles of Incorporation,
as incorporator, and who is also named therein as director, and who
acknowledged to me that he executed the said instrument.
IN WITNESS WHEREOF, I have hereunto affixed my hand and official seal
this 18th day of May, 1956.
[SIGNATURE]
---------------------------------------------
Notary Public in and for the County of Orange,
State of California
My Commission Expires:
(NOTARIAL SEAL)
STATE OF CALIFORNIA )
) SS.
COUNTY OF ORANGE )
On this 24th day of May, 1956, before me, a Notary Public in and for
Los Angeles County, State of California, residing therein, duly commissioned and
sworn, personally appeared H.E. HIGGINSON and C.L. BROCK, personally known to me
to be the persons whose names are subscribed to the foregoing Articles of
Incorporation, as incorporators, and who are also named therein as directors,
and who acknowledged to me that they executed the said instrument.
IN WITNESS WHEREOF, I have hereunto affixed my hand and official seal
this 24th day of May, 1956.
[SIGNATURE]
-----------------------------------
Notary Public in and for the County
of Los Angeles, State of California
My Commission Expires:
(NOTORIAL SEAL)
-10-
<PAGE>
EXHIBIT 3.18
ARTICLES OF INCORPORATION
OF
GOLF COURSE INNS OF AMERICA, INC.
KNOW ALL MEN BY THESE PRESENTS: That we, the undersigned, have this
day voluntarily associated ourselves together for the purpose of forming a
corporation under and pursuant to the laws of the State of California, and we do
hereby certify:
FIRST: That the name of said corporation shall be:
GOLF COURSE INNS OF AMERICA, INC.
SECOND: That the purposes for which said corporation is formed are:
(a) To conduct and carry on the business of builders, building
contractors, general contractors, other classifications of contractors and
constructors in building, construction, erection, alteration, repair and any
other work in connection with any and all classes of building and improvements
of any kind or nature whatsoever, including the locating, laying out and
construction of dwellings, stores, factories, business and apartment buildings
and all other types of buildings, public and private, and roads, streets,
avenues, docks, sewer preparation, wells, walls, railroads, street railways,
power lines, power plants and generally of all classes of buildings, erections
and works, both public and private, and any and all integral parts thereof.
(b) To improve and operate, to purchase or otherwise acquire, own and
hold, and to sell, convey, assign or exchange, transfer, mortgage, lease or
otherwise dispose of, and to invest and deal in and with real property and any
personal property.
(c) To borrow money and issue evidence of indebtedness in furtherance
of any or all of the objects of its business; to secure the same by mortgage,
deed of trust, pledge or other lien.
<PAGE>
(d) To enter into, perform and carry out contracts of any kind
necessary to or in connection with or incidental to the accomplishment of, any
one or more of the purposes of the Corporation.
(e) To acquire by purchase, lease or otherwise, lands of any and every
description and leasehold estates and other interests therein; to improve and
hold lands for investment purposes; to construct improvements upon lands owned
by this corporation or held under leasehold or otherwise; to deal in lands,
buying and selling real property of any description; to deal in leasehold
estates and other estates in land less than the fee thereof; to sublet real
property of every kind and character and to relet and underlet any and all such
real property; to engage in the business of subdividing land and to hire, buy,
sell and deal in any and all classes of real property and improvements thereon
and interests therein.
(f) To buy, sell, and deal in securities of every description,
including mortgages, bonds, debentures, promissory notes, commercial paper and
securities of other classes; to buy, sell and generally deal in shares and bonds
of other corporations; to exchange shares, bonds or other securities issued by
other corporations, or for real or personal property of any kind.
(g) To engage, generally, in the business of financing any lawful
enterprise in any lawful way.
(h) To hold for investment purposes, securities of any and every
description in whatsoever manner acquired; to exchange any real or personal
property of this corporation for other real or personal property, including
corporate shares of other corporations or bonds or other obligations thereof;
and to generally deal in any and all classes of real or personal property
hereinbefore mentioned.
<PAGE>
(i) To act as agent, factor or broker in the purchase, sale or lease
of land or property of any kind; to act as agent or broker in negotiating loans,
placing bond issues, promoting and financing the construction of improvements of
any description, and in selling or purchasing corporate shares, bonds,
debentures or other securities.
(j) To acquire by purchase or otherwise, the good will, business,
property rights, franchises and assets of every kind, with or without
undertaking, either wholly or in part, the liabilities of any person, firm,
association or corporation; and to acquire any property or business as a going
concern or otherwise (1) by purchase of the assets thereof wholly or in part,
(2) by acquisition of the shares or any part thereof, or (3) in any other
manner, and to pay for the same in cash or in shares or bonds or other evidences
of indebtedness of this corporation, or otherwise; to hold, maintain and
operate, in any manner, or in any manner dispose of the whole or any part of the
good will, business, rights, and property so acquired, and to conduct in any
lawful manner, the whole or any part of any business so acquired; and to
exercise all the powers necessary or convenient in and about the management of
such business.
(k) To become a partner (either general or limited or both) and to
enter into agreements of partnership with one or more other persons or
corporations, for the purpose of carrying on any business whatsoever which this
corporation may deem proper or convenient in connection with any of the purposes
herein set forth or otherwise, or which may be calculated, directly or
indirectly, to promote the interests of this corporation or to enhance the value
of the business or the property of the corporation.
(l) To carry on any business whatsoever, either as principal or as
agent or both or as partnership, which this
-3-
<PAGE>
corporation may deem proper or convenient in connection with any of the
foregoing purposes or otherwise, or which may be calculated, directly or
indirectly, to promote the interests of this corporation or to enhance the value
of its property or business; to conduct its business in this state, in other
states, in the District of Columbia, in the territories and colonies of the
United States, and in foreign countries.
(m) To have and to exercise all the powers conferred by the laws of
California upon corporations formed under the laws pursuant to and under which
this corporation is formed, as such laws are now in effect or may at any time
hereafter be amended.
The foregoing statement of purposes shall be construed as a statement
of both purposes and powers, and the purposes and powers stated in each clause
shall, except where otherwise expressed be in no wise limited or restricted by
reference to or inference from the terms or provisions of any other clause but
shall be regarded as independent purposes and powers.
THIRD: The specific business in which the corporation primarily to
-----
engage is the franchising of the development and operation of motor inns, in
conjunction with golf course facilities.
FOURTH: That the county in the State of California where the
------
principal office for the transaction of the business of this corporation is to
be located is San Diego County.
FIFTH: The amount of the total authorized common stock of this
-----
corporation is One Million (1,000,000) shares, without nominal or par value, and
which shall be all of the same class. Stock may be issued from time to time,
without action by the stockholders, for such consideration as may be fixed from
time to time by the Board of Directors, and shares so issued, the full
consideration for which has been paid or delivered, shall
-4-
<PAGE>
be deemed fully paid stock, and the holders of such shares shall not be liable
for any further payment therefor.
SIXTH: That the number of directors of said corporation shall be
-----
three, who need not be stockholders, and the names and addresses of those who
are appointed to act as the first directors and to hold office until the
selection and qualification of their successors are:
NAME ADDRESS
S. FRED LITTLER 2569 Ardath Road
La Jolla, Calif. 92037
THEODORE VALLAS 3200 Vista Way
Oceanside, Calif. 92054
RICHARD CRAKE 6039 Camino de la Costa
La Jolla, Calif. 92037
That the number of persons named above shall constitute the number of
directors of the corporation until changed by amendment to the articles or by a
by-law adopted by the shareholders, increasing or decreasing the number of
directors as may be desired in the manner provided by law.
SEVENTH: The stock of this corporation shall be fully paid and non-
-------
assessable, and the private property of the stockholders shall not be subject to
the payment of corporate debts to any extent whatsoever.
IN WITNESS WHEREOF, for the purpose of forming this corporation under
the laws of the State of California, we, the undersigned, constituting the
incorporators of this corporation, including the persons named hereinabove as
the first directors of this corporation, have executed these Articles of
Incorporation this 25th day of September, 1968.
----
/s/ S. Fred Littler
------------------------------
S. Fred Littler
/s/ Theodore Vallas
------------------------------
Theodore Vallas
/s/ Richard Crake
-------------------------------
Richard Crake
<PAGE>
STATE OF CALIFORNIA)
)SS:
COUNTY OF SAN DIEGO)
On this 25th day of September, 1968, before me, DONNA JOHNSON, a
Notary Public in and for said County and State, residing therein, duly
commissioned and sworn, personally appeared S. FRED LITTLER, THEODORE VALLAS and
RICHARD CRAKE, known to be to be [sic] the persons whose names are subscribed to
the foregoing Articles of Incorporation, and acknowledged to me that they
executed the same.
WITNESS my hand and official seal.
/s/ Donna Johnson
-------------------------
Donna Johnson
[SEAL OF NOTARY PUBLIC]
<PAGE>
EXHIBIT 3.19
ARTICLES OF INCORPORATION
-------------------------
OF
--
OCEANSIDE GOLF MANAGEMENT CORP.
-------------------------------
FIRST: The name of the corporation is Oceanside Golf Management Corp.
SECOND: The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of California other than the banking business, the trust company business,
or the practice of a profession permitted to be incorporated by the California
Corporations Code.
THIRD: The name of this corporation's initial agent for service of
process in the State of California is James A. Husband, whose address is 3702
Via de la Valle, Suite No. 202, Del Mar, California 92014.
FOURTH: The total number of shares which the corporation is authorized to
issue is one thousand (1,000) common shares of the par value of One Dollar
($1.00) each.
FIFTH: This corporation is a close corporation. All of the corporation's
issued shares shall be held of record by not more than thirty-five (35) persons.
IN WITNESS WHEREOF, the undersigned have executed these articles this 21st
day of September, 1993.
INCORPORATORS:
/s/ Sol S. Reifer
___________________________________
Sol S. Reifer
/s/ Linda Blanton-Myers
___________________________________
Linda Blanton-Myers
Articles of Incorporation - California solo page
- --------------------------------------
<PAGE>
EXHIBIT 3.20
ARTICLES OF INCORPORATION
-------------------------
OF
--
OVLC FINANCIAL CORP.
--------------------
FIRST: The name of the corporation is OVLC Financial Corp.
SECOND: The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of California other than the banking business, the trust company business,
or the practice of a profession permitted to be incorporated by the California
Corporations Code.
THIRD: The name of this corporation's initial agent for service of process
in the State of California is James A. Husband. Address 15821 Ventura Blvd.,
Suite 550, Encino, California 91436.
FOURTH: The total number of shares which the corporation is authorized to
issue is one thousand (1,000) common shares of the par value of One Dollar
($1.00) each.
FIFTH: This corporation is a close corporation. All of the corporation's
issued shares shall be held of record by not more than thirty-five (35) persons.
IN WITNESS WHEREOF, the undersigned have executed these articles this 16th
day of March, 1993.
INCORPORATOR:
/s/ Linda L. Blanton
___________________________________
Linda L. Blanton
Articles of Incorporation - California solo page
- --------------------------------------
<PAGE>
EXHIBIT 3.21
ARTICLES OF INCORPORATION
-------------------------
OF
--
CSR GOLF GROUP, INC.
--------------------
The undersigned natural person, of the age of eighteen (18) years or more,
acting as incorporator of a corporation under the Texas Business Corporation
Act, hereby adopts the following Articles of Incorporation for such corporation.
ARTICLE ONE
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The name of the corporation is CSR Golf Group, Inc.
ARTICLE TWO
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The period of its duration is perpetual.
ARTICLE THREE
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The purpose for which the corporation is organized is to engage in the
businesses of establishing, developing, building, designing, constructing,
maintaining, managing, operating, buying, selling, acquiring, leasing, trading,
and dealing in one or more private clubs and/or restaurants for the providing of
refreshments, entertainment, exercise, health, and athletic facilities and
social diversions for their members and guests and to afford all customary
privileges and accommodations of a private club for profit, and to engage in
such other related activities and make such other investments as the Board of
Directors of the corporation may from time to time deem advisable, both within
and without the State of Texas, and to do all things incidental thereto or
connected therewith which are necessary, proper, advisable, or convenient in the
premises and are not forbidden by law.
ARTICLE FOUR
------------
The aggregate number of shares of capital stock which the corporation has
authority to issue is one thousand (1,000) shares of common stock of the par
value of One Dollar ($1.00). The shares shall be designated as common stock and
shall have identical rights, privileges, and powers in every respect. Cumulative
voting shall not be allowed and no shareholder shall have any preemptive rights.
Articles of Incorporation - Texas page 1
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<PAGE>
ARTICLE FIVE
------------
The corporation will not commence business until it has received for the
issuance of its shares consideration of the value of One Thousand Dollars
($1,000.00), consisting of money, labor done, or property actually received.
ARTICLE SIX
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The address of its initial registered office is TriWest Plaza, 3030 LBJ
Freeway, Dallas, Texas 75234, and the name of its initial registered agent at
such address is James E. Maser.
ARTICLE SEVEN
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The number of directors constituting the initial board of directors is
three (3), and the names and addresses of the persons who shall serve as
directors until the first annual meeting of the shareholders or until their
successors are elected and qualified are:
<TABLE>
<S> <C>
Murry E. Page 15770 Dallas Parkway,
5th Floor
Dallas, Texas 75248
Randolph D. Addison 15770 Dallas Parkway,
5th Floor
Dallas, Texas 75248
W. Keith Bryant 15770 Dallas Parkway,
5th Floor
Dallas, Texas 75248
</TABLE>
ARTICLE EIGHT
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The name and address of the incorporator is Linda Blanton-Myers, 15770
Dallas Parkway, 5th Floor, Dallas, Texas 75248.
/s/ Linda Blanton-Myers
______________________________
Linda Blanton-Myers
Articles of Incorporation - Texas page 2
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<PAGE>
EXHIBIT 3.22
AMENDED AND RESTATED BYLAWS FOR THE REGULATION, EXCEPT AS
OTHERWISE PROVIDED BY STATUTE OR ITS
ARTICLES OF INCORPORATION, OF
CSR GOLF GROUP, INC.
ARTICLE I
OFFICES
Section 1. Principal Office. The corporation will maintain offices for
----------------
the transaction of business of the corporation at 3702 Via de la Valle, Suite
202, Del Mar, California 92014.
Section 2. Other Offices. Branch or affiliate offices may at any time be
-------------
established by the Board of Directors at any place or places where the
corporation is qualified to do business.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. Place of Meetings. All meetings of shareholders shall be held
-----------------
at the principal office of the corporation or at any other place which may be
(i) designated by the Board of Directors, or (ii) consented to by the written
consent of all shareholders entitled to vote thereat, given either before or
after the meeting and filed with the Secretary of the corporation, or (iii) in
the city of residence of any shareholder holding over two-thirds of the capital
stock of the corporation.
Section 2. Annual Meetings. The annual meeting of shareholders shall be
---------------
on the 3rd Wednesday of September in each year at 10:00 a.m.; provided, however,
that should said day fall upon a legal holiday, then any such annual meeting of
shareholders shall be held at the same time and place on the next day thereafter
ensuing which is not a legal holiday. At such meetings, Directors shall be
elected, reports of the affairs of the corporation shall be considered, and any
other business may be transacted which is within the power of the shareholders.
Section 3. Special Meetings. Special meetings of the shareholders for any
----------------
purpose whatsoever may be called at any time either by the President or by the
Board of Directors, to be held at such time as he or they may designate. In
addition, one or more shareholders holding not less than one-fifth of the voting
power of the corporation may call such a meeting by causing a written request to
be sent by registered mail or delivered personally to the President, Vice
President or Secretary. The officer forthwith shall cause notice to be given,
as provided below, that a meeting will be held at a time, fixed by the officer,
not less than ten (10) nor more than sixty (60) days after the receipt of the
request.
Amended Bylaws (Revised May 1, 1996)
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page 1
<PAGE>
Section 4. Notice of Meeting. Not less than ten (10) days prior to any
-----------------
meeting of shareholders, the Secretary or his delegate shall cause written
notice of such meeting to be given to all shareholders entitled to vote thereat.
If a shareholder gives no address, notice shall be deemed to have been duly
given if sent by mail or other means of written communication addressed to the
place where the principal office of the corporation is situated, or if published
at least once in a newspaper of general circulation in the county in which said
office is located.
The notice shall specify the place, the day and the hour of such meeting,
and, in the case of a special meeting, the general nature of the business to be
transacted. No action may be taken at any meeting of shareholders on any of the
following proposals unless the notice thereof specifies the general nature of
the proposal: (a) a proposal to sell, lease, convey, exchange, transfer or
otherwise dispose of all, or substantially all, of the property or assets of the
corporation, (b) a proposal to merge or consolidate with another corporation,
domestic or foreign, (c) a proposal to reduce the stated capital of the
corporation, (d) a proposal to amend the Articles of Incorporation, (e) a
proposal to wind up and dissolve the corporation, or (f) a proposal to adopt a
plan of distribution of shares, securities, or any other consideration (other
than money) in the process of winding up.
Section 5. Consent of Absentees. The transactions conducted at any
--------------------
meeting of shareholders, either annual or special, however called and noticed,
shall be as valid as though had at a meeting duly held after regular call and
notice, if a quorum be present either in person or by proxy, and if, either
before or after the meeting, each of the shareholders entitled to vote, not
present in person or by proxy, signs a written waiver of notice, a consent to
the holding of such meeting, or an approval of the minutes thereof. All such
waivers, consents or approvals shall be filed with the corporate records or made
a part of the minutes of the meeting.
Section 6. Quorum. The presence in person or by proxy of persons entitled
------
to vote a majority of the voting shares at any meeting shall constitute a quorum
for the transaction of business. The shareholders present at a duly called or
held meeting at which a quorum is present may continue to do business until
adjournment, notwithstanding the withdrawal of enough shareholders to leave less
than a quorum.
Section 7. Voting. Unless a record date for voting purposes be fixed, as
------
hereinafter provided, only persons in whose names shares entitled to vote stand
on the stock records of the corporation as of the date of such meeting shall be
entitled to vote thereat. Except as otherwise provided by law or the Articles
of Incorporation, every shareholder shall be entitled to one vote for each share
standing in his name on the record of shareholders of the corporation. Voting
rights shall be noncumulative. Except as otherwise provided herein or in the
Articles of Incorporation, all corporate actions shall be determined by vote of
a majority of the votes cast at a meeting of shareholders entitled to vote
thereat. Such vote may be viva voce or by ballot; provided, however, that all
---- ----
elections for Directors must be by ballot upon demand made by a shareholder at
any election and before the voting begins. The candidates receiving the highest
number of votes up to the number of Directors to be elected shall be elected.
Amended Bylaws (Revised May 1, 1996)
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page 2
<PAGE>
Section 8. Proxies. Every person entitled to vote or execute consents
-------
shall have the right to do so either in person or by one or more agents
authorized by a written proxy executed by such person or his duly authorized
agent and filed with the Secretary of the corporation.
Section 9. Adjourned Meetings and Notice Thereof. Any shareholders'
-------------------------------------
meeting, annual or special, whether or not a quorum is present, may be adjourned
from time to time by the vote of a majority of the shares, the holders of which
are either present in person or represented by proxy thereat, but in the absence
of a quorum, no other business may be transacted at such meeting.
When any shareholders' meeting, either annual or special, is adjourned for
thirty (30) days or more, notice of the adjourned meeting shall be given as in
the case of an original meeting. Except as provided above, it shall not be
necessary to give any notice of any adjournment or of the business to be
transacted at any adjourned meeting other than by announcement at the meeting at
which such adjournment is taken.
Section 10. Action Without Meeting. Any action which may be taken at a
----------------------
meeting of the shareholders may be taken without a meeting if authorized by a
writing signed by all of the persons who would be entitled to vote upon such
action at a meeting and filed with the Secretary of the corporation; provided,
however, a meeting shall be held for dissolution, transfer of all or
substantially all of the assets of the corporation, or for merger or
consolidation of the corporation with other corporations, if same is required
under applicable law.
ARTICLE III
DIRECTORS
Section 1. Powers. Subject to limitations imposed by law or by the
------
Articles of Incorporation, all corporate powers shall be exercised by or under
the authority of, and the business and affairs of the corporation shall be
controlled by, the Board of Directors. In the exercise of its powers, the Board
may appoint an Executive Committee and other committees and may delegate to
the Executive Committee any of the powers and authority of the Board in the
management of the business and affairs of the corporation, except the power to
declare dividends and to adopt, amend or repeal bylaws. The Executive Committee
shall be composed of two or more Directors.
Section 2. Number of Directors. The authorized number of Directors of the
-------------------
corporation shall be not less than one nor more than five until changed by
amendment of the Articles of Incorporation or by a bylaw duly adopted by the
shareholders amending this section. Directors need not be shareholders of the
corporation.
Section 3. Election and Term of Office. The Directors shall be elected at
---------------------------
the annual meeting of shareholders, but if any such annual meeting is not held
or the Directors are not elected thereat, Directors may be elected at any
special meeting of shareholders held for that
Amended Bylaws (Revised May 1, 1996)
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page 3
<PAGE>
purpose. Directors shall hold office until the election and qualification of
their respective successors.
Section 4. Vacancies. Vacancies in the Board of Directors may be filled
---------
by a majority of the remaining Directors, though less than a quorum, or by a
sole remaining Director, and each Director so elected shall hold office until
his successor is elected at an annual or a special meeting of the shareholders.
If the entire Board of Directors resigns at one time, the shareholders shall,
within a reasonable time thereafter, at a regular or special meeting, as
provided herein, elect a new Board of Directors.
A vacancy in the Board of Directors shall be deemed to exist in the case of
the death, resignation or removal of any Director, or if at any annual or
special meeting of shareholders at which any Director is elected the authorized
number of Directors is increased or if the shareholders fail to elect the full
authorized number of Directors to be voted for at that meeting.
The shareholders may elect a Director or Directors at any time to fill any
vacancy or vacancies not filled by the remaining Director or Directors. If the
Board of Directors accepts the resignation of a Director tendered to take effect
at a future time, the Board or the shareholders shall have the power to elect a
successor to take office when the resignation is to become effective.
No reduction of the authorized number of Directors shall have the effect of
removing any Director prior to the expiration of his term of office.
Section 5. Quorum. A majority of the authorized number of Directors shall
------
be necessary to constitute a quorum of the Board for the transaction of
business. Every act or decision done or made by a majority of the Directors
present at a meeting duly held at which a quorum is present shall be regarded as
the act of the Board of Directors, unless a greater number be required by law.
Section 6. Place of Directors' Meetings. Meetings of the Board of
----------------------------
Directors shall be held at the principal office of the corporation, or at any
other location which has been designated by resolution of the Board, or by
written consent of all of the Directors.
Section 7. Regular Meetings. Immediately following each annual meeting of
----------------
shareholders, the Board of Directors shall hold a regular meeting for the
purpose of electing officers and transacting any other business which may come
before them. No notice of such meeting need be given.
Section 8. Special Meetings. Special meetings of the Board of Directors
----------------
for any purpose or purposes shall be called by the President, or, if he is
absent or unable or refuses to act, by any Vice President or by any two
Directors.
Written notice of the time and place of special meetings shall be delivered
personally to each Director or sent to each Director by mail or other form of
written communication,
Amended Bylaws (Revised May 1, 1996)
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page 4
<PAGE>
charges prepaid, addressed to him at his address as is shown upon the records of
the corporation, or, if it is not so shown and if it is not readily
ascertainable, addressed to him at the city or place where the meetings of the
Directors are regularly held. Notices mailed or telegraphed shall be deposited
in the United States mail or delivered to the telegraph company at the place
where the principal office of the corporation is located at least forty-eight
(48) hours prior to the time of the holding of the meeting, and notices
delivered personally shall be so delivered at least twenty-four (24) hours prior
to the time of the holding of the meeting.
Section 9. Notice of Adjournment. Notice of the time and place of holding
---------------------
an adjourned meeting need not be given to absent Directors if the time and place
are fixed at the meeting adjourned.
Section 10. Waiver of Notice: Consent to Meeting. The transactions
-------------------------------------
conducted at any meeting of the Board of Directors, however called or noticed or
wherever held, shall be as valid as though conducted at a meeting duly held
after regular call and notice if a quorum is present and if, either before or
after the meeting, each of the Directors signs a waiver of notice, a consent to
hold such a meeting, or an approval of the minutes thereof. All such waivers,
consents or approvals shall be filed with the corporate records and made a part
of the minutes of the meeting.
Section 11. Adjournment. A quorum of the Directors may adjourn to meet
-----------
again at a set day and hour, and in the absence of a quorum, a majority of the
Directors present may adjourn from time to time until the time fixed for the
next regular meeting of the Board.
Section 12. Action Without Meeting. Any action required or permitted to
----------------------
be taken by the Board of Directors may be taken without a meeting if all members
of the Board shall individually or collectively consent in writing to such
action. Such written consent or consents shall be filed with the minutes of the
proceedings of the Board. Such action by written consent shall have the same
force and effect as a unanimous vote of such Directors.
Section 13. Fees and Compensation. Directors shall not receive any stated
---------------------
salary for their services as Directors, but by resolution of the Board, a fee or
other remuneration, with or without expenses of attendance, may be allowed for
attendance at each meeting. Nothing herein contained shall be construed to
preclude any Director from serving the corporation in any other capacity as an
officer, agent or employee, or otherwise, and receiving compensation therefor.
Section 14. Indemnification of Directors, Officers
--------------------------------------
and Employees.
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A. In the event a person is sued, either alone or with others, because he
is or was a Director, officer or employee of the corporation, in any proceeding
arising out of his alleged misfeasance or nonfeasance in the performance of his
duties as such Director, officer or employee, or out of any alleged wrongful act
by the corporation, he shall be indemnified for his reasonable expenses,
including attorneys' fees incurred in the defense of the proceeding, if both of
the following conditions exist: (i) the person sued is successful in whole or in
part,
Amended Bylaws (Revised May 1, 1996)
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page 5
<PAGE>
or the proceeding against him is settled with the approval of the court, and
(ii) the court finds that his conduct fairly and equitable merits such
indemnity.
The amount of such indemnity may be assessed against the corporation, its
receiver, its trustee, or any other proper party, by the court in the same or in
a separate proceeding and shall be so much of the expenses, including attorneys'
fees incurred in the defense of the action as the court determines and finds to
be reasonable. Application for such indemnity may be made either by a person
sued or by the attorney or other person rendering services to him in connection
with the defense, and the court may order fees and expenses to be paid directly
to the attorney or other person although he is not a party to the proceeding.
Notice of the application for such indemnity shall be served upon the
corporation, its receiver, or its trustee and upon the plaintiff and other
parties to the proceeding. The court may also order notice to be given to the
shareholders in the manner provided elsewhere in these bylaws for giving notice
of shareholders' meetings, in such form as the court directs.
B. Notwithstanding the foregoing provisions, the Board of Directors may
authorize the corporation to pay expenses incurred by or to satisfy a judgment
or fine rendered or levied against a present or former Director, officer or
employee of the corporation in an action brought by a third party against such
person (whether or not the corporation is joined as a party defendant) to impose
a liability or penalty on such person for an act alleged to have been committed
by such person in the performance of his duties as such Director, officer or
employee, or by the corporation, or by both, provided the Board of Directors
determines that such Director, officer or employee was acting in good faith
within what he reasonably believed to be the scope of his employment or
authority and for a purpose which he reasonably believed to be in the best
interests of the corporation or its shareholders. Payments authorized hereunder
include amounts paid and expenses incurred in settling any such action or
threatened action. This Paragraph does not apply to any action instituted or
maintained as the right of the corporation by a shareholder or holder of a
voting trust certificate representing shares of the corporation.
C. The provisions of this Section shall apply to the estate, executor,
administrator, heirs, legatees or devisees of any such present or former
Director, officer or employee of the corporation.
D. The Board of Directors may, at its discretion, authorize the purchase
of a policy or policies of insurance against any liability of the corporation to
indemnify any person pursuant to this Section, containing such terms and
conditions as the Board may deem appropriate. Such policy or policies may
include provisions for the direct indemnification of directors, officers or
other persons for expenses of a kind not subject to indemnification hereunder,
provided the premiums on such combined policy are, in the judgment of the Board,
fairly allocated between the corporation and the insured persons.
E. The foregoing provisions of this Section 14 shall not be considered as
limiting the right of indemnification permitted by the Texas Business
Corporation Act, Articles 2.021, but indemnification shall be to the maximum
extent permited under Texas Business Corporation Act, Article 2.02-1.
Amended Bylaws (Revised May 1, 1996)
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page 6
<PAGE>
ARTICLE IV
OFFICERS
Section 1. Officers. The corporation shall have a President, one or more
--------
Vice Presidents, a Secretary and a Treasurer. Such officers shall be elected
annually by the Board of Directors and each shall hold office until he shall
resign or shall be removed or otherwise disqualified to serve and until his
successor shall be elected.
Section 2. Other Officers. The corporation may also have, in the
--------------
discretion of the Board of Directors, a Chairman of the Board, one or more
Assistant Secretaries, one or more Assistant Treasurers, and such other officers
and agents shall hold office for such terms and have such authority and perform
such duties as the Board of Directors may from time to time specify, and shall
hold office until they shall resign or shall be removed or otherwise
disqualified to serve.
Section 3. Removal and Resignation. Any officer or agent may be removed,
-----------------------
either with or without cause, by a majority of the Directors at the time in
office at any regular or special meeting of the Board, or, except in case of an
office chosen by the Board of Directors, by any officer upon whom such power of
removal may be conferred by the Board of Directors.
Any officer or agent may resign at any time by giving written notice to the
Board of Directors, the President or the Secretary of the corporation. Any such
resignation shall take effect as of the date of the receipt of such notice or at
any later time specified therein, and unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
Section 4. Vacancies. A vacancy in any office because of death,
---------
resignation, removal, disqualification, or any other cause shall be filled in
the manner prescribed in these Bylaws for regular appointments to such office.
Section 5. Chairman of the Board. The Chairman of the Board, if there
---------------------
shall be such an officer, shall, if present, preside at all meetings of the
Board of Directors and exercise and perform such other powers and duties as may
from time to time be assigned to him by the Board of Directors.
Section 6. President. Subject to such supervisory powers, if any, as may
---------
be given by the Board of Directors to the Chairman of the Board, if there be
such an officer, the President shall be the chief executive officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and affairs of the
corporation. He shall preside at all meetings of the shareholders and, in the
absence of the Chairman of the Board, at all meetings of the Board of Directors.
He shall be an ex officio member of all the standing committees, including the
-- -------
Executive Committee, if any, and shall have the general powers and duties of
management usually vested in the office of the President of a corporation and
shall have such other powers and duties as may be prescribed by the Board of
Directors.
Amended Bylaws (Revised May 1, 1996)
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page 7
<PAGE>
Section 7. Vice President. In the absence or disability of the President,
--------------
the Vice Presidents, in order of their rank as fixed by the Board of Directors,
or, if not ranked, the Vice President designated by the Board of Directors,
shall perform all the duties of the President, and when so acting, shall have
all the powers of and be subject to all the restrictions upon the President.
The Vice Presidents shall have such other powers and perform such other duties
as from time to time may be prescribed for them respectively by the Board of
Directors.
Section 8. Secretary. The Secretary shall keep, or cause to be kept, a
---------
book of minutes at the principal office of the corporation, or at such other
place as the Board of Directors may order, of all meetings of Directors and
shareholders, with the time and place of holding, whether regular or special,
and if special, how authorized, the notice thereof given, the names of those
present at Directors' meetings, the number of shares present or represented at
shareholders' meetings and the proceedings thereof.
The Secretary shall keep, or cause to be kept, at the principal office of
the corporation, or at the office of the corporation's transfer agent, a share
register, or a duplicate share register, showing the names of the shareholders
and their addresses, the number and classes of shares held by each, and the
number and date of cancellation of every certificate surrendered for
cancellation.
The Secretary shall give, or cause to be given, notice of all meetings of
the shareholders and of the Board of Directors required by these Bylaws or by
law to be given, and he shall keep the seal of the corporation in safe custody
and shall have such other powers and perform such other duties as may be
prescribed by the Board of Directors.
Section 9. Treasurer. The Treasurer shall keep and maintain, or cause to
---------
be kept and maintained, adequate and correct accounts of the properties and
business transactions of the corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital surplus and shares.
Any surplus, including earned surplus, paid-in surplus and surplus arising from
a reduction of stated capital, shall be classified according to source and shown
in a separate account. The books of account shall at all reasonable times be
open to inspection by any Director.
The Treasurer shall deposit all moneys and other valuables in the name and
to the credit of the corporation with such depositories as may be designated by
the Board of Directors. He shall disburse the funds of the corporation as may
be ordered by the Board of Directors, shall render to the President and Board,
whenever they request it, an account of all of his transactions as Treasurer and
of the financial condition of the corporation, and shall have such other powers
and perform such other duties as may be prescribed by the Board of Directors.
ARTICLE V
MISCELLANEOUS
Section 1. Record Date and Closing Stock Books. The Board of Directors
-----------------------------------
may fix a time as a record date for the determination of the shareholders
entitled to notice of and to vote
Amended Bylaws (Revised May 1, 1996)
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page 8
<PAGE>
at any meeting of shareholders or entitled to receive any dividend or
distribution or any allotment of rights, or to exercise rights in respect to any
change, conversion or exchange of shares. The record date so fixed shall not be
more than fifty (50) days prior to the date of the meeting or event for the
purposes of which it is fixed. When a record date is so fixed, only shareholders
who are of record on that date are entitled to notice of and to vote at the
meeting or to receive the dividend, distribution or allotment of rights, or to
exercise the rights, as the case may be, notwithstanding any transfer of any
shares on the books of the corporation after the record date.
The Board of Directors may close the books of the corporation against
transfers of shares during the whole or any part of a period not more than fifty
(50) days prior to the date of a shareholders' meeting, the date when the right
to any dividend, distribution or allotment of rights vests, or the effective
date of any change, conversion or exchange of shares.
Section 2. Inspection of Corporate Records. The share register or
-------------------------------
duplicate share register, the books of account and minutes of proceedings of the
shareholders, the Board of Directors and the Executive Committee shall be open
to inspection upon the written demand of any shareholder, or the holder of a
voting trust certificate, at any reasonable time and for a purpose reasonably
related to his interests as a shareholder, or as the holder of such voting trust
certificate, and shall be exhibited at any time when required by demand at any
shareholders' meeting of ten percent (10%) of the shares represented at the
meeting. Such inspection may be made in person or by an agent or attorney and
shall include the right to make extracts. Demand of inspection, other than at a
shareholders' meeting, shall be made in writing upon the President, Secretary or
Assistant Secretary of the corporation.
Every Director shall have the right at any reasonable time to inspect the
books, records, documents of every kind, and the physical properties of the
corporation and of its subsidiary corporations, domestic or foreign.
Section 3. Certificates for Shares. A certificate or certificates for
-----------------------
shares of the corporation (in such form as may be approved from time to time by
the Board of Directors) shall be issued to each stockholder when such shares are
fully paid. The certificates shall be numbered and the holder's name, number of
shares and the date of issue shall be entered in the books of the corporation as
they are issued. The certificates shall exhibit the holder's name, the number
and class of shares evidenced thereby or a statement that the shares are without
par value, and such additional information as may be required by the Board of
Directors. They shall be signed by the President or a Vice President and the
Secretary or an Assistant Secretary, or be authenticated by facsimiles of the
signatures of the President and the Secretary. Every certificate authenticated
by a facsimile of a signature must be countersigned by a transfer clerk.
Section 4. Transfer of Stock. The corporation shall recognize the right
-----------------
of the person registered on its books as owner of shares to receive dividends
and to vote as such owner. Shares may be transferred on the books of the
corporation only by the person named in the certificate as the owner thereof, or
by his agent, attorney or legal representative, upon surrender to the Secretary
of the corporation of a certificate, duly endorsed or accompanied by proper
Amended Bylaws (Revised May 1, 1996)
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<PAGE>
evidence of succession, assignment or authority to transfer. The Secretary shall
thereupon cause a new certificate to be issued to the person entitled thereto
and shall cancel the old certificate and record the transaction upon the books
of the corporation.
Section 5. Lost Certificates. New certificates for shares or other
-----------------
securities of the corporation may be issued for and in place of any such
instrument theretofore issued which is alleged to have been lost or destroyed.
The Directors may, in their discretion, require the owner of such lost or
destroyed instrument, or his legal representative, to give the corporation a
bond or other security in an adequate amount as indemnity against any claim that
may be made against the corporation. A new instrument may be issued, however,
without requiring any bond or other security when in the judgment of the
Directors it is proper to do so.
Section 6. Corporate Seal. A corporate seal shall be provided and
--------------
adopted by the Board of Directors and shall contain the name of the corporation
and such other wording as the Board may deem suitable or as may be required by
law.
Section 7. Contracts - Execution of Documents. The Board of Directors may
----------------------------------
authorize any officer or officers, agent or agents to enter into any contract or
execute any instrument in the name of and on behalf of the corporation, and such
authority may be general or confined to specific instances, and unless so
authorized by the Board of Directors, no officer, agent or employee shall have
any power or authority to bind the corporation by any contract or engagement or
to pledge its credit or to render it liable for any purpose or in any amount;
except, however, the club membership secretary may execute membership
application agreements on behalf of the corporation.
All checks, drafts or other orders for payment of money, notes or other
evidences of indebtedness issued in the name of or payable to the corporation
shall be signed or endorsed by such person or persons and in such manner as from
time to time shall be determined by resolution of the Board of Directors.
Section 8. Representation of Shares of Other Corporations. The President
----------------------------------------------
or any Vice President and the Secretary or Assistant Secretary of this
corporation are authorized to vote, represent and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority herein
granted to said officers to vote or represent on behalf of this corporation any
and all shares held by this corporation in any other corporation or corporations
may be exercised either by such officers in person or by any person authorized
so to do by proxy or power of attorney duly executed by said officers.
Section 9. Inspection of Bylaws. The corporation shall keep in its
--------------------
principal office for the transaction of business the original or a copy of these
Bylaws, as amended or otherwise altered to date, certified by the Secretary,
which shall be open to inspection by the shareholders at all reasonable times
during office hours.
Amended Bylaws (Revised May 1, 1996)
- --------------
page 10
<PAGE>
ARTICLE VI
AMENDMENTS
Section 1. Power of Shareholders. New Bylaws may be adopted or these
---------------------
Bylaws may be amended or repealed by the vote of shareholders entitled to
exercise a majority of the voting power of the corporation or by the written
consent of such shareholders, except as otherwise provided by the Articles of
Incorporation, provided that the vote of written consent of shareholders holding
more than seventy-five percent (75%) of the voting power of the corporation
shall be required to reduce the authorized number of Directors.
Section 2. Power of Directors. Subject to the right of shareholders to
------------------
adopt, amend or repeal these Bylaws, these Bylaws, other than a Bylaw or
amendment thereof changing the authorized number of Directors, may be adopted,
amended or repealed by the Board of Directors at any regular or special meeting
thereof.
Amended Bylaws (Revised May 1, 1996)
- --------------
page 11
<PAGE>
EXHIBIT 3.23
ARTICLES OF INCORPORATION
OF
LAKEWAY GOLF CLUBS, INC.
The undersigned natural person of the age of eighteen years or more,
acting as the sole incorporator of a corporation under the Texas Business
Corporation Act, does hereby adopt the following Articles of Incorporation for
such corporation:
ARTICLE 1
The name of the corporation is LAKEWAY GOLF CLUBS, INC.
ARTICLE 2
The period of its duration is perpetual.
ARTICLE 3
The purpose or purposes for which the corporation is organized are:
To transact any and all lawful business for which corporations
may be incorporated under the Texas Business Corporation Act; and
In general, to have and exercise all of the powers conferred by
the laws of Texas upon corporations formed under the Texas Business
Corporation Act, and to do any and all things hereinafter set forth to
the same extent as natural persons might or could do.
ARTICLE 4
The aggregate number of shares which the corporation shall have
authority to issue is 1,000 shares, and the par value of each of such shares
shall be $1.00. All such shares shall be of one class and shall be designated as
Common Stock.
No shareholder shall have a preemptive right to acquire any shares or
securities of any class, whether now or hereafter authorized, which may at any
time be issued, sold or offered for sale by the corporation.
1
<PAGE>
ARTICLE 5
The corporation will not commence business until it has received for the
issuance of its shares consideration of the value of $1,000, consisting of money
paid, labor done, or property actually received.
ARTICLE 6
The address of its initial registered office is 350 North St. Paul
Street, Dallas, Texas 75201, and the name of its initial registered agent at
such address is CT Corporation.
ARTICLE 7
The number of directors constituting the initial Board of Directors is
one and the name and address of the person who is to serve as the director of
the corporation until the first annual meeting of the shareholders or until his
successor is elected and qualified is:
Name Address
---- -------
James A. Husband 3702 Via de La Valle, Suite 202
Del Mar, CA 92015
Frederick J. Warren 3702 Via de La Valle, Suite 202
Del Mar, CA 92015
David H. Wong 3702 Via de La Valle, Suite 202
Del Mar, CA 92015
The right of shareholders to cumulative voting in the election of
directors is expressly prohibited.
ARTICLE 8
The name and address of the incorporator is Andrew R. Crosson, 3702 Via
de La Valle, Suite 202, Del Mar, CA 92015
ARTICLE 9
Unless a Bylaw adopted by the shareholders provides otherwise as to all
or some portion of the corporation's Bylaws, the corporation's shareholders may
amend, repeal, or
<PAGE>
adopt the corporation's Bylaws even though the Bylaws may also be amended,
repealed, or adopted by its Board of Directors.
ARTICLE 10
Any action required by the Texas Business Corporation Act to be taken at
any annual or special meeting of shareholders, or any action which may be taken
at any annual or special meeting of shareholders, may be taken without a
meeting, without prior notice, and without a vote, if a consent or consents in
writing, setting forth the action so taken, shall have been signed by the holder
or holders of shares having not less than the minimum number of votes that would
be necessary to take such action at a meeting at which the holders of all shares
entitled to vote on the action were present and voted.
ARTICLE 11
No director of the corporation shall be liable to the corporation or its
shareholders for monetary damages for an act or omission in the director's
capacity as a director, except for liability (a) for any breach of the
director's duty of loyalty to the corporation or its shareholders, (b) for acts
or omissions not in good faith that constitute a breach of duty of the directory
to the corporation or an act or omission that involves intentional misconduct or
a knowing violation of law, (c) for any transaction from which the director
received an improper benefit, whether or not the benefit resulted from an act
taken within the scope of the director's office, and (d) for acts or omissions
for which the liability of a director is expressly provided by statute. Any
repeal or amendment of this Article by the shareholders of the corporation shall
be prospective only, and shall not adversely affect any limitation on the
personal liability of a director of the corporation existing at the time of such
repeal or amendment. In addition to the circumstances in which a director of the
corporation is not personally liable as set forth in the preceding sentences, a
director shall not be liable to the fullest extent permitted by any amendment to
the Texas statutes hereafter enacted that further limits the liability of a
director.
IN WITNESS WHEREOF, the undersigned has set his hand March 10 1995.
--------
/s/ Andrew R. Crosson
-------------------------------
ANDREW R. CROSSON
3
<PAGE>
EXHIBIT 3.24
AMENDED AND RESTATED BYLAWS FOR THE REGULATION, EXCEPT AS
OTHERWISE PROVIDED BY STATUTE OR ITS
ARTICLES OF INCORPORATION, OF
LAKEWAY GOLF CLUBS,, INC.
ARTICLE I
OFFICES
Section 1. Principal Office. The corporation will maintain offices for
----------------
the transaction of business of the corporation at 3702 Via de al Valle, Suite
202, Del Mar, California 92014.
Section 2. Other Offices. Branch or affiliate offices may at any time be
-------------
established by the Board of Directors at any place or places where the
corporation is qualified to do business.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. Place of Meetings. All meetings of shareholders shall be held
-----------------
at the principal office of the corporation or at any other place which may be
(i) designated by the Board of Directors, or (ii) consented to by the written
consent of all shareholders entitled to vote thereat, given either before or
after the meeting and filed with the Secretary of the corporation, or (iii) in
the city of residence of any shareholder holding over two-thirds of the capital
stock of the corporation.
Section 2. Annual Meetings. The annual meeting of shareholders shall be
---------------
on the 1st day of March in each year at 10:00 a.m.; provided, however, that
should said day fall upon a legal holiday, then any such annual meeting of
shareholders shall be held at the same time and place on the next day thereafter
ensuing which is not a legal holiday. At such meetings, Directors shall be
elected, reports of the affairs of the corporation shall be considered, and any
other business may be transacted which is within the power of the shareholders.
Section 3. Special Meetings. Special meetings of the shareholders for any
----------------
purpose whatsoever may be called at any time either by the President or by the
Board of Directors, to be held at such time as he or they may designate. In
addition, one or more shareholders holding not less than one-fifth of the voting
power of the corporation may call such a meeting by causing a written request to
be sent by registered mail or delivered personally to the President, Vice
President or Secretary. The officer forthwith shall cause notice to be given,
as provided below, that a meeting will be held at a time, fixed by the officer,
not less than ten (10) nor more than sixty (60) days after the receipt of the
request.
Amendment to Bylaws (Revised May 1, 1996)
- -------------------
Page 1
<PAGE>
Section 4. Notice of Meeting. Not less than ten (10) days prior to any
-----------------
meeting of shareholders, the Secretary or his delegate shall cause written
notice of such meeting to be given to all shareholders entitled to vote thereat.
If a shareholder gives no address, notice shall be deemed to have been duly
given if sent by mail or other means of written communication addressed to the
place where the principal office of the corporation is situated, or if published
at least once in a newspaper of general circulation in the county in which said
office is located.
The notice shall specify the place, the day and the hour of such meeting,
and, in the case of a special meeting, the general nature of the business to be
transacted. No action may be taken at any meeting of shareholders on any of the
following proposals unless the notice thereof specifies the general nature of
the proposal: (a) a proposal to sell, lease, convey, exchange, transfer or
otherwise dispose of all, or substantially all, of the property or assets of the
corporation, (b) a proposal to merge or consolidate with another corporation,
domestic or foreign, (c) a proposal to reduce the stated capital of the
corporation, (d) a proposal to amend the Articles of Incorporation, (e) a
proposal to wind up and dissolve the corporation, or (f) a proposal to adopt a
plan of distribution of shares, securities, or any other consideration (other
than money) in the process of winding up.
Section 5. Consent of Absentees. The transactions conducted at any
--------------------
meeting of shareholders, either annual or special, however called and noticed,
shall be as valid as though had at a meeting duly held after regular call and
notice, if a quorum be present either in person or by proxy, and if, either
before or after the meeting, each of the shareholders entitled to vote, not
present in person or by proxy, signs a written waiver of notice, a consent to
the holding of such meeting, or an approval of the minutes thereof. All such
waivers, consents or approvals shall be filed with the corporate records or
made a part of the minutes of the meeting.
Section 6. Quorum. The presence in person or by proxy of persons entitled
------
to vote a majority of the voting shares at any meeting shall constitute a quorum
for the transaction of business. The shareholders present at a duly called or
held meeting at which a quorum is present may continue to do business until
adjournment, notwithstanding the withdrawal of enough shareholders to leave less
than a quorum.
Section 7. Voting. Unless a record date for voting purposes be fixed, as
------
hereinafter provided, only persons in whose names shares entitled to vote stand
on the stock records of the corporation as of the date of such meeting shall be
entitled to vote thereat. Except as otherwise provided by law or the Articles
of Incorporation, every shareholder shall be entitled to one vote for each share
standing in his name on the record of shareholders of the corporation. Voting
rights shall be noncumulative. Except as otherwise provided herein or in the
Articles of Incorporation, all corporate actions shall be determined by vote of
a majority of the votes cast at a meeting of shareholders entitled to vote
thereat. Such vote may be viva voce or by ballot; provided, however, that all
---- ----
elections for Directors must be by ballot upon demand made by a shareholder at
any election and before the voting begins. The candidates receiving the highest
number of votes up to the number of Directors to be elected shall be elected.
Amendment to Bylaws (Revised May 1, 1996)
- -------------------
Page 2
<PAGE>
Section 8. Proxies. Every person entitled to vote or execute consents
-------
shall have the right to do so either in person or by one or more agents
authorized by a written proxy executed by such person or his duly authorized
agent and filed with the Secretary of the corporation.
Section 9. Adjourned Meetings and Notice Thereof. Any shareholders'
-------------------------------------
meeting, annual or special, whether or not a quorum is present, may be adjourned
from time to time by the vote of a majority of the shares, the holders of which
are either present in person or represented by proxy thereat, but in the absence
of a quorum, no other business may be transacted at such meeting.
When any shareholders' meeting, either annual or special, is adjourned for
thirty (30) days or more, notice of the adjourned meeting shall be given as in
the case of an original meeting. Except as provided above, it shall not be
necessary to give any notice of any adjournment or of the business to be
transacted at any adjourned meeting other than by announcement at the meeting at
which such adjournment is taken.
Section 10. Action Without Meeting. Any action which may be taken at a
----------------------
meeting of the shareholders may be taken without a meeting if authorized by a
writing signed by all of the persons who would be entitled to vote upon such
action at a meeting and filed with the Secretary of the corporation; provided,
however, a meeting shall be held for dissolution, transfer of all or
substantially all of the assets of the corporation, or for merger or
consolidation of the corporation with other corporations, if same is required
under applicable law.
ARTICLE III
DIRECTORS
Section 1. Powers. Subject to limitations imposed by law or by the
------
Articles of Incorporation, all corporate powers shall be exercised by or under
the authority of, and the business and affairs of the corporation shall be
controlled by, the Board of Directors. In the exercise of its powers, the
Board may appoint an Executive Committee and other committees and may delegate
to the Executive Committee any of the powers and authority of the Board in the
management of the business and affairs of the corporation, except the power to
declare dividends and to adopt, amend or repeal bylaws. The Executive Committee
shall be composed of two or more Directors.
Section 2. Number of Directors. The authorized number of Directors of the
-------------------
corporation shall be not less than one nor more than five until changed by
amendment of the Articles of Incorporation or by a bylaw duly adopted by the
shareholders amending this section. Directors need not be shareholders of the
corporation.
Section 3. Election and Term of Office. The Directors shall be elected at
---------------------------
the annual meeting of shareholders, but if any such annual meeting is not held
or the Directors are not elected thereat, Directors may be elected at any
special meeting of shareholders held for that
Amendment to Bylaws (Revised May 1, 1996)
- -------------------
Page 3
<PAGE>
purpose. Directors shall hold office until the election and qualification of
their respective successors.
Section 4. Vacancies. Vacancies in the Board of Directors may be filled
---------
by a majority of the remaining Directors, though less than a quorum, or by a
sole remaining Director, and each Director so elected shall hold office until
his successor is elected at an annual or a special meeting of the shareholders.
If the entire Board of Directors resigns at one time, the shareholders shall,
within a reasonable time thereafter, at a regular or special meeting, as
provided herein, elect a new Board of Directors.
A vacancy in the Board of Directors shall be deemed to exist in the case of
the death, resignation or removal of any Director, or if at any annual or
special meeting of shareholders at which any Director is elected the authorized
number of Directors is increased or if the shareholders fail to elect the full
authorized number of Directors to be voted for at that meeting.
The shareholders may elect a Director or Directors at any time to fill any
vacancy or vacancies not filled by the remaining Director or Directors. If the
Board of Directors accepts the resignation of a Director tendered to take
effect at a future time, the Board or the shareholders shall have the power to
elect a successor to take office when the resignation is to become effective.
No reduction of the authorized number of Directors shall have the effect of
removing any Director prior to the expiration of his term of office.
Section 5. Quorum. A majority of the authorized number of Directors shall
------
be necessary to constitute a quorum of the Board for the transaction of
business. Every act or decision done or made by a majority of the Directors
present at a meeting duly held at which a quorum is present shall be regarded as
the act of the Board of Directors, unless a greater number be required by law.
Section 6. Place of Directors' Meetings. Meetings of the Board of
----------------------------
Directors shall be held at the principal office of the corporation, or at any
other location which has been designated by resolution of the Board, or by
written consent of all of the Directors.
Section 7. Regular Meetings. Immediately following each annual meeting
-----------------
of shareholders, the Board of Directors shall hold a regular meeting for the
purpose of electing officers and transacting any other business which may come
before them. No notice of such meeting need be given.
Section 8. Special Meetings. Special meetings of the Board of Directors
----------------
for any purpose or purposes shall be called by the President, or, if he is
absent or unable or refuses to act, by any Vice President or by any two
Directors.
Written notice of the time and place of special meetings shall be delivered
personally to each Director or sent to each Director by mail or other form of
written communication,
Amendment to Bylaws (Revised May 1, 1996)
- -------------------
Page 4
<PAGE>
charges prepaid, addressed to him at his address as is shown upon the records of
the corporation, or, if it is not so shown and if it is not readily
ascertainable, addressed to him at the city or place where the meetings of the
Directors are regularly held. Notices mailed or telegraphed shall be deposited
in the United States mail or delivered to the telegraph company at the place
where the principal office of the corporation is located at least forty-eight
(48) hours prior to the time of the holding of the meeting, and notices
delivered personally shall be so delivered at least twenty-four (24) hours prior
to the time of the holding of the meeting.
Section 9. Notice of Adjournment. Notice of the time and place of holding
---------------------
an adjourned meeting need not be given to absent Directors if the time and place
are fixed at the meeting adjourned.
Section 10. Waiver of Notice: Consent to Meeting. The transactions
-------------------------------------
conducted at any meeting of the Board of Directors, however called or noticed or
wherever held, shall be as valid as though conducted at a meeting duly held
after regular call and notice if a quorum is present and if, either before or
after the meeting, each of the Directors signs a waiver of notice, a consent to
hold such a meeting, or an approval of the minutes thereof. All such waivers,
consents or approvals shall be filed with the corporate records and made a part
of the minutes of the meeting.
Section 11. Adjournment. A quorum of the Directors may adjourn to meet
-----------
again at a set day and hour, and in the absence of a quorum, a majority of the
Directors present may adjourn from time to time until the time fixed for the
next regular meeting of the Board.
Section 12. Action Without Meeting. Any action required or permitted to
----------------------
be taken by the Board of Directors may be taken without a meeting if all members
of the Board shall individually or collectively consent in writing to such
action. Such written consent or consents shall be filed with the minutes of the
proceedings of the Board. Such action by written consent shall have the same
force and effect as a unanimous vote of such Directors.
Section 13. Fees and Compensation. Directors shall not receive any stated
---------------------
salary for their services as Directors, but by resolution of the Board, a fee or
other remuneration, with or without expenses of attendance, may be allowed for
attendance at each meeting. Nothing herein contained shall be construed to
preclude any Director from serving the corporation in any other capacity as an
officer, agent or employee, or otherwise, and receiving compensation therefor.
Section 14. Indemnification of Directors, Officers
--------------------------------------
and Employees.
-------------
A. In the event a person is sued, either alone or with others, because he
is or was a Director, officer or employee of the corporation, in any proceeding
arising out of his alleged misfeasance or nonfeasance in the performance of his
duties as such Director, officer or employee, or out of any alleged wrongful act
by the corporation, he shall be indemnified for his reasonable expenses,
including attorneys' fees incurred in the defense of the proceeding, if both of
the following conditions exist: (i) the person sued is successful in whole or in
part,
Amendment to Bylaws (Revised May 1, 1996)
- -------------------
Page 5
<PAGE>
or the proceeding against him is settled with the approval of the court, and
(ii) the court finds that his conduct fairly and equitable merits such
indemnity.
The amount of such indemnity may be assessed against the corporation, its
receiver, its trustee, or any other proper party, by the court in the same or in
a separate proceeding and shall be so much of the expenses, including attorneys'
fees incurred in the defense of the action as the court determines and finds to
be reasonable. Application for such indemnity may be made either by a person
sued or by the attorney or other person rendering services to him in connection
with the defense, and the court may order fees and expenses to be paid directly
to the attorney or other person although he is not a party to the proceeding.
Notice of the application for such indemnity shall be served upon the
corporation, its receiver, or its trustee and upon the plaintiff and other
parties to the proceeding. The court may also order notice to be given to the
shareholders in the manner provided elsewhere in these bylaws for giving notice
of shareholders' meetings, in such form as the court directs.
B. Notwithstanding the foregoing provisions, the Board of Directors may
authorize the corporation to pay expenses incurred by or to satisfy a judgment
or fine rendered or levied against a present or former Director, officer or
employee of the corporation in an action brought by a third party against such
person (whether or not the corporation is joined as a party defendant) to impose
a liability or penalty on such person for an act alleged to have been committed
by such person in the performance of his duties as such Director, officer or
employee, or by the corporation, or by both, provided the Board of Directors
determines that such Director, officer or employee was acting in good faith
within what he reasonably believed to be the scope of his employment or
authority and for a purpose which he reasonably believed to be in the best
interests of the corporation or its shareholders. Payments authorized hereunder
include amounts paid and expenses incurred in settling any such action or
threatened action. This Paragraph does not apply to any action instituted or
maintained as the right of the corporation by a shareholder or holder of a
voting trust certificate representing shares of the corporation.
C. The provisions of this Section shall apply to the estate, executor,
administrator, heirs, legatees or devisees of any such present or former
Director, officer or employee of the corporation.
D. The Board of Directors may, at its discretion, authorize the purchase
of a policy or policies of insurance against any liability of the corporation to
indemnify any person pursuant to this Section, containing such terms and
conditions as the Board may deem appropriate. Such policy or policies may
include provisions for the direct indemnification of directors, officers or
other persons for expenses of a kind not subject to indemnification hereunder,
provided the premiums on such combined policy are, in the judgment of the Board,
fairly allocated between the corporation and the insured persons.
E. The foregoing provisions of this Section 14 shall not be considered as
limiting the right of indemnification permitted by the Texas Business
Corporation Act, Article 2.021, but indemnification shall be to the maximum
extent permitted under Texas Business Corporation Act, Article 2.02-1.
Amendment to Bylaws (Revised May 1, 1996)
- -------------------
Page 6
<PAGE>
ARTICLE IV
OFFICERS
Section 1. Officers. The corporation shall have a President, one or more
--------
Vice Presidents, a Secretary and a Treasurer. Such officers shall be elected
annually by the Board of Directors and each shall hold office until he shall
resign or shall be removed or otherwise disqualified to serve and until his
successor shall be elected.
Section 2. Other Officers. The corporation may also have, in the
--------------
discretion of the Board of Directors, a Chairman of the Board, one or more
Assistant Secretaries, one or more Assistant Treasurers, and such other officers
and agents shall hold office for such terms and have such authority and perform
such duties as the Board of Directors may from time to time specify, and shall
hold office until they shall resign or shall be removed or otherwise
disqualified to serve.
Section 3. Removal and Resignation. Any officer or agent may be removed,
-----------------------
either with or without cause, by a majority of the Directors at the time in
office at any regular or special meeting of the Board, or, except in case of an
office chosen by the Board of Directors, by any officer upon whom such power of
removal may be conferred by the Board of Directors.
Any officer or agent may resign at any time by giving written notice to the
Board of Directors, the President or the Secretary of the corporation. Any such
resignation shall take effect as of the date of the receipt of such notice or at
any later time specified therein, and unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
Section 4. Vacancies. A vacancy in any office because of death,
---------
resignation, removal, disqualification, or any other cause shall be filled in
the manner prescribed in these Bylaws for regular appointments to such office.
Section 5. Chairman of the Board. The Chairman of the Board, if there
---------------------
shall be such an officer, shall, if present, preside at all meetings of the
Board of Directors and exercise and perform such other powers and duties as may
from time to time be assigned to him by the Board of Directors.
Section 6. President. Subject to such supervisory powers, if any, as may
---------
be given by the Board of Directors to the Chairman of the Board, if there be
such an officer, the President shall be the chief executive officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and affairs of the
corporation. He shall preside at all meetings of the shareholders and, in the
absence of the Chairman of the Board, at all meetings of the Board of Directors.
He shall be an ex officio member of all the standing committees, including the
-- -------
Executive Committee, if any, and shall have the general powers and duties of
management usually vested in the office of the President of a corporation and
shall have such other powers and duties as may be prescribed by the Board of
Directors.
Amendment to Bylaws (Revised May 1, 1996)
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Page 7
<PAGE>
Section 7. Vice President. In the absence or disability of the President,
--------------
the Vice Presidents, in order of their rank as fixed by the Board of Directors,
or, if not ranked, the Vice President designated by the Board of Directors,
shall perform all the duties of the President, and when so acting, shall have
all the powers of and be subject to all the restrictions upon the President.
The Vice Presidents shall have such other powers and perform such other duties
as from time to time may be prescribed for them respectively by the Board of
Directors.
Section 8. Secretary. The Secretary shall keep, or cause to be kept, a
---------
book of minutes at the principal office of the corporation, or at such other
place as the Board of Directors may order, of all meetings of Directors and
shareholders, with the time and place of holding, whether regular or special,
and if special, how authorized, the notice thereof given, the names of those
present at Directors' meetings, the number of shares present or represented at
shareholders' meetings and the proceedings thereof.
The Secretary shall keep, or cause to be kept, at the principal office of
the corporation, or at the office of the corporation's transfer agent, a share
register, or a duplicate share register, showing the names of the shareholders
and their addresses, the number and classes of shares held by each, and the
number and date of cancellation of every certificate surrendered for
cancellation.
The Secretary shall give, or cause to be given, notice of all meetings of
the shareholders and of the Board of Directors required by these Bylaws or by
law to be given, and he shall keep the seal of the corporation in safe custody
and shall have such other powers and perform such other duties as may be
prescribed by the Board of Directors.
Section 9. Treasurer. The Treasurer shall keep and maintain, or cause to
---------
be kept and maintained, adequate and correct accounts of the properties and
business transactions of the corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital surplus and shares.
Any surplus, including earned surplus, paid-in surplus and surplus arising from
a reduction of stated capital, shall be classified according to source and shown
in a separate account. The books of account shall at all reasonable times be
open to inspection by any Director.
The Treasurer shall deposit all moneys and other valuables in the name and
to the credit of the corporation with such depositories as may be designated by
the Board of Directors. He shall disburse the funds of the corporation as may
be ordered by the Board of Directors, shall render to the President and Board,
whenever they request it, an account of all of his transactions as Treasurer and
of the financial condition of the corporation, and shall have such other powers
and perform such other duties as may be prescribed by the Board of Directors.
ARTICLE V
MISCELLANEOUS
Section 1. Record Date and Closing Stock Books. The Board of Directors
-----------------------------------
may fix a time as a record date for the determination of the shareholders
entitled to notice of and to vote
Amendment to Bylaws (Revised May 1, 1996)
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Page 8
<PAGE>
at any meeting of shareholders or entitled to receive any dividend or
distribution or any allotment of rights, or to exercise rights in respect to any
change, conversion or exchange of shares. The record date so fixed shall not be
more than fifty (50) days prior to the date of the meeting or event for the
purposes of which it is fixed. When a record date is so fixed, only shareholders
who are of record on that date are entitled to notice of and to vote at the
meeting or to receive the dividend, distribution or allotment of rights, or to
exercise the rights, as the case may be, notwithstanding any transfer of any
shares on the books of the corporation after the record date.
The Board of Directors may close the books of the corporation against
transfers of shares during the whole or any part of a period not more than fifty
(50) days prior to the date of a shareholders' meeting, the date when the right
to any dividend, distribution or allotment of rights vests, or the effective
date of any change, conversion or exchange of shares.
Section 2. Inspection of Corporate Records. The share register or
-------------------------------
duplicate share register, the books of account and minutes of proceedings of the
shareholders, the Board of Directors and the Executive Committee shall be open
to inspection upon the written demand of any shareholder, or the holder of a
voting trust certificate, at any reasonable time and for a purpose reasonably
related to his interests as a shareholder, or as the holder of such voting trust
certificate, and shall be exhibited at any time when required by demand at any
shareholders' meeting of ten percent (10%) of the shares represented at the
meeting. Such inspection may be made in person or by an agent or attorney and
shall include the right to make extracts. Demand of inspection, other than at a
shareholders' meeting, shall be made in writing upon the President, Secretary or
Assistant Secretary of the corporation.
Every Director shall have the right at any reasonable time to inspect the
books, records, documents of every kind, and the physical properties of the
corporation and of its subsidiary corporations, domestic or foreign.
Section 3. Certificates for Shares. A certificate or certificates for
-----------------------
shares of the corporation (in such form as may be approved from time to time by
the Board of Directors) shall be issued to each stockholder when such shares are
fully paid. The certificates shall be numbered and the holder's name, number of
shares and the date of issue shall be entered in the books of the corporation as
they are issued. The certificates shall exhibit the holder's name, the number
and class of shares evidenced thereby or a statement that the shares are without
par value, and such additional information as may be required by the Board of
Directors. They shall be signed by the President or a Vice President and the
Secretary or an Assistant Secretary, or be authenticated by facsimiles of the
signatures of the President and the Secretary. Every certificate authenticated
by a facsimile of a signature must be countersigned by a transfer clerk.
Section 4. Transfer of Stock. The corporation shall recognize the right
-----------------
of the person registered on its books as owner of shares to receive dividends
and to vote as such owner. Shares may be transferred on the books of the
corporation only by the person named in the certificate as the owner thereof, or
by his agent, attorney or legal representative, upon surrender to the Secretary
of the corporation of a certificate, duly endorsed or accompanied by proper
Amendment to Bylaws (Revised May 1, 1996)
- -------------------
Page 9
<PAGE>
evidence of succession, assignment or authority to transfer. The Secretary shall
thereupon cause a new certificate to be issued to the person entitled thereto
and shall cancel the old certificate and record the transaction upon the books
of the corporation.
Section 5. Lost Certificates. New certificates for shares or other
-----------------
securities of the corporation may be issued for and in place of any such
instrument theretofore issued which is alleged to have been lost or destroyed.
The Directors may, in their discretion, require the owner of such lost or
destroyed instrument, or his legal representative, to give the corporation a
bond or other security in an adequate amount as indemnity against any claim that
may be made against the corporation. A new instrument may be issued, however,
without requiring any bond or other security when in the judgment of the
Directors it is proper to do so.
Section 6. Corporate Seal. A corporate seal shall be provided and
--------------
adopted by the Board of Directors and shall contain the name of the corporation
and such other wording as the Board may deem suitable or as may be required by
law.
Section 7. Contracts - Execution of Documents. The Board of Directors may
----------------------------------
authorize any officer or officers, agent or agents to enter into any contract or
execute any instrument in the name of and on behalf of the corporation, and such
authority may be general or confined to specific instances, and unless so
authorized by the Board of Directors, no officer, agent or employee shall have
any power or authority to bind the corporation by any contract or engagement or
to pledge its credit or to render it liable for any purpose or in any amount;
except, however, the club membership secretary may execute membership
application agreements on behalf of the corporation.
All checks, drafts or other orders for payment of money, notes or other
evidences of indebtedness issued in the name of or payable to the corporation
shall be signed or endorsed by such person or persons and in such manner as from
time to time shall be determined by resolution of the Board of Directors.
Section 8. Representation of Shares of Other Corporations. The President
----------------------------------------------
or any Vice President and the Secretary or Assistant Secretary of this
corporation are authorized to vote, represent and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority herein
granted to said officers to vote or represent on behalf of this corporation any
and all shares held by this corporation in any other corporation or corporations
may be exercised either by such officers in person or by any person authorized
so to do by proxy or power of attorney duly executed by said officers.
Section 9. Inspection of Bylaws. The corporation shall keep in its
--------------------
principal office for the transaction of business the original or a copy of these
Bylaws, as amended or otherwise altered to date, certified by the Secretary,
which shall be open to inspection by the shareholders at all reasonable times
during office hours.
Amendment to Bylaws (Revised May 1, 1996)
- -------------------
Page 10
<PAGE>
ARTICLE VI
AMENDMENTS
Section 1. Power of Shareholders. New Bylaws may be adopted or these
---------------------
Bylaws may be amended or repealed by the vote of shareholders entitled to
exercise a majority of the voting power of the corporation or by the written
consent of such shareholders, except as otherwise provided by the Articles of
Incorporation, provided that the vote of written consent of shareholders holding
more than seventy-five percent (75%) of the voting power of the corporation
shall be required to reduce the authorized number of Directors.
Section 2. Power of Directors. Subject to the right of shareholders to
------------------
adopt, amend or repeal these Bylaws, these Bylaws, other than a Bylaw or
amendment thereof changing the authorized number of Directors, may be adopted,
amended or repealed by the Board of Directors at any regular or special meeting
thereof.
Amendment to Bylaws (Revised May 1, 1996)
- -------------------
Page 11
<PAGE>
EXHIBIT 3.25
ARTICLES OF INCORPORATION
-------------------------
OF
--
WESTON LAKE MANAGEMENT CORP.
----------------------------
The undersigned natural person, of the age of eighteen (18) years or more,
acting as incorporator of a corporation under the Texas Business Corporation
Act, hereby adopts the following Articles of Incorporation for such corporation.
ARTICLE ONE
-----------
The name of the corporation is Weston Lakes Management Corp.
ARTICLE TWO
-----------
The period of its duration is perpetual.
ARTICLE THREE
-------------
The purpose for which the corporation is organized is to engage in the
businesses of establishing, developing, building, designing, constructing,
maintaining, managing, operating, buying, selling, acquiring, leasing, trading,
and dealing in one or more private clubs and/or restaurants for the providing of
refreshments, entertainment, exercise, health, and athletic facilities and
social diversions for their members and guests and to afford all customary
privileges and accommodations of a private club for profit, and to engage in
such other related activities and make such other investments as the Board of
Directors of the corporation may from time to time deem advisable, both within
and without the State of Texas, and to do all things incidental thereto or
connected therewith which are necessary, proper, advisable, or convenient in the
premises and are not forbidden by law, and to transact any or all lawful
business for which corporations may be incorporated under the Texas Business
Corporation Act.
ARTICLE FOUR
------------
The aggregate number of shares which the corporation has authority to issue
is 1,000 shares of the par value of $1.00. The shares shall be designated a
common stock and shall have identical rights, privileges, and powers in every
respect. Cumulative voting shall not be allowed and no shareholder shall have
any preemptive rights.
Articles of Incorporation - Texas page 1
- ---------------------------------
A4089.1.29.46A
<PAGE>
ARTICLE FIVE
------------
The corporation will not commence business until it has received for the
issuance of its shares consideration of the value of One Thousand Dollars
($1,000.00), consisting of money, labor done, or property actually received.
ARTICLE SIX
-----------
The street address of its initial registered office is 350 North St. Paul
Street, Dallas, Texas 75201, and the name of its initial registered agent at
such address is C T Corporation System.
ARTICLE SEVEN
-------------
The Number of directors constituting the initial board of directors is
three (3), and the name and address of the persons who shall serve as directors
until the first annual meeting of the shareholders or until their successors are
elected and qualified are:
Murry E. Page 15770 Dallas Parkway, 5th Floor
Dallas, Texas 75248
Randolph D. Addison 15770 Dallas Parkway, 5th Floor
Dallas, Texas 75248
Douglass C. Peter 15770 Dallas Parkway, 5th Floor
Dallas, Texas 75248
ARTICLE EIGHT
-------------
The name and address of the incorporator is Linda Blanton-Myers, 15770
Dallas Parkway, 5th Floor, Dallas, Texas 75248.
/s/ Linda Blanton-Myers
---------------------------------
Linda Blanton-Myers
Articles of Incorporation - Texas page 2
- ---------------------------------
A4089.1.29.46A
<PAGE>
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
WESTON LAKES MANAGEMENT CORP.
Pursuant to the provisions of Article 4.04 of the Texas Business
Corporation Act, the undersigned corporation adopts the following Articles of
Amendment to its Articles of Incorporation.
ARTICLE ONE. The name of the corporation is "Weston Lakes Management
Corp."
ARTICLE TWO. The following amendment to the Articles of Incorporation was
adopted by a majority of the initial directors of the corporation on March 15,
1994:
Article One of the Articles of Incorporation is hereby amended to read as
follows:
"The name of the corporation is Inwood Golf Club, Inc."
ARTICLE THREE. No shares have been issued.
Dated this 15th day of March, 1994.
WESTON LAKES MANAGEMENT CORP.
/s/ Murry E. Page
----------------------------------------
Murry E. Page, Director
/s/ Douglas C. Peter
----------------------------------------
Douglas C. Peter, Director
Articles of Amendment to Articles of Incorporation
- --------------------------------------------------
page 1
<PAGE>
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
INWOOD GOLF CLUB, INC.
Pursuant to the provisions of Article 4.04 of the Texas Business
Corporation Act, the undersigned corporation adopts the following Articles of
Amendment to its Articles of Incorporation.
ARTICLE ONE. The name of the corporation is "Inwood Golf Club, Inc."
ARTICLE TWO. The following amendment to the Articles of Incorporation was
adopted by a majority of the initial directors of the corporation on September
23, 1994:
Article One of the Articles of Incorporation is hereby amended to read as
follows:
"The name of the corporation is Woodcrest Golf Club, Inc."
Dated this 23rd day of September, 1994.
INWOOD GOLF CLUB, INC.
/s/ Murry E. Page
--------------------------------------
Murry E. Page, Initial Director
/s/ Douglas C. Peter
--------------------------------------
Douglas C. Peter, Initial Director
Articles of Amendment to Articles of Incorporation
- --------------------------------------------------
page 1
<PAGE>
EXHIBIT 3.26
AMENDED AND RESTATED BYLAWS FOR THE REGULATION, EXCEPT AS
OTHERWISE PROVIDED BY STATUTE OR ITS
ARTICLES OF INCORPORATION, OF
WOODCREST GOLF CLUB, INC.
ARTICLE I
OFFICES
Section 1. Principal Office. The corporation will maintain offices for
----------------
the transaction of business of the corporation at 3702 Via de la Valle, Suite
202, Del Mar, California, 92014.
Section 2. Other Offices. Branch or affiliate offices may at any time be
-------------
established by the Board of Directors at any place or places where the
corporation is qualified to do business.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. Place of Meetings. All meetings of shareholders shall be held
-----------------
at the principal office of the corporation or at any other place which may be
(i) designated by the Board of Directors, or (ii) consented to by the written
consent of all shareholders entitled to vote thereat, given either before or
after the meeting and filed with the Secretary of the corporation, or (iii) in
the city of residence of any shareholder holding over two-thirds of the capital
stock of the corporation.
Section 2. Annual Meetings. The annual meeting of shareholders shall be
---------------
on the 4th Tuesday of September in each year at 10:00 a.m.; provided, however,
that should said day fall upon a legal holiday, then any such annual meeting of
shareholders shall be held at the same time and place on the next day thereafter
ensuing which is not a legal holiday. At such meetings, Directors shall be
elected, reports of the affairs of the corporation shall be considered, and any
other business may be transacted which is within the power of the shareholders.
Section 3. Special Meetings. Special meetings of the shareholders for any
----------------
purpose whatsoever may be called at any time either by the President or by the
Board of Directors, to be held at such time as he or they may designate. In
addition, one or more shareholders holding not less than one-fifth of the voting
power of the corporation may call such a meeting by causing a written request to
be sent by registered mail or delivered personally to the President, Vice
President or Secretary. The officer forthwith shall cause notice to be given,
as provided below, that a meeting will be held at a time, fixed by the officer,
not less than ten (10) nor more than sixty (60) days after the receipt of the
request.
Amended Bylaws (Revised May 1, 1996)
- --------------
page 1
<PAGE>
Section 4. Notice of Meeting. Not less than ten (10) days prior to any
-----------------
meeting of shareholders, the Secretary or his delegate shall cause written
notice of such meeting to be given to all shareholders entitled to vote thereat.
If a shareholder gives no address, notice shall be deemed to have been duly
given if sent by mail or other means of written communication addressed to the
place where the principal office of the corporation is situated, or if published
at least once in a newspaper of general circulation in the county in which said
office is located.
The notice shall specify the place, the day and the hour of such meeting,
and, in the case of a special meeting, the general nature of the business to be
transacted. No action may be taken at any meeting of shareholders on any of the
following proposals unless the notice thereof specifies the general nature of
the proposal: (a) a proposal to sell, lease, convey, exchange, transfer or
otherwise dispose of all, or substantially all, of the property or assets of the
corporation, (b) a proposal to merge or consolidate with another corporation,
domestic or foreign, (c) a proposal to reduce the stated capital of the
corporation, (d) a proposal to amend the Articles of Incorporation, (e) a
proposal to wind up and dissolve the corporation, or (f) a proposal to adopt a
plan of distribution of shares, securities, or any other consideration (other
than money) in the process of winding up.
Section 5. Consent of Absentees. The transactions conducted at any
--------------------
meeting of shareholders, either annual or special, however called and noticed,
shall be as valid as though had at a meeting duly held after regular call and
notice, if a quorum be present either in person or by proxy, and if, either
before or after the meeting, each of the shareholders entitled to vote, not
present in person or by proxy, signs a written waiver of notice, a consent to
the holding of such meeting, or an approval of the minutes thereof. All such
waivers, consents or approvals shall be filed with the corporate records or made
a part of the minutes of the meeting.
Section 6. Quorum. The presence in person or by proxy of persons entitled
------
to vote a majority of the voting shares at any meeting shall constitute a quorum
for the transaction of business. The shareholders present at a duly called or
held meeting at which a quorum is present may continue to do business until
adjournment, notwithstanding the withdrawal of enough shareholders to leave less
than a quorum.
Section 7. Voting. Unless a record date for voting purposes be fixed, as
------
hereinafter provided, only persons in whose names shares entitled to vote stand
on the stock records of the corporation as of the date of such meeting shall be
entitled to vote thereat. Except as otherwise provided by law or the Articles
of Incorporation, every shareholder shall be entitled to one vote for each share
standing in his name on the record of shareholders of the corporation. Voting
rights shall be noncumulative. Except as otherwise provided herein or in the
Articles of Incorporation, all corporate actions shall be determined by vote of
a majority of the votes cast at a meeting of shareholders entitled to vote
thereat. Such vote may be viva voce or by ballot; provided, however, that all
---- ----
elections for Directors must be by ballot upon demand made by a shareholder at
any election and before the voting begins. The candidates receiving the highest
number of votes up to the number of Directors to be elected shall be elected.
Amended Bylaws (Revised May 1, 1996)
- --------------
page 2
<PAGE>
Section 8. Proxies. Every person entitled to vote or execute consents
-------
shall have the right to do so either in person or by one or more agents
authorized by a written proxy executed by such person or his duly authorized
agent and filed with the Secretary of the corporation.
Section 9. Adjourned Meetings and Notice Thereof. Any shareholders'
-------------------------------------
meeting, annual or special, whether or not a quorum is present, may be adjourned
from time to time by the vote of a majority of the shares, the holders of which
are either present in person or represented by proxy thereat, but in the absence
of a quorum, no other business may be transacted at such meeting.
When any shareholders' meeting, either annual or special, is adjourned for
thirty (30) days or more, notice of the adjourned meeting shall be given as in
the case of an original meeting. Except as provided above, it shall not be
necessary to give any notice of any adjournment or of the business to be
transacted at any adjourned meeting other than by announcement at the meeting at
which such adjournment is taken.
Section 10. Action Without Meeting. Any action which may be taken at a
----------------------
meeting of the shareholders may be taken without a meeting if authorized by a
writing signed by all of the persons who would be entitled to vote upon such
action at a meeting and filed with the Secretary of the corporation; provided,
however, a meeting shall be held for dissolution, transfer of all or
substantially all of the assets of the corporation, or for merger or
consolidation of the corporation with other corporations, if same is required
under applicable law.
ARTICLE III
DIRECTORS
Section 1. Powers. Subject to limitations imposed by law or by the
------
Articles of Incorporation, all corporate powers shall be exercised by or under
the authority of, and the business and affairs of the corporation shall be
controlled by, the Board of Directors. In the exercise of its powers, the Board
may appoint an Executive Committee and other committees and may delegate to
the Executive Committee any of the powers and authority of the Board in the
management of the business and affairs of the corporation, except the power to
declare dividends and to adopt, amend or repeal bylaws. The Executive Committee
shall be composed of two or more Directors.
Section 2. Number of Directors. The authorized number of Directors of the
-------------------
corporation shall be not less than one nor more than five until changed by
amendment of the Articles of Incorporation or by a bylaw duly adopted by the
shareholders amending this section. Directors need not be shareholders of the
corporation.
Section 3. Election and Term of Office. The Directors shall be elected at
---------------------------
the annual meeting of shareholders, but if any such annual meeting is not held
or the Directors are not elected thereat, Directors may be elected at any
special meeting of shareholders held for that
Amended Bylaws (Revised May 1, 1996)
- --------------
page 3
<PAGE>
purpose. Directors shall hold office until the election and qualification of
their respective successors.
Section 4. Vacancies. Vacancies in the Board of Directors may be filled
---------
by a majority of the remaining Directors, though less than a quorum, or by a
sole remaining Director, and each Director so elected shall hold office until
his successor is elected at an annual or a special meeting of the shareholders.
If the entire Board of Directors resigns at one time, the shareholders shall,
within a reasonable time thereafter, at a regular or special meeting, as
provided herein, elect a new Board of Directors.
A vacancy in the Board of Directors shall be deemed to exist in the case of
the death, resignation or removal of any Director, or if at any annual or
special meeting of shareholders at which any Director is elected the authorized
number of Directors is increased or if the shareholders fail to elect the full
authorized number of Directors to be voted for at that meeting.
The shareholders may elect a Director or Directors at any time to fill any
vacancy or vacancies not filled by the remaining Director or Directors. If the
Board of Directors accepts the resignation of a Director tendered to take effect
at a future time, the Board or the shareholders shall have the power to elect a
successor to take office when the resignation is to become effective.
No reduction of the authorized number of Directors shall have the effect of
removing any Director prior to the expiration of his term of office.
Section 5. Quorum. A majority of the authorized number of Directors shall
------
be necessary to constitute a quorum of the Board for the transaction of
business. Every act or decision done or made by a majority of the Directors
present at a meeting duly held at which a quorum is present shall be regarded as
the act of the Board of Directors, unless a greater number be required by law.
Section 6. Place of Directors' Meetings. Meetings of the Board of
----------------------------
Directors shall be held at the principal office of the corporation, or at any
other location which has been designated by resolution of the Board, or by
written consent of all of the Directors.
Section 7. Regular Meetings. Immediately following each annual meeting of
----------------
shareholders, the Board of Directors shall hold a regular meeting for the
purpose of electing officers and transacting any other business which may come
before them. No notice of such meeting need be given.
Section 8. Special Meetings. Special meetings of the Board of Directors
----------------
for any purpose or purposes shall be called by the President, or, if he is
absent or unable or refuses to act, by any Vice President or by any two
Directors.
Written notice of the time and place of special meetings shall be delivered
personally to each Director or sent to each Director by mail or other form of
written communication,
Amended Bylaws (Revised May 1, 1996)
- --------------
page 4
<PAGE>
charges prepaid, addressed to him at his address as is shown upon the records of
the corporation, or, if it is not so shown and if it is not readily
ascertainable, addressed to him at the city or place where the meetings of the
Directors are regularly held. Notices mailed or telegraphed shall be deposited
in the United States mail or delivered to the telegraph company at the place
where the principal office of the corporation is located at least forty-eight
(48) hours prior to the time of the holding of the meeting, and notices
delivered personally shall be so delivered at least twenty-four (24) hours prior
to the time of the holding of the meeting.
Section 9. Notice of Adjournment. Notice of the time and place of holding
---------------------
an adjourned meeting need not be given to absent Directors if the time and place
are fixed at the meeting adjourned.
Section 10. Waiver of Notice: Consent to Meeting. The transactions
-------------------------------------
conducted at any meeting of the Board of Directors, however called or noticed or
wherever held, shall be as valid as though conducted at a meeting duly held
after regular call and notice if a quorum is present and if, either before or
after the meeting, each of the Directors signs a waiver of notice, a consent to
hold such a meeting, or an approval of the minutes thereof. All such waivers,
consents or approvals shall be filed with the corporate records and made a part
of the minutes of the meeting.
Section 11. Adjournment. A quorum of the Directors may adjourn to meet
-----------
again at a set day and hour, and in the absence of a quorum, a majority of the
Directors present may adjourn from time to time until the time fixed for the
next regular meeting of the Board.
Section 12. Action Without Meeting. Any action required or permitted to
----------------------
be taken by the Board of Directors may be taken without a meeting if all members
of the Board shall individually or collectively consent in writing to such
action. Such written consent or consents shall be filed with the minutes of the
proceedings of the Board. Such action by written consent shall have the same
force and effect as a unanimous vote of such Directors.
Section 13. Fees and Compensation. Directors shall not receive any stated
---------------------
salary for their services as Directors, but by resolution of the Board, a fee or
other remuneration, with or without expenses of attendance, may be allowed for
attendance at each meeting. Nothing herein contained shall be construed to
preclude any Director from serving the corporation in any other capacity as an
officer, agent or employee, or otherwise, and receiving compensation therefor.
Section 14. Indemnification of Directors, Officers
--------------------------------------
and Employees.
-------------
A. In the event a person is sued, either alone or with others, because he
is or was a Director, officer or employee of the corporation, in any proceeding
arising out of his alleged misfeasance or nonfeasance in the performance of his
duties as such Director, officer or employee, or out of any alleged wrongful act
by the corporation, he shall be indemnified for his reasonable expenses,
including attorneys' fees incurred in the defense of the proceeding, if both of
the following conditions exist: (i) the person sued is successful in whole or in
part,
Amended Bylaws (Revised May 1, 1996)
- --------------
page 5
<PAGE>
or the proceeding against him is settled with the approval of the court, and
(ii) the court finds that his conduct fairly and equitable merits such
indemnity.
The amount of such indemnity may be assessed against the corporation, its
receiver, its trustee, or any other proper party, by the court in the same or in
a separate proceeding and shall be so much of the expenses, including attorneys'
fees incurred in the defense of the action as the court determines and finds to
be reasonable. Application for such indemnity may be made either by a person
sued or by the attorney or other person rendering services to him in connection
with the defense, and the court may order fees and expenses to be paid directly
to the attorney or other person although he is not a party to the proceeding.
Notice of the application for such indemnity shall be served upon the
corporation, its receiver, or its trustee and upon the plaintiff and other
parties to the proceeding. The court may also order notice to be given to the
shareholders in the manner provided elsewhere in these bylaws for giving notice
of shareholders' meetings, in such form as the court directs.
B. Notwithstanding the foregoing provisions, the Board of Directors may
authorize the corporation to pay expenses incurred by or to satisfy a judgment
or fine rendered or levied against a present or former Director, officer or
employee of the corporation in an action brought by a third party against such
person (whether or not the corporation is joined as a party defendant) to impose
a liability or penalty on such person for an act alleged to have been committed
by such person in the performance of his duties as such Director, officer or
employee, or by the corporation, or by both, provided the Board of Directors
determines that such Director, officer or employee was acting in good faith
within what he reasonably believed to be the scope of his employment or
authority and for a purpose which he reasonably believed to be in the best
interests of the corporation or its shareholders. Payments authorized hereunder
include amounts paid and expenses incurred in settling any such action or
threatened action. This Paragraph does not apply to any action instituted or
maintained as the right of the corporation by a shareholder or holder of a
voting trust certificate representing shares of the corporation.
C. The provisions of this Section shall apply to the estate, executor,
administrator, heirs, legatees or devisees of any such present or former
Director, officer or employee of the corporation.
D. The Board of Directors may, at its discretion, authorize the purchase
of a policy or policies of insurance against any liability of the corporation to
indemnify any person pursuant to this Section, containing such terms and
conditions as the Board may deem appropriate. Such policy or policies may
include provisions for the direct indemnification of directors, officers or
other persons for expenses of a kind not subject to indemnification hereunder,
provided the premiums on such combined policy are, in the judgment of the Board,
fairly allocated between the corporation and the insured persons.
E. The foregoing provisions of this Section 14 shall not be considered as
limiting the right of indemnification permitted by the Texas Business
Corporation Act, Articles 2.021, but indemnification shall be to the maximum
extent permited under Texas Business Corporation Act, Article 2.02-1.
Amended Bylaws (Revised May 1, 1996)
- --------------
page 6
<PAGE>
ARTICLE IV
OFFICERS
Section 1. Officers. The corporation shall have a President, one or more
--------
Vice Presidents, a Secretary and a Treasurer. Such officers shall be elected
annually by the Board of Directors and each shall hold office until he shall
resign or shall be removed or otherwise disqualified to serve and until his
successor shall be elected.
Section 2. Other Officers. The corporation may also have, in the
--------------
discretion of the Board of Directors, a Chairman of the Board, one or more
Assistant Secretaries, one or more Assistant Treasurers, and such other officers
and agents shall hold office for such terms and have such authority and perform
such duties as the Board of Directors may from time to time specify, and shall
hold office until they shall resign or shall be removed or otherwise
disqualified to serve.
Section 3. Removal and Resignation. Any officer or agent may be removed,
-----------------------
either with or without cause, by a majority of the Directors at the time in
office at any regular or special meeting of the Board, or, except in case of an
office chosen by the Board of Directors, by any officer upon whom such power of
removal may be conferred by the Board of Directors.
Any officer or agent may resign at any time by giving written notice to the
Board of Directors, the President or the Secretary of the corporation. Any such
resignation shall take effect as of the date of the receipt of such notice or at
any later time specified therein, and unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
Section 4. Vacancies. A vacancy in any office because of death,
---------
resignation, removal, disqualification, or any other cause shall be filled in
the manner prescribed in these Bylaws for regular appointments to such office.
Section 5. Chairman of the Board. The Chairman of the Board, if there
---------------------
shall be such an officer, shall, if present, preside at all meetings of the
Board of Directors and exercise and perform such other powers and duties as may
from time to time be assigned to him by the Board of Directors.
Section 6. President. Subject to such supervisory powers, if any, as may
---------
be given by the Board of Directors to the Chairman of the Board, if there be
such an officer, the President shall be the chief executive officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and affairs of the
corporation. He shall preside at all meetings of the shareholders and, in the
absence of the Chairman of the Board, at all meetings of the Board of Directors.
He shall be an ex officio member of all the standing committees, including the
-- -------
Executive Committee, if any, and shall have the general powers and duties of
management usually vested in the office of the President of a corporation and
shall have such other powers and duties as may be prescribed by the Board of
Directors.
Amended Bylaws (Revised May 1, 1996)
- --------------
page 7
<PAGE>
Section 7. Vice President. In the absence or disability of the President,
--------------
the Vice Presidents, in order of their rank as fixed by the Board of Directors,
or, if not ranked, the Vice President designated by the Board of Directors,
shall perform all the duties of the President, and when so acting, shall have
all the powers of and be subject to all the restrictions upon the President.
The Vice Presidents shall have such other powers and perform such other duties
as from time to time may be prescribed for them respectively by the Board of
Directors.
Section 8. Secretary. The Secretary shall keep, or cause to be kept, a
---------
book of minutes at the principal office of the corporation, or at such other
place as the Board of Directors may order, of all meetings of Directors and
shareholders, with the time and place of holding, whether regular or special,
and if special, how authorized, the notice thereof given, the names of those
present at Directors' meetings, the number of shares present or represented at
shareholders' meetings and the proceedings thereof.
The Secretary shall keep, or cause to be kept, at the principal office of
the corporation, or at the office of the corporation's transfer agent, a share
register, or a duplicate share register, showing the names of the shareholders
and their addresses, the number and classes of shares held by each, and the
number and date of cancellation of every certificate surrendered for
cancellation.
The Secretary shall give, or cause to be given, notice of all meetings of
the shareholders and of the Board of Directors required by these Bylaws or by
law to be given, and he shall keep the seal of the corporation in safe custody
and shall have such other powers and perform such other duties as may be
prescribed by the Board of Directors.
Section 9. Treasurer. The Treasurer shall keep and maintain, or cause to
---------
be kept and maintained, adequate and correct accounts of the properties and
business transactions of the corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital surplus and shares.
Any surplus, including earned surplus, paid-in surplus and surplus arising from
a reduction of stated capital, shall be classified according to source and shown
in a separate account. The books of account shall at all reasonable times be
open to inspection by any Director.
The Treasurer shall deposit all moneys and other valuables in the name and
to the credit of the corporation with such depositories as may be designated by
the Board of Directors. He shall disburse the funds of the corporation as may
be ordered by the Board of Directors, shall render to the President and Board,
whenever they request it, an account of all of his transactions as Treasurer and
of the financial condition of the corporation, and shall have such other powers
and perform such other duties as may be prescribed by the Board of Directors.
ARTICLE V
MISCELLANEOUS
Section 1. Record Date and Closing Stock Books. The Board of Directors
-----------------------------------
may fix a time as a record date for the determination of the shareholders
entitled to notice of and to vote
Amended Bylaws (Revised May 1, 1996)
- --------------
page 8
<PAGE>
at any meeting of shareholders or entitled to receive any dividend or
distribution or any allotment of rights, or to exercise rights in respect to any
change, conversion or exchange of shares. The record date so fixed shall not be
more than fifty (50) days prior to the date of the meeting or event for the
purposes of which it is fixed. When a record date is so fixed, only shareholders
who are of record on that date are entitled to notice of and to vote at the
meeting or to receive the dividend, distribution or allotment of rights, or to
exercise the rights, as the case may be, notwithstanding any transfer of any
shares on the books of the corporation after the record date.
The Board of Directors may close the books of the corporation against
transfers of shares during the whole or any part of a period not more than fifty
(50) days prior to the date of a shareholders' meeting, the date when the right
to any dividend, distribution or allotment of rights vests, or the effective
date of any change, conversion or exchange of shares.
Section 2. Inspection of Corporate Records. The share register or
-------------------------------
duplicate share register, the books of account and minutes of proceedings of the
shareholders, the Board of Directors and the Executive Committee shall be open
to inspection upon the written demand of any shareholder, or the holder of a
voting trust certificate, at any reasonable time and for a purpose reasonably
related to his interests as a shareholder, or as the holder of such voting trust
certificate, and shall be exhibited at any time when required by demand at any
shareholders' meeting of ten percent (10%) of the shares represented at the
meeting. Such inspection may be made in person or by an agent or attorney and
shall include the right to make extracts. Demand of inspection, other than at a
shareholders' meeting, shall be made in writing upon the President, Secretary or
Assistant Secretary of the corporation.
Every Director shall have the right at any reasonable time to inspect the
books, records, documents of every kind, and the physical properties of the
corporation and of its subsidiary corporations, domestic or foreign.
Section 3. Certificates for Shares. A certificate or certificates for
-----------------------
shares of the corporation (in such form as may be approved from time to time by
the Board of Directors) shall be issued to each stockholder when such shares are
fully paid. The certificates shall be numbered and the holder's name, number of
shares and the date of issue shall be entered in the books of the corporation as
they are issued. The certificates shall exhibit the holder's name, the number
and class of shares evidenced thereby or a statement that the shares are without
par value, and such additional information as may be required by the Board of
Directors. They shall be signed by the President or a Vice President and the
Secretary or an Assistant Secretary, or be authenticated by facsimiles of the
signatures of the President and the Secretary. Every certificate authenticated
by a facsimile of a signature must be countersigned by a transfer clerk.
Section 4. Transfer of Stock. The corporation shall recognize the right
-----------------
of the person registered on its books as owner of shares to receive dividends
and to vote as such owner. Shares may be transferred on the books of the
corporation only by the person named in the certificate as the owner thereof, or
by his agent, attorney or legal representative, upon surrender to the Secretary
of the corporation of a certificate, duly endorsed or accompanied by proper
Amended Bylaws (Revised May 1, 1996)
- --------------
page 9
<PAGE>
evidence of succession, assignment or authority to transfer. The Secretary shall
thereupon cause a new certificate to be issued to the person entitled thereto
and shall cancel the old certificate and record the transaction upon the books
of the corporation.
Section 5. Lost Certificates. New certificates for shares or other
-----------------
securities of the corporation may be issued for and in place of any such
instrument theretofore issued which is alleged to have been lost or destroyed.
The Directors may, in their discretion, require the owner of such lost or
destroyed instrument, or his legal representative, to give the corporation a
bond or other security in an adequate amount as indemnity against any claim that
may be made against the corporation. A new instrument may be issued, however,
without requiring any bond or other security when in the judgment of the
Directors it is proper to do so.
Section 6. Corporate Seal. A corporate seal shall be provided and adopted
--------------
by the Board of Directors and shall contain the name of the corporation and such
other wording as the Board may deem suitable or as may be required by law.
Section 7. Contracts - Execution of Documents. The Board of Directors may
----------------------------------
authorize any officer or officers, agent or agents to enter into any contract or
execute any instrument in the name of and on behalf of the corporation, and such
authority may be general or confined to specific instances, and unless so
authorized by the Board of Directors, no officer, agent or employee shall have
any power or authority to bind the corporation by any contract or engagement or
to pledge its credit or to render it liable for any purpose or in any amount;
except, however, the club membership secretary may execute membership
application agreements on behalf of the corporation.
All checks, drafts or other orders for payment of money, notes or other
evidences of indebtedness issued in the name of or payable to the corporation
shall be signed or endorsed by such person or persons and in such manner as from
time to time shall be determined by resolution of the Board of Directors.
Section 8. Representation of Shares of Other Corporations. The President
----------------------------------------------
or any Vice President and the Secretary or Assistant Secretary of this
corporation are authorized to vote, represent and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority herein
granted to said officers to vote or represent on behalf of this corporation any
and all shares held by this corporation in any other corporation or corporations
may be exercised either by such officers in person or by any person authorized
so to do by proxy or power of attorney duly executed by said officers.
Section 9. Inspection of Bylaws. The corporation shall keep in its
--------------------
principal office for the transaction of business the original or a copy of these
Bylaws, as amended or otherwise altered to date, certified by the Secretary,
which shall be open to inspection by the shareholders at all reasonable times
during office hours.
Amended Bylaws (Revised May 1, 1996)
- --------------
page 10
<PAGE>
ARTICLE VI
AMENDMENTS
Section 1. Power of Shareholders. New Bylaws may be adopted or these
---------------------
Bylaws may be amended or repealed by the vote of shareholders entitled to
exercise a majority of the voting power of the corporation or by the written
consent of such shareholders, except as otherwise provided by the Articles of
Incorporation, provided that the vote of written consent of shareholders holding
more than seventy-five percent (75%) of the voting power of the corporation
shall be required to reduce the authorized number of Directors.
Section 2. Power of Directors. Subject to the right of shareholders to
------------------
adopt, amend or repeal these Bylaws, these Bylaws, other than a Bylaw or
amendment thereof changing the authorized number of Directors, may be adopted,
amended or repealed by the Board of Directors at any regular or special meeting
thereof.
Amended Bylaws (Revised May 1, 1996)
- --------------
page 11
<PAGE>
EXHIBIT 3.27
ARTICLES OF INCORPORATION
-------------------------
OF
--
VIRGINIA GOLF COUNTRY CLUB, INC.
--------------------------------
The undersigned, person, pursuant to Chapter 9 of Title 13.1 of the Code of
Virginia, hereby executes the following articles of incorporation and sets
forth:
1. The name of the corporation is: "VIRGINIA GOLF COUNTRY CLUB, INC."
2. The number and class of shares the corporation is authorized to issue
is:
<TABLE>
<CAPTION>
Class No. of Shares Authorized
----- ------------------------
<S> <C>
Common 1,000 Shares
</TABLE>
3. The post office address, including street and number of the initial
registered office is: 5511 Staples Mill Road, Richmond, Virginia,
23228.
4. The name of the initial registered agent is Edward R. Parker, who is a
resident of Virginia and is a member of the Virginia State Bar, and
whose business office is identical with the registered office.
DATED: September 14, 1994.
/s/ Linda Blanton-Myers
--------------------------------------
Linda Blanton-Myers, Incorporator
/s/ Douglas C. Peter
--------------------------------------
Douglas C. Peter, Incorporator
Articles of Incorporation - Virginia
- ------------------------------------
Page 1
<PAGE>
EXHIBIT 3.28
BYLAWS FOR THE REGULATION, EXCEPT AS
OTHERWISE PROVIDED BY STATUTE OR ITS
ARTICLES OF INCORPORATION, OF
VIRGINIA GOLF COUNTRY CLUB, INC.
ARTICLE 1
OFFICES
Section 1. Principal Office. The corporation will maintain offices for the
----------------
transaction of business of the corporation at 3702 Via de la Valle, Suite 202,
Del Mar, California 92014.
Section 2. Other Offices. Branch or affiliate offices may at any time be
-------------
established by the Board of Directors at any place or places where the
corporation is qualified to do business.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. Place of Meetings. All meetings of shareholders shall be held
-----------------
at the principal office of the corporation or at any other place which may be
(i) designated by the Board of Directors, or (ii) consented to by the written
consent of all shareholders entitled to vote thereat, given either before or
after the meeting and filed with the Secretary of the corporation, or (iii) in
the city of residence of any shareholder holding over two-thirds of the capital
stock of the corporation,
Section 2. Annual Meetings. The annual meetings of shareholders shall be
---------------
on the 4th Monday of september in each year at 10:00 a.m.; provided, however,
that should said day fall upon a legal holiday, then any such annual meeting of
shareholders shall be held at the same time and place on the next day thereafter
ensuing which is not a legal holiday. At such meetings, Directors shall be
elected, reports of the affairs of the corporation shall be considered, and any
other business may be transacted which is within the power of the shareholders.
Section 3. Special Meetings. Special Meetings of the shareholders for any
----------------
purpose whatsoever may be called at any time either by the President or by the
Board of Directors, to be held at such time as he or they may designate. In
addition, one or more shareholders holding not less than one-fifth of the voting
power of the corporation may call such a meeting by causing a written request to
be sent by registered mail or delivered personally to the President, Vice
President or Secretary. The officer forthwith shall cause notice to be given, as
provided below, that a meeting will be held at a time, fixed by the officer, not
less than ten (10) nor more than sixty (60) days after the receipt of the
request.
Section 4. Notice of Meeting. Not less than ten (10) days prior to any
-----------------
meeting of shareholders, the Secretary or his delegate shall cause written
notice of such meeting to be given to
Bylaws page 1
- ------
<PAGE>
all shareholders entitled to vote thereat. If a shareholder gives no address,
notice shall be deemed to have been duly given if sent by mail or other means of
written communication addressed to the place where the principal office of the
corporation is situated,, or if published at least once in a newspaper of
general circulation in the county in which said office is located.
The notice shall specify the place, the day and the hour of such meeting,
and, in the case of a special meeting, the general nature of the business to be
transacted. No action may be taken at any meeting of shareholders on any of the
following proposals unless the notice thereof specifies the general nature of
the proposal: (a) a proposal to sell, lease, convey, exchange, transfer or
otherwise dispose of all, of the property or assets of the corporation, (b) a
proposal to merge or consolidate with another corporation, domestic or foreign,
(c) a proposal to reduce the stated capital of the corporation, (d) a proposal
to amend the Articles of Incorporation, (e) a proposal to wind up and dissolve
the corporation, or (f) a proposal to adopt a plan of distribution of shares,
securities, or any other consideration (other than money) in the process of
winding up.
Section 5. Consent of Absentees. The transactions conducted at any meeting
--------------------
of shareholders, either annual or special, however called and noticed, shall be
as valid as though had at a meeting duly held after regular call and notice, if
a quorum be present either in person or by proxy, and if, either before or after
the meeting, each of the shareholders entitled to vote, not present in person or
by proxy, signs a written waiver of notice, a consent to the holding of such
meeting, or an approval of the minutes thereof. All such waivers, consents or
approvals shall be filed with the corporate records or made a part of the
minutes of the meeting.
Section 6. Quorum. The Presence in person or by proxy of persons entitled
------
to vote a majority of the voting shares at any meeting shall constitute a quorum
for the transactions of business. The shareholders present at a duly called or
held meeting at which a quorum is present may continue to do business until
adjournment, notwithstanding the withdrawal of enough shareholders to leave less
than a quorum.
Section 7. Voting. Unless a record date for voting purposes be fixed, as
------
hereinafter provided, only persons in whose names shares entitled to vote stand
on the stock records of the corporation as of the date of such meeting shall be
entitled to vote thereat. Except as otherwise provided by law or the Articles of
Incorporation, every shareholder shall be entitled to one vote for each share
standing in his name on the record of shareholders of the corporation. Voting
rights shall be noncumulative. Except as otherwise provided herein or in the
Articles of Incorporation, all corporate actions shall be determined by vote of
a majority of the votes cast at a meeting of shareholders entitled to vote
thereat. Such vote may be viva voce or by ballot; provided, however, that all
elections for Directors must be by ballot upon demand made by a shareholder at
any election and before the voting begins. The candidates receiving the highest
number of votes up to the number of Directors to be elected shall be elected.
Section 8. Proxies. Every person entitled to vote or execute consents
-------
shall have the right to do so either or by one or more agents authorized by a
written proxy executed by such person or his duly authorized agent and filed
with the Secretary of the corporation.
Bylaws
- ------
page 2
<PAGE>
Section 9. Adjourned Meetings and Notice Thereof. Any shareholders'
-------------------------------------
meeting, annual or special, whether or not a quorum is present, may be adjourned
from time to time by the vote of a majority of the shares, the holders of which
are either present in person or represented by proxy thereat, but in the absence
of a quorum, no other business may be transacted at such meeting.
When any shareholders' meeting, either annual or special, is adjourned for
thirty (30) days or more, notice of the adjourned meeting shall be given as in
the case of an original meeting. Except as provided above, it shall not be
necessary to give any notice of any adjournment or of the business to be
transacted at any adjourned meeting other than by announcement at the meeting at
which such adjournment is taken.
Section 10. Action Without Meeting. Any action which may be taken at a
----------------------
meeting of the shareholders may be taken without a meeting if authorized by a
writing signed by all of the persons who would be entitled to vote upon such
action at a meeting and filed with the Secretary of the corporation; provided,
however, a meeting shall be held for dissolution, transfer of all or
substantially all of the assets of the corporation, or for merger or
consolidation of the corporation with other corporations, if same is required
under applicable law.
ARTICLE III
DIRECTORS
Section 1. Powers. Subject to limitations imposed by law or by the
------
Articles of Incorporation, all corporate powers shall be exercised by or under
the authority of, and the business and affairs of the corporation shall be
controlled by, the Board of Directors. In the exercise of its powers, the Board
may appoint an Executive Committee and other committees and may delegate to the
Executive Committee any of the powers and authority of the Board in the
management of the business and affairs of the corporation, except the power to
declare dividends and to adopt, amend or repeal bylaws. The Executive Committee
shall be composed of two or more Directors.
Section 2. Number of Directors. The authorized number of Directors of the
-------------------
corporation shall be not less than one nor more than five until changed by
amendment of the Articles of Incorporation or by a bylaw duly adopted by the
shareholders amending this section. Directors need not be shareholders of the
corporation.
Section 3. Election and Term of Office. The Directors shall be elected at
---------------------------
the annual meeting of shareholders, but if any such annual meeting is not held
or the Directors are not elected thereat, Directors may be elected at any
special meeting of shareholders held for that purpose. Directors shall hold
office until the election and qualification of their respective successors.
Section 4. Vacancies. Vacancies in the Board of Directors may be filled by
---------
a majority of the remaining Directors, though less than a quorum, or by a sole
remaining Director, and each Director so elected shall hold office until his
successor is elected at an annual or a special meeting of the shareholders. If
the entire Board of Directors resigns at one time, the shareholders shall,
Bylaws
- ------
page 3
<PAGE>
within a reasonable time thereafter, at a regular or special meeting, as
provided herein, elect a new Board of Directors.
A vacancy in the Board of Directors shall be deemed to exist in the case of
the death, resignation or removal of any Director, or if at any annual or
special meeting of shareholders at which any Director is elected the authorized
number of Directors is increased or if the shareholders fail to elect the full
authorized number of Directors to be voted for at that meeting.
The shareholders may elect a Director or Directors at any time to fill any
vacancy or vacancies not filed by the remaining Director or Directors. If the
Board of Directors accepts the resignation of a Director tendered to take effect
at a future time, the Board or the shareholders shall have the power to elect a
successor to take office when the resignation is to become effective.
No reduction of the authorized number of Directors shall have the effect of
removing any Director prior to the expiration of his term of office.
Section 5. Quorum. A majority of the authorized number of Directors shall
------
be necessary to constitute a quorum of the Board for the transaction of
business. Every act or decision done or made by a majority of the Directors
present at a meeting duly held at which a quorum is present shall be regarded as
the act of the Board, or by written consent of all of the Directors.
Section 6. Place of Directors' Meetings. Meetings of the Board of
----------------------------
Directors shall be held at the principal office of the corporation, or at any
other location which has been designated by resolution of the Board, or by
written consent of all of the Directors.
Section 7. Regular Meetings. Immediately following each annual meeting of
----------------
shareholders, the Board of Directors shall hold a regular meeting for the
purpose of electing officers and transacting any other business which may come
before them. No notice of such meeting need be given.
Section 8. Special Meetings. Special meetings of the Board of Directors
----------------
for any purpose or purposes shall be called by the President, or, if he is
absent or unable or refuses to act, by any Vice President or by any two
Directors.
Written notice of the time and place of special meetings shall be delivered
personally to each Director or sent to each Director by mail or other form of
written communication, charges prepaid, addressed to him at his address as is
shown upon the records of the corporation, or, if it is not so shown and if it
is not readily ascertainable, addressed to him at the city or place where the
meetings of the Directors are regularly held. Notices mailed or telegraphed
shall be deposited in the United States mail or delivered to the telegraph
company at the place where the principal office of the corporation is located at
least forty-eight (48) hours prior to the time of the holding of the meeting,
and notices delivered personally shall be so delivered at least twenty-four (24)
hours prior to the time of the holding of the meeting.
Bylaws
- ------
page 4
<PAGE>
Section 9. Notice of Adjournment. Notice of the time and place of holding
---------------------
an adjourned meeting need not be given to absent Directors if the time and place
are fixed at the meeting adjourned.
Section 10. Waiver of Notice: Consent to Meeting. The transactions
------------------------------------
conducted at any meeting of the Board of Directors, however called or noticed or
wherever held, shall be as valid as though conducted at a meeting duly held
after regular call and notice if a quorum is present and if, either before or
after the meeting, each of the Directors signs a waiver of notice, a consent to
hold such a meeting, or an approval of the minutes thereof. All such waivers,
consents or approvals shall be filed with the corporate records and made a part
of the minutes of the meeting.
Section 11. Adjournment. A quorum of the Directors may adjourn to meet
-----------
again at a set day and hour, and in the absence of a quorum, a majority of the
Directors present may adjourn form time to time until the time fixed for the
next regular meeting of the Board.
Section 12. Action Without Meeting. Any action required or permitted to be
----------------------
taken by the Board of Directors may be taken without a meeting if all members of
the Board shall individually or collectively consent in writing to such action.
Such written consent or consents shall be filed with the minutes of the
proceedings of the Board. Such action by written consent shall have the same
force and effect as a unanimous vote of such Directors.
Section 13. Fees and Compensation. Directors shall not receive any stated
---------------------
salary for their services as Directors, but by resolution of the Board, a fee or
other remuneration, with or without expenses of attendance, may be allowed for
attendance at each meeting. Nothing herein contained shall be construed to
preclude any Director from serving the corporation in any other capacity as an
officer, agent or employee, or otherwise, and receiving compensation therefor.
Section 14. Indemnification of Directors, Officers
--------------------------------------
and Employees.
-------------
A. In the event a person is sued, either alone or with others, because he
is or was a Director, officer or employee of the corporation, in any proceeding
arising out of his alleged misfeasance or nonfeasance in the performance of his
duties as such Director, officer or employee, or out of any alleged wrongful act
by the corporation, he shall be indemnified for his reasonable expenses,
including attorneys' fees incurred in the defense of the proceeding, if both of
the following conditions exist: (i) the person sued is successful in whole or
in part, or the proceeding against him is settled with the approval of the
court, and (ii) the court finds that his conduct fairly and equitable merits
such indemnity.
The amount of such indemnity may be assessed against the corporation, its
receiver, its trustee, or any other proper party, by the court in the same or in
a separate proceeding and shall be so much of the expenses, including attorneys'
fees incurred in the defense of the action as the court determines and finds to
be reasonable. Application for such indemnity may be made either by a person
sued or by the attorney or other person rendering services to him in connection
with the defense, and the court may order fees and expenses to be paid directly
to the attorney or other person
Bylaws page 5
- ------
<PAGE>
although he is not a party to the proceeding. Notice of the application for such
indemnity shall be served upon the corporation, its receiver, or its trustee and
upon the plaintiff and other parties to the proceeding. The court may also order
notice to be given to the shareholders in the manner provided elsewhere in these
bylaws for giving notice of shareholders' meetings, in such form as the court
directs.
B. Notwithstanding the foregoing provisions, the Board of Directors may
authorize the corporation to pay expenses incurred by or to satisfy a judgment
or fine rendered or levied against a present or former Director, officer or
employee of the corporation in an action brought by a third party against such
person (whether or not the corporation is joined as a party defendant) to impose
a liability or penalty on such person for an act alleged to have been committed
by such person in the performance of his duties as such Director, officer or
employee, or by the corporation, or by both, provided the Board of Directors
determines that such Director, officer or employee was acting in good faith
within what he reasonably believed to be the scope of his employment or
authority and for a purpose which he reasonably believed to be in the best
interests of the corporation or its shareholders. Payments authorized hereunder
include amounts paid and expenses incurred in settling any such action or
threatened action. This Paragraph does not apply to any action instituted or
maintained as the right of the corporation by a shareholder or holder of a
voting trust certificate representing shares of the corporation.
C. The provisions of this Section shall apply to the estate, executor,
administrator, heirs, legatees or devicees of any such present or former
Director, officer or employee of the corporation.
D. The Board of Directors may, at its discretion, authorize the purchase
of a policy or policies of insurance against any liability of the corporation to
indemnify any person pursuant to this Section, containing such terms and
conditions as the Board may deem appropriate. Such policy or policies may
include provisions for the direct indemnification of directors, officers or
other persons for expenses of a kind not subject to indemnification hereunder,
provided the premiums on such combined policy are, in the judgment of the Board,
fairly allocated between the corporation and the insured persons.
ARTICLE IV
OFFICERS
Section 1. Officers. The corporation shall have a President, one or more
--------
Vice Presidents, a Secretary and a Treasurer. Such officers shall be elected
annually by the Board of Directors and each shall hold office until he shall
resign or shall be removed or otherwise disqualified to serve and until his
successor shall be elected.
Section 2. Other Officers. The corporation may also have, in the discretion
--------------
of the Board of Directors, a Chairman of the Board, one or more Assistant
Secretaries, one or more Assistant
Bylaws page 6
- ------
<PAGE>
Treasurers, and such other officers and agents shall hold office for such terms
and have such authority and perform such duties as the Board of Directors may
from time to time specify, and shall hold office until they shall resign or
shall be removed or otherwise disqualified to serve.
Section 3. Removal and Resignation. Any officer or agent may be removed,
-----------------------
either with or without cause, my a majority of the Directors at the time in
office at any regular or special meeting of the Board, or, except in case of an
office chosen by the Board of Directors, by any officer upon whom such power of
removal may be conferred by the Board of Directors.
Any officer or agent may resign at any time by giving written notice to the
Board of Directors, the President or the Secretary of the corporation. Any such
resignation shall take effect as of the date of the receipt of such notice or at
any later time specified therein, and unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
Section 4. Vacancies. A vacancy in any office because of death,
---------
resignation, removal, disqualification, or any other cause shall be filled in
the manner prescribed in these Bylaws for regular appointments to such office.
Section 5. Chairman of the Board. The Chairman of the Board, if there
---------------------
shall be such an officer, shall, if present, preside at all meetings of the
Board of Directors and exercise and perform such other powers and duties as may
from time to time be assigned to him by the Board of Directors.
Section 6. President. Subject to such supervisory powers, if any, as may
---------
be given by the Board of Directors to the Chairman of the Board, if there be
such an officer, the President shall be the chief executive officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, discretion and control of the business and affairs of the
corporation. He shall preside at all meetings of the shareholders and, in the
absence of the Chairman of the Board, at all meetings of the Board of Directors.
He shall be an ex officio member of all of the standing committees, including
-- -------
the Executive Committee, if any, and shall have the general powers and duties of
management usually vested in the office of the President of a corporation and
shall have such other powers and duties as may be prescribed by the Board of
Directors.
Section 7. Vice President. In the absence or disability of the President,
--------------
the Vice Presidents, in order of their rank as fixed by the Board of Directors,
or, if not ranked, the Vice President designated by the Board of Directors,
shall perform all duties of the President, and when so acting, shall have all
the powers of and be subject to all the restrictions upon the President. The
Vice President shall have such other powers and perform such other duties as
from time to time may be prescribed for them respectively by the Board of
Directors.
Section 8. Secretary. The Secretary shall keep, or cause to be kept, a
---------
book of minutes at the principal office of the corporation, or at such other
place as the Board of Directors may order, of all meetings of Directors and
shareholders, with the time and place of holding, whether regular or special,
and if special, how authorized, the notice thereof given, the names of those
present at Directors' meetings, the number of shares present or represented at
shareholders' meetings and the proceedings thereof.
Bylaws
- ------
page 7
<PAGE>
The Secretary shall keep, or cause to be kept, at the principal office of
the corporation, or at the office of the corporation's transfer agent, a share
register, or a duplicate share register, showing the names of the shareholders
and their addresses, the number and classes of shares held by each, and the
number and date of cancellation of every certificate surrendered for
cancellation.
The Secretary shall give, or cause to be given, notice of all meetings of
the shareholders and of the Board of Directors required by these Bylaws or by
law to be given, and he shall keep the seal of the corporation in safe custody
and shall have such other powers and perform such other duties as may be
prescribed by the Board of Directors.
Section 9. Treasurer. The Treasurer shall keep and maintain, or cause to
---------
be kept and maintained, adequate and correct accounts of the properties and
business transactions of the corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital surplus and shares.
Any surplus, including earned surplus, paid-in surplus and surplus arising from
a reduction of stated capital, shall be classified according to source and shown
in a separate account. The books of account shall at all reasonable times be
open to inspection by any Director.
The Treasurer shall deposit all moneys and other valuables in the name and
to the credit of the corporation with such depositories as may be designated by
the Board of Directors. He shall disburse the funds of the corporation as may be
ordered by the Board of Directors, shall render to the President and Board,
whenever they request it, an account of all of his transactions as Treasurer and
of the financial condition of the corporation, and shall have such other powers
and perform such other duties as may be prescribed by the Board of Directors.
ARTICLE V
MISCELLANEOUS
Section 1. Record Date and Closing Stock Books. The Board of Directors
-----------------------------------
may fix a time as a record date for the determination of the shareholders
entitled to notice of and to vote at any meeting of shareholders or entitled to
receive any dividend or distribution or any allotment of rights, or to exercise
rights in respect to any change, conversion or exchange of shares. The record
date so fixed shall not be more than fifty (50) days prior to the date of the
meeting or event for the purposes of which it is fixed. When a record date is so
fixed, only shareholders who are of record on that date are entitled to notice
of and to vote at the meeting or to receive the dividend, distribution or
allotment of rights, or to exercise the rights, as the case may be,
notwithstanding any transfer of any shares on the books of the corporation after
the record date.
The Board of Directors may close the books of the corporation against
transfers of shares during the whole or any part of a period not more than
fifty (50) days prior to the date of a shareholders' meeting, the date when the
right to any dividend, distribution or allotment of rights vests, or the
effective date of any change, conversion or exchange of shares.
Section 2. Inspection of Corporate Records. The share register or
-------------------------------
duplicate share register, the books of an account and minutes of proceedings of
the shareholders, the Board of Directors and the
Bylaws page 8
- ------
<PAGE>
Executive Committee shall be open to inspection upon the written demand of any
shareholder, or the holder of a voting trust certificate, at any reasonable time
and for a purpose reasonably related to his interests as a shareholder, or as
the holder of such voting trust certificate, and shall be exhibited at any time
when required by demand at any shareholders' meeting of ten percent (10%) of the
shares represented at the meeting. Such inspection may be made in person or by
an agent or attorney and shall include the right to make extracts. Demand of
inspection, other than at a shareholders' meeting, shall be made in writing upon
the President, Secretary or Assistant Secretary of the corporation.
Every Director shall have the right at any reasonable time to inspect the
books, records, documents of every kind, and the physical properties of the
corporation and of its subsidiary corporations, domestic or foreign.
Section 3. Certificates for Shares. A certificate or certificates for
-----------------------
shares of the corporation (in such form as may be approved from time to time by
the Board of Directors) shall be issued to each stockholder when such shares are
fully paid. The certificates shall be numbered and the holder's name, number of
shares and the date of issue shall be entered in the books of the corporation as
they are issued. The certificates shall exhibit the holder's name, the number
and class of shares evidenced thereby or a statement that the shares are
without par value, and such additional information as may be required by the
Board of Directors. They shall be signed by the President or a Vice President
and the Secretary or an Assistant Secretary, or be authenticated by facsimiles
of the signatures of the President and the Secretary. Every certificate
authenticated by a facsimile of a signature must be countersigned by a transfer
clerk.
Section 4. Transfer of Stock. The corporation shall recognize the right
-----------------
of the person registered on its books as owner of shares to receive dividends
and to vote as such owner. Shares may be transferred on the books of the
corporation only by the person named in the certificate as the owner thereof, or
by his agent, attorney or legal representative, upon surrender to the Secretary
of the corporation of a certificate, duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer. The Secretary shall
thereupon cause a new certificate to be issued to the person entitled thereto
and shall cancel the old certificate and record the transaction upon the books
of the corporation.
Section 5. Lost Certificates. New certificates for shares or other
-----------------
securities of the corporation may be issued for and in place of any such
instrument theretofore issued which is alleged to have been lost or destroyed.
The Directors may, in their discretion, require the owner of such lost or
destroyed instrument, or his legal representative, to give the corporation a
bond or other security in an adequate amount as indemnity against any claim that
may be made against the corporation. A new instrument may be issued, however,
without requiring any bond or other security when in the judgement of the
Directors it is proper to do so.
Section 6. Corporate Seal. A corporate seal shall be provided and adopted
--------------
by the Board of Directors and shall contain the name of the corporation and such
other wording as the Board may deem suitable or as may be required by law.
Bylaws page 9
- ------
<PAGE>
Section 7. Contracts - Execution of Documents. The Board of Directors may
--------- ----------------------
authorize any officer or officers, agent or agents to enter into any contract or
execute any instrument in the name of and on behalf of the corporation, and such
authority may be general or confined to specific instances, and unless so
authorized by the Board of Directors, no officer, agent or employee shall have
any power or authority to bind the corporation by any contract or engagement or
to pledge its credit or to render it liable for any purpose or in any amount;
except, however, the club membership secretary may execute membership
application agreements on behalf of the corporation.
All checks, drafts or other orders for payment of money, notes or other
evidences of indebtedness issued in the name of or payable to the corporation
shall be signed or endorsed by such person or persons and in such manner as from
time to time shall be determined by resolution of the Board of Directors.
Section 8. Representation of Shares of Other Corporations. The President
----------------------------------------------
or any Vice President and the Secretary or Assistant Secretary of this
corporation are authorized to vote, represent and exercise behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority herein
granted to said officers to vote or represent on behalf of this corporation any
and all shares held by this corporation in any other corporation or corporations
may be exercised either by such officers in person or by any person authorized
so to do by proxy or power of attorney duly executed by said officers.
Section 9. Inspection of Bylaws. The corporation shall keep in its
--------------------
principal office for the transaction of business the original or a copy of these
Bylaws, as amended or otherwise altered to date, certified by the Secretary,
which shall be open to inspection by the shareholders at all reasonable times
during office hours.
ARTICLE VI
AMENDMENTS
Section 1. Power of Shareholders. New Bylaws may be adopted or these Bylaws
---------------------
may be amended or repealed by the vote of shareholders entitled to exercise a
majority of the voting power of the corporation or by the written consent of
such shareholders, except as otherwise provided by the Articles of
Incorporation, provided that the vote of written consent of shareholders holding
more than seventy-five percent (75%) of the voting power of the corporation
shall be required to reduced the authorized number of Directors.
Section 2. Power of Directors. Subject to the right of shareholders to
------------------
adopt, amend or repeal these Bylaws, these Bylaws, other than a Bylaw or
amendment thereof changing the authorized number of Directors, may be adopted,
amended or repealed by the Board of Directors at any regular or special meeting
thereof.
Bylaws
- ------
Page 10
<PAGE>
EXHIBIT 3.29
ARTICLES OF INCORPORATION
-------------------------
OF
--
LAKEWAY CLUBS, INC.
------------------
The undersigned natural person, of the age of eighteen (18) years or more,
acting as incorporator of a corporation under the Texas Business Corporation
Act, hereby adopts the following Articles of Incorporation for such
corporation.
ARTICLE ONE
-----------
The name of the corporation is Lakeway Clubs, Inc.
ARTICLE TWO
-----------
The period of its duration is perpetual.
ARTICLE THREE
-------------
The purpose for which the corporation is organized is to transact any and
all lawful business for which corporations may be organized under the Texas
Business Corporation Act.
ARTICLE FOUR
------------
The aggregate number of shares of capital stock which the corporation has
authority to issue is one thousand (1,000) shares of common stock of the par
value of One Dollar ($1.00). The shares shall be designated as common stock and
shall have identical rights, privileges, and powers in every respect.
Cumulative voting shall not be allowed and no shareholder shall have any
preemptive rights.
ARTICLE FIVE
------------
The corporation will not commence business until it has received for the
issuance of its shares consideration of the value of One Thousand Dollars
($1,0000.00), consisting of money, labor done, or property actually received.
Articles of Incorporation - Texas page 1
- ---------------------------------
<PAGE>
ARTICLE SIX
-----------
The address of its initial registered office is 350 North St.Paul Street,
Dallas, Texas 75201, and the name of its initial registered agent at such
address is C T Corporation System.
ARTICLE SEVEN
-------------
The number of directors constituting the initial board of directors is
three (3), and the names and addresses of the persons who shall serve as
directors until the first annual meeting of the shareholders or until their
successors are elected and qualified are:
Randolph D. Addison 15770 Dallas Parkway,
5th Floor
Dallas, Texas 75248
Murry E. Page 15770 Dallas Parkway,
5th Floor,
Dallas, Texas 75248
Deborah G. Means 15770 Dallas Parkway,
5th Floor,
Dallas, Texas 75248
ARTICLE EIGHT
-------------
The name and address of the incorporator is Linda Blanton-Myers, 15770
Dallas Parkway, 5th Floor, Dallas, Texas 75248.
/s/ Linda Blanton-Myers
-----------------------------------
Linda Blanton-Myers
Articles of Incorporation - Texas page 2
- ---------------------------------
<PAGE>
EXHIBIT 3.30
AMENDED AND RESTATED BYLAWS FOR THE REGULATION, EXCEPT AS
OTHERWISE PROVIDED BY STATUTE OR ITS
ARTICLES OF INCORPORATION, OF
LAKEWAY CLUBS, INC.
ARTICLE I
OFFICES
Section 1. Principal Office. The corporation will maintain offices for
----------------
the transaction of business of the corporation at 3702 Via de al Valle, Suite
202, Del Mar, California 92014.
Section 2. Other Offices. Branch or affiliate offices may at any time be
-------------
established by the Board of Directors at any place or places where the
corporation is qualified to do business.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. Place of Meetings. All meetings of shareholders shall be held
-----------------
at the principal office of the corporation or at any other place which may be
(i) designated by the Board of Directors, or (ii) consented to by the written
consent of all shareholders entitled to vote thereat, given either before or
after the meeting and filed with the Secretary of the corporation, or (iii) in
the city of residence of any shareholder holding over two-thirds of the capital
stock of the corporation.
Section 2. Annual Meetings. The annual meeting of shareholders shall be
---------------
on the 4th Tuesday of February in each year at 10:00 a.m.; provided, however,
that should said day fall upon a legal holiday, then any such annual meeting of
shareholders shall be held at the same time and place on the next day thereafter
ensuing which is not a legal holiday. At such meetings, Directors shall be
elected, reports of the affairs of the corporation shall be considered, and any
other business may be transacted which is within the power of the shareholders.
Section 3. Special Meetings. Special meetings of the shareholders for any
----------------
purpose whatsoever may be called at any time either by the President or by the
Board of Directors, to be held at such time as he or they may designate. In
addition, one or more shareholders holding not less than one-fifth of the voting
power of the corporation may call such a meeting by causing a written request
to be sent by registered mail or delivered personally to the President, Vice
President or Secretary. The officer forthwith shall cause notice to be given,
as provided below, that a meeting will be held at a time, fixed by the
Amended Bylaws (Revised May 1, 1996) page 1
- --------------
A4568.7.33.34B
<PAGE>
officer, not less than ten (10) nor more than sixty (60) days after the receipt
of the request.
Section 4. Notice of Meeting. Not less than ten (10) days prior to any
-----------------
meeting of shareholders, the Secretary or his delegate shall cause written
notice of such meeting to be given to all shareholders entitled to vote thereat.
If a shareholder gives no address, notice shall be deemed to have been duly
given if sent by mail or other means of written communication addressed to the
place where the principal office of the corporation is situated, or if published
at least once in a newspaper of general circulation in the county in which said
office is located.
The notice shall specify the place, the day and the hour of such meeting,
and, in the case of a special meeting, the general nature of the business to be
transacted. No action may be taken at any meeting of shareholders on any
of the following proposals unless the notice thereof specifies the general
nature of the proposal: (a) a proposal to sell, lease, convey, exchange,
transfer or otherwise dispose of all, or substantially all, of the property or
assets of the corporation, (b) a proposal to merge or consolidate with another
corporation, domestic or foreign, (c) a proposal to reduce the stated capital of
the corporation, (d) a proposal to amend the Articles of Incorporation, (e) a
proposal to wind up and dissolve the corporation, or (f) a proposal to adopt a
plan of distribution of shares, securities, or any other consideration (other
than money) in the process of winding up.
Section 5. Consent of Absentees. The transactions conducted at any
--------------------
meeting of shareholders, either annual or special, however called and noticed,
shall be as valid as though had at a meeting duly held after regular call and
notice, if a quorum be present either in person or by proxy, and if, either
before or after the meeting, each of the shareholders entitled to vote, not
present in person or by proxy, signs a written waiver of notice, a consent to
the holding of such meeting, or an approval of the minutes thereof. All such
waivers, consents or approvals shall be filed with the corporate records or made
a part of the minutes of the meeting.
Section 6. Quorum. The presence in person or by proxy of persons
------
entitled to vote a majority of the voting shares at any meeting shall constitute
a quorum for the transaction of business. The shareholders present at a duly
called or held meeting at which a quorum is present may continue to do business
until adjournment, notwithstanding the withdrawal of enough shareholders to
leave less than a quorum.
Section 7. Voting. Unless a record date for voting purposes be fixed, as
------
hereinafter provided, only persons in whose names shares entitled to vote stand
on the stock records of the corporation as of the date of such meeting shall be
entitled to vote thereat. Except as otherwise provided by law or the
Amended Bylaws (Revised May 1, 1996)
- --------------
A4568.7.33.34B page 2
<PAGE>
Articles of Incorporation, every shareholder shall be entitled to one vote for
each share standing in his name on the record of shareholders of the
corporation. Voting rights shall be noncumulative. Except as otherwise
provided herein or in the Articles of Incorporation, all corporate actions shall
be determined by vote of a majority of the votes cast at a meeting of
shareholders entitled to vote thereat. Such vote may be viva voce or by ballot;
---- ----
provided, however, that all elections for Directors must be by ballot upon
demand made by a shareholder at any election and before the voting begins. The
candidates receiving the highest number of votes up to the number of Directors
to be elected shall be elected.
Section 8. Proxies. Every person entitled to vote or execute consents
-------
shall have the right to do so either in person or by one or more agents
authorized by a written proxy executed by such person or his duly authorized
agent and filed with the Secretary of the corporation.
Section 9. Adjourned Meetings and Notice Thereof. Any shareholders'
-------------------------------------
meeting, annual or special, whether or not a quorum is present, may be adjourned
from time to time by the vote of a majority of the shares, the holders of which
are either present in person or represented by proxy thereat, but in the absence
of a quorum, no other business may be transacted at such meeting.
When any shareholders' meeting, either annual or special, is adjourned for
thirty (30) days or more, notice of the adjourned meeting shall be given as in
the case of an original meeting. Except as provided above, it shall not be
necessary to give any notice of adjournment or of the business to be transacted
at any adjourned meeting other than by announcement at the meeting at which such
adjournment is taken.
Section 10. Action Without Meeting. Any action which may be taken at a
----------------------
meeting of the shareholders may be taken without a meeting if authorized by a
writing signed by all of the persons who would be entitled to vote upon such
action at a meeting and filed with the Secretary of the corporation; provided,
however, a meeting shall be held for dissolution, transfer of all or
substantially all of the assets of the corporation, or for merger or
consolidation of the corporation with other corporations, if same is required
under applicable law.
ARTICLE III
DIRECTORS
Section. Powers. Subject to limitations imposed by law or by the Articles
------
of Incorporation, all corporate powers shall be exercised by or under the
authority of, and the business and affairs of the corporation shall be
controlled by, the Board of Directors. In the exercise of its powers, the Board
may appoint an Executive Committee and other committees and may delegate to
Amended Bylaws (Revised May 1, 1996)
- --------------
A4568.7.33.34B page 3
<PAGE>
the Executive Committee any of the powers and authority of the Board in the
management of the business and affairs of the corporation, except the power to
declare dividends and to adopt, amend or repeal bylaws. The Executive Committee
shall be composed of two or more Directors.
Section 2. Number of Directors. The authorized number of Directors of the
-------------------
corporation shall be not less than one or more than five until changed by
amendment of the Articles of Incorporation or by a bylaw duly adopted by the
shareholders amending this section. Directors need not be shareholders of the
corporation.
Section 3. Election and Term of Office. The Directors shall be elected at
---------------------------
the annual meeting of shareholders, but if any such annual meeting is not held
or the Directors are not elected thereat, Directors may be elected at any
special meeting of shareholders held for that purpose. Directors shall hold
office until the election and qualification of their respective successors.
Section 4. Vacancies. Vacancies in the Board of Directors may be filled
---------
by a majority of the remaining Directors, though less than a quorum, or by a
sole remaining Director, and each Director so elected shall hold office until
his successor is elected at an annual or a special meeting of the shareholders.
If the entire Board of Directors resigns at one time, the shareholders shall,
within a reasonable time thereafter, at a regular or special meeting, as
provided herein, elect a new Board of Directors.
A vacancy in the Board of Directors shall be deemed to exist in the case of
the death, resignation or removal of any Director, or if at any annual or
special meeting of shareholders at which any Director is elected the authorized
number of Directors is increased or if the shareholders fail to elect the full
authorized number of Directors to be voted for at that meeting.
The shareholders may elect a Director or Directors at any time to fill any
vacancy or vacancies not filled by the remaining Director or Directors. If the
Board of Directors accepts the resignation of a Director tendered to take effect
at a future time, the Board or the shareholders shall have the power to elect a
successor to take office when the resignation is to become effective.
No reduction of the authorized number of Directors shall have the effect of
removing any Director prior to the expiration of his term of office.
Section 5. Quorum. A majority of the authorized number of Directors shall
------
be necessary to constitute a quorum of the Board for the transaction of
business. Every act or decision done or made by a majority of the Directors
present at a meeting duly
Amended Bylaws (Revised May 1, 1996)
- --------------
A4568.7.33.34B page 4
<PAGE>
held at which a quorum is present shall be regarded as the act of the Board of
Directors, unless a greater number be required by law.
Section 6. Place of Directors' Meetings. Meetings of the Board of
----------------------------
Directors shall be held at the principal office of the corporation, or at any
other location which has been designated by resolution of the Board, or by
written consent of all of the Directors.
Section 7. Regular Meetings. Immediately following each annual meeting of
----------------
shareholders, the Board of Directors shall hold a regular meeting for the
purpose of electing officers and transacting any other business which may come
before them. No notice of such meeting need be given.
Section 8. Special Meetings. Special meetings of the Board of Directors
----------------
for any purpose or purposes shall be called by the President, or, if he is
absent or unable or refuses to act, by any Vice President or by any two
Directors.
Written notice of the time and place of special meetings shall be delivered
personally to each Director or sent to each Director by mail or other form of
written communication, charges prepaid, addressed to him at his address as is
shown upon the records of the corporation, or, if it is not so shown and if it
is not readily ascertainable, addressed to him at the city or place where the
meetings of the Directors are regularly held. Notices mailed or telegraphed
shall be deposited are regularly held. Notices mailed or telegraphed shall be
deposited in the United States mail or delivered to the telegraph company at the
place where the principal office of the corporation is located at least
forty-eight (48) hours prior to the time of the holding of the meeting, and
notices delivered personally shall be so delivered at least twenty-four (24)
hours prior to the time of the holding of the meeting.
Section 9. Notice of Adjournment. Notice of the time and place of holding
---------------------
an adjourned meeting need not be given to absent Directors if the time and place
are fixed at the meeting adjourned.
Section 10. Waiver of Notice: Consent to Meeting. The transactions
-------------------------------------
conducted at any meeting of the Board of Directors, however called or noticed or
wherever held, shall be as valid as though conducted at a meeting duly held
after regular call and notice if a quorum is present and if, either before or
after the meeting, each of the Directors signs a waiver of notice, a consent to
hold such a meeting, or an approval of the minutes thereof. All such waivers,
consents or approvals shall be filed with the corporate records and made a part
of the minutes of the meeting.
Amended Bylaws (Revised May 1, 1996)
- --------------
A4568.7.33.34B page 5
<PAGE>
Section 11. Adjournment. A quorum of the Directors may adjourn to meet
-----------
again at a set day and hour, and in the absence of a quorum, a majority of the
Directors present may adjourn from time to time until the time fixed for the
next regular meeting of the Board.
Section 12. Action Without Meeting. Any action required or permitted to
----------------------
be taken by the Board of Directors may be taken without a meeting if all members
of the Board shall individually or collectively consent in writing to such
action. Such written consent or consents shall be filed with the minutes of the
proceedings of the Board. Such action by written consent shall have the same
force and effect as a unanimous vote of such Directors.
Section 13. Fees and Compensation. Directors shall not receive any stated
---------------------
salary for their services as Directors, but by resolution of the Board, a fee or
other remuneration, with or without expenses of attendance, may be allowed for
attendance at each meeting. Nothing herein contained shall be construed to
preclude any Director from serving the corporation in any other capacity as an
officer, agent or employee, or otherwise, and receiving compensation therefor.
Section 14. Indemnification of Directors, Officers and Employees.
----------------------------------------------------
A. In the event a person is sued, either alone or with others, because he
is or was a Director, officer or employee of the corporation, in any proceeding
arising out of his alleged misfeasance or nonfeasance in the performance of his
duties as such Director, officer or employee, or out of any alleged wrongful act
by the corporation, he shall be indemnified for his reasonable expenses,
including attorneys' fees incurred in the defense of the proceeding, if both of
the following conditions exist: (i) the person sued is successful in whole or
in part or the proceeding against him is settled with the approval of the court,
and (ii) the court finds that his conduct fairly and equitable merits such
indemnity.
The amount of such indemnity may be assessed against the corporation, its
receiver, its trustee, or any other proper party, by the court in the same or in
a separate proceeding and shall be so much of the expenses, including attorneys'
fees incurred in the defense of the action as the court determines and finds to
be reasonable. Application for such indemnity may be made either by a person
sued or by the attorney or other person rendering services to him in connection
with the defense, and the court may order fees and expenses to be paid directly
to the attorney or other person although he is not a party to the proceeding.
Notice of the application for such indemnity shall be served upon the
corporation, its receiver, or its trustee and upon the plaintiff and other
parties to the proceeding. The court may also order notice to be given to the
shareholders in
Amended Bylaws (Revised May 1, 1996)
- --------------
A4568.7.33.34B page 6
<PAGE>
the manner provided elsewhere in these bylaws for giving notice of shareholders'
meetings, in such form as the court directs.
B. Notwithstanding the foregoing provisions, the Board of Directors may
authorize the corporation to pay expenses incurred by or to satisfy a judgment
or fine rendered or levied against a present or former Director, officer or
employee of the corporation in an action brought by a third party against such
person (whether or not the corporation is joined as a party defendant) to impose
a liability or penalty on such person for an act alleged to have been committed
by such person in the performance of his duties as such Director, officer or
employee, or by the corporation, or by both, provided the Board of Directors
determines that such Director, officer or employee was acting in good faith
within what he reasonably believed to be the scope of his employment or
authority and for a purpose which he reasonably believed to be in the best
interests of the corporation or its shareholders. Payments authorized hereunder
include amounts paid and expenses incurred in settling any such action or
threatened action. This Paragraph does not apply to any action instituted or
maintained as the right of the corporation by a shareholder or holder of a
voting trust certificate representing shares of the corporation.
C. The provisions of this Section shall apply to the estate, executor,
administrator, heirs, legatees or devisees of any such present or former
Director, officer or employee of the corporation.
D. The Board of Directors may, at its discretion, authorize the purchase
of a policy or policies of insurance against any liability of the corporation to
indemnify any person pursuant to this Section, containing such terms and
conditions as the Board may deem appropriate. Such policy or policies may
include provisions for the direct indemnification of directors, officers or
other persons for expenses of a kind not subject to indemnification hereunder,
provided the premiums on such combined policy are, in the judgment of the Board,
fairly allocated between the corporation and the insured persons.
E. The foregoing provisions of this Section 14 shall not be considered as
limiting the right of indemnification permitted by the Texas Business
Corporation Act, Article 2.021, but indemnification shall be to the maximum
extent permitted under Texas Business Corporation Act, Article 2.02-1.
ARTICLE IV
OFFICERS
Section 1. Officers. The corporation shall have a President, one or more
--------
Vice Presidents, a Secretary and a Treasurer. Such officers shall be elected
annually by the Board
Amended Bylaws (Revised May 1, 1996)
- --------------
A4568.7.33.34B page 7
<PAGE>
of Directors and each shall hold office until he shall resign or shall be
removed or otherwise disqualified to serve and until his successor shall be
elected.
Section 2. Other Officers. The corporation may also have, in the
--------------
discretion of the Board of Directors, a Chairman of the Board, one or more
Assistant Secretaries, one or more Assistant Treasurers, and such other officers
and agents shall hold office for such terms and have such authority and perform
such duties as the Board of Directors may from time to time specify, and shall
hold office until they shall resign or shall be removed or otherwise
disqualified to serve.
Section 3. Removal and Resignation. Any officer or agent may be removed,
-----------------------
either with or without cause, by a majority of the Directors at the time in
office at any regular or special meeting of the Board, or, except in case of an
officer chosen by the Board of Directors, by any officer upon whom such power of
removal may be conferred by the Board of Directors.
Any officer or agent may resign at any time by giving written notice to the
Board of Directors, the President or the Secretary of the corporation. Any such
resignation shall take effect as of the date of the receipt of such notice or at
any later time specified therein, and unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
Section 4. Vacancies. A vacancy in any officer because of death,
----------
resignation, removal, disqualification, or any other cause shall be filled in
the manner prescribed in these Bylaws for regular appointments to such office.
Section 5. Chairman of the Board. The Chairman of the Board, if there
---------------------
shall be such an officer, shall, if present, preside at all meetings of the
Board of Directors and exercise and perform such other powers and duties as may
from time to time be assigned to him by the Board of Directors.
Section 6. President. Subject to such supervisory powers, if any, as may
---------
be given by the Board of Directors to the Chairman of the Board, if there be
such an officer, the President shall be the chief executive officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and affairs of the
corporation. He shall preside at all meetings of the shareholders and, in the
absence of the Chairman of the Board, at all meetings of the Board of Directors.
He shall be an ex officio member of all the standing committees, including the
----------
Executive Committee, if any, and shall have the general powers and duties of
management usually vested in the office of the President of a corporation and
shall have such other powers and duties as may be prescribed by the Board of
Directors.
Amended Bylaws (Revised May 1, 1996)
- --------------
A4568.7.33.34B page 8
<PAGE>
Section 7. Vice President. In the absence or disability of the President,
--------------
the Vice Presidents, in order of their rank as fixed by the Board of Directors,
or, if not ranked, the Vice President designated by the Board of Directors,
shall perform all the duties of the President, and when so acting, shall have
all the powers of and be subject to all the restrictions upon the President. The
Vice Presidents shall have such other powers and perform such other duties as
from time to time may be prescribed for them respectively by the Board of
Directors.
Section 8. Secretary. The Secretary shall keep, or cause to be kept, a
---------
book of minutes at the principal office of the corporation, or at such other
place as the Board of Directors may order, of all meetings of Directors and
shareholders, with the time and place of holding, whether regular or special,
and if special, how authorized, the notice thereof given, the names of those
present at Directors' meetings, the number of shares present or represented at
shareholders' meetings and the proceedings thereof.
The Secretary shall keep, or cause to be kept, at the principal office of
the corporation, or at the office of the corporation's transfer agent, a share
register, or a duplicate share register, showing he names of the shareholders
and their addresses, the number and classes of shares held by each, and the
number and date of cancellation of every certificate surrendered for
cancellation.
The Secretary shall give, or cause to be given, notice of all meetings of
the shareholders and of the Board of Directors required by these Bylaws or by
law to be given, and he shall keep the seal of the corporation in safe custody
and shall have such other powers and perform such other duties as may be
prescribed by the Board of Directors.
Section 9. Treasurer. The Treasurer shall keep and maintain, or cause to
---------
be kept and maintained, adequate and correct accounts of the properties and
business transactions of the corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital surplus and shares.
Any surplus, including earned surplus, paid-in surplus and surplus arising from
a reduction of stated capital, shall be classified according to source and shown
in a separate account. The books of account shall at all reasonable times be
open to inspection by any Director.
The Treasurer shall deposit all moneys and other valuables in the name and
to the credit of the corporation with such depositories as may be designated by
the Board of Directors. He shall disburse the funds of the corporation as may
be ordered by the Board of Directors, shall render to the President the Board,
whenever they request it, an account of all of his transactions
Amended Bylaws (Revised May 1, 1996) Page 9
- --------------
A4568.7.33.34B
<PAGE>
as Treasurer and of the financial condition of the corporation, and shall have
such other powers and perform such other duties as may be prescribed by the
Board of Directors.
ARTICLE V
MISCELLANEOUS
Section 1. Record Date and Closing Stock Books. The Board of Directors
-----------------------------------
may fix a time as a record date for the determination of the shareholders
entitled to notice of and to vote at any meeting of shareholders entitled to
receive any dividend or distribution or any allotment of rights, or to exercise
rights in respect to any change, conversion or exchange of shares. The record
date so fixed shall not be more than fifty (50) days prior to the date of the
meeting or event for the purposes of which it is fixed. When a record date is
so fixed, only shareholders who are of record on that date are entitled to
notice of and to vote at the meeting or to receive the dividend, distribution
or allotment of rights, or to exercise the rights, as the case may be,
notwithstanding any transfer of any shares on the books of the corporation after
the record date.
The Board of Directors may close the books of the corporation against
transfers of shares during the whole or any part of a period not more than
fifty (50) days prior to the date of a shareholders' meeting, the date when the
right to any dividend, distribution or allotment of rights vests, or the
effective date of any change, conversion or exchange of shares.
Section 2. Inspection of Corporation Record. The share register or
--------------------------------
duplicate share register, the books of account and minutes of proceedings of the
shareholders, the Board of Directors and the Executive Committee shall be open
to inspection upon the written demand of any shareholder, or the holder of a
voting trust certificate, at any reasonable time and for a purpose reasonably
related to his interests as a shareholder, or as the holder of such voting trust
certificate, and shall be exhibited at any time when required by demand at any
shareholders' meeting of ten percent (10%) of the shares represented at the
meeting. Such inspection may be made in person or by an agent or attorney and
shall include the right to make extracts. Demand of inspection, other than at a
shareholders' meeting, shall be made in writing upon the President, Secretary or
Assistant Secretary of the corporation.
Every Director shall have the right at any reasonable time to inspect the
books, records, documents of every kind, and the physical properties of the
corporation and of its subsidiary corporation, domestic or foreign.
Amended Bylaws (Revised May 1, 1996)
- --------------
A4568.7.33.34B
page 10
<PAGE>
Section 3. Certificates for Shares. A certificate or certificates for
-----------------------
shares of the corporation (in such form as may be approved from time to time by
the Board of Directors) shall be issued to each stockholder when such shares are
fully paid. The certificates shall be numbered and the holder's name, number
shares and the date of issue shall be entered in the books of the corporation as
they are issued. The certificates shall exhibit the holder's name, the number
and class of shares evidenced thereby or a statement that the shares are without
par value, and such additional information as may be required by the Board of
Directors. they shall be signed by the President or a Vice President and the
Secretary or an Assistant Secretary, or be authenticated by facsimiles of the
signatures of the President and the Secretary. Every certificate authenticated
by a facsimile of a signature must be countersigned by a transfer clerk.
Section 4. Transfer of Stock. The corporation shall recognize the right of
-----------------
the person registered on its books as owner of shares to receive dividends and
to vote as such owner. Shares may be transferred on the books of the corporation
only by the person named in the certificate as the owner thereof, or by his
agent, attorney or legal representative, upon surrender to the Secretary of the
corporation of a certificate, duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer. the SEcretary shall thereupon
cause a new certificate to be issued to the person entitled thereto and shall
cancel the old certificate and record the transaction upon the books of the
corporation.
Section 5. Lost Certificates. New certificates for shares or other
-----------------
securities of the corporation may be issued for and in place of any such
instrument theretofore issued which is alleged to have been lost or destroyed.
The Directors may, in their discretion, require the owner of such lost or
destroyed instrument, or his legal representative to give the corporation a bond
or other security in an adequate amount as indemnity against any claim that may
be made against the corporation. A new instrument may be issued, however,
without requiring any bond or other security when in the judgment of the
Directors it is proper to do so.
Section 6. Corporate Seal. A corporate seal shall be provided and adopted
--------------
by the Board of Directors and shall contain the name of the corporation and such
other wording as the Board may deem suitable or as may be required by law.
Section 7. Contracts - Execution of Documents. The Board of Directors may
----------------------------------
authorize any officer or officers, agent or agents to enter into any contract or
execute any instrument in the name of and on behalf of the corporation, and such
authority may be general or confined to specific instances, and unless so
Amended Bylaws (Revised May 1, 1996)
- --------------
A4568.7.33.34B page 11
<PAGE>
authorized by the Board of Directors, no officer, agent or employee shall have
any power or authority to bind the corporation by any contract or engagement or
to pledge its credit or to render it liable for any purpose or in any amount;
except, however, the club membership secretary may execute membership
application agreements on behalf of the corporation.
All checks, drafts or other orders for payment of mony, notes or other
evidences of indebtedness issued in the name of or payable to the corporation
shall be signed or endorsed by such person or persons and in such manner as from
time to time shall be determined by resolution of the Board of Directors.
Section 8. Representation of Shares of Other Corporations. The President
----------------------------------------------
or any Vice President and the Secretary or Assistant Secretary of this
corporation are authorized to vote, represent and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority herein
granted to said officers to vote or represent on behalf of this corporation any
and all shares held by this corporation in any other corporation or corporations
may be exercised either by such officers in person or by any person authorized
so to do by proxy or power of attorney duly executed by said officers.
Section 9. Inspection of Bylaws. The corporation shall keep in its
--------------------
principal office for the transaction of business the original or a copy of these
Bylaws, as amended or otherwise altered to date, certified by the Secretary,
which shall be open to inspection by the shareholders at all reasonable times
during office hours.
ARTICLE VI
AMENDMENTS
Section 1. Power of Shareholders. New Bylaws may be adopted or these
---------------------
Bylaws may be amended or repealed by the vote of shareholders entitled to
exercise a majority of the voting power of the corporation or by the written
consent of such shareholders, except as otherwise provided by the Articles of
Incorporation, provided that the vote of written consent of shareholders holding
more than seventy-five percent (75%) of the voting power of the corporation
shall be required to reduce the authorized number of Directors.
Section 2. Power of Directors. Subject to the right of shareholders to
------------------
adopt, amend or repeal these Bylaws, these Bylaws, other than a Bylaw or
amendment thereof changing the authorized number of Directors, may be adopted,
amended or repealed by the Board of Directors at any regular or special meeting
thereof.
Amended Bylaws (Revised May 1, 1996)
- --------------
A4568.7.33.34B page 12
<PAGE>
EXHIBIT 3.31
ARTICLES OF INCORPORATION
-------------------------
OF
--
TGFC CORPORATION
----------------
The undersigned natural person, of the age of eighteen (18) years or more,
acting as incorporator of a corporation under the Texas Business Corporation
Act, hereby adopts the following Articles of Incorporation for such corporation.
ARTICLE ONE
-----------
The name of the corporation is TGFC Corporation.
ARTICLE TWO
-----------
The period of its duration is perpetual.
ARTICLE THREE
-------------
The purpose for which the corporation is organized is the transaction any
or all lawful business for which corporations may be incorporated under the
Texas Business Corporation Act.
ARTICLE FOUR
------------
The aggregate number of shares which the corporation has authority to issue
is 1,000 shares of the par value of $1.00. The shares shall be designated as
common stock and shall have identical rights, privileges, and powers in every
respect. Cumulative voting shall not be allowed and no shareholder shall have
any preemptive rights.
ARTICLE FIVE
------------
The corporation will not commence business until it has received for the
issuance of its shares consideration of the value of One Thousand Dollars
($1,000.00), consisting of money, labor done, or property actually received.
ARTICLE SIX
-----------
The street address of its initial registered office is 350 North St. Paul
Street, Dallas, Texas 75201, and the name of its initial registered agent at
such address is C T Corporation System.
Articles of Incorporation - Texas page 1
- ---------------------------------
<PAGE>
ARTICLE SEVEN
-------------
The number of directors constituting the initial board of directors is two
(2), and the name and address of the persons who shall serve as directors until
the first annual meeting of the shareholders or until their successors are
elected and qualified are:
Randolph D. Addison 15770 Dallas Parkway, 5th Fl.
Dallas, Texas 75248
Murry E. Page 15770 Dallas Parkway, 5th Fl.
Dallas, Texas 75248
ARTICLE EIGHT
-------------
The name and address of the incorporator is Linda Blanton-Myers, 15770
Dallas Parkway, 5th Floor, Dallas, Texas 75248.
/s/ Linda Blanton-Myers
______________________________
Linda Blanton-Myers
Articles of Incorporation - Texas page 2
- ---------------------------------
<PAGE>
EXHIBIT 3.32
AMENDED AND RESTATED BYLAWS FOR THE REGULATION, EXCEPT AS
OTHERWISE PROVIDED BY STATUTE OR ITS
ARTICLES OF INCORPORATION, OF
TGFC CORPORATION
ARTICLE I
OFFICES
Section 1. Principal Office. The corporation will maintain offices for the
----------------
transaction of business of the corporation at 3702 Via de al Valle, Suite 202,
Del Mar, California 92014.
Section 2. Other Offices. Branch of affiliate offices may at any time be
-------------
established by the Board of Directors at any place or places where the
corporation is qualified to do business.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. Place of Meetings. All meetings of shareholders shall be held at
-----------------
the principal office of the corporation or at any other place which may be (i)
designated by the Board of Directors, or (ii) consented to by the written
consent of all shareholders entitled to vote thereat, given either before or
after the meeting and filed with the Secretary of the corporation, or (iii) in
the city of residence of any shareholder holding over two-thirds of the capital
stock of the corporation.
Section 2. Annual Meetings. The annual meeting of shareholders shall be
---------------
on the 2nd Monday of February in each year at 10:00 a.m.; provided, however,
that should said day fall upon a legal holiday, then any such annual meeting of
shareholders shall be held at the same time and place on the next day thereafter
ensuing which is not a legal holiday. At such meetings, Directors shall be
elected, reports of the affairs of the corporation shall be considered, and any
other business may be transacted which is within the power of the shareholders.
Section 3. Special Meetings. Special meetings of the shareholders for any
----------------
purpose whatsoever may be called at any time either by the President or by the
Board of Directors, to be held at such time as he or they may designate. In
addition, one or more shareholders holding not less than one-fifth of the voting
power of the corporation may call such a meeting by causing a written request to
be sent by registered mail or delivered personally to the President, Vice
President or Secretary. The officer forthwith shall cause notice to be given, as
provided below, that a meeting will be held at a time, fixed by the officer, not
less than ten (10) nor more than sixty (60) days after the receipt of the
request.
Amended and Restated Bylaws (Revised May 1, 1996)
- ---------------------------
Page 1
<PAGE>
Section 4. Notice of Meeting. Not less than ten (10) days prior to any
-----------------
meeting of shareholders, the Secretary or his delegate shall cause written
notice of such meeting to be given to all shareholders entitled to vote thereat.
If a shareholder gives no address, notice shall be deemed to have been duly
given if sent by mail or other means of written communication addressed to the
place where the principal office of the corporation is situated, or if published
at least once in a newspaper of general circulation in the county in which said
office is located.
The notice shall specify the place, the day and the hour of such meeting,
and, in the case of a special meeting, the general nature of the business to be
transacted. No action may be taken at any meeting of shareholders on any of the
following proposals unless the notice thereof specifies the general nature of
the proposal: (a) a proposal to sell, lease, convey, exchange, transfer or
otherwise dispose of all, or substantially all, of the property or assets of the
corporation, (b) a proposal to merge or consolidate with another corporation,
domestic or foreign, (c) a proposal to reduce the stated capital of the
corporation, (d) a proposal to amend the Articles of Incorporation, (e) a
proposal to wind up and dissolve the corporation, or (f) a proposal to adopt a
plan of distribution of shares, securities, or any other consideration (other
than money) in the process of winding up.
Section 5. Consent of Absentees. The transactions conducted at any meeting
--------------------
of shareholders, either annual or special, however called and noticed, shall be
as valid as though had at a meeting duly held after regular call and notice, if
a quorum be present either in person or by proxy, and if, either before or after
the meeting, each of the shareholders entitled to vote, not present in person or
by proxy, signs a written waiver of notice, a consent to the holding of such
meeting, or an approval of the minutes thereof. All such waivers, consents or
approvals shall be filed with the corporate records or made a part of the
minutes of the meeting.
Section 6. Quorum. The presence in person or by proxy of persons entitled
------
to vote a majority of the voting shares at any meeting shall constitute a quorum
for the transaction of business. The shareholders present at a duly called or
held meeting at which a quorum is present may continue to do business until
adjournment, notwithstanding the withdrawal of enough shareholders to leave less
than a quorum.
Section 7. Voting. Unless a record date for voting purposes be fixed, as
------
hereinafter provided, only persons in whose names shares entitled to vote stand
on the stock records of the corporation as of the date of such meeting shall be
entitled to vote thereat. Except as otherwise provided by law or the Articles of
Incorporation, every shareholder shall be entitled to one vote for each share
standing in his name on the record of shareholders of the corporation. Voting
rights shall be noncumulative. Except as otherwise provided herein or in the
Articles of Incorporation, all corporate actions shall be determined by vote of
a majority of the votes cast at a meeting of shareholders entitled to vote
thereat. Such vote may be viva voce or by ballot; provided, however, that all
---- ----
elections for Directors must be by ballot upon demand made by a shareholder at
any election and before the voting begins. The candidates receiving the highest
number of votes up to the number of Directors to be elected shall be elected.
Amended and Restated Bylaws (Revised May 1, 1996) Page 2
- ---------------------------
<PAGE>
Section 8. Proxies. Every person entitled to vote or execute consents
-------
shall have the right to do so either in person or by one or more agents
authorized by a written proxy executed by such person or his duly authorized
agent and filed with the Secretary of the corporation.
Section 9. Adjourned Meetings and Notice Thereof. Any shareholders'
-------------------------------------
meeting, annual or special, whether or not a quorum is present, may be adjourned
from time to time by the vote of a majority of the shares, the holders of which
are either present in person or represented by proxy thereat, but in the absence
of a quorum, no other business may be transacted at such meeting.
When any shareholders' meeting, either annual or special, is adjourned for
thirty (30) days or more, notice of the adjourned meeting shall be given as
in the case of an original meeting. Except as provided above, it shall not be
necessary to give any notice of any adjournment or of the business to be
transacted at any adjourned meeting other than by announcement at the meeting at
which such adjournment is taken.
Section 10. Action Without Meeting. Any action which may be taken at a
----------------------
meeting of the shareholders may be taken without a meeting if authorized by a
writing signed by all of the persons who would be entitled to vote upon such
action at a meeting and filed with the Secretary of the corporation; provided,
however, a meeting shall be held for dissolution, transfer of all or
substantially all of the assets of the corporation, or for merger or
consolidation of the corporation with other corporations, if same is required
under applicable law.
ARTICLE III
DIRECTORS
Section 1. Powers. Subject to limitations imposed by law or by the
------
Articles of Incorporation, all corporate powers shall be exercised by or under
the authority of, and the business and affairs of the corporation shall be
controlled by, the Board of Directors. In the exercise of its powers, the Board
may appoint an Executive Committee and other committees and may delegate to the
Executive Committee any of the powers and authority of the Board in the
management of the business and affairs of the corporation, except the power to
declare dividends and to adopt, amend or repeal bylaws. The Executive Committee
shall be composed of two or more Directors.
Section 2. Number of Directors. The authorized number of Directors of
-------------------
the corporation shall be not less than one nor more than five until changed
by amendment of the Articles of Incorporation or by a bylaw duly adopted by the
shareholders amending this section. Directors need not be shareholders of the
corporation.
Section 3. Election and Term of Office. The Director shall be elected at
---------------------------
the annual meeting of shareholders, but if any such annual meeting is not held
or the Directors are not elected thereat, Directors may be elected at any
special meeting of shareholders held for that
Amendment to Bylaws (Revised May 1, 1996)
- --------------------
page 3
<PAGE>
purpose. Directors shall hold office until the election and qualification of
their respective successors.
Section 4. Vacancies. Vacancies in the Board of Directors may be filled
---------
by a majority of the remaining Directors, through less than a quorum, or by a
sole remaining Director, and each Director so elected shall hold office until
his successor is elected at an annual or a special meeting of the shareholders.
If the entire Board of Directors resigns at one time, the shareholders shall,
within a reasonable time thereafter, at a regular or special meeting, as
provided herein, elect a new board of Directors.
A vacancy in the Board of Directors shall be deemed to exist in the case
of the death, resignation or removal of any Director, or if at any annual or
special meeting of shareholder at which any Director is elected the authorized
number of Directors is increased or if the shareholders fail to elect the full
authorized number of Directors to be voted for at that meeting.
The shareholders may elect a Director or Directors at any time to fill any
vacancy or vacancies not filled by the remaining Director or Directors. If the
Board of Directors accepts the resignation of a Director tendered to take effect
at a future time, the Board or the shareholders shall have the power to elect a
successor to take office when the resignation is to become effective.
No reduction of the authorized number of Directors shall have the effect of
removing any Director prior to the expiration of his term of office.
Section 5. Quorum. A majority of the authorized number of Directors shall
------
be necessary to constitute a quorum of the Board for the transaction of
business. Every act or decision done or made by a majority of the Directors
present at a meeting duly held at which a quorum is present shall be regarded as
the act of the Board of Directors, unless a greater number is required by law.
Section 6. Place of Directors' Meetings. Meetings of the Board of
----------------------------
Directors shall be held at the principal office of the corporation, or at any
other location which has been designated by resolution of the Board, or by
written consent of all of the Directors.
Section 7. Regular Meetings. Immediately following each annual meeting of
----------------
Shareholders, the Board of Directors shall hold a regular meeting for the
purpose of electing officers and transacting any other business which may come
before them. No notice of such meeting need be given.
Section 8. Special Meetings. Special meetings of the Board of Directors
----------------
for any purpose or purposes shall be called by the President, or, if he is
absent or unable or refuses to act, by any Vice President or by any two
Directors.
Written notice of the time and place of special meetings shall be delivered
personally to each Director or sent to each Director by mail or other form of
written communication,
Amended and Restated Bylaws (Revised May 1, 1996)
- ---------------------------
page 4
<PAGE>
charges prepaid, addressed to him at his address as is shown upon the records of
the corporation, or, if it is not so shown and if it is not readily
ascertainable, addressed to him at the city or place where the meetings of the
Directors are regularly held. Notices mailed or telegraphed shall be deposited
in the United States mail or delivered to the telegraph company at the place
where the principal office of the corporation is located at least forty-eight
(48) hours prior to the time of the holding of the meeting, and notices
delivered personally shall be so delivered at least twenty-four (24) hours prior
to the time of the holding of the meeting.
Section 9. Notices of Adjournment. Notice of the time and place of holding
----------------------
an adjourned meeting need not be given to absent Directors if the time and place
are fixed at the meeting adjourned.
Section 10. Waiver of Notice; Consent to Meeting. The transactions
------------------------------------
conducted at any meeting of the Board of Directors, however called or noticed or
wherever held, shall be as valid as though conducted at a meeting duly held
after regular call and notice if a quorum is present and if, either before or
after the meeting, each of the Directors signs a waiver of notice, a consent to
hold such a meeting, or an approval of the minutes thereof. All such waivers,
consents or approvals shall be filed with the corporate records and made a part
of the minutes of the meeting.
Section 11. Adjournment. A quorum of the Directors may adjourn to meet
-----------
again at a set day and hour, and in the absence of a quorum, a majority of the
Directors present may adjourn from time to time until the time fixed for the
next regular meeting of the Board.
Section 12. Action Without Meeting. Any action required or permitted to be
----------------------
taken by the Board of Directors may be taken without a meeting if all members of
the Board shall individually or collectively consent in writing to such action.
Such written consent or consents shall be filed with the minutes of the
proceedings of the Board. Such action by written consent shall have the same
force and effect as a unanimous vote of such Directors.
Section 13. Fees and Compensation. Directors shall not receive any stated
---------------------
salary for their services as Directors, but by resolution of the Board, a fee or
other remuneration, with or without expenses of attendance, may be allowed for
attendance at each meeting. Nothing herein contained shall be construed to
preclude any Director from serving the corporation in any other capacity as an
officer, agent or employee, or otherwise, and receiving compensation therefor.
Section 14. Indemnification of Directors, Officers
--------------------------------------
and Employees.
-------------
A. In the event a person is sued, either alone or with others, because he
is or was a Director, officer or employee of the corporation, in any proceeding
arising out of his alleged misfeasance or nonfeasance in the performance of his
duties as such Director, officer or employee, or out of any alleged wrongful act
by the corporation, he shall be indemnified for his reasonable expenses,
including attorneys' fees incurred in the defense of the proceeding, if both of
the following conditions exist: (i) the person sued is successful in whole or in
part,
Amended and Restated Bylaws (Revised May 1, 1996)
- ---------------------------
page 5
<PAGE>
or the proceeding against him is settled with the approval of the court, and
(ii) the court finds that his conduct fairly and equitable merits such
indemnity.
The amount of such indemnity may be assessed against the corporation, its
receiver, its trustee, or any other proper party, by the court in the same or in
a separate proceeding and shall be so much of the expenses, including attorneys'
fees incurred in the defense of the action as the court determines and finds to
be reasonable. Application for such indemnity may be made either by a person
sued or by the attorney or other person rendering services to him in connection
with the defense, and the court may order fees and expenses to be paid directly
to the attorney or other person although he is not a party to the proceeding.
Notice of the application for such indemnity shall be served upon the
corporation, its receiver, or its trustee and upon the plaintiff and other
parties to the proceeding. The court may also order notice to be given to the
shareholders in the manner provided elsewhere in these bylaws for giving notice
of shareholder's meetings, in such form as the court directs.
B. Notwithstanding the foregoing provisions, the Board of Directors may
authorize the corporation to pay expenses incurred by or to satisfy a judgment
or fine rendered or levied against a present or former Director, officer or
employee of the corporation in an action brought by a third party against such
person (whether or not the corporation is joined as a party defendant) to impose
a liability or penalty on such person for an act alleged to have been committed
by such person in the performance of his duties as such Director, officer or
employee, or by the corporation, or by both, provided the Board of Directors
determines that such Director, officer or employee was acting in good faith
within what he reasonably believed to be the scope of his employment or
authority and for a purpose which he reasonably believed to be in the best
interests of the corporation or its shareholders. Payments authorized hereunder
include amounts paid and expenses incurred in settling any such action or
threatened action. This Paragraph does not apply to any action instituted or
maintained as the right of the corporation by a shareholder or holder of a
voting trust certificate representing shares of the corporation.
C. The provisions of this Section shall apply to the estate, executor,
administrator, heirs, legatees or devises of any such present or former
Director, officer or employee of the corporation.
D. The Board of Directors may, at its discretion, authorize the purchase
of a policy or policies of insurance against any liability of the corporation to
indemnify any person pursuant to this Section, containing such terms and
conditions as the Board may deem appropriate. Such policy or policies may
include provisions for the direct indemnification of directors, officers or
other persons for expenses of a kind not subject to indemnification hereunder,
provided the premiums on such combined policy are, in the judgment of the Board,
fairly allocated between the corporation and the insured persons.
E. The foregoing provisions of this Section 14 shall not be considered as
limiting the right of indemnification permitted by the Texas Business
Corporation Act, Article 2.021, but indemnification shall be to the maximum
extent permitted under Texas Business Corporation Act, Article 2.02-1.
Amended and Restated Bylaws (Revised May 1, 1996)
- ---------------------------
page 6
<PAGE>
ARTICLE IV
OFFICERS
Section 1. Officers. The corporation shall have a President, one or more
--------
Vice Presidents, a Secretary and a Treasurer. Such officers shall be elected
annually by the Board of Directors and each shall hold office until he shall
resign or shall be removed or otherwise disqualified to serve and until his
successor shall be elected.
Section 2. Other Officers. The corporation may also have, in the
--------------
discretion of the Board of Directors, a Chairman of the Board, one or more
Assistant Secretaries, one or more Assistant Treasurers, and such other officers
and agents shall hold office for such terms and have such authority and perform
such duties as the Board of Directors may from time to time specify, and shall
hold office until they shall resign or shall be removed or otherwise
disqualified to serve.
Section 3. Removal and Resignation. Any officer or agent may be removed,
-----------------------
either with or without cause, by majority of the Directors at the time in office
at any regular or special meeting of the Board, or except in case of an office
chosen by the Board of Directors, by an officer upon whom such power of removal
may be conferred by the Board of Directors.
Any officer or agent may resign at any time by giving written notice to the
Board of Directors, the President or the Secretary of the corporation. Any such
resignation shall take effect as of the date of the receipt of such notice or at
any later time specified therein, and unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
Section 4. Vacancies. A vacancy in any office because of death,
---------
resignation, removal, disqualification, or any other cause shall be filled in
the manner prescribed in these Bylaws for regular appointments to such office.
Section 5. Chairman of the Board. The Chairman of the Board, if there
---------------------
shall be such an officer, shall, if present, preside at all meetings of the
Board of Directors and exercise and perform such other powers and duties as may
from time to time be assigned to him by the Board of Directors.
Section 6. President. Subject to such supervisory powers, if any, as may
---------
be given by the Board of Directors to the Chairman of the Board, if there be
such an officer, the President shall be the chief executive officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and affairs of the
corporation. He shall preside at all meetings of the shareholders and, in the
absence of the Chairman of the Board, at all meetings of the Board of Directors.
He shall be an ex officio member of all the standing committees, including the
-- -------
Executive Committee, if any, and shall have the general powers and duties of
management usually vested in the office of the President of a corporation and
shall have such other powers and duties as may be prescribed by the Board of
Directors.
Amended and Restated Bylaws (Revised May 1, 1996)
- ---------------------------
Page 7
<PAGE>
Section 7. Vice President. In the absence or disability of the President,
--------------
the Vice Presidents, in order of their rank as fixed by the Board of Directors,
or, if not ranked, the Vice President designated by the Board of Directors,
shall perform all the duties of the President, and when so acting, shall have
all the powers of and be subject to all the restrictions upon the President. The
Vice Presidents shall have such other powers and perform such other duties as
from time to time may be prescribed for them respectively by the Board of
Directors.
Section 8. Secretary. The Secretary shall keep, cause to be kept, a book
---------
of minutes at the principal office of the corporation, or at such other place as
the Board of Directors may order, of all meetings of Directors and shareholders,
with the time and place of holding, whether regular or special, and if special,
how authorized, the notice thereof given, the names of those present at
Directors' meetings, the number of shares present or represented at
shareholders' meetings and the proceedings thereof.
The Secretary shall keep, or cause to be kept, at the principal office of
the corporation, or at the office of the corporation's transfer agent, a share
register, or a duplicate share register, showing the names of the shareholders
and their addresses, the number and classes of shares held by each, and the
number and date of cancellation of every certificate surrendered for
cancellation.
The Secretary shall give, or cause to be given, notice of all meetings of
the shareholders and of the Board of Directors required by these Bylaws or by
law to be given, and he shall keep the seal of the corporation in safe custody
and shall have such other powers and perform such other duties as may be
prescribed by the Board of Directors.
Section 9. Treasurer. The Treasurer shall keep and maintain, or cause to
---------
be kept and maintained, adequate and correct accounts of the properties and
business transactions of the corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital surplus and shares.
Any surplus, including earned surplus, paid-in surplus and surplus arising from
a reduction of stated capital, shall be classified according to source and shown
in a separate account. The books of account shall at all reasonable times be
open to inspection by any Director.
The Treasurer shall deposit all moneys and other valuables in the name and
to the credit of the corporation with such depositories as may be designated by
the Board of Directors. He shall disburse the funds of the corporation as may
be ordered by the Board of Directors, shall render to the President and Board,
whenever they request it, an account of all of his transactions as Treasurer and
of the financial condition of the corporation, and shall have such other powers
and perform such other duties as may be prescribed by the Board of Directors.
ARTICLE V
MISCELLANEOUS
Section 1. Record Date and Closing Stock Books. The Board of Directors
-----------------------------------
may fix a time as a record date for the determination of the shareholders
entitled to notice of and to vote
Amended and Restated Bylaws (Revised May 1, 1996)
- ---------------------------
Page 8
<PAGE>
at any meeting of shareholders or entitled to receive any dividend or
distribution or any allotment of rights, or to exercise rights in respect to any
change, conversion or exchange of shares. The record date so fixed shall not be
more than fifty (50) days prior to the date of the meeting or event for the
purposes of which it is fixed. When a record date is so fixed, only
shareholders who are of record on that date are entitled to notice of and to
vote at the meeting or to receive the dividend, distribution or allotment of
rights, or to exercise the rights, as the case may be, notwithstanding any
transfer of any shares on the books of the corporation after the record date.
The Board of Directors may close the books of the corporation against
transfers of shares during the whole or any part of a period not more than fifty
(50) days prior to the date of a shareholders' meeting, the date when the right
to any dividend, distribution or allotment of rights vests, or effective date of
any change, conversion or exchange of shares.
Section 2. Inspection of Corporate Records. The share register or
-------------------------------
duplicate share register, the books of account and minutes of proceedings of the
shareholders, the Board of Directors and the Executive Committee shall be open
to inspection upon the written demand of any shareholder, or the holder of a
voting trust certificate, at any reasonable time and for a purpose reasonably
related to his interests as a shareholder, or as the holder of such voting trust
certificate, and shall be exhibited at any time when required by demand at any
shareholders' meeting of ten percent (10%) of the shares represented at the
meeting. Such inspection may be made in person or by an agent or attorney and
shall include the right to make extracts. Demand of inspection, other than at a
shareholders' meeting, shall be made in writing upon the President, Secretary of
the corporation.
Every Director shall have the right at any reasonable time to inspect the
books, records, documents of every kind, and the physical properties of the
corporation and of its subsidiary corporations, domestic or foreign.
Section 3. Certificates for Shares. A certificate or certificates for
-----------------------
shares of the corporation (in such form as may be approved from time to time by
the Board of Directors) shall be issued to each stockholder when such shares are
fully paid. The certificates shall be numbered and the holder's name, number of
shares and the date of issue shall be entered in in the books of the corporation
as they are issued. The certificates shall exhibit the holder's name, the
number and class of shares evidenced thereby or a statement that the shares are
without par value, and such additional information as may be required by the
Board of Directors. They shall be signed by the President or a Vice President
and the Secretary or an Assistant Secretary, or be authenticated by facsimiles
of the signatures of the President and the Secretary. Every certificate
authenticated by a facsimile of a signature must be countersigned by a transfer
clerk.
Section 4. Transfer of Stock. The corporation shall recognize the right of
-----------------
the person registered on its books as owner of shares to receive dividends and
to vote as such owner. Shares may be transferred on the books of the corporation
on my by the person named in the certificate as the owner thereof, or by his
agent, attorney or legal representative, upon surrender of the Secretary of the
corporation of a certificate, duly endorsed or accompanied by proper
Amended and Restated Bylaws (Revised May 1, 1996)
- ---------------------------
Page 9
<PAGE>
evidence of succession, assignment or authority to transfer. The Secretary shall
thereupon cause a new certificate to be issued to the person entitled thereto
and shall cancel the old certificate and record the transaction upon the books
of the corporation.
Section 5. Lost Certificates. New certificates for shares or other
-----------------
securities of the corporation may be issued for and in place of any such
instrument theretofore issued which is alleged to have been lost or destroyed.
The Directors may, in their discretion, require the owner of such lost or
destroyed instrument, or his legal representative, to give the corporation a
bond or other security in an adequate amount as indemnity against any claim that
may be made against the corporation. A new instrument may be issued, however,
without requiring any bond or other security when in the judgement of the
Directors it is proper to do so.
Section 6. Corporate Seal. A corporate seal shall be provided and adopted
--------------
by the Board of Directors and shall contain the name of the corporation and such
other wording as the Board may deem suitable or as may be required by law.
Section 7. Contracts - Execution of Documents. The Board of Directors may
----------------------------------
authorize any officer or officers, agent or agents to enter into any contract or
execute any instrument in the name of and on behalf of the corporation, and such
authority may be general or confined to specific instances, and unless so
authorized by the Board of Directors, no officer, agent or employee shall have
any power or authority to bind the corporation by any contract or engagement or
to pledge its credit or to render it liable for any purpose or in any amount;
except, however, the club membership secretary may execute membership
application agreements on behalf of the corporation.
All checks, drafts or other orders for payment of money, notes or other
evidences of indebtedness issued in the name of or payable to the corporation
shall be signed or endorsed by such persons and in such manner as from time to
time shall be determined by resolution of the Board of Directors.
Section 8. Representations of Shares of Other Corporations. The President
-----------------------------------------------
or any Vice President and the Secretary or Assistant Secretary of this
corporation are authorized to vote, represent and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority herein
granted to said officers to vote or represent on behalf of this corporation any
and all shares held by this corporation in any other corporation or corporations
may be exercised either by such officers in person or by any person authorized
so to do by proxy or power of attorney duly executed by said officers.
Section 9. Inspection of Bylaws. The corporation shall keep in its
--------------------
principal office for the transaction of business the original or a copy of these
Bylaws, as amended or otherwise altered to date, certified by the Secretary,
which shall be open to inspection by the shareholders at all reasonable times
during office hours.
Amended and Restated Bylaws (Revised May 1, 1996)
- ---------------------------
Page 10
<PAGE>
ARTICLE VI
AMENDMENTS
Section 1. Power of Shareholders. New Bylaws may be adopted or these
---------------------
Bylaws may be amended or repealed by the vote of shareholders entitled to
exercise a majority of the voting power of the corporation or by the written
consent of such shareholders, except as otherwise provided by the Articles of
Incorporation, provided that the vote of written consent of shareholders holding
more than seventy-five percent (75%) of the voting power of the corporation
shall be required to reduce the authorized number of Directors.
Section 2. Power of Directors. Subject to the right of shareholders to
------------------
adopt, amend or repeal these Bylaws, these Bylaws, other than a Bylaw or
amendment thereof changing the authorized number of Directors, may be adopted,
amended or repealed by the Board of Directors at any regular or special meeting
thereof.
Amended and Restated Bylaws (Revised May 1, 1996)
- ---------------------------
Page 11
<PAGE>
EXHIBIT 3.33
ARTICLES OF INCORPORATION
OF
C-RHK, INC.
I.
The name of this corporation is C-RHK, INC.
II.
The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
California other than the banking business, the trust company business or the
practice of a profession permitted to be incorporated by the California
Corporations Code.
III.
The name and address in the State of California of this corporation's
initial agent for service of process is:
Scott Chaffin
3702 Via De La Valle, Suite 202
Del Mar, California 92014
IV.
This corporation is authorized to issue only one class of shares of stock;
and the total number of shares which this corporation is authorized to issue is
One Thousand (1,000).
V.
A. The liability of the directors of this Corporation for monetary damages
shall be eliminated to the fullest extent permissible under California law.
B. This Corporation is authorized to provide indemnification of agents (as
defined in Section 317 of the California Corporations Code) through bylaw
provisions, agreements with agents, vote of shareholders or disinterested
directors or otherwise, in excess of the indemnification otherwise permitted by
Section 317 of the California Corporations Code, subject only to applicable
limits set forth in Section 204 of the California Corporations code with respect
to actions for breach of duty to the Corporation and its shareholders.
C. Any appeal or modification of this Article V shall be prospective and
shall not affect the rights under Article V in effect at the time of the alleged
occurrence of any act or omission to act giving rise to liability or
indemnification.
DATED: September 25, 1995
/s/ Daniel Howard
---------------------------
Daniel Howard, Incorporator
<PAGE>
EXHIBIT 3.34
ARTICLES OF INCORPORATION
-------------------------
OF
--
CEL GOLF GROUP, INC.
--------------------
ARTICLE ONE
-----------
The name of the corporation is CEL Golf Group, Inc.
ARTICLE TWO
-----------
The corporation is organized for the purpose of transacting any and all
lawful business for which corporations may be incorporated under the Georgia
Business Corporation Code.
ARTICLE THREE
-------------
The number of shares the corporation is authorized to issue is one thousand
(1,000) shares of the par value of One Dollar ($1.00). The shares shall be
designated as common stock and shall have identical rights, privileges and
powers in every respect. Cumulative voting shall not be allowed and no
shareholder shall have any preemptive rights.
ARTICLE FOUR
------------
The address of its initial registered office is 1201 Peachtree Street, NE,
Atlanta, Fulton County, Georgia 30361, and the initial registered agent of the
corporation at such address is C T Corporation System.
ARTICLE FIVE
------------
The name and address of each incorporator is:
Randolph D. Addison 15770 Dallas Parkway
5th Floor
Dallas, Texas 75248
Linda Blanton-Myers 15770 Dallas Parkway
5th Floor
Dallas, Texas 75248.
page 1
<PAGE>
ARTICLE SIX
-----------
The mailing address of the initial principal office of the corporation is
3702 Via de la Valle, Suite No. 202, Del Mar, California 92014.
IN WITNESS WHEREOF, the undersigned have executed these Articles of
Incorporation.
This the ____ day of August, 1995.
/s/ Randolph D. Addison
_____________________________
Randolph D. Addison,
Incorporator
/s/ Linda Blanton-Myers
_____________________________
Linda Blanton-Myers,
Incorporator
page 2
<PAGE>
EXHIBIT 3.35
BYLAWS FOR THE REGULATION, EXCEPT AS
OTHERWISE PROVIDED BY STATUTE OR ITS
ARTICLES OF INCORPORATION, OF
CEL GOLF GROUP, INC.
ARTICLE I
OFFICES
Section 1. Principal Office. The corporation will maintain offices for
----------------
the transaction of business of the corporation at 3702 Via de al Valle, Suite
202, Del Mar, California 92014.
Section 2. Other Offices. Branch or affiliate offices may at any time be
-------------
established by the Board of Directors at any place or places where the
corporation is qualified to do business.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. Place of Meetings. All meetings of shareholders shall be held
-----------------
at the principal office of the corporation or at any other place which may be
(i) designated by the Board of Directors, or (ii) consented to by the written
consent of all shareholders entitled to vote thereat, given either before or
after the meeting and filed with the Secretary of the corporation, or (iii) in
the city of residence of any shareholder holding over two-thirds of the capital
stock of the corporation.
Section 2. Annual Meetings. The annual meeting of shareholders shall be
---------------
on the 3rd Wednesday of August in each year at 10:00 a.m.; provided, however,
that should said day fall upon a legal holiday, then any such annual meeting of
shareholders shall be held at the same time and place on the next day thereafter
ensuing which is not a legal holiday. At such meetings, Directors shall be
elected, reports of the affairs of the corporation shall be considered, and any
other business may be transacted which is within the power of the shareholders.
Section 3. Special Meetings. Special meetings of the shareholders for any
----------------
purpose whatsoever may be called at any time either by the President or by the
Board of Directors, to be held at such time as he or they may designate. In
addition, one or more shareholders holding not less than one-fifth of the voting
power of the corporation may call such a meeting by causing a written request to
be sent by registered mail or delivered personally to the President, Vice
President or Secretary. The officer forthwith shall cause notice to be given,
as provided below, that a meeting will be held at a time, fixed by the officer,
not less than ten (10) nor more than sixty (60) days after the receipt of the
request.
Bylaws page 1
- ------
<PAGE>
Section 4. Notice of Meeting. Not less than ten (10) days prior to any
-----------------
meeting of shareholders, the Secretary or his delegate shall cause written
notice of such meeting to be given to all shareholders entitled to vote thereat.
If a shareholder gives no address, notice shall be deemed to have been duly
given if sent by mail or other means of written communication addressed to the
place where the principal office of the corporation is situated, or if published
at least once in a newspaper of general circulation in the county in which said
office is located.
The notice shall specify the place, the day and the hour of such meeting,
and, in the case of a special meeting, the general nature of the business to be
transacted. No action may be taken at any meeting of shareholders on any of the
following proposals unless the notice thereof specifies the general nature of
the proposal: (a) a proposal to sell, lease, convey, exchange, transfer or
otherwise dispose of all, or substantially all, of the property or assets of the
corporation, (b) a proposal to merge or consolidate with another corporation,
domestic or foreign, (c) a proposal to reduce the stated capital of the
corporation, (d) a proposal to amend the Articles of Incorporation, (e) a
proposal to wind up and dissolve the corporation, or (f) a proposal to adopt a
plan of distribution of shares, securities, or any other consideration (other
than money) in the process of winding up.
Section 5. Consent of Absentees. The transactions conducted at any
--------------------
meeting of shareholders, either annual or special, however called and noticed,
shall be as valid as though had at a meeting duly held after regular call and
notice, if a quorum be present either in person or by proxy, and if, either
before or after the meeting, each of the shareholders entitled to vote, not
present in person or by proxy, signs a written waiver of notice, a consent to
the holding of such meeting, or an approval of the minutes thereof. All such
waivers, consents or approvals shall be filed with the corporate records or made
a part of the minutes of the meeting.
Section 6. Quorum. The presence in person or by proxy of persons entitled
------
to vote a majority of the voting shares at any meeting shall constitute a quorum
for the transaction of business. The shareholders present at a duly called or
held meeting at which a quorum is present may continue to do business until
adjournment, notwithstanding the withdrawal of enough shareholders to leave less
than a quorum.
Section 7. Voting. Unless a record date for voting purposes be fixed, as
------
hereinafter provided, only persons in whose names shares entitled to vote stand
on the stock records of the corporation as of the date of such meeting shall be
entitled to vote thereat. Except as otherwise provided by law or the Articles
of Incorporation, every shareholder shall be entitled to one vote for each share
standing in his name on the record of shareholders of the corporation. Voting
rights shall be noncumulative. Except as otherwise provided herein or in the
Articles of Incorporation, all corporate actions shall be determined by vote of
a majority of the votes cast at a meeting of shareholders entitled to vote
thereat. Such vote may be viva voce or by ballot; provided, however, that all
---- ----
elections for Directors must be by ballot upon demand made by a shareholder at
any election and before the voting begins. The candidates receiving the highest
number of votes up to the number of Directors to be elected shall be elected.
Bylaws page 2
- ------
<PAGE>
Section 8. Proxies. Every person entitled to vote or execute consents
-------
shall have the right to do so either in person or by one or more agents
authorized by a written proxy executed by such person or his duly authorized
agent and filed with the Secretary of the corporation.
Section 9. Adjourned Meetings and Notice Thereof. Any shareholders'
-------------------------------------
meeting, annual or special, whether or not a quorum is present, may be adjourned
from time to time by the vote of a majority of the shares, the holders of which
are either present in person or represented by proxy thereat, but in the absence
of a quorum, no other business may be transacted at such meeting.
When any shareholders' meeting, either annual or special, is adjourned for
thirty (30) days or more, notice of the adjourned meeting shall be given as in
the case of an original meeting. Except as provided above, it shall not be
necessary to give any notice of any adjournment or of the business to be
transacted at any adjourned meeting other than by announcement at the meeting at
which such adjournment is taken.
Section 10. Action Without Meeting. Any action which may be taken at a
----------------------
meeting of the shareholders may be taken without a meeting if authorized by a
writing signed by all of the persons who would be entitled to vote upon such
action at a meeting and filed with the Secretary of the corporation; provided,
however, a meeting shall be held for dissolution, transfer of all or
substantially all of the assets of the corporation, or for merger or
consolidation of the corporation with other corporations, if same is required
under applicable law.
ARTICLE III
DIRECTORS
Section 1. Powers. Subject to limitations imposed by law or by the
------
Articles of Incorporation, all corporate powers shall be exercised by or under
the authority of, and the business and affairs of the corporation shall be
controlled by, the Board of Directors. In the exercise of its powers, the Board
may appoint an Executive Committee and other committees and may delegate to
the Executive Committee any of the powers and authority of the Board in the
management of the business and affairs of the corporation, except the power to
declare dividends and to adopt, amend or repeal bylaws. The Executive Committee
shall be composed of two or more Directors.
Section 2. Number of Directors. The authorized number of Directors of the
-------------------
corporation shall be not less than one nor more than five until changed by
amendment of the Articles of Incorporation or by a bylaw duly adopted by the
shareholders amending this section. Directors need not be shareholders of the
corporation.
Section 3. Election and Term of Office. The Directors shall be elected at
---------------------------
the annual meeting of shareholders, but if any such annual meeting is not held
or the Directors are not elected thereat, Directors may be elected at any
special meeting of shareholders held for that purpose. Directors shall hold
office until the election and qualification of their respective successors.
Bylaws page 3
- ------
<PAGE>
Section 4. Vacancies. Vacancies in the Board of Directors may be filled
---------
by a majority of the remaining Directors, though less than a quorum, or by a
sole remaining Director, and each Director so elected shall hold office until
his successor is elected at an annual or a special meeting of the shareholders.
If the entire Board of Directors resigns at one time, the shareholders shall,
within a reasonable time thereafter, at a regular or special meeting, as
provided herein, elect a new Board of Directors.
A vacancy in the Board of Directors shall be deemed to exist in the case of
the death, resignation or removal of any Director, or if at any annual or
special meeting of shareholders at which any Director is elected the authorized
number of Directors is increased or if the shareholders fail to elect the full
authorized number of Directors to be voted for at that meeting.
The shareholders may elect a Director or Directors at any time to fill any
vacancy or vacancies not filled by the remaining Director or Directors. If the
Board of Directors accepts the resignation of a Director tendered to take effect
at a future time, the Board or the shareholders shall have the power to elect a
successor to take office when the resignation is to become effective.
No reduction of the authorized number of Directors shall have the effect of
removing any Director prior to the expiration of his term of office.
Section 5. Quorum. A majority of the authorized number of Directors shall
------
be necessary to constitute a quorum of the Board for the transaction of
business. Every act or decision done or made by a majority of the Directors
present at a meeting duly held at which a quorum is present shall be regarded as
the act of the Board of Directors, unless a greater number be required by law.
Section 6. Place of Directors' Meetings. Meetings of the Board of
----------------------------
Directors shall be held at the principal office of the corporation, or at any
other location which has been designated by resolution of the Board, or by
written consent of all of the Directors.
Section 7. Regular Meetings. Immediately following each annual meeting of
----------------
shareholders, the Board of Directors shall hold a regular meeting for the
purpose of electing officers and transacting any other business which may come
before them. No notice of such meeting need be given.
Section 8. Special Meetings. Special meetings of the Board of Directors
----------------
for any purpose or purposes shall be called by the President, or, if he is
absent or unable or refuses to act, by any Vice President or by any two
Directors.
Written notice of the time and place of special meetings shall be delivered
personally to each Director or sent to each Director by mail or other form of
written communication, charges prepaid, addressed to him at his address as is
shown upon the records of the corporation, or, if it is not so shown and if it
is not readily ascertainable, addressed to him at the city or place where the
meetings of the Directors are regularly held. Notices mailed or telegraphed
shall be deposited in the United States mail or delivered to the telegraph
company
Bylaws page 4
- ------
<PAGE>
at the place where the principal office of the corporation is located at
least forty-eight (48) hours prior to the time of the holding of the meeting,
and notices delivered personally shall be so delivered at least twenty-four (24)
hours prior to the time of the holding of the meeting.
Section 9. Notice of Adjournment. Notice of the time and place of holding
---------------------
an adjourned meeting need not be given to absent Directors if the time and place
are fixed at the meeting adjourned.
Section 10. Waiver of Notice: Consent to Meeting. The transactions
-------------------------------------
conducted at any meeting of the Board of Directors, however called or noticed or
wherever held, shall be as valid as though conducted at a meeting duly held
after regular call and notice if a quorum is present and if, either before or
after the meeting, each of the Directors signs a waiver of notice, a consent to
hold such a meeting, or an approval of the minutes thereof. All such waivers,
consents or approvals shall be filed with the corporate records and made a part
of the minutes of the meeting.
Section 11. Adjournment. A quorum of the Directors may adjourn to meet
-----------
again at a set day and hour, and in the absence of a quorum, a majority of the
Directors present may adjourn from time to time until the time fixed for the
next regular meeting of the Board.
Section 12. Action Without Meeting. Any action required or permitted to
----------------------
be taken by the Board of Directors may be taken without a meeting if all members
of the Board shall individually or collectively consent in writing to such
action. Such written consent or consents shall be filed with the minutes of the
proceedings of the Board. Such action by written consent shall have the same
force and effect as a unanimous vote of such Directors.
Section 13. Fees and Compensation. Directors shall not receive any stated
---------------------
salary for their services as Directors, but by resolution of the Board, a fee or
other remuneration, with or without expenses of attendance, may be allowed for
attendance at each meeting. Nothing herein contained shall be construed to
preclude any Director from serving the corporation in any other capacity as an
officer, agent or employee, or otherwise, and receiving compensation therefor.
Section 14. Indemnification of Directors, Officers
--------------------------------------
and Employees.
-------------
A. In the event a person is sued, either alone or with others, because he
is or was a Director, officer or employee of the corporation, in any proceeding
arising out of his alleged misfeasance or nonfeasance in the performance of his
duties as such Director, officer or employee, or out of any alleged wrongful act
by the corporation, he shall be indemnified for his reasonable expenses,
including attorneys' fees incurred in the defense of the proceeding, if both of
the following conditions exist: (i) the person sued is successful in whole or in
part, or the proceeding against him is settled with the approval of the court,
and (ii) the court finds that his conduct fairly and equitable merits such
indemnity.
The amount of such indemnity may be assessed against the corporation, its
receiver, its trustee, or any other proper party, by the court in the same or in
a separate proceeding and
Bylaws page 5
- ------
<PAGE>
shall be so much of the expenses, including attorneys' fees incurred in the
defense of the action as the court determines and finds to be reasonable.
Application for such indemnity may be made either by a person sued or by the
attorney or other person rendering services to him in connection with the
defense, and the court may order fees and expenses to be paid directly to the
attorney or other person although he is not a party to the proceeding. Notice of
the application for such indemnity shall be served upon the corporation, its
receiver, or its trustee and upon the plaintiff and other parties to the
proceeding. The court may also order notice to be given to the shareholders in
the manner provided elsewhere in these bylaws for giving notice of shareholders'
meetings, in such form as the court directs.
B. Notwithstanding the foregoing provisions, the Board of Directors may
authorize the corporation to pay expenses incurred by or to satisfy a judgment
or fine rendered or levied against a present or former Director, officer or
employee of the corporation in an action brought by a third party against such
person (whether or not the corporation is joined as a party defendant) to impose
a liability or penalty on such person for an act alleged to have been committed
by such person in the performance of his duties as such Director, officer or
employee, or by the corporation, or by both, provided the Board of Directors
determines that such Director, officer or employee was acting in good faith
within what he reasonably believed to be the scope of his employment or
authority and for a purpose which he reasonably believed to be in the best
interests of the corporation or its shareholders. Payments authorized hereunder
include amounts paid and expenses incurred in settling any such action or
threatened action. This Paragraph does not apply to any action instituted or
maintained as the right of the corporation by a shareholder or holder of a
voting trust certificate representing shares of the corporation.
C. The provisions of this Section shall apply to the estate, executor,
administrator, heirs, legatees or devisees of any such present or former
Director, officer or employee of the corporation.
D. The Board of Directors may, at its discretion, authorize the purchase
of a policy or policies of insurance against any liability of the corporation to
indemnify any person pursuant to this Section, containing such terms and
conditions as the Board may deem appropriate. Such policy or policies may
include provisions for the direct indemnification of directors, officers or
other persons for expenses of a kind not subject to indemnification hereunder,
provided the premiums on such combined policy are, in the judgment of the Board,
fairly allocated between the corporation and the insured persons.
ARTICLE IV
OFFICERS
Section 1. Officers. The corporation shall have a President, one or more
--------
Vice Presidents, a Secretary and a Treasurer. Such officers shall be elected
annually by the Board of Directors and each shall hold office until he shall
resign or shall be removed or otherwise disqualified to serve and until his
successor shall be elected.
Section 2. Other Officers. The corporation may also have, in the
--------------
discretion of the Board of Directors, a Chairman of the Board, one or more
Assistant Secretaries, one or more Assistant
Bylaws page 6
- ------
<PAGE>
Treasurers, and such other officers and agents shall hold office for such terms
and have such authority and perform such duties as the Board of Directors may
from time to time specify, and shall hold office until they shall resign or
shall be removed or otherwise disqualified to serve.
Section 3. Removal and Resignation. Any officer or agent may be removed,
-----------------------
either with or without cause, by a majority of the Directors at the time in
office at any regular or special meeting of the Board, or, except in case of an
office chosen by the Board of Directors, by any officer upon whom such power of
removal may be conferred by the Board of Directors.
Any officer or agent may resign at any time by giving written notice to the
Board of Directors, the President or the Secretary of the corporation. Any such
resignation shall take effect as of the date of the receipt of such notice or at
any later time specified therein, and unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
Section 4. Vacancies. A vacancy in any office because of death,
---------
resignation, removal, disqualification, or any other cause shall be filled in
the manner prescribed in these Bylaws for regular appointments to such office.
Section 5. Chairman of the Board. The Chairman of the Board, if there
---------------------
shall be such an officer, shall, if present, preside at all meetings of the
Board of Directors and exercise and perform such other powers and duties as may
from time to time be assigned to him by the Board of Directors.
Section 6. President. Subject to such supervisory powers, if any, as may
---------
be given by the Board of Directors to the Chairman of the Board, if there be
such an officer, the President shall be the chief executive officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and affairs of the
corporation. He shall preside at all meetings of the shareholders and, in the
absence of the Chairman of the Board, at all meetings of the Board of Directors.
He shall be an ex officio member of all the standing committees, including the
-- -------
Executive Committee, if any, and shall have the general powers and duties of
management usually vested in the office of the President of a corporation and
shall have such other powers and duties as may be prescribed by the Board of
Directors.
Section 7. Vice President. In the absence or disability of the President,
--------------
the Vice Presidents, in order of their rank as fixed by the Board of Directors,
or, if not ranked, the Vice President designated by the Board of Directors,
shall perform all the duties of the President, and when so acting, shall have
all the powers of and be subject to all the restrictions upon the President.
The Vice Presidents shall have such other powers and perform such other duties
as from time to time may be prescribed for them respectively by the Board of
Directors.
Section 8. Secretary. The Secretary shall keep, or cause to be kept, a
---------
book of minutes at the principal office of the corporation, or at such other
place as the Board of Directors may order, of all meetings of Directors and
shareholders, with the time and place of holding, whether regular or special,
and if special, how authorized, the notice thereof given, the names
Bylaws page 7
- ------
<PAGE>
of those present at Directors' meetings, the number of shares present or
represented at shareholders' meetings and the proceedings thereof.
The Secretary shall keep, or cause to be kept, at the principal office of
the corporation, or at the office of the corporation's transfer agent, a share
register, or a duplicate share register, showing the names of the shareholders
and their addresses, the number and classes of shares held by each, and the
number and date of cancellation of every certificate surrendered for
cancellation.
The Secretary shall give, or cause to be given, notice of all meetings of
the shareholders and of the Board of Directors required by these Bylaws or by
law to be given, and he shall keep the seal of the corporation in safe custody
and shall have such other powers and perform such other duties as may be
prescribed by the Board of Directors.
Section 9. Treasurer. The Treasurer shall keep and maintain, or cause to
---------
be kept and maintained, adequate and correct accounts of the properties and
business transactions of the corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital surplus and shares.
Any surplus, including earned surplus, paid-in surplus and surplus arising from
a reduction of stated capital, shall be classified according to source and shown
in a separate account. The books of account shall at all reasonable times be
open to inspection by any Director.
The Treasurer shall deposit all moneys and other valuables in the name and
to the credit of the corporation with such depositories as may be designated by
the Board of Directors. He shall disburse the funds of the corporation as may
be ordered by the Board of Directors, shall render to the President and Board,
whenever they request it, an account of all of his transactions as Treasurer and
of the financial condition of the corporation, and shall have such other powers
and perform such other duties as may be prescribed by the Board of Directors.
ARTICLE V
MISCELLANEOUS
Section 1. Record Date and Closing Stock Books. The Board of Directors
-----------------------------------
may fix a time as a record date for the determination of the shareholders
entitled to notice of and to vote at any meeting of shareholders or entitled to
receive any dividend or distribution or any allotment of rights, or to exercise
rights in respect to any change, conversion or exchange of shares. The record
date so fixed shall not be more than fifty (50) days prior to the date of the
meeting or event for the purposes of which it is fixed. When a record date is
so fixed, only shareholders who are of record on that date are entitled to
notice of and to vote at the meeting or to receive the dividend, distribution or
allotment of rights, or to exercise the rights, as the case may be,
notwithstanding any transfer of any shares on the books of the corporation after
the record date.
The Board of Directors may close the books of the corporation against
transfers of shares during the whole or any part of a period not more than fifty
(50) days prior to the date
Bylaws page 8
- ------
<PAGE>
of a shareholders' meeting, the date when the right to any dividend,
distribution or allotment of rights vests, or the effective date of any change,
conversion or exchange of shares.
Section 2. Inspection of Corporate Records. The share register or
-------------------------------
duplicate share register, the books of account and minutes of proceedings of the
shareholders, the Board of Directors and the Executive Committee shall be open
to inspection upon the written demand of any shareholder, or the holder of a
voting trust certificate, at any reasonable time and for a purpose reasonably
related to his interests as a shareholder, or as the holder of such voting trust
certificate, and shall be exhibited at any time when required by demand at any
shareholders' meeting of ten percent (10%) of the shares represented at the
meeting. Such inspection may be made in person or by an agent or attorney and
shall include the right to make extracts. Demand of inspection, other than at a
shareholders' meeting, shall be made in writing upon the President, Secretary or
Assistant Secretary of the corporation.
Every Director shall have the right at any reasonable time to inspect the
books, records, documents of every kind, and the physical properties of the
corporation and of its subsidiary corporations, domestic or foreign.
Section 3. Certificates for Shares. A certificate or certificates for
-----------------------
shares of the corporation (in such form as may be approved from time to time by
the Board of Directors) shall be issued to each stockholder when such shares are
fully paid. The certificates shall be numbered and the holder's name, number of
shares and the date of issue shall be entered in the books of the corporation as
they are issued. The certificates shall exhibit the holder's name, the number
and class of shares evidenced thereby or a statement that the shares are without
par value, and such additional information as may be required by the Board of
Directors. They shall be signed by the President or a Vice President and the
Secretary or an Assistant Secretary, or be authenticated by facsimiles of the
signatures of the President and the Secretary. Every certificate authenticated
by a facsimile of a signature must be countersigned by a transfer clerk.
Section 4. Transfer of Stock. The corporation shall recognize the right
-----------------
of the person registered on its books as owner of shares to receive dividends
and to vote as such owner. Shares may be transferred on the books of the
corporation only by the person named in the certificate as the owner thereof, or
by his agent, attorney or legal representative, upon surrender to the Secretary
of the corporation of a certificate, duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer. The Secretary
shall thereupon cause a new certificate to be issued to the person entitled
thereto and shall cancel the old certificate and record the transaction upon the
books of the corporation.
Section 5. Lost Certificates. New certificates for shares or other
-----------------
securities of the corporation may be issued for and in place of any such
instrument theretofore issued which is alleged to have been lost or destroyed.
The Directors may, in their discretion, require the owner of such lost or
destroyed instrument, or his legal representative, to give the corporation a
bond or other security in an adequate amount as indemnity against any claim that
may be made against the corporation. A new instrument may be issued, however,
without requiring any bond or other security when in the judgment of the
Directors it is proper to do so.
Bylaws page 9
- ------
<PAGE>
Section 6. Corporate Seal. A corporate seal shall be provided and
--------------
adopted by the Board of Directors and shall contain the name of the corporation
and such other wording as the Board may deem suitable or as may be required by
law.
Section 7. Contracts - Execution of Documents. The Board of Directors may
----------------------------------
authorize any officer or officers, agent or agents to enter into any contract or
execute any instrument in the name of and on behalf of the corporation, and such
authority may be general or confined to specific instances, and unless so
authorized by the Board of Directors, no officer, agent or employee shall have
any power or authority to bind the corporation by any contract or engagement or
to pledge its credit or to render it liable for any purpose or in any amount;
except, however, the club membership secretary may execute membership
application agreements on behalf of the corporation.
All checks, drafts or other orders for payment of money, notes or other
evidences of indebtedness issued in the name of or payable to the corporation
shall be signed or endorsed by such person or persons and in such manner as from
time to time shall be determined by resolution of the Board of Directors.
Section 8. Representation of Shares of Other Corporations. The President
----------------------------------------------
or any Vice President and the Secretary or Assistant Secretary of this
corporation are authorized to vote, represent and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority herein
granted to said officers to vote or represent on behalf of this corporation any
and all shares held by this corporation in any other corporation or corporations
may be exercised either by such officers in person or by any person authorized
so to do by proxy or power of attorney duly executed by said officers.
Section 9. Inspection of Bylaws. The corporation shall keep in its
--------------------
principal office for the transaction of business the original or a copy of these
Bylaws, as amended or otherwise altered to date, certified by the Secretary,
which shall be open to inspection by the shareholders at all reasonable times
during office hours.
ARTICLE VI
AMENDMENTS
Section 1. Power of Shareholders. New Bylaws may be adopted or these
---------------------
Bylaws may be amended or repealed by the vote of shareholders entitled to
exercise a majority of the voting power of the corporation or by the written
consent of such shareholders, except as otherwise provided by the Articles of
Incorporation, provided that the vote of written consent of shareholders holding
more than seventy-five percent (75%) of the voting power of the corporation
shall be required to reduce the authorized number of Directors.
Section 2. Power of Directors. Subject to the right of shareholders to
------------------
adopt, amend or repeal these Bylaws, these Bylaws, other than a Bylaw or
amendment thereof changing the authorized number of Directors, may be adopted,
amended or repealed by the Board of Directors at any regular or special meeting
thereof.
Bylaws page 10
- ------
<PAGE>
EXHIBIT 3.36
================================================================================
______________________________________________________________________________
AMENDED AND RESTATED
JOINT VENTURE AGREEMENT
-----------------------
(WHISPERING PALMS)
BY AND BETWEEN
GOLF INNS OF AMERICA, INC.,
a California corporation
("Golf Inns")
AND
OCEAN VISTA LAND COMPANY,
a California corporation
("Ocean Vista")
______________________________________________________________________________
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Article Page
- ------- ----
<S> <C> <C>
INTRODUCTION / WITNESSETH 1
-------------------------
1. DEFINITIONS
-----------
Definitions ........................................... 2
2. FORMATION OF THE PARTNERSHIP
----------------------------
Formation ............................................. 2
Name .................................................. 2
Principal Office ...................................... 2
Purpose of the Joint Venture .......................... 2
Partnership Act; Ownership; No Partition .............. 2
No Individual Authority ............................... 3
No Restrictions ....................................... 3
Not Responsible for Other's Commitments ............... 3
Legal Obligations ..................................... 3
3. TERM
----
Term .................................................. 4
4. CONTRIBUTIONS TO THE JOINT VENTURE
----------------------------------
Initial Capital Contributions ......................... 4
Capital Contributions and Obligations ................. 4
5. INTEREST OF THE VENTURERS
-------------------------
Percentage Interest ................................... 5
Profits, Losses and
Distributive Shares of Tax Items .................... 6
Deficit Capital Makeup ................................ 6
6. MANAGEMENT OF THE JOINT VENTURE
-------------------------------
Management Committee .................................. 6
Meetings of the Management Committee .................. 7
Action by the Management Committee .................... 7
Managing Partner ...................................... 8
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Accounting Records .................................... 10
Costs and Expenses; No Compensation ................... 10
Replacement ........................................... 10
7. BUDGETS
-------
Budgets ............................................... 10
8. DISTRIBUTION OF POSITIVE NET CASH FLOW
--------------------------------------
Positive Net Cash Flow ................................ 11
9. GOLF INNS' COVENANTS AND REPRESENTATIONS 12
----------------------------------------
10. OCEAN VISTA'S COVENANTS AND REPRESENTATIONS 13
-------------------------------------------
11. PROHIBITED TRANSACTIONS
-----------------------
Prohibited Transactions ............................... 14
12. BOOKS, RECORDS, AUDITS, TAXES, ETC.
-----------------------------------
Books; Statements ..................................... 15
Where Maintained; Availability ........................ 16
Audits ................................................ 16
Independent Audit ..................................... 16
Other Information ..................................... 16
Banking ............................................... 16
Tax Returns; Review ................................... 16
13. DISSOLUTION AND LIQUIDATION OF THE JOINT VENTURE
------------------------------------------------
Dissolution Events .................................... 17
Method of Liquidation ................................. 17
Date of Termination ................................... 18
14. TRANSFER OF JOINT VENTURE INTEREST 19
----------------------------------
15. BUY-SELL PROVISIONS
-------------------
Mandatory Buy-Sell .................................... 19
16. DEFAULT BY A VENTURER
---------------------
Events of Default ..................................... 20
Effect of Default ..................................... 22
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Failure to Make a Capital Contribution ................ 23
17. PROCEDURE FOR APPRAISEMENT
--------------------------
Selection of Appraisers ............................... 24
Determination of Fair Market Value .................... 24
Fees and Expenses ..................................... 25
18. MISCELLANEOUS
-------------
Affiliated Corporations ............................... 25
Exhibits .............................................. 25
Notices ............................................... 25
Independent Corporation ............................... 26
Affiliates ............................................ 27
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Golf Inns' Inquiry .................................... 27
Assignment ............................................ 28
Public Announcements .................................. 28
Severability .......................................... 28
Approvals ............................................. 28
Integrated Agreement .................................. 28
Construction of Agreement ............................. 28
Amendment and Waiver .................................. 28
Successors and Assigns ................................ 29
Unavoidable Delay ..................................... 29
Documentation ......................................... 29
EXECUTION / ATTESTATION 30
-----------------------
</TABLE>
<PAGE>
EXHIBITS TO AMENDED AND RESTATED
JOINT VENTURE AGREEMENT
-----------------------
BY AND BETWEEN
GOLF INNS OF AMERICA, INC.
AND
OCEAN VISTA LAND COMPANY
A3477.2.142.9A
================================================================================
DEFINITIONS ..................... "A"
EXISTING DEBT ................... "B"
REAL PROPERTY ................... "C"
================================================================================
<PAGE>
DEFINITIONS
-----------
(Whispering Palms Joint Venture)
All capitalized terms referenced or used in the Joint Venture Agreement
(the "Agreement") and not specifically defined therein shall have the meaning
set forth below in this Exhibit "A", which is attached to and made a part of the
Agreement for all purposes. The section, paragraph and exhibit references herein
refer to the Sections, Paragraphs and Exhibits in and to the Agreement.
1.1. Act. The term "Act" shall mean the California Uniform Partnership Act,
---
as from time to time amended.
1.2. Annual Operations Budget. The term "Annual Operations Budget" shall be
------------------------
defined as the annual operations budget of the Joint Venture to be prepared
pursuant to Paragraph 7.1.1.
1.3. Capital Contributions. The term "Capital Contribu-tions" shall and/or
---------------------
capital contribution pursuant to the provisions of Section 4.2 hereof to fund a
Venturer's Percentage Interest or a lesser portion of any (i) Negative Net Cash
Flow, or (ii) Deficit Capital Costs incurred by the Joint Venture.
1.4. Capital Costs. The term "Capital Costs" shall mean the amount
-------------
investment required to be expended by the Joint Venture to fund any capital
improvements or replacements, if any, to the Improvements, as provided for in
the Capital Expenditures Budget.
1.5. Capital Expenditures Budget. The term "Capital Expenditures Budget"
---------------------------
shall be defined as the budget for capital expenditures of the Club as set forth
in Paragraph 7.1.2.
1.6. Capital Reserve. The term "Capital Reserve" shall mean those amounts
---------------
periodically established by the Management Committee, as defined herein, but not
less than five percent (5%) of Gross Receipts on a Fiscal Year basis, and
allocated to an account for capital replacements, repairs and improvements
within and to the Club.
1.7. Closing Date. The term "Closing Date" shall be defined as the date
------------
upon which the Acquired Shares are transferred by Theodore L. Vallas to OVLC
Management Corp. pursuant to that certain Stock Purchase Agreement dated
September 4, 1992, and as amended by that certain Assignment, Release and
Amendment of Stock Purchase and Option Agreement, entered into on April 1, 1993,
by and between Theodore L. Vallas, Ocean Vista Acquisition Corp. and OVLC
Management Corp..
1.8. Club. The term "Club" shall be defined as the club facilities known as
----
"Whispering Palms Lodge and Country Club" located on the Real Property.
1.9. Club Facilities. The term "Club Facilities" shall be defined as the
---------------
27-hole golf course, 100-room lodge, clubhouse facility, including men's and
women's locker rooms, pro shop, grill, main dining room, private meeting rooms,
administrative office, and other
Exhibition "A" page 1
- --------------
<PAGE>
clubhouse facilities, tennis courts, swimming pool facilities, cabana area,
clubhouse grounds, parking lots, and golf course maintenance building, located
on the Real Property.
1.10. Club Management Agreement. The term "Club Management Agreement"
-------------------------
shall mean the Club Management Agreement of dated September 4, 1992, by and
between the Joint Venture and the Club Manager, as amended by that certain
Assignment, Release and Amendment of Management Contracts, dated April 1, 1993,
by and between Ocean Vista Management Corp. and OVLC Management Corp., pursuant
to which the Club Manager is retained to manage the Club.
1.11. Club Manager. The term "Club Manager" shall mean OVLC Management
------------
Corp., a California corporation, an affiliate of Ocean Vista, which is
contemporaneously herewith entering into the Club Management Agreement with the
Joint Venture.
1.12. Defaulting Loan. The term "Defaulting Loan" shall have the meaning
---------------
set forth in Paragraph 16.3.1.
1.13. Deficit Capital Costs. The term "Deficit Capital Costs" shall mean
---------------------
the amount of a projected or actual deficit in the amount of Positive Net Cash
Flow, as determined by the Management Committee, necessary to fund the required
Capital Costs of the Joint Venture.
1.14. Equity Interest. The term "Equity Interest" shall have the meaning
---------------
set forth in Section 4.2.
1.15. Equity Loan. The term "Equity Loan" shall have the meaning set
-----------
forth in Section 4.2.
1.16. Expenses. The term "Expenses" shall mean the following reasonable
--------
expenses and cash outlays incurred and payable on an accrual basis, utilizing
generally accepted accounting principles, by the Joint Venture, pursuant to the
approved Annual Operations Budget, subsequent to the execution date of the
Agreement in connection with the development, management and operation of the
Club, including, but not limited to, the following:
1.16.1. Salaries, wages, commissions, employee benefits (including
reasonable profit sharing programs) and payroll expenses of all employees
employed by the Joint Venture in the direct operation of the Club;
1.16.2. Actual construction and development costs incurred to
construct any additional Improvements to the Club;
1.16.3. All management fees, out-of-pocket expenses, and other sums
paid to the Club Manager pursuant to the terms and conditions of the Club
Management Agreement;
1.16.4. Principal and interest and all other amounts due on (i) the
Existing Debt, (ii) any subsequent refinancing of the Existing Debt, or
(iii) any
Exhibit "A" page 2
- -----------
<PAGE>
additional loans to the Joint Venture with respect to the Club, approved by
the Management Committee;
1.16.5. Accounting and computer fees payable by the Joint Venture for
accounting and computer services;
1.16.6. A credit to a reserve for insurance and property taxes each
Fiscal Month in an amount or at a rate that is sufficient to pay such
insurance premiums and property taxes when they become due and payable;
1.16.7. Insurance premiums and property taxes, to the extent not paid
from the reserve established therefor, which shall be adjusted to reflect
any new assignments and rates due to the sale as if the new rate or
assignment had been effective during the preceding 12-month calendar period
(Purchaser agrees to use reasonable efforts, at no cost to Purchaser, to
attempt to preclude reassignment of the Property);
1.16.8. Office supplies, postage, printing, and routine operating
expenses incurred in the operation of the Club;
1.16.9. A deposit or credit to the Capital Reserve, as permitted
herein;
1.16.10. Maintenance and repairs to the Club and the Improvements, to
the extent not paid from the Capital Reserve established therefor. All
expenditures resulting in the acquisition or construction of equipment or
other property with a useful life of one (1) year or more or which would,
under generally accepted accounting principles, be classified as a capital
expenditure (allowing, however, an exception for materiality of FIVE
HUNDRED DOLLARS ($500.00) or less for any given item), shall be paid from
and charged against the Capital Reserve and shall not be separately
deducted hereunder;
1.16.11. All legal fees incurred in the develop-ment and operation of
the Club;
1.16.12. Marketing, advertising and promotional costs and expenses;
1.16.13. State income taxes;
1.16.14. Principal and interest payments due on any Third Party Equity
Loan or Equity Loan;
1.16.15. Fees, costs, and other charges associated with financing
commitments and the Existing Debt;
1.16.16. Equipment lease and rental payments paid by the Joint Venture
concerning the operation of the Club;
Exhibit "A" page 3
- ----------
<PAGE>
1.16.17. Maintenance of level of Working Capital required for the
operation of the Club, as permitted herein;
1.16.18. Reasonable travel expenses of employees of the Club incurred
directly in connection with the Club's business;
1.16.19. Accounts receivable previously included within Gross
Receipts, to the extent they remain unpaid ninety (90) days after the first
billing;
1.16.20. The costs of utilities, including, but not limited to, gas,
water, electricity and telephone in connection with the operation of the
Club;
1.16.21. Replacement of inventories of mainte-nance parts and
supplies, food stores and bar supplies;
1.16.22. Replacement of broken, lost or damaged equipment, golf
maintenance, flags, furniture, fixtures, silver, chinaware, glassware,
cooking utensils, and other items of equipment used in the operation of the
Club;
1.16.23. The costs of entertainment at any of the restaurant or
private club facilities included in the Club, including vocalists and
bands;
1.16.24. Any financial management and accounting fees paid to OVLC
Management Corp., or other entities for similar services;
1.16.25. Any Negative Net Cash Flow from any previous Fiscal Month, to
the extent such Negative Net Cash Flow has not been previously deducted as
an Expense; and
1.16.26. All other customary and reasonable expenses incurred in the
operation of the Club and the Improvements.
Expenses shall not include (i) depreciation, or (ii) any amounts expended
from a reserve account. Any provision aforesaid resulting in a double deduction
from Expenses shall be allowed only once.
1.17. Existing Debt. The term "Existing Debt" shall be defined as the
-------------
existing debt of the Joint Venture described in Exhibit "B".
1.18. Financial Statements. The term "Financial State-ments" shall mean a
--------------------
balance sheet of the Joint Venture as of the close of a fiscal period and a
statement of income and expense (including Gross Receipts and Expenses and
Positive or Negative Net Cash Flow) for that portion of the Fiscal Year then
ended, prepared in conformity with generally accepted accounting principles,
applied on a basis consistent with that of the preceding period, or containing
disclosures of either the effect on the financial position or the results to
operations from any such change in the application of generally accepted
accounting principles during the period, and certified as accurate by an
executive officer of the Club Manager.
Exhibit "A" page 4
- -----------
<PAGE>
1.19. Fiscal Month. The term "Fiscal Month" shall mean a consecutive 28-day
------------
period, or a portion thereof, during a Fiscal Year commencing on the first day
following the termination of the prior Fiscal Month, provided that the last
Fiscal Month in each Fiscal Year shall end on the last day of such Fiscal Year.
The first Fiscal Month of each Fiscal Year shall commence on the first day of
each Fiscal Year; provided, however, that for purposes hereof, the first Fiscal
Month may be a short period commencing on the execution date of the Agreement
and ending on that date which would have been the ending date for such Fiscal
Month if such Fiscal Month had been part of a Fiscal Year commencing on the
Thursday following the last Wednesday in the December immediately preceding the
execution date of the Agreement.
1.20. Fiscal Quarter. The term "Fiscal Quarter" shall mean a division of a
--------------
Fiscal Year, as hereinafter defined. There shall be four (4) Fiscal Quarters in
each Fiscal Year, the first three of which shall consist of three (3) Fiscal
Months and the last of which shall consist of four (4) Fiscal Months. The first
Fiscal Quarter of each Fiscal Year shall commence on the first day of each
Fiscal Year and the last Fiscal Quarter shall end on the last day of the Fiscal
Year.
1.21. Fiscal Year. The term "Fiscal Year" shall mean a period commencing on
-----------
the Thursday following the last Wednesday in December during each calendar year
and ending on the last Wednesday of the next following December; provided,
however, that for purposes hereof, the first Fiscal Year shall be a short period
commencing on the execution date hereof and ending on the last Wednesday of the
following December.
1.22. Gross Receipts. The term "Gross Receipts" shall mean all receipts of
--------------
the Joint Venture, computed on an accrual basis, recognized during or after the
first Fiscal Month beginning on or after the date hereof from all business
conducted upon, related to, or from the Property by the Joint Venture, and shall
include, but not be limited to, all proceeds from the sale of any portion of the
Real Property, all Capital Contributions made by the Joint Venturers, any other
refinancing or additional loans approved by the Management Committee, and
insurance and condemnation proceeds. Gross Receipts shall also include all
receipts related to or derived from the operation of the Club, computed on an
accrual basis, from cash or credit transactions, recognized during or after the
first Fiscal Month beginning on or after the Closing Date, and shall include,
but shall not be limited to, guest fees, income derived from the investment of
Gross Receipts, the amount of all sales (wholesale or retail) of food,
beverages, goods, wares or merchandise on, at, or from the Property, or for
services of any nature performed on, at, or from the Property, determined in
accordance with generally accepted accounting principles applied on a consistent
basis. Gross Receipts shall be reduced by any refunds, rebates, discounts and
credits of a similar nature given, paid or returned in the course of obtaining
such Gross Receipts. Gross Receipts shall not include applicable gross receipts,
admission, cabaret, excise, sales and use taxes, or similar governmental charges
collected directly from members or their guests or as a part of the sales price
of any goods or services.
1.23. Improvements. The term "Improvements" shall be defined as all
------------
improvements, structures and fixtures placed, constructed or installed, or to be
placed, constructed or installed, on the Real Property for the Club.
Exhibit "A" page 5
- -----------
<PAGE>
1.24. Intangible Personal Property. The term "Intangible Personal Property"
----------------------------
shall be defined as all intangible personal property of any nature owned by the
Joint Venture in connection with the operation of the Club, including, but not
limited to, all permits, security deposits, contract rights, water rights,
utility permits, logos, service marks, and the use of the name "Whispering Palms
Country Club" and any derivative thereof.
1.25. Management Committee. The term "Management Committee" shall have the
--------------------
meaning set forth in Section 6.1 hereof.
1.26. Managing Partner. The term "Managing Partner" shall have the meaning
----------------
set forth in Section 6.4 hereof.
1.27. Negative Net Cash Flow. The term "Negative Net Cash Flow" shall mean
----------------------
that amount by which Expenses exceed Gross Receipts for the period in question.
1.28. Olympic Resort Capital Call. The term "Olympic Resort Capital Call"
---------------------------
shall mean any amount owed by Golf Inns or Theodore L. Vallas under the terms
and conditions of the Olympic Resort Joint Venture.
1.29. Olympic Resort Joint Venture. The term "Olympic Resort Joint Venture"
----------------------------
shall mean the joint venture between Seller and Whispering Palms Joint Venture
concerning the property operated as the "Olympic Resort."
1.30. Option Period. The term "Option Period" shall have the meaning set
-------------
forth in that certain option agreement between Theodore L. Vallas and Ocean
Vista Acquisition Corp. dated September 4, 1992.
1.31. Percentage Interest. The term "Percentage Interest" shall have the
-------------------
meaning set forth in Section 5.1.
1.32. Personal Property. The term "Personal Property" shall mean all
-----------------
equipment, machinery, fixtures, furnishings, accessories, and other tangible
personal property placed or installed, or to be placed or installed, on or about
the Real Property and used as a part of or in connection with the operation of
the Improvements and the Club.
1.33. Positive Net Cash Flow. The term "Positive Net Cash Flow" shall mean
----------------------
the amount by which Gross Receipts exceed Expenses for the period in question.
1.34. Property. The term "Property" shall be defined as (i) the Real
--------
Property, (ii) the Improvements, (iii) the Personal Property, (iv) the
Intangible Personal Property, and (v) any other properties, assets and revenues
of the Joint Venture, tangible or intangible, real or personal.
1.35. Real Property. The term "Real Property" shall mean that certain tract
-------------
of land specifically described in Exhibit "C".
1.36. Third Party Equity Loan. The term "Third Party Equity Loan" shall
-----------------------
have the meaning set forth in Section 4.2.
Exhibit "A" - A3477.2.80.59A.wpd page 6
- -----------
<PAGE>
1.37. Third Party Lender. The term "Third Party Lender" shall have the
------------------
meaning set forth in Section 4.2.
1.38. Unavoidable Delay. The term "Unavoidable Delay" shall have the
-----------------
meaning set forth in Section 18.15.
1.39. Working Capital. The term "Working Capital" shall mean the sum of
---------------
working capital reasonably required for the operation of the Club and the
Property, which sum shall be periodically designated by the Management Committee
to meet the requirements of the operation of the Club.
Exhibit "A" page 7
- -----------
<PAGE>
EXHIBIT "C"
-----------
REAL PROPERTY
-------------
Title recorded in the names of the venture partners. Legal description as set
forth in Preliminary Title Report issued by Chicago Title Company dated March
23, 1993 and supplement dated May __, 1993.
See Lease Agreement dated May 16, 1984, between Golf Inns of America, Inc. and
California Cotton Sales Co. re: leasehold for maintenance facilities and one
hole of the course.
<PAGE>
AMENDED AND RESTATED
JOINT VENTURE AGREEMENT
-----------------------
(WHISPERING PALMS)
THIS AGREEMENT is made and entered into this _____ day of May, 1993, by and
between GOLF INNS OF AMERICA, INC., a California corporation (hereinafter
referred to as "Golf Inns"), and OCEAN VISTA LAND COMPANY, a California
corporation (hereinafter referred to as "Ocean Vista"). The foregoing parties
shall hereinafter collectively be referred to as the "Venturers."
W I T N E S S E T H
-------------------
WHEREAS, Golf Inns and Ocean Vista own a fifty percent (50%) interest each
in the property known as "Whispering Palms Lodge and Country Club," located on a
tract of real property in the City of Rancho Santa Fe, California (the
"Project"); and
WHEREAS, Golf Inns and Ocean Vista have previously entered into that
certain Joint Venture Agreement (the "Original Agreement") dated February 1,
1971, and now desire to restate and amend in its entirety the Original Agreement
to form this Joint Venture to acquire the Real Property for the Club from Golf
Inns and Ocean Vista and to develop and operate the Club pursuant to the terms
and conditions recited herein; and
WHEREAS, the Joint Venture and Ocean Vista Management Corp., a California
corporation (hereinafter referred to as the "Club Manager"), have entered into a
club management agreement (the "Club Management Agreement") concerning the
management of the Club,
WHEREAS, Club Manager and OVLC Management Corp., a California corporation
(hereinafter referred to as "New Club Manager"), have entered into an
Assignment, Release and Amendment of Management Contracts dated April 1, 1993,
thereby transferring the Club Management Agreement to New Club Manager,
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereby restate the joint venture for the purposes and upon the
terms, provisions and conditions hereinafter set forth.
ARTICLE 1.
DEFINITIONS
-----------
1.1. Definitions. All capitalized terms referenced or used in this
-----------
Agreement and not specifically defined herein shall have the meaning set forth
in alphabetical listing on Exhibit "A", which is attached hereto and
incorporated by reference.
Amended and Restated Joint Venture Agreement - Whispering Plams
- ---------------------------------------------------------------
page 1
<PAGE>
ARTICLE 2.
FORMATION OF THE PARTNERSHIP
----------------------------
2.1. Formation. Golf Inns and Ocean Vista hereby form a general
---------
partnership (the "Joint Venture") for the limited purposes hereinafter set
forth.
2.2. Name. The name of the Joint Venture shall be "Whispering Palms
----
Country Club Joint Venture." The Venturers shall execute all assumed or
fictitious name certificates required by law to be published and filed in
connection with the formation and operation of the Joint Venture.
2.3. Principal Office. The principal office of the Joint Venture shall be
----------------
located on the Real Property, or at such other place as the Management Committee
may from time to time determine.
2.4. Purpose of the Joint Venture. The purpose of the Joint Venture shall
----------------------------
be limited solely to the following:
2.4.1. To develop, maintain and operate the Club located on the Real
Property by the Joint Venture; and
2.4.2. To engage in any and all general activities related or in any
way incidental thereto, and to do all things necessary for the operation of
such activities.
2.5. Partnership Act; Ownership; No Partition. Except as is
----------------------------------------
expressly herein stipulated to the contrary, the rights and obligations of the
Venturers and the administration and termination of the Joint Venture shall be
governed by the Uniform Partnership Act, adopted by the State of California, as
may from time to time be amended (the "Act"). All real or personal property
acquired by the Joint Venture shall be deemed to be owned by the Joint Venture
as an entity, and no Venturer individually shall have any ownership of such
property. Each of the Venturers does hereby agree to, and does hereby
irrevocably waive, for the duration of this Agreement, any right or power any
such Venturer might have to cause the Joint Venture or any of its assets to be
partitioned, to cause the appointment of a receiver for the assets of the Joint
Venture, to compel any sale of all or any portion of the assets of the Joint
Venture pursuant to any applicable law or laws, or to file a complaint or to
institute any proceeding at law or in equity to cause the termination or
dissolution of the Joint Venture, except as expressly provided for herein. Each
of the Venturers hereby acknowledges and agrees that such Venturer has been
induced to enter into this Agreement in reliance upon the mutual waivers set
forth in this Section, and without such waivers, none of the Venturers would
have entered into this Agreement. No Venturer has any interest in specific
Joint Venture property, but the interests of the Venturers in the Joint Venture
are for all purposes personal property. Upon any breach of the provisions of
this Section by any Venturer, the other Venturers, in addition to all other
rights and remedies at law and in equity they may
Amended and Restated Joint Venture Agreement - Whispering Plams
- ---------------------------------------------------------------
page 2
<PAGE>
have, shall be entitled to a decree or order restraining and enjoining such
application, action or proceeding.
2.6. No Individual Authority. The business of the Joint Venture shall be
-----------------------
limited strictly to the purposes set forth in Section 2.4, and, except as
otherwise expressly provided in this Agreement, a Venturer acting alone shall
not have any authority to act for, or to assume any obligation or responsibility
on behalf of, the other Venturers or the Joint Venture.
2.7. No Restrictions. Nothing contained in this Agreement shall be
---------------
construed to prohibit, restrict or limit a Venturer or any entity, firm or
corporation controlled by such Venturer, or any parent company, from owning,
operating or investing in any business or activity of any nature, including,
without limitation, the acquisition, development and management of real property
or other club facilities; said activities to be without any accountability,
liability or obligation whatsoever to the Joint Venture or to the other
Venturers, even if such business or activity competes with the business of the
Joint Venture.
2.8. Not Responsible for Other's Commitments. Neither the Venturers
---------------------------------------
nor the Joint Venture shall be responsible or liable for any indebtedness or
obligation of a Venturer incurred either before or after the execution of this
Agreement, except as to those joint responsibilities, liabilities, indebtedness
or obligations incurred pursuant to the terms of this Agreement, and each
Venturer agrees to indemnify and hold the other Venturers and the Joint Venture
harmless from such obligations and indebtedness.
2.9. Legal Obligations. If any claim, liability or expense shall be
-----------------
asserted against the Joint Venture or a Venturer as a result or consequence of
the Joint Venture or the operation and conduct of the business of the Joint
Venture, and if the assets of the Joint Venture are insufficient to satisfy the
same, each Venturer shall bear a share of any such claim, liability or expense
in accordance with its Joint Venture interest at said time, as set forth in
Article 5. Each Venturer shall cooperate and consult with the other in
defending any such action and in making any settlement or compromise thereof.
If any Venturer is required to pay more than its share of a claim against the
Joint Venture, it shall be entitled to contribution from the other Venturers
and, without limiting the generality of the foregoing, shall have a prior claim
therefor on such other Venturer's interest in the Joint Venture.
Notwithstanding the foregoing, if any claim, liability or expense shall be
asserted against the Joint Venture or a Venturer by reason of the sole
negligence of a Venturer or an act or omission by a Venturer in violation of
this Agreement, then the Venturer committing such negligence or performing such
act shall indemnify and save harmless the Joint Venture and the other Venturers
from and against any and all loss resulting therefrom. The right of
contribution and rights of indemnity contained in this Section shall survive and
remain in full force and effect, notwithstanding any termination of the Joint
Venture and this Agreement. The provisions of this Section are not intended to
and shall not be applicable to any claim or liability with respect to any
mortgages, loans, deeds of trust, or other encumbrances against the Real
Property which are nonrecourse as to the Joint Venture and the Venturers.
Amended and Restated Joint Venture Agreement - Whispering Plams
- ---------------------------------------------------------------
page 3
<PAGE>
ARTICLE 3.
TERM
----
3.1. Term. The Joint Venture shall commence as of the date of this
----
Agreement and shall continue until dissolution or termination pursuant to the
expressed provisions hereof.
ARTICLE 4.
CONTRIBUTIONS TO THE JOINT VENTURE
----------------------------------
4.1. Initial Capital Contributions. Golf Inns and Ocean Vista have
-----------------------------
each contributed their fifty percent (50%) undivided interest in the Real
Property to the Joint Venture. The Venturers acknowledge that their Capital
Contributions to the Joint Venture based on their present respective percentage
of ownership as provided in Section 5.1 is as follows:
<TABLE>
<S> <C>
Golf Inns ......................... $1,000
Golf Inns ......................... $1,000
Ocean Vista ......................... $1,000
-----
Total ............................... $2,000
</TABLE>
4.2. Capital Contributions and Obligations. After the execution date
-------------------------------------
hereof, if there is a projected or actual Negative Net Cash Flow or Deficit
Capital Costs (including such borrowing made to prevent the Joint Venture from
being in default of its obligations under the Existing Debt), the Management
Committee shall have the option to first utilize any reserve accounts to fund
the Negative Net Cash Flow or Deficit Capital Costs. If said funds are not
sufficient, then the Management Committee shall (i) utilize any existing bank
line of credit available to the Joint Venture, then (ii) if said amount is not
sufficient, attempt to secure conventional third party financing (without
providing to the lender any equity participation in the Joint Venture).
However, if said conventional financing cannot be obtained, the Management
Committee shall attempt to secure debt financing with an equity component or
equity financing from a third party or an affiliate of any Venturer (the "Third
Party Equity Loan," and such third party or affiliate being called the "Third
Party Lender"). Each Venturer shall have the option, upon receipt of the
proposed terms of the Third Party Equity Loan, to elect to either (i) have its
Percentage Interest diluted pro rata with the other Venturers to provide the
equity participation to the Third Party Lender (the "Equity Interest"), or (ii)
make a Capital Contribution to the Joint Venture on the terms and conditions of
the Third Party Equity Loan in an amount equal to its Percentage Interest, or,
at such Venturer's election, a lesser amount than its Percentage Interest of
(a) the Negative Net Cash Flow, or (b) the Deficit Capital Costs, as applicable.
The portion of any Capital Contribution advanced by a Venturer which constitutes
a loan to the Joint Venture shall be deemed to be an "Equity Loan" and shall be
entitled to the preferential distributions provided herein. The portion, if
any, of such Capital Contribution paid for the Equity Interest shall be
accounted for as a Capital Contribution to the Joint Venture, in respect of such
Equity Interest, and concurrently with payment of the Capital Contribution, the
Venturer shall acquire and receive that portion of the Equity Interest equal to
the ratio its Capital Contribution bears to the aggregate Third Party Equity
Loan (including
Amended and Restated Joint Venture Agreement - Whispering Plams
- ---------------------------------------------------------------
page 4
<PAGE>
the Capital Contributions of all other Venturers in respect thereof). In the
event (i) the Joint Venture cannot obtain a Third Party Equity Loan or
conventional financing, or (ii) the Management Committee elects, at its sole
discretion, not to seek said financing, then each Venturer agrees to fund its
Percentage Interest of the Capital Contribution. Each Venturer agrees to advance
to the Joint Venture its Capital Contribution upon the written request of the
Managing Partner, within ten (10) days thereof. If a requested Capital
Contribution is not paid by a Venturer within thirty (30) days after written
notice of such request, then the provisions of Section 16.3 may be elected by
the remaining Venturers. The parties acknowledge that the obligation to fund the
Capital Contributions recited herein does not obligate the Joint Venture to
continue to operate at a Negative Net Cash Flow, as said decision shall be in
the sole and absolute discretion of the Management Committee.
ARTICLE 5.
INTEREST OF THE VENTURERS
-------------------------
5.1. Percentage Interest. Except as may be otherwise expressly
-------------------
stipulated herein, including the allocations of Positive Net Cash Flow set forth
in Paragraph 8.1.1 and Section 5.2 below, the interests of the respective
Venturers in the assets, liabilities, profits and losses of the Joint Venture
shall be as follows (the "Percentage Interest"):
<TABLE>
<CAPTION>
Venturer Percentage
-------- ----------
<S> <C>
Ocean Vista ................. 50%
Golf Inns .................... 50%
</TABLE>
5.2. Profits, Losses and Distributive Shares of Tax Items. The
----------------------------------------------------
Venturers' net profit or net loss, as the case may be, for each Fiscal Year of
the Joint Venture shall be allocated to the Venturers for both financial
accounting and income tax purposes in proportion to their respective Percentage
Interest in the Joint Venture, or any other different allocation agreed to in
writing by the Venturers. Notwithstanding the foregoing, any gain or loss on
Joint Venture assets occurring in connection with the liquidation of the Joint
Venture shall be credited or charged to the Venturers first in a manner, as
nearly as can be, to cause the capital account of the respective Venturers to
stand in the same ratios as their respective Percentage Interest in the Joint
Venture, and thereafter any gain or loss remaining shall be credited or charged
to the Venturers in accordance with their respective Percentage Interest in the
Joint Venture.
5.3. Deficit Capital Makeup. Upon the liquidation of any Venturer's
----------------------
interest in the Joint Venture, said Venturer shall be required to pay a sum to
the Joint Venture equal to the deficit balance of said Venturer's capital
account, if any, on or before (i) the end of the taxable year in which the
liquidation occurs, or (ii) ninety (90) days after the effective date of said
liquidation, whichever occurs first.
Amended and Restated Joint Venture Agreement - Whispering Plams
- ---------------------------------------------------------------
page 5
<PAGE>
ARTICLE 6.
MANAGEMENT OF THE JOINT VENTURE
-------------------------------
6.1. Management Committee. The major policy decisions of the Joint
--------------------
Venture shall be controlled by a management committee consisting of three (3)
members, two being selected by Ocean Vista and one by Golf Inns, or such
additional representatives as may be determined by the agreement of all
Venturers (the "Management Committee"). The Venturers shall designate the
members to represent them on the Management Committee (the "Members") in
connection with the operation of the Joint Venture. Each Venturer hereby agrees
that its Members shall have the full and complete power and authority to act on
its behalf, to execute documents in its name, and to bind it in all matters
relating to the Joint Venture and its business. The Venturers may also
designate "Alternate Members" for each of its Members. Members and Alternate
Members shall serve at the will of the Venturer whom they represent, and such
service may be terminated by notice from such Venturer to the other Venturers.
In the event of the death, incapacity or termination of any Member of a
Venturer, its Alternate Member shall serve in its stead until its successor has
been appointed by the Venturer whom it represents and the other Venturer has
received notice thereof. Each Venturer shall, by notice to the other,
immediately designate a successor to any Member or Alternate Member who has
ceased to serve by reason of its death, incapacity or termination.
6.2. Meetings of the Management Committee. Regular meet-ings of the
------------------------------------
Management Committee shall be held monthly, but in no event less frequently than
quarterly, on such day and at such time as may be agreed upon by the Members.
Special meetings of the Management Committee may be called at any time by any
Member of the Management Committee upon not less than two (2) days notice.
Notwithstanding anything to the contrary, it shall require two (2) meetings of
the Management Committee to remove and replace the Managing Partner. Waiver of
notice of such special meeting may be made in the same manner as required for
Management Committee action as hereinafter set forth. Regular and special
meetings shall be held at any place designated from time to time by the
Management Committee, and in the absence of such designation, shall be held at
the principal offices of the Joint Venture. Any Member unable to participate in
a meeting of the Management Committee may designate its Alternate to serve in
its place at such meeting, and all references herein to "Members of the
Management Committee" shall include such Alternates when so serving. No regular
or special meeting of the Management Committee may be validly held unless sixty-
five percent (65%) of the Members thereof are in attendance. The Management
Committee shall appoint a secretary who shall prepare minutes of its meetings
and place same in a permanent minute book, copies of which minutes shall be
distributed to the Venturers within seven (7) days thereafter. An agenda and
drafts of all resolutions proposed for approval shall be disseminated to each
party's representative at least two (2) business days prior to the scheduled
meeting.
6.3. Action by the Management Committee. Each Member of the Management
----------------------------------
Committee shall be entitled to one (1) vote, and a vote of fifty-one percent
(51%) or more (a "Majority Vote") shall be binding on all actions to be taken
taken by the Management Committee.
Amended and Restated Joint Venture Agreement - Whispering Plams
- ---------------------------------------------------------------
page 6
<PAGE>
6.3.1. Unanimous Written Consent. Any action may be taken by the
-------------------------
Management Committee by obtaining written consent, signed by all of its
Members, specifying the action so taken without the necessity of a meeting.
6.3.2. Deficit Capital Costs. Notwithstanding anything to the
---------------------
contrary, the parties agree that if funding is desired for additional
improvements or expansion of existing facilities (the "Additional
Facilities"), that if Golf Inns does not vote for the Additional
Facilities, that the costs of the Additional Facilities shall be funded by
(i) a Third Party Lender, or (ii) a Third Party Equity Loan, or (iii) an
Equity Loan by Ocean Vista, and shall not be funded by a Capital
Contribution to fund Deficit Capital Costs. Further, the parties agree
that if the costs of the Additional Facilities exceed FIVE HUNDRED THOUSAND
DOLLARS ($500,000.00), that both parties shall have an equal vote as to (i)
approval of the Additional Facilities and (ii) approval of the financing
plan necessary to fund the Additional Facilities.
6.4. Managing Partner. The supervision, management, direction and
----------------
control of the day-to-day business and activities of the Joint Venture shall be
handled by Ocean Vista as the managing partner of the Joint Venture (the
"Managing Partner"), subject to the budgets, policies, guidelines, restrictions
and procedures set forth herein and established by the Management Committee and
to be carried out by the Club Manager pursuant to the terms of the Club
Management Agreement. The Venturers acknowledge and agree that the obligations
and duties recited herein may be assigned by the Managing Partner to the Club
Manager as provided in the terms of the Club Management Agreement. The Managing
Partner shall perform the following specific duties:
6.4.1. Business Plans. Prepare or cause the Club Manager to prepare
--------------
annual business plans to be submitted to the Management Committee for the
development of the Club, which shall include marketing, construction, sales
programs, staffing requirements, cash flow projections, utility
requirements, and all other aspects of the development and marketing of the
Club as a first class country club;
6.4.2. Golf Course Improvements. Prepare and review golf course
------------------------
improvement proposals, construction specifications and physical
construction and coordinate golf course improvements construction,
including preparation of construction timetables, budgets, coordination of
construction specifications, contract award and construction oversight.
6.4.3. Budgets. Prepare or cause to be prepared the budgets provided
-------
for in Article 7 to be submitted to the Management Committee for approval;
6.4.4. Day-to-Day Operations. Oversee and handle the day-to-day
---------------------
operation of the Joint Venture in conjunction with the Club Manager,
subject to the specific policies, procedures, budgets and restrictions
provided for herein;
Amended and Restated Joint Venture Agreement - Whispering Plams
- ---------------------------------------------------------------
page 7
<PAGE>
6.4.5. Coordination. Coordinate all actions of the Joint Venture and
------------
to protect and preserve the title and interest of the Joint Venture with
respect to the Property and all contract rights owned by the Joint Venture;
6.4.6. Supervision. Supervise the performance of all obligations of
-----------
the Joint Venture under all contracts and management agreements approved by
the Management Committee;
6.4.7. Employees. Retain, employ and coordinate the services of all
---------
employees, supervisors, architects, engineers, accountants, attorneys, and
other persons necessary or appropriate to carry out the business of the
Joint Venture, subject to the restrictions of the Annual Operations Budget.
The Management Committee reserves the right to approve the hiring and
salary levels of all key employees and may require the dismissal of any
employee;
6.4.8. Debts. Pay all debts and other obliga-tions of the Joint
-----
Venture, including servicing the Existing Club Debt, to the extent that
funds of the Joint Venture are available therefor;
6.4.9. Laws. Use its best efforts to cause the Joint Venture to
----
comply with all applicable laws or regulations, whether presently in force
or passed in the future;
6.4.10. Estimates. Prepare, estimate and submit to each Venturer, at
---------
least fifteen (15) days prior to the beginning of each calendar month, the
amount of any estimated Negative Net Cash Flow or Deficit Capital Cost for
such calendar month;
6.4.11. Tax Returns. Prepare and submit to the Venturers for their
-----------
review, at least thirty (30) days prior to the due date, a draft of the tax
returns required of the Joint Venture. Notwithstanding the foregoing,
Ocean Vista shall be designated as the "Tax Matters Partner" pursuant to
Section 6223 of the Internal Revenue Code;
6.4.12. Insurance. Cause the Joint Venture to carry and maintain
---------
comprehensive general liability insurance with (i) bodily injury limits of
ONE MILLION DOLLARS ($1,000,000.00) for injury or death to any one person
and TWO MILLION DOLLARS ($2,000,000.00) for any one occurrence, (ii)
property damage limits of ONE MILLION DOLLARS ($1,000,000.00) for any one
occurrence and TWO MILLION DOLLARS ($2,000,000.00) in the aggregate, and
(iii) property insurance on all applicable assets owned by the Joint
Venture in amounts not less than ninety percent (90%) of the full
replacement value; and
Amended and Restated Joint Venture Agreement - Whispering Plams
- ---------------------------------------------------------------
page 8
<PAGE>
6.4.13. Implementation. Implement any and all decisions of the
--------------
Management Committee and Venturers and coordinate them with the Club
Manager as necessary.
6.5. Accounting Records. The Joint Venture shall contract with OVLC
------------------
MANAGEMENT CORP., or any of its affiliated entities, for the maintenance of
accounting records and bookkeeping for the Joint Venture. Such services shall
be at a rate which is reasonable and comparable to those rates charged for
similar services by comparable accounting firms in the San Diego, California.
6.6. Costs and Expenses; No Compensation. Neither the Venturers, the
-----------------------------------
Members of the Management Committee, nor the Managing Partner shall be entitled
to any compensation for discharging their obligations under this Agreement or
otherwise acting on behalf of the Joint Venture, except as otherwise provided
for in management fees and compensation to the Club Manager in the Club
Management Agreement.
6.7. Replacement. The parties acknowledge that the Managing Partner
-----------
may be removed and replaced with another party at any time upon written notice
to the Managing Partner by a two-thirds (2/3) majority vote of the Management
Committee.
ARTICLE 7.
BUDGETS
-------
7.1. Budgets. All budgets for the Joint Venture shall include a
-------
projection of (i) Gross Receipts and Expenses, (ii) Positive Net Cash Flow or
Negative Net Cash Flow, as the case may be, (iii) Capital Costs, and (iv)
Capital Contributions, if so projected, and the estimated timing thereof. The
budgets described in Paragraphs 7.1.1 and 7.1.2 shall be presented on a Fiscal
Month basis in reasonable detail and in a format similar to the Financial
Statements.
7.1.1. Annual Operations Budget. The parties acknowledge that they
------------------------
have agreed to a proforma estimated operations budget for Gross Receipts,
balance sheet, and cash flow statements for the period from the Closing
Date through December 31, 1992 (the "1992 Budget"), and January 1, 1993,
through December 31, 1993 (the "Initial Annual Operations Budget"), which
may be amended by the Management Committee. For each Fiscal Year
thereafter, not later than forty-five (45) days prior to the beginning of
each Fiscal Year, the Managing Partner shall cause the Club Manager to
prepare and deliver to the Management Committee for its review and approval
a budget for Gross Receipts, a balance sheet, and cash flow statements for
said Fiscal Year (the "Annual Operations Budget").
7.1.2. Capital Expenditures Budget. Not later than forty-five (45)
---------------------------
days prior to the beginning of each Fiscal Year after the initial Fiscal
Year, the Managing Partner shall cause the Club Manager to prepare and
deliver to the
Amended and Restated Joint Venture Agreement - Whispering Plams
- ---------------------------------------------------------------
Management Committee for its review and approval a budget for Capital Costs for
such Fiscal Year (the "Capital Expenditures Budget").
Amended and Restated Joint Venture Agreement - Whispering Plams
- ---------------------------------------------------------------
page 9
<PAGE>
ARTICLE 8.
DISTRIBUTION OF POSITIVE NET CASH FLOW
--------------------------------------
8.1. Positive Net Cash Flow. The Venturers agree that a conservative
----------------------
financial approach will be utilized in the disbursements of Positive Net Cash
Flow, and that Positive Net Cash Flow shall be distributed only on the basis of
prudent business judgment if said funds are not required for the ongoing
development and operation of the Project, as determined by the Management
Committee. In the event Positive Net Cash Flow is available for distribution
within thirty (30) days following the close of each Fiscal Quarter, the amount
of Positive Net Cash Flow generated by the Joint Venture, on a consolidated
basis, shall be distributed as follows:
8.1.1. Payment of Defaulting Loans. If either Venturer fails to make
---------------------------
a required Capital Contribution or any other contribution and the other
Venturer advances such amount as provided herein, then said Venturer's
Percentage Interest of Positive Net Cash Flow to be distributed as provided
below shall be distributed to the Venturer making such advance to the
extent necessary to repay said Defaulting Loan, including interest as
provided herein.
8.1.2. Payment of Equity Loans. Any remaining Positive Net Cash
-----------------------
Flow shall be applied to the outstanding balance of any Equity Loan until
paid in full, including any accrued interest thereon.
8.1.3. Distribution. Any remaining Positive Net Cash Flow after
------------
payment of the items referenced above shall be distributed to the Venturers
in accordance with their respective Percentage Interest at the time of the
distribution. Notwithstanding anything to the contrary recited herein,
Golf Inns hereby acknowledges and agrees that in the event at the time of
distribution there is any outstanding Olympic Resort Capital Call owed by
Golf Inns or Theodore L. Vallas, that the distribution of Golf Inns'
Percentage Interest in the Positive Net Cash Flow shall be payable directly
to the Managing Partner of the Olympic Resort Joint Venture, to be applied
against any outstanding Olympic Resort Capital Call until said amount is
paid in full. The parties acknowledge that any distributions made to the
Olympic Resort Venture, as provided above, shall be treated in all respects
as a distribution to Golf Inns, for all purposes hereof.
ARTICLE 9.
GOLF INNS' COVENANTS AND REPRESENTATIONS
----------------------------------------
9.1. Golf Inns makes the following representations to the other
Venturers, which representations shall, unless otherwise stated herein, survive
the execution and delivery of this Agreement:
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<PAGE>
9.1.1. Corporate Status. Golf Inns is a corporation duly organized,
----------------
validly existing, and in good standing under the laws of California, with
full corporate power to enter into this Agreement and execute all documents
required hereunder, evidence of which shall include, but shall not be
limited to, a good standing certificate, which shall be furnished to the
other Venturers.
9.1.2. Authorization. The making, execution, delivery and
-------------
performance of this Agreement by Golf Inns has been duly authorized and
approved by all requisite action of the Board of Directors of Golf Inns,
and this Agreement has been duly executed and delivered by Golf Inns and
constitutes a valid and binding obligation of Golf Inns, enforceable in
accordance with its terms.
9.1.3. Violation of Representations. From and after the date hereof
----------------------------
and until the termination of this Agreement, neither Golf Inns nor any of
its affiliates shall take any action, or omit to take any action, which
action or omission would have the effect of violating any of the material
covenants, representations and warranties of Golf Inns contained in this
Agreement.
9.1.4. Violation of Agreement. Neither the execution and delivery of
----------------------
this Agreement by Golf Inns or its affiliates or Golf Inns' performance of
its obligations hereunder will result in a violation or breach of any
material term or provision, or constitute a material default, or accelerate
the performance required under any other material agreement or document to
which Golf Inns or its affiliates are a party or are otherwise bound, and
will not, to the best of Golf Inns' or its affiliates' knowledge,
constitute a violation of any law, ruling, regulation or order to which
Golf Inns or its affiliates are subject.
9.1.5. Documentation. If necessary to carry out the intent of this
-------------
Agreement, Golf Inns agrees to execute and provide to the Venturers any and
all other instruments, documents, conveyances, assignments and agreements
which the Venturers may reasonably request in connection with the duties
and obligations set forth herein.
ARTICLE 10.
OCEAN VISTA'S COVENANTS AND REPRESENTATIONS
-------------------------------------------
10.1. Ocean Vista makes the following representations to the other
Venturers, which representations shall, unless otherwise stated herein, survive
the execution and delivery of this Agreement:
10.1.1. Corporate Status. Ocean Vista is a corporation duly
----------------
organized, validly existing, and in good standing under the laws of
California, with full corporate power to enter into this Agreement and
execute all documents required hereunder, evidence of which shall include,
but shall not be limited to, a good standing certificate, which shall be
furnished to the other Venturers.
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<PAGE>
10.1.2. Authorization. The making, execution, delivery and
-------------
performance of this Agreement by Ocean Vista has been duly authorized and
approved by all requisite action of the Board of Directors of Ocean Vista,
and this Agreement has been duly executed and delivered by Ocean Vista and
constitutes a valid and binding obligation of Ocean Vista, enforceable in
accordance with its terms.
10.1.3. Violation of Representations. From and after the date hereof
----------------------------
and until the termination of this Agreement, neither Ocean Vista nor any of
its affiliates shall take any action, or omit to take any action, which
action or omission would have the effect of violating any of the material
covenants, representations and warranties of Ocean Vista contained in this
Agreement.
10.1.4. Violation of Agreement. Neither the execution and delivery
----------------------
of this Agreement by Ocean Vista or its affiliates or Ocean Vista's
performance of its obligations hereunder will result in a violation or
breach of any material term or provision, or constitute a material default,
or accelerate the performance required under any other material agreement
or document to which Ocean Vista or its affiliates are a party or are
otherwise bound, and will not, to the best of Ocean Vista's or its
affiliates' knowledge, constitute a violation of any law, ruling,
regulation or order to which Ocean Vista or its affiliates are subject.
10.1.5. Documentation. If necessary to carry out the intent of this
-------------
Agreement, Ocean Vista agrees to execute and provide to the Venturers any
and all other instruments, documents, conveyances, assignments and
agreements which the Venturers may reasonably request in connection with
the duties and obligations set forth herein.
ARTICLE 11.
PROHIBITED TRANSACTIONS
-----------------------
11.1. Prohibited Transactions. During the time of the organization
-----------------------
or continuance of the Joint Venture, no Venturer shall (except to the extent
otherwise provided herein) do any of the following:
11.1.1. Use the name of the Joint Venture (or any substantially
similar name) or any trademark or trade name adopted by the Joint Venture
except in the ordinary course of the Joint Venture's business;
11.1.2. Disclose to any outside person any of the Joint Venture's
business practices, trade secrets, or any other information not generally
known to the business community;
11.1.3. Do any other act or deed with the intention of harming the
operations of the Joint Venture;
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<PAGE>
11.1.4. Do any act contrary to this Agreement except with the prior
express approval of all the Venturers;
11.1.5. Do any act which would make it impossible to carry on the
intended or ordinary business of the Joint Venture;
11.1.6. Confess a judgment against the Joint Venture;
11.1.7. Possess Joint Venture property or assign the right of the
Joint Venture or the Venturers in specific Joint Venture property for other
than a Joint Venture purpose;
11.1.8. Make, execute or deliver any general assignments for the
benefit of creditors, or any bond, guaranty, indemnity bond or surety bond;
11.1.9. Assign, transfer, pledge, compromise or release any claim of
the Joint Venture, except for full payment or arbitrate, or consent to the
arbitration of any of its disputes or controversies;
11.1.10. Create any personal liability for a Venturer other than that
personal liability to which a Venturer may have agreed to in writing; or
11.1.11. Admit another person or entity as a Venturer.
ARTICLE 12.
BOOKS, RECORDS, AUDITS, TAXES, ETC.
-----------------------------------
12.1. Books; Statements. The Managing Partner shall keep, or cause to be
-----------------
kept, accurate, full and complete records, books and accounts, on an accrual
basis, showing exclusively the Joint Venture's assets and liabilities,
operations, transactions and financial condition. The Financial Statements shall
be accurate in all material respects, shall present fairly the financial
position and results of operation of the Joint Venture, and shall be prepared in
accordance with generally accepted accounting principles consistently applied
over the periods reflected thereby. The Managing Partner shall furnish the
Financial Statements, including income statements and a balance sheet, to the
Joint Venture within twenty (20) days following the close of each Fiscal Month
and each Fiscal Quarter. Except as specifically provided in this Agreement, the
Management Committee shall determine which accounting firm shall maintain the
accounting records, the methods to be used in the preparation of the Financial
Statements, and the federal, state and municipal income and franchise tax
returns for the Joint Venture in connection with all items of income and
expense, including, but not limited to, valuation of assets, the methods of
depreciation, elections, credits and accounting procedures. Provided, however,
(i) all construction period real estate taxes and interest of the Joint Venture
shall be capitalized as required by Section 263A of the Internal Revenue Code
(the "Code"), (ii) depreciation shall be deducted on the accelerated basis, and
(iii) in the case of a distribution of a property which is made in the manner
provided in Section 743 of the
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<PAGE>
Code, or in the case of a transfer of Joint Venture interest which is permitted
by this Agreement and which is made in the manner provided in Section 743 of the
Code, then, upon the request for the distribution of such property by the
transferee of such Joint Venture interest, the Joint Venture shall file an
election under Section 754 of the Code in accordance with the procedures set
forth in the Treasury regulations applicable thereto. The Joint Venture will not
be responsible for the booking or reporting of any basis adjustments on behalf
of the Venturers who are affected by an election under Section 754 of the Code.
Each Venturer must make any adjustments necessary due to such an election on its
individual return.
12.2. Where Maintained; Availability. The books, accounts and records
------------------------------
of the Joint Venture shall be maintained at its principal office, or at such
other place as may be designated from time to time by the Management Committee,
and shall at all reasonable times be available for inspection by the Venturers
and their representatives.
12.3. Audits. Any Venturer may, at its option and at its own expense,
------
conduct internal audits of the books, records and accounts of the Joint Venture.
Audits may be on either a continuous or a periodic basis, or both.
12.4. Independent Audit. The Management Committee reserves the right
-----------------
to require that the Joint Venture conduct an independent audit of its books,
records and accounts on an annual basis. Such independent audit shall, if
requested, be conducted annually, and shall be submitted to the Management
Committee no later than sixty (60) days following the end of each Fiscal Year.
All audit fees incurred by the Joint Venture with respect to the annual
independent audit shall be paid by the Joint Venture, unless said audit fees
exceed TWO THOUSAND FIVE HUNDRED DOLLARS ($2,500.00), in which event the excess
over the foregoing sum shall be paid by the Venturer or Venturers requesting the
audit.
12.5. Other Information. The Managing Partner may release information
-----------------
concerning the operations of the Joint Venture to such sources as is required by
law or regulation, or by order of any regulatory body. The Managing Partner
shall furnish the Venturers or their representatives any further information in
such form as they may reasonably request relative to any phase of the operations
of the Joint Venture. All Venturers and their representatives shall have free
access during normal business hours to all records relative to the operations of
the Joint Venture. For the term of the Joint Venture, and for a period of four
(4) years thereafter, the Managing Partner shall maintain and preserve all books
of accounts and other relevant documents.
12.6. Banking. The funds of the Joint Venture shall be kept in such
-------
accounts as may be designated by the Management Committee. All withdrawals
therefrom shall be made on such signature or signatures as shall be designated
by the Management Committee. There shall be no commingling of the funds of the
Joint Venture with the funds of any other entity or person.
12.7. Tax Returns; Review. The Joint Venture shall be treated as a
-------------------
partnership for federal, state and municipal income tax and franchise tax
purposes, but this shall not be construed to extend the purposes or business of
the Joint Venture. The Managing Partner shall
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<PAGE>
prepare or cause to be prepared all federal, state and municipal partnership tax
returns required to be filed in accordance with the provisions of this
Agreement.
ARTICLE 13.
DISSOLUTION
AND LIQUIDATION OF THE JOINT VENTURE
------------------------------------
13.1. Dissolution Events. The Joint Venture shall be dissolved in the
------------------
manner hereinafter provided upon the happening of any of the following events:
13.1.1. The sale of the Property owned by the Joint Venture;
13.1.2. The agreement of the Venturers of the Joint Venture to
dissolve the Joint Venture or sell all or substantially all of the assets
of the Joint Venture;
13.1.3. The closing of the buy/sell agreement referenced in Articles
15 or 16 and only one Venturer is remaining in the Joint Venture;
13.1.4. The occurrence of any other event causing the dissolution of
the Joint Venture by operation of law; or
13.1.5. The entry of a final judgment, order or decree of a court of
competent jurisdiction adjudicating the Joint Venture to be bankrupt, and
the expiration without appeal of the period, if any, allowed by applicable
law for appeal.
13.2. Method of Liquidation. Upon the happening of any of the events
---------------------
hereinabove specified, the Venturers shall immediately commence to wind up the
affairs of the Joint Venture and shall liquidate the assets of the Joint Venture
as promptly as possible, unless the Venturers shall determine that an immediate
sale of the Joint Venture's assets would cause undue loss to the Venturers, in
which event (i) the liquidation may be deferred for a reasonable time, and/or
(ii) all or part of the Joint Venture's assets may be distributed in kind. The
Venturers shall continue to share net cash flow, profits and losses during the
period of liquidation in the same proportions as before dissolution. The
proceeds from liquidation of the Joint Venture, including repayment of any debts
of the Venturers to the Joint Venture, shall be applied in the order of priority
as follows:
13.2.1. To the satisfaction of debts of the Joint Venture other than
to the Venturers; provided, however, if the Joint Venture makes
distributions in kind of undivided interests in the Joint Venture's
property which secures mortgage indebtedness, then each of the Venturers
receiving such distribution of property in kind, subject to such mortgage
indebtedness, shall be severally liable (as among each other, but not for
the benefit of third parties) for its proportionate part of such mortgage
indebtedness (which need not be paid or otherwise discharged out of the
proceeds of liquidation) in proportion to its interest in such
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<PAGE>
property so distributed; provided, further, that no Venturer intends hereby
to incur (except as among each other, and then only to the extent of the
value of its interest), nor does it assume, any liability on any such
mortgage indebtedness which it has not previously incurred under the terms
of the instrument creating said mortgage indebtedness; then
13.2.2. To the establishment of any reserves deemed reasonably
necessary or appropriate by the Venturers for any contingent or unforeseen
liabilities or obligations of the Joint Venture. Such reserves established
hereunder shall be held for the purpose of paying any such contingent or
unforeseen liabilities or obligations and, at the expiration of such
period, as the Venturers may reasonably deem advisable, for distributing
the balance of such reserves in the manner provided hereinafter in this
Section; then
13.2.3. To the repayment of any liabilities or debts, other than
capital accounts, of the Joint Venture to any of the Venturers, including
any Equity Loan or Defaulting Loan; then
13.2.4. To the payment of each Venturer of its capital account; and
then
13.2.5. To the Venturers in proportion to their respective Percentage
Interest in the Joint Venture.
13.3. Date of Termination. The Joint Venture shall be terminated and
-------------------
dissolved when all of the cash or property available for application and
distribution under the preceding Section shall have been applied and distributed
in accordance with such Section. The establishment of any reserves in
accordance with the preceding Section shall not have the effect of extending the
term of the Joint Venture, but any such reserve shall be distributed in the
manner provided in such Section upon the expiration of the period of such
reserve.
ARTICLE 14.
TRANSFER OF JOINT VENTURE INTEREST
----------------------------------
14.1. No Venturer shall sell, transfer, assign, mortgage or otherwise
hypothecate all or any part of its interest in the Joint Venture without the
prior written consent of the other
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<PAGE>
Venturers; provided, however, that Ocean Vista shall have the right to transfer
all or any portion of its interest to any of its affiliates, provided the
affiliate has a comparable financial net worth. No Venturer shall have any
authority to transfer, convey, mortgage or otherwise hypothecate any of the
assets of the Joint Venture without the prior written consent of the other
Venturers.
ARTICLE 15.
BUY-SELL PROVISIONS
-------------------
15.1. Mandatory Buy-Sell. Any Venturer (the "Movant"), at any time
------------------
after the expiration of the Option Period, may elect to exercise the following
mandatory buy-sell rights by notifying, in writing, the other Venturers of such
election (the "Buy-Sell Notice"), to buy out from or to sell out to such other
Venturers, at the option of the non-Movant Venturers, as follows:
15.1.1. The Buy-Sell Notice shall contain a statement of the Movant's
valuation in cash (the "Valuation Amount") of the Joint Venture, prepared
by the Movant, and shall indicate that the Movant is willing and offers at
once to buy out from or to sell out to the non-Movant Venturers for a cash
price based upon said Valuation Amount.
15.1.2. The Venturer who receives a Buy-Sell Notice (the
"Respondent") is automatically granted and required to exercise an election
in writing delivered to the Movant within ninety (90) days after receipt of
the Buy-Sell Notice, either to (i) sell out to the Movant all of the
interest of such Respondent in the Joint Venture, or (ii) buy out from the
Movant all of the interest of the Movant in the Joint Venture, for a price
in cash, for the interest to be acquired, corresponding (in proportion to
the interest to be acquired) to the Valuation Amount established by the
Movant.
15.1.3. A Respondent who fails or refuses to exercise such option
either to buy or to sell within ninety (90) days after the receipt of the
Buy-Sell Notice shall be deemed to have exercised the option to sell
provided above.
15.1.4. A Respondent shall buy or sell, as the case may be, the
interest to be acquired hereunder within ninety (90) days after receipt of
such Buy-Sell Notice at a time and place in San Diego, California,
specified by the buyer of such interest (the "Buyer"), and the Movant shall
buy or sell the interest to be acquired hereunder within said 90-day period
at a time and place in San Diego, California, specified by the Buyer. The
foregoing mandatory buy-sell rights and obligations are subject to specific
enforcement. All expenses and fees (excluding legal fees) in connection
with closing and such sale(s) shall be paid equally by the buyer(s) and
seller(s). Each Venturer shall be responsible for their own legal fees
incurred in connection with the sale.
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<PAGE>
15.1.5. At the closing of the sale of the Venturer's interest in the
Joint Venture, the following shall occur: (i) the Buyer shall deliver the
purchase price in cash to the seller of said interest (the "Seller"), and
(ii) the Seller shall execute and deliver to the Buyer all documents
necessary to transfer all interest of the Seller in the Joint Venture, free
and clear of any claims, liens or encumbrances, except as provided herein
or those incurred by the Joint Venture.
15.1.6. Upon payment, the Seller shall have no further interest in
the Joint Venture, and the Buyer shall indemnify the Seller against all
obligations, if any (including any indebtedness secured by the Property of
the Joint Venture to third party creditors of the Joint Venture).
ARTICLE 16.
DEFAULT BY A VENTURER
---------------------
16.1. Events of Default. The following events shall be deemed to be
-----------------
events of default by a Venturer ("Events of Default"):
16.1.1. Failure of a Venturer to make, when due, any Capital
Contribution or advance required to be made under Article 4 or under the
terms of this Agreement and the continuance of such failure for a period of
ten (10) days after written notice thereof from a nondefaulting Venturer to
the other Venturers;
16.1.2. If any Venturer shall fail in the performance of or
compliance with any of the covenants, agreements, terms or conditions
contained in this Agreement, other than that referred to in the foregoing
Paragraph and such failure shall continue for a period of thirty (30) days
after written notice thereof from one Venturer to the other Venturers,
specifying in detail the nature of such failure, or in the case such
failure cannot with due diligence be cured within such period of thirty
(30) days, the Venturer fails to proceed promptly and with all due
diligence to cure the same and thereafter to prosecute the curing of such
failure with all due diligence (it being intended that in connection with a
failure not susceptible of being cured with due diligence within thirty
(30) days, that the time within which to cure the same shall be extended
for such period as may be necessary to complete the same with all due
diligence);
16.1.3. If any Venturer shall file a voluntary petition in bankruptcy
or shall be adjudicated a bankrupt or insolvent, or shall file any petition
or answer seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief for itself under
the present or future applicable federal bankruptcy act, or any other
present or future applicable federal, state or other statute or law
relative to bankruptcy, insolvency or other relief for debtors, or shall
seek or consent to or acquiesce in the appointment of any trustee,
receiver, conservator or liquidator of said Venturer, or of all or any
substantial
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<PAGE>
part of its properties or its interest in the Joint Venture [the term
"acquiesce" includes but is not limited to the failure to file a petition
or motion to vacate or discharge any order, judgment or decree providing
for such appointment within ten (10) days after the appointment];
16.1.4. If a court of competent jurisdiction shall enter an order,
judgment or decree approving a petition filed against any Venturer seeking
any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under the present or any future federal
bankruptcy act, or any other present or future applicable federal, state or
other statute of law relating to bankruptcy, insolvency or other relief for
debts and said Venturer shall acquiesce in the entry for such order,
judgment or decree [the term "acquiesce" includes but is not limited to the
failure to file a petition or motion to vacate or discharge such order,
judgment or decree within ten (10) days after the entry of the order,
judgment or decree], or such order, judgment or decree shall remain
unvacated and unstayed for an aggregate of ninety (90) days (whether or not
consecutive) from the date of entry thereof, or any trustee, receiver,
conservator or liquidator of said Venturer, or of all or any substantial
part of its property or its interest in the Joint Venture shall be
appointed without the consent or acquiescence of said Venturer and such
appointment shall remain unvacated and unstayed for an aggregate of sixty
(60) days (whether or not consecutive);
16.1.5. Any Venturer shall admit in writing its inability to pay its
debts as they mature; or
16.1.6. The appointment of a receiver for all or substantially all of
the assets of a Venturer and the failure to have such receiver discharged
within thirty (30) days after appointment.
16.2. Effect of Default. Upon the occurrence of an Event of Default
-----------------
by a Venturer, the other Venturer shall have the right to cause the Joint
Venture to pay the defaulting Venturer the fair market value of its interest in
the Joint Venture, determined pursuant to the provisions of Article 17, based on
the Venturer's Percentage Interest, after deducting all Equity Loans, set out in
Section 4.2, damages sustained by the Joint Venture, and taking into
consideration any outstanding indebtedness, liabilities, liens and obligations
relating to the Property for the purchase and redemption of its interest in the
Joint Venture.
16.2.1. Pursuit of the foregoing remedies shall not preclude pursuit
of any other remedies herein provided or any other remedies provided by
law, nor shall pursuit of any remedy herein provided constitute a
forfeiture or waiver of any amount due by a defaulting Venturer hereunder
or of any damages accruing by reason of the violation of any of the terms,
provisions and covenants herein contained. A defaulting Venturer shall be
responsible for the payment of all attorneys' fees reasonably incurred by
the Joint Venture and interest on all amounts by which the defaulting
Venturer is indebted to the Joint Venture hereunder at the highest lawful
rate.
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<PAGE>
16.2.2. No waiver of any violation shall be deemed or construed to
constitute a waiver of any other violation or breach of any of the terms,
provisions and covenants herein contained and forbearance to enforce one or
more of the remedies herein provided upon an event of default shall not be
deemed or construed to constitute a waiver of such default.
16.2.3. Each Venturer hereby agrees that in the event it shall
default as hereinabove provided, it shall execute and deliver such
conveyances, agreements, notes, instruments, or other documents which may
be necessary to confirm and render fully effective the transfer of the
defaulting Venturer's interest as herein provided. Notwithstanding
anything contained in this Paragraph, any such relinquishment and transfer
as herein provided shall not relieve the defaulting Venturer from any
obligation or liability under this Agreement which may have accrued prior
to the date of such relinquishment and transfer.
16.3. Failure to Make a Capital Contribution. In the event a Venturer
--------------------------------------
fails to make a required Capital Contribution when due, under Section 4.2, and
said default is not cured within the time period provided herein, then the
nondefaulting Venturer shall have the right, but not the obligation, to pursue
any of the remedies provided below, in addition to, and not in lieu of, any
remedies provided in Section 16.2.
16.3.1. Defaulting Loan. The nondefaulting Venturer, at its option,
---------------
may pay to the Joint Venture the Capital Contribution on behalf of the
defaulting Venturer. Any such Capital Contribution made by the
nondefaulting Venturer on behalf of the defaulting Venturer shall be
deemed to be a "Defaulting Loan." Any Defaulting Loan shall bear
interest at the lesser of (i) the highest rate allowed by law, or (ii)
twenty percent (20%).
16.3.2. Dilution of Venturer's Interest. The Venturers further agree
-------------------------------
that the nondefaulting Venturer may elect at any time after six (6) months
following the initial funding of a Defaulting Loan (provided said
Defaulting Loan has not been repaid prior to the date the election is made
by the nondefaulting Venturer) to have the defaulting Venturer's Percentage
Interest in the Joint Venture diluted and adjusted pursuant to the
provisions of Subparagraph 16.3.2.1 hereof, and all Positive Net Cash Flow
distributions shall thereafter be diluted from the date the Defaulting Loan
is advanced for the balance of the term of this Agreement.
16.3.2.1. Adjustment of Percentage Interest. The
nondefaulting Venturer's Percentage Interest shall equal the
following percentage: (a) the sum of (i) all amounts actually
funded by the nondefaulting Venturer, including any initial
capital, Capital Contributions and Defaulting Loans, plus (ii)
the amount of the Defaulting Loan funded by the nondefaulting
Venturer; divided by (b) the sum of (i) all amounts actually
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<PAGE>
funded by the Venturers, including the initial capital, Deficit
Capital Costs or Negative Net Cash Flow Contributions, and
Defaulting Loans, plus (ii) the Venturer's Defaulting Loans. The
Venturer's Interest of the defaulting Venturer equals the
percentage determined by subtracting the percentage determined
above from one hundred percent (100%).
For Example: Assume that the initial capitalization of the
-----------
nondefaulting Venturer is SEVEN THOUSAND FIVE HUNDRED DOLLARS
($7,500.00) and that of the defaulting Venturer is TWO THOUSAND
FIVE HUNDRED DOLLARS ($2,500.00). A request is made for a Deficit
Capital Cost Capital Contributions totaling TEN THOUSAND DOLLARS
($10,000.00) and the nondefaulting Venturer funds SEVEN THOUSAND
FIVE HUNDRED DOLLARS ($7,500.00) and the defaulting Venturer does
not fund its TWO THOUSAND FIVE HUNDRED DOLLAR ($2,500.00) pro
rata share. The nondefaulting Venturer makes a Defaulting Loan of
TWO THOUSAND FIVE HUNDRED DOLLARS ($2,500.00) on the defaulting
Venturer's behalf, then the nondefaulting Venturer's Percentage
Interest becomes eighty-eight and eighty-nine one hundredths
percent (88.89%), and that of the defaulting Venturer becomes
eleven and eleven one hundredths percent (11.11%).
Nondefaulting Venturer's Interest:
---------------------------------
($7,500 + $7,500 + $2,500) + $2,500 =
---------------------------------------------
($7,500 + $2,500 + $7,500 + $2,500) +($2,500)
$20,000.00
----------
$22,500.00 ................................. = 88.89%
Defaulting Venturer's Percentage Interest:
-----------------------------------------
100% - 88.89% .............................. = 11.11%
ARTICLE 17.
PROCEDURE FOR APPRAISEMENT
--------------------------
17.1. Selection of Appraisers. Within ten (10) days after an appraisal
-----------------------
is required under any provision hereof, each group or individual, as the case
may be, shall select an appraiser. If either party fails to name an appraiser
within the specified time, the other party may select the second appraiser.
Amended and Restated Joint Venture Agreement - Whispering Plams
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<PAGE>
17.2. Determination of Fair Market Value. The two appraisers so selected
----------------------------------
shall proceed to promptly determine the fair market value of the Joint Venture's
interest, including therein a fair market valuation of the interest and equity
in the Joint Venture of the Venturers in question, taking into consideration any
outstanding indebtedness, liabilities, liens and obligations of such fair market
value by the two appraisers, selected as hereinabove provided. The final
determination of the two appraisers shall be final and binding upon all the
parties; provided, however, if the two appraisers so selected are unable to
agree upon such fair market value, said two appraisers shall select a third
appraiser, whose determination as to such fair market value shall be averaged
with the appraisals of the other two appraisers, and the average of the three
appraisals shall be conclusive evidence as to such fair market value and shall
be final and binding upon all parties. The appraisers shall deliver a written
report of their appraisal to the Managing Partner, who shall provide copies
thereof to all interested parties.
17.3. Fees and Expenses. Each party shall pay the fee and expense of the
-----------------
appraiser selected by such party, and if a third appraiser is selected, the fee
of the third appraiser shall be borne equally by the parties appointing the
other two appraisers.
ARTICLE 18.
MISCELLANEOUS
-------------
18.1. Affiliated Corporations. The Managing Partner may retain (i) the
-----------------------
financial management and accounting expertise of a subsidiary or affiliated
company which shall provide accounting services, including, but not limited to,
establishment and use of computer programs and billing and accounting systems,
or (ii) the services of any other affiliated corporations, so long as the rates
charged therefor are substantially comparable to the rates charged in the
immediately comparable San Diego, California market for equally comparable
services in said market.
18.2. Exhibits. The Venturers hereby covenant and agree that each Exhibit
--------
attached hereto is incorporated herein as if fully set forth herein, and to the
extent the Exhibits attached to this Agreement are incomplete on the date
hereof, such Exhibits shall be completed and attached to this Agreement as
quickly as possible, using all due diligence. To the extent this Agreement may
be rendered unenforceable by the lack of completion of any of the Exhibits, such
defect in this Agreement shall be cured as such incomplete Exhibits are made
complete in accordance with this Section.
18.3. Notices. Any notices or other communications required or permitted
-------
hereunder shall be sufficiently given if in writing and (i) delivered
personally, (ii) forwarded by prepaid telegram, or (iii) sent by certified mail,
return receipt requested, postage prepaid, addressed as shown below, or to such
other address as the party concerned may substitute by written notice to the
other. All notices personally delivered shall be deemed received on the date of
delivery. All notices forwarded by prepaid telegram shall be deemed received two
(2) days after the date same are sent. All notices forwarded by mail shall be
deemed received on a date seven (7) days (excluding Sundays and legal holidays
when the U.S. mail is not delivered) immediately
Amended and Restated Joint Venture Agreement - Whispering Plams
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<PAGE>
following date of deposit in the U.S. mail; provided, however, the return
receipt indicating the date upon which all notices were received shall be prima
-----
facie evidence that such notices were received on the date on the return
- -----
receipt.
If to Golf Inns: THEODORE L. VALLAS
c/o Golf Inns of America, Inc.
2192 Palomar Airport Road
Carlsbad, California 92008
With copies to:
--------------
Rex B. Beatty, Esq.
Mulvaney, Kahan & Barry
First National Bank Building
17th Floor
401 West A. Street
San Diego, California 92101-7907
If to Ocean Vista: OCEAN VISTA LAND COMPANY
15821 Ventura Boulevard
Suite 550
Encino, California 91436
Attention: President
With a copy to:
--------------
Randolph D. Addison
Page & Addison, P.C.
15770 North Dallas Parkway, 5th Floor
Dallas, Texas 75248
The addresses and addressees may be changed by giving notice of such
change in the manner provided herein for giving notice. Unless and until such
written notice is received, the last address and addressee given shall be deemed
to continue in effect for all purposes.
18.4. Independent Corporation. Golf Inns recognizes and acknowledges
-----------------------
that Ocean Vista is an independent corporation, chartered under the laws of the
State of California, to whom Golf Inns will solely look and who is solely
responsible for the obligations and liabilities of Ocean Vista recited herein,
arising hereunder, or in any manner related to the transactions contemplated
hereby, and Golf Inns further recognizes and acknowledges that no other entity
or entities, including (i) Ocean Vista's parent corporation, (ii) any
individual, (iii) any corporation affiliated with Ocean Vista which may supply
services to or take actions in behalf of or for the benefit of Ocean Vista with
respect to the matter herein contemplated (it being agreed among and between the
parties hereto that the parent of and/or the affiliated corporations of Ocean
Vista may form, organize, provide services to, provide loans and funds to,
negotiate for, provide personnel to, make representations on behalf of, and from
time to time take actions on behalf of or for the benefit of Ocean Vista by
direct dealings with Golf Inns or those acting for it), or (iv) any other
corporation affiliated with Ocean Vista, although
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<PAGE>
such corporation may do any thing listed in (iii) above, is in any manner liable
or responsible for the obligations and liabilities of Ocean Vista, whether
recited herein, arising hereunder, or in any manner related to the transactions
contemplated hereby. As used in this Article, the term "Operator" shall mean
OCEAN VISTA LAND COMPANY, INC., a California corporation, and any Affiliate
thereof to whom the rights and obligations of "Ocean Vista" may be assigned
pursuant to the terms hereof.
18.5. Affiliates. It is agreed and understood among and between the
----------
parties hereto that the Affiliates of Ocean Vista may provide services for a fee
to Ocean Vista and that the provision of such services for a fee and the actions
taken in providing such services shall in no manner be construed to constitute
the undertaking by such Affiliate of any obligation, duty, or liability of Ocean
Vista to Golf Inns under the terms of this Agreement or any other relationship
existing between Ocean Vista and Golf Inns, unless specifically set forth in a
document executed by the party to be charged with such obligation, duty, or
liability. Ocean Vista may retain the services of any Affiliate of Ocean
Vista's parent company, so long as the rates charged therefor are substantially
comparable to the rates generally charged for equally comparable services in the
immediate market. Additionally, the fees paid for such services to such
Affiliates shall not be considered to constitute payments to others in detriment
to Golf Inns except as provided by the terms of this Agreement or the laws of
bankruptcy or insolvency which are applicable to Ocean Vista. Golf Inns
covenants that in dealing with representatives of an Affiliate of Ocean Vista,
that such direct dealings taken by such representative shall in no manner be
construed to be the direct action, obligation, duty, liability, or undertaking
of such Affiliate, and Golf Inns agrees that it shall not attempt to pierce the
corporate veil of Ocean Vista in order to impose any such liability.
18.6. Golf Inns' Inquiry. Golf Inns warrants and represents that it
------------------
has made such inquiry and investigation as it deems appropriate as to the
financial ability of Ocean Vista to perform all of its obligations, duties,
liabilities, and undertakings contemplated by the transaction from which this
Agreement arises and that it has no further inquiry it desires to make. Golf
Inns further warrants and represents that it is not relying on any other entity
to contribute to the financial wherewithal to Ocean Vista to carry out its
obligations, duties, liabilities, and undertakings, and no oral representations
have been made as to other financial support of Ocean Vista by any party or
entity. Golf Inns is thus solely relying on the financial ability of Ocean
Vista, and Golf Inns shall not attempt to pierce the corporate veil of Ocean
Vista in order to obtain financial contribution or responsibility.
18.7. Assignment. Except as expressly provided herein, this
----------
Agreement and any documents executed in connection herewith shall not be
assigned by any Venturer without the prior written consent of the other
Venturers.
18.8. Public Announcements. No party hereto shall make any public
--------------------
announcement or press release concerning this Agreement or the transactions
contemplated herein except as may be mutually agreed upon by the parties.
Amended and Restated Joint Venture Agreement - Whispering Plams
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<PAGE>
18.9. Severability. Should any portion of this Agreement be deemed
------------
unenforceable by a court of competent jurisdiction, the remaining portion hereof
shall remain unaffected and be interpreted as if such unenforceable portions
were initially deleted.
18.10. Approvals. Any consent or approval of either party referred
---------
to herein (by whatever words used) shall not be unreasonably withheld or
delayed, and neither party shall seek or obtain any payment in connection
therewith as a condition therefor. Except as otherwise expressly provided
herein, whenever either party has called upon the other to execute and deliver a
consent or approval in accordance with the terms of this Agreement, the failure
of such party to respond to the demand within fifteen (15) days after written
request therefor, or such other period as may be specifically set forth herein,
shall be deemed to be a consent or approval. In the event that either party
refuses to give its consent or approval to any request by the other, such
refusing party shall indicate by notice to the other the reason for such
refusal.
18.11. Integrated Agreement. This Agreement constitutes the entire
--------------------
agreement between the parties hereto and there are no agreements,
understandings, warranties or representations between the parties other then
those set forth herein.
18.12. Construction of Agreement. This Agreement concerns property
-------------------------
situated in the State of California and shall be deemed to be a contract made
under the laws of said state.
18.13. Amendment and Waiver. This Agreement may not be amended or
--------------------
modified in any way except by instrument in writing executed by all parties
hereto; provided, however, any Venturer may, in writing (i) extend in writing
the time for performance of any of the obligations of the other, (ii) waive in
writing any inaccuracies and representations by the other contained in this
Agreement, (iii) waive in writing compliance by the other with any of the
covenants contained in this Agreement, and (iv) waive in writing the
satisfaction of any condition that is precedent to the performance by the party
so waiving of any of its obligations under this Agreement.
18.14. Successors and Assigns. This Agreement shall be binding upon
----------------------
and inure to the benefit of the parties hereto and their respective successors,
legal representatives and assigns where permitted herein.
18.15. Unavoidable Delay. The provisions of this Section shall be
-----------------
applicable if there shall occur during the term of this Agreement any (i)
strike(s), lockout(s) or labor dispute(s), (ii) inability to obtain labor or
materials, or reasonable substitutes therefor, (iii) acts of God, governmental
restrictions, regulations or controls, enemy or hostile governmental action,
civil commotion, fire, or other casualty, or (iv) other conditions similar to
those enumerated in this Section beyond the reasonable control of the party
obligated to perform. As the result of any of the above-described events, if
the parties hereto shall fail punctually to perform any obligation on its part
to be performed under this Agreement, then, upon written notice to the other,
within ten (10) days of such event, such failure shall be excused and not be a
breach of this Agreement by the party claiming an unavoidable delay, but only to
the extent occasioned by such event. If any right or option of either party to
take any action under or with respect
Amended and Restated Joint Venture Agreement - Whispering Plams
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<PAGE>
to the term of this Agreement is conditioned upon the same being exercised
within any prescribed period of time or at or before a named date, then such
prescribed period of time or such named date shall be deemed to be extended or
delayed, as the case may be, upon written notice, as provided above, for a time
equal to the period of the unavoidable delay. Notwithstanding anything contained
herein to the contrary, the provisions of this Section shall not be applicable
to the parties' obligation to pay any sums, monies, costs, charges or expenses
required to be paid pursuant to the terms of this Agreement.
18.16. Documentation. If necessary to carry out the intent of this
-------------
Agreement, each party agrees to execute and provide to the other party any and
all other instruments, documents, conveyances, assignments and agreements which
may be necessary to effectuate, carry out and perform the terms, provisions and
conditions of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first written above.
GOLF INNS:
---------
GOLF INNS OF AMERICA, INC.,
Attest: a California corporation
_____________________________ By:___________________________
Title:_______________________ Title:________________________
OCEAN VISTA:
-----------
OCEAN VISTA LAND COMPANY,
Attest: a California corporation
_____________________________ By:___________________________
Title:_______________________ Title:________________________
Amended and Restated Joint Venture Agreement - Whispering Plams
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<PAGE>
EXHIBIT 3.37
ARTICLES OF INCORPORATION
-------------------------
OF
--
SWC GOLF GROUP, INC.
--------------------
The undersigned natural person, of the age of eighteen (18) years or more,
acting as incorporator of a corporation under the Texas Business Corporation
Act, hereby adopts the following Articles of Incorporation for such corporation.
ARTICLE ONE
-----------
The name of the corporation is SWC Golf Group, Inc.
ARTICLE TWO
-----------
The period of its duration is perpetual.
ARTICLE THREE
-------------
The purpose for which the corporation is organized is to engage in the
businesses of establishing, developing, building, designing, constructing,
maintaining, managing, operating, buying, selling, acquiring, leasing, trading,
and dealing in one or more private clubs and/or restaurants for the providing of
refreshments, entertainment, exercise, health, and athletic facilities and
social diversions for their members and guests and to afford all customary
privileges and accommodations of a private club for profit, and to engage in
such other related activities and make such other investments as the Board of
Directors of the corporation may from time to time deem advisable, both within
and without the State of Texas, and to do all things incidental thereto or
connected therewith which are necessary, proper, advisable, or convenient in the
premises and are not forbidden by law.
ARTICLE FOUR
------------
The aggregate number of shares of capital stock which the corporation has
authority to issue is one thousand (1,000) shares of common stock of the par
value of One Dollar ($1.00). The shares shall be designated as common stock and
shall have identical rights, privileges, and powers in every respect. Cumulative
voting shall not be allowed and no shareholder shall have any preemptive rights.
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<PAGE>
ARTICLE FIVE
------------
The corporation will not commence business until it has received for the
issuance of its shares consideration of the value of One Thousand Dollars
($1,000.00), consisting of money, labor done, or property actually received.
ARTICLE SIX
-----------
The address of its initial registered office is 350 North St. Paul Street,
Dallas, Texas 75201, and the name of its initial registered agent at such
address is C T Corporation System.
ARTICLE SEVEN
-------------
The number of directors constituting the initial board of directors is
three (3), and the names and addresses of the persons who shall serve as
directors until the first annual meeting of the shareholders or until their
successors are elected and qualified are:
Murry E. Page 15770 Dallas Parkway,
5th Floor
Dallas, Texas 75248
Randolph D. Addison 15770 Dallas Parkway,
5th Floor
Dallas, Texas 75248
W. Keith Bryant 15770 Dallas Parkway,
5th Floor
Dallas, Texas 75248
ARTICLE EIGHT
-------------
The name and address of the incorporator is Linda Blanton-Myers, 15770
Dallas Parkway, 5th Floor, Dallas, Texas 75248.
/s/ Linda Blanton-Myers
-----------------------
Linda Blanton-Myers
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<PAGE>
EXHIBIT 3.38
BYLAWS FOR THE REGULATION, EXCEPT AS
OTHERWISE PROVIDED BY STATUTE OR ITS
ARTICLES OF INCORPORATION, OF
SWC GOLF GROUP, INC.
ARTICLE I
OFFICES
Section 1. Principal Office. The corporation will maintain offices for the
----------------
transaction of business of the corporation at 3702 Via de la Valle, Suite 202,
Del Mar, California 92104.
Section 2. Other Offices. Branch or affiliate offices may at any time be
-------------
established by the Board of Directors at any place or places where the
corporation is qualified to do business.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. Place of Meetings. All meetings of shareholders shall be held
-----------------
at the principal office of the corporation or at any other place which may be
(i) designated by the Board of Directors, or (ii) consented to by the written
consent of all shareholders entitled to vote thereat, given either before or
after the meeting and filed with the Secretary of the corporation, or (iii) in
the city of residence of any shareholder holding over two-thirds of the capital
stock of the corporation.
Section 2. Annual Meetings. The annual meeting of shareholders shall be
---------------
on the 1st Monday of May in each year at 10:00 a.m.; provided, however, that
should said day fall upon a legal holiday, then any such annual meeting of
shareholders shall be held at the same time and place on the next day thereafter
ensuing which is not a legal holiday. At such meetings, Directors shall be
elected, reports of the affairs of the corporation shall be considered, and any
other business may be transacted which is within the power of the shareholders.
Section 3. Special Meetings. Special meetings of the shareholders for
----------------
any purpose whatsoever may be called at any time either by the President or by
the Board of Directors, to be held at such time as he or they may designate. In
addition, one or more shareholders holding not less than one-fifth of the voting
power of the corporation may call such a meeting by causing a written request to
be sent by registered mail or delivered personally to the President, Vice
President or Secretary. The officer forthwith shall cause notice to be given,
as provided below, that a meeting will be held at a time, fixed by the
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<PAGE>
officer, not less than ten (10) nor more than sixty (60) days after the receipt
of the request.
Section 4. Notice of Meeting. Not less than ten (10) days prior to any
-----------------
meeting of shareholders, the Secretary or his delegate shall cause written
notice of such meeting to be given to all shareholders entitled to vote thereat.
If a shareholder gives no address, notice shall be deemed to have been duly
given if sent by mail or other means of written communication addressed to the
place where the principal office of the corporation is situated, or if published
at least once in a newspaper of general circulation in the county in which said
office is located.
The notice shall specify the place, the day and the hour of such
meeting, and, in the case of a special meeting, the general nature of the
business to be transacted. No action may be taken at any meeting of shareholders
on any of the following proposals unless the notice thereof specifies the
general nature of the proposal: (a) a proposal to sell, lease, convey, exchange,
transfer or otherwise dispose of all, or substantially all, of the property or
assets of the corporation, (b) a proposal to merge or consolidate with another
corporation, domestic or foreign, (c) a proposal to reduce the stated capital of
the corporation, (d) a proposal to amend the Articles of Incorporation, (e) a
proposal to wind up and dissolve the corporation, or (f) a proposal to adopt a
plan of distribution of shares, securities, or any other consideration (other
than money) in the process of winding up.
Section 5. Consent of Absentees. The transactions conducted at any
--------------------
meeting of shareholders, either annual or special, however called and noticed,
shall be as valid as though had at a meeting duly held after regular call and
notice, if a quorum be present either in person or by proxy, and if, either
before or after the meeting, each of the shareholders entitled to vote, not
present in person or by proxy, signs a written waiver of notice, a consent to
the holding of such meeting, or an approval of the minutes thereof. All such
waivers, consents or approvals shall be filed with the corporate records or made
a part of the minutes of the meeting.
Section 6. Quorum. The presence in person or by proxy of persons
------
entitled to vote a majority of the voting shares at any meeting shall constitute
a quorum for the transaction of business. The shareholders present at a duly
called or held meeting at which a quorum is present may continue to do business
until adjournment, notwithstanding the withdrawal of enough shareholders to
leave less than a quorum.
Section 7. Voting. Unless a record date for voting purposes be fixed,
------
as hereinafter provided, only persons in whose names shares entitled to vote
stand on the stock records of the corporation as of the date of such meeting
shall be entitled to vote thereat. Except as otherwise provided by law or the
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<PAGE>
Articles of Incorporation, every shareholder shall be entitled to one vote for
each share standing in his name on the record of shareholders of the
corporation. Voting rights shall be noncumulative. Except as otherwise provided
herein or in the Articles of Incorporation, all corporate actions shall be
determined by vote of a majority of the votes cast at a meeting of shareholders
entitled to vote thereat. Such vote may be viva voce or by ballot; provided,
---------
however, that all elections for Directors must be by ballot upon demand made by
a shareholder at any election and before the voting begins. The candidates
receiving the highest number of votes up to the number of Directors to be
elected shall be elected.
Section 8. Proxies. Every person entitled to vote or execute consents
-------
shall have the right to do so either in person or by one or more agents
authorized by a written proxy executed by such person or his duly authorized
agent and filed with the Secretary of the corporation.
Section 9. Adjourned Meetings and Notice Thereof. Any shareholders'
-------------------------------------
meeting, annual or special, whether or not a quorum is present, may be adjourned
from time to time by the vote of a majority of the shares, the holders of which
are either present in person or represented by proxy thereat, but in the absence
of a quorum, no other business may be transacted at such meeting.
When any shareholders' meeting, either annual or special, is adjourned
for thirty (30) days or more, notice of the adjourned meeting shall be given as
in the case of an original meeting. Except as provided above, it shall not be
necessary to give any notice of any adjournment or of the business to be
transacted at any adjourned meeting other than by announcement at the meeting at
which such adjournment is taken.
Section 10. Action Without Meeting. Any action which may be taken at
----------------------
a meeting of the shareholders may be taken without a meeting if authorized by a
writing signed by all of the persons who would be entitled to vote upon such
action at a meeting and filed with the Secretary of the corporation; provided,
however, a meeting shall be held for dissolution, transfer of all or
substantially all of the assets of the corporation, or for merger or
consolidation of the corporation with other corporations, if same is required
under applicable law.
ARTICLE III
DIRECTORS
Section 1. Powers. Subject to limitations imposed by law or by the
------
Articles of Incorporation, all corporate powers shall be exercised by or under
the authority of, and the business and affairs of the corporation shall be
controlled by, the Board of Directors. In the exercise of its powers, the Board
may appoint an Executive Committee and other committees and may delegate to
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<PAGE>
the Executive Committee any of the powers and authority of the Board in the
management of the business and affairs of the corporation, except the power to
declare dividends and to adopt, amend or repeal bylaws. The Executive Committee
shall be composed of two or more Directors.
Section 2. Number of Directors. The authorized number of Directors of the
-------------------
corporation shall be not less than one nor more than five until changed by
amendment of the Articles of Incorporation or by a bylaw duly adopted by the
shareholders amending this section. Directors need not be shareholders of the
corporation.
Section 3. Election and Term of Office. The Directors shall be elected at
---------------------------
the annual meeting of shareholders, but if any such annual meeting is not held
or the Directors are not elected thereat, Directors may be elected at any
special meeting of shareholders held for that purpose. Directors shall hold
office until the election and qualification of their respective successors.
Section 4. Vacancies. Vacancies in the Board of Directors may be filled
----------
by a majority of the remaining Directors, though less than a quorum, or by a
sole remaining Director, and each Director so elected shall hold office until
his successor is elected at an annual or a special meeting of the shareholders.
If the entire Board of Directors resigns at one time, the shareholders shall,
within a reasonable time thereafter, at a regular or special meeting, as
provided herein, elect a new Board of Directors.
A vacancy in the Board of Directors shall be deemed to exist in the case
of the death, resignation or removal of any Director, or if at any annual or
special meeting of shareholders at which any Director is elected the authorized
number of Directors is increased or if the shareholders fail to elect the full
authorized number of Directors to be voted for at that meeting.
The shareholders may elect a Director or Directors at any time to fill any
vacancy or vacancies not filled by the remaining Director or Directors. If the
Board of Directors accepts the resignation of a Director tendered to take effect
at a future time, the Board or the shareholders shall have the power to elect a
successor to take office when the resignation is to become effective.
No reduction of the authorized number of Directors shall have the effect of
removing any Director prior to the expiration of his term of office.
Section 5. Quorum. A majority of the authorized number of Directors shall
------
be necessary to constitute a quorum of the Board for the transaction of
business. Every act or decision done or made by a majority of the Directors
present at a meeting duly
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<PAGE>
held at which a quorum is present shall be regarded as the act of the Board
of Directors, unless a greater number be required by law.
Section 6. Place of Directors' Meetings. Meetings of the Board of
----------------------------
Directors shall be held at the principal office of the corporation, or at any
other location which has been designated by resolution of the Board, or by
written consent of all of the Directors.
Section 7. Regular Meetings. Immediately following each annual meeting of
----------------
shareholders, the Board of Directors shall hold a regular meeting for the
purpose of electing officers and transacting any other business which may come
before them. No notice of such meeting need be given.
Section 8. Special Meetings. Special meetings of the Board of Directors
----------------
for any purpose or purposes shall be called by the President, or, if he is
absent or unable or refuses to act, by any Vice President or by any two
Directors.
Written notice of the time and place of special meetings shall be delivered
personally to each Director or sent to each Director by mail or other form of
written communication, charges prepaid, addressed to him at his address as is
shown upon the records of the corporation, or, if it is not so shown and if it
is not readily ascertainable, addressed to him at the city or place where the
meetings of the Directors are regularly held. Notices mailed or telegraphed
shall be deposited in the United States mail or delivered to the telegraph
company at the place where the principal office of the corporation is located at
least forty-eight (48) hours prior to the time of the holding of the meeting,
and notices delivered personally shall be so delivered at least twenty-four (24)
hours prior to the time of the holding of the meeting.
Section 9. Notice of Adjournment. Notice of the time and place of holding
---------------------
an adjourned meeting need not be given to absent Directors if the time and place
are fixed at the meeting adjourned.
Section 10. Waiver of Notice: Consent to Meeting. The transactions
-------------------------------------
conducted at any meeting of the Board of Directors, however called or noticed or
wherever held, shall be as valid as though conducted at a meeting duly held
after regular call and notice if a quorum is present and if, either before or
after the meeting, each of the Directors signs a waiver of notice, a consent to
hold such a meeting, or an approval of the minutes thereof. All such waivers,
consents or approvals shall be filed with the corporate records and made a part
of the minutes of the meeting.
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<PAGE>
Section 11. Adjournment. A quorum of the Directors may adjourn to meet
-----------
again at a set day and hour, and in the absence of a quorum, a majority of the
Directors present may adjourn from time to time until the time fixed for the
next regular meeting of the Board.
Section 12. Action Without Meeting. Any action required or permitted to
----------------------
be taken by the Board of Directors may be taken without a meeting if all members
of the Board shall individually or collectively consent in writing to such
action. Such written consent or consents shall be filed with the minutes of the
proceedings of the Board. Such action by written consent shall have the same
force and effect as a unanimous vote of such Directors.
Section 13. Fees and Compensation. Directors shall not receive any stated
---------------------
salary for their services as Directors, but by resolution of the Board, a fee or
other remuneration, with or without expenses of attendance, may be allowed for
attendance at each meeting. Nothing herein contained shall be construed to
preclude any Director from serving the corporation in any other capacity as an
officer, agent or employee, or otherwise, and receiving compensation therefor.
Section 14. Indemnification of Directors, Officers and Employees.
----------------------------------------------------
A. In the event a person is sued, either alone or with others, because he
is or was a Director, officer or employee of the corporation, in any proceeding
arising out of his alleged misfeasance or nonfeasance in the performance of his
duties as such Director, officer or employee, or out of any alleged wrongful act
by the corporation, he shall be indemnified for his reasonable expenses,
including attorneys' fees incurred in the defense of the proceeding, if both of
the following conditions exist: (i) the person sued is successful in whole or in
part, or the proceeding against him is settled with the approval of the court,
and (ii) the court finds that his conduct fairly and equitable merits such
indemnity.
The amount of such indemnity may be assessed against the corporation, its
receiver, its trustee, or any other proper party, by the court in the same or in
a separate proceeding and shall be so much of the expenses, including attorneys'
fees incurred in the defense of the action as the court determines and finds to
be reasonable. Application for such indemnity may be made either by a person
sued or by the attorney or other person rendering services to him in
connection with the defense, and the court may order fees and expenses to be
paid directly to the attorney or other person although he is not a party to the
proceeding. Notice of the application for such indemnity shall be served upon
the corporation, its receiver, or its trustee and upon the plaintiff and other
parties to the proceeding. The court may also order notice to be given to the
shareholders in
page 6
<PAGE>
the manner provided elsewhere in these bylaws for giving notice of shareholders'
meetings, in such form as the court directs.
B. Notwithstanding the foregoing provisions, the Board of Directors may
authorize the corporation to pay expenses incurred by or to satisfy a judgment
or fine rendered or levied against a present or former Director, officer or
employee of the corporation in an action brought by a third party against such
person (whether or not the corporation is joined as a party defendant) to impose
a liability or penalty on such person for an act alleged to have been committed
by such person in the performance of his duties as such Director, officer or
employee, or by the corporation, or by both, provided the Board of Directors
determines that such Director, officer or employee was acting in good faith
within what he reasonably believed to be the scope of his employment or
authority and for a purpose which he reasonably believed to be in the best
interests of the corporation or its shareholders. Payments authorized hereunder
include amounts paid and expenses incurred in settling any such action or
threatened action. This Paragraph does not apply to any action instituted or
maintained as the right of the corporation by a shareholder or holder of a
voting trust certificate representing shares of the corporation.
C. The provisions of this Section shall apply to the estate, executor,
administrator, heirs, legatees or devisees of any such present or former
Director, officer or employee of the corporation.
D. The Board of Directors may, at its discretion, authorize the purchase
of a policy or policies of insurance against any liability of the corporation to
indemnify any person pursuant to this Section, containing such terms and
conditions as the Board may deem appropriate. Such policy or policies may
include provisions for the direct indemnification of directors, officers or
other persons for expenses of a kind not subject to indemnification hereunder,
provided the premiums on such combined policy are, in the judgment of the Board,
fairly allocated between the corporation and the insured persons.
E. The foregoing provisions of this Section 14 shall not be considered as
limiting the right of indemnification permitted by the Texas Business
Corporation Act, Articles 2.021, but indemnification shall be to the maximum
extent permitted under Texas Business Corporation Act, Article 2.02-1.
ARTICLE IV
OFFICERS
Section 1. Officers. The corporation shall have a President, one or more
--------
Vice Presidents, a Secretary and a Treasurer. Such officers shall be elected
annually by the Board
page 7
<PAGE>
of Directors and each shall hold office until he shall resign or shall be
removed or otherwise disqualified to serve and until his successor shall be
elected.
Section 2. Other Officers. The corporation may also have, in the
--------------
discretion of the Board of Directors, a Chairman of the Board, one or more
Assistant Secretaries, one or more Assistant Treasurers, and such other officers
and agents shall hold office for such terms and have such authority and perform
such duties as the Board of Directors may from time to time specify, and shall
hold office until they shall resign or shall be removed or otherwise
disqualified to serve.
Section 3. Removal and Resignation. Any officer or agent may be removed,
-----------------------
either with or without cause, by a majority of the Directors at the time in
office at any regular or special meeting of the Board, or, except in case of an
office chosen by the Board of Directors, by any officer upon whom such power of
removal may be conferred by the Board of Directors.
Any officer or agent may resign at any time by giving written notice to the
Board of Directors, the President or the Secretary of the corporation. Any such
resignation shall take effect as of the date of the receipt of such notice or at
any later time specified therein, and unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
Section 4. Vacancies. A vacancy in any office because of death,
---------
resignation, removal, disqualification, or any other cause shall be filled in
the manner prescribed in these Bylaws for regular appointments to such office.
Section 5. Chairman of the Board. The Chairman of the Board, if there
---------------------
shall be such an officer, shall, if present, preside at all meetings of the
Board of Directors and exercise and perform such other powers and duties as may
from time to time be assigned to him by the Board of Directors.
Section 6. President. Subject to such supervisory powers, if any, as may
---------
be given by the Board of Directors to the Chairman of the Board, if there be
such an officer, the President shall be the chief executive officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and affairs of the
corporation. He shall preside at all meetings of the shareholders and, in the
absence of the Chairman of the Board, at all meetings of the Board of Directors.
He shall be an ex officio member of all the standing committees, including the
----------
Executive Committee, if any, and shall have the general powers and duties of
management usually vested in the office of the President of a corporation and
shall have such other powers and duties as may be prescribed by the Board of
Directors.
page 8
<PAGE>
Section 7. Vice President. In the absence or disability of the President,
--------------
the Vice Presidents, in order of their rank as fixed by the Board of Directors,
or, if not ranked, the Vice President designated by the Board of Directors,
shall perform all the duties of the President, and when so acting, shall have
all the powers of and be subject to all the restrictions upon the President. The
Vice Presidents shall have such other powers and perform such other duties as
from time to time may be prescribed for them respectively by the Board of
Directors.
Section 8. Secretary. The Secretary shall keep, or cause to be kept, a book
---------
of minutes at the principal office of the corporation, or at such other place as
the Board of Directors may order, of all meetings of Directors and shareholders,
with the time and place of holding, whether regular or special, and if special,
how authorized, the notice thereof given, the names of those present at
Directors' meetings, the number of shares present or represented at
shareholders' meetings and the proceedings thereof.
The Secretary shall keep, or cause to be kept, at the principal office of
the corporation, or at the office of the corporation's transfer agent, a share
register, or a duplicate share register, showing the names of the shareholders
and their addresses, the number and classes of shares held by each, and the
number and date of cancellation of every certificate surrendered for
cancellation.
The Secretary shall give, or cause to be given, notice of all meetings of
the shareholders and of the Board of Directors required by these Bylaws or by
law to be given, and he shall keep the seal of the corporation in safe custody
and shall have such other powers and perform such other duties as may be
prescribed by the Board of Directors.
Section 9. Treasurer. The Treasurer shall keep and maintain, or cause to
---------
be kept and maintained, adequate and correct accounts of the properties and
business transactions of the corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital surplus and shares.
Any surplus, including earned surplus, paid-in surplus and surplus arising from
a reduction of stated capital, shall be classified according to source and shown
in a separate account. The books of account shall at all reasonable times be
open to inspection by any Director.
The Treasurer shall deposit all moneys and other valuables in the name and
to the credit of the corporation with such depositories as may be designated by
the Board of Directors. He shall disburse the funds of the corporation as may be
ordered by the Board of Directors, shall render to the President and Board,
whenever they request it, an account of all of his transactions
page 9
<PAGE>
as Treasurer and of the financial condition of the corporation, and shall have
such other powers and perform such other duties as may be prescribed by the
Board of Directors.
ARTICLE V
MISCELLANEOUS
Section 1. Record Date and Closing Stock Books. The Board of Directors may
-----------------------------------
fix a time as a record date for the determination of the shareholders entitled
to notice of and to vote at any meeting of shareholders or entitled to receive
any dividend or distribution or any allotment of rights, or to exercise rights
in respect to any change, conversion or exchange of shares. The record date so
fixed shall not be more than fifty (50) days prior to the date of the meeting or
event for the purposes of which it is fixed. When a record date is so fixed,
only shareholders who are of record on that date are entitled to notice of and
to vote at the meeting or to receive the dividend, distribution or allotment of
rights, or to exercise the rights, as the case may be, notwithstanding any
transfer of any shares on the books of the corporation after the record date.
The Board of Directors may close the books of the corporation against
transfers of shares during the whole or any part of a period not more than fifty
(50) days prior to the date of a shareholders' meeting, the date when the right
to any dividend, distribution or allotment of rights vests, or the effective
date of any change, conversion or exchange of shares.
Section 2. Inspection of Corporate Records. The share register or duplicate
-------------------------------
share register, the books of account and minutes of proceedings of the
shareholders, the Board of Directors and the Executive Committee shall be open
to inspection upon the written demand of any shareholder, or the holder of a
voting trust certificate, at any reasonable time and for a purpose reasonably
related to his interests as a shareholder, or as the holder of such voting trust
certificate, and shall be exhibited at any time when required by demand at any
shareholders' meeting of ten percent (10%) of the shares represented at the
meeting. Such inspection may be made in person or by an agent or attorney and
shall include the right to make extracts. Demand of inspection, other than at a
shareholders' meeting, shall be made in writing upon the President, Secretary or
Assistant Secretary of the corporation.
Every Director shall have the right at any reasonable time to inspect the
books, records, documents of every kind, and the physical properties of the
corporation and of its subsidiary corporations, domestic or foreign.
Section 3. Certificates for Shares. A certificate or certificates for
-----------------------
shares of the corporation (in such form as may be approved from time to time by
the Board of Directors) shall be
page 10
<PAGE>
issued to each stockholder when such shares are fully paid. The certificates
shall be numbered and the holder's name, number of shares and the date of issue
shall be entered in the books of the corporation as they are issued. The
certificates shall exhibit the holder's name, the number and class of shares
evidenced thereby or a statement that the shares are without par value, and such
additional information as may be required by the Board of Directors. They shall
be signed by the President or a Vice President and the Secretary or an Assistant
Secretary, or be authenticated by facsimiles of the signatures of the President
and the Secretary. Every certificate authenticated by a facsimile of a signature
must be countersigned by a transfer clerk.
Section 4. Transfer of Stock. The corporation shall recognize the right of
-----------------
the person registered on its books as owner of shares to receive dividends and
to vote as such owner. Shares may be transferred on the books of the corporation
only by the person named in the certificate as the owner thereof, or by his
agent, attorney or legal representative, upon surrender to the Secretary of the
corporation of a certificate, duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer. The Secretary shall thereupon
cause a new certificate to be issued to the person entitled thereto and shall
cancel the old certificate record the transaction upon the books of the
corporation.
Section 5. Lost Certificates. New certificates for shares or other
-----------------
securities of the corporation may be issued for an in place of any such
instrument theretofore issued which is alleged to have been lost or destroyed.
The Directors may, in their discretion, require the owner of such lost or
destroyed instrument, or his legal representative, to give the corporation a
bond or other security in an adequate amount as indemnity against any claim that
may be made against the corporation. A new instrument may be issued, however,
without requiring any bond or other security when in the judgment of the
Directors it is proper to do so.
Section 6. Corporate Seal. A corporate seal shall be provided and adopted
--------------
by the Board of Directors and shall contain the name of the corporation and such
other wording as the Board may deem suitable or as may be required by law.
Section 7. Contracts - Execution of Documents. The Board of Directors may
----------------------------------
authorize any officer or officers, agent or agents to enter into any contract or
execute any instrument in the name of an on behalf of the corporation, and such
authority may be general or confined to specific instances, and unless so
authorized by the Board of Directors, no officer, agent or employee shall have
any power or authority to bind the corporation by any contract or engagement or
to pledge its credit
page 11
<PAGE>
or to render it liable for any purpose or in any amount; except, however, the
club membership secretary may execute membership application agreements on
behalf of the corporation.
All checks, drafts or other orders for payment of money, notes or other
evidences of indebtedness issued in the name of or payable to the corporation
shall be signed or endorsed by such person or persons and in such manner as from
time to time shall be determined by resolution of the Board of Directors.
Section 8. Representation of Shares of Other Corporations. The President
----------------------------------------------
or any Vice President and the Secretary or Assistant Secretary of this
corporation are authorized to vote, represent and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority herein
granted to said officers to vote or represent on behalf of this corporation any
and all shares held by this corporation in any other corporation or corporations
may be exercised either by such officers in person or by any person authorized
so to do by proxy or power of attorney duly executed by said officers.
Section 9. Inspection of Bylaws. The corporation shall keep in its
--------------------
principal office for the transaction of business the original or a copy of these
Bylaws, as amended or otherwise altered to date, certified by the Secretary,
which shall be open to inspection by the shareholders at all reasonable times
during office hours.
ARTICLE VI
AMENDMENTS
Section 1. Power of Shareholders. New Bylaws may be adopted or these Bylaws
---------------------
may be amended or repealed by the vote of shareholders entitled to exercise a
majority of the voting power of the corporation or by the written consent of
such shareholders, except as otherwise provided by the Articles of
Incorporation, provided that the vote of written consent of shareholders holding
more than seventy-five percent (75%) of the voting power of the corporation
shall be required to reduce the authorized number of Directors.
Section 2. Power of Directors. Subject to the right of shareholders to
------------------
adopt, amend or repeal these Bylaws, these Bylaws, other than a Bylaw or
amendment thereof changing the authorized number of Directors, may be adopted,
amended or repealed by the Board of Directors at any regular or special meeting
thereof.
page 12
<PAGE>
================================================================================
EXHIBIT 4.1
COBBLESTONE GOLF GROUP, INC.
ISSUER,
AND
THE GUARANTORS NAMED HEREIN
AND
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
TRUSTEE
__________________________
INDENTURE
Dated as of June 4, 1996
___________________________
$70,000,000
11 1/2% Senior Notes due 2003
===============================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
<TABLE>
<S> <C> <C>
SECTION 1.1. Definitions................................................. 1
-----------
SECTION 1.2. Incorporation by Reference of TIA........................... 17
---------------------------------
SECTION 1.3. Rules of Construction....................................... 18
---------------------
ARTICLE II
THE SECURITIES
SECTION 2.1. Form and Dating............................................. 19
---------------
SECTION 2.2. Execution and Authentication................................ 19
----------------------------
SECTION 2.3. Registrar and Paying Agent.................................. 20
--------------------------
SECTION 2.4. Paying Agent to Hold Assets in Trust........................ 20
------------------------------------
SECTION 2.5. Securityholder Lists........................................ 21
--------------------
SECTION 2.6. Transfer and Exchange....................................... 21
---------------------
SECTION 2.7. Replacement Securities...................................... 27
----------------------
SECTION 2.8. Outstanding Securities...................................... 27
----------------------
SECTION 2.9. Treasury Securities......................................... 28
-------------------
SECTION 2.10. Temporary Securities........................................ 28
--------------------
SECTION 2.11. Cancellation................................................ 28
------------
SECTION 2.12. Defaulted Interest.......................................... 28
------------------
ARTICLE III
REDEMPTION
SECTION 3.1. Right of Redemption......................................... 30
-------------------
SECTION 3.2. Notices to Trustee.......................................... 30
------------------
SECTION 3.3. Selection of Securities to Be Redeemed...................... 30
--------------------------------------
SECTION 3.4. Notice of Redemption........................................ 31
--------------------
SECTION 3.5. Effect of Notice of Redemption.............................. 32
------------------------------
SECTION 3.6. Deposit of Redemption Price................................. 32
---------------------------
SECTION 3.7. Securities Redeemed in Part................................. 32
---------------------------
</TABLE>
i
<PAGE>
PAGE
----
ARTICLE IV
COVENANTS
<TABLE>
<S> <C> <C>
SECTION 4.1. Payment of Securities...................................... 33
---------------------
SECTION 4.2. Maintenance of Office or Agency............................ 33
-------------------------------
SECTION 4.3. Limitation on Restricted Payments.......................... 33
---------------------------------
SECTION 4.4. Corporate and Partnership Existence........................ 35
-----------------------------------
SECTION 4.5. Payment of Taxes and Other Claims.......................... 36
---------------------------------
SECTION 4.6. Maintenance of Properties and Insurance.................... 36
---------------------------------------
SECTION 4.7. Compliance Certificate; Notice of Default.................. 37
-----------------------------------------
SECTION 4.8. Reports.................................................... 37
-------
SECTION 4.9. Limitation on Status as Investment Company................. 38
------------------------------------------
SECTION 4.10. Limitation on Transactions with Affiliates................. 38
------------------------------------------
SECTION 4.11. Limitation on Incurrence of Additional Indebtedness and
-------------------------------------------------------
Disqualified Capital Stock................................. 38
-----------------------------
SECTION 4.12. Limitations on Dividends and Other Payment Restrictions
-------------------------------------------------------
Affecting Subsidiaries..................................... 40
----------------------
SECTION 4.13. Limitations on Liens....................................... 40
--------------------
SECTION 4.14. Limitation on Sales of Assets and Subsidiary Stock......... 41
--------------------------------------------------
SECTION 4.15. Waiver of Stay, Extension or Usury Laws.................... 45
---------------------------------------
SECTION 4.16. Rule 144A Information Requirement.......................... 45
---------------------------------
SECTION 4.17. Restriction on Sale and Issuance of Subsidiary Stock....... 45
----------------------------------------------------
SECTION 4.18. Future Subsidiary Guarantors............................... 46
----------------------------
SECTION 4.19. Limitations on Lines of Business........................... 46
--------------------------------
ARTICLE V
SUCCESSOR CORPORATION
SECTION 5.1. Limitation on Merger, Sale or Consolidation................ 46
-------------------------------------------
SECTION 5.2. Successor Corporation Substituted.......................... 47
---------------------------------
</TABLE>
ii
<PAGE>
PAGE
----
ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES
<TABLE>
<S> <C> <C>
SECTION 6.1. Events of Default.......................................... 47
-----------------
SECTION 6.2. Acceleration of Maturity Date; Rescission and Annulment.... 49
-------------------------------------------------------
SECTION 6.3. Collection of Indebtedness and Suits for Enforcement by
-------------------------------------------------------
Trustee.................................................... 50
-------
SECTION 6.4. Trustee May File Proofs of Claim........................... 51
--------------------------------
SECTION 6.5. Trustee May Enforce Claims Without Possession of Securities 52
-----------------------------------------------------------
SECTION 6.6. Priorities................................................. 52
----------
SECTION 6.7. Limitation on Suits........................................ 53
-------------------
SECTION 6.8. Unconditional Right of Holders to Receive Principal,
---------------------------------------------------
Premium and Interest....................................... 53
--------------------
SECTION 6.9. Rights and Remedies Cumulative............................. 54
------------------------------
SECTION 6.10. Delay or Omission Not Waiver............................... 54
----------------------------
SECTION 6.11. Control by Holders......................................... 54
------------------
SECTION 6.12. Waiver of Past Default..................................... 54
----------------------
SECTION 6.13. Undertaking for Costs...................................... 55
---------------------
SECTION 6.14. Restoration of Rights and Remedies......................... 55
----------------------------------
ARTICLE VII
TRUSTEE
SECTION 7.1. Duties of Trustee.......................................... 56
-----------------
SECTION 7.2. Rights of Trustee.......................................... 57
-----------------
SECTION 7.3. Individual Rights of Trustee............................... 58
----------------------------
SECTION 7.4. Trustee's Disclaimer....................................... 58
--------------------
SECTION 7.5. Notice of Default.......................................... 58
-----------------
SECTION 7.6. Reports by Trustee to Holders.............................. 58
-----------------------------
SECTION 7.7. Compensation and Indemnity................................. 59
--------------------------
SECTION 7.8. Replacement of Trustee..................................... 60
----------------------
SECTION 7.9. Successor Trustee by Merger, Etc........................... 61
--------------------------------
SECTION 7.10. Eligibility; Disqualification.............................. 61
-----------------------------
SECTION 7.11. Preferential Collection of Claims Against Company.......... 61
-------------------------------------------------
</TABLE>
iii
<PAGE>
PAGE
----
ARTICLE VIII
DISCHARGE; LEGAL DEFEASANCE AND COVENANT DEFEASANCE
<TABLE>
<S> <C> <C>
SECTION 8.1. Discharge; Option to Effect Legal Defeasance or Covenant Defeasance 61
-------------------------------------------------------------------
SECTION 8.2. Legal Defeasance and Discharge..................................... 62
------------------------------
SECTION 8.3. Covenant Defeasance................................................ 62
-------------------
SECTION 8.4. Conditions to Legal or Covenant Defeasance......................... 63
------------------------------------------
SECTION 8.5. Deposited Cash and U.S. Government Obligations to be............... 64
----------------------------------------------------
Held in Trust; Other Miscellaneous Provisions...................... 64
---------------------------------------------
SECTION 8.6. Repayment to the Company........................................... 64
------------------------
SECTION 8.7. Reinstatement...................................................... 65
-------------
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.1. Supplemental Indentures Without Consent of Holders................. 65
----------------------------------------------------
SECTION 9.2. Amendments, Supplemental Indentures and Waivers with
----------------------------------------------------
Consent of Holders................................................. 66
------------------
SECTION 9.3. Compliance with TIA................................................ 68
------------------
SECTION 9.4. Revocation and Effect of Consents.................................. 68
--------------------------------
SECTION 9.5. Notation on or Exchange of Securities.............................. 69
-------------------------------------
SECTION 9.6. Trustee to Sign Amendments, Etc.................................... 69
-------------------------------
ARTICLE X
MEETINGS OF SECURITYHOLDERS
SECTION 10.1. Purposes for Which Meetings May Be Called.......................... 69
-----------------------------------------
SECTION 10.2. Manner of Calling Meetings......................................... 70
--------------------------
SECTION 10.3. Call of Meetings by the Company or Holders......................... 70
------------------------------------------
SECTION 10.4. Who May Attend and Vote at Meetings................................ 70
-----------------------------------
SECTION 10.5. Regulations May Be Made by Trustee; Conduct of the
--------------------------------------------------
Meeting; Voting Rights; Adjournment................................ 71
-----------------------------------
SECTION 10.6. Voting at the Meeting and Record to Be Kept........................ 71
-------------------------------------------
SECTION 10.7. Exercise of Rights of Trustee or Securityholders May............... 71
----------------------------------------------------
Not Be Hindered or Delayed by Call of Meeting...................... 72
---------------------------------------------
</TABLE>
iv
<PAGE>
PAGE
----
ARTICLE XI
RIGHT TO REQUIRE REPURCHASE
<TABLE>
<S> <C> <C>
SECTION 11.1. Repurchase of Securities at Option of the Holder Upon a
--------------------------------------------------------
Change of Control.......................................... 72
-----------------
ARTICLE XII
GUARANTEE
SECTION 12.1. Guarantee.................................................. 75
---------
SECTION 12.2. Execution and Delivery of Guarantee........................ 76
-----------------------------------
SECTION 12.3. Future Guarantors.......................................... 77
-----------------
SECTION 12.4. Certain Bankruptcy Events.................................. 77
-------------------------
ARTICLE XIII
MISCELLANEOUS
SECTION 13.1. TIA Controls............................................... 77
------------
SECTION 13.2. Notices.................................................... 77
-------
SECTION 13.3. Communications by Holders with Other Holders............... 78
--------------------------------------------
SECTION 13.4. Certificate and Opinion as to Conditions Precedent......... 79
--------------------------------------------------
SECTION 13.5. Statements Required in Certificate or Opinion.............. 79
---------------------------------------------
SECTION 13.6. Rules by Trustee, Paying Agent, Registrar.................. 79
-----------------------------------------
SECTION 13.7. Legal Holidays............................................. 79
--------------
SECTION 13.8. Governing Law.............................................. 79
-------------
SECTION 13.9. No Adverse Interpretation of Other Agreements.............. 80
---------------------------------------------
SECTION 13.10. No Recourse Against Others................................. 80
--------------------------
SECTION 13.11. Successors................................................. 80
----------
SECTION 13.12. Duplicate Originals........................................ 81
-------------------
SECTION 13.13. Severability............................................... 81
------------
SECTION 13.14. Table of Contents, Headings, Etc........................... 81
--------------------------------
SECTION 13.15. Qualification of Indenture................................. 81
--------------------------
SECTION 13.16. Registration Rights........................................ 81
-------------------
SIGNATURES................................................. 83
EXHIBIT A FORM OF SECURITY........................................... A-1
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
EXHIBIT B FORM OF GUARANTEE..................................................... B-1
</TABLE>
vi
<PAGE>
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA INDENTURE
SECTION SECTION
-------
<S> <C>
310(a)(1).............................................. 7.10
(a)(2)................................................ 7.10
(a)(3)................................................ N.A.
(a)(4).............................................. N.A.
(a)(5).............................................. 7.10
(b)................................................. 7.8
7.10;
14.2
(c)................................................... N.A.
311(a)................................................. 7.11
(b)................................................. 7.11
(c)................................................. N.A.
312(a)................................................. 2.5
(b)................................................. 14.3
(c)................................................. 14.3
313(a)................................................. 7.6
(b)(1) ........................................... N.A.
(b)(2).............................................. 7.6
(c)................................................. 7.6;
14.2
(d)................................................. 7.6
314(a)................................................. 4.7(a);
4.8;
13.2
(b)................................................. N.A.
(c)(1).............................................. 2.2;
7.2;
14.4
(c)(2).............................................. 7.2;
14.4
(c)(3).............................................. N.A.
(d)................................................. N.A.
(e)................................................. 14.5
(f)................................................. N.A.
315(a)................................................. 7.1(b)
(b)................................................. 7.5;
7.6;
14.2
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TIA INDENTURE
SECTION SECTION
------- -------
<S> <C>
(c).............................................. 7.1(a)
(d).............................................. 2.8;
6.11;
7.1(b),
(c)
(e).............................................. 6.13
316(a)(last sentence)................................ 2.9
(a)(1)(A)........................................ 6.11
(a)(1)(B)........................................ 6.12
(a)(2)........................................... N.A.
(b).............................................. 6.12;
6.7
317(a)(1)........................................... 6.3
(a)(2)........................................... 6.4
(b).............................................. 14.1
</TABLE>
__________
N.A. means Not Applicable
Note: This Cross-Reference Table shall not, for any purpose, be deemed to
be a part of the Indenture.
viii
<PAGE>
INDENTURE, dated as of June 4, 1996, by and among Cobblestone
Golf Group, Inc., a Delaware corporation (the "Company"), the Guarantors
referred to below and Norwest Bank Minnesota, National Association, as Trustee.
Each party hereto agrees as follows for the benefit of each other
party and for the equal and ratable benefit of the Holders of the Company's 11
1/2% Series A Senior Notes due 2003 and the class of 11 1/2% Series B Senior
Notes due 2003 to be exchanged for the 11 1/2% Series A Senior Notes due 2003:
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1. Definitions.
-----------
"Acquired Indebtedness" means Indebtedness of any person existing
at the time such person becomes a subsidiary of such person or is merged or
consolidated into or with such person or one of its subsidiaries, and not
incurred in connection with or in anticipation of, such merger or consolidation
or of such person becoming a subsidiary of such person.
"Acquisition" means the purchase or other acquisition of any
person or substantially all the assets of any person by any other person,
whether by purchase, merger, consolidation, or other transfer, and whether or
not for consideration.
"Affiliate" means (i) any person directly or indirectly
controlling or controlled by or under direct or indirect common control with the
Company or any of the Guarantors, (ii) any spouse, immediate family member, or
other relative who has the same principal residence of any person described in
clause (i) above, and (iii) any trust in which any person described in clause
(i) or (ii) above has a beneficial interest. For purposes of this definition,
the term "control" means the power to direct the management and policies of a
person, directly or through one or more intermediaries, whether through the
ownership of voting securities, by contract, or otherwise, provided, that a
beneficial owner of 10% or more of the total voting power normally entitled to
vote in the election of directors, managers or trustees, as applicable, shall
for such purposes be deemed to constitute control. Notwithstanding the
foregoing, the term Affiliate shall not include Subsidiary Guarantors.
"Agent" means any Registrar, Paying Agent or co-Registrar.
"Assets to Be Disposed of" means assets identified in an
Officer's Certificate at the time of an Acquisition as assets the Company or the
acquiring Subsidiary intends to dispose of within 180 days of such Acquisition.
"Asset Sale" shall have the meaning specified in Section 4.14 of
this Indenture.
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"Average Life" means, as of the date of determination, with
respect to any security or instrument, the quotient obtained by dividing (i) the
sum of (a) the product of the number of years from the date of determination to
the date or dates of each successive scheduled principal (or redemption) payment
of such security or instrument and (b) the amount of each such respective
principal (or redemption) payment by (ii) the sum of all such principal (or
redemption) payments.
"Bankruptcy Law" means Title 11, U.S. Code, or any similar
Federal, state or foreign law for the relief of debtors.
"beneficial owner," for purposes of the definition of Change of
Control, has the meaning attributed to it in Rules 13d-3 and 13d-5 under the
Exchange Act (as in effect on the Issue Date), whether or not applicable, except
that a "person" shall be deemed to have "beneficial ownership" of all shares
that any such person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time or (unless not within the control
of such person) upon the occurrence of certain events.
"Board of Directors" means, with respect to any Person, the board
of directors of such Person or any committee of the board of directors of such
Person authorized, with respect to any particular matter, to exercise the power
of the board of directors of such Person.
"Board Resolution" means, with respect to any Person, a duly
adopted resolution of the Board of Directors of such Person.
"Brentwood Agreement" means the Corporate Development and
Administrative Services Agreement dated September 30, 1992 between the Company
and Brentwood Buyout Partners, L.P., as amended as of the Issue Date.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in New York, New
York are authorized or obligated by law or executive order to close.
"Capital Stock" means, with respect to any person, any capital
stock of such person and shares, interests, participations or other ownership
interests (however designated) of any person and any rights (other than debt
securities convertible into corporate stock), warrants and options to purchase
any of the foregoing, including (without limitation) each class of common stock
and preferred stock of such person if such person is a corporation and each
general and limited partnership interest of such person if such person is a
partnership.
"Capitalized Lease Obligation" means rental obligations under a
lease that are required to be capitalized for financial reporting purposes in
accordance with GAAP, and the amount of Indebtedness represented by such
obligations shall be the capitalized amount of such obligations, as determined
in accordance with GAAP.
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"Cash" means such coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment of
public and private debts.
"Cash Equivalent" means (i) securities issued or directly and
fully guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof), (ii) time deposits and
certificates of deposit and commercial paper issued by the parent corporation of
any domestic commercial bank of recognized standing having capital and surplus
in excess of $500 million and commercial paper issued by others rated at least
A-2 or the equivalent thereof by Standard & Poor's Corporation or at least P-2
or the equivalent thereof by Moody's Investors Service, Inc. and in each case
maturing within one year after the date of acquisition and (iii) investments in
money market funds substantially all of whose assets comprise securities of the
types described in clauses (i) and (ii) above.
"Change of Control" means (i) the Investor Group is no longer the
"beneficial owner," directly or indirectly, of more than 50% of the total voting
power in the aggregate normally entitled to vote in the election of directors,
managers, or trustees, as applicable, of the Company and (ii) any "person" or
"group" (as such terms are used for purposes of Sections 13(d) and 14(d) of the
Exchange Act, whether or not applicable) is or becomes the "beneficial owner,"
directly or indirectly, of more of the total voting power in the aggregate
outstanding normally entitled to vote in elections of directors of the Company
than is owned collectively by Brentwood Golf Partners, L.P. and James A.
Husband.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means the party named as such in this Indenture until a
successor replaces it pursuant to this Indenture, and thereafter means such
successor.
"Consolidated Cash Flow Ratio" of any person on any date of
determination (the "Transaction Date"), means the ratio, on a pro forma basis,
of (a) the aggregate amount of consolidated Indebtedness of such person on the
Transaction Date to (b) the aggregate amount of Consolidated EBITDA of such
person (exclusive of amounts attributable to operations and businesses
permanently discontinued or disposed of) during the Reference Period; provided,
however, that for purposes of such calculation, (i) Acquisitions which occurred
during the Reference Period or subsequent to the Reference Period and on or
prior to the Transaction Date shall be assumed to have occurred on the first day
of the Reference Period, (ii) transactions giving rise to the need to calculate
the Consolidated Cash Flow Ratio shall be assumed to have occurred on the first
day of the Reference Period and (iii) the incurrence of any Indebtedness or
issuance of any Disqualified Capital Stock during the Reference Period or
subsequent to the Reference Period and on or prior to the Transaction Date (and
the application of the proceeds therefrom to the extent used to refinance or
retire other Indebtedness) shall be assumed to have occurred on the first day of
such Reference Period.
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"Consolidated Depreciation and Amortization Expenses" for any
person means the total depreciation and amortization for such person and its
Consolidated Subsidiaries, as determined in accordance with GAAP.
"Consolidated EBITDA" means, with respect to any person, for any
period, the Consolidated Net Income of such person for such period adjusted to
add thereto (to the extent deducted from net revenues in determining
Consolidated Net Income), without duplication, the sum of (i) Consolidated
Income Tax Expense, (ii) Consolidated Depreciation and Amortization Expenses
(including any accelerations thereof) and (iii) Consolidated Fixed Charges.
"Consolidated Fixed Charges" of any person means, for any period,
the aggregate amount (without duplication and determined in each case in
accordance with GAAP) of (a) interest expensed or capitalized, paid, accrued, or
scheduled to be paid or accrued (including, in accordance with the following
sentence, interest attributable to Capitalized Lease Obligations) of such person
and its Consolidated Subsidiaries during such period, including (i) original
issue discount and non-cash interest payments or accruals on any Indebtedness,
(ii) the interest portion of all deferred payment obligations, and (iii) all
commissions, discounts and other fees and charges owed with respect to bankers'
acceptances and letters of credit financings and currency and Interest Swap and
Hedging Obligations, in each case to the extent attributable to such period, (b)
one-third of rental expense for such period attributable to operating leases of
such person and its Consolidated Subsidiaries, and (c) the amount of dividends
accrued or payable by such person or any of its Consolidated Subsidiaries in
respect of Disqualified Capital Stock (other than by Subsidiaries of such person
to such person or such person's wholly owned Subsidiaries). For purposes of this
definition, (x) interest on a Capitalized Lease Obligation shall be deemed to
accrue at an interest rate reasonably determined by the Company to be the rate
of interest implicit in such Capitalized Lease Obligation in accordance with
GAAP and (y) interest expense attributable to any Indebtedness represented by
the guarantee by such person or a Subsidiary of such person of an obligation of
another person shall be deemed to be the interest expense attributable to the
Indebtedness guaranteed.
"Consolidated Income Tax Expense" for any person means the total
net income tax expenses for such person and its Consolidated Subsidiaries, as
determined in accordance with GAAP.
"Consolidated Net Income" means, with respect to any person for
any period, the net income (or loss) of such person and its Consolidated
Subsidiaries (determined on a consolidated basis in accordance with GAAP) for
such period, adjusted to exclude (only to the extent included in computing such
net income (or loss) and without duplication): (a) all gains (but not losses)
which are either extraordinary (as determined in accordance with GAAP) or are
either unusual or nonrecurring (including without limitation any gain from the
sale or other disposition of assets outside the ordinary course of business or
from the issuance or sale of any Capital Stock), (b) the net income, if
positive, of any person, other than a wholly owned Consolidated Subsidiary, in
which such person or any of its Consolidated Subsidiaries has an interest,
except to the extent of the amount of any dividends or distributions actually
paid in cash to such person
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or a wholly owned Consolidated Subsidiary of such person during such period, but
in any case not in excess of such person's pro rata share of such person's net
income for such period, (c) the net income or loss of any person acquired in a
pooling of interests transaction for any period prior to the date of such
acquisition and (d) the net income, if positive, of any of such person's
Consolidated Subsidiaries to the extent that the declaration or payment of
dividends or similar distributions is not at the time permitted by operation of
the terms of its charter or bylaws or any other agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to such
Consolidated Subsidiary.
"Consolidated Subsidiary" means, for any person, each Subsidiary
of such person (whether now existing or hereafter created or acquired) the
financial statements of which shall be (or should have been) consolidated for
financial statement reporting purposes with the financial statements of such
person in accordance with GAAP.
"Consolidated Tangible Net Worth" of any person at any date means
the total assets of such person and its Consolidated Subsidiaries, as would be
shown on the consolidated balance sheet of such person prepared in accordance
with GAAP, less (a) the total liabilities appearing on such balance sheet, and
(b) intangible assets. For purposes hereof, "intangible assets" means the value
(net of any applicable reserves), as shown on or reflected in such balance
sheet, of: (i) all trade names, trademarks, licenses, patents, copyrights and
goodwill; (ii) organizational and development costs; and (iii) unamortized debt
discount and expense, less unamortized premium.
"Corporate Trust Office" means the office of the Trustee in the
Borough of Manhattan, The City of New York.
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"Debt Incurrence Ratio" shall have the meaning specified in
paragraph (1) of Section 4.11 of this Indenture.
"Default" means any event or condition that is, or after notice
or passage of time or both would be, an Event of Default.
"Defaulted Interest" shall have the meaning specified in Section
2.12 of this Indenture.
"Definitive Securities" means Securities that are in the form of
Security attached hereto as Exhibit A that do not include the information called
for by footnotes 3 and 6 thereof.
"Depository" means, with respect to the Securities issuable or
issued in whole or in part in global form, the person specified in Section 2.3
of this Indenture as the Depository with respect to the Securities, until a
successor shall have been appointed and become such
5
<PAGE>
pursuant to the applicable provision of this Indenture, and, thereafter,
"Depository" shall mean or include such successor.
"Disqualified Capital Stock" means (a) except as set forth in
(b), with respect to any person, Capital Stock of such person that, by its terms
or by the terms of any security into which it is convertible, exercisable or
exchangeable, is, or upon the happening of an event or the passage of time would
be, required to be redeemed or repurchased (including at the option of the
holder thereof) by such person or any of its Subsidiaries, in whole or in part,
on or prior to the Stated Maturity of the Securities and (b) with respect to any
Subsidiary of such person (including with respect to any Subsidiary of the
Company), any Capital Stock other than any common stock with no special rights
and no preference, privileges, or redemption or repayment provisions.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated by the SEC thereunder.
"Exchange Securities" means the 11 1/2% Series B Senior Notes due
2003, as supplemented from time to time in accordance with the terms hereof, to
be issued pursuant to this Indenture in connection with the offer to exchange
Securities for the Initial Securities that may be made by the Company and the
Guarantors pursuant to the Registration Rights Agreement that contains the
changes referred to in footnotes 1 and 2 to the form of Security attached hereto
as Exhibit A.
"Existing Assets" means assets of the Company and its
Subsidiaries existing at the Issue Date (other than Cash, Cash Equivalents or
inventory held for resale in the ordinary course of business) and including
proceeds of any sale of such assets and assets acquired in whole or in part with
proceeds from the sale from any such assets.
"GAAP" means United States generally accepted accounting
principles set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as approved by a significant segment
of the accounting profession as in effect on the Issue Date.
"Global Security" means a Security that contains the paragraph
referred to in footnote 3 and the additional schedule referred to in footnote 6
to the form of Security attached hereto as Exhibit A.
"Guarantors" means Escondido Consulting, Inc., a California
corporation, Cobblestone Texas, Inc., a Texas corporation, Pecan Grove Golf
Club, Inc., a Texas corporation, Foothills Holding Company, Inc., a Nevada
corporation, Bellows Golf Group, Inc., an Arizona corporation, Carmel Mountain
Ranch Golf Club, Inc., a California corporation, OVLC Management Corp., a
California corporation, OVLC Financial Corp., a California corporation, CSR Golf
Group, Inc., a Texas corporation, Lakeway Golf Clubs, Inc., a Texas
6
<PAGE>
corporation, Woodcrest Golf Club, Inc., a Texas corporation, Virginia Golf
Country Club, Inc., a Virginia corporation, Ocean Vista Land Company, a
California corporation ("OVLC"), Golf Course Inns of America, Inc., a California
corporation, Oceanside Golf Management Corp., a California corporation,
Whispering Palms Country Club Joint Venture, a California general partnership,
C-RHK, Inc., a California corporation, The Liquor Club at Pecan Grove, Inc., a
Texas corporation, Lakeway Clubs, Inc., a Texas corporation, TGFC Corp., a Texas
corporation, CEL Golf Group, Inc., a Georgia corporation, and such other Persons
as shall become a party to this Indenture upon compliance with the covenant
relating thereto contained in Section 4.18 of this Indenture.
"Holder" or "Securityholder" means the Person in whose name a
Security is registered on the Registrar's books.
"Holdings" means Cobblestone Golf Holdings, Inc., a Delaware
corporation, and the sole stockholder of the Company.
"Incur" shall have the meaning specified in Section 4.11 of this
Indenture.
"Indebtedness" of any person means, without duplication, (a) all
liabilities and obligations, contingent or otherwise, of any such person, (i) in
respect of borrowed money (whether or not the recourse of the lender is to the
whole of the assets of such person or only to a portion thereof), (ii) evidenced
by bonds, notes, debentures or similar instruments, (iii) representing the
balance deferred and unpaid of the purchase price of any property or services,
except (other than accounts payable or other obligations to trade creditors
which have remained unpaid for greater than ninety days past their original due
date, or for which adequate reserves have been established while such amounts
are being contested in good faith) those incurred in the ordinary course of its
business that would ordinarily constitute a trade payable to trade creditors,
(iv) evidenced by bankers' acceptances or similar instruments issued or accepted
by banks, (v) in respect of Capitalized Lease Obligations, or (vi) evidenced by
a letter of credit or a reimbursement obligation of such person with respect to
any letter of credit; (b) all net obligations of such person under Interest Swap
and Hedging Obligations; (c) all liabilities of others of the kind described in
the preceding clauses (a) and (b) that such person has guaranteed or that is
otherwise its legal liability and all obligations to purchase, redeem or acquire
any Capital Stock; (d) all obligations secured by a Lien to which the property
or assets (including, without limitation, leasehold interests and any other
tangible or intangible property rights) of such person are subject, whether or
not the obligations secured thereby shall have been assumed by or shall
otherwise be such person's legal liability, provided, that the amount of such
obligations shall be limited to the lesser of the fair market value of the
assets or property to which such Lien attaches and the amount of the obligation
so secured; and (e) any and all deferrals, renewals, extensions, refinancings
and refundings (whether direct or indirect) of, or amendments, modifications or
supplements to, any liability of the kind described in any of the preceding
clauses (a), (b), (c), (d) or this clause (e), whether or not between or among
the same parties.
7
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"Indenture" means this Indenture, as amended or supplemented from
time to time in accordance with the terms hereof.
"Initial Purchasers" means Donaldson, Lufkin & Jenrette
Securities Corporation and BA Securities, Inc, severally, and not jointly.
"Initial Securities" means the 11 1/2% Series A Senior Notes due
2003, as supplemented from time to time in accordance with the terms hereof,
issued under this Indenture that contains the changes referred to in footnotes
4, 5 and 7 to the form of Security attached hereto as Exhibit A.
"Interest Payment Date" means the stated due date of an
installment of interest on the Securities.
"Interest Swap and Hedging Obligation" means any obligation of
any person pursuant to any interest rate swap agreement, interest rate cap
agreement, interest rate collar agreement, interest rate exchange agreement,
currency exchange agreement or any other agreement or arrangement designed to
protect against fluctuations in interest rates or currency values, including,
without limitation, any arrangement whereby, directly or indirectly, such person
is entitled to receive from time to time periodic payments calculated by
applying either a fixed or floating rate of interest on a stated notional amount
in exchange for periodic payments made by such person calculated by applying a
fixed or floating rate of interest on the same notional amount.
"Investment" by any person in any other person means (without
duplication) (a) the acquisition by such person (whether for cash, property,
services, securities or otherwise) of capital stock, bonds, notes, debentures,
partnership or other ownership interests or other securities, including any
options or warrants, of such other person or any agreement to make any such
acquisition; (b) the making by such person of any deposit with, or advance, loan
or other extension of credit to, such other person (including the purchase of
property from another person subject to an understanding or agreement,
contingent or otherwise, to resell such property from another person subject to
an understanding or agreement, contingent or otherwise, to resell such property
to such other person) or any commitment to make any such advance, loan or
extension (but excluding accounts receivable or deposits arising in the ordinary
course of business); (c) other than the Guarantees of the Securities, the
entering into by such person of any guarantee of, or other credit support or
contingent obligation with respect to, Indebtedness or other liability of such
other person; (d) the making of any capital contribution by such person to such
other person; and (e) the designation by the Board of Directors of the Company
of any person to be an Unrestricted Subsidiary. The Company shall be deemed to
make an "Investment" in an amount equal to the fair market value of the net
assets of any person (or, if neither the Company nor any of its Subsidiaries has
theretofore made an Investment in such person, in an amount equal to the
Investments being made), at the time that such person is designated an
Unrestricted Subsidiary or, if such designation is made pursuant to clause
(i)(c) of the definition of Unrestricted Subsidiary, in an amount equal to the
sum of the Investments
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<PAGE>
being made and the consideration paid by the Company and its Subsidiaries to
effect such Acquisition (excluding, for this purpose only, Qualified Capital
Stock of the Company issued in connection therewith). Any property transferred
to an Unrestricted Subsidiary from the Company or a Subsidiary of the Company,
shall be deemed an "Investment" valued at its fair market value at the time of
such transfer.
"Investor Group" means any one or more of the stockholders of
Holdings immediately prior to the Issue Date and any one or more Affiliates of
such persons.
"Issue Date" means the date of first issuance of the Securities
under this Indenture.
"Legal Holiday" shall have the meaning specified in Section 13.7.
"Lien" means any mortgage, lien, pledge, charge, security
interest, or other encumbrance of any kind, whether or not filed, recorded or
otherwise perfected under applicable law (including any conditional sale or
other title retention agreement and any lease deemed to constitute a security
interest and any option or other agreement to give any security interest).
"Maturity Date" means, when used with respect to any Security,
the date specified on such Security as the fixed date on which the final
installment of principal of such Security is due and payable (in the absence of
any acceleration thereof pursuant to the provisions of this Indenture regarding
acceleration of Indebtedness or any Change of Control Offer or Offer to
Purchase).
"Net Cash Proceeds" means the aggregate amount of Cash or Cash
Equivalents received by the Company in the case of a sale of Qualified Capital
Stock and by the Company and its Subsidiaries in respect of an Asset Sale plus,
in the case of an issuance of Qualified Capital Stock upon any exercise,
exchange or conversion of securities (including options, warrants, rights and
convertible or exchangeable debt) of the Company that were issued for Cash on or
after the Issue Date, the amount of Cash originally received by the Company upon
the issuance of such securities (including options, warrants, rights and
convertible or exchangeable debt) less, in each case, the sum of all payments,
fees, commissions and (in the case of Asset Sales, reasonable and customary),
expenses (including, without limitation, the fees and expenses of legal counsel
and investment banking fees and expenses) incurred in connection with such Asset
Sale or sale of Qualified Capital Stock, and, in the case of an Asset Sale only,
less the amount (estimated reasonably and in good faith by the Company) of
income, franchise, sales and other applicable taxes required to be paid by the
Company or any of its respective Subsidiaries in the current or next succeeding
taxable year of sale in connection with such Asset Sale.
"New Credit Facility" means the credit agreement to be dated as
of June 4, 1996 by and among the Company, Holdings, Bank of America NT&SA,
individually and as agent, and certain financial institutions, providing for (A)
an aggregate $45,000,000 million reducing revolving loan facility, and (B) an
aggregate $5,000,000 million working capital revolving credit
9
<PAGE>
facility, including any related notes, guarantees, collateral documents,
instruments and agreements executed in connection therewith, as such credit
agreement and/or related documents may be amended, restated, supplemented,
renewed, replaced or otherwise modified from time to time whether or not with
the same agent, trustee, representative lenders or holders, and, subject to the
proviso to the next succeeding sentence, irrespective of any changes in the
terms and conditions thereof. Without limiting the generality of the foregoing,
the term "New Credit Facility" shall include agreements in respect of Interest
Swap and Hedging Obligations with lenders party to the New Credit Facility and
shall also include any amendment, amendment and restatement, renewal, extension,
restructuring, supplement or modification to the New Credit Facility and all
refundings, refinancings and replacements of the New Credit Facility, including
any agreement (i) extending the maturity of any Indebtedness incurred thereunder
or contemplated thereby, (ii) adding or deleting borrowers or guarantors
thereunder, so long as borrowers and issuers include one or more of the Company
and its Subsidiaries and their respective successors and assigns, (iii)
increasing the amount of Indebtedness incurred thereunder or available to be
borrowed thereunder, provided, however, that on the date such Indebtedness is
incurred it would not be prohibited by Section 4.11 of this Indenture or (iv)
otherwise altering the terms and conditions thereof in a manner not prohibited
by the terms of this Indenture.
"Non-recourse Purchase Money Indebtedness" means Indebtedness of
the Company or its Subsidiaries to the extent that (i) under the terms thereof
or pursuant to law, no personal recourse may be had against the Company or its
Subsidiaries for the payment of the principal of or interest or premium on such
Indebtedness (or such portion), and enforcement of obligations on such
Indebtedness (or such portion), (except with respect to fraud, willful
misconduct, misrepresentation, misapplication of funds, reckless damage to
assets and undertakings with respect to environmental matters or construction
defects) is limited only to recourse against interests in specified assets and
property (the "Subject Assets"), accounts and proceeds arising therefrom, and
rights under purchase agreements or other agreements with respect to such
Subject Assets; (ii) such Indebtedness is incurred in connection with the
acquisition of such Subject Asset for the business of the Company or such
Subsidiaries, including Indebtedness assumed, which Indebtedness existed at the
time of the acquisition of such Subject Asset; (iii) such Indebtedness was
incurred at the time of such acquisition of such Subject Asset; and (iv) no
proceeds from the sale of Existing Assets were used to acquire such Subject
Asset.
"Obligation" means any principal, premium, interest, penalties,
fees, reimbursements, damages, indemnification and other liabilities relating to
obligations of the Company or any Guarantor under the Securities, the Guarantees
or this Indenture.
"Officer" means, with respect to the Company or any Guarantor,
the Chief Executive Officer, the President, any Vice President, the Chief
Financial Officer, the Treasurer, the Controller, or the Secretary of the
Company or such Guarantor.
"Officers' Certificate" means, with respect to the Company or
such Guarantor, a certificate signed by two Officers or by an Officer and an
Assistant Secretary of the Company
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or such Guarantor and otherwise complying with the requirements of Sections 13.4
and 13.5 of this Indenture.
"Opinion of Counsel" means a written opinion from legal counsel
who is reasonably acceptable to the Trustee complying with the requirements of
Sections 13.4 and 13.5 of this Indenture.
"Paying Agent" shall have the meaning specified in Section 2.3 of
this Indenture.
"Permitted Indebtedness" means, without duplication, any of the
following: (a) the Company and the Guarantors may incur Indebtedness in respect
of Capitalized Lease Obligations and Non-recourse Purchase Money Indebtedness in
the ordinary course of business, in amounts and for the purposes customary in
the Company's industry; provided, however, that the aggregate principal amount
outstanding of such Indebtedness (including any Indebtedness issued to
Refinance, refund or replace such Indebtedness) shall at no time exceed
$10,000,000; (b) the Company may incur Indebtedness to any wholly owned
Subsidiary Guarantor, and any Subsidiary Guarantor may incur Indebtedness to any
wholly owned Subsidiary Guarantor or to the Company; provided, that such
obligations shall be subordinated in all respects to the Company's obligations,
or such Guarantor's obligations pursuant to its Guarantee of the Company's
obliga tions pursuant to this Indenture and the Securities; and (c) Indebtedness
of the Company and the Guarantors outstanding on the Issue Date after giving
effect to the implementation of the New Credit Facility.
"Permitted Liens" means any of the following: (a) Liens existing
on the Issue Date (including Liens in favor of the Trustee arising under the
Indenture and Liens securing Indebtedness permitted to be incurred pursuant to
the New Credit Facility in compliance with Section 4.11(5) of this Indenture),
after giving effect to the implementation of the New Credit Facility, and any
extension, renewal, replacement or refinancing, in whole or in part, of any such
Lien so long as (1) the amount of security is not increased thereby, (2) the
aggregate amount secured by such Lien after such extension, renewal, replacement
or refinancing does not exceed (after deduction of reasonable and customary fees
and expenses incurred in connection therewith) the aggregate amount secured
thereby prior thereto and (3) the Indebtedness secured by such Lien, if any, is
permitted under Section 4.11 of this Indenture; (b) Liens for taxes, assessments
or other governmental charges or claims not yet due or which are being contested
in good faith and by appropriate proceedings by a person if adequate reserves or
other appropriate provisions with respect thereto are maintained on the books of
such person to the extent required in accordance with GAAP; (c) statutory Liens
of carriers, warehousemen, mechanics, landlords, materialmen, repairmen or other
like Liens arising by operation of law and Liens on deposits made to obtain the
release of such Liens if (1) the underlying obligations are not overdue for a
period of more than sixty days or (2) such Liens are being contested in good
faith and by appropriate proceedings by such person and adequate reserves with
respect thereto are maintained on the books of such person in accordance with
GAAP; (d) Liens securing the performance of bids, trade contracts (other than in
connection with any borrowing of money or any commitment to loan any money or to
extend any credit), leases, statutory obligations, surety
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and appeal bonds and other obligations of a like nature, and pledges or deposits
in connection with workers' compensation, unemployment insurance and other types
of social security legislation, in each case made or incurred in the ordinary
course of business consistent with industry practices; (e) easements, rights-of-
ways, zoning and similar restrictions and other similar encumbrances or title
defects which, in the aggregate, are not substantial in amount, and which do not
in any case materially detract from the value of the property subject thereto
(as such property is used by such person) or interfere with the ordinary conduct
of the business of such person; provided, that any such Liens are not incurred
for the benefit of any borrowing of money or any commitment to loan any money or
to extend any credit; (f) Liens arising by operation of law in connection with
judgments to the extent, for an amount and for a period not resulting in an
Event of Default with respect thereto; (g) Liens securing Non-recourse Purchase
Money Indebtedness permitted to be incurred under the Indenture, provided, that
each such Lien relates only to the property which is subject to such Non-
recourse Purchase Money Indebtedness; (h) any customary retention of title by
the lessor under a Capitalized Lease Obligation incurred in compliance with
Section 4.11 of this Indenture; (i) Liens that secure Acquired Indebtedness,
provided, in each case, that such Liens do not secure any other property or
assets and were not put in place in connection with or in anticipation of such
acquisition, merger or consolidation, and any extension, renewal, replacement or
refinancing, in whole or in part, of any such Lien so long as (1) the amount of
security is not increased thereby, (2) the aggregate amount secured by such Lien
after such extension, renewal, replacement or refinancing does not exceed (after
deduction of reasonable and customary fees and expenses incurred in connection
therewith) the aggregate amount secured thereby prior thereto and (3) the
Indebtedness secured by such Lien, if any, is permitted under Section 4.11 of
this Indenture; (j) Liens that secure Indebtedness incurred pursuant to clause
(1) of Section 4.11 of this Indenture, provided, that (i) after giving effect on
a pro forma basis to such Incurrence and the use of proceeds therefrom, the Debt
Incurrence Ratio is no greater than 5 to 1 and (ii) the aggregate amount secured
by any such Lien does not exceed the aggregate amount of such Indebtedness; and
(k) Liens that secure Indebtedness under the New Credit Facility Incurred either
(i) pursuant to clause (5) of Section 4.11 of this Indenture or (2) pursuant to
clause (1) of Section 4.11 of this Indenture, provided, that after giving effect
on a pro forma basis to such Incurrence and the use of proceeds therefrom, the
Debt Incurrence Ratio is no greater than 5 to 1.
"Person" or "person" means any corporation, individual, limited
liability company, joint stock company, joint venture, partnership, limited
liability company, unincorporated association, governmental regulatory entity,
country, state or political subdivision thereof, trust, municipality or other
entity.
"principal" of any Indebtedness means the principal of such
Indebtedness plus, without duplication, any applicable premium, if any, on such
Indebtedness.
"property" means any right or interest in or to property or
assets of any kind whatsoever, whether real, personal or mixed and whether
tangible or intangible.
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"Public Equity Offering" means an underwritten offering of common
stock of the Company or Holdings pursuant to an effective registration statement
under the Securities Act after which the common stock of the Company or
Holdings, as applicable, is listed on a national securities exchange or quoted
on the Nasdaq National Market.
"Purchase Agreement" means that certain Purchase Agreement dated
May 29, 1996 by and among the Company, the Guarantors and the Initial
Purchasers, as such agreement may be amended, modified or supplemented from time
to time in accordance with the terms thereof.
"Qualified Capital Stock" means any Capital Stock of the Company
that is not Disqualified Capital Stock.
"Qualified Exchange" means any defeasance, redemption,
retirement, repurchase or other acquisition of Capital Stock or Indebtedness of
the Company issued on or after the Issue Date with the Net Cash Proceeds
received by the Company from the substantially concurrent sale of Qualified
Capital Stock.
"Record Date" means a Record Date specified in the Securities
whether or not such Record Date is a Business Day.
"Redemption Date," when used with respect to any Security to be
redeemed, means the date fixed for such redemption pursuant to Article III of
this Indenture and Paragraph 5 in the form of Security attached hereto as
Exhibit A.
"Redemption Price," when used with respect to any Security to be
redeemed, means the redemption price for such redemption pursuant to Paragraph 5
in the form of Security attached hereto as Exhibit A, which shall include,
without duplication, in each case, accrued and unpaid interest to the Redemption
Date.
"Reference Period" with regard to any person means the four full
fiscal quarters (or such lesser period during which such person has been in
existence) ended immediately preceding any date upon which any determination is
to be made pursuant to the terms of the Securities or this Indenture; provided,
however, that the Consolidated Fixed Charges of such person, to the extent such
person has been in existence for a shorter period than four full fiscal
quarters, shall be computed on an annualized basis.
"Refinancing Indebtedness" means Indebtedness or Disqualified
Capital Stock (a) issued in exchange for, or the proceeds from the issuance and
sale of which are used substantially concurrently to repay, redeem, defease,
refund, refinance, discharge or otherwise retire for value, in whole or in part,
or (b) constituting an amendment, modification or supplement to, or a deferral
or renewal of ((a) and (b) above are, collectively, a "Refinancing"), any
Indebtedness or Disqualified Capital Stock in a principal amount or, in the case
of Disquali-
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fied Capital Stock, liquidation preference, not to exceed (after deduction of
reasonable and customary fees and expenses incurred in connection with the
Refinancing) the lesser of (i) the principal amount or, in the case of
Disqualified Capital Stock, liquidation preference, of the Indebtedness or
Disqualified Capital Stock so Refinanced and (ii) if such Indebtedness being
Refinanced was issued with an original issue discount, the accreted value
thereof (as determined in accordance with GAAP) at the time of such Refinancing;
provided, however, that (A) such Refinancing Indebtedness of any Subsidiary of
the Company shall only be used to Refinance outstanding Indebtedness or
Disqualified Capital Stock of such Subsidiary, (B) Refinancing Indebtedness
shall (x) not have an Average Life shorter than the Indebtedness or Disqualified
Capital Stock to be so refinanced at the time of such Refinancing and (y) in all
respects, be no less subordinated, if applicable, to the rights of Holders of
the Securities than was the Indebtedness or Disqualified Capital Stock to be
refinanced and (C) such Refinancing Indebtedness shall have no installment of
principal (or redemption payment) scheduled to come due earlier than the
scheduled maturity of any installment of principal of the Indebtedness or
Disqualified Capital Stock to be so refinanced which was scheduled to come due
prior to the Stated Maturity.
"Registrar" shall have the meaning specified in Section 2.3 of
this Indenture.
"Registration Rights Agreement" means the Registration Rights
Agreement dated as of June 4, 1996 by and among the Initial Purchasers, the
Company and the Guarantors, as such agreement may be amended, modified or
supplemented from time to time in accordance with the terms thereof.
"Related Business" means the business conducted by the Company
and its Subsidiaries as of the Issue Date and any and all businesses that in the
good faith judgment of the Board of Directors of the Company are materially
related businesses.
"Restricted Investment" means, in one or a series of related
transactions, any Investment, other than (a) in Cash Equivalents, (b)
intercompany notes to the extent permitted under "Permitted Indebtedness," (c)
Investments in existence on the Issue Date and (d) Investments in wholly owned
Subsidiary Guarantors (including Investments as a direct result of which the
surviving entity is or becomes the Company or a direct wholly owned Subsidiary
Guarantor).
"Restricted Payment" means, with respect to any person, (a) the
declaration or payment of any dividend or other distribution in respect of
Capital Stock of such person or any Subsidiary of such person, (b) any payment
on account of the purchase, redemption or other acquisition or retirement for
value of Capital Stock of such person or any Subsidiary of such person, (c) any
purchase, redemption, or other acquisition or retirement for value of, any
payment in respect of any amendment of the terms of or any defeasance of, any
Subordinated Indebtedness, directly or indirectly, by such person or a
Subsidiary of such person prior to the scheduled maturity, any scheduled
repayment of principal, or scheduled sinking fund payment, as the case may be,
of such Indebtedness and (d) any Restricted Investment by such person;
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provided, however, that the term "Restricted Payment" does not include (i) any
dividend, distribution or other payment on or with respect to Capital Stock of
an issuer to the extent payable solely in shares of Qualified Capital Stock of
such issuer; (ii) any dividend, distribution or other payment to the Company or
to any of its Subsidiaries by the Company or any of its Subsidiaries, provided,
however, that such payment by a Subsidiary which is not wholly owned by the
Company and/or its wholly owned Subsidiaries shall constitute a "Restricted
Payment" to the extent not paid on a pro rata basis in accordance with its
organizational documents as in effect on the later of the Issue Date and the
time such person first became a Subsidiary of the Company; or (iii) loans or
advances to any Subsidiary Guarantor the proceeds of which are used by such
Subsidiary Guarantor in a Related Business activity of such Subsidiary
Guarantor.
"Restricted Security" means a Security, unless or until it has
been (i) effectively registered under the Securities Act and disposed of in
accordance with the registration statement covering it or (ii) distributed to
the public pursuant to Rule 144 (or any similar provision then in force) under
the Securities Act; provided, that in no case shall an Exchange Security issued
in accordance with this Indenture and the terms and provisions of the
Registration Rights Agreement be a Restricted Security.
"SEC" means the Securities and Exchange Commission.
"Securities" means, collectively, the Initial Securities and,
when and if issued as provided in the Registration Rights Agreement, the
Exchange Securities.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the SEC promulgated thereunder.
"Securities Custodian" means the Trustee, as custodian with
respect to the Securities in global form, or any successor entity thereto.
"Securityholder" or "Holder" means the Person in whose name a
Security is registered on the Registrar's books.
"Significant Subsidiary," with respect to any person, means a
Subsidiary of such person which, as of the end of such person's most recent
fiscal quarter, had a Consolidated Tangible Net Worth equal to at least 5% of
the Consolidated Tangible Net Worth of such person as of such date.
"Special Record Date" for payment of any Defaulted Interest means
a date fixed by the Trustee pursuant to Section 2.12 of this Indenture.
"Stated Maturity," when used with respect to any Security, means
June 1, 2003.
"Strategic Investors" means any person whose principal line of
business activity is a Related Business and (a) whose total market
capitalization is in excess of $500,000,000 as
15
<PAGE>
measured by the sum of the aggregate principal dollar amount of its Indebtedness
plus the aggregate dollar value of its Capital Stock (as measured by the per
share price of its Capital Stock multiplied by the number of outstanding shares
of such Capital Stock) or (b) in the case of a person without publicly traded
Capital Stock, whose private market value, as determined by the Board of
Directors of the Company consistent with advice obtained from an independent,
nationally recognized investment banking firm, is in excess of $500,000,000.
"Subordinated Indebtedness" means Indebtedness of the Company or
a Subsidiary that is subordinated in right of payment to the Securities or, if
applicable, a Guarantee in respect thereof in any respect, or has a stated
maturity on or after the Stated Maturity.
"Subsidiary," with respect to any person, means (i) a corporation
a majority of whose Capital Stock with voting power, under ordinary
circumstances, to elect directors is at the time, directly or indirectly, owned
by such person, by such person and one or more Subsidiaries of such person or by
one or more Subsidiaries of such person, (ii) a partnership in which a person or
a subsidiary of such person is, at the date of determination, a general partner
of such partnership and in which such person or a subsidiary of such person has
a majority of the economic interests or (iii) any other person (other than a
corporation) in which such person, one or more Subsidiaries of such person, or
such person and one or more Subsidiaries of such person, directly or indirectly,
at the date of determination thereof has at least majority ownership interest.
Notwithstanding the foregoing, an Unrestricted Subsidiary shall not be a
Subsidiary of the Company or of any Subsidiary of the Company.
"Subsidiary Guarantor" means a Guarantor that is also a
Subsidiary of the Company.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code (S)(S)
77aaa-77bbbb) as in effect on the date of the execution of this Indenture.
"Tax Sharing Agreement" means any agreements between the Company
and Holdings pursuant to which the Company may make payments to Holdings with
respect to the Company's Federal, state, or local income or franchise tax
liabilities where the Company is included in a consolidated, unitary or combined
return filed by Holdings; provided, that the payment by the Company under such
agreement shall not exceed the liability of the Company for such taxes if it had
filed income tax returns as a separate company.
"Transfer Restricted Securities" means Securities that bear or
are required to bear the legend set forth in Section 2.6 of this Indenture.
"Trustee" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
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"Trust Officer" means any officer within the corporate trust
division (or any successor group) of the Trustee or any other officer of the
Trustee customarily performing functions similar to those performed by the
Persons who at that time shall be such officers, and also means, with respect to
a particular corporate trust matter, any other officer of the Trustee to whom
such trust matter is referred because of his knowledge of and familiarity with
the particular subject.
"Unrestricted Subsidiary" means any subsidiary of the Company
that does not own any Capital Stock of, or own or hold any Lien on any property
of, the Company or any Subsidiary of the Company and that, at the time of
determination, shall be an Unrestricted Subsidiary (as designated by the Board
of Directors of the Company); provided, however, that such subsidiary shall not
engage, to any substantial extent, in any line or lines of business activity
other than a Related Business, and immediately prior thereto and after giving
pro forma effect to such designation (i) either (a) the Company could incur at
least $1.00 of Indebtedness pursuant to the Debt Incurrence Ratio, (b) such
subsidiary, at the time of designation, has no assets or (c) such subsidiary is
designated an "Unrestricted Subsidiary" at the time of Acquisition by the
Company or its Subsidiaries and (ii) there would not exist a Default or Event of
Default. The Board of Directors of the Company may designate any Unrestricted
Subsidiary to be a Subsidiary, provided, that (i) no Default or Event of Default
is existing or will occur as a consequence thereof and (ii) immediately after
giving effect to such designation, on a pro forma basis, the Company could incur
at least $1.00 of Indebtedness pursuant to the Debt Incurrence Ratio. Each such
designation shall be evidenced by filing with the Trustee a certified copy of
the resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing conditions.
"U.S. Government Obligations" means direct non-callable
obligations of, or noncallable obligations guaranteed by, the United States of
America for the payment of which obligation or guarantee the full faith and
credit of the United States of America is pledged.
"Warrant" means the Warrant dated January 31, 1994 issued by
Holdings to Continental Bank, N.A.
"Wholly Owned" or "wholly owned" with respect to a Subsidiary of
any person means (i) with respect to a Subsidiary that is a limited liability
company or similar entity, a Subsidiary whose capital stock is 99% or greater
beneficially owned by such person and (ii) with respect to a Subsidiary that is
other than a limited liability company or similar entity, a Subsidiary whose
capital stock or other equity interest is 100% beneficially owned by such
person.
"Zero-Coupon Notes" means the $86,000,000 million aggregate
principal amount of 13 1/2% Senior Zero Coupon Notes due 2004 issued by Holdings
on the Issue Date.
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SECTION 1.2. Incorporation by Reference of TIA.
---------------------------------
Whenever this Indenture refers to a provision of the TIA, such
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture securityholder" means a Holder or a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company and any
other obligor on the Securities.
All other TIA terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute or defined by SEC rule and
not otherwise defined herein have the meanings assigned to them thereby.
SECTION 1.3. Rules of Construction.
---------------------
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in
the plural include the singular;
(5) provisions apply to successive events and transactions;
(6) "herein," "hereof" and other words of similar import
refer to this Indenture as a whole and not to any particular Article, Section or
other subdivision; and
(7) references to Sections or Articles means reference to
such Section or Article in this Indenture, unless stated otherwise.
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ARTICLE II
THE SECURITIES
SECTION 2.1. Form and Dating.
---------------
The Securities and the Trustee's certificate of authentication,
in respect thereof, shall be substantially in the form of Exhibit A hereto,
which Exhibit is part of this Indenture. The Securities may have notations,
legends or endorsements required by law, stock exchange rule or usage. The
Company shall approve the form of the Securities and any notation, legend or
endorsement on them. Any such notations, legends or endorsements not contained
in the form of Security attached as Exhibit A hereto shall be delivered in
writing to the Trustee. Each Security shall be dated the date of its
authentication.
The terms and provisions contained in the forms of Securities
shall constitute, and are hereby expressly made, a part of this Indenture and,
to the extent applicable, the Company and the Trustee, by their execution and
delivery of this Indenture, expressly agree to such terms and provisions and to
be bound thereby.
SECTION 2.2. Execution and Authentication.
----------------------------
Two Officers shall sign, or one Officer shall sign and one
Officer shall attest to, the Security for the Company by manual or facsimile
signature. The Company's seal shall be impressed, affixed, imprinted or
reproduced on the Securities and may be in facsimile form.
If an Officer whose signature is on a Security was an Officer at
the time of such execution but no longer holds that office at the time the
Trustee authenticates the Security, the Security shall be valid nevertheless and
the Company shall nevertheless be bound by the terms of the Securities and this
Indenture.
A Security shall not be valid until an authorized signatory of
the Trustee manually signs the certificate of authentication on the Security but
such signature shall be conclusive evidence that the Security has been
authenticated pursuant to the terms of this Indenture.
The Trustee shall authenticate Initial Securities for original
issue in the aggregate principal amount of up to $70,000,000 and shall
authenticate Exchange Securities for original issue in the aggregate principal
amount of up to $70,000,000, in each case upon a written order of the Company in
the form of an Officers' Certificate; provided that such Exchange Securities
shall be issuable only upon the valid surrender for cancellation of Initial
Securities of a like aggregate principal amount in accordance with the
Registration Rights Agreement. The Officers' Certificate shall specify the
amount of Securities to be authenticated and the date on which the Securities
are to be authenticated. The aggregate principal amount of Securities
outstanding at any time may not exceed $70,000,000, except as provided in
Section 2.7. Upon the written
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order of the Company in the form of an Officers' Certificate, the Trustee shall
authenticate Securities in substitution of Securities originally issued to
reflect any name change of the Company.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Securities. Unless otherwise provided in the
appointment, an authenticating agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with the Company, any Affiliate of the Company,
or any of their respective Subsidiaries.
Securities shall be issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof.
SECTION 2.3. Registrar and Paying Agent.
--------------------------
The Company shall maintain an office or agency in the Borough of
Manhattan, The City of New York, where Securities may be presented for
registration of transfer or for exchange ("Registrar"), and an office or agency
where Securities may be presented for payment ("Paying Agent"), and where
notices and demands to or upon the Company in respect of the Securities may be
served. The Company may act as Registrar or Paying Agent, except that, for the
purposes of Articles III, VIII, XI, and Section 4.14 and as otherwise specified
in this Indenture, neither the Company nor any Affiliate of the Company shall
act as Paying Agent. The Registrar shall keep a register of the Securities and
of their transfer and exchange. The Company may have one or more co-Registrars
and one or more additional Paying Agents. The term "Paying Agent" includes any
additional Paying Agent. The Company hereby initially appoints the Trustee as
Registrar and Paying Agent, and the Trustee hereby initially agrees so to act.
The Company shall enter into an appropriate written agency
agreement with any Agent not a party to this Indenture, which agreement shall
implement the provisions of this Indenture that relate to such Agent. The
Company shall promptly notify the Trustee in writing of the name and address of
any such Agent. If the Company fails to maintain a Registrar or Paying Agent,
the Trustee shall act as such.
The Company initially appoints The Depository Trust Company
("DTC"), to act as Depository with respect to the Global Securities.
The Company initially appoints the Trustee to act as Securities
Custodian with respect to the Global Securities.
SECTION 2.4. Paying Agent to Hold Assets in Trust.
------------------------------------
The Company shall require each Paying Agent other than the
Trustee to agree in writing that each Paying Agent shall hold in trust for the
benefit of Holders or the Trustee all
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assets held by the Paying Agent for the payment of principal of, premium, if
any, or interest on, the Securities (whether such assets have been distributed
to it by the Company or any other obligor on the Securities), and shall notify
the Trustee in writing of any Default in making any such payment. If either of
the Company or a Subsidiary of the Company acts as Paying Agent, it shall
segregate such assets and hold them as a separate trust fund for the benefit of
the Holders or the Trustee. The Company at any time may require a Paying Agent
to distribute all assets held by it to the Trustee and account for any assets
disbursed and the Trustee may at any time during the continuance of any payment
Default, upon written request to a Paying Agent, require such Paying Agent to
distribute all assets held by it to the Trustee and to account for any assets
distributed. Upon distribution to the Trustee of all assets that shall have been
delivered by the Company to the Paying Agent, the Paying Agent (if other than
the Company) shall have no further liability for such assets.
SECTION 2.5. Securityholder Lists.
--------------------
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders. If the Trustee is not the Registrar, the Company shall furnish to the
Trustee on or before the third Business Day preceding each Interest Payment Date
and at such other times as the Trustee may request in writing a list in such
form and as of such date as the Trustee reasonably may require of the names and
addresses of Holders.
SECTION 2.6. Transfer and Exchange.
---------------------
(a) Transfer and Exchange of Definitive Securities. When
----------------------------------------------
Definitive Securities are presented to the Registrar or a co-Registrar with a
request:
(x) to register the transfer of such Definitive
Securities; or
(y) to exchange such Definitive Securities for an equal
principal amount of Definitive Securities of other authorized denominations,
the Registrar or co-Registrar shall register the transfer or make the exchange
as requested if its reasonable requirements for such transaction are met;
provided, however, that the Definitive Securities surrendered for transfer or
exchange:
(i) shall be duly endorsed or accompanied by a written
instrument of transfer in form reasonably satisfactory to the Company and
the Registrar or co-Registrar, duly executed by the Holder thereof or his
attorney duly authorized in writing; and
(ii) in the case of Transfer Restricted Securities that
are Definitive Securities, shall be accompanied by the following additional
information and documents, as applicable:
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(A) if such Transfer Restricted Securities are being
delivered to the Registrar by a Holder for registration in the name of
such Holder, without transfer, a certification from such Holder to
that effect (in substantially the form set forth on the reverse of the
Security); or
(B) if such Transfer Restricted Security is being
transferred to a "qualified institutional buyer" (as defined in Rule
144A under the Securities Act) in accordance with Rule 144A under the
Securities Act, or pursuant to an exemption from registration in
accordance with Rule 144, or Regulation S under the Securities Act, or
pursuant to an effective registration statement under the Securities
Act, or to an institutional "accredited investor" within the meaning
of Rule 501 (A)(1), (2), (3) or (7) under the Securities Act that is
acquiring such Transfer Restricted Security for its own account, or
for the account of such an institutional accredited investor, not with
a view to or for offer or sale in connection with any distribution in
violation of the Securities Act, a certification to that effect (in
substantially the form set forth on the reverse of the Security); or
(C) if such Transfer Restricted Security is being
transferred in reliance on another exemption from the registration
requirements of the Securities Act, a certification to that effect (in
substantially the form set forth on the reverse of the Security) and
an Opinion of Counsel reasonably acceptable to the Company and to the
Registrar to the effect that such transfer is in compliance with the
Securities Act.
(b) Restrictions on Transfer of a Definitive Security for a
-------------------------------------------------------
Beneficial Interest in a Global Security. A Definitive Security may not be
- ----------------------------------------
exchanged for a beneficial interest in a Global Security except upon
satisfaction of the requirements set forth below. Upon receipt by the Trustee of
a Definitive Security, duly endorsed or accompanied by appropriate instruments
of transfer, in form satisfactory to the Trustee, together with:
(i) if such Definitive Security is a Transfer Restricted
Security, certification, substantially in the form set forth on the reverse
of the Security, that such Definitive Security is being transferred to a
"qualified institutional buyer" (as defined in Rule 144A under the
Securities Act) in accordance with Rule 144A under the Securities Act; and
(ii) whether or not such Definitive Security is a Transfer
Restricted Security, written instructions directing the Trustee to make, or
to direct the Securities Custodian to make, an endorsement on the Global
Security to reflect an increase in the aggregate principal amount of the
Securities represented by the Global Security,
then the Trustee shall cancel such Definitive Security and cause, or direct the
Securities Custodian to cause, in accordance with the standing instructions and
procedures existing between
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<PAGE>
the Depository and the Securities Custodian, the aggregate principal amount of
Securities represented by the Global Security to be increased accordingly. If no
Global Securities are then outstanding, the Company shall issue and the Trustee
shall authenticate a new Global Security in the appropriate principal amount.
(c) Transfer and Exchange of Global Securities. The transfer
------------------------------------------
and exchange of Global Securities or beneficial interests therein shall be
effected through the Depository, in accordance with this Indenture (including
applicable restrictions on transfer set forth herein, if any) and the procedures
of the Depository therefor.
(d) Transfer of a Beneficial Interest in a Global Security for a
------------------------------------------------------------
Definitive Security.
- -------------------
(i) Any Person having a beneficial interest in a Global
Security may upon request exchange such beneficial interest for a
Definitive Security. Upon receipt by the Trustee of written instructions or
such other form of instructions as is customary for the Depository, from
the Depository or its nominee on behalf of any Person having a beneficial
interest in a Global Security, and upon receipt by the Trustee of a written
instruction or such other form of instructions as is customary for the
Depository or the Person designated by the Depository as having such a
beneficial interest in a Transfer Restricted Security only, the following
additional information and documents (all of which may be submitted by
facsimile):
(A) if such beneficial interest is being transferred to the
Person designated by the Depository as being the beneficial owner, a
certification from such person to that effect (in substantially the
form set forth on the reverse of the Security); or
(B) if such beneficial interest is being transferred to a
"qualified institutional buyer" (as defined in Rule 144A under the
Securities Act) in accordance with Rule 144A under the Securities Act,
or pursuant to an exemption from registration in accordance with Rule
144, or Regulation S under the Securities Act, or pursuant to an
effective registration statement under the Securities Act, or to an
institutional "accredited investor" within the meaning of Rule 501
(A)(1), (2), (3) or (7) under the Securities Act that is acquiring
such beneficial interest in such Global Security for its own account,
or for the account of such an institutional accredited investor, not
with a view to or for offer or sale in connection with any
distribution in violation of the Securities Act, a certification to
that effect from the transferor (in substantially the form set forth
on the reverse of the Security); or
(C) if such beneficial interest is being transferred in
reliance on another exemption from the registration requirements of
the Securities Act, a certification to that effect from the transferee
or transferor (in substantially the
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form set forth on the reverse of the Security) or an Opinion of
Counsel from the transferee or transferor reasonably acceptable to the
Company and to the Registrar to the effect that such transfer is in
compliance with the Securities Act,
then the Trustee or the Securities Custodian, at the direction of the
Trustee, will cause, in accordance with the standing instructions and
procedures existing between the Depository and the Securities Custodian,
the aggregate principal amount of the Global Security to be reduced and,
following such reduction, the Company will execute and, upon receipt of an
authentication order in the form of an Officers' Certificate, the Trustee
will authenticate and deliver to the transferee a Definitive Security.
(ii) Definitive Securities issued in exchange for a
beneficial interest in a Global Security pursuant to this Section 2.6(d)
shall be registered in such names and in such authorized denominations as
the Depository, pursuant to instructions from its direct or indirect
participants or otherwise, shall instruct the Trustee. The Trustee shall
deliver such Definitive Securities to the persons in whose names such
Securities are so registered.
(e) Restrictions on Transfer and Exchange of Global Securities.
----------------------------------------------------------
Notwithstanding any other provisions of this Indenture (other than the
provisions set forth in subsection (f) of this Section 2.6), a Global Security
may not be transferred as a whole except by the Depository to a nominee of the
Depository or by a nominee of the Depository to the Depository or another
nominee of the Depository or by the Depository or any such nominee to a
successor Depository or a nominee of such successor Depository.
(f) Authentication of Definitive Securities in Absence of
-----------------------------------------------------
Depository. If at any time:
- ----------
(i) the Depository for the Securities notifies the Company
that the Depository is unwilling or unable to continue as Depository for
the Global Securities and a successor Depository for the Global Securities
is not appointed by the Company within ninety days after delivery of such
notice; or
(ii) the Company, in its sole discretion, notifies the
Trustee in writing that they elect to cause the issuance of Definitive
Securities under this Indenture,
then the Company will execute, and the Trustee, upon receipt of an Officers'
Certificate requesting the authentication and delivery of Definitive Securities,
will authenticate and deliver Definitive Securities, in an aggregate principal
amount equal to the principal amount of the Global Securities, in exchange for
such Global Securities.
(g) Legends.
-------
24
<PAGE>
(i) Except as permitted by the following paragraph (ii),
each Security certificate evidencing the Global Securities and the
Definitive Securities (and all Securities issued in exchange therefor or
substitution thereof) shall bear a legend in substantially the following
form:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE
SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR ANY
APPLICABLE EXEMPTION THEREFROM.
EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED
THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE
HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE
COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED, ONLY (1)(a) TO A PERSON WHO THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (b) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE
MEANING OF SUBPARAGRAPH (A)(1), (2), (3) OR (7) OF RULE 501 UNDER THE
SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR
FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN
CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT,
(c) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, (d) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES
ACT OR (e) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF
COUNSEL IF THE COMPANY SO REQUESTS) (2) TO THE COMPANY OR (3) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNTIED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER
WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO NOTIFY ANY PURCHASER
FROM IT OF THE SECURITY
25
<PAGE>
EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE."
(ii) Upon any sale or transfer of a Transfer Restricted
Security (including any Transfer Restricted Security represented by a
Global Security) pursuant to Rule 144 under the Act or an effective
registration statement under the Act:
(A) in the case of any Transfer Restricted Security that is
a Definitive Security, the Registrar shall permit the Holder thereof
to exchange such Transfer Restricted Security for a Definitive
Security that does not bear the legend set forth above and rescind any
restriction on the transfer of such Transfer Restricted Security; and
(B) any such Transfer Restricted Security represented by a
Global Security shall not be subject to the provisions set forth in
(i) above (such sales or transfers being subject only to the
provisions of Section 2.6(c) of this Indenture); provided, however,
that with respect to any request for an exchange of a Transfer
Restricted Security that is represented by a Global Security for a
Definitive Security that does not bear a legend, which request is made
in reliance upon Rule 144, the Holder thereof shall certify in writing
to the Registrar that such request is being made pursuant to Rule 144
(such certification to be substantially in the form set forth on the
reverse of the Security).
(h) Cancellation and/or Adjustment of Global Security. At such
-------------------------------------------------
time as all beneficial interests in a Global Security have either been exchanged
for Definitive Securities, redeemed, repurchased or cancelled, such Global
Security shall be returned to or retained and cancelled by the Trustee. At any
time prior to such cancellation, if any beneficial interest in a Global Security
is exchanged for Definitive Securities, redeemed, repurchased or cancelled, the
principal amount of Securities represented by such Global Security shall be
reduced and an endorsement shall be made on such Global Security, by the Trustee
or the Securities Custodian, at the direction of the Trustee, to reflect such
reduction.
(i) Obligations with respect to Transfers and Exchanges of
------------------------------------------------------
Definitive Securities.
- ---------------------
(i) To permit registrations of transfers and exchanges,
the Company shall execute and the Trustee shall authenticate Definitive
Securities and Global Securities at the Registrar's or co-Registrar's
request.
(ii) No service charge shall be made for any registration
of transfer or exchange, but the Company may require payment of a sum
sufficient to cover any transfer tax, assessments, or similar governmental
charge payable in connection therewith (other than any such transfer taxes,
assessments, or similar governmental charge payable
26
<PAGE>
upon exchanges or transfers pursuant to Section 2.2 (fourth paragraph),
2.10, 3.7, 4.14(8), 9.5, or 11.1 (final paragraph) of this Indenture).
(iii) The Registrar or co-Registrar shall not be required to
register the transfer of or exchange of (a) any Definitive Security
selected for redemption in whole or in part pursuant to Article III, except
the unredeemed portion of any Definitive Security being redeemed in part,
or (b) any Security for a period beginning fifteen Business Days before the
mailing of a notice of an offer to repurchase pursuant to Article XI or
Section 4.14 of this Indenture or redeem Securities pursuant to Article III
hereof and ending at the close of business on the day of such mailing.
SECTION 2.7. Replacement Securities.
----------------------
If a mutilated Security is surrendered to the Trustee or if the Holder
of a Security claims and submits an affidavit or other evidence, satisfactory to
the Trustee, to the Trustee to the effect that the Security has been lost,
destroyed or wrongfully taken, the Company shall issue and the Trustee shall
authenticate a replacement Security if the Trustee's requirements are met. If
required by the Trustee or the Company, such Holder must provide an indemnity
bond or other indemnity, sufficient in the judgment of both the Company and the
Trustee, to protect the Company, the Trustee or any Agent from any loss which
any of them may suffer if a Security is replaced. The Company may charge such
Holder for its reasonable, out-of-pocket expenses in replacing a Security.
Every replacement Security is an additional obligation of the Company.
SECTION 2.8. Outstanding Securities.
----------------------
Securities outstanding at any time are all the Securities that have
been authenticated by the Trustee (including any Security represented by a
Global Security) except those cancelled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Security effected by
the Trustee hereunder and those described in this Section 2.8 of this Indenture
as not outstanding. A Security does not cease to be outstanding because the
Company or an Affiliate of the Company holds the Security, except as provided in
Section 2.9 of this Indenture.
If a Security is replaced pursuant to Section 2.7 of this Indenture
(other than a mutilated Security surrendered for replacement), it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser. A mutilated Security ceases
to be outstanding upon surrender of such Security and replacement thereof
pursuant to Section 2.7 of this Indenture.
If on a Redemption Date or the Maturity Date the Paying Agent (other
than an Company or an Affiliate of an Company) holds Cash or U.S. Government
Obligations sufficient to pay all of the principal and interest due on the
Securities payable on that date and payment
27
<PAGE>
of the Securities called for redemption is not otherwise prohibited, then on and
after that date such Securities cease to be outstanding and interest on them
ceases to accrue.
SECTION 2.9. Treasury Securities.
-------------------
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, amendment, supplement, waiver or
consent, Securities owned by the Company or Affiliates of the Company shall be
disregarded, except that, for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, amendment, supplement,
waiver or consent, only Securities that the Trustee knows are so owned shall be
disregarded.
SECTION 2.10. Temporary Securities.
--------------------
Until definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Securities. Temporary
Securities shall be substantially in the form of definitive Securities but may
have variations that the Company reasonably and in good faith consider
appropriate for temporary Securities. Without unreasonable delay, the Company
shall prepare and the Trustee shall authenticate definitive Securities in
exchange for temporary Securities. Until so exchanged, the temporary Securities
shall in all respects be entitled to the same benefits under this Indenture as
permanent Securities authenticated and delivered hereunder.
SECTION 2.11. Cancellation.
------------
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Securities surrendered to them for transfer, exchange or payment. The
Trustee, or at the direction of the Trustee, the Registrar or the Paying Agent
(other than the Company or an Affiliate of the Company), and no one else, shall
cancel and, at the written direction of the Company, shall dispose of all
Securities surrendered for transfer, exchange, payment or cancellation. Subject
to Section 2.7 of this Indenture, the Company may not issue new Securities to
replace Securities that have been paid or delivered to the Trustee for
cancellation. No Securities shall be authenticated in lieu of or in exchange for
any Securities cancelled as provided in this Section 2.11 of this Indenture,
except as expressly permitted in the form of Securities and as permitted by this
Indenture.
SECTION 2.12. Defaulted Interest.
------------------
Interest on any Security which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the person in
whose name that Security (or one or more predecessor Securities) is registered
at the close of business on the Record Date for such interest.
28
<PAGE>
Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date plus, to the extent
lawful, any interest payable on the defaulted interest ("Defaulted Interest"),
shall forthwith cease to be payable to the registered holder on the relevant
Record Date, and such Defaulted Interest may be paid by the Company, at its
election in each case, as provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted
Interest to the persons in whose names the Securities (or their respective
predecessor Securities) are registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest, which shall
be fixed in the following manner. The Company shall notify the Trustee in
writing of the amount of Defaulted Interest proposed to be paid on each
Security and the date of the proposed payment, and at the same time the
Company shall deposit with the Trustee an amount of Cash equal to the
aggregate amount proposed to be paid in respect of such Defaulted Interest
or shall make arrangements satisfactory to the Trustee for such deposit
prior to the date of the proposed payment, such Cash when deposited to be
held in trust for the benefit of the persons entitled to such Defaulted
Interest as provided in this clause (1). Thereupon the Trustee shall fix a
record date for the payment of such Defaulted Interest (a "Special Record
Date"), which shall be not more than fifteen days, and not less than ten
days prior to the date of the proposed payment and not less than ten days
after the receipt by the Trustee of the notice of the proposed payment. The
Trustee shall promptly notify the Company of such Special Record Date and,
in the name and at the expense of the Company, shall cause notice of the
proposed payment of such Defaulted Interest and the Special Record Date
therefor to be mailed, first-class postage prepaid, to each Holder at his
address as it appears in the Security register not less than ten days prior
to such Special Record Date. Notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor having been mailed
as aforesaid, such Defaulted Interest shall be paid to the persons in whose
names the Securities (or their respective predecessor Securities) are
registered on such Special Record Date and shall no longer be payable
pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest
in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon such
notice as may be required by such exchange, if, after notice given by the
Company to the Trustee of the proposed payment pursuant to this clause,
such manner shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon transfer of or in exchange for or in lieu of
any other Security shall carry the rights to interest accrued and unpaid, and to
accrue, which were carried by such other Security.
29
<PAGE>
ARTICLE III
REDEMPTION
SECTION 3.1. Right of Redemption.
-------------------
Redemption of Securities, as permitted by any provision of this
Indenture, shall be made in accordance with such provision and this Article III.
The Company will not have the right to redeem any Securities prior to June 1,
1999 (other than out of the Net Cash Proceeds of certain issuances of Capital
Stock of the Company or Holdings described under "Redemption" in Section 5 of
the form of the Securities attached as Exhibit A hereto). On or after June 1,
1999, the Company will have the right to redeem all or any part of the
Securities at the Redemption Prices specified in the form of Security attached
as Exhibit A set forth therein under the caption "Redemption," in each case,
including accrued and unpaid interest to the Redemption Date.
SECTION 3.2. Notices to Trustee.
------------------
If the Company elects to redeem Securities pursuant to Paragraph 5 of
the Securities, it shall notify the Trustee in writing of the Redemption Date
and the principal amount of Securities to be redeemed and whether it wants the
Trustee to give notice of redemption to the Holders.
If the Company elects to reduce the principal amount of Securities to
be redeemed pursuant to Paragraph 5 of the Securities by crediting against any
such redemption Securities it has not previously delivered to the Trustee for
cancellation, it shall so notify the Trustee of the amount of the reduction and
deliver such Securities with such notice.
The Company shall give each notice to the Trustee provided for in this
Section 3.2 at least forty-five days before the Redemption Date (unless a
shorter notice shall be satisfactory to the Trustee). Any such notice may be
cancelled at any time prior to notice of such redemption being mailed to any
Holder and shall thereby be void and of no effect.
SECTION 3.3. Selection of Securities to Be Redeemed.
--------------------------------------
If less than all of the Securities are to be redeemed pursuant to
Paragraph 5 thereof, the Trustee shall select the Securities to be redeemed by
lot or by such other method as the Trustee shall determine to be fair and
appropriate and in such manner as complies with any applicable Depositary, legal
and stock exchange requirements.
The Trustee shall make the selection from the Securities outstanding
and not previously called for redemption and shall promptly notify the Company
in writing of the Securities selected for redemption and, in the case of any
Security selected for partial redemption, the principal amount thereof to be
redeemed. Securities in denominations of $1,000 may be
30
<PAGE>
redeemed only in whole. The Trustee may select for redemption portions (equal to
$1,000 or any integral multiple thereof) of the principal of Securities that
have denominations larger than $1,000. Provisions of this Indenture that apply
to Securities called for redemption also apply to portions of Securities called
for redemption.
SECTION 3.4. Notice of Redemption.
--------------------
At least thirty days, but not more than sixty days before a Redemption
Date, the Company shall mail a notice of redemption by first class mail, postage
prepaid, to the Trustee and each Holder whose Securities are to be redeemed. At
the Company's request, the Trustee shall give the notice of redemption in the
Company's name and at the Company's expense. Each notice for redemption shall
identify the Securities to be redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price, including the amount of accrued
and unpaid interest to be paid upon such redemption;
(3) the name, address and telephone number of the Paying
Agent;
(4) that Securities called for redemption must be
surrendered to the Paying Agent at the address specified in such notice to
collect the Redemption Price;
(5) that, unless (a) the Company defaults in its obligation
to deposit Cash with the Paying Agent in accordance with Section 3.6 of
this Indenture or (b) such redemption payment is prohibited for any reason,
interest on Securities called for redemption ceases to accrue on and after
the Redemption Date and the only remaining right of the Holders of such
Securities is to receive payment of the Redemption Price, including accrued
and unpaid interest to the Redemption Date, upon surrender to the Paying
Agent of the Securities called for redemption and to be redeemed;
(6) if any Security is being redeemed in part, the portion
of the principal amount, equal to $1,000 or any integral multiple thereof,
of such Security to be redeemed and that, after the Redemption Date, and
upon surrender of such Security, a new Security or Securities in aggregate
principal amount equal to the unredeemed portion thereof will be issued;
(7) if less than all the Securities are to be redeemed, the
identification of the particular Securities (or portion thereof) to be
redeemed, as well as the aggregate principal amount of such Securities to
be redeemed and the aggregate principal amount of Securities to be
outstanding after such partial redemption;
(8) the CUSIP number of the Securities to be redeemed; and
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<PAGE>
(9) that the notice is being sent pursuant to this Section
3.4 and pursuant to the optional redemption provisions of Paragraph 5 of
the Securities.
SECTION 3.5. Effect of Notice of Redemption.
------------------------------
Once notice of redemption is mailed in accordance with Section 3.4 of
this Indenture, Securities called for redemption become due and payable on the
Redemption Date and at the Redemption Price, including accrued and unpaid
interest to the Redemption Date. Upon surrender to the Trustee or Paying Agent,
such Securities called for redemption shall be paid at the Redemption Price,
including interest, if any, accrued and unpaid to the Redemption Date; provided
that if the Redemption Date is after a regular Record Date and on or prior to
the Interest Payment Date, the accrued interest shall be payable to the Holder
of the redeemed Securities registered on the relevant Record Date; and provided,
further, that if a Redemption Date is a Legal Holiday, payment shall be made on
the next succeeding Business Day and no interest shall accrue for the period
from such Redemption Date to such succeeding Business Day.
SECTION 3.6. Deposit of Redemption Price.
---------------------------
On or prior to the Redemption Date, the Company shall deposit with the
Paying Agent (other than the Company or an Affiliate of the Company) Cash
sufficient to pay the Redemption Price of, including accrued and unpaid interest
on, all Securities to be redeemed on such Redemption Date (other than Securities
or portions thereof called for redemption on that date that have been delivered
by the Company to the Trustee for cancellation). The Paying Agent shall promptly
return to the Company any Cash so deposited which is not required for that
purpose upon the written request of the Company.
If the Company complies with the preceding paragraph and the other
provisions of this Article III and payment of the Securities called for
redemption is not prohibited for any reason, interest on the Securities to be
redeemed will cease to accrue on the applicable Redemption Date, whether or not
such Securities are presented for payment. Notwithstanding anything herein to
the contrary, if any Security surrendered for redemption in the manner provided
in the Securities shall not be so paid upon surrender for redemption because of
the failure of the Company to comply with the preceding paragraph, interest
shall continue to accrue and be paid from the Redemption Date until such payment
is made on the unpaid principal, and, to the extent lawful, on any interest not
paid on such unpaid principal, in each case at the rate and in the manner
provided in Section 4.1 of this Indenture and the Security.
SECTION 3.7. Securities Redeemed in Part.
---------------------------
Upon surrender of a Security that is to be redeemed in part, the
Company shall execute and the Trustee shall authenticate and deliver to the
Holder, without service charge to the Holder, a new Security or Securities equal
in principal amount to the unredeemed portion of the Security surrendered.
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ARTICLE IV
COVENANTS
SECTION 4.1. Payment of Securities.
---------------------
The Company shall pay the principal of and interest on the Securities
on the dates and in the manner provided herein and in the Securities. An
installment of principal of or interest on the Securities shall be considered
paid on the date it is due if the Trustee or Paying Agent (other than the
Company, a Subsidiary of the Company or an Affiliate of the Company) holds for
the benefit of the Holders, on or before 10:00 a.m. New York City time on that
date, Cash deposited and designated for and sufficient to pay the installment.
The Company shall pay interest on overdue principal and on overdue
installments of interest at the rate specified in the Securities compounded
semi-annually, to the extent lawful.
SECTION 4.2. Maintenance of Office or Agency.
-------------------------------
The Company and the Guarantors shall maintain in the Borough of
Manhattan, The City of New York, an office or agency where Securities may be
presented or surrendered for payment, where Securities may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Company and the Guarantors in respect of the Securities and this Indenture
may be served. The Company and the Guarantors shall give prompt written notice
to the Trustee of the location, and any change in the location, of such office
or agency. If at any time the Company and the Guarantors shall fail to maintain
any such required office or agency or shall fail to furnish the Trustee with the
address thereof, such presentations, surrenders, notices and demands may be made
or served at the address of the Trustee set forth in Section 13.2 of this
Indenture.
The Company and the Guarantors may also from time to time designate
one or more other offices or agencies where the Securities may be presented or
surrendered for any or all such purposes and may from time to time rescind such
designations; provided, however, that no such designation or rescission shall in
any manner relieve the Company and the Guarantors of their obligation to
maintain an office or agency in the Borough of Manhattan, The City of New York,
for such purposes. The Company and the Guarantors shall give prompt written
notice to the Trustee of any such designation or rescission and of any change in
the location of any such other office or agency. The Company and the Guarantors
hereby initially designate the Corporate Trust Office of the Trustee as such
office.
SECTION 4.3. Limitation on Restricted Payments.
---------------------------------
The Company and the Guarantors shall not, and shall not permit any of
their Subsidiaries to, directly or indirectly, make any Restricted Payment, if,
immediately prior to or after giving effect to such Restricted Payment on a pro
forma basis, (1) a Default or an Event
33
<PAGE>
of Default shall have occurred and be continuing, (2) the Company is not
permitted to incur at least $1.00 of additional Indebtedness pursuant to the
Debt Incurrence Ratio, or (3) the aggregate amount of all Restricted Payments
made by the Company, the Guarantors and their Subsidiaries, including after
giving effect to such proposed Restricted Payment, from and after the Issue
Date, would exceed the sum of (a) the amount determined by subtracting (i) 2.0
times the aggregate Consolidated Fixed Charges of the Company and its
Consolidated Subsidiaries for the period (taken as one accounting period),
commencing on the first day of the first full fiscal quarter commencing after
the Issue Date, to and including the last day of the fiscal quarter ended
immediately prior to the date of each such calculation (the "Computation
Period"), from (ii) Consolidated EBITDA of the Company and its Consolidated
Subsidiaries for the Computation Period, plus (b) 100% of the aggregate Net Cash
Proceeds received by the Company from the sale of its Qualified Capital Stock
(other than (i) to a Subsidiary or Unrestricted Subsidiary of the Company and
(ii) to the extent applied in connection with a Qualified Exchange, but
including the Net Cash Proceeds received by the Company upon the exercise,
exchange or conversion of securities into Qualified Capital Stock other than in
connection with a Qualified Exchange) after the Issue Date and on or prior to
the date of such Restricted Payment. The full amount of any Restricted Payment
made pursuant to the immediately following paragraph (other than clause (w), (x)
or (y) thereof), however, will be deducted in the calculation of the aggregate
amount of Restricted Payments available to be made referred to in clause (3) of
the immediately preceding sentence.
Notwithstanding the foregoing, the provisions in the immediately
preceding paragraph will not prohibit (r) dividends by the Company to Holdings
to the extent promptly applied by Holdings to pay (i) liquidated damages due on
the Zero-Coupon Notes, (ii) amounts due in respect of Capital Stock of Holdings
required to be repurchased upon the exercise of "put" rights held prior to the
Issue Date by the holders of the Capital Stock issued upon exercise of the
Warrant and (iii) reasonable general and administrative expenses of Holdings not
to exceed $250,000 in any consecutive four-quarter period, (s) Investments by
the Company or any Guarantor in Unrestricted Subsidiaries in an aggregate amount
not to exceed the sum of (i) $5,000,000 plus (ii) to the extent not otherwise
applied to a Restricted Payment, 100% of the aggregate Net Cash Proceeds
received by the Company from the sale of its Qualified Capital Stock after the
Issue Date (other than (i) to a Subsidiary or Unrestricted Subsidiary of the
Company and (ii) to the extent applied in connection with a Qualified Exchange,
but including the Net Cash Proceeds received by the Company upon the exercise,
exchange or conversion of securities into Qualified Capital Stock other than in
connection with a Qualified Exchange), (t) repurchases of Capital Stock from
employees and directors of the Company or its Subsidiaries (or payments to
Holdings for such a purpose) upon the death, disability or termination of
employment or such person's position as a director in an aggregate amount to all
employees and directors not to exceed $300,000 per year or $2,100,000 in the
aggregate on and after the Issue Date, (u) payments by OVLC of dividends on its
preferred stock outstanding prior to the Issue Date, in accordance with the
terms thereof, (v) Investments in non-wholly owned Subsidiaries not to exceed
$5,000,000 in the aggregate, (w) payments to Holdings for taxes calculated and
paid in accordance with the Tax Sharing Agreement, (x) payments of up to
$1,250,000 in the aggregate to repurchase Capital Stock of Subsidiaries are
outstanding prior to the Issue Date,
34
<PAGE>
held by minority stockholders, and not beneficially owned by the Company or any
of its Affiliates, (y) a Qualified Exchange, or (z) the payment of any dividend
on Qualified Capital Stock within sixty days after the date of its declaration
if such dividend could have been made on the date of such declaration in
compliance with the foregoing provisions. Notwithstanding any other provision
hereof, the foregoing clauses (r)(iii), (s), (x) and (z) will not be deemed to
permit the respective Restricted Payments otherwise contemplated to be made
pursuant thereto if, immediately prior thereto or after giving effect to such
Restricted Payment on a pro forma basis, a Default or an Event of Default shall
have occurred or be continuing.
Not later than the date of making any Restricted Payment, the Company
shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by this Section 4.3 were computed, which calculations may
be based upon the Company's latest available internal financial statements;
provided, however, that a failure to so deliver such Officers' Certificate shall
not constitute a Default if the Company provides the Officers' Certificate
within thirty days of the date of making such Restricted Payment and
conclusively demonstrates therein that the Restricted Payment was permitted to
be made on the date made. The Trustee may rely on such Officers' Certificate
without further inquiry.
SECTION 4.4. Corporate and Partnership Existence.
-----------------------------------
Subject to Article V, the Company and the Guarantors shall do or cause
to be done all things necessary to preserve and keep in full force and effect
their respective corporate or partnership existence, as the case may be, and the
corporate or partnership existence, as the case may be, of each of their
Subsidiaries in accordance with the respective organizational documents of each
of them and the rights (charter and statutory) and corporate franchises of the
Company, the Guarantors and each of their respective Subsidiaries; provided,
however, that neither the Company nor any Guarantor shall be required to
preserve, with respect to themselves, any right or franchise, and with respect
to any of their respective Subsidiaries, any such existence, right or franchise,
if (a) the Board of Directors of the Company shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
such entity and (b) the loss thereof is not disadvantageous in any material
respect to the Holders.
SECTION 4.5. Payment of Taxes and Other Claims.
---------------------------------
Except with respect to immaterial items, the Company and the
Guarantors shall, and shall cause each of their Subsidiaries to, pay or
discharge or cause to be paid or discharged, before the same shall become
delinquent, (i) all taxes, assessments and governmental charges (including
withholding taxes and any penalties, interest and additions to taxes) levied or
imposed upon the Company, any Guarantor or any of their Subsidiaries or any of
their respective properties and assets and (ii) all lawful claims, whether for
labor, materials, supplies, services or anything else, which have become due and
payable and which by law have or may become a Lien upon the property and assets
of the Company, any Guarantor or any of their Subsidiaries; provided, however,
that neither the Company nor any Guarantor shall be required to pay or dis-
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charge or cause to be paid or discharged any such tax, assessment, charge or
claim whose amount, applicability or validity is being contested in good faith
by appropriate proceedings and for which disputed amounts adequate reserves have
been established in accordance with GAAP.
SECTION 4.6. Maintenance of Properties and Insurance.
---------------------------------------
The Company and the Guarantors shall cause all material properties
used or useful to the conduct of their business and the business of each of
their Subsidiaries to be maintained and kept in good condition, repair and
working order (reasonable wear and tear excepted) and supplied with all
necessary equipment and shall cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in their reasonable
judgment may be necessary, so that the business carried on in connection
therewith may be properly conducted at all times; provided, however, that
nothing in this Section 4.6 shall prevent the Company or any Guarantor from
discontinuing any operation or maintenance of any of such properties, or
disposing of any of them, if such discontinuance or disposal is (a), in the
judgment of the Board of Directors of the Company, desirable in the conduct of
the business of such entity and (b) not disadvantageous in any material respect
to the Holders.
The Company and the Guarantors shall provide, or cause to be provided,
for themselves and each of their Subsidiaries, insurance (including appropriate
self-insurance) against loss or damage of the kinds that, in the reasonable,
good faith opinion of the Company is adequate and appropriate for the conduct of
the business of the Company, the Guarantors and such Subsidiaries in a prudent
manner, with (except for self-insurance) reputable insurers or with the
government of the United States of America or an agency or instrumentality
thereof, in such amounts, with such deductibles, and by such methods as shall be
customary, in the reasonable, good faith opinion of the Company and adequate and
appropriate for the conduct of the business of the Company, the Guarantors and
such Subsidiaries in a prudent manner for entities similarly situated in the
industry, unless failure to provide such insurance (together with all other such
failures) would not have a material adverse effect on the financial condition or
results of operations of the Company, the Guarantors and such Subsidiaries taken
as a whole .
SECTION 4.7. Compliance Certificate; Notice of Default.
-----------------------------------------
(a) The Company shall deliver to the Trustee within 120 days
after the end of its fiscal year an Officers' Certificate complying with Section
314(a)(4) of the TIA and stating that a review of its activities and the
activities of its Subsidiaries during the preceding fiscal year has been made
under the supervision of the signing Officers with a view to determining whether
the Company has kept, observed, performed and fulfilled its obligations under
this Indenture and further stating, as to each such Officer signing such
certificate, whether or not the signer knows of any failure by the Company, any
Guarantor or any Subsidiary of the Company to comply with any conditions or
covenants in this Indenture and, if such signer does know of such a failure to
comply, the certificate shall describe such failure with particularity. The
Officers' Certificate shall also notify the Trustee should the relevant fiscal
year end on any date other than the current fiscal year end date.
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(b) The Company shall, so long as any of the Securities are
outstanding, deliver to the Trustee, promptly upon becoming aware of any Default
or Event of Default, an Officers' Certificate specifying such Default or Event
of Default and what action the Company is taking or proposes to take with
respect thereto. The Trustee shall not be deemed to have knowledge of any
Default, any Event of Default or any such fact unless one of its Trust Officers
receives notice thereof from the Company or any of the Holders.
SECTION 4.8. Reports.
-------
Whether or not the Company or Holdings is subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, each of the Company and
Holdings shall deliver to the Trustee and to each Holder and to prospective
purchasers of the Securities identified to the Company by an Initial Purchaser
within fifteen days after it is or would have been required to file such with
the SEC, (i) annual and quarterly financial statements substantially equivalent
to financial statements that would have been included in reports filed with the
SEC, if the Company and Holdings were subject to Section 13 or 15(d) of the
Exchange Act, including, with respect to annual information only, a report
thereon by the Company's certified independent public accountants as such would
be required in such reports to the SEC, and, in each case, together with a
management's discussion and analysis of financial condition and results of
operations which would be so required; and (ii) all reports that would be
required to be filed with the SEC on Form 8-K. In addition, whether or not
required by the rules and regulations of the SEC, the Company will file a copy
of all such information and reports with the SEC for public availability (unless
the SEC will not accept such a filing) and make such information available to
securities analysts and prospective investors upon request for so long as any
Securities remain outstanding.
SECTION 4.9. Limitation on Status as Investment Company.
------------------------------------------
The Company shall not and it shall not permit any of its Subsidiaries
to become an "investment company" (as that term is defined in the Investment
Company Act of 1940, as amended), or otherwise become subject to regulation
under the Investment Company Act.
SECTION 4.10. Limitation on Transactions with Affiliates.
------------------------------------------
The Company shall not, and shall not permit any of its Subsidiaries or
Unrestricted Subsidiaries to, enter into any contract, agreement, arrangement or
transaction with any Affiliate (an "Affiliate Transaction"), or any series of
related Affiliate Transactions unless (1) the terms of such Affiliate
Transaction are fair and reasonable to the Company, such Subsidiary or such
Unrestricted Subsidiary, as the case may be, and no less favorable to the
Company, such Subsidiary or such Unrestricted Subsidiary, as the case may be,
than could have been obtained in comparable arm's length transaction with a non-
Affiliate, (2) involving consideration to either party in excess of $1,000,000,
unless such transaction is evidenced by an Officers' Certificate addressed and
delivered to the Trustee stating that the terms of such Affiliate Transaction
are fair and reasonable to the Company, such Subsidiary or such
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Unrestricted Subsidiary, as the case may be, and no less favorable to the
Company, such Subsidiary or such Unrestricted Subsidiary, as the case may be,
than could have been obtained in comparable arm's length transaction with a non-
Affiliate, and (3) involving consideration to either party in excess of
$5,000,000, unless the Company, prior to the consummation thereof, obtains a
written favorable opinion as to the fairness of such transaction to the Company
from a financial point of view from an independent investment banking firm of
national reputation. The foregoing restriction will not apply to (u) pro rata
dividends or distributions paid in Cash on any class of Capital Stock and not
prohibited under Section 4.3 of this Indenture, (v) payments to Holdings made in
accordance with the Tax Sharing Agreement, (w) indemnification payments on
behalf of directors or employees of the Company or a Guarantor made or incurred
by such persons in such capacities, (x) payments made in accordance with the
Brentwood Agreement as in effect on the Issue Date, so long as no Event of
Default shall have occurred or be continuing, (y) repurchases of Capital Stock
not prohibited under clause (t) of Section 4.3 of this Indenture and (z)
transactions between the Company and any Wholly Owned Subsidiary Guarantor of
the Company or between Wholly Owned Subsidiary Guarantors of the Company.
SECTION 4.11. Limitation on Incurrence of Additional Indebtedness and
-------------------------------------------------------
Disqualified Capital Stock.
- --------------------------
The Company and the Guarantors shall not, and shall not permit any of
their Subsidiaries to, directly or indirectly, issue, assume, guaranty, incur,
become directly or indirectly liable with respect to (including as a result of
an Acquisition), extend the maturity of, or otherwise become responsible for,
contingently or otherwise (individually and collectively, to "incur" or "Incur"
or, as appropriate, an "incurrence" or "Incurrence"), any Indebtedness or any
Disqualified Capital Stock from and after the Issue Date. Notwithstanding the
foregoing:
(1) if (i) no Default or Event of Default shall have
occurred and be continuing at the time of, or would occur after giving
effect on a pro forma basis to, such incurrence of Indebtedness or
Disqualified Capital Stock and (ii) on the date of such incurrence
(the "Incurrence Date"), the Consolidated Cash Flow Ratio of the
Company for the Reference Period immediately preceding the Incurrence
Date, after giving effect on a pro forma basis to such incurrence of
such Indebtedness or Disqualified Capital Stock and, to the extent set
forth in the definition of Consolidated Cash Flow Ratio, the use of
proceeds thereof, would be no greater than 6 to 1 for Incurrence Dates
prior to June 1, 1998 and no greater than 5 to 1 thereafter (the "Debt
Incurrence Ratio"), then the Company and the Guarantors may incur such
Indebtedness or Disqualified Capital Stock, provided, however, that
Indebtedness incurred by a Guarantor shall be subordinated in right of
payment to such Guarantor's Guarantee of the Securities, except for
Non-recourse Purchase Money Indebtedness of such Guarantor and
Indebtedness of such Guarantor in the form of a guarantee which is in
respect of Indebtedness of the Company that is pari passu in right of
payment with the Securities,
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in which case that guarantee may be pari passu in right of payment
with such Guarantor's Guarantee of the Securities;
(2) the Company and the Guarantors may incur Indebtedness
evidenced by the Securities and the Guarantees and represented by the
Indenture up to the amounts specified herein as of the Issue Date;
(3) the Company and the Guarantors may incur Refinancing
Indebtedness with respect to any Indebtedness or Disqualified Capital
Stock, as applicable, described in clauses (1) and (2) of this Section
4.11 or which is, after giving effect to the implementation of the New
Credit Facility, outstanding on the Issue Date;
(4) the Company and the Guarantors may incur Permitted
Indebtedness;
(5) the Company and the Guarantors may incur Indebtedness
pursuant to the New Credit Facility on or after the Issue Date up to
an aggregate amount outstanding (including any Indebtedness issued to
Refinance, refund or replace such Indebtedness) at any time of
$50,000,000, plus accrued interest, fees incurred in connection with
the New Credit Facility and such additional amounts as may be deemed
to be outstanding in the form of Interest Swap and Hedging Obligations
with lenders party to the New Credit Facility, reduced by the amount
of any such Indebtedness permanently retired with Net Cash Proceeds
from any Asset Sale (other than a sale of Assets to Be Disposed of) or
assumed by a transferee in an Asset Sale; and
(6) the Company and the Guarantors may incur Indebtedness
on or after the Issue Date up to an aggregate amount outstanding
(including any Indebtedness issued to Refinance, refund or replace
such Indebtedness) at any time of $7,500,000.
SECTION 4.12. Limitations on Dividends and Other Payment Restrictions
-------------------------------------------------------
Affecting Subsidiaries.
- ----------------------
The Company and the Guarantors shall not, and shall not permit any of
their Subsidiaries to, directly or indirectly, create, assume or suffer to exist
any consensual restriction on the ability of any Subsidiary of the Company to
pay dividends or make other distributions to, or to pay any obligation to, or
otherwise to transfer assets or property to, or make or pay loans or advances
to, the Company or any Subsidiary of the Company, except (a) restrictions
imposed by the Securities, this Indenture, the Zero-Coupon Notes or the
indenture pursuant to which the Zero-Coupon Notes are issued, (b) customary
provisions restricting subletting or assignment of any lease (including a
Capitalized Lease Obligation), (c) restrictions imposed by applicable law, (d)
existing restrictions under Indebtedness outstanding, after giving effect to the
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<PAGE>
implementation of the New Credit Facility, on the Issue Date, (e) restrictions
under any Acquired Indebtedness not incurred in violation of the Indenture or
under any agreement relating to any property, asset, or business acquired by the
Company or any of its Subsidiaries, which restrictions existed at the time of
acquisition, were not put in place in connection with or in anticipation of such
acquisition and are not applicable to any person, other than the person
acquired, or to any property, asset or business, other than the property, assets
and business so acquired, (f) restrictions with respect solely to a Subsidiary
of the Company imposed pursuant to a binding agreement which has been entered
into for the sale or disposition of all or substantially all of the Capital
Stock or assets of such Subsidiary, provided, such restrictions apply solely to
the Capital Stock or assets of such Subsidiary, (g) restrictions pursuant to the
New Credit Facility, (h) restrictions pursuant to Indebtedness, other than
Subordinated Indebtedness, incurred in compliance with clause (1) of Section
4.11 of this Indenture (including Refinancings permitted to be incurred under
clause (3) thereof), (i) Liens specified under "Permitted Liens," other than
clauses (b), (c) and (e) thereof, and (j) in connection with and pursuant to
permitted Refinancings, replacements of restrictions that are not more
restrictive than those being replaced and do not apply to any other person or
assets than those that would have been covered by the restrictions in the
Indebtedness so refinanced.
SECTION 4.13. Limitations on Liens.
--------------------
The Company and the Guarantors shall not, and shall not permit any of
their Subsidiaries to, directly or indirectly, create, incur, suffer to exist or
become effective any Lien upon any of its property or assets, whether now owned
or hereafter acquired, or any income or profits therefrom, or assign or convey
any right to receive income therefrom, unless all payments due under the
Indenture and the Securities or the Guarantees, as the case may be, are secured
on an equal and ratable basis with the obligations so secured until such time as
such obligation is no longer secured by a Lien, provided, however, that
Permitted Liens may be created or incurred or may exist or become effective
without any requirement that all payments due under this Indenture, the
Securities or the Guarantees, as the case may be, be equally and ratably
secured.
SECTION 4.14. Limitation on Sales of Assets and Subsidiary Stock.
--------------------------------------------------
The Company and the Guarantors shall not, and shall not permit any of
their Subsidiaries to, in one or a series of related transactions, convey, sell,
transfer, assign or otherwise dispose of, directly or indirectly, any of its
property, business or assets, including by merger or consolidation and including
upon any sale or other transfer or issuance of any Capital Stock of any
Subsidiary of the Company or any sale and leaseback transaction, whether by the
Company or a Subsidiary or through the issuance, sale or transfer of Capital
Stock by a Subsidiary of the Company (an "Asset Sale"), unless (1)(a) within 405
days after the date of such Asset Sale, the Net Cash Proceeds therefrom (the
"Asset Sale Offer Amount"), are applied to the optional redemption of the
Securities in accordance with the terms of this Indenture or to the repurchase
of the Securities pursuant to an irrevocable, unconditional offer by the Company
(the "Asset Sale Offer"), to repurchase Securities at a purchase price (the
"Asset Sale Offer Price"),
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<PAGE>
of 100% of principal amount, plus accrued interest to the date of payment, made
within 360 days of such Asset Sale or (b) within 360 days of such Asset Sale,
the Asset Sale Offer Amount is (i) invested (or committed, pursuant to a binding
commitment subject only to reasonable, customary closing conditions, to be
invested, and in fact is so invested, within an additional ninety days) in fixed
assets and real property which in the good faith judgment of the Board of
Directors constitute or are a part of a Related Business of the Company, or in
100% of the issued and outstanding Capital Stock of a person the assets of which
are principally comprised of such fixed assets and real properties, or (ii) used
to retire Indebtedness outstanding under the New Credit Facility, except with
respect to the use of proceeds from the sale of Assets to Be Disposed of, and to
permanently reduce the amount of such Indebtedness permitted to be incurred in
compliance with paragraph (5) of Section 4.11 of this Indenture (including that
in the case of a revolver or similar arrangement that makes credit available,
such commitment is so reduced by such amount), (2) with respect to any
transaction or related series of transactions in respect of securities, property
or assets with an aggregate fair market value in excess of $1,000,000, at least
85% of the consideration for such Asset Sale (excluding the amount of (A) any
Indebtedness (other than the Securities) that is required to be repaid or
assumed (and is either repaid or assumed by the transferee of the related
assets) by virtue of such Asset Sale and which is secured by a Lien on the
property or assets sold and (B) property received by the Company or any such
Subsidiary from the transferee that within thirty days of such Asset Sale is
converted into Cash or Cash Equivalents) consists of Cash or Cash Equivalents,
(3) no Default or Event of Default shall have occurred and be continuing at the
time of, or would occur after giving effect, on a pro forma basis, to, such
Asset Sale, and (4) the Board of Directors of the Company determines in good
faith that the Company or such Subsidiary, as applicable, receives fair market
value for such Asset Sale. Notwithstanding clause (1)(a) above, if an Asset Sale
Offer is commenced and securities of the Company ranking pari passu in right of
payment with the Securities are outstanding at the date of commencement thereof,
the terms of which provide that a substantially similar offer must be made with
respect thereto, then the Asset Sale Offer shall be made concurrently with such
other offer, and securities of each issue which the holders of securities of
such issue elect to have purchased will be accepted pro rata in proportion to
the aggregate principal amount thereof; provided, that in so repurchasing such
other securities, the Company is in compliance with Section 4.3 of this
Indenture.
In addition, notwithstanding the provisions of the prior paragraph:
(i) the Company and its Subsidiaries may (A) convey, sell,
lease, transfer, assign or otherwise dispose of assets in the ordinary
course of business or (B) exchange assets for assets in a Related Business,
provided, however, in the case of this clause (B) that (1) the Company,
prior to the consummation of any such proposed exchange or series of
related exchanges having a fair market value in excess of $2,500,000,
obtains a written favorable opinion as to the fairness of such transaction
to the Company from a financial point of view from an independent
investment banking firm of national reputation, (2) no Default or Event of
Default shall have occurred and be continuing and (3) after giving effect
to such proposed exchange on a pro forma basis, either (x) the Company is
permitted to incur at least $1.00 of additional Indebtedness
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pursuant to the Debt Incurrence Ratio or (y) the Company's Debt Incurrence
Ratio is no greater than it was immediately prior to such proposed
exchange;
(ii) the Company and its Subsidiaries may convey, sell,
lease, transfer, assign or otherwise dispose of assets pursuant to and in
accordance with the provisions of Article V of this Indenture;
(iii) the Company and its Subsidiaries may (A) sell or
dispose of damaged, worn out or other obsolete property in the ordinary
course of business so long as such property is no longer necessary for the
proper conduct of the business of the Company or such Subsidiary, as
applicable, or (B) abandon such property if it cannot, through reasonable
efforts, be sold; and
(iv) the Company and its Subsidiaries may convey, sell,
transfer, assign or otherwise dispose of assets to the Company or any of
its Wholly Owned Subsidiaries.
The Company shall accumulate all Net Cash Proceeds (including any cash
as and when received from the proceeds of any property which itself was acquired
in consideration of an Asset Sale), and the aggregate amount of such accumulated
Net Cash Proceeds not used for the purposes permitted and within the time
provided by this Section 4.14 is referred to as the "Accumulated Amount."
For purposes of this Section 4.14, "Minimum Accumulation Date" means
each date on which the Accumulated Amount exceeds $10,000,000. Not later than
ten Business Days after each Minimum Accumulation Date, the Company will
commence an irrevocable unconditional offer (an "Offer to Purchase"), to the
Holders to purchase, on a pro rata basis, for Cash, Securities having a
principal amount (the "Offer Amount"), equal to the Accumulated Amount, at a
purchase price (the "Offer Price"), equal to 100% of principal amount, plus
accrued but unpaid interest to, and including, the date (the "Purchase Date"),
the Securities tendered are purchased and paid for in accordance with this
Section 4.14. The Offer to Purchase shall remain open for twenty Business Days,
except to the extent that a longer period is required by applicable law, but in
any case not more than ninety Business Days after such Minimum Accumulation Date
(or within 120 days of the commencement of the Offer to Purchase if, during any
such extension beyond ninety days following the commencement, the Company is
diligently pursuing all commercially reasonable steps to consummate the Offer to
Purchase or purchase properly tendered Securities pursuant thereto as promptly
as practicable). Notice of an Offer to Purchase will be sent on or before the
commencement of any Offer to Purchase, by first-class mail, by the Company to
each Holder at its registered address, with a copy to the Trustee. The notice to
the Holders will contain all information, instructions and materials required by
applicable law or otherwise material to such Holders' decision to tender
Securities pursuant to the Offer to Purchase. The notice, which (to the extent
consistent with the Indenture) shall govern the terms of the Offer to Purchase,
shall state:
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(1) that the Offer to Purchase is being made pursuant to
such notice and this Section 4.14;
(2) the Offer Amount, the Offer Price, the amount of
accrued and unpaid interest as of the then applicable Purchase Date, the
Final Put Date (as defined below), and the then applicable Purchase Date;
(3) that any Security, or portion thereof, not tendered or
accepted for payment will continue to accrue interest;
(4) that, unless the Company defaults in depositing Cash
with the Paying Agent in accordance with the penultimate paragraph of this
Section 4.14 or such payment is otherwise prevented, any Security, or
portion thereof, accepted for payment pursuant to the Offer to Purchase
shall cease to accrue interest after the Purchase Date;
(5) that Holders electing to have a Security, or portion
thereof, purchased pursuant to an Offer to Purchase will be required to
surrender the Security, with the form entitled "Option of Holder to Elect
Purchase" on the reverse of the Security completed, to the Paying Agent
(which may not for purposes of this Section 4.14, notwithstanding anything
in this Indenture to the contrary, be the Company or any Affiliate of the
Company) at the address specified in the notice prior to the close of
business on the earlier of (a) the third Business Day prior to the Purchase
Date and (b) the third Business Day following the expiration of the Offer
to Purchase (such earlier date being the "Final Put Date");
(6) that Holders will be entitled to withdraw their
elections, in whole or in part, if the Paying Agent (which may not for
purposes of this Section 4.14, notwithstanding any other provision of this
Indenture, be the Company or any Affiliate of the Company) receives, up to
the close of business on the Purchase Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Securities the Holder is withdrawing and a statement that
such Holder is withdrawing his election to have such principal amount of
Securities purchased;
(7) that if Securities in a principal amount in excess of
the principal amount of Securities to be acquired pursuant to the Offer to
Purchase are tendered on or prior to the Final Put Date and not withdrawn,
the Company shall purchase such Securities on a pro rata basis (with such
adjustments as may be deemed appropriate by the Company so that only
Securities in denominations of $1,000 or integral multiples of $1,000 shall
be acquired);
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<PAGE>
(8) that Holders whose Securities were purchased only in
part will be issued new Securities equal in principal amount to the
unpurchased portion of the Securities surrendered; and
(9) a brief description of the circumstances and relevant
facts regarding such Asset Sales.
Any such Offer to Purchase shall comply with all applicable provisions
of Federal and state laws, including those regulating tender offers, if
applicable, and any provisions of this Indenture that conflict with such laws
shall be deemed to be superseded by the provisions of such laws.
On or before a Purchase Date, the Company shall (i) accept for payment
Securities or portions thereof properly tendered pursuant to the Offer to
Purchase on or before the Final Put Date (on a pro rata basis if required
pursuant to paragraph (7) of this Section 4.14), (ii) deposit with the Paying
Agent Cash sufficient to pay the Offer Price for all Securities or portions
thereof so tendered and accepted and (iii) deliver to the Trustee Securities so
accepted together with an Officers' Certificate stating the Securities or
portions thereof being purchased by the Company. The Paying Agent shall on
each Purchase Date mail or deliver to Holders of Securities so accepted payment
in an amount equal to the Offer Price for such Securities, and the Trustee
shall promptly authenticate and mail or deliver to such Holders a new Security
equal in principal amount to any unpurchased portion of the Security
surrendered. The Company shall not have any obligation to accept for payment or
pay for any Securities tendered by a Holder after the Final Put Date. Any
Security not so accepted shall be promptly mailed or delivered by the Company to
the Holder thereof.
If the amount required to be paid by the Company in order to acquire
all Securities duly tendered by Holders (and not withdrawn) pursuant to an
Offer to Purchase (the "Acceptance Amount"), made pursuant to the third
paragraph of this Section 4.14 is less than the Offer Amount, the excess of the
Offer Amount over the Acceptance Amount may be used by the Company for general
corporate purposes without restriction, unless otherwise restricted by the other
provisions of this Indenture. Upon consummation of any Offer to Purchase made
in accordance with the terms of this Indenture, the Accumulated Amount will be
reduced to zero irrespective of the amount of Securities tendered pursuant to
the Offer to Purchase.
SECTION 4.15. Waiver of Stay, Extension or Usury Laws.
---------------------------------------
Each of the Company and the Guarantors covenants (to the extent that
it may lawfully do so) that it will not at any time insist upon, plead, or in
any manner whatsoever claim or take the benefit or advantage of, any stay or
extension law or any usury law or other law which would prohibit or forgive the
Company or any Guarantor from paying all or any portion of the principal of,
premium of, or interest on the Securities as contemplated herein, wherever
enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this Indenture; and (to the extent that it may
lawfully do so) each of the
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Company and the Guarantors hereby expressly waives all benefit or advantage of
any such law, and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and permit
the execution of every such power as though no such law had been enacted.
SECTION 4.16. Rule 144A Information Requirement.
---------------------------------
The Company shall furnish to the Holders of the Securities, securities
analysts, and prospective purchasers of Securities designated by the Holders of
Transfer Restricted Securities, upon their request, the information required to
be delivered pursuant to Rule 144A(d)(4) under the Securities Act until such
time as either the Company has concluded an offer to exchange the Exchange
Securities for the Initial Securities or a registration statement relating to
resales of the Securities has become effective under the Securities Act. The
Company shall also furnish such information during the pendency of any
suspension of effectiveness of such resale registration statement.
SECTION 4.17. Restriction on Sale and Issuance of Subsidiary
----------------------------------------------
Stock.
- -----
The Company and the Guarantors shall not sell, and shall not permit
any of their Subsidiaries to issue or sell, any shares of Capital Stock of any
Subsidiary of the Company to any person other than the Company or a wholly owned
Subsidiary of the Company, provided, however, that all of the Capital Stock of a
Subsidiary of the Company may be sold if such Asset Sale complies with the
provisions of Section 4.14 of this Indenture. In such case, the Subsidiary so
sold shall be released from its obligations under its Guarantee in respect of
the Securities and this Indenture.
SECTION 4.18. Future Subsidiary Guarantors.
----------------------------
All present and future Subsidiaries of the Company jointly and
severally shall guarantee irrevocably and unconditionally all principal,
premium, if any, and interest on the Securities on a senior basis, all in
accordance with Article XII hereof.
SECTION 4.19. Limitations on Lines of Business.
--------------------------------
The Company shall not and shall not permit any of its Subsidiaries or
Unrestricted Subsidiaries to directly or indirectly engage to any substantial
extent in any line or lines of business activity other than a Related Business.
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ARTICLE V
SUCCESSOR CORPORATION
SECTION 5.1. Limitation on Merger, Sale or Consolidation.
-------------------------------------------
(a) The Company shall not, directly or indirectly, consolidate
with or merge with or into another Person or sell, lease, convey or transfer all
or substantially all of its assets (computed on a consolidated basis), whether
in a single transaction or a series of related transactions, to another Person
or group of affiliated Persons, unless (i) either (a) the Company is the
continuing entity or (b) the resulting, surviving or transferee entity is a
corporation organized under the laws of the United States, any state thereof or
the District of Columbia and expressly assumes by supplemental indenture all of
the obligations of the Company in connection with the Securities and this
Indenture; (ii) no Default or Event of Default shall exist or shall occur
immediately before or after giving effect on a pro forma basis to such
transaction; (iii) other than in the case of a transaction solely between the
Company and any wholly owned Guarantor, immediately after giving effect to such
transaction on a pro forma basis, the consolidated surviving or transferee
entity would immediately thereafter be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Debt Incurrence Ratio; and (iv) the
Company has delivered to the Trustee an Officers' Certificate and an Opinion of
Counsel, each stating that such consolidation, merger or transfer and, if a
supplemental indenture is required, such supplemental indenture comply with
this Indenture and that all conditions precedent herein relating to such
transactions have been satisfied.
(b) For purposes of clause (a), the sale, lease, conveyance,
assignment, transfer or other disposition of all or substantially all of the
properties and assets of one or more Subsidiaries of the Company, which
properties and assets, if held by the Company instead of such Subsidiaries,
would constitute all or substantially all of the properties and assets of the
Company on a consolidated basis, shall be deemed to be the transfer of all or
substantially all of the properties and assets of the Company.
SECTION 5.2. Successor Corporation Substituted.
---------------------------------
Upon any consolidation or merger or any transfer of all or
substantially all of the assets of the Company in accordance with Section 5.1 of
this Indenture, the successor corporation formed by such consolidation or into
which the Company is merged or to which such transfer is made, shall succeed to,
and be substituted for, and may exercise every right and power of, the Company
under this Indenture with the same effect as if such successor corporation had
been named herein as the Company, and when a successor corporation duly assumes
all of the obligations of the Company pursuant hereto and pursuant to the
Securities, the Company shall be released from such obligations (except with
respect to any obligations that arise from, or are related to, such
transaction).
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ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES
SECTION 6.1. Events of Default.
-----------------
"Event of Default," wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be caused voluntarily or involuntarily or effected, without limitation, by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(1) failure to pay any installment of interest upon the
Securities as and when the same becomes due and payable, and the
continuance of such default for a period of thirty days;
(2) failure to pay all or any part of the principal of or
premium, if any, on the Securities when and as the same becomes due and
payable at maturity, upon redemption, by acceleration or otherwise,
including, without limitation, default in the payment of the Change of
Control Payment in accordance with Article XI or the Offer Price in
accordance with Section 4.14 or otherwise;
(3) the making by the Company or any of its Subsidiaries of a
Restricted Payment not permitted by Section 4.3 of this Indenture;
(4) failure by the Company or any Guarantor to observe or
perform any covenant or agreement contained in the Securities or this
Indenture (other than a default in the performance of any covenant or
agreement which is specifically dealt with elsewhere in this Section 6.1),
and continuance of such failure for a period of sixty days after there has
been given, by registered or certified mail, to the Company by the Trustee,
or to the Company and the Trustee by Holders of at least 25% in aggregate
principal amount of the outstanding Securities, a written notice specifying
such default or breach, requiring it to be remedied and stating that such
notice is a "Notice of Default" hereunder;
(5) a decree, judgment or order by a court of competent
jurisdiction shall have been entered adjudicating the Company or any of its
Significant Subsidiaries as bankrupt or insolvent, or approving as properly
filed a petition seeking reorganization of the Company or any of its
Significant Subsidiaries under any Bankruptcy Law, and such decree or order
shall have continued undischarged and unstayed for a period of sixty days;
or a decree or order of a court of competent jurisdiction over the
appointment of a receiver, liquidator, trustee or assignee in bankruptcy or
insolvency of the Company or any of its Significant Subsidiaries, or of the
property of any such Person, or for the winding up or liquidation of the
affairs of any such Person, shall have been entered, and
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such decree, judgment or order shall have remained in force undischarged
and unstayed for a period of sixty days;
(6) the Company or any of its Significant Subsidiaries shall
institute proceedings to be adjudicated a voluntary bankrupt, or shall
consent to the filing of a bankruptcy proceeding against it, or shall file
a petition or answer or consent seeking reorganization under any bankruptcy
or similar law or similar statute, or shall consent to the filing of any
such petition, or shall consent to the appointment of a Custodian,
receiver, liquidator, trustee or assignee in bankruptcy or insolvency of it
or any of its assets or property, or shall make a general assignment for
the benefit of creditors, or shall admit in writing its inability to pay
its debts generally as they become due, or shall, within the meaning of any
Bankruptcy Law, become insolvent, fail generally to pay its debts as they
become due, or take any corporate action in furtherance of or to
facilitate, conditionally or otherwise, any of the foregoing;
(7) a default under Indebtedness of the Company or any of its
Subsidiaries with an aggregate principal amount in excess of $5,000,000
(a) resulting from the failure to pay principal at maturity or (b) as a
result of which the maturity of such Indebtedness has been accelerated
prior to its stated maturity;
(8) final unsatisfied judgments not covered by insurance for the
payment of money, or the issuance of any warrant of attachment against any
portion of the property or assets of the Company or any of its
Subsidiaries, aggregating in excess of $5,000,000 at any one time rendered
against the Company or any of its Subsidiaries and not be stayed, bonded or
discharged within a period (during which execution shall not be effectively
stayed) of ninety days (or, in the case of any such final judgment which
provides for payment over time, which shall so remain unstayed, unbonded or
undischarged beyond any applicable payment date provided therein); or
(9) except as otherwise permitted under this Indenture and the
Securities, the cessation of effectiveness of any Guarantee in any material
respect or the finding by any judicial proceeding that any Guarantee is
unenforceable or invalid in any material respect or the denial or
disaffirmation by any Guarantor in writing of its obligations under its
Guarantee.
Notwithstanding the sixty-day period and notice requirement contained
in Section 6.1(4) above, (i) with respect to a default under Article XI the
sixty-day period referred to in Section 6.1(4) shall be deemed to have begun as
of the date the Change of Control notice is required to be sent in the event
that the Company has not complied with the provisions of Section 11.1 of this
Indenture, and the Trustee or Holders of at least 25% in principal amount of the
outstanding Securities thereafter give the Notice of Default referred to in
Section 6.1(4) to the Company and, if applicable, the Trustee; provided,
however, that if the breach or default is a result of a default in the payment
when due of the Change of Control Payment, such default shall be deemed, for
purposes of this Section 6.1, to arise no later than on such due date; and
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(ii) with respect to a default under Section 4.14 of this Indenture, the sixty-
day period referred to in Section 6.1(4) shall be deemed to have begun as of the
date the notice of an Offer to Purchase is required to be sent in the event that
the Company has not complied with the provisions of Section 4.14 of this
Indenture requiring the giving of such notice, and the Trustee or Holders of at
least 25% in principal amount of the outstanding Securities thereafter give the
Notice of Default referred to in Section 6.1(4) to the Company and, if
applicable, the Trustee; provided, however, that if the breach or default is a
result of a default in the payment when due of the Offer Price, such default
shall be deemed, for purposes of this Section 6.1, to arise no later than on
such due date.
If a Default occurs and is continuing, the Trustee must, within ninety
days after the occurrence of such default, give to the Holders notice of such
default.
SECTION 6.2. Acceleration of Maturity Date; Rescission and
---------------------------------------------
Annulment.
- ---------
If an Event of Default (other than an Event of Default specified in
Section 6.1(5) or (6) above relating to the Company or any of its Significant
Subsidiaries) occurs and is continuing, then, and in every such case, unless
the principal of all of the Securities shall have already become due and
payable, either the Trustee or the Holders of not less than 25% in aggregate
principal amount of then outstanding Securities, by a notice in writing to the
Company (and to the Trustee if given by Holders) (an "Acceleration Notice"), may
declare all of the principal of the Securities, determined as set forth below,
including in each case accrued interest thereon, to be due and payable
immediately. In the event a declaration of acceleration resulting from an Event
of Default described in Section 6.1(7) above has occurred and is continuing,
such declaration of acceleration shall be automatically annulled if such default
is cured or waived or the holders of the Indebtedness which is the subject of
such default have rescinded their declaration of acceleration in respect of
such Indebtedness within sixty days thereof and the Trustee has received written
notice of such cure, waiver or rescission and no other Event of Default
described in Section 6.1(7) above has occurred that has not been cured or
waived, or as to which the declaration has not been rescinded, within sixty days
of the declaration of such acceleration in respect of such Indebtedness. If an
Event of Default specified in Section 6.1(5) or (6) above relating to the
Company or any Significant Subsidiary occurs, all principal and accrued interest
thereon will be immediately due and payable on all outstanding Securities
without any declaration or other act on the part of Trustee or the Holders.
At any time after such a declaration of acceleration being made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter provided in this Article VI, the Holders of a
majority in aggregate principal amount of then outstanding Securities, by
written notice to the Company and the Trustee, may rescind, on behalf of all
Holders, any such declaration of acceleration if:
(1) the Company has paid or deposited with the Trustee Cash
sufficient to pay:
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(A) all overdue interest on all Securities,
(B) the principal of (and premium, if any, applicable to)
any Securities which would become due other than by reason of such
declaration of acceleration, and interest thereon at the rate borne by
the Securities,
(C) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate borne by the Securities,
(D) all sums paid or advanced by the Trustee hereunder and
the compensation, expenses, disbursements and advances of the Trustee
and its agents and counsel, and
(2) all Events of Default, other than the non-payment of the
principal of, premium, if any, and interest on Securities which have become
due solely by such declaration of acceleration, have been cured or waived
as provided in Section 6.12 of this Indenture.
Notwithstanding the previous sentence of this Section 6.2, no waiver shall be
effective against any Holder for any Event of Default or event which with notice
or lapse of time or both would be an Event of Default with respect to any
covenant or provision which cannot be modified or amended without the consent of
the Holder of each outstanding Security affected thereby, unless all such
affected Holders agree, in writing, to waive such Event of Default or other
event. No such waiver shall cure or waive any subsequent default or impair any
right consequent thereon.
SECTION 6.3. Collection of Indebtedness and Suits for Enforcement by
-------------------------------------------------------
Trustee.
- -------
The Company covenants that if an Event of Default in payment of
principal, premium or interest specified in clause (1) or (2) of Section 6.1 of
this Indenture occurs and is continuing, the Company shall, upon demand of the
Trustee, pay to it, for the benefit of the Holders of such Securities, the whole
amount then due and payable on such Securities for principal, premium (if any),
and interest, and, to the extent that payment of such interest shall be legally
enforceable, interest on any overdue principal (and premium, if any), and on any
overdue interest, at the rate borne by the Securities, and, in addition thereto,
such further amount as shall be sufficient to cover the costs and expenses of
collection, including compensation to, and expenses, disbursements and advances
of the Trustee and its agents and counsel.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust in favor of the
Holders, may institute a judicial proceeding for the collection of the sums so
due and unpaid, may prosecute such proceeding to judgment or final decree and
may enforce the same against the Company or any other obligor upon the
Securities and collect the moneys adjudged or decreed to be payable in the
manner provided by law out of the property of the Company or any other obligor
upon the Securities, wherever situated.
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If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effective to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 6.4. Trustee May File Proofs of Claim.
--------------------------------
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the
Securities or the property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of the Securities
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand on
the Company for the payment of overdue principal or interest) shall be entitled
and empowered, by intervention in such proceeding or otherwise to take any and
all actions under the TIA, including
(1) to file and prove a claim for the whole amount of principal (and
premium, if any) and interest owing and unpaid in respect of the Securities
and to file such other papers or documents as may be necessary or advisable
in order to have the claims of the Trustee (including any claim for the
reasonable compensation, expenses, disbursements and advances of the
Trustee and its agent and counsel) and of the Holders allowed in such
judicial proceeding, and
(2) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Holder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the Holders, to
pay to the Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee and its agents and counsel, and any
other amounts due the Trustee under Section 7.7 of this Indenture.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
SECTION 6.5. Trustee May Enforce Claims Without Possession of
------------------------------------------------
Securities.
- ----------
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the
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Trustee shall be brought in its own name as trustee of an express trust in favor
of the Holders, and any recovery of judgment shall, after provision for the
payment of compensation to, and expenses, disbursements and advances of the
Trustee and its agents and counsel, be for the ratable benefit of the Holders
of the Securities in respect of which such judgment has been recovered.
SECTION 6.6. Priorities.
----------
Any money collected by the Trustee pursuant to this Article VI shall
be applied in the following order, at the date or dates fixed by the Trustee
and, in case of the distribution of such money on account of principal, premium
(if any), or interest, upon presentation of the Securities and the notation
thereon of the payment if only partially paid and upon surrender thereof if
fully paid:
FIRST: To the Trustee in payment of all amounts due pursuant to
Section 7.7 of this Indenture;
SECOND: To the Holders in payment of the amounts then due and unpaid
for principal of, premium (if any), and interest on, the Securities in respect
of which or for the benefit of which such money has been collected, ratably,
without preference or priority of any kind, according to the amounts due and
payable on such Securities for principal, premium (if any), and interest,
respectively; and
THIRD: To the Company or such other Person as may be lawfully
entitled thereto, the remainder, if any.
The Trustee may, but shall not be obligated to, fix a record date and
payment date for any payment to the Holders under this Section 6.6.
SECTION 6.7. Limitation on Suits.
-------------------
No Holder of any Security shall have any right to order or direct the
Trustee to institute any proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless
(A) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(B) the Holders of not less than 25% in principal amount of then
outstanding Securities shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name
as Trustee hereunder;
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(C) such Holder or Holders have offered to the Trustee
reasonable security or indemnity against the costs, expenses and
liabilities to be incurred or reasonably probable to be incurred in
compliance with such request;
(D) the Trustee for sixty days after its receipt of such notice,
request and offer of indemnity has failed to institute any such proceeding;
and
(E) no direction inconsistent with such written request has been
given to the Trustee during such sixty-day period by the Holders of a
majority in principal amount of the outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatsoever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
SECTION 6.8. Unconditional Right of Holders to Receive Principal,
----------------------------------------------------
Premium and Interest.
- --------------------
Notwithstanding any other provision of this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of, and premium (if any), and interest on, such
Security on the Maturity Dates of such payments as expressed in such Security
(in the case of redemption, the Redemption Price on the applicable Redemption
Date, in the case of the Change of Control Payment, on the applicable Change of
Control Payment Date, and in the case of the Offer Price, on the Purchase Date)
and to institute suit for the enforcement of any such payment after such
respective dates, and such rights shall not be impaired without the consent of
such Holder.
SECTION 6.9. Rights and Remedies Cumulative.
------------------------------
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in Section 2.7 of
this Indenture, no right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
SECTION 6.10. Delay or Omission Not Waiver.
----------------------------
No delay or omission by the Trustee or by any Holder of any Security
to exercise any right or remedy arising upon any Event of Default shall impair
the exercise of any such
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right or remedy or constitute a waiver of any such Event of Default. Every
right and remedy given by this Article VI or by law to the Trustee or to the
Holders may be exercised from time to time, and as often as may be deemed
expedient, by the Trustee or by the Holders, as the case may be.
SECTION 6.11. Control by Holders.
------------------
The Holder or Holders of a majority in aggregate principal amount of
then outstanding Securities shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred upon the Trustee, provided, that
(1) such direction shall not be in conflict with any rule of law
or with this Indenture,
(2) the Trustee shall not determine that the action so directed
would be unjustly prejudicial to the Holders not taking part in such
direction, and
(3) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
SECTION 6.12. Waiver of Past Default.
----------------------
Subject to Section 6.8 of this Indenture, the Holder or Holders of not
less than a majority in aggregate principal amount of the outstanding Securities
may, on behalf of all Holders, prior to the declaration of acceleration of the
maturity of the Securities, waive any past default hereunder and its
consequences, except a default
(A) in the payment of the principal of, premium, if any, or
interest on, any Security as specified in clauses (1) and (2) of Section
6.1 of this Indenture and not yet cured, or
(B) in respect of a covenant or provision hereof which, under
Article IX, cannot be modified or amended without the consent of the Holder
of each outstanding Security affected.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair the exercise of any right arising therefrom.
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SECTION 6.13. Undertaking for Costs.
---------------------
All parties to this Indenture agree, and each Holder of any Security
by his acceptance thereof shall be deemed to have agreed, that in any suit for
the enforcement of any right or remedy under this Indenture, or in any suit
against the Trustee for any action taken, suffered or omitted to be taken by it
as Trustee, any court may in its discretion require the filing by any party
litigant in such suit of an undertaking to pay the costs of such suit, and that
such court may in its discretion assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in such suit, having due regard to
the merits and good faith of the claims or defenses made by such party litigant;
but the provisions of this Section 6.13 shall not apply to any suit instituted
by the Company, to any suit instituted by the Trustee, to any suit instituted by
any Holder, or group of Holders, holding in the aggregate more than 10% in
aggregate principal amount of the outstanding Securities, or to any suit
instituted by any Holder for enforcement of the payment of principal of, or
premium (if any), or interest on, any Security on or after the respective
Maturity Date expressed in such Security (including, in the case of redemption,
on or after the Redemption Date).
SECTION 6.14. Restoration of Rights and Remedies.
----------------------------------
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every case, subject to any
determination in such proceeding, the Company, the Guarantors, the Trustee and
the Holders shall be restored severally and respectively to their former
positions hereunder and thereafter all rights and remedies of the Trustee and
the Holders shall continue as though no such proceeding had been instituted.
ARTICLE VII
TRUSTEE
The Trustee hereby accepts the trust imposed upon it by this Indenture
and covenants and agrees to perform the same, as herein expressed.
SECTION 7.1. Duties of Trustee.
-----------------
(a) If a Default or an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested in
it by this Indenture and use the same degree of care and skill in their exercise
as a prudent Person would exercise or use under the circumstances in the conduct
of his or her own affairs.
(b) Except during the continuance of a Default or an Event of
Default:
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(1) The Trustee need perform only those duties as are
specifically set forth in this Indenture and no others, and no covenants or
obligations shall be implied in or read into this Indenture which are
adverse to the Trustee, and
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
the Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b) of
this Section 7.1,
(2) The Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer, unless it is proved that the Trustee
was negligent in ascertaining the pertinent facts, and
(3) The Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.11 of this Indenture.
(d) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or to take or omit to take any action
under this Indenture or at the request, order or direction of the Holders or in
the exercise of any of its rights or powers if it shall have reasonable grounds
for believing that repayment of such funds or adequate indemnity against such
risk or liability is not reasonably assured to it.
(e) Every provision of this Indenture that in any way relates to
the Trustee is subject to paragraphs (a), (b), (c), (d) and (f) of this Section
7.1.
(f) The Trustee shall not be liable for interest on any assets
received by it except as the Trustee may agree in writing with the Company.
Assets held in trust by the Trustee need not be segregated from other assets
except to the extent required by law.
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SECTION 7.2. Rights of Trustee.
-----------------
Subject to Section 7.1 of the Indenture:
(a) The Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by the proper Person. The Trustee
need not investigate any fact or matter stated in such document.
(b) Before the Trustee acts or refrains from acting, it may
consult with counsel and may require an Officers' Certificate or an Opinion of
Counsel, which shall conform to Sections 13.4 and 13.5 of this Indenture. The
Trustee shall not be liable for any action it takes or omits to take in good
faith in reliance on such certificate or advice of counsel.
(c) The Trustee may act through its attorneys and agents and
shall not be responsible for the misconduct or negligence of any agent appointed
with due care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within its
rights or powers conferred upon it by this Indenture.
(e) The Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, notice, request, direction, consent, order, bond, debenture
or other paper or document, but the Trustee, in its discretion, may make such
further inquiry or investigation into such facts or matters as it may see fit.
(f) The Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders, pursuant to the provisions of this Indenture,
unless such Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby.
(g) Unless otherwise specifically provided for in this
Indenture, any demand, request, direction or notice from the Company or any
Guarantor shall be sufficient if signed by an Officer of the Company or such
Guarantor, as applicable.
(h) The Trustee shall have no duty to inquire as to the
performance of the Company's or any Guarantor's covenants in Article IV hereof.
In addition, the Trustee shall not be deemed to have knowledge of any Default or
Event of Default except (i) any Event of Default occurring pursuant to Sections
6.1(1), 6.1(2) and 5.1 of this Indenture, or (ii) any Default or Event of
Default of which the Trustee shall have received written notification or
obtained actual knowledge.
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SECTION 7.3. Individual Rights of Trustee.
----------------------------
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Company, any
Guarantor, any of their Subsidiaries, or their respective Affiliates with the
same rights it would have if it were not Trustee. Any Agent may do the same
with like rights. However, the Trustee must comply with Sections 7.10 and 7.11
of this Indenture.
SECTION 7.4. Trustee's Disclaimer.
--------------------
The Trustee makes no representation as to the validity or adequacy of
this Indenture or the Securities and it shall not be accountable for the
Company's use of the proceeds from the Securities, and it shall not be
responsible for any statement in the Securities, other than the Trustee's
certificate of authentication, or the use or application of any funds received
by a Paying Agent other than the Trustee.
SECTION 7.5. Notice of Default.
-----------------
If a Default or an Event of Default occurs and is continuing and if it
is known to the Trustee, the Trustee shall mail to each Securityholder notice of
the uncured Default or Event of Default within ninety days after such Default or
Event of Default occurs. Except in the case of a Default or an Event of Default
in payment of principal (or premium, if any), of, or interest on, any Security
(including the payment of the Change of Control Purchase Price on the Change of
Control Payment Date, the payment of the Redemption Price on the Redemption Date
and the payment of the Offer Price on the Purchase Date), the Trustee may
withhold the notice if and so long as a Trust Officer in good faith determines
that withholding the notice is in the interest of the Securityholders.
SECTION 7.6. Reports by Trustee to Holders.
-----------------------------
Within sixty days after each May 15 beginning with the May 15
following the date of this Indenture, the Trustee shall, if required by law,
mail to each Securityholder a brief report dated as of such May 15 that complies
with TIA (S) 313(a). The Trustee also shall comply with TIA (S)(S) 313(b) and
313(c).
The Company shall promptly notify the Trustee in writing if the
Securities become listed on any stock exchange or automatic quotation system.
A copy of each report at the time of its mailing to Securityholders
shall be mailed to the Company and filed with the SEC and each stock exchange,
if any, on which the Securities are listed.
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SECTION 7.7. Compensation and Indemnity.
--------------------------
The Company and the Guarantors jointly and severally agree to pay to
the Trustee from time to time reasonable compensation for its services. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company and the Guarantors shall reimburse the
Trustee upon request for all reasonable disbursements, expenses and advances
incurred or made by it in accordance with this Indenture. Such expenses shall
include the reasonable compensation, disbursements and expenses of the Trustee's
agents, accountants, experts and counsel.
The Company and the Guarantors jointly and severally agree to
indemnify the Trustee (in its capacity as Trustee) and each of its officers,
directors, attorneys-in-fact and agents for, and hold it harmless against, any
claim, demand, expense (including but not limited to reasonable compensation,
disbursements and expenses of the Trustee's agents and counsel), loss or
liability incurred by it without negligence or bad faith on the part of the
Trustee, arising out of or in connection with the administration of this trust
and its rights or duties hereunder, including the reasonable costs and expenses
of defending itself against any claim or liability in connection with the
exercise or performance of any of its powers or duties hereunder. The Trustee
shall notify the Company promptly of any claim asserted against the Trustee for
which it may seek indemnity. The Company and the Guarantors shall defend the
claim and the Trustee shall provide reasonable cooperation at the Company's and
the Guarantors' expense in the defense. The Trustee may have separate counsel
and the Company and the Guarantors shall pay the reasonable fees and expenses of
such counsel; provided, that the Company and the Guarantors will not be required
to pay such fees and expenses if they assume the Trustee's defense and there is
no conflict of interest between the Company and the Guarantors and the Trustee
in connection with such defense. The Company and the Guarantors need not pay
for any settlement made without their written consent. The Company and the
Guarantors need not reimburse any expense or indemnify against any loss or
liability to the extent incurred by the Trustee through its negligence, bad
faith or willful misconduct.
To secure the Company's and the Guarantors' payment obligations in
this Section 7.7, the Trustee shall have a lien prior to the Securities on all
assets held or collected by the Trustee, in its capacity as Trustee, except
assets held in trust to pay principal and premium, if any, of or interest on
particular Securities.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.1(5) or (6) of this Indenture occurs, the
expenses and the compensation for the services are intended to constitute
expenses of administration under any Bankruptcy Law.
The Company's and the Guarantors' obligations under this Section 7.7
and any lien arising hereunder shall survive the resignation or removal of the
Trustee, the discharge of the Company's and the Guarantors' obligations pursuant
to Article VIII of this Indenture and any rejection or termination of this
Indenture under any Bankruptcy Law.
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SECTION 7.8. Replacement of Trustee.
----------------------
The Trustee may resign by so notifying the Company in writing. The
Holder or Holders of a majority in principal amount of the outstanding
Securities may remove the Trustee by so notifying the Company and the Trustee in
writing and may appoint a successor trustee with the Company's consent. The
Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 of this
Indenture;
(b) the Trustee is adjudged bankrupt or insolvent;
(c) a receiver, Custodian or other public officer takes
charge of the Trustee or its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holder
or Holders of a majority in principal amount of the Securities may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after that
and provided that all sums owing to the retiring Trustee provided for in Section
7.7 of this Indenture have been paid, the retiring Trustee shall transfer all
property held by it as trustee to the successor Trustee, subject to the lien
provided in Section 7.7 of this Indenture, the resignation or removal of the
retiring Trustee shall become effective, and the successor Trustee shall have
all the rights, powers and duties of the Trustee under this Indenture. A
successor Trustee shall mail notice of its succession to each Holder.
If a successor Trustee does not take office within sixty days after
the retiring Trustee resigns or is removed, the retiring Trustee, the Company or
the Holder or Holders of at least 10% in principal amount of the outstanding
Securities may petition any court of competent jurisdiction for the appointment
of a successor Trustee.
If the Trustee fails to comply with Section 7.10 of this Indenture,
any Securityholder may petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section
7.8, the Company's and the Guarantors' obligations under Section 7.7 of this
Indenture shall continue for the benefit of the retiring Trustee.
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SECTION 7.9. Successor Trustee by Merger, Etc.
---------------------------------
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the resulting, surviving or transferee corporation without any
further act shall, if such resulting, surviving or transferee corporation is
otherwise eligible hereunder, be the successor Trustee.
SECTION 7.10. Eligibility; Disqualification.
-----------------------------
The Trustee shall at all times satisfy the requirements of TIA (S)
310(a)(1), (2) and (5). The Trustee shall have a combined capital and surplus
of at least $25,000,000 as set forth in its most recent published annual report
of condition. The Trustee shall comply with TIA (S) 310(b).
SECTION 7.11. Preferential Collection of Claims Against Company.
-------------------------------------------------
The Trustee shall comply with TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated.
ARTICLE VIII
DISCHARGE; LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.1. Discharge; Option to Effect Legal Defeasance or
-----------------------------------------------
Covenant Defeasance.
- -------------------
This Indenture shall cease to be of further effect (except that the
Company's and the Guarantors' obligations under Section 7.7 and the Trustee's
and the Paying Agent's obligations under Sections 8.6 and 8.7 shall survive)
when all outstanding Securities theretofore authenticated and issued have been
delivered (other than destroyed, lost or stolen Securities that have been
replaced or paid) to the Trustee for cancellation and the Company or the
Guarantors have paid all sums payable hereunder. In addition, the Company may,
at its option at any time, elect to have Section 8.2 or 8.3 of this Indenture
applied to all outstanding Securities upon compliance with the conditions set
forth below in this Article VIII.
SECTION 8.2. Legal Defeasance and Discharge.
------------------------------
Upon the Company's exercise under Section 8.1 of this Indenture of the
option applicable to this Section 8.2, the Company and the Guarantors shall be
deemed to have been discharged from their respective obligations with respect to
all outstanding Securities on the date the conditions set forth below are
satisfied (hereinafter, "Legal Defeasance"). For this purpose, such Legal
Defeasance means that the Company shall be deemed to have paid and discharged
the entire Indebtedness represented by the outstanding Securities, which shall
thereafter be
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deemed to be "outstanding" only for the purposes of Section 8.5 of this
Indenture and the other Sections of this Indenture referred to in (a) and (b)
below, and the Company and the Guarantors shall be deemed to have satisfied all
other of their respective obligations under such Securities and this Indenture
(and the Trustee, on demand of and at the expense of the Company, shall execute
proper instruments acknowledging the same), except for the following which shall
survive until otherwise terminated or discharged hereunder: (a) the rights of
Holders of outstanding Securities to receive solely from the trust fund
described in Section 8.4 of this Indenture, and as more fully set forth in such
section, payments in respect of the principal of, premium, if any, and interest
on such Securities when such payments are due, (b) the Company's obligations
with respect to such Securities under Sections 2.4, 2.6, 2.7, 2.10 and 5.2 of
this Indenture, (c) the rights, powers, trusts, duties and immunities of the
Trustee hereunder and the Company's and the Guarantors' obligations in
connection therewith and (d) this Article VIII. Subject to compliance with
this Article VIII, the Company may exercise its option under this Section 8.2
notwithstanding the prior exercise of its option under Section 8.3 of this
Indenture with respect to the Securities.
SECTION 8.3. Covenant Defeasance.
-------------------
Upon the Company's exercise under Section 8.1 of this Indenture
of the option applicable to this Section 8.3, the Company and the Guarantors
shall be released from their respective obligations under the covenants
contained in Sections 4.3, 4.5, 4.6, 4.7, 4.8, 4.10, 4.11, 4.12, 4.13, 4.14,
4.17 and 4.18 and Article V of this Indenture with respect to the outstanding
Securities on and after the date the conditions set forth below are satisfied
(hereinafter, "Covenant Defeasance"), and the Securities shall thereafter be
deemed not "outstanding" for the purposes of any direction, waiver, consent or
declaration or act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed "outstanding"
for all other purposes hereunder. For this purpose, such Covenant Defeasance
means that, with respect to the outstanding Securities, neither the Company nor
any Guarantor need comply with and shall have any liability in respect of any
term, condition or limitation set forth in any such covenant, whether directly
or indirectly, by reason of any reference elsewhere herein to any such covenant
or by reason of any reference in any such covenant to any other provision herein
or in any other document (and Section 6.1(4) of this Indenture shall not apply
to any such covenant), but, except as specified above, the remainder of this
Indenture and such Securities shall be unaffected thereby. In addition, upon the
Company's exercise under Section 8.1 of this Indenture of the option applicable
to this Section 8.3, Sections 6.1(7) and 6.1(8) of this Indenture shall not
constitute Events of Default.
SECTION 8.4. Conditions to Legal or Covenant Defeasance.
------------------------------------------
The following shall be the conditions to the application of
either Section 8.2 or 8.3 of this Indenture to the outstanding Securities:
(a) (1) The Company shall irrevocably have deposited or
caused to be deposited with the Trustee (or another trustee satisfying the
requirements of Section 7.10 of this
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Indenture who shall agree to comply with the provisions of this Article VIII
applicable to it) as trust funds in trust for the purpose of making the
following payments, specifically pledged as security for, and dedicated solely
to, the benefit of the Holders of such Securities, (a) Cash, or (b) U.S.
Government Obligations which through the scheduled payment of principal and
interest in respect thereof in accordance with their terms will provide, not
later than one day before the due date of any payment, or (c) a combination
thereof, in such amounts, as in each case will be sufficient, in the opinion of
a nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, to pay and discharge,
and which shall be applied by the Trustee (or other qualifying trustee) to pay
and discharge, the principal of, premium, if any, and interest on the
outstanding Securities on the stated maturity or on the applicable redemption
date, as the case may be, of such principal or installment of principal,
premium, if any, or interest; provided that the Trustee shall have been
irrevocably instructed to apply such Cash and the proceeds of such U.S.
Government Obligations to said payments with respect to the Securities and (2)
the Holders must have a valid, perfected, exclusive security interest in such
trust;
(b) In the case of an election under Section 8.2 of this
Indenture prior to one year before the Stated Maturity, the Company shall have
delivered to the Trustee an Opinion of Counsel in the United States reasonably
acceptable to the Trustee confirming that (i) the Company has received from, or
there has been published by, the Internal Revenue Service a ruling or (ii) since
the date hereof, there has been a change in the applicable Federal income tax
law, in either case to the effect that, and based thereon such opinion shall
confirm that, the Holders of the outstanding Securities will not recognize
income, gain or loss for Federal income tax purposes as a result of such Legal
Defeasance and will be subject to Federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such Legal
Defeasance had not occurred;
(c) In the case of an election under Section 8.3 of this
Indenture, the Company shall have delivered to the Trustee an Opinion of Counsel
in the United States to the effect that the Holders of the outstanding
Securities will not recognize income, gain or loss for Federal income tax
purposes as a result of such Covenant Defeasance and will be subject to Federal
income tax in the same amount, in the same manner and at the same times as would
have been the case if such Covenant Defeasance had not occurred;
(d) No Default or Event of Default with respect to the
Securities shall have occurred and be continuing on the date of such deposit or,
insofar as Section 6.1(5) or 6.1(6) of this Indenture is concerned, at any time
in the period ending on the ninety-first day after the date of such deposit (it
being understood that this condition is a condition subsequent which shall not
be deemed satisfied until the expiration of such period, but in the case of
Covenant Defeasance, the covenants which are defeased under Section 8.3 of this
Indenture will cease to be in effect unless an Event of Default under Section
6.1(5) or 6.1(6) of this Indenture occurs during such period);
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(e) Such Legal Defeasance or Covenant Defeasance shall not
result in a breach or violation of, or constitute a default under, this
Indenture or any other material agreement or instrument to which the Company,
the Guarantors, or any of their Subsidiaries is a party or by which any of them
is bound;
(f) The Company shall have delivered to the Trustee an
Officers' Certificate stating that the deposit made by the Company pursuant to
its election under Section 8.2 or 8.3 of this Indenture was not made by the
Company with the intent of preferring the Holders over any other creditors of
the Company or with the intent of defeating, hindering, delaying or defrauding
any other creditors of the Company or others; and
(g) The Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel in the United States, each
stating that all conditions precedent provided for relating to either the Legal
Defeasance under Section 8.2 of this Indenture or the Covenant Defeasance under
Section 8.3 of this Indenture, as the case may be, have been complied with as
contemplated by this Section 8.4.
SECTION 8.5. Deposited Cash and U.S. Government Obligations to
-------------------------------------------------
be Held in Trust; Other Miscellaneous Provisions.
- ------------------------------------------------
Subject to Section 8.6 of this Indenture, all Cash and U.S.
Government Obligations (including the proceeds thereof) deposited with the
Trustee (or other qualifying trustee, collectively for purposes of this Section
8.5, the "Trustee") pursuant to Section 8.4 of this Indenture in respect of the
outstanding Securities shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Securities and this Indenture, to the
payment, either directly or through any Paying Agent as the Trustee may
determine, to the Holders of such Securities of all sums due and to become due
thereon in respect of principal, premium, if any, and interest, but such money
need not be segregated from other funds except to the extent required by law.
SECTION 8.6. Repayment to the Company.
------------------------
(a) The Trustee and the Paying Agent shall promptly pay to
the Company upon written request any Cash and U.S. Government Obligations
(including the proceeds thereof) held by them at any time in excess of amounts
required to pay principal of, premium, if any, and interest on the outstanding
Securities on the applicable date.
(b) Any Cash and U.S. Government Obligations (including the
proceeds thereof) deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of, premium, if any,
or interest on any Security and remaining unclaimed for two years after such
principal, and premium, if any, or interest has become due and payable shall be
paid to the Company on its request; and the Holder of such Security shall
thereafter look only to the Company for payment thereof, and all liability of
the Trustee or such Paying Agent with respect to such trust money shall
thereupon cease; provided, however, that
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the Trustee or such Paying Agent, before being required to make any such
repayment, may at the expense of the Company cause to be published once, in the
New York Times and The Wall Street Journal (national edition), notice that such
money remains unclaimed and that, after a date specified therein, which shall
not be less than thirty days from the date of such notification or publication,
any unclaimed balance of such money then remaining will be repaid to the
Company.
SECTION 8.7. Reinstatement.
-------------
If the Trustee or Paying Agent is unable to apply any Cash or
U.S. Government Obligations in accordance with Section 8.2 or 8.3 of this
Indenture, as the case may be, of this Indenture by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, then the Company's and the Guarantors'
obligations under this Indenture and the Securities shall be revived and
reinstated as though no deposit had occurred pursuant to Section 8.2 or 8.3 of
this Indenture until such time as the Trustee or Paying Agent is permitted to
apply such money in accordance with Sections 8.2 and 8.3 of this Indenture, as
the case may be; provided, however, that, if the Company makes any payment of
principal of, premium, if any, or interest on any Security following the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Securities to receive such payment from the Cash or U.S.
Government Obligations held by the Trustee or Paying Agent.
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.1. Supplemental Indentures Without Consent of Holders.
--------------------------------------------------
Without the consent of any Holder, the Company, or any Guarantor
(when authorized by Board Resolutions) and the Trustee, at any time and from
time to time, may enter into one or more indentures supplemental hereto, in form
satisfactory to the Trustee, for any of the following purposes:
(1) to cure any ambiguity, defect or inconsistency, or to
make any other provisions with respect to matters or questions arising under
this Indenture which shall not be inconsistent with the provisions of this
Indenture, provided such action pursuant to this clause (1) shall not adversely
affect the interests of any Holder in any respect;
(2) to provide for uncertificated Securities in addition to
or in place of certificated Securities;
(3) to add to the covenants of the Company or the
Guarantors for the benefit of the Holders, or to surrender any right or power
herein conferred upon the Company or the Guarantors or to make any other change
that does not adversely affect the legal rights of
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any Holder under the Indenture, provided, that the Company or the Guarantors
have delivered to the Trustee an Opinion of Counsel stating that such change
does not adversely affect the rights of any Holder;
(4) to provide for collateral for or additional Guarantors
of the Securities;
(5) to evidence the succession of another Person to the
Company, and the assumption by any such successor of the obligations of the
Company, herein and in the Securities in accordance with Article V;
(6) to comply with requirements of the Commission in order
to effect or maintain the qualification of the Indenture under the TIA; or
(7) to provide for the issuance and authorization of the
Exchange Securities.
SECTION 9.2. Amendments, Supplemental Indentures and Waivers
-----------------------------------------------
with Consent of Holders.
- -----------------------
Subject to Section 6.8 of this Indenture, with the consent of the
Holders of not less than a majority in aggregate principal amount of then
outstanding Securities (including consents obtained in connection with a tender
offer or exchange offer for Securities), by written act of said Holders
delivered to the Company and the Trustee, the Company or any Guarantor, when
authorized by Board Resolutions, and the Trustee may amend or supplement this
Indenture or the Securities or enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or the
Securities or of modifying in any manner the rights of the Holders under this
Indenture or the Securities. Subject to Section 6.8 of this Indenture, the
Holder or Holders of not less than a majority, in principal amount of then
outstanding Securities may waive compliance by the Company or any Guarantor
with any provision of this Indenture or the Securities. Notwithstanding any of
the above, however, no such amendment, supplemental indenture or waiver shall
without the consent of the Holder of each outstanding Security affected thereby:
(1) change the Change of Control Purchase Date pursuant to
Section 11.1 hereof or the Asset Sale Offer Period pursuant to Section 4.14
hereof;
(2) reduce the principal amount of any Security, or reduce
the Change of Control Payment, the Offer Price or the Redemption Price;
(3) reduce the rate or extend the time for payment of
interest on any Security;
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(4) reduce the percentage of principal amount of Securities
whose Holders must consent to an amendment, supplement or waiver of any
provision of this Indenture or the Securities;
(5) change the ranking of the Securities or the Guarantees
to anything other than pari passu in right of payment to all unsubordinated
Indebtedness of the Company or the applicable Guarantor;
(6) change the Stated Maturity of any Security;
(7) alter the redemption provisions of Article III or the
change of control provisions in Article XI in a manner adverse to any Holder;
(8) make any changes in the provisions concerning waivers
of Defaults or Events of Default by Holders of the Securities or the rights of
Holders to recover the principal or premium of, interest on, or redemption
payment with respect to, any Security, including without limitation any changes
that impair the right to institute suit for enforcement of such payments or any
changes in Section 6.8 or 6.12 of this Indenture or the third sentence of this
Section 9.2, except to increase any required percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived without
the consent of the Holder of each outstanding Security affected thereby; or
(9) make the principal of, or the interest on, or any
premium payable upon redemption of, any Security payable with anything or in any
manner other than as provided for in this Indenture (including changing the
place of payment where, or the coin or currency in which, any Security is
payable) and the Securities as in effect on the date hereof.
It shall not be necessary for the consent of the Holders under
this Section 9.2 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section
becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such supplemental indenture or
waiver.
After an amendment, supplement or waiver under this Section 9.2
or under Section 9.4 of this Indenture becomes effective, it shall bind each
Holder.
In connection with any amendment, supplement or waiver under this
Article IX, the Company may, but shall not be obligated to, offer to any Holder
who consents to such
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amendment, supplement or waiver, or to all Holders, consideration for such
Holder's consent to such amendment, supplement or waiver.
SECTION 9.3. Compliance with TIA.
-------------------
Every amendment, waiver or supplement of this Indenture or the
Securities shall comply with the TIA as then in effect.
SECTION 9.4. Revocation and Effect of Consents.
---------------------------------
Until an amendment, waiver or supplement becomes effective, a
consent to it by a Holder is a continuing consent by the Holder and every
subsequent Holder of a Security or portion of a Security that evidences the same
debt as the consenting Holder's Security, even if notation of the consent is not
made on any Security. However, any such Holder or subsequent Holder may revoke
the consent as to his Security or portion of his Security by written notice to
the Company or the Person designated by the Company as the Person to whom
consents should be sent if such revocation is received by the Company or such
Person before the date on which the Trustee receives an Officers' Certificate
certifying that the Holders of the requisite principal amount of Securities have
consented (and not theretofore revoked such consent) to the amendment,
supplement or waiver.
The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver, which record date shall be the date so fixed by the
Company notwithstanding the provisions of the TIA. If a record date is fixed,
then notwithstanding the last sentence of the immediately preceding paragraph,
those Persons who were Holders at such record date, and only those Persons (or
their duly designated proxies), shall be entitled to revoke any consent
previously given, whether or not such Persons continue to be Holders after such
record date. No such consent shall be valid or effective for more than ninety
days after such record date.
After an amendment, supplement or waiver becomes effective, it
shall bind every Securityholder, unless it makes a change described in any of
clauses (1) through (9) of Section 9.2 of this Indenture, in which case, the
amendment, supplement or waiver shall bind only each Holder of a Security who
has consented to it and every subsequent Holder of a Security or portion of a
Security that evidences the same debt as the consenting Holder's Security;
provided, that any such waiver shall not impair or affect the right of any
Holder to receive payment of principal and premium of and interest on a
Security, on or after the respective dates set for such amounts to become due
and payable expressed in such Security, or to bring suit for the enforcement of
any such payment on or after such respective dates.
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SECTION 9.5. Notation on or Exchange of Securities.
-------------------------------------
If an amendment, supplement or waiver changes the terms of a
Security, the Trustee may require the Holder of the Security to deliver it to
the Trustee or require the Holder to put an appropriate notation on the
Security. The Trustee may place an appropriate notation on the Security about
the changed terms and return it to the Holder. Alternatively, if the Company or
the Trustee so determines, the Company in exchange for the Security shall issue
and the Trustee shall authenticate a new Security that reflects the changed
terms. Any failure to make the appropriate notation or to issue a new Security
shall not affect the validity of such amendment, supplement or waiver.
SECTION 9.6. Trustee to Sign Amendments, Etc.
--------------------------------
The Trustee shall execute any amendment, supplement or waiver
authorized pursuant to this Article IX; provided, that the Trustee may, but
shall not be obligated to, execute any such amendment, supplement or waiver
which affects the Trustee's own rights, duties or immunities under this
Indenture. The Trustee shall be entitled to receive, and shall be fully
protected in relying upon, an Opinion of Counsel stating that the execution of
any amendment, supplement or waiver authorized pursuant to this Article IX is
authorized or permitted by this Indenture.
ARTICLE X
MEETINGS OF SECURITYHOLDERS
SECTION 10.1. Purposes for Which Meetings May Be Called.
-----------------------------------------
A meeting of Securityholders may be called at any time and from
time to time pursuant to the provisions of this Article X for any of the
following purposes:
(a) to give any notice to the Company, any Guarantor or the
Trustee, or to give any directions to the Trustee, or to waive or to consent to
the waiving of any Default or Event of Default hereunder and its consequences,
or to take any other action authorized to be taken by Securityholders pursuant
to any of the provisions of Article VI;
(b) to remove the Trustee or appoint a successor Trustee
pursuant to the provisions of Article VII;
(c) to consent to an amendment, supplement or waiver and
the execution of an indenture or indentures supplemental hereto pursuant to the
provisions of Section 9.2 of this Indenture; or
(d) to take any other action (i) authorized to be taken by
or on behalf of the Holder or Holders of any specified aggregate principal
amount of the Securities under any
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other provision of this Indenture, or authorized or permitted by law or (ii)
which the Trustee deems necessary or appropriate in connection with the
administration of this Indenture.
SECTION 10.2. Manner of Calling Meetings.
--------------------------
The Trustee may at any time call a meeting of Securityholders to
take any action specified in Section 10.1 of this Indenture, to be held at such
time and at such place in the City of New York, New York or elsewhere as the
Trustee shall determine. Notice of each meeting of Securityholders, setting
forth the time and place of such meeting and in general terms the action
proposed to be taken at such meeting, shall be mailed by the Trustee, first-
class postage prepaid, to the Company, the Guarantors and the Holders at their
last addresses as they shall appear on the registration books of the Registrar,
not less than ten nor more than sixty days prior to the date fixed for such
meeting.
Any meeting of Securityholders shall be valid without notice if
the Holders of all Securities then outstanding are present in Person or by
proxy, or if notice is waived before or after the meeting by the Holders of all
Securities outstanding, and if the Company and the Trustee are either present by
duly authorized representatives or have, before or after the meeting, waived
notice.
SECTION 10.3. Call of Meetings by the Company or Holders.
------------------------------------------
In case at any time the Company or the Holders of not less than
20% in aggregate principal amount of the Securities then outstanding, shall have
requested the Trustee to call a meeting of Securityholders to take any action
specified in Section 10.1 of this Indenture, by written request setting forth in
reasonable detail the action proposed to be taken at the meeting, and the
Trustee shall not have mailed the notice of such meeting within twenty days
after receipt of such request, then the Company or the Holders of Securities in
the amount above specified may determine the time and place in The City of New
York, New York or elsewhere for such meeting and may call such meeting for the
purpose of taking such action, by mailing or causing to be mailed notice thereof
as provided in Section 10.2 of this Indenture, or by causing notice thereof to
be published at least once in each of two successive calendar weeks (on any
Business Day during such week) in a newspaper or newspapers printed in the
English language, customarily published at least five days a week of a general
circulation in The City of New York, State of New York, the first such
publication to be not less than ten nor more than sixty days prior to the date
fixed for the meeting.
SECTION 10.4. Who May Attend and Vote at Meetings.
-----------------------------------
To be entitled to vote at any meeting of Securityholders, a
Person shall (a) be a registered Holder of one or more Securities, or (b) be a
Person appointed by an instrument in writing as proxy for the registered Holder
or Holders of Securities. The only Persons who shall be entitled to be present
or to speak at any meeting of Securityholders shall be the Persons
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entitled to vote at such meeting and their counsel and any representatives of
the Trustee and its counsel and any representatives of the Company and the
Guarantors and their counsel.
SECTION 10.5. Regulations May Be Made by Trustee; Conduct of the
--------------------------------------------------
Meeting; Voting Rights; Adjournment.
- -----------------------------------
Notwithstanding any other provision of this Indenture, the
Trustee may make such reasonable regulations as it may deem advisable for any
action by or any meeting of Securityholders, in regard to proof of the holding
of Securities and of the appointment of proxies, and in regard to the
appointment and duties of inspectors of votes, and submission and examination of
proxies, certificates and other evidence of the right to vote, and such other
matters concerning the conduct of the meeting as it shall think appropriate.
Such regulations may fix a record date and time for determining the Holders of
record of Securities entitled to vote at such meeting, in which case those and
only those Persons who are Holders of Securities at the record date and time so
fixed, or their proxies, shall be entitled to vote at such meeting whether or
not they shall be such Holders at the time of the meeting.
The Trustee shall, by an instrument in writing, appoint a
temporary chairman of the meeting, unless the meeting shall have been called by
the Company or by Securityholders as provided in Section 10.3 of this Indenture,
in which case the Company or the Securityholders calling the meeting, as the
case may be, shall in like manner appoint a temporary chairman. A permanent
chairman and a permanent secretary of the meeting shall be elected by vote of
the Holders of a majority in principal amount of the Securities represented at
the meeting and entitled to vote.
At any meeting each Securityholder or proxy shall be entitled to
one vote for each $1,000 principal amount of Securities held or represented by
him; provided, however, that no vote shall be cast or counted at any meeting in
respect of any Securities challenged as not outstanding and ruled by the
chairman of the meeting to be not then outstanding. The chairman of the meeting
shall have no right to vote other than by virtue of Securities held by him or
instruments in writing as aforesaid duly designating him as the proxy to vote on
behalf of other Securityholders. Any meeting of Securityholders duly called
pursuant to the provisions of Section 10.2 or 10.3 of this Indenture may be
adjourned from time to time by vote of the Holder or Holders of a majority in
aggregate principal amount of the Securities represented at the meeting and
entitled to vote, and the meeting may be held as so adjourned without further
notice.
SECTION 10.6. Voting at the Meeting and Record to Be Kept.
-------------------------------------------
The vote upon any resolution submitted to any meeting of
Securityholders shall be by written ballots on which shall be subscribed the
signatures of the Holders of Securities or of their representatives by proxy and
the principal amount of the Securities voted by the ballot. Subject to the
Trustee's regulations adopted under Section 10.5 of this Indenture, the
permanent chairman of the meeting shall appoint two inspectors of votes, who
shall count all votes cast at
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the meeting for or against any resolution and who shall make and file with the
secretary of the meeting their verified written reports in duplicate of all
votes cast at the meeting. A record in duplicate of the proceedings of each
meeting of Securityholders shall be prepared by the secretary of the meeting
and there shall be attached to such record the original reports of the
inspectors of votes on any vote by ballot taken thereat and affidavits by one or
more Persons having knowledge of the facts, setting forth a copy of the notice
of the meeting and showing that such notice was mailed as provided in Section
10.2 of this Indenture or published as provided in Section 10.3 of this
Indenture. The record shall be signed and verified by the affidavits of the
permanent chairman and the secretary of the meeting and one of the duplicates
shall be delivered to the Company and the other to the Trustee to be preserved
by the Trustee, the latter to have attached thereto the ballots voted at the
meeting.
Any record so signed and verified shall be conclusive evidence of
the matters therein stated.
SECTION 10.7. Exercise of Rights of Trustee or Securityholders
------------------------------------------------
May Not Be Hindered or Delayed by Call of Meeting.
- -------------------------------------------------
Nothing contained in this Article X shall be deemed or construed
to authorize or permit, by reason of any call of a meeting of Securityholders or
any rights expressly or impliedly conferred hereunder to make such call, any
hindrance or delay in the exercise of any right or rights conferred upon or
reserved to the Trustee or to the Securityholders under any of the provisions of
this Indenture or of the Securities.
ARTICLE XI
RIGHT TO REQUIRE REPURCHASE
SECTION 11.1. Repurchase of Securities at Option of the Holder
------------------------------------------------
Upon a Change of Control.
- ------------------------
(a) In the event that a Change of Control occurs, each
Holder shall have the right, at such Holder's option, subject to the terms and
conditions of this Indenture, to require the Company to repurchase all or any
part of such Holder's Securities (provided, that the principal amount of such
Securities at maturity must be $1,000 or an integral multiple thereof) at a cash
price (the "Change of Control Payment"), equal to 101% of the principal amount
thereof, plus accrued and unpaid interest, if any, to and including the date
(the "Change of Control Payment Date"), the Securities tendered are purchased
and paid for in accordance with this Article XI.
(b) In the event of a Change of Control, the Company shall
be required to commence an offer to purchase Securities (a "Change of Control
Offer"), as follows:
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(1) the Change of Control Offer shall commence within thirty
Business Days following the Change of Control date;
(2) the Change of Control Offer shall remain open for twenty
Business Days, except to the extent that a longer period is required by
applicable law, but in any case not more than ninety Business Days after
the occurrence of the Change of Control (or not more than 120 days of the
Change of Control if, during any such extension beyond ninety days
following the Change of Control, the Company is diligently pursuing all
commercially reasonable steps to consummate the Change of Control Offer as
promptly as practicable);
(3) the Company shall provide the Trustee with notice of the
Change of Control Offer at least five Business Days before the commencement
of any Change of Control Offer; and
(4) on or before the commencement of any Change of Control
Offer, the Company or the Trustee (upon the request and at the expense of
the Company) shall send, by first-class mail, a notice to each of the
Securityholders, which (to the extent consistent with this Indenture) shall
govern the terms of the Change of Control Offer and shall state:
(i) that the Change of Control Offer is being made pursuant
to such notice and this Section 11.1 and that all Securities, or portions
thereof, tendered will be accepted for payment;
(ii) the Change of Control Payment, including the amount of
accrued and unpaid interest as of the then applicable Change of Control
Payment Date, the then applicable Change of Control Payment Date and the
Change of Control Put Date (as defined below);
(iii) that any Security, or portion thereof, not tendered
or accepted for payment will continue to accrue interest;
(iv) that, unless the Company defaults in depositing Cash
with the Paying Agent in accordance with the last paragraph of this Article
XI or such payment is prevented, any Security, or portion thereof, accepted
for payment pursuant to the Change of Control Offer shall cease to accrue
interest after the Change of Control Payment Date;
(v) that Holders electing to have a Security, or portion
thereof, purchased pursuant to a Change of Control Offer will be required
to surrender the Security, with the form entitled "Option of Holder to
Elect Purchase" on the reverse of the Security completed, to the Paying
Agent (which may not for purposes of this Section 11.1, notwithstanding
anything in this Indenture to the contrary, be the Company or any
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Affiliate of the Company) at the address specified in the notice prior to
the close of business on the earlier of (a) the third Business Day prior to
the Change of Control Payment Date and (b) the third Business Day
following the expiration of the Change of Control Offer (such earlier date
being the "Change of Control Put Date");
(vi) that Holders will be entitled to withdraw their
election, in whole or in part, if the Paying Agent (which may not for
purposes of this Section 11.1, notwithstanding anything in this Indenture
to the contrary, be the Company or any Affiliate of the Company) receives,
up to the close of business on the Change of Control Payment Date, a
telegram, telex, facsimile transmission or letter setting forth the name of
the Holder, the principal amount of the Securities such Holder is
withdrawing and a statement that such Holder is withdrawing his election to
have such principal amount of Securities purchased;
(vii) that Holders whose Securities are purchased only in
part will be issued new Securities equal in principal amount to the
unpurchased portion of the Securities surrendered; and
(viii) a brief description of the events resulting in such
Change of Control.
Any such Change of Control Offer shall comply with all applicable
provisions of Federal and state laws, including those regulating tender offers,
if applicable, and any provisions of this Indenture which conflict with such
laws shall be deemed to be superseded by the provisions of such laws.
On or before the Change of Control Payment Date, the Company shall (i)
accept for payment Securities or portions thereof properly tendered pursuant to
the Change of Control Offer on or before the Change of Control Put Date, (ii)
deposit with the Paying Agent Cash sufficient to pay the Change of Control
Payment (including accrued and unpaid interest) for all Securities or portions
thereof so tendered and (iii) deliver to the Trustee Securities so accepted
together with an Officers' Certificate listing the Securities or portions
thereof being purchased by the Company. The Paying Agent shall on the Change of
Control Payment Date mail to Holders of Securities so accepted payment in an
amount equal to the Change of Control Payment for such Securities, and the
Trustee shall promptly authenticate and mail or deliver to such Holders a new
Security equal in principal amount to any unpurchased portion of the Security
surrendered. The Company shall not have any obligation to accept for payment or
pay for any Securities tendered by a Holder after the Change of Control Put
Date. Any Security not so accepted shall be promptly mailed or delivered by
the Company to the Holder thereof.
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ARTICLE XII
GUARANTEE
SECTION 12.1. Guarantee.
---------
(a) In consideration of good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, to the fullest
extent permitted by applicable law, each of the Guarantors hereby irrevocably
and unconditionally guarantees on a senior basis (collectively, the "Guarantee")
to each Holder of a Security authenticated and delivered by the Trustee and to
the Trustee and its successors and assigns, irrespective of the validity and
enforceability of this Indenture, the Securities or the obligations of the
Company under this Indenture or the Securities, that: (x) the principal of and
premium (if any), and interest on the Securities will be paid in full when due,
whether at the maturity or interest payment date, by acceleration, call for
redemption, upon a Change of Control, an Offer to Purchase or otherwise; (y) all
other obligations of the Company to the Holders or the Trustee under this
Indenture or the Securities will be promptly paid in full or performed, all in
accordance with the terms of this Indenture and the Securities; and (z) in case
of any extension of time of payment or renewal of any Securities or any of such
other obligations, they will be paid in full when due or performed in accordance
with the terms of the extension or renewal, whether at maturity, by
acceleration, call for redemption, upon a Change of Control, an Offer to
Purchase or otherwise. Failing payment when due of any amount so guaranteed for
whatever reason, each Guarantor shall be obligated to pay the same before
failure so to pay becomes an Event of Default.
(b) Each Guarantor hereby agrees to the fullest extent
permitted by applicable law, that its obligations with regard to this Guarantee
shall be unconditional, irrespective of the validity, regularity or
enforceability of the Securities or this Indenture, the absence of any action
to enforce the same, any delays in obtaining or realizing upon or failures to
obtain or realize upon collateral, the recovery of any judgment against the
Company, any action to enforce the same or any other circumstances that might
otherwise constitute a legal or equitable discharge or defense of a Guarantor.
Each Guarantor hereby waives diligence, presentment, demand of payment, filing
of claims with a court in the event of insolvency or bankruptcy of the Company,
any right to require a proceeding first against the Company or right to require
the prior disposition of the assets of the Company to meet its obligations,
protest, notice and all demands whatsoever and covenants that this Guarantee
will not be discharged except by complete performance of the obligations
contained in the Securities and this Indenture.
(c) If any Holder or the Trustee is required by any court
or otherwise to return to either the Company or any Guarantor, or any Custodian
or similar official acting in relation to either the Company or such Guarantor,
any amount paid by either the Company or such Guarantor to the Trustee or such
Holder, this Guarantee, to the extent theretofore discharged, shall be
reinstated in full force and effect. Each Guarantor agrees that it will not be
entitled to any right of subrogation in relation to the Holders in respect of
any obligations guaranteed hereby until payment in full of all obligations
guaranteed hereby. Each Guarantor
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further agrees that, as between such Guarantor, on the one hand, and the Holders
and the Trustee, on the other hand, (i) the maturity of the obligations
guaranteed hereby may be accelerated as provided in Section 6.2 of this
Indenture for the purposes of this Guarantee, notwithstanding any stay,
injunction or other prohibition preventing such acceleration as to the Company
of the obligations guaranteed hereby, and (ii) in the event of any declaration
of acceleration of those obligations as provided in Section 6.2 of this
Indenture, those obligations (whether or not due and payable) will forthwith
become due and payable by each of the Guarantors for the purpose of this
Guarantee.
(d) It is the intention of each Guarantor and the Company
that the obligations of each Guarantor hereunder shall be in, but not in excess
of, the maximum amount permitted by applicable law. Accordingly, if the
obligations in respect of the Guarantee would be annulled, avoided or
subordinated to the creditors of any Guarantor by a court of competent
jurisdiction in a proceeding actually pending before such court as a result of a
determination both that such Guarantee was made by such Guarantor without fair
consideration and, immediately after giving effect thereto, such Guarantor was
insolvent or unable to pay its debts as they mature or left with an unreasonably
small capital, then the obligations of such Guarantor under such Guarantee shall
be reduced by such court if and to the extent such reduction would result in the
avoidance of such annulment, avoidance or subordination; provided, however, that
any reduction pursuant to this paragraph shall be made in the smallest amount as
is strictly necessary to reach such result. For purposes of this paragraph,
"fair consideration", "insolvency", "unable to pay its debts as they mature",
"unreasonably small capital" and the effective times of reductions, if any,
required by this paragraph shall be determined in accordance with applicable
law.
SECTION 12.2. Execution and Delivery of Guarantee.
-----------------------------------
To evidence its Guarantee set forth in Section 12.1 of this
Indenture, each Guarantor agrees to execute a Guarantee substantially in the
form annexed hereto as Exhibit B and that this Indenture shall be executed on
behalf of such Guarantor by two Officers or an Officer and an Assistant
Secretary by manual or facsimile signature, other than in the case of any
Guarantor which has only one officer, in which case, by such sole officer.
Each Guarantor agrees that its Guarantee set forth in Section
12.1 of this Indenture shall remain in full force and effect and apply to all
the Securities notwithstanding any failure to endorse on each Security a
notation of such Guarantee.
If an Officer whose signature is on a Guarantee no longer holds
that office at the time the Trustee authenticates the Security to which a
Guarantee relates, the Guarantee shall be valid nevertheless.
The delivery of any Security by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of the Guarantee
set forth in this Indenture on behalf of each Guarantor.
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SECTION 12.3. Future Guarantors.
-----------------
The Company and the Guarantors covenant and agree that they shall
cause each person that is or becomes a Subsidiary of the Company or of any
Guarantor to execute a Guarantee in the form of Exhibit B hereto and will cause
such Subsidiary to execute an Indenture supplemental hereto for the purpose of
adding such Subsidiary as a Guarantor hereunder.
SECTION 12.4. Certain Bankruptcy Events.
-------------------------
Each Guarantor hereby covenants and agrees, to the fullest extent
that it may do so under applicable law, that in the event of the insolvency,
bankruptcy, dissolution, liquidation or reorganization of the Company, such
Guarantor shall not file (or join in any filing of), or otherwise seek to
participate in the filing of, any motion or request seeking to stay or to
prohibit (even temporarily) execution on the Guarantee and hereby waives and
agrees not to take the benefit of any such stay of execution, whether under
Section 362 or 105 of the United States Bankruptcy Code or otherwise.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.1. TIA Controls.
------------
If any provision of this Indenture limits, qualifies, or
conflicts with the duties imposed by operation of the TIA, the imposed duties,
upon qualification of this Indenture under the TIA, shall control.
SECTION 13.2. Notices.
-------
Any notices or other communications to the Company or any
Guarantor or the Trustee required or permitted hereunder shall be in writing,
and shall be sufficiently given if made by hand delivery, by telex, by
telecopier or registered or certified mail, postage prepaid, return receipt
requested, addressed as follows:
if to the Company or any Guarantor:
Cobblestone Golf Group, Inc.
3702 Villa de la Valle, Suite 202
Del Mar, California 92014
Attention: Chief Financial Officer
Telecopy: (619) 794-7806
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if to the Trustee:
Norwest Bank Minnesota, National Association
Norwest Center
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55472
Attention: Corporate Trust Division
Telecopy: (612) 667-9825
Any party by notice to each other party may designate additional
or different addresses as shall be furnished in writing by such party. Any
notice or communication to any party shall be deemed to have been given or made
as of the date so delivered, if personally delivered; when answered back, if
telexed; when receipt is acknowledged, if telecopied; and five Business Days
after mailing if sent by registered or certified mail, postage prepaid (except
that a notice of change of address shall not be deemed to have been given until
actually received by the addressee).
Any notice or communication mailed to a Securityholder shall be
mailed to him by first class mail or other equivalent means at his address as it
appears on the registration books of the Registrar and shall be sufficiently
given to him if so mailed within the time prescribed.
Failure to mail a notice or communication to a Securityholder or
any defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 13.3. Communications by Holders with Other Holders.
--------------------------------------------
Securityholders may communicate pursuant to TIA (S) 312(b) with
other Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and any other Person shall
have the protection of TIA (S) 312(c).
SECTION 13.4. Certificate and Opinion as to Conditions
----------------------------------------
Precedent.
- ---------
Upon any request or application by the Company or any Guarantor
to the Trustee to take any action under this Indenture, such Person shall
furnish to the Trustee:
(1) an Officers' Certificate (in form and
substance reasonably satisfactory to the Trustee) stating that,
in the opinion of the signers, all conditions precedent, if any,
provided for in this Indenture relating to the proposed action
have been met; and
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(2) an Opinion of Counsel (in form and
substance reasonably satisfactory to the Trustee) stating that,
in the opinion of such counsel, all such conditions precedent
have been met.
SECTION 13.5. Statements Required in Certificate or Opinion.
---------------------------------------------
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that the Person making such
certificate or opinion has read such covenant or condition;
(2) a brief statement as to the nature and
scope of the examination or investigation upon which the
statements or opinions contained in such certificate or opinion
are based;
(3) a statement that, in the opinion of such
Person, he has made such examination or investigation as is
necessary to enable him to express an informed opinion as to
whether or not such covenant or condition has been met; and
(4) a statement as to whether or not, in the
opinion of each such Person, such condition or covenant has been
met; provided, however, that with respect to matters of fact an
Opinion of Counsel may rely on an Officers' Certificate or
certificates of public officials.
SECTION 13.6. Rules by Trustee, Paying Agent, Registrar.
-----------------------------------------
The Trustee may make reasonable rules for action by or at a
meeting of Securityholders. The Paying Agent or Registrar may make reasonable
rules for its functions.
SECTION 13.7. Legal Holidays.
--------------
A "Legal Holiday" is a Saturday, a Sunday or a day on which
banking institutions in New York, New York are authorized or obligated by law or
executive order to close. If a payment date is a Legal Holiday at such place,
payment may be made at such place on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue for the intervening period.
SECTION 13.8. Governing Law.
-------------
THIS INDENTURE, THE GUARANTEES AND THE SECURITIES SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
AS APPLIED TO CONTRACTS MADE AND PERFORMED
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WITHIN THE STATE OF NEW YORK. EACH OF THE COMPANY AND THE GUARANTORS HEREBY
IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN
THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN
THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE AND THE SECURITIES,
AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. EACH OF THE COMPANY AND
THE GUARANTORS IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO
SO UNDER APPLICABLE LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH
COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH
COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING HEREIN SHALL AFFECT
THE RIGHT OF THE TRUSTEE OR ANY SECURITYHOLDER TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED
AGAINST THE COMPANY AND THE GUARANTORS IN ANY OTHER JURISDICTION.
SECTION 13.9. No Adverse Interpretation of Other Agreements.
---------------------------------------------
This Indenture may not be used to interpret another indenture,
loan or debt agreement of the Company or any Guarantor or any of their
respective Subsidiaries. Any such indenture, loan or debt agreement may not be
used to interpret this Indenture.
SECTION 13.10. No Recourse Against Others.
--------------------------
No partner, incorporator, direct or indirect stockholder,
director, officer or employee, as such, past, present or future, of the Company
or any Guarantor, or any successor entity, shall have any personal liability in
respect of the obligations of the Company and the Guarantors under the
Securities or this Indenture by reason of his, her or its status as such
partner, incorporator, stockholder, director, officer or employee. Each
Securityholder by accepting a Security waives and releases all such liability.
Such waiver and release are part of the consideration for the issuance of the
Securities.
SECTION 13.11. Successors.
----------
All agreements of the Company and the Guarantors in this
Indenture and the Securities shall bind its successor. All agreements of the
Trustee in this Indenture shall bind its successor.
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SECTION 13.12. Duplicate Originals.
-------------------
All parties may sign any number of copies or counterparts of this
Indenture. Each signed copy or counterpart shall be an original, but all of
them together shall represent the same agreement.
SECTION 13.13. Severability.
------------
In case any one or more of the provisions in this Indenture or in
the Securities or in the Guarantees shall be held invalid, illegal or
unenforceable, in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions shall not in any way be affected or impaired thereby, it being
intended that all of the provisions hereof shall be enforceable to the full
extent permitted by law.
SECTION 13.14. Table of Contents, Headings, Etc.
---------------------------------
The Table of Contents, Cross-Reference Table and headings of the
Articles and the Sections of this Indenture have been inserted for convenience
of reference only, are not to be considered a part hereof and shall in no way
modify or restrict any of the terms or provisions hereof.
SECTION 13.15. Qualification of Indenture.
--------------------------
The Company shall qualify this Indenture under the TIA in
accordance with the terms and conditions of the Registration Rights Agreement
and shall pay all costs and expenses (including attorneys' fees for the Company
and the Trustee) incurred in connection therewith, including, but not limited
to, costs and expenses of qualification of the Indenture and the Securities and
printing this Indenture and the Securities. The Trustee shall be entitled to
receive from the Company any such Officers' Certificates, Opinions of Counsel or
other documentation as it may reasonably request in connection with any such
qualification of this Indenture under the TIA.
SECTION 13.16. Registration Rights.
-------------------
Certain Holders of the Securities may be entitled to certain
registration rights with respect to such Securities pursuant to, and subject to
the terms of, the Registration Rights Agreement.
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SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed as of the date first written above.
COBBLESTONE GOLF GROUP, INC.,
a Delaware corporation
By: /s/ James A. Husband
--------------------
Name: James A. Husband
Title: President and Chief
Executive Officer
Attest: /s/ Stefan C. Karnavas
----------------------
Secretary
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee
By: /s/ Raymond S. Haverstock
-------------------------
Name: Raymond S. Haverstock
Title: Vice President
<PAGE>
GUARANTORS: ESCONDIDO CONSULTING, INC.
By: /s/ James A. Husband
--------------------
Name: James A. Husband
Title: President
By: /s/ Stefan C. Karnavas
----------------------
Name: Stefan C. Karnavas
Title: Secretary
COBBLESTONE TEXAS, PECAN GROVE GOLF CLUB, INC.
INC.
By: /s/ James A. Husband By: /s/ James A. Husband
-------------------- --------------------
Name: James A. Husband Name: James A. Husband
Title: President Title: President
By: /s/ Stefan C. Karnavas By: /s/ Stefan C. Karnavas
---------------------- ----------------------
Name: Stefan C. Karnavas Name: Stefan C. Karnavas
Title: Secretary Title: Secretary
FOOTHILLS HOLDING BELLOWS GOLF GROUP, INC.
COMPANY, INC.
By: /s/ James A. Husband By: /s/ James A. Husband
-------------------- --------------------
Name: James A. Husband Name: James A. Husband
Title: President Title: President
By: /s/ Stefan C. Karnavas By: /s/ Stefan C. Karnavas
---------------------- ----------------------
Name: Stefan C. Karnavas Name: Stefan C. Karnavas
Title: Secretary Title: Secretary
<PAGE>
CARMEL MOUNTAIN OVLC MANAGEMENT CORP.
RANCH GOLF CLUB, INC.
By: /s/ James A. Husband By: /s/ James A. Husband
-------------------- --------------------
Name: James A. Husband Name: James A. Husband
Title: President Title: President
By: /s/ Stefan C. Karnavas By: /s/ Stefan C. Karnavas
---------------------- ----------------------
Name: Stefan C. Karnavas Name: Stefan C. Karnavas
Title: Secretary Title: Secretary
OVLC FINANCIAL CORP. CSR GOLF GROUP, INC.
By: /s/ James A. Husband By: /s/ James A. Husband
-------------------- --------------------
Name: James A. Husband Name: James A. Husband
Title: President Title: President
By: /s/ Stefan C. Karnavas By: /s/ Stefan C. Karnavas
---------------------- ----------------------
Name: Stefan C. Karnavas Name: Stefan C. Karnavas
Title: Secretary Title: Secretary
<PAGE>
LAKEWAY GOLF CLUBS, WOODCREST GOLF CLUB, INC.
INC.
By: /s/ James A. Husband By: /s/ James A. Husband
-------------------- --------------------
Name: James A. Husband Name: James A. Husband
Title: President Title: President
By: /s/ Stefan C. Karnavas By: /s/ Stefan C. Karnavas
---------------------- ----------------------
Name: Stefan C. Karnavas Name: Stefan C. Karnavas
Title: Secretary Title: Secretary
VIRGINIA GOLF COUNTRY OCEAN VISTA LAND COMPANY
CLUB, INC.
By: /s/ James A. Husband By: /s/ James A. Husband
-------------------- --------------------
Name: James A. Husband Name: James A. Husband
Title: President Title: President
By: /s/ Stefan C. Karnavas By: /s/ Stefan C. Karnavas
---------------------- ----------------------
Name: Stefan C. Karnavas Name: Stefan C. Karnavas
Title: Secretary Title: Secretary
<PAGE>
GOLF COURSE INNS OF OCEANSIDE GOLF MANAGEMENT
AMERICA, INC. CORP.
By: /s/ James A. Husband By: /s/ James A. Husband
-------------------- --------------------
Name: James A. Husband Name: James A. Husband
Title: President Title: President
By: /s/ Stefan C. Karnavas By: /s/ Stefan C. Karnavas
---------------------- ----------------------
Name: Stefan C. Karnavas Name: Stefan C. Karnavas
Title: Secretary Title: Secretary
WHISPERING PALMS C-RHK, INC.
COUNTRY CLUB JOINT VENTURE
By: /s/ James A. Husband By: /s/ James A. Husband
-------------------- --------------------
Name: James A. Husband Name: James A. Husband
Title: Managing Committee Member Title: President
By: /s/ Stefan C. Karnavas By: /s/ Stefan C. Karnavas
---------------------- ----------------------
Name: Stefan C. Karnavas Name: Stefan C. Karnavas
Title: Managing Committee Member Title: Secretary
<PAGE>
LIQUOR CLUB AT PECAN GROVE, INC. TGFC CORP.
By: /s/ Timothy S. O'Hern By: /s/ James A. Husband
--------------------- --------------------
Name: Timothy S. O'Hern Name: James A. Husband
Title: President Title: President
By: /s/ Stefan C. Karnavas
----------------------
Name: Stefan C. Karnavas
Title: Secretary
LAKEWAY CLUBS, INC. CEL GOLF GROUP, INC.
By: /s/ Laurie Ann Wright By: /s/ James A. Husband
--------------------- --------------------
Name: Laurie Ann Wright Name: James A. Husband
Title: President, Treasurer and Title: President
Secretary
By: /s/ Stefan C. Karnavas
----------------------
Name: Stefan C. Karnavas
Title: Secretary
<PAGE>
EXHIBIT A
FORM OF SECURITY
COBBLESTONE GOLF GROUP, INC.
11 1/2% SERIES A/1/ SENIOR NOTE DUE 2003
CUSIP No. 190885AA1
No. $
Cobblestone Golf Group, Inc., a Delaware corporation (hereinafter
called the "Company", which term includes any successors under the Indenture
hereinafter referred to), for value received, hereby promises to pay to _____,
or registered assigns, the principal sum of _____ Dollars, on June 1, 2003.
Interest Payment Dates: June 1 and December 1, commencing December 1,
1996.
Record Dates: May 15 and November 15.
Reference is made to the further provisions of this Security on the
reverse side, which will, for all purposes, have the same effect as if set forth
at this place.
IN WITNESS WHEREOF, the Company has caused this Instrument to be duly
executed under its corporate seal.
Dated:
COBBLESTONE GOLF GROUP, INC.,
a Delaware corporation
By: ______________________________
Name:
Title:
Attest: ____________________
Secretary
____________________
/1/ Series A should be replaced with Series B in the Exchange
Securities.
A-1
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities described in the within-mentioned
Indenture.
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
By _____________________________
Authorized Signatory
Dated: ___________ ___, _____.
A-2
<PAGE>
COBBLESTONE GOLF GROUP, INC.
11 1/2% SERIES A/2/ Senior Note due 2003
Unless and until it is exchanged in whole or in part for
Securities in definitive form, this Security may not be transferred except as a
whole by the Depository to a nominee of the Depository or by a nominee of the
Depository to the Depository or another nominee of the Depository or by the
Depository or any such nominee to a successor Depository or a nominee of such
successor Depository. Unless this certificate is presented by an authorized
representative of The Depository Trust Company (55 Water Street, New York, New
York) ("DTC"), to the Company or its agent for registration of transfer,
exchange or payment, and any certificate issued is registered in the name of
Cede & Co. or such other name as requested by an authorized representative of
DTC (and any payment is made to Cede & Co. or such other entity as is requested
by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the
registered owner hereof, Cede & Co., has an interest herein./3/
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5
OF THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR ANY APPLICABLE EXEMPTION THEREFROM.
EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY
NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE
PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE
144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY
AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH NOTE MAY BE
RESOLD OR OTHERWISE TRANSFERRED, ONLY (1)(a) TO A PERSON WHO THE
SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION
MEETING THE REQUIRE-
___________________________
/2/ Series A should be replaced with Series B in the Exchange Security.
/3/ This paragraph should only be added if the Security is issued in global
form.
A-3
<PAGE>
MENTS OF RULE 144A, (b) TO AN INSTITUTIONAL "ACCREDITED INVESTOR"
WITHIN THE MEANING OF SUBPARAGRAPH (A)(1),(2),(3) OR (7) OF RULE
501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR
ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
"ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A
VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, (c) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, (d) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE
SECURITIES ACT OR (e) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED
UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS) (2) TO THE
COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNTIED STATES OR ANY OTHER APPLICABLE
JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER
IS REQUIRED TO NOTIFY ANY PURCHASER FROM IT OF THE SECURITY
EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A)
ABOVE./4/
1. Interest.
--------
Cobblestone Golf Group, Inc., a Delaware corporation (hereinafter
called the "Company," which term includes any successors under the Indenture
hereinafter referred to), promises to pay interest on the principal amount of
this Security at the rate of 11 1/2% per annum. To the extent it is lawful, the
Company promises to pay interest on any interest payment due but unpaid on such
principal amount at a rate of 11 1/2% per annum compounded semi-annually.
The Company will pay interest semi-annually on June 1 and
December 1 of each year (each, an "Interest Payment Date"), commencing December
1, 1996. Interest on the Securities will accrue from the most recent date to
which interest has been paid or, if no interest has been paid on the Securities,
from June 4, 1996. Interest will be computed on the basis of a 360-day year
consisting of twelve 30-day months.
___________________
/4/ This paragraph should be included only for the Initial Securities.
A-4
<PAGE>
2. Method of Payment.
-----------------
The Company shall pay interest on the Securities (except defaulted
interest) to the Persons who are the registered Holders at the close of business
on the Record Date immediately preceding the Interest Payment Date. Holders must
surrender Securities to a Paying Agent to collect principal payments. Except as
provided below, the Company shall pay principal and interest in Cash. However,
the Company may pay principal and interest by wire transfer of Federal funds, or
interest by its check denominated in United States Dollars. The Company may
deliver any such interest payment to the Paying Agent or the Company may mail
any such interest payment to a Holder at the Holder's registered address.
3. Paying Agent and Registrar.
--------------------------
Initially, Norwest Bank Minnesota, National Association (the
"Trustee"), will act as Paying Agent and Registrar. The Company may change any
Paying Agent, Registrar or co-Registrar without notice to the Holders. The
Company or any of its Subsidiaries may, subject to certain exceptions, act as
Paying Agent, Registrar or co-Registrar.
4. Indenture.
---------
The Company issued the Securities under an Indenture, dated as of June
4, 1996 (the "Indenture"), among the Company, the Guarantors named therein and
the Trustee. Capitalized terms herein are used as defined in the Indenture
unless otherwise defined herein. The terms of the Securities include those
stated in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act, as in effect on the date of the Indenture. The Securities
are subject to all such terms, and Holders of Securities are referred to the
Indenture and said Act for a statement of them. The Securities are general
unsecured obligations of the Company limited in aggregate principal amount to
$70,000,000.
5. Redemption.
----------
The Securities may be redeemed in whole or from time to time in part
at any time on and after June 1, 1999, at the option of the Company, at the
Redemption Price (expressed as a percentage of principal amount) set forth below
with respect to the indicated Redemption Date, in each case, plus any accrued
but unpaid interest to the Redemption Date. The Securities may not be so
redeemed prior to June 1, 1999 (other than out of the Net Cash Proceeds of
certain issuances of Qualified Capital Stock of the Company described below).
A-5
<PAGE>
<TABLE>
<CAPTION>
If redeemed during
the 12-month period
beginning June 1, Redemption Price
------------------- ----------------
<S> <C>
1999 . . . . . . . . . 105.750%
2000 . . . . . . . . . 103.833%
2001 . . . . . . . . . 101.917%
2002 and thereafter. . 100.000%
</TABLE>
Notwithstanding the foregoing, until June 1, 1999, upon one or more
Public Equity Offerings or issuances of Qualified Capital Stock to Strategic
Investors, up to $17,500,000 aggregate principal amount of Securities may be
redeemed at the option of the Company within 120 days of such Public Equity
Offering or issuance to Strategic Investors, with the Net Cash Proceeds thereof
in the case of such an offering by the Company, or from such proceeds invested
by Holdings in the Company's Qualified Capital Stock in the case of such an
offering by Holdings, at 110.5% of the principal amount, together with accrued
and unpaid interest, if any, to the date of redemption; provided, however, that
immediately following each such redemption not less than $52,500,000 aggregate
principal amount of Securities is outstanding.
Any such redemption will comply with Article III of the Indenture.
6. Notice of Redemption.
--------------------
Notice of redemption will be sent by first class mail, at least
30 days and not more than 60 days prior to the Redemption Date to the Holder of
each Security to be redeemed at such Holder's last address as then shown upon
the registry books of the Registrar. Securities may be redeemed in part in
multiples of $1,000 only.
Except as set forth in the Indenture, from and after any Redemption
Date, if monies for the redemption of the Securities called for redemption shall
have been deposited with the Paying Agent on such Redemption Date, the
Securities called for redemption will cease to bear interest and the only right
of the Holders of such Securities will be to receive payment of the Redemption
Price, plus any accrued and unpaid interest to the Redemption Date.
7. Denominations; Transfer; Exchange.
---------------------------------
The Securities are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder may register
the transfer of, or exchange Securities in accordance with, the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. The Registrar need not register the transfer
of or exchange any Securities selected for redemption.
A-6
<PAGE>
8. Persons Deemed Owners.
---------------------
The registered Holder of a Security may be treated as the owner of it
for all purposes.
9. Unclaimed Money.
---------------
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee and the Paying Agent(s) will pay the money back to
the Company at its written request. After that, all liability of the Trustee and
such Paying Agent(s) with respect to such money shall cease.
10. Discharge Prior to Redemption or Maturity.
-----------------------------------------
Except as set forth in the Indenture, if the Company irrevocably
deposits with the Trustee, in trust, for the benefit of the Holders, Cash, U.S.
Government Obligations or a combination thereof, in such amounts as will be
sufficient in the opinion of a nationally recognized firm of independent public
accountants selected by the Trustee, to pay the principal of, premium, if any,
and interest on the Securities to redemption or maturity and complies with the
other provisions of the Indenture relating thereto, the Company and the
Guarantors will be discharged from certain provisions of the Indenture and the
Securities (including the financial covenants, but excluding their obligation to
pay the principal of, premium, if any, and interest on the Securities). Upon
satisfaction of certain additional conditions set forth in the Indenture, the
Company may elect to have its and the Guarantors' obligations discharged with
respect to outstanding Securities.
11. Amendment; Supplement; Waiver.
-----------------------------
Subject to certain exceptions, the Indenture or the Securities may be
amended or supplemented with the written consent of the Holders of at least a
majority in aggregate principal amount of the Securities then outstanding, and
any existing Default or Event of Default or compliance with any provision of the
Indenture or the Securities may be waived with the consent of the Holders of a
majority in aggregate principal amount of the Securities then outstanding.
Without notice to or consent of any Holder, the parties thereto may under
certain circumstances amend or supplement the Indenture or the Securities to,
among other things, cure any ambiguity, defect or inconsistency, or make any
other change that does not adversely affect the rights of any Holder of a
Security.
12. Restrictive Covenants.
---------------------
The Indenture imposes certain limitations on the ability of the
Company and the Guarantors to, among other things, Incur additional Indebtedness
and Disqualified Capital Stock, pay dividends or make certain other Restricted
Payments, enter into certain
A-7
<PAGE>
transactions with Affiliates, incur Liens, sell assets and subsidiary stock,
merge or consolidate with any other Person or transfer (by lease, assignment or
otherwise) substantially all of the properties and assets of the Company. The
limitations are subject to a number of important qualifications and exceptions.
The Company must periodically report to the Trustee on compliance with such
limitations.
13. Repurchase at Option of Holder.
------------------------------
(a) If there is a Change of Control, the Company shall be required to
offer to purchase on the Change of Control Payment Date all outstanding
Securities at a purchase price equal to 101% of the principal amount thereof,
plus accrued and unpaid interest, if any, to the Change of Control Payment Date.
Holders of Securities will receive a Change of Control Offer from the Company
prior to any related Change of Control Payment Date and may elect to have such
Securities purchased by completing the form entitled "Option of Holder to Elect
Purchase" appearing below.
(b) The Indenture imposes certain limitations on the ability of the
Company, the Guarantors or any of their respective Subsidiaries to sell assets
and subsidiary stock. In the event the proceeds from a permitted Asset Sale
exceed certain amounts, as specified in the Indenture, the Company will be
required either to reinvest the proceeds of such Asset Sale in a Related
Business or to make an offer to purchase each Holder's Securities at 100% of the
principal amount thereof, plus accrued interest, if any, to the purchase date.
14. Successors.
----------
When a successor assumes all the obligations of its predecessor under
the Securities and the Indenture, the predecessor will be released from those
obligations.
15. Defaults and Remedies.
---------------------
If an Event of Default occurs and is continuing (other than as Event
of Default relating to certain events of bankruptcy, insolvency or
reorganization), then in every such case, unless the principal of all of the
securities shall have already become due and payable, either the Trustee or the
Holders of 25% in aggregate principal amount of Securities then outstanding may
declare all the Securities to be due and payable immediately in the manner and
with the effect provided in the Indenture. Holders of Securities may not enforce
the Indenture or the Securities except as provided in the Indenture. The Trustee
may require indemnity satisfactory to it before it enforces the Indenture or the
Securities. Subject to certain limitations, Holders of a majority in aggregate
principal amount of the Securities then outstanding may direct the Trustee in
its exercise of any trust or power. The Trustee may withhold from
Securityholders notice of any continuing Default or Event of Default (except a
Default in payment of principal or interest), if it determines that withholding
notice is in their interest.
A-8
<PAGE>
16. Trustee Dealings with Company.
-----------------------------
The Trustee under the Indenture, in its individual or any other
capacity, may make loans to, accept deposits from, and perform services for the
Company any Guarantor, any of their Subsidiaries or any of their respective
Affiliates, and may otherwise deal with such Persons as if it were not the
Trustee.
17. No Recourse Against Others.
--------------------------
No partner, incorporator, direct or indirect stockholder, partner,
director, officer or employee, as such, past, present or future, of the Company
or any Guarantor, or any successor entity, shall have any personal liability in
respect of the obligations of the Company and the Guarantors under the
Securities or the Indenture by reason of his, her or its status as such partner,
incorporator, stockholder, director, officer or employee. Each Holder of a
Security by accepting a Security waives and releases all such liability. The
waiver and release are part of the consideration for the issuance of the
Securities.
18. Authentication.
--------------
This Security shall not be valid until the Trustee or authenticating
agent signs the certificate of authentication on the other side of this
Security.
19. Abbreviations and Defined Terms.
-------------------------------
Customary abbreviations may be used in the name of a Holder of a
Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
20. CUSIP Numbers.
-------------
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company will cause CUSIP numbers to be
printed on the Securities as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
A-9
<PAGE>
21. Additional Rights of Holders of Transfer Restricted Securities./5/
--------------------------------------------------------------
In addition to the rights provided to Holders of Securities under the
Indenture, Holders of Securities shall have all the rights set forth in the
Registration Rights Agreement.
22. Guarantees
----------
This security is entitled to the benefit of certain Guarantees
pursuant to Article XII of the Indenture.
________________
/5/ This paragraph should be included only for the Initial Securities.
A-10
<PAGE>
ASSIGNMENT
I or we assign this Security to
__________________________________________________________
__________________________________________________________
__________________________________________________________
(Print or type name, address and zip code of assignee)
Please insert Social Security or other identifying number of assignee
_________________________
and irrevocably appoint __________ agent to transfer this Security on the
books of the Company. The agent may substitute another to act for him.
Dated: __________ Signed: ________________________________
___________________________________________________________
(Sign exactly as name appears on
the other side of this Security)
A-11
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.14 or Article XI of the Indenture, check the appropriate
box: [_] Section 4.14 [_] Article XI.
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.14 or Article XI of the Indenture, as the case
may be, state the amount you want to be purchased: $________
Date: ________________ Signature:__________________________________
(Sign exactly as your name
appears on the other side of this
Security)
A-12
<PAGE>
SCHEDULE OF EXCHANGES OF DEFINITIVE SECURITIES/6/
The following exchanges of a part of this Global Security for
Definitive Securities have been made:
<TABLE>
<S> <C> <C> <C> <C>
Amount of Amount of Principal Amount Signature of
decrease in increase in of this Global authorized officer of
Principal Amount Principal Amount Security following Trustee or
Date of of this Global of this Global such decrease (or Securities
Exchange Security Secrurity increase) Custodian
- ------------------------------------------------------------------------------------------
</TABLE>
____________________________
/6/ This schedule should only be added if the Security is issued in global
form.
<PAGE>
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER OF
TRANSFER RESTRICTED SECURITIES/7/
Re: 11 1/2% SERIES A SENIOR NOTES DUE 2003 OF COBBLESTONE GOLF GROUP, INC.
This Certificate relates to $______ principal amount of Securities held in
(check applicable space) _____ book-entry or ______ definitive form by
_________________ (the "Transferor").
The Transferor (check applicable box):
[_] has requested the Trustee by written order to deliver in exchange
for its beneficial interest in the Global Security held by the Depository a
Security or Securities in definitive, registered form of authorized
denominations and an aggregate principal amount equal to its beneficial interest
in such Global Security (or the portion thereof indicated above); or
[_] has requested the Trustee by written order to exchange or register the
transfer of a Security or Securities.
In connection with such request and in respect of each such Security, the
Transferor does hereby certify that Transferor is familiar with the Indenture
relating to the above-captioned Securities and as provided in Section 2.6 of
such Indenture, the transfer of this Security does not require registration
under the Securities Act (as defined below) because:
[_] Such Security is being acquired for the Transferor's own account,
without transfer (in satisfaction of Section 2.6(a)(ii)(A) or Section
2.6(d)(i)(A) of the Indenture).
[_] Such Security is being transferred to a "qualified institutional
buyer" (as defined in Rule 144A under the Securities Act of 1933, as amended
(the "Securities Act")) in reliance on Rule 144A (in satisfaction of Section
2.6(a)(ii)(B), Section 2.6(b)(i) or Section 2.6(d)(i)(B) of the Indenture), to
an institutional "accredited investor" within the meaning of subparagraph
(a)(1),(2),(3) or (7) of Rule 501 under the Securities Act that is acquiring the
security for its own account, or for the account of such an institutional
"accredited investor," for investment purposes and not with a view to, or for
offer or sale in connection with, any distribution in violation of the
Securities Act, or pursuant to an exemption from registration in accordance with
Regulation S under the Securities Act (in satisfaction of Section 2.06(a)(ii)(B)
or Section 2.06 (d)(i)(B) of the Indenture).
__________________
/7/ The following should be included only for Initial Securities.
A-14
<PAGE>
[_] Such Security is being transferred in accordance with Rule 144 under
the Securities Act, or pursuant to an effective registration statement under the
Securities Act (in satisfaction of Section 2.6(a)(ii)(B) or Section 2.6(d)(i)(B)
of the Indenture).
[_] Such Security is being transferred in reliance on and in compliance
with an exemption from the registration requirements of the Securities Act,
other than as provided in the immediately preceding paragraph. An Opinion of
Counsel to the effect that such transfer does not require registration under the
Securities Act accompanies this Certificate (in satisfaction of Section
2.6(a)(ii)(C) or Section 2.6(d)(i)(C) of the Indenture).
__________________________________
[INSERT NAME OF TRANSFEROR]
By:_______________________________
Date:__________________________________
A-15
<PAGE>
EXHIBIT B
FORM OF GUARANTEE
-----------------
For value received, __________________, a __________________
[corporation/general partnership], hereby irrevocably and unconditionally
guarantees on a senior basis to the Holder of the Security which is entitled to
the benefit of this Guarantee, the due and punctual payment, as set forth in the
Indenture pursuant to which such Security and this Guarantee were issued, of the
principal of, premium (if any) and interest on such Security when and as the
same shall become due and payable for any reason according to the terms of such
Security and Article XII of the Indenture. The Guarantee of the Security to
which this Guarantee relates will not become effective until the Trustee signs
the certificate of authentication on such Security.
_______________________________
By: ___________________________
By: ___________________________
<PAGE>
EXHIBIT 5.1
FORM OF OPINION OF LATHAM & WATKINS
[LATHAM & WATKINS LETTERHEAD]
_____________, 1996
Cobblestone Golf Group, Inc.
3702 Via de la Valle, Suite 202
Del Mar, California 92014
Re: Cobblestone Golf Group, Inc.
Registration Statement on Form S-4
----------------------------------
Ladies/Gentlemen:
At your request, we have examined the Registration Statement on Form S-4
(the "Registration Statement") of Cobblestone Golf Group, Inc., a Delaware
corporation (the "Company"), which you have filed with the Securities and
Exchange Commission on ______________, 1996 in connection with the exchange of
$1,000 principal amount of 11 1/2% Series B Senior Notes due 2003 of the Company
for each $1,000 principal amount of its outstanding 11 1/2% Series A Senior
Notes due 2003.
We have examined such matters of fact and questions of law as we have
considered appropriate for purposes of this opinion. We have examined, among
other things, the terms of the Notes, and the indenture pursuant to which the
Notes are to be issued. In our examination, we have assumed the genuineness of
all signatures, the authenticity of all documents submitted to us as originals,
and the conformity to authentic original documents of all documents submitted to
us as copies.
We are opining herein as to the effect on the subject transaction only of
the federal securities laws of the United States, the internal laws of the State
of California and the General Corporation Law of the State of Delaware, and we
express no opinion with respect to the applicability thereto, or the effect
thereon, of any other laws.
Based upon the foregoing, we are of the opinion that, the Notes are legally
valid and binding obligations of the Company, except as may be limited by the
effect of bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to or affecting the rights or remedies
of creditors; the affect of general principles of equity, whether enforcement is
considered in a proceeding in equity or at law, and the discretion of the court
before which any
<PAGE>
proceeding therefor may be brought; and the unenforceability under certain
circumstances under law or court decisions of provisions providing for the
indemnification of or contribution to a party with respect to a liability where
such indemnification or contribution is contrary to public policy.
We consent to your filing this opinion as an exhibit to the Registration
Statement.
Very truly yours,
LATHAM & WATKINS
<PAGE>
EXHIBIT 8.1
FORM OF OPINION OF LATHAM & WATKINS
[LATHAM & WATKINS LETTERHEAD]
______________, 1996
Cobblestone Golf Group, Inc.
3702 Via de la Valle, Suite 202
Del Mar, California 92014
Re: Cobblestone Golf Group, Inc.
Registration Statement on Form S-4
----------------------------------
Ladies/Gentlemen:
You have requested our opinion concerning the material federal income tax
consequences of the exchange of $1,000 principal amount of 11 1/2% Series B
Senior Notes due 2003 of Cobblestone Golf Group, Inc., a Delaware corporation
(the "Company"), for 11 1/2% Series A Senior Notes due 2003 of the Company,
pursuant to the Registration Statement on Form S-4 filed with the Securities and
Exchange Commission (the "Commission") on ______________, 1996 (the
"Registration Statement").
The facts, as we understand them, and upon which with your permission we
rely in rendering the opinion expressed herein, are set forth in the
Registration Statement. Based on such facts, it is our opinion that the
material federal income tax consequences are accurately set forth under the
heading "Certain Federal Income Tax Considerations" in the registration
Statement. No opinion is expressed to any matter not discussed therein.
This opinion is based on various statutory provisions, regulations
promulgated thereunder and interpretations thereof by the Internal Revenue
Service and the courts having jurisdiction over such matters, all of which are
subject to change either prospectively or retroactively. Also, any variation or
difference in the facts from those set forth in the Registration Statement may
affect the conclusion stated herein.
<PAGE>
This opinion is rendered to you solely for use in connection with the
Registration Statement. We consent to your filing this opinion as an exhibit to
the Registration Statement and to the reference of our firm under the heading
"Certain Federal Income Tax Considerations."
Very truly yours,
LATHAM & WATKINS
<PAGE>
EXHIBIT 10.1
- --------------------------------------------------------------------------------
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
dated as of June 4, 1996
among
COBBLESTONE GOLF GROUP, INC.,
as Borrower,
COBBLESTONE HOLDINGS, INC.,
as Guarantor
VARIOUS FINANCIAL INSTITUTIONS,
and
BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION,
individually and as Agent
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1.1 DEFINITIONS...................................................... 1
1.2 Reallocation of Loans and Commitments............................ 28
SECTION 2 COMMITMENTS OF THE LENDERS; TYPES OF LOANS;
BORROWING PROCEDURES; LETTERS OF CREDIT........................ 30
2.1 Commitments...................................................... 30
2.1.1 Working Capital Revolving Commitments..................... 31
2.1.2 Reducing Revolver Loan Commitment......................... 31
2.2 Various Types of Loans........................................... 32
2.3 Borrowing Procedures............................................. 33
2.4 Procedures for Conversion of Type of Loan........................ 33
2.5 Conditions to the Making of Reducing Revolver Loans
Used to Finance Subsequent Acquisitions........................ 33
2.6 Other Terms Applicable to Delayed Subsequent
Acquisition Capital Expenditures and Designated
Non-Recurring Capital Expenditures............................. 38
2.7 Warranty......................................................... 40
2.8 Conditions....................................................... 41
2.9 Commitments Several.............................................. 41
2.10 Letters of Credit................................................ 41
2.10.1 Issuance of Letters of Credit............................ 41
2.10.2 Issuance Requests........................................ 41
2.10.3 Amendments............................................... 43
2.10.4 Letter of Credit Fees.................................... 43
2.10.5 Other Lenders' Participations; Reimbursements............ 44
2.10.6 Disbursements............................................ 45
2.10.7 Reimbursement............................................ 46
2.10.8 Deemed Disbursements..................................... 46
2.10.9 Nature of Reimbursement Obligations...................... 47
SECTION 3 NOTES EVIDENCING LOANS........................................... 49
3.1 Notes............................................................ 49
3.2 Recordkeeping.................................................... 50
SECTION 4 INTEREST......................................................... 50
4.1 Interest Rates................................................... 50
4.2 Interest Payment Dates........................................... 50
4.3 Interest Periods................................................. 51
4.4 Setting and Notice of Eurodollar Rates........................... 51
4.5 Computation of Interest.......................................... 51
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SECTION 5 FEES............................................................. 52
5.1 Working Capital Revolving Loan Non-Use Fee....................... 52
5.2 Reducing Revolver Loan Non-Use Fee............................... 52
5.3 Additional Fees.................................................. 52
SECTION 6 REDUCTION OR TERMINATION OF COMMITMENTS; REPAYMENTS;
PREPAYMENTS.................................................... 52
6.1 Reduction or Termination of the Commitments................ 53
6.1.1 Scheduled Mandatory Reductions of Reducing
Revolver Loan Commitments................................ 53
6.1.2 Mandatory Reduction from Asset Sale........................ 53
6.1.3 Mandatory Reduction from Debt Securities Sale.............. 53
6.1.4 Mandatory Reduction from Equity Securities Sale............ 53
6.1.5 Voluntary Reduction or Termination......................... 53
6.1.6 All Reduction.............................................. 54
6.2 Repayments................................................. 54
6.3 Prepayments...................................................... 54
6.3.1 Mandatory Prepayments from Asset Sales..................... 54
6.3.2 Mandatory Prepayments from Debt Securities Sale............ 54
6.3.3 Mandatory Prepayments from Equity Securities Sale.......... 55
6.3.4 Mandatory Prepayments Due to Commitment Reductions......... 55
6.3.5 Voluntary Prepayments...................................... 55
6.3.6 All Prepayments............................................ 55
SECTION 7 MAKING AND PRORATION OF PAYMENTS; SETOFF; TAXES.................. 56
7.1 Making of Payments............................................... 56
7.2 Application of Certain Payments.................................. 56
7.3 Due Date Extension............................................... 56
7.4 Setoff........................................................... 56
7.5 Proration of Payments............................................ 57
7.6 Net Payments; Tax Exemptions..................................... 57
SECTION 8 INCREASED COSTS; SPECIAL PROVISIONS FOR EURODOLLAR LOANS......... 58
8.1 Increased Costs.................................................. 58
8.2 Basis for Determining Interest Rate Inadequate or Unfair......... 60
8.3 Changes in Law Rendering Eurodollar Loans Unlawful............... 60
8.4 Funding Losses................................................... 61
8.5 Right of Lenders to Fund through Other Offices................... 61
8.6 Discretion of Lenders as to Manner of Funding.................... 62
8.7 Mitigation of Circumstances; Replacement of Affected Lender...... 62
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8.8 Conclusiveness of Statements; Survival of
Provisions........................................................ 63
SECTION 9 WARRANTIES.......................................................... 63
9.1 Organization, etc................................................. 63
9.2 Authorization; No Conflict........................................ 63
9.3 Validity and Binding Nature....................................... 64
9.4 Financial Information............................................. 64
9.5 No Material Adverse Change........................................ 65
9.6 Litigation........................................................ 65
9.7 Ownership of Properties; Liens.................................... 66
9.8 Subsidiaries; Capitalization...................................... 66
9.9 Pension and Welfare Plans......................................... 66
9.10 Investment Company Act........................................... 67
9.11 Public Utility Holding Company Act............................... 67
9.12 Regulations G, T, U and X........................................ 67
9.13 Taxes............................................................ 67
9.14 Solvency, etc.................................................... 67
9.15 Insurance........................................................ 68
9.16 Contracts; Labor Matters......................................... 68
9.17 Environmental and Safety and Health Matters...................... 68
9.18 Real Property.................................................... 69
9.19 Information...................................................... 69
9.20 Patents, Trademarks, etc......................................... 70
9.21 The Collateral Documents......................................... 70
SECTION 10 COVENANTS.......................................................... 71
10.1 Reports, Certificates and Other Information...................... 71
10.1.1 Annual Report............................................. 71
10.1.2 Quarterly Reports......................................... 71
10.1.3 Monthly Reports........................................... 72
10.1.4 Certificates.............................................. 72
10.1.5 Reports to SEC, Shareholders and Holders of Debt..........
10.1.6 Budget, Etc............................................... 73
10.1.7 Stockholders' Agreements.................................. 73
10.1.8 Notice of Default, Litigation and ERISA Matters
10.1.9 Subsidiaries.............................................. 74
10.1.10 Management Reports....................................... 74
10.1.11 Insurance Information.................................... 74
10.1.12 Capital Stock Ownership.................................. 74
10.1.13 Update on Delayed Subsequent Acquisition Capital
Expenditures............................................. 74
10.1.14 Other Information........................................ 75
10.2 Books, Records and Inspections................................... 75
10.3 Insurance........................................................ 75
10.4 Compliance with Laws; Maintenance of Property; Payment
of Taxes and Liabilities......................................... 76
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10.5 Maintenance of Existence, etc.................................... 76
10.6 Financial Covenants.............................................. 76
10.6.1 Funded Debt to Adjusted EBITDA Ratio...................... 76
10.6.2 Net Worth................................................. 77
10.6.3 Fixed Charge Coverage Ratio............................... 77
10.6.4 Interest Coverage Ratio................................... 77
10.6.5 Bank Debt to Adjusted EBITDA Ratio........................ 79
10.7 Limitations on Debt.............................................. 79
10.8 Liens............................................................ 80
10.9 Capital Expenditures............................................. 81
10.10 Operating Leases................................................ 82
10.11 Dividends, etc.................................................. 83
10.12 Investments..................................................... 84
10.13 Mergers, Consolidations, Sales, Capital Stock Issuances, Etc....
10.14 Guaranty and Collateral Documents............................... 86
10.15 Use of Proceeds................................................. 87
10.16 Transactions with Affiliates.................................... 87
10.17 Employee Benefit Plans.......................................... 87
10.18 Environmental Covenants......................................... 88
10.18.1 Environmental Response Obligation........................ 88
10.18.2 Environmental Liabilities................................ 88
10.18.3 Environmental Notices.................................... 88
10.19 Unconditional Purchase Obligations.............................. 89
10.20 Inconsistent Agreements......................................... 89
10.21 Further Assurances.............................................. 89
10.22 Modification, etc. of Certain Agreements........................ 89
10.23 Negative Pledges; Subsidiary Payments........................... 90
10.24 Fiscal Year..................................................... 90
10.25 Tax Sharing Agreements.......................................... 90
10.26 Conduct of Business............................................. 90
SECTION 11 CONDITIONS OF..................................................... 90
11.1 Amendment Effective Time........................................ 90
11.2 Documentary Conditions.......................................... 90
11.2.1 Notes.................................................... 90
11.2.2 Resolutions.............................................. 90
11.2.3 Consents, etc............................................ 91
11.2.4 Incumbency and Signature Certificates.................... 91
11.2.5 Guaranty................................................. 92
11.2.6 Security Agreement, etc.................................. 92
11.2.7 Pledge Agreements........................................ 92
11.2.8 Real Estate Documentation................................ 92
11.2.9 Landlord's Consents...................................... 93
11.2.10 Opinions of Counsel for Parent, the
Company and the Guarantors.............................. 93
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11.2.11 Insurance................................................. 93
11.2.12 Senior Note Documents..................................... 93
11.2.13 Other..................................................... 94
11.3 Other Conditions to Amendment Effective Time..................... 94
11.3.1 Fees...................................................... 94
11.3.2 No Material Adverse Effect................................ 94
11.3.3 Further Requests.......................................... 94
11.3.4 Satisfactory Legal Form................................... 94
11.4 Amendment Effective Time and All Credit Extensions............... 94
11.4.1 Required Notice........................................... 94
11.4.2 No Default................................................ 95
11.4.3 Representations and Warranties............................
11.4.4 No Litigation, etc........................................ 95
11.4.5 Subsequent Acquisitions and Delayed Subsequent
Acquisition Capital Expenditures..........................
SECTION 12 EVENTS OF DEFAULT AND THEIR EFFECT................................. 96
12.1 Events of Default................................................ 96
12.1.1 Non-Payment of the Loans, etc............................. 96
12.1.2 Default under Other Debt.................................. 96
12.1.3 Other Material Obligations................................ 96
12.1.4 Bankruptcy, Insolvency, etc............................... 96
12.1.5 Non-Compliance with Provisions of This Agreement..........
12.1.6 Warranties................................................ 97
12.1.7 Pension Plans............................................. 97
12.1.8 Judgments................................................. 97
12.1.9 Invalidity of Guaranty, etc............................... 98
12.1.10 Invalidity of Collateral Documents, etc...................
12.1.11 Change in Control......................................... 98
12.1.12 Material Adverse Effect................................... 98
12.2 Effect of Event of Default....................................... 98
SECTION 13 THE AGENT.......................................................... 99
13.1 Appointment and Authorization............................... 99
13.2 Delegation of Duties........................................ 99
13.3 Liability of Agent.......................................... 99
13.4 Reliance by Agent........................................... 100
13.5 Notice of Default........................................... 100
13.6 Credit Decision............................................. 101
13.7 Indemnification............................................. 101
13.8 Agent in Individual Capacity................................ 102
13.9 Successor Agent............................................. 103
13.10 Collateral Matters.......................................... 103
13.11 Issuer...................................................... 104
SECTION 14 GENERAL............................................................ 104
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14.1 Waiver; Amendments............................................... 104
14.2 Confirmations.................................................... 105
14.3 Notices.......................................................... 105
14.4 Computations..................................................... 105
14.5 Regulation U..................................................... 105
14.6 Costs, Expenses and Taxes........................................ 105
14.7 Captions......................................................... 106
14.8 Assignments; Participations...................................... 106
14.8.1 Assignments............................................... 106
14.8.2 Participations............................................ 107
14.9 Governing Law.................................................... 108
14.10 Counterparts.................................................... 108
14.11 Successors and Assigns.......................................... 108
14.12 Indemnification by the Company.................................. 109
14.13 Confidentiality................................................. 109
14.14 Maximum Interest................................................ 110
14.15 Forum Selection and Consent to Jurisdiction..................... 111
14.16 Waiver of Jury Trial............................................ 111
SECTION 15 GUARANTY OF PARENT................................................. 111
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EXHIBITS AND SCHEDULES
EXHIBIT A-1 Form of Working Capital Revolving Note
EXHIBIT A-2 Form of Reducing Revolver Note
EXHIBIT B-1 Form of Compliance Certificate
EXHIBIT B-2 Form of Subsequent Acquisition Certificate
EXHIBIT C Form of Guaranty
EXHIBIT D Form of Security Agreement
EXHIBIT E-1 Form of Company Pledge Agreement
EXHIBIT E-2 Form of Subsidiary Pledge Agreement
EXHIBIT E-3 Form of Parent Pledge Agreement
EXHIBIT F-1 Form of Opinion of Latham & Watkins
EXHIBIT F-2 Form of Opinion of Quarles & Brady
EXHIBIT F-3 Form of Opinion of Page & Addison
EXHIBIT F-4 Form of Opinion of Lionel, Sawyer & Collins
EXHIBIT F-5 Form of Opinion of Young, Goldman & Van Beek
EXHIBIT G Form of Assignment Agreement
EXHIBIT H Form of Landlord's Consent
EXHIBIT I Form of Certificate as to Senior Note Documents
EXHIBIT J-1 Form of Issuance Request
EXHIBIT J-2 Form of Letter of Credit Amendment Request
EXHIBIT K-1 Sample Financial Schedule - Corporate Expenditures
EXHIBIT K-2 Sample Golf Course Property Financial Statement (The Club at
Trophy Club) - Cost of Goods Sold and Operating Expenses
EXHIBIT L Form of Mortgage Amendment
EXHIBIT M Form of Hazardous Materials Indemnity
SCHEDULE 1 Commitments and Percentages
SCHEDULE 1.2 Existing Commitments and Loans
SCHEDULE 2.1 Certain Specified Capital Expenditures
SCHEDULE 9.6 Litigation
SCHEDULE 9.8 Subsidiaries; Capitalization
SCHEDULE 9.9 Welfare Plans
SCHEDULE 9.15 Insurance
SCHEDULE 9.16 Contracts; Labor Matters
SCHEDULE 9.17 Environmental and Safety and Health Matters
SCHEDULE 9.18 Properties
SCHEDULE 10.7 Debt
SCHEDULE 10.8 Liens
SCHEDULE 10.12 Investments
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SECOND AMENDED AND RESTATED
---------------------------
CREDIT AGREEMENT
----------------
This SECOND AMENDED AND RESTATED CREDIT AGREEMENT, dated as of June 4, 1996
(as amended or otherwise modified from time to time, this "Agreement"), is
entered into among COBBLESTONE GOLF GROUP, INC., a Delaware corporation (the
"Company"), COBBLESTONE HOLDINGS, INC., a Delaware corporation ("Parent"), the
undersigned financial institutions (together with their respective successors
and assigns, collectively the "Lenders" and individually each a "Lender"), and
BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION, a national banking
association having its principal office at 1455 Market Street, Agency Management
Services #5596, San Francisco, California 94103 (in its individual capacity,
"BofA"), as agent for the Lenders.
WITNESSETH:
WHEREAS certain parties to this agreement entered into a Credit Agreement
dated as of January 31, 1994 (as amended, the "Original Credit Agreement");
WHEREAS the Original Credit Agreement was amended and restated in its
entirety pursuant to the Amended and Restated Credit Agreement dated as of March
30, 1995 (as amended and in effect on the date hereof, the "Existing Credit
Agreement");
WHEREAS the parties hereto desire to amend and restate the Existing Credit
Agreement as this Agreement;
NOW THEREFORE, in consideration of the premises and the mutual agreements
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
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SECTION 1.1 DEFINITIONS. When used herein, the following terms shall have
the following meaning (such definitions to be applicable to both the singular
and plural forms of such terms):
Additional Bank Warrants means the warrants, issued by Parent to certain
Lenders in connection with the closing of the Existing Credit Agreement, to
purchase an aggregate of (a) 3,633 shares of Parent's common stock, $0.01 par
value per share, and (b) 13,279 shares of Parent's Series A Preferred Stock,
$0.01 par value per share.
Adjusted EBITDA means, at the last date of any Fiscal Quarter in each
Fiscal Year, an amount equal to:
(a) for the Pre-Existing Properties, the actual aggregate Golf Course
Property EBITDA attributable to the Pre-Existing Properties for the
most recent complete consecutive four Fiscal Quarters as of such date;
plus
(b) for any Golf Course Property acquired in a Subsequent Acquisition,
(i) if such date is the end-date of the first incomplete Fiscal
Quarter following such Subsequent Acquisition, projected Golf
Course Property EBITDA attributable to such Golf Course Property
for the first four complete consecutive Fiscal Quarters to occur
following such Subsequent Acquisition; or
(ii) if such date is the end-date of the first complete Fiscal Quarter
ending following such Subsequent Acquisition, the product of
(A) the quotient of (x) actual Golf Course Property EBITDA
attributable to such Golf Course Property for such Fiscal
Quarter, divided by (y) projected Golf Course Property
EBITDA attributable to such Golf Course Property for such
Fiscal Quarter (provided that such quotient shall not be
greater than 1.5), times
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(B) projected Golf Course Property EBITDA attributable to such
Golf Course Property for the first four complete consecutive
Fiscal Quarters to occur following such Subsequent
Acquisition; or
(iii) if such date is the end-date of the second complete
consecutive Fiscal Quarter ending following such Subsequent
Acquisition, the product of
(A) the quotient of (x) actual Golf Course Property EBITDA
attributable to such Golf Course Property for the first two
complete consecutive Fiscal Quarters following such
Subsequent Acquisition, divided by (y) projected Golf Course
Property EBITDA attributable to such Golf Course Property
for such two complete consecutive Fiscal Quarters (provided
that such quotient shall not be greater than 1.5), times
(B) projected Golf Course Property EBITDA attributable to such
Golf Course Property for the first four complete consecutive
Fiscal Quarters to occur following such Subsequent
Acquisition; or
(iv) if such date is the end-date of the third complete consecutive
Fiscal Quarter ending following such Subsequent Acquisition, the
product of
(A) the quotient of (x) actual Golf Course Property EBITDA
attributable to such Golf Course Property for the first
three complete consecutive Fiscal Quarters following such
Subsequent Acquisition, divided by (y) projected Golf Course
Property EBITDA attributable to such Golf Course Property
for such three complete consecutive Fiscal Quarters
(provided that such quotient shall not be greater than 1.5),
times
(B) projected Golf Course Property EBITDA attributable to such
Golf Course Property for the first four complete consecutive
Fiscal
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Quarters to occur following such Subsequent
Acquisition; or
(v) if such date is the end-date of the fourth or any subsequent
complete consecutive Fiscal Quarter ending following such
Subsequent Acquisition, the actual Golf Course Property EBITDA
attributable to such Golf Course Property for the most recent
four complete consecutive Fiscal Quarters as of such date;
minus
(c) the actual Corporate Expenditures for the most recent four complete
consecutive Fiscal Quarters as of such date.
Adjusted Working Capital means the excess of:
(a) (i) the consolidated current assets of the Company and its
Subsidiaries, less (ii) the amount of cash and Cash Equivalent Investments
of the Company and its Subsidiaries included in such consolidated current
assets;
over
(b) (i) consolidated current liabilities of the Company and its
Subsidiaries, less (ii) the amount of short-term Debt (including current
maturities of long-term Debt) of the Company and its Subsidiaries included
in such consolidated current liabilities.
Advance - see Section 2.2.
Affected Lender means any Lender that has given notice to the Company
(which has not been rescinded) of (i) any obligation by the Company to pay any
amount pursuant to Section 7.6 or 8.1 or (ii) the occurrence of any
circumstances of the nature described in Section 8.2 or 8.3.
Affected Loan - see Section 8.3.
Affiliate of any Person means any other Person which, directly or
indirectly, controls or is controlled by or is under common control with such
Person.
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Agent means BofA in its capacity as agent for the Lenders hereunder and any
successor thereto in such capacity.
Agent-Related Persons means BofA and any successor agent arising under
Section 13.9, together with their respective Affiliates (including, in the case
of BofA, the Arranger), and the officers, directors, employees, agents and
attorneys-in-fact of such Persons and Affiliates.
Agreement - see the Preamble.
Alternate Reference Rate means, on any day, the greater of (a) the Federal
Funds Rate plus 1/2 of 1% and (b) the rate of interest in effect for such day as
publicly announced from time to time by BofA in San Francisco, California, as
its "reference rate." (The "reference rate" is a rate set by BofA based upon
various factors, including BofA's costs and desired return, general economic
conditions and other factors, and is used as a reference point for pricing some
loans, which may be priced at, above, or below such announced rate.) Any change
in the reference rate announced by BofA shall take effect at the opening of
business on the day specified in the public announcement of such change.
Amendment Effective Time means the time when the conditions precedent for
the effectiveness of this Agreement specified in Section 11 shall have been met
or waived.
Arranger means BA Securities, Inc., a Delaware corporation.
Asset Sale means any sale, transfer or other disposition (including by way
of merger or consolidation) by Parent, the Company or any Subsidiary of any
asset (including any capital stock of the Company or any Subsidiary) outside the
ordinary course of business to a Person other than the Company or a Subsidiary,
and shall also include any condemnation, expropriation, loss or casualty (to the
extent that an Event of Default or Unmatured Event of Default exists as of the
date of such casualty or the receipt of insurance proceeds related thereto) of
any such asset; provided that any sale of a Golf Course Property or a golf
course or a Person owning a Golf Course Property or a golf course by Parent, the
Company or any Subsidiary to a Person other than the Company or any Subsidiary
shall be an Asset Sale.
Assignee - see Section 14.8.1.
5
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Assignment Agreement - see Section 14.8.1.
BAI means Bank of America Illinois, an Illinois banking corporation.
Bank Debt means the outstanding principal amount of all Loans under the
Credit Agreement.
Bank Debt to Adjusted EBITDA Ratio means, as of any measurement date, the
ratio of
(i) the sum of (A) Bank Debt as of such date plus (B) the aggregate
amount of projected Delayed Subsequent Acquisition Capital Expenditures as
of such date described in Sections 2.1.2(a)(i)(B) and (C), to
(ii) the sum of (A) Adjusted EBITDA as of such date less (B) any net
increase in Membership Notes Receivable (both current and noncurrent)
during the period over which such Adjusted EBITDA was measured above (1)
for the period between the Amendment Effective Date and June 29, 1997,
$5,400,000 and (2) for all Fiscal Quarter end-dates on or after June 30,
1997, the Fiscal Quarter-end balance four Fiscal Quarters prior thereto
plus (C) any net decrease in Membership Notes Receivable (both current and
non-current) during the period over which such Adjusted EBITDA was measured
below (1) for the period between the Amendment Effective Date and June 29,
1997, the June 30, 1996 Fiscal Quarter-end balance and (2) for all Fiscal
Quarter end-dates on or after June 30, 1997, the Fiscal Quarter-end balance
four Fiscal Quarters prior thereto.
Beneficial Owner is used as defined in Rule 13d-3 promulgated by the SEC
under the Securities Exchange Act of 1934, as amended; and "Beneficially Owned"
shall have a correlative meaning.
BofA - see the Preamble.
Brentwood means Brentwood Golf Partners, L.P., a Delaware limited
partnership and/or its Affiliates.
Budget - see Section 10.1.6.
Business Day means any day on which commercial banks are open for
commercial banking business in San Francisco, Chicago and New
6
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York and, in the case of a Business Day which relates to a Eurodollar Loan, the
Cayman Islands.
Capital Expenditures means all expenditures which, in accordance with
generally accepted accounting principles, would be required to be capitalized
and shown on the consolidated balance sheet of the Company, but excluding any
such expenditures made pursuant to Capital Leases or purchase money financing
permitted hereunder.
Capital Lease means, with respect to any Person, any lease of (or other
agreement conveying the right to use) any real or personal property by such
Person which, in conformity with generally accepted accounting principles, is
accounted for as a capital lease on the balance sheet of such Person.
Cash Equivalent Investment means, at any time:
(a) any evidence of Debt, maturing not more than one year after such
time, issued or guaranteed by the United States Government;
(b) commercial paper, maturing not more than one year from the date
of issue, which is issued by
(i) a corporation (except an Affiliate of the Company) organized
under the laws of any State of the United States of America or of the
District of Columbia and rated at least A-1 by Standard & Poor's
Corporation or P-1 by Moody's Investors Service, Inc., at the time of
investment, or
(ii) the Agent or any Lender (or its holding company);
(c) any certificate of deposit or bankers' acceptance or eurodollar
time deposit, maturing not more than one year after the date of issue,
which is issued by either
(i) a financial institution that is a member of the Federal
Reserve System and has a combined capital and surplus and undivided
profits of not less than $500,000,000 at the time of investment, or
(ii) the Agent or any Lender; or
7
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(d) any repurchase agreement with a term of one year or less which
(i) is entered into with
(A) the Agent or any Lender, or
(B) any other commercial banking institution of the stature
referred to in clause (c)(i),
(ii) is secured by a fully perfected Lien in any obligation of
the type described in any of clauses (a) through (c), and
(iii) has a market value at the time such repurchase agreement
is entered into of not less than 100% of the repurchase obligation of
the Agent or such Lender (or other commercial banking institution)
thereunder;
(e) investments in money market funds that invest primarily in Cash
Equivalent Investments described in clauses (a) through (d); or
(f) investments in short-term asset management accounts offered by
the Agent or any Lender for the purpose of investing in loans to any
corporation (other than an Affiliate of the Company) organized under the
laws of any state of the United States or of the District of Columbia and
rated at least A-1 by Standard & Poor's Corporation or P-1 by Moody's
Investors Service, Inc.
Cash Flow Subsequent Acquisition Capital Expenditures means Capital
Expenditures that cease to be Delayed Subsequent Acquisition Capital
Expenditures in accordance with the definition thereof because such Capital
Expenditures are not funded by the Company or any Subsidiary from Reducing
Revolver Loans.
8
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Change In Control means the occurrence of any of the following:
(a) the failure by Brentwood and James A. Husband to be the Beneficial
Owner of each class of the issued and outstanding capital stock of Parent
representing more than 50%, on a fully diluted basis, of the voting power
in elections for directors of Parent, without regard to the occurrence of
any contingency;
(b) a majority of the Board of Directors of Parent ceases to be
comprised of Continuing Directors;
(c) the failure of Parent to be the Beneficial Owner of all of the
issued and outstanding capital stock of the Company, and of all options,
warrants or rights to subscribe for such capital stock; or
(d) any "change in control" or similar event under the Senior Note
Documents.
Collateral Document means the Security Agreement, each Pledge Agreement,
each Mortgage, each Mortgage Amendment, each Hazardous Materials Indemnity, and
each other instrument or document executed and delivered by Parent, the Company
or any Subsidiary pursuant to or in connection with any thereof in accordance
with the terms of this Agreement.
Commercial Letter of Credit means any Letter of Credit which is drawable
upon presentation of a sight draft and other documents evidencing the sale or
shipment of goods purchased by the Company or any Subsidiary in the ordinary
course of business.
Commitment means, as to any Lender, such Lender's Working Capital Revolving
Commitment and/or Reducing Revolver Loan Commitment, as applicable.
Common Stock means the common stock of Parent, $0.01 par value per share.
Company - see the Preamble.
Company Pledge Agreement - see Section 11.2.7(a).
9
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Consolidated Net Income means, with respect to the Company and its
Subsidiaries for any period, the consolidated net income (or loss) of the
Company and its Subsidiaries for such period.
Contingent Liability means any agreement, undertaking or arrangement by
which any Person guarantees, endorses or otherwise becomes or is contingently
liable upon (by direct or indirect agreement, contingent or otherwise, to
provide funds for payment, to supply funds to or otherwise to invest in a
debtor, or otherwise to assure a creditor against loss) any indebtedness,
obligation or other liability of any other Person (other than by endorsements of
instruments in the course of collection), or guarantees the payment of dividends
or other distributions upon the shares of any other Person. The amount of any
Person's obligation under any Contingent Liability shall (subject to any
limitation set forth therein) be deemed to be the outstanding principal amount
of the debt, obligation or other liability guaranteed thereby.
Continuing Director means a director who either (a) was a member of the
Board of Directors of Parent prior to the Amendment Effective Time and
continuously thereafter or (b) after the Amendment Effective Time became a
director of Parent and whose election or nomination for election subsequent to
such date was approved by (i) a vote of the majority of the Continuing Directors
then on the Board of Directors of Parent or (ii) Brentwood.
Corporate Expenditures means corporate overhead expenditures of Parent and
the Company, in accordance with generally accepted accounting principles, which
are not expenditures of any Subsidiary or related to any individual Golf Course
Property, and which expenditures are calculated in a manner consistent with (and
include, but are not limited to) the lines "Salaries & Wages," "Outside
Services," "Payroll Costs," "Employee Benefits," "Rent and Parking," "Travel &
Entertainment," "Telephone," "Legal and Accounting Fees," "Brentwood Fees,"
"Other Office Overhead," and "Corporate Bonuses" set forth in the financial
schedule set forth at Exhibit K-1.
Cost of Goods Sold means any expenditures classified as cost of goods sold
in accordance with generally accepted accounting principles, which are
expenditures of any Subsidiary or related to any individual Golf Course
Property, and which expenditures are calculated in a manner consistent with (and
include, but are not limited to) the lines "Cost of Goods Golf Retail," "Cost of
Goods F&B" and "Cost of
10
<PAGE>
Goods Tennis" set forth in the financial statements for The Club at Trophy Club
Golf Course Property set forth at Exhibit K-2.
Credit Extension means any Loan, Letter of Credit or Reimbursement
Obligation.
Debt of any Person means, without duplication, (a) all indebtedness of such
Person for borrowed money, whether or not evidenced by bonds, debentures, notes
or similar instruments, (b) all obligations of such Person as lessee under
Capital Leases which have been recorded as liabilities on a balance sheet of
such Person, (c) all obligations of such Person to pay the deferred purchase
price of property or services (other than current accounts payable in the
ordinary course of business), (d) all indebtedness secured by a Lien on the
property of such Person, whether or not such indebtedness shall have been
assumed by such Person (it being understood that if such Person has not assumed
or otherwise become personally liable for any such indebtedness, the amount of
the Debt of such Person in connection therewith shall be limited to the lesser
of the face amount of such indebtedness or the fair market value of all property
of such Person securing such indebtedness), (e) all obligations, contingent or
otherwise, with respect to the face amount of all letters of credit (whether or
not drawn) and banker's acceptances issued for the account of such Person, (f)
liabilities of such Person in respect of Hedging Agreements, and (g) all
Contingent Liabilities of such Person.
Debt Securities Sale means any public or private sale or issuance by
Parent, the Company or any Subsidiary of its Debt securities, except issuances
of Debt permitted under Section 10.7.
Default Rate means the rate of interest at any time applicable to any Loan
or Reimbursement Obligation, as applicable, plus 2% per annum.
Delayed Subsequent Acquisition Capital Expenditures means any Capital
Expenditures made in connection with any Subsequent Acquisition, which had been
projected to be and which shall be made within the 18 months following such
Subsequent Acquisition (except to the extent otherwise permitted hereunder) in
accordance with the projections for such Subsequent Acquisition delivered
pursuant to Section 2.5(e)(i) and which are financed with the proceeds of
Reducing Revolver Loans borrowed in accordance with Section 2.6(a) (or term
loans borrowed in accordance with Section
11
<PAGE>
2.6(a) of the Original Credit Agreement or the Existing Credit Agreement);
provided that (a) upon certification by the Company to the Agent and the
Lenders, at the time of delivery of any financial statement pursuant to Section
10.1.1 or 10.1.2 or of any Subsequent Acquisition Certificate, that it does not
intend to make certain identified Delayed Subsequent Acquisition Capital
Expenditures and that it requests that such Delayed Subsequent Acquisition
Capital Expenditures cease to be treated as such hereunder, such Delayed
Subsequent Acquisition Capital Expenditures shall cease to be treated as Delayed
Subsequent Acquisition Capital Expenditures hereunder for all purposes and (b)
upon certification by the Company to the Agent and the Lenders, at the time of
delivery of any financial statement pursuant to Section 10.1.1 or 10.1.2 or of
any Subsequent Acquisition Certificate, that it does not intend to use the
proceeds of Reducing Revolver Loans to fund certain identified Delayed
Subsequent Acquisition Capital Expenditures because such Delayed Subsequent
Acquisition Capital Expenditures will not be funded from Loans, such Delayed
Subsequent Acquisition Capital Expenditures shall be treated hereunder as Cash
Flow Subsequent Acquisition Capital Expenditures for all purposes and shall
cease to be treated as Delayed Subsequent Acquisition Capital Expenditures
hereunder for all purposes.
Designated Non-Recurring Capital Expenditures - see Section 10.9(d).
Disbursement - see Section 2.10.6.
Disbursement Date - see Section 2.10.6.
Disqualified Capital Stock means (a) except as set forth in clause (b)
below, with respect to any Person, capital stock of such Person that, by its
terms or by the terms of any security into which it is convertible, exercisable
or exchangeable, is, or upon the happening of an event or the passage of time
would be, required to be redeemed or repurchased (including at the option of the
holder thereof) by such Person or any of its Subsidiaries, in whole or in part,
on or prior to the Reducing Revolver Termination Date or the Working Capital
Revolving Termination Date and (b) with respect to any Subsidiary of such Person
(including with respect to any Subsidiary of Parent), any capital stock other
than any common stock with no special rights and no preferences, privileges, or
redemption or repayment provisions.
12
<PAGE>
Dollar and the sign "$" mean lawful money of the United States of America.
EBITDA means, for any period of four complete consecutive Fiscal Quarters,
the sum, without duplication, of
(a) Consolidated Net Income for such period,
plus
(b) Interest Expense for such period,
plus
(c) all depreciation and amortization of assets (including
goodwill and other intangible assets) of the Company and its
Subsidiaries deducted in determining Consolidated Net Income for such
period,
plus
(d) all federal, state, local and foreign income taxes of the
Company and its Subsidiaries deducted in determining Consolidated Net
Income for such period,
plus (minus)
(e) other non-cash and non-operating charges deducted in
determining Consolidated Net Income for such period (or gains added in
determining Consolidated Net Income for such period).
Environmental Laws means the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response, Compensation and Liability Act, any so-
called "Superfund" or "Superlien" law, the Toxic Substances Control Act, and any
other applicable federal, state or local statute, law, ordinance, code, rule,
regulation, order, decree or other requirement regulating, relating to, or
imposing liability or standards of conduct (including, but not limited to,
permit requirements and emission or effluent restrictions) concerning any
Hazardous Materials, as now or at any time hereafter in effect.
Equity Documents means the Stockholders' Agreement, the Original Bank
Warrants and the Additional Bank Warrants.
13
<PAGE>
Equity Securities Sale means any public or private sale or transfer by
Parent, the Company or any Subsidiary of its capital stock, except (x) any sale
or transfer of capital stock of Parent (i) to the Persons listed on Schedule 9.8
hereto in the amounts set forth on such Schedule 9.8, and (ii) to members of
management and directors of Parent or any of its Subsidiaries or to any Person
selling any Golf Course Property or interest therein in connection with a
Subsequent Acquisition in an aggregate amount for all sales or transfers under
this clause (x)(ii) not to exceed 15% of the total outstanding shares of any
class or series of capital stock of Parent as of the Amendment Effective Time
(but giving effect to the issuances described in clause (i) above), (y) capital
contributions to the Company or its Subsidiaries and (z) the issuance of Common
Stock pursuant to the Senior Note Documents.
ERISA means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to sections of ERISA also refer to any successor sections.
Escondido Subsidiary means Escondido Consulting, Inc., a California
corporation, the principal asset of which is the lease of The Vineyard at
Escondido Golf Course Property located at 925 San Pasqual Road, Escondido,
California.
Escondido Subsidiary Loan Agreement means the two promissory notes dated as
of December 1, 1993 made by the Escondido Subsidiary payable to the City of
Escondido in the original aggregate principal amount of $6,274,640.
Eurocurrency Reserve Percentage means, with respect to any Eurodollar Loan
for any Interest Period, a percentage (expressed as a decimal) equal to the
daily average during such Interest Period of the percentage in effect on each
day of such Interest Period, as prescribed by the Board of Governors of the
Federal Reserve System (or any successor), for determining the aggregate maximum
reserve requirements applicable to "Eurocurrency Liabilities" pursuant to
Regulation D of such Board of Governors or any other then applicable regulation
of such Board of Governors which prescribes reserve requirements applicable to
"Eurocurrency Liabilities" as presently defined in Regulation D.
14
<PAGE>
Eurodollar Loan means any Loan which bears interest at a rate determined by
reference to the Eurodollar Rate (Reserve Adjusted).
Eurodollar Office means with respect to any Lender the office or offices of
such Lender which shall be making or maintaining the Eurodollar Loans of such
Lender hereunder or such other office or offices through which such Lender
determines its Eurodollar Rate. A Eurodollar Office of any Lender may be, at the
option of such Lender, either a domestic or foreign office.
Eurodollar Rate means, with respect to any Eurodollar Loan for any Interest
Period, the rate per annum at which Dollar deposits in immediately available
funds are offered to the Grand Cayman Branch of BofA two Business Days prior to
the beginning of such Interest Period by major banks in the interbank eurodollar
market as at or about 11:00 a.m., New York time, for delivery on the first day
of such Interest Period, for the number of days comprised therein and in an
amount equal or comparable to the amount of the Eurodollar Loan of BAI for such
Interest Period.
Eurodollar Rate (Reserve Adjusted) means, with respect to any Eurodollar
Loan for any Interest Period, a rate per annum (rounded upwards, if necessary,
to the nearest 1/16 of 1%) determined pursuant to the following formula:
Eurodollar Rate = Eurodollar Rate
(Reserve Adjusted) 1-Eurocurrency
Reserve Percentage
Event of Default means any of the events described in Section 12.1.
Excluded Taxes - see the definition of "Taxes."
Exemption Agreement - see Section 7.6(b).
Exemption Representation - see Section 7.6(c).
Existing Credit Agreement is defined in the recitals.
Existing Lender means a "Lender" under and as defined in the Existing
Credit Agreement immediately prior to the Amendment Effective Time.
Existing Loans means Existing Revolving Loans and Existing Term Loans.
15
<PAGE>
Existing Revolving Commitment means a "Revolving Commitment" under and as
defined in the Existing Credit Agreement immediately prior to the Amendment
Effective Time.
Existing Revolving Loan means a "Revolving Loan" under and as defined in
the Existing Credit Agreement immediately prior to the Amendment Effective Time.
Existing Term Commitment means a "Term Loan Commitment" under and as
defined in the Existing Credit Agreement immediately prior to the Amendment
Effective Time.
Existing Term Loan means a "Term Loan" under and as defined in the Existing
Credit Agreement immediately prior to the Amendment Effective Time.
Federal Funds Rate means, for any day, the rate set forth in the weekly
statistical release designated as H.15(519), or any successor publication,
published by the Federal Reserve Bank of New York (including any such successor
publication, "H.15(519)") on the preceding Business Day opposite the caption
"Federal Funds (Effective)"; or, if for any relevant day such rate is not so
published for any such preceding Business Day, the rate for such day will be the
arithmetic mean as determined by the Agent of the rates for the last transaction
in overnight Federal funds arranged prior to 9:00 a.m. (New York City time) on
that day by each of three leading brokers of Federal funds transactions in New
York City selected by the Agent.
Financial Standby Letter of Credit means any Standby Letter of Credit which
any Lender is required under applicable law (including under 12 CFR Part 3,
Appendix A, Section 3, clause (b)) to classify as a financial letter of credit
with respect to its participation therein pursuant to this Agreement.
FIRREA means the Financial Institutions Reform, Recovery and Enforcement
Act of 1989, as amended and any successor statute of similar import, together
with the regulations thereunder, in each case as in effect from time to time.
Fiscal Quarter means a fiscal quarter of a Fiscal Year.
Fiscal Year means the fiscal year of Parent and the Company and its
Subsidiaries, which period shall be the 12-month period ending on September 30
of each year. References to a Fiscal Year
16
<PAGE>
with a number corresponding to any calendar year (e.g., "Fiscal Year 1993")
refer to the Fiscal Year ending on September 30 of such calendar year.
Fixed Charge Coverage Ratio means, for any period of four complete
consecutive Fiscal Quarters, the ratio of
(a) the remainder of, without duplication,
(i) EBITDA for such period,
plus
(ii) at any measurement date, the unused principal amount of the
Working Capital Revolving Commitments,
plus
(iii) at any measurement date, the amount of cash and Cash
Equivalent Investments shown on the Company's consolidated balance
sheet at such date,
minus
(iv) all federal, state, local and foreign income taxes paid
with respect to income of the Company and Subsidiaries during such
period or accrued and payable for such period,
minus
(v) Capital Expenditures (other than Capital Expenditures funded
by Reducing Revolver Loans and other than Designated Non-Recurring
Capital Expenditures) during such period (exclusive of such Capital
Expenditures that were funded from the first $1,000,000 in Net Cash
Proceeds from all Asset Sales received in each Fiscal Year),
to
(b) the sum, without duplication, of
(i) repayments of principal of Reducing Revolver Loans
pursuant to Section 6.3.4 made during
17
<PAGE>
such period (whether such repayments were made on the last day of the
relevant Fiscal Quarter as a result of the commitment reduction
scheduled for such day in accordance with Section 6.1.1 or were made
at any time during such Fiscal Quarter), regularly scheduled principal
payments with respect to any other long-term Debt of the Company and
its Subsidiaries made during such period, and the portion of any
payments with respect to Capital Leases allocable to principal made
during such period,
plus
(ii) Interest Expense for such period.
Floating Rate Loan means any Loan which bears interest at or by reference
to the Alternate Reference Rate.
Funded Debt means the remainder of (x) the outstanding principal amount of
all Debt of the Company and its Subsidiaries, excluding (i) all Contingent
Liabilities and any contingent obligations in respect of undrawn letters of
credit (except to the extent constituting Contingent Liabilities in respect of
any Funded Debt of a Person other than the Company or any Subsidiary), (ii)
liabilities in respect of Hedging Agreements, (iii) Debt of the Company to
Subsidiaries and Debt of Subsidiaries to the Company or to other Subsidiaries
and (iv) Debt in respect of Capital Leases and purchase money financing
permitted hereunder minus (y) cash and Cash Equivalent Investments held by the
Company and its Subsidiaries in excess of $1,000,000.
Funded Debt to Adjusted EBITDA Ratio means, as of any measurement date, the
ratio of
(i) the sum of (A) Funded Debt as of such date plus (B) the aggregate
amount of projected Delayed Subsequent Acquisition Capital Expenditures as
of such date described in Sections 2.1.2(a)(i)(B) and (C), to
(ii) the sum of (A) Adjusted EBITDA as of such date less (B) any net
increase in Membership Notes Receivable (both current and non-current)
during the period over which such Adjusted EBITDA was measured above (1)
for the period between the Amendment Effective Date and June 29, 1997,
$5,400,000 and (2) for all Fiscal Quarter end-dates on or after June 30,
1997, the Fiscal Quarter-end balance four
18
<PAGE>
Fiscal Quarters prior thereto plus (C) any net decrease in Membership Notes
Receivable (both current and non-current) during the period over which such
Adjusted EBITDA was measured below (1) for the period between the Amendment
Effective Date and June 29, 1997, the June 30, 1996 Fiscal Quarter-end
balance and (2) for all Fiscal Quarters end-dates on or after June 30,
1997, the Fiscal Quarter-end balance four Fiscal Quarters prior thereto.
Golf Course Property means any parcel or parcels of real property owned or
leased by or licensed to the Company or a Subsidiary that includes, as the
principal component of such parcel or parcels, a golf course or golf facility
(including driving ranges, "pitch and putt" and "par three" courses).
Golf Course Property EBITDA means, for any period and for any Golf Course
Property, the remainder of
(a) net revenues attributable to such Golf Course Property,
minus
(b) Cost of Goods Sold attributable to such Golf Course Property,
minus
(c) Operating Expenses attributable to such Golf Course Property,
plus
(d) depreciation and amortization attributable to such Golf Course
Property to the extent deducted in order to arrive at such Cost of
Goods Sold or Operating Expenses in the calculation thereof;
provided, that (x) for any such calculation made with respect to any period
prior to the acquisition of such Golf Course Property, such calculation shall be
certified in good faith by a Responsible Officer as being true and accurate in
the Company's best judgment based on all available historical information for
such period, and (y) for any such calculation made with respect to any period
after such acquisition, such calculation shall be certified as being
19
<PAGE>
made for such period in accordance with generally accepted accounting principles
consistently applied.
Guarantor means (a) as of the Amendment Effective Time, Parent and each
Subsidiary listed on Schedule 9.8, and (b) thereafter, the Persons referred to
in clause (a) and each other Person which from time to time executes and
delivers a counterpart of the Guaranty.
Guaranty - see Section 11.2.5.
Hazardous Materials means any toxic substance, hazardous substance,
hazardous material, hazardous chemical or hazardous waste defined or qualifying
as such in (or for the purposes of) any Environmental Law, or any pollutant or
contaminant, and shall include, but not be limited to, petroleum, including
crude oil or any fraction thereof which is liquid at standard conditions of
temperature or pressure (60 degrees fahrenheit and 14.7 pounds per square inch
absolute), any radioactive material, including, but not limited to, any source,
special nuclear or by-product material as defined at 42 U.S.C. section 2011 et
seq., as amended from time to time, polychlorinated biphenyls and asbestos in
any form or condition.
Hazardous Materials Indemnity means any hazardous materials undertaking and
indemnity entered into in connection with any Mortgage, substantially in the
form of Exhibit M.
Hedging Agreement means any interest rate, currency or commodity swap
agreement, interest rate cap agreement, interest rate collar agreement, or other
agreement or arrangement designed to protect a Person against fluctuations in
interest rates, currency exchange rates or commodity prices.
Highest Lawful Rate means, on any date, the maximum non-usurious interest
rate that may, under applicable federal and applicable state law, be contracted
for, charged or received under such laws.
Incurrence Test - see Section 2.5(a).
Indemnified Liabilities - see Section 14.12(a).
Interest Coverage Ratio means, as of the last day of any period of four
complete consecutive Fiscal Quarters, the ratio of
20
<PAGE>
(a) EBITDA for such period ending on such day to (b) Interest Expense for such
period.
Interest Expense means for any period the excess of (a) the consolidated
interest expense of the Company and its Subsidiaries for such period (including,
without limitation, all imputed interest on Capital Leases, all imputed interest
on Hedging Agreements, all fees under Sections 5.1, 5.2 and 5.3, and all
liquidated damages payable under the Senior Notes, but excluding (x) payments
and amortization of commissions and fees paid as a condition to (i) the
Amendment Effective Time or in connection with the closing of or amendments to
the Original Credit Agreement or the Existing Credit Agreement or (ii) the
Senior Notes and (y) all imputed interest over (b) the consolidated interest
income of the Company and its Subsidiaries for such period (excluding all
imputed interest income on the Membership Notes).
Interest Period - see Section 4.3.
Investment means, with respect to any Person:
(a) any loan or advance made by such Person to any other Person; and
(b) any ownership or similar interest held by such Person in any other
Person.
The amount of any Investment shall be the original principal or capital
amount thereof less all returns of principal or equity thereon (and without
adjustment by reason of the financial condition of such other Person) and shall,
if made by the transfer or exchange of property other than cash, be deemed to
have been made in an original principal or capital amount equal to the fair
market value of such property.
Issuance Request - see Section 2.10.2.
Issuer means BAI in its capacity as issuer of any Letter of Credit.
L/C Fee Rate means the rate per annum set forth in the table below for the
applicable type of Letter of Credit opposite the applicable Funded Debt to
Adjusted EBITDA Ratio:
21
<PAGE>
<TABLE>
<CAPTION>
Financial Non-Financial
Standby Standby Commercial
Funded Debt to Adjusted Letter Letter Letter
EBITDA Ratio of Credit of Credit of Credit
- ----------------------------- -------------- ----------- ----------
<S> <C> <C> <C>
Equal to or greater 2.75% 1.50% 1.00%
than 5.75 to 1
Equal to or greater 2.50% 1.25% 1.00%
than 5.0 to 1 but
less than 5.75 to 1
Equal to or greater 2.25% 1.25% 1.00%
than 3.50 to 1 but
less than 5.0 to 1
Less than 3.50 2.00% 1.00% 1.00%.
</TABLE>
The L/C Fee Rate shall be adjusted, to the extent applicable, (x) 45 days
(or, in the case of the last Fiscal Quarter of any Fiscal Year, 90 days) after
the end of each Fiscal Quarter based on the Funded Debt to Adjusted EBITDA Ratio
as of the last day of such Fiscal Quarter and (y) on the date of the borrowing
of the Reducing Revolver Loans applied to fund each Subsequent Acquisition
(after giving effect to such borrowing); it being understood that if the Company
fails to deliver the financial statements required by Section 10.1.1 or 10.1.2,
as applicable, by the 45th day (or, if applicable, the 90th day) after any
Fiscal Quarter, the L/C Fee Rate shall be 2.75% for Financial Standby Letters of
Credit until such financial statements are delivered.
Landlord's Consent means a landlord's consent substantially in the form of
Exhibit H, in each case with such changes as may be reasonably agreed to by the
Agent.
Lender - see the Preamble.
Lender Party - see Section 14.12(a).
Lending Office - see Section 8.1.
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<PAGE>
Letter of Credit means any Financial Standby Letter of Credit, Non-
Financial Standby Letter of Credit and/or Commercial Letter of Credit, as the
context may require or allow.
Letter of Credit Amendment Request - see Section 2.10.3.
Liabilities - see Section 15.
Lien means, when used with respect to any Person, any interest of any other
Person in any real or personal property, asset or other right owned or being
purchased or acquired by such Person which secures payment or performance of any
obligation and shall include any mortgage, lien, encumbrance, charge or other
security interest of any kind, whether arising by contract, as a matter of law,
by judicial process or otherwise.
Loan Documents means this Agreement, the Notes, the Letters of Credit, the
Guaranty, any Hedging Agreement entered into with any Lender or any Affiliate
thereof, the Collateral Documents, each borrowing or continuation notice, each
Issuance Request, each Letter of Credit Amendment Request, and each other
instrument or document executed and delivered by Parent, the Company or any
Subsidiary to the Agent or any Lender pursuant to or in connection with any
thereof in accordance with the terms of this Agreement, but excluding the Equity
Documents and the Senior Note Documents.
Loans means Working Capital Revolving Loans and Reducing Revolver Loans.
Maintenance Capital Expenditures means all Capital Expenditures other than
Delayed Subsequent Acquisition Capital Expenditures, Cash Flow Subsequent
Acquisition Capital Expenditures and Designated Non-Recurring Capital
Expenditures.
Margin means the rate per annum set forth in the table below for the
applicable type of Loan opposite the applicable Funded Debt to Adjusted EBITDA
Ratio then in effect:
<TABLE>
<CAPTION>
Funded Debt to Adjusted EBITDA Ratio Margin for Margin for
- -------------------------------------- Floating Eurodollar
Rate Loans Loans
---------- ----------
<S> <C> <C>
Equal to or greater than 5.75 to 1 1.50% 2.75%
Equal to or greater than 5.0 to 1 1.25% 2.50%
but less than 5.75 to 1
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Equal to or greater than 3.5 to 1 1.00% 2.25%
but less than 5.0 to 1
Less than 3.50 to 1 0.75% 2.00%
</TABLE>
The Margin shall be adjusted, to the extent applicable, 45 days (or, in the case
of the last Fiscal Quarter of any Fiscal Year, 90 days) after the end of each
Fiscal Quarter based on the Funded Debt to Adjusted EBITDA Ratio as of the last
day of such Fiscal Quarter; it being understood that (a) if the Company fails to
deliver the financial statements required by Section 10.1.1 or 10.1.2, as
applicable, by the 45th day (or, if applicable, the 90th day) after any Fiscal
Quarter, the Margin shall be 1.50% for Floating Rate Loans and 2.75% for
Eurodollar Loans until such financial statements are delivered and (b) no
decrease in the Margin shall be effected on any date on which an Event of
Default exists (but shall be delayed until the first date on which no Event of
Default exists). Any change in the Margin shall be immediately effective for all
outstanding Loans.
Margin Stock means any "margin stock" or "margin security" as defined in
Regulations G, T, U or X of the Board of Governors of the Federal Reserve
System.
Material Adverse Effect means a material adverse effect on (a) the
condition (financial or otherwise), operations, business, properties or assets
of the Company and its Subsidiaries taken as a whole or (b) the ability of
Parent, the Company and the Guarantors taken as a whole to timely and fully
perform any of their respective payment or other material obligations under this
Agreement or any other Loan Document or Senior Note Document to which any of
them is a party.
Membership Notes Receivable means, at any date of determination, the
principal amount of notes receivable (both current and non-current) due as of
such date from members of all Golf Course Properties owned by the Company or its
Subsidiaries.
Mortgage means a mortgage, leasehold mortgage, deed of trust or similar
document granting a Lien on real property in appropriate form for filing or
recording in the applicable jurisdiction and otherwise reasonably satisfactory
to the Agent, executed and delivered pursuant to the Original Credit Agreement,
the Existing Credit Agreement or Section 10.14.
24
<PAGE>
Mortgage Amendment means each amendment (which shall include, without
limitation, extensions of the applicable Mortgage to any real property interests
that have resulted from Delayed Subsequent Acquisition Capital Expenditures made
prior to the Amendment Effective Date) to a Mortgage previously executed by the
Company or a Subsidiary, in appropriate form for filing or recording in the
applicable jurisdiction, substantially in the form of Exhibit L and reasonably
satisfactory to the Agent, executed and delivered pursuant to Section 11.2.8.
Net Cash Proceeds means
(a) with respect to any Asset Sale, the aggregate cash proceeds (including
cash proceeds received in respect of non-cash proceeds and
condemnation awards, and casualty loss insurance recoveries to the
extent the affected assets are not replaced or repaired in accordance
with the applicable Collateral Document(s)) received by the Company or
any Subsidiary pursuant to such Asset Sale, net of (i) the direct
costs relating to such Asset Sale (including, without limitation,
sales commissions and legal, accounting and investment banking fees),
(ii) taxes paid or payable as a result thereof (after taking into
account any available tax credits or deductions and any tax sharing
arrangements), (iii) amounts required to be applied to the repayment
of any Debt secured by a Lien on the asset subject to such sale (other
than the Loans) and (iv) any reserve for adjustment in respect of the
sale price of such asset (until such amount is available to the
Company or the applicable Subsidiary); and
(b) with respect to any Debt Securities Sale or Equity Securities Sale,
the aggregate cash proceeds received by the Company or any Subsidiary
pursuant to such Debt Securities Sale or Equity Securities Sale, net
of the direct costs relating to such Debt Securities Sale or Equity
Securities Sale (including, without limitation, sales and
underwriter's commissions and legal, accounting and investment banking
fees).
Net Worth means the Company's consolidated stockholders' equity.
Non-Financial Standby Letter of Credit means any Standby Letter of Credit
that is not a Financial Standby Letter of Credit.
25
<PAGE>
Notes means each of the Working Capital Revolving Note and the Reducing
Revolver Note.
Obligations means all unpaid principal of and accrued and unpaid interest
on the Notes, all accrued and unpaid fees and expenses, the stated amount of any
outstanding Letter of Credit, all Reimbursement Obligations, and all other
obligations of the Company or, as applicable, any Affiliate to the Lenders or to
any Lender, Agent or the Issuer arising under or in connection with the Loan
Documents.
Occupational Safety and Health Law means the Occupational Safety and Health
Act of 1970 and any other federal, state or local statute, law, ordinance, code,
rule, regulation, order or decree regulating, relating to or imposing liability
or standards of conduct concerning employee health and/or safety.
Operating Expenses means all operating expenses of the Company or any
Subsidiary, or relating to any individual Golf Course Property, calculated in
accordance with generally accepted accounting principles, and calculated in a
manner consistent with (and include but are not limited to) the lines "Admin &
General (Incl Taxes/Insurance)", "Golf Dept", "Golf Retail", "Course
Maintenance", "Food & Beverage", "Golf Schools", "Membership", "Tennis", and
"Pool" set forth in the financial statements for The Club at Trophy Club Golf
Course Property set forth at Exhibit K-2.
Original Bank Warrants means the warrants, issued by Parent to certain
Lenders in connection with the closing of the Original Credit Agreement, to
purchase an aggregate of (a) 5,472 shares of Parent's common stock, $0.01 par
value per share, and (b) 20,000 shares of Parent's Series A Preferred Stock,
$0.01 par value per share.
Original Credit Agreement is defined in the recitals.
Parent - see the Preamble.
Parent Guaranty - see Section 15.
Parent Pledge Agreement - see Section 11.2.7(c).
Participant - see Section 14.8.2.
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PBGC means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
Pension Plan means a "pension plan", as such term is defined in section
3(2) of ERISA, which is subject to title IV of ERISA (other than a multi-
employer plan as defined in section 4001(a)(3) of ERISA), and to which the
Company or any corporation, trade or business that is, along with the Company, a
member of a controlled group of corporations or a controlled group of trades or
businesses, as described in section 414 of the Internal Revenue Code of 1986, as
amended, or section 4001 of ERISA, may have any liability, including any
liability by reason of having been a substantial employer within the meaning of
section 4063 of ERISA at any time during the preceding five years or by reason
of being deemed to be a contributing sponsor under section 4069 of ERISA.
Permitted Acquisition Costs means (without duplication) the costs paid or
payable by the Company or a Subsidiary in connection with a Subsequent
Acquisition, including without limitation the purchase price of such Subsequent
Acquisition (including any principal and interest payments required on a
deferred purchase money note issued in connection with such Subsequent
Acquisition); any other assumed Debt; all closing costs, accountants' and
advisors' fees and expenses, attorneys' fees and disbursements, title fees and
premiums, appraisals, environmental and hydrological report fees, survey costs,
brokerage commissions, internally capitalized costs relating to such Subsequent
Acquisition and other out-of-pocket costs incurred in connection with such
Subsequent Acquisition; Delayed Subsequent Acquisition Capital Expenditures
relating to such Subsequent Acquisition (including engineering and
architectural fees); and the initial working capital requirements relating to
such Subsequent Acquisition.
Person means any natural person, corporation, partnership, trust,
association, governmental authority or unit, or any other entity, whether acting
in an individual, fiduciary or other capacity.
Pledge Agreements means the Company Pledge Agreement, the Parent Pledge
Agreement and each Subsidiary Pledge Agreement.
Pre-Existing Properties means the following Golf Course Properties at the
following locations:
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(a) Balboa Park Municipal Golf Course, located in San Diego, California;
(b) Saticoy Golf Course, located in Ventura, California;
(c) El Camino Country Club, located in Oceanside, California;
(d) Foothills Golf Club, located in Phoenix, Arizona;
(e) Woodcrest Country Club, located in Grand Prairie, Texas;
(f) Carmel Mountain Ranch Country Club and Golf Course, located in San
Diego, California;
(g) Morgan Run Resort and Club, located in Rancho Santa Fe, California;
(h) The Vineyard at Escondido, located in Escondido, California;
(i) The Club at Trophy Club, located in Trophy Club, Texas;
(j) Pecan Grove Plantation Country Club, located in Richmond, Texas;
(k) Ahwatukee Country Club and The Lakes at Ahwatukee, located in Phoenix,
Arizona;
(l) The Ranch Country Club and Stonebridge Country Club, each located in
McKinney, Texas;
(m) Red Mountain Ranch Country Club, located in Mesa, Arizona;
(n) The Hills of Lakeway, Live Oak Golf Course and Yaupon Golf Course,
each located in Austin, Texas; and
(o) Brandermill Country Club, located in Richmond, Virginia.
Qualified Capital Stock means any capital stock of Parent or any Subsidiary
is not Disqualified Capital Stock.
Recipient Taxes - see Section 7.6(a).
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Reducing Revolver Loan - see Section 2.1.2.
Reducing Revolver Loan Commitment means as to any Lender the commitment of
such Lender to make Reducing Revolver Loans pursuant to Section 2.1.2. The
amount of the Reducing Revolver Loan Commitment of each Lender is set forth on
Schedule 1.
Reducing Revolver Loan Percentage means as to any Lender the percentage
which (a) such Lender's Reducing Revolver Loan Commitment (or, after the
termination of the Reducing Revolver Loan Commitments, the aggregate principal
amount of such Lender's Reducing Revolver Loans) is of (b) the aggregate amount
of the Reducing Revolver Loan Commitments of all Lenders (or, after the
termination of the Reducing Revolver Loan Commitments, the aggregate principal
amount of all Reducing Revolver Loans). The initial Reducing Revolver Loan
Percentage for each Lender is set forth opposite such Lender's name on Schedule
1.
Reducing Revolver Note - see Section 3.1(b).
Reducing Revolver Termination Date means June 30, 2002 or such other date
on which the Reducing Revolver Loan Commitments shall terminate pursuant to
Section 12.
Reimbursement Obligation - see Section 2.10.7.
Required Lenders means Lenders having an aggregate Total Percentage of at
least 51%.
Responsible Officer means the Company's chief executive officer or chief
financial officer.
SEC means the Securities and Exchange Commission.
Security Agreement - see Section 11.2.6.
Senior Company Notes means the __% Senior Notes due June 2003 of the
Company.
Senior Zero-Coupon Notes means the __% Senior Zero-Coupon Notes due June
2004 of Parent.
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Senior Note Documents means any instrument evidencing or issued in
connection with Senior Notes, or pursuant to which any Debt consisting of Senior
Notes may be incurred.
Senior Notes means any of (a) the Senior Company Notes and (b) the Units of
Parent, consisting of the Senior Zero-Coupon Notes and the shares of Common
Stock.
Standby Letter of Credit means any Letter of Credit other than a Commercial
Letter of Credit.
Stated Expiry Date - see Section 2.10.2(b)(i).
Stockholders' Agreement means the Stockholders' Agreement dated as of
January 31, 1994 by and among Parent and the shareholders of Parent.
Stonebridge means Stonebridge Ranch Development Corporation, a Delaware
corporation.
Subordinated Debt means Debt of the Company having terms (including,
without limitation, as to covenants, acceleration, defaults, interest rate,
maturity and amortization), and which is subordinated to the Obligations of the
Company hereunder, in a manner satisfactory to the Required Lenders.
Subsequent Acquisition means the acquisition by the Company or any
Subsidiary, on or after the Amendment Effective Time, of a Golf Course Property
located in the United States (excluding Puerto Rico and other possessions and/or
territories of the United States), which term shall include (but not be limited
to) all Permitted Acquisition Costs incurred in connection therewith.
Subsequent Acquisition Certificate means a certificate, substantially in
the form of Exhibit B-2 hereto, delivered by a Responsible Officer of the
Company pursuant to Section 2.5(e)(v).
Subsidiary means, with respect to any Person, a Person of which such Person
and/or its other Subsidiaries own, directly or indirectly, such number of
outstanding shares or other ownership interests as have more than 50% of the
ordinary voting power for the election of directors (or, in the case of a Person
that is not a corporation, the ordinary voting power concerning such matters as
to which such ownership interests are entitled to vote). Unless the context
otherwise requires, each reference to
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Subsidiaries herein shall be a reference to Subsidiaries of the Parent or the
Company, as the context permits.
Subsidiary Pledge Agreement - see Section 11.2.7(b).
Taxes relative to any Person means taxes, assessments or other governmental
charges or levies imposed upon such Person, its income or any of its properties,
franchises or assets (excluding, in the case of payments made to a Lender or the
Agent (all of the following taxes being "Excluded Taxes") taxes imposed upon the
overall net income of such Lender or the Agent).
Total Percentage means as to any Lender the percentage which (a) the
aggregate amount of such Lender's Working Capital Revolving Commitment (or,
after the termination of the Working Capital Revolving Commitments, the
aggregate principal amount of such Lender's Working Capital Revolving Loans and
Reimbursement Obligations) plus such Lender's Reducing Revolver Loan Commitment
(or, after the termination of the Reducing Revolver Loan Commitments, the
aggregate principal amount of such Lender's Reducing Revolver Loans) is of (b)
the aggregate amount of the Working Capital Revolving Commitments of all Lenders
(or, after the termination of the Working Capital Revolving Commitments, the
outstanding principal amount of all Working Capital Revolving Loans and
Reimbursement Obligations) plus the Reducing Revolver Loan Commitments of all
Lenders (or, after the termination of the Reducing Revolver Loan Commitments,
the outstanding principal amount of all Reducing Revolver Loans).
Transaction Documents means the Loan Documents, the Equity Documents and
the Senior Note Documents.
Type of Loan or Borrowing - see Section 2.2. The types of Loans or
borrowings under this Agreement are Floating Rate Loans or borrowings and
Eurodollar Loans or borrowings.
Unmatured Event of Default means any event which if it continues uncured
will, with lapse of time or notice or lapse of time and notice, constitute an
Event of Default.
Welfare Plan means a "welfare plan", as such term is defined in section
3(1) of ERISA.
Wholly-Owned Subsidiary means a Subsidiary of which the Company and/or its
Subsidiaries own, directly or indirectly, all
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of the outstanding shares of capital stock (other than directors' qualifying
shares).
Working Capital Revolving Commitment means as to any Lender the commitment
of such Lender to make Working Capital Revolving Loans pursuant to Section 2.1.1
and its obligation pursuant to Section 2.10.5 to participate in Letters of
Credit. The initial amount of the Working Capital Revolving Commitment of each
Lender is set forth on Schedule 1.
Working Capital Revolving Loan - see Section 2.1.1.
Working Capital Revolving Note - see Section 3.1(a).
Working Capital Revolving Percentage means as to any Lender the percentage
which (a) such Lender's Working Capital Revolving Commitment (or, after the
termination of the Working Capital Revolving Commitments, the aggregate
principal amount of such Lender's Working Capital Revolving Loans and
Reimbursement Obligations) is of (b) the aggregate amount of the Working Capital
Revolving Commitments of all Lenders (or, after the termination of the Working
Capital Revolving Commitments, the aggregate principal amount of all Working
Capital Revolving Loans and Reimbursement Obligations). The initial Working
Capital Revolving Percentage for each Lender is set forth opposite such Lender's
name on Schedule 1.
Working Capital Revolving Termination Date means June 30, 2002 or such
other date on which the Working Capital Revolving Commitments shall terminate
pursuant to Section 12.
1.2 Reallocation of Loans and Commitments.
(a) Each of the Lenders agrees that effective as of the Amendment
Effective Time,
(i) each Existing Revolving Commitment and, if any, Existing
Revolving Loan shall, upon sale, assignment and assumption in
accordance with clauses (ii) and (iii) below, be deemed to be a
Working Capital Revolving Commitment and a Working Capital
Revolving Loan; and each Existing Term Commitment and, if any,
Existing Term Loan shall, upon sale, assignment and assumption
in accordance with clauses (ii) and
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(iii) below, be deemed to be a Reducing Revolver Loan
Commitment and a Reducing Revolver Loan;
(ii) each of the Existing Lenders shall be deemed to have sold and
assigned any portion of its Existing Revolving Commitment,
Existing Revolving Loans, Existing Term Commitment and Existing
Term Loans which is in excess of the amount of such Existing
Lender's Working Capital Revolving Commitment, Working Capital
Revolving Percentage of all outstanding Working Capital
Revolving Loans, Reducing Revolver Loan Commitment, and
Reducing Revolver Loan Percentage of all outstanding Reducing
Revolver Loans, respectively, after giving effect to the
effectiveness hereof; and
(iii) each of the Lenders shall, to the extent applicable, be deemed
to have purchased and assumed that portion of the Existing
Revolving Commitments, the Existing Revolving Loans, the
Existing Term Commitments and the Existing Term Loans (which
shall be deemed to be, after giving effect to clause (i) above,
Working Capital Revolving Commitments, Working Capital
Revolving Loans, Reducing Revolver Loan Commitments and
Reducing Revolver Loans, respectively) which is being sold
pursuant to clause (ii) above, and to have increased its
Working Capital Revolving Commitment and/or Reducing Revolver
Loan Commitment in an amount, which will cause such Lender's
Working Capital Revolving Commitment, Working Capital Revolving
Percentage of all outstanding Working Capital Revolving Loans,
Reducing Revolver Loan Commitment and Reducing Revolver Loan
Percentage of all outstanding Reducing Revolver Loans, to be in
each such case as set forth on Schedule 1.
(b) Each Existing Lender represents and warrants to the Agent and each
Lender that, at the Amendment Effective Time (but before giving effect to the
restatement hereof), (i) its Existing Revolving Commitment, its Existing
Revolving Loans, its Existing Term Commitment and its Existing Term Loans are in
the amounts set forth on Schedule 1.2; and (ii) to the extent that such Existing
Lender is making a sale and assignment pursuant to clause (a)(ii)
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of this Section 1.2, the rights and interests being assigned are free and clear
of any adverse claim or encumbrance.
(c) The Company, Parent, the Existing Lenders and the Agent agree that each
Existing Lender which is making a sale and assignment pursuant to clause (a)(ii)
of this Section 1.2 shall, as of the Amendment Effective Time, relinquish its
rights and be released from its obligations under this Agreement and the
Existing Credit Agreement to the extent of the rights and interests so sold and
assigned.
(d) At the Amendment Effective Time, (i) each Lender which is purchasing
Existing Revolving Loans or Existing Term Loans (which in accordance with clause
(a)(i) above shall be deemed to be Working Capital Revolving Loans or Reducing
Revolver Loans, respectively) and/or increasing its Existing Revolving
Commitment and/or Existing Term Commitment (which in accordance with clause
(a)(i) above shall be deemed to be its Working Capital Revolving Commitment or
its Reducing Revolver Loan Commitment, respectively) pursuant to clause (a)(iii)
of this Section 1.2 shall deliver to the Agent immediately available funds to
cover such purchase and/or increase and (ii) the Agent shall, to the extent of
the funds so received, disburse such funds to the Existing Lenders which are
making sales and assignments pursuant to clause (a)(ii) of this Section 1.2.
(e) The Company agrees that, at the Amendment Effective Time, the Company
will (i) prepay all Loans outstanding under the Existing Credit Agreement and
(ii) pay to the Agent for the account of each Existing Lender all interest, fees
and other amounts (including amounts payable pursuant to Section 8.4) owed to
such Existing Lender under the Existing Credit Agreement.
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SECTION 2 COMMITMENTS OF THE LENDERS; TYPES OF LOANS;
BORROWING PROCEDURES; LETTERS OF CREDIT.
2.1 Commitments. On and subject to the terms and conditions of this
Agreement, each of the Lenders, severally and for itself alone, agrees that as
of the Amendment Effective Time, such Lender shall be deemed to have made a
Working Capital Revolving Loan and a Reducing Revolver Loan to the Company in an
amount equal to the amount set forth beside its name under the headings
"Outstanding Working Capital Revolving Loans" and "Outstanding Reducing Revolver
Loans" on Schedule 1. In addition, each of the Lenders, severally and for itself
above, agrees as follows:
2.1.1 Working Capital Revolving Commitments. (a) Each Lender agrees to
make revolving loans to the Company (together with revolving loans deemed made
in accordance with Section 2.1 above, its "Working Capital Revolving Loans")
from time to time on or after the Amendment Effective Time but before the
Working Capital Revolving Termination Date in such Lender's Working Capital
Revolving Percentage of such aggregate amounts as the Company may from time to
time request from all Lenders under the Working Capital Revolving Commitments,
provided that no Lender shall be permitted or required to make any Working
Capital Revolving Loan if, after giving effect thereto, the sum of (i) the
aggregate principal amount of all Working Capital Revolving Loans then
outstanding plus (ii) the aggregate undrawn stated amount of all then
outstanding Letters of Credit and all Reimbursement Obligations then due and
payable would exceed $5,000,000 (as such amount may be reduced from time to time
pursuant to Section 6).
(b) Working Capital Revolving Loans will be made only to (i) finance
Maintenance Capital Expenditures, (ii) provide working capital (including,
without limitation, payments under Section 10.11), (iii) fund escrow accounts or
make "good faith" deposits or similar deposits or payments in connection with a
Subsequent Acquisition pursuant to a purchase agreement for such Subsequent
Acquisition, in accordance with Section 10.12(h)(ii), and (iv) finance any
payment by Parent in accordance with Section 10.11. Subject to the foregoing,
Working Capital Revolving Loans may be repaid and reborrowed from time to time.
2.1.2 Reducing Revolver Loan Commitments. (a) Subject to the next
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succeeding sentence, each Lender agrees to make revolving loans to the Company
(together with Reducing Revolver Loans deemed made in accordance with Section
2.1 above, its "Reducing Revolver Loans") from time to time on or after the
Amendment Effective Time in such Lender's Reducing Revolver Loan Percentage of
such aggregate amounts as the Company may from time to time request from all
Lenders under the Reducing Revolver Loan Commitments, provided that the
aggregate principal amount of all Reducing Revolver Loans of all Lenders shall
not exceed $45,000,000 (as such amount may be reduced from time to time pursuant
to Section 6). Notwithstanding the foregoing, no borrowing of Reducing Revolver
Loans shall be made on any date if
(i) in the case of Reducing Revolver Loans used to finance any
Subsequent Acquisition (and not used to finance Delayed Subsequent
Acquisition Capital Expenditures), after giving effect to such borrowing,
the aggregate principal amount of Reducing Revolver Loans outstanding would
exceed the remainder of (A) $45,000,000 (as such amount may be reduced from
time to time pursuant to Section 6) less (B) the aggregate amount of all
Delayed Subsequent Acquisition Capital Expenditures permitted in accordance
with Section 2.6 (but subject to the definition thereof) for all Subsequent
Acquisitions closed prior to such date, which Delayed Subsequent
Acquisition Capital Expenditures have not been financed by Reducing
Revolver Loans already made prior to such date or by Term Loans under the
Existing Credit Agreement, less (C) the amount of Delayed Subsequent
Acquisition Capital Expenditures projected to be made in connection with
such Subsequent Acquisition for which such Reducing Revolver Loans are
being borrowed, and
(ii) in the case of Reducing Revolver Loans used to finance Delayed
Subsequent Acquisition Capital Expenditures, the principal amount of such
Reducing Revolver Loans would exceed the aggregate amount of all Delayed
Subsequent Acquisition Capital Expenditures permitted in accordance with
Section 2.6 (but subject to the definition thereof) for all Subsequent
Acquisitions closed prior to such date, which Delayed Subsequent
Acquisition Capital Expenditures have not been financed by Reducing
Revolver Loans already made prior to such date or by Term Loans under the
Existing Credit Agreement.
(b) Reducing Revolver Loans will be made only (i) on and after the
Amendment Effective Time, for the purpose of financing
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Permitted Acquisition Costs in connection with Subsequent Acquisitions made from
time to time if, and only if, each of the conditions precedent set forth in
Section 2.5 for each such Subsequent Acquisition is satisfied or waived in
accordance with the terms of this Agreement, (ii) on and after the Amendment
Effective Time, for the purpose of financing Delayed Subsequent Acquisition
Capital Expenditures made from time to time if, and only if, each of the
conditions precedent set forth in Section 2.5 for each related Subsequent
Acquisition was satisfied or waived at the time of such Subsequent Acquisition
and, in addition, each of the conditions precedent set forth in Section 2.6(a)
is satisfied or waived with respect to such Delayed Subsequent Acquisition
Capital Expenditures and (iii) on and after the Amendment Effective Time, for
the purpose of financing Designated Non-Recurring Capital Expenditures made from
time to time if, and only if, each of the conditions precedent set forth in
Section 2.6(c) is satisfied or waived with respect to such Designated Non-
Recurring Capital Expenditures. Subject to the foregoing, Reducing Revolver
Loans may be repaid and reborrowed from time to time.
2.2 Various Types of Loans. Each Loan may be divided into tranches which
are either a Floating Rate Loan or a Eurodollar Loan (each a "type" of Loan), as
the Company shall specify in the related notice of borrowing or conversion
pursuant to Section 2.3 or 2.4. Eurodollar Loans having the same Interest
Period are sometimes called an "Advance" or collectively "Advances". Floating
Rate Loans and Eurodollar Loans may be outstanding at the same time. Not more
than twelve different Advances of Eurodollar Loans shall be outstanding at any
one time, and the aggregate principal amount of each Advance of Eurodollar Loans
shall at all times be at least $500,000. All borrowings, conversions and
repayments of Loans shall be effected so that each Lender will have a pro rata
share (according to its Working Capital Revolving Percentage or Reducing
Revolver Loan Percentage, as applicable) of all types and Advances of Working
Capital Revolving Loans and Reducing Revolver Loans, as applicable.
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2.3 Borrowing Procedures. The Company shall give written or telephonic
notice to the Agent of each proposed borrowing not later than (a) in the case of
a borrowing of Floating Rate Loans, 10:00 a.m., Chicago time, on the Business
Day of the proposed date of such borrowing, and (b) in the case of a borrowing
of Eurodollar Loans, noon, Chicago time, at least three Business Days prior to
the proposed date of such borrowing. Each such notice shall be effective upon
receipt by the Agent, shall be irrevocable, and shall specify the date, amount
and type of borrowing and, in the case of a borrowing of Eurodollar Loans, the
initial Interest Period therefor. Promptly upon receipt of such notice, the
Agent shall advise each Lender thereof. Not later than 1:00 p.m., Chicago time,
on the date of a proposed borrowing, each Lender shall provide the Agent at the
principal office of the Agent in San Francisco with immediately available funds
covering such Lender's Working Capital Revolving Percentage or Reducing Revolver
Loan Percentage, as applicable, of such borrowing and, subject to the
satisfaction of the conditions precedent set forth in Section 11 with respect to
such borrowing, the Agent shall pay over the requested amount to the Company on
the requested borrowing date. Each borrowing shall be on a Business Day. Each
Floating Rate borrowing shall be in an aggregate amount of at least $250,000.
Unless the Company shall otherwise direct in writing, the proceeds of all
borrowings shall be deposited to the Company's demand deposit account no. 72-
10604 maintained with BAI.
2.4 Procedures for Conversion of Type of Loan. Subject to the provisions
of Section 2.2, the Company may convert all or any part of any outstanding Loan
into a Loan of a different type by giving written or telephonic notice to the
Agent not later than (a) in the case of conversion into a Floating Rate Loan,
noon, Chicago time, at least three Business Days prior to the proposed date of
such conversion, and (b) in the case of a conversion into a Eurodollar Loan,
noon, Chicago time, at least three Business Days prior to the proposed date of
such conversion. Each such notice shall be effective upon receipt by the Agent,
shall be irrevocable, and shall specify the date and amount of such conversion,
the Loan to be so converted, the type of Loan to be converted into and, in the
case of a conversion into a Eurodollar Loan, the initial Interest Period
therefor. Promptly upon receipt of such notice, the Agent shall advise each
Lender thereof. Subject to Sections 2.7 and 2.8, such Loan shall be so
converted on the requested date of conversion. Each conversion shall be on a
Business Day.
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2.5 Conditions to the Making of Reducing Revolver Loans Used to Finance
Subsequent Acquisitions. The Company shall not, and shall not permit any
Subsidiary to, make any Subsequent Acquisition after the Amendment Effective
Time unless, and the Lenders shall have no obligation to fund any Reducing
Revolver Loan used to finance any Subsequent Acquisition unless, each of the
following conditions precedent is satisfied with respect to such Subsequent
Acquisition:
(a) The Company's ratio of (x) the sum of, without duplication (A)
Funded Debt projected to be outstanding (after giving effect to such
Subsequent Acquisition) plus (B) Delayed Subsequent Acquisition Capital
Expenditures projected to be made in connection with such Subsequent
Acquisition plus (C) Delayed Subsequent Acquisition Capital Expenditures
projected to be made in connection with all previous Subsequent
Acquisitions and not yet made (and subject to the definition thereof), to
(y) the sum of (A) Adjusted EBITDA (calculated on a pro forma basis as of
the last date of the next succeeding Fiscal Quarter for the proposed
Subsequent Acquisition or any Subsequent Acquisition consummated in the
then-current Fiscal Quarter, and calculated on a pro forma basis as of the
last date of the next preceding Fiscal Quarter for any Subsequent
Acquisition consummated prior to the then-current Fiscal Quarter) less (B)
any increases in Membership Notes Receivable above (i) for the period
between the Amendment Effective Date and June 29, 1997, $5,400,000 and (ii)
for all Fiscal Quarters ending on or after June 30, 1997, the Fiscal
Quarter-end balance four Fiscal Quarters prior plus (C) reductions in
Membership Notes Receivable below (i) for the period between the Amendment
Effective Date and June 29, 1997, the June 30, 1996 Fiscal Quarter-end
balance and (ii) for all Fiscal Quarters ending on or after June 30, 1997,
the Fiscal Quarter-end balance four Fiscal Quarters prior, shall be less
than or equal to:
(i) 6.5 to 1.0 from the Amendment Effective Time to and
including March 30, 1997;
(ii) 6.25 to 1.0 from March 31, 1997 to and including June 29,
1997;
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(iii) 6.0 to 1.0 from June 30, 1997 to and including September
29, 1997;
(iv) 5.75 to 1.0 from September 30, 1997 to and including
December 30, 1997;
(v) 5.5 to 1.0 from December 31, 1997 to and including March
30, 1998;
(vi) 5.25 to 1.0 from March 31, 1998 to and including June 29,
1998;
(vii) 5.0 to 1.0 from June 30, 1998 to and including December
30, 1998;
(viii) [other dates] (the condition in this clause (a) being
the "Incurrence Test");
(b) at the time of such Subsequent Acquisition, Parent, Company and
its Subsidiaries, on a consolidated basis, shall have no more than
$2,000,000 in cash and Cash Equivalent Investments, or such cash and Cash
Equivalent Investments in excess of $2,000,000 shall be used in making such
Subsequent Acquisition prior to using Loans borrowed under this Agreement;
(c) the Company or the relevant Subsidiary making such Subsequent
Acquisition shall grant to the Agent, for the benefit of the Lenders, a
first priority perfected security interest (subject only to Liens permitted
hereunder) on (i) all assets acquired in such Subsequent Acquisition,
including, without limitation, accounts receivable, inventory, equipment,
real property, intangibles and any stock or other ownership interests of
any Person acquired by the Company or its Subsidiaries in such Subsequent
Acquisition, and (ii) any material leasehold interest acquired by the
Company or any Subsidiary in connection with such Subsequent Acquisition;
the Company shall have paid all mortgage recordation taxes, title insurance
premiums and other fees or costs associated with the grant of such security
interest, with the allocated value of the mortgage amount applicable to any
such mortgage recordation taxes (in any jurisdiction that restricts
foreclosure or other enforcement recoveries to the mortgage amount as to
which mortgage recordation taxes have been paid) being not less than the
product of (i) 1.40 times (ii) the sum of (without
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duplication) the Reducing Revolver Loans borrowed to finance such
Subsequent Acquisition and any Permitted Acquisition Costs incurred in
connection therewith; the Company shall take and cause each Subsidiary to
take such action in connection therewith as the Agent may reasonably
require; and the Company or such Subsidiary shall deliver to the Agent and
the Lenders an opinion or opinions of independent counsel as to such
security interest and as to such other matters (including, without
limitation, water rights issues) in connection with such Subsequent
Acquisition as the Agent may reasonably require;
(d) no Event of Default or Unmatured Event of Default shall exist at
the time of or after giving effect to such Subsequent Acquisition;
(e) the Company shall provide to the Agent and the Lenders the
following information with respect to such Subsequent Acquisition, no later
than ten Business Days prior to the projected closing date for such
Subsequent Acquisition:
(i) a detailed business plan, which shall include (without
limitation) an estimated schedule of all sources and uses of funds,
including (without limitation) an estimated schedule for all Delayed
Subsequent Acquisition Capital Expenditures (it being understood that
(A) all Delayed Subsequent Acquisition Capital Expenditures for such
Subsequent Acquisition must be completed within 18 months of the
borrowing date for the initial Reducing Revolver Loans (or term loans
made under the Original Credit Agreement or the Existing Credit
Agreement) funding such Subsequent Acquisition, and (B) the actual
uses for such Delayed Subsequent Acquisition Capital Expenditures, on
an aggregate basis for any Golf Course Property, must be consistent in
all material respects with the projected uses for such Delayed
Subsequent Acquisition Capital Expenditures specified in such
schedule);
(ii) historical financial and operating data for at least the
most recent 12 complete consecutive calendar months for which
financial statements are
available for the Golf Course Property subject to such Subsequent
Acquisition, and all other historical financial and operating data and
descriptive material
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in the Company's possession relating to such Golf Course Property, it
being understood that all such data and descriptive material (as well
as the business plan referred to in subclause (i) above and the
projections referred to in subclause (iv) below) shall be those
prepared for the Company's Board of Directors for purposes of
approving such Subsequent Acquisition and shall be in substantially
the same format and level of detail as those previously prepared by
the Company for the Subsequent Acquisition of The Club at Trophy Club
Golf Course Property located in Trophy Club, Texas and distributed to
the Agent and the Lenders;
(iii) the purchase agreement pursuant to which such Subsequent
Acquisition will be consummated (or, if not yet executed, the most
current version of such purchase agreement; provided that the final
version is provided at least three Business Days prior to the closing
date for such Subsequent Acquisition), and each material services
agreement, consulting agreement, lease, credit or financing agreement
or other material agreement relating to such Subsequent Acquisition or
applicable to such Golf Course Property to be in effect after the
consummation of such Subsequent Acquisition (or, if not yet executed,
the most current version of any such agreement; provided that the
final version is provided at least three Business Days prior to the
closing date for such Subsequent Acquisition);
(iv) detailed financial projections (x) on an annual basis,
for the seven Fiscal Years following such Subsequent Acquisition, and
(y) on a monthly basis, for the first four Fiscal Quarters (and any
calendar months occurring prior to the beginning of such first Fiscal
Quarter) following such Subsequent Acquisition;
(v)(a) Subsequent Acquisition Certificate, (A) showing the
calculations made to determine compliance with the Incurrence Test,
(B) as to such business plan, historical data, descriptive material,
projections, and all other materials furnished under this Section 2.5,
(C) as to compliance with all conditions set forth in this Section
2.5, and (D) as to resolutions and other corporate and third party
authorizations for such Subsequent Acquisition;
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(vi) [under review] a Phase I environmental report prepared by
an environmental firm on Agent's approved list regarding the real
property and other assets to be acquired in such Subsequent
Acquisition, which report (A) shall have been prepared in accordance
with the Agent's Phase I Environmental Site Assessment Scope of Work
and Report Outline, (B) shall include as an attachment the Agent's
Environmental Questionnaire and Disclosure Statement, and (C) shall
show no evidence that the Company would not be able to make the
representations and warranties set forth at Section 9.17 of this
Agreement, or to comply with the covenants set forth at Section 10.18
of this Agreement, after giving effect to such Subsequent Acquisition;
and
(vii) such other information as the Agent or any Lender may
reasonably request with respect to such Subsequent Acquisition;
(f) the Permitted Acquisition Costs (which costs, if not finally
determined at the time of determining compliance with this clause (f),
shall represent the Company's best estimate thereof) for such Subsequent
Acquisition (including, without limitation, any escrow account, "good
faith" deposit or similar deposit or payment made in connection with such
Subsequent Acquisition in accordance with Section 10.12(h)), shall not
exceed $15,000,000;
(g) the Person or assets to be acquired in such Subsequent Acquisition
shall not have experienced, based on financial information provided by the
seller, during the most recently completed twelve complete consecutive
calendar months for which financial statements are available prior to the
date of borrowing the Reducing Revolver Loans to fund such Subsequent
Acquisition, negative cumulative Golf Course Property EBITDA in excess of
<$1,000,000>, when taken together with the negative cumulative Golf Course
Property EBITDA for the most recently completed twelve complete consecutive
calendar months for all other Subsequent Acquisitions consummated after the
Amendment Effective Time (measured in each case as of the date of
consummation of such Subsequent Acquisition); provided, however, that if an
acquired Golf Course Property that had negative cumulative Golf Course
Property EBITDA on the date of consummation of the acquisition has been
owned by the Company for more than
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one year and such Golf Course Property has had positive cumulative Golf
Course Property EBITDA for the most recent four complete consecutive Fiscal
Quarters, the negative Golf Course Property EBITDA attributable to such
Golf Course Property shall no longer be included for purposes of
calculating compliance with this clause (g);
(h) the borrowing of Reducing Revolver Loans applied to fund such
Subsequent Acquisition shall include any amounts previously borrowed as
Working Capital Revolving Loans and applied to fund any escrow account,
"good faith deposit" or similar deposit or payment made in connection with
such Subsequent Acquisition in accordance with Section 10.12(i); and such
Working Capital Revolving Loans shall be repaid with the proceeds of such
Reducing Revolver Loans on or promptly after the borrowing date of such
Reducing Revolver Loans.
2.6 Other Terms Applicable to Delayed Subsequent Acquisition Capital
Expenditures and Designated Non-Recurring Capital Expenditures.
(a) The Company shall not, and shall not permit any Subsidiary to,
make any Delayed Subsequent Acquisition Capital Expenditures unless, and
the Lenders shall have no obligation to fund any Reducing Revolver Loan
used to finance any Delayed Subsequent Acquisition Capital Expenditures
unless, each of the following conditions precedent is satisfied with
respect to such Delayed Subsequent Acquisition Capital Expenditures:
(i) except as otherwise provided for herein, any Reducing
Revolver Loans used to finance such Delayed Subsequent Acquisition
Capital Expenditures shall be borrowed, and such Delayed Subsequent
Acquisition Capital Expenditures shall be completed, no later than 18
months after the borrowing date for the initial Reducing Revolver
Loans (or term loans made under the Original Credit Agreement or the
Existing Credit Agreement) used to finance the related Subsequent
Acquisition;
(ii) such Delayed Subsequent Acquisition Capital Expenditures
shall be described in writing in reasonable detail to the Agent and
the Lenders, by no
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later than three Business Days prior to the Company's submission of
the initial borrowing notice relating to the Reducing Revolver Loans
to fund such Delayed Subsequent Acquisition Capital Expenditures;
(iii) the Company or the relevant Subsidiary making such
Delayed Subsequent Acquisition Capital Expenditures shall grant to the
Agent, for the benefit of the Lenders, a first priority security
interest (subject only to Liens permitted hereunder) on all assets
acquired or constructed with such Delayed Subsequent Acquisition
Capital Expenditures;
(iv) the amount of such Delayed Subsequent Acquisition Capital
Expenditures does not exceed the amount designated therefor (on an
aggregate basis for any Golf Course Property), and the actual uses of
such Delayed Subsequent Acquisition Capital Expenditures does not vary
in material respects from the uses designated therefor, in the
business plan furnished by the Company pursuant to Section 2.5(e)(i);
(v) no Event of Default or Unmatured Event of Default shall
exist at the time of or after giving effect to such Delayed Subsequent
Acquisition Capital Expenditures;
(vi) if such Delayed Subsequent Acquisition Capital
Expenditure is for an improvement to real property, the Agent shall
have received a currently dated (x) Pending Disbursement Endorsement
to the title insurance policy for the Mortgage relating to the Golf
Course Property as to which such Delayed Subsequent Acquisition
Capital Expenditures relate confirming that the amount of insurance
offered by such policy has been increased (or the commitment of the
title insurer has been increased) by the amount of any Delayed
Subsequent Acquisition Capital Expenditures being funded with such
Loans being borrowed (without duplication of amounts of insurance
offered and paid for under Section 2.5(c)) and (y) a later date
endorsement showing no exceptions not reasonably acceptable to the
Agent; and
(vii) the Company shall have provided to the Agent and the
Lenders such information relating to such
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Delayed Subsequent Acquisition Capital Expenditures as the Agent or
any Lender may reasonably request.
(b) An amount equal to the aggregate amount of all Delayed Subsequent
Acquisition Capital Expenditures not yet funded by Reducing Revolver Loans
shall be deducted from the principal amount of Reducing Revolver Loans
available to be borrowed for Subsequent Acquisitions in accordance with
Section 2.1.2(a). Upon certification by the Company to the Agent and the
Lenders as to any Delayed Subsequent Acquisition Capital Expenditures no
longer being Delayed Subsequent Acquisition Capital Expenditures in
accordance with the definition of "Delayed Subsequent Acquisition Capital
Expenditures", the amount of such Delayed Subsequent Acquisition Capital
Expenditures will no longer be so deducted from the principal amount of
Reducing Revolver Loans available to be borrowed for Subsequent
Acquisitions.
(c) The Company shall not, and shall not permit any Subsidiary to,
make any Designated Non-Recurring Capital Expenditure unless, and the
Lenders shall have no obligation to fund any Reducing Revolver Loan used to
finance any Designated Non-Recurring Capital Expenditures unless, each of
the following conditions precedent is satisfied with respect to such
Designated Non-Recurring Capital Expenditures:
(i) at the borrowing date for the applicable Reducing
Revolver Loans the Company shall be in compliance with the Incurrence
Test (after including such Designated Non-Recurring Capital
Expenditures in the numerator of the Incurrence Test in the
calculation thereof);
(ii) such Designated Non-Recurring Capital Expenditures shall
be described in writing in reasonable detail to the Agent and the
Lenders and certified by a Responsible Officer as qualifying as a
Designated Non-Recurring Capital Expenditure, by no later than ten
Business Days prior to the Company's submission of the initial
borrowing notice relating to the Reducing Revolver Loans to fund such
Designated Non-Recurring Capital Expenditures;
(iii) the Company or the relevant Subsidiary making such
Designated Non-Recurring Capital Expenditures shall grant to the
Agent, for the benefit
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of the Lenders, a first priority security interest (subject only to
Liens permitted hereunder) on all assets acquired or constructed with
such Designated Non-Recurring Capital Expenditures;
(iv) no Event of Default or Unmatured Event of Default shall
exist at the time of or after giving effect to such Designated Non-
Recurring Capital Expenditures; and
(v) if such Designated Non-Recurring Capital Expenditure is for
an improvement to real property, the Agent shall have received a
currently dated (x) Pending Disbursement Endorsement to the title
insurance policy for the Mortgage relating to the Golf Course Property
as to which such Designated Non-Recurring Capital Expenditures relate
confirming that the amount of insurance offered by such policy has
been increased (or the commitment of the title insurer has been
increased) by the amount of any Designated Non-Recurring Capital
Expenditures being funded with such Loans being borrowed (without
duplication of amounts of insurance offered and paid for under Section
2.5(c)) and (y) a later date endorsement showing no exceptions not
reasonably acceptable to the Agent.
2.7 Warranty. Each notice of borrowing pursuant to Section 2.3, each
Issuance Request pursuant to Section 2.10.2 and each Letter of Credit Amendment
Request pursuant to Section 2.10.3 shall automatically constitute a warranty by
the Company to the Agent and each Lender on the date of such requested Credit
Extensions as to the facts specified in Sections 11.4.2 through 11.4.5.
2.8 Conditions. Notwithstanding any other provision of this Agreement, no
Lender shall be obligated to make any Credit Extension if the conditions
specified in Sections 11.4.2 through 11.4.5 have not been satisfied or waived.
2.9 Commitments Several. The failure of any Lender to make a requested
Credit Extension on any date shall not relieve any other Lender of its
obligation to make a Credit Extension on such date, but no Lender shall be
responsible for the failure of any other Lender to make any Credit Extension to
be made by such other Lender.
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2.10 Letters of Credit.
2.10.1 Issuance of Letters of Credit. On the terms and subject to
the conditions set forth in this Agreement, the Issuer shall issue from
time to time on or after the Amendment Effective Time and prior to the
Working Capital Revolving Termination Date (and, in the case of Commercial
Letters of Credit, prior to 15 Business Days before the Working Capital
Revolving Termination Date), one or more irrevocable Letters of Credit on
behalf of and for the account of the Company or any Subsidiary, each of
which Letters of Credit shall be denominated in Dollars and issued to
support obligations of the Company or a Subsidiary incurred in the ordinary
course of business; provided that no Letter of Credit shall be issued if
after the issuance thereof (a) the sum of (i) outstanding Working Capital
Revolving Loans plus (ii) the aggregate undrawn stated amounts of Letters
of Credit plus (iii) the aggregate unpaid Reimbursement Obligations then
due and payable hereunder would exceed $5,000,000 (as such amount may be
reduced from time to time pursuant to Section 6) or (b) the sum of the
amounts in clauses (a)(ii) plus (a)(iii) above would exceed $2,500,000.
Letters of Credit will be issued only for the purposes set forth in Section
2.1.1(b).
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2.10.2 Issuance Requests.
(a) By delivering a duly completed issuance request (an
"Issuance Request") in the form of Exhibit J-1, accompanied by a duly
completed application for a Letter of Credit, on or before 9:00 a.m.,
Chicago time, at least one Business Day prior to the requested
Business Day of issuance, to the Agent and the Issuer, the Company may
request the issuance from time to time of Letters of Credit; it being
understood that the Issuer may require
by notice to the Company a postponement of such requested issuance
date to the extent reasonably necessary for the preparation and
negotiation of such Letter of Credit and all related documentation.
Each Issuance Request and application shall be irrevocable, and upon
its receipt thereof, the Agent shall promptly notify the Lenders
thereof. Issuance Requests and applications (and all attachments
thereto) may be delivered to the Agent and the Issuer by facsimile or
telex if such deliveries are confirmed, or by delivery of the original
executed Issuance Requests and applications (and all attachments
thereto) to such Persons, in each case not later than one Business Day
prior to the date of issuance. The Agent shall promptly notify the
Issuer and the Company if, after giving effect to the issuance of any
requested Letter of Credit, the limitation set forth in the proviso to
Section 2.10.1 would be violated.
(b) Each Letter of Credit shall be in a form mutually
satisfactory to the Issuer and the Company and shall, by its terms,
(i) be stated to expire on a date (its "Stated Expiry
Date") not later than the earlier of (A) one year after the date
of issuance thereof and (B) the Working Capital Revolving
Termination Date,
(ii) unless the Agent shall otherwise agree, terminate on
or prior to its Stated Expiry Date immediately upon notice to the
Issuer from the beneficiary thereunder that all obligations
covered thereby have been terminated, paid or otherwise satisfied
in full, and
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(iii) provide for payment not earlier than three (3)
Business Days (unless the Issuer shall otherwise agree) after
demand for payment under such Letter of Credit and full
satisfaction of the conditions precedent thereto, and provide
solely for payment upon the presentation of a sight draft rather
than a time draft.
(c) The Issuer shall make the original of each Letter of Credit
it issues available (but in the case of replacement Letters of Credit,
only against delivery by such beneficiary of the Letter of Credit
being replaced) to the beneficiary indicated in the respective
Issuance Request (and provide on the date of issuance a copy thereof
to the Agent).
2.10.3 Amendments. Any extension of the Stated Expiry Date, increase
in the stated amount, or other modification of a Letter of Credit shall be
made only upon satisfaction of all of the procedures and conditions for the
issuance of a new Letter of Credit of the same type, except that the
Company's request therefor shall be in the form of Exhibit J-2 (a "Letter
of Credit Amendment Request").
2.10.4 Letter of Credit Fees.
(a) The Company agrees to pay to the Agent with respect to each
Letter of Credit, for the account of the Issuer and each other Lender,
ratably in accordance with their respective Working Capital Revolving
Percentages, accrual fees at the applicable L/C Fee Rate for a Letter
of Credit of such type (calculated in each case from and including the
date of issuance (or date of renewal or extension, if any) thereof to,
but not including, the Stated Expiry Date thereof or, if earlier, the
date upon which such Letter of Credit is cancelled, fully drawn or
terminated), in each case on the daily average undrawn stated amount
thereof, payable in arrears on a 360-day year for each Fiscal Quarter
within five (5) days after the Company's receipt of any statement of
such fees provided by the Agent or Issuer for such Fiscal Quarter;
provided that during the existence of any Event of Default, each of
such accrual fees shall be increased by 2.0% per annum.
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(b) The Company further agrees to pay upon demand made by the
Issuer from time to time, solely to the Issuer:
(i) all reasonable and customary fees and expenses of the
Issuer, as advised by the Issuer from time to time, in connection
with the negotiation, maintenance, modification (if any),
amendment, renewal, administration and collection of, or drawing
under, Letters of Credit issued by the Issuer;
(ii) an issuance fee of 0.125% of the face amount of each
Letter of Credit issued, payable at the same time as the accrual
fees described in clause (a) above; and
(iii) without duplication of payments made under Section 8,
any applicable reserve, assessment, insurance charge, premium or
levy imposed on the Issuer by any governmental authority,
including Federal Deposit Insurance Corporation assessments and
charges, with respect to any Letter of Credit issued hereunder.
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2.10.5 Other Lenders' Participations; Reimbursements.
(a) Each Letter of Credit shall, effective upon issuance and
without further action, be issued on behalf of each Lender (including
the Issuer) in accordance with the immediately succeeding sentence, in
each case pro rata according to such Lender's respective Working
Capital Revolving Percentage. Each Lender shall, to the extent of its
Working Capital Revolving Percentage, be deemed to have irrevocably
purchased a participation in the amount of its Working Capital
Revolving Percentage in each Letter of Credit issued on its behalf and
shall reimburse promptly to the Agent, on behalf of the Issuer, for
Reimbursement Obligations not reimbursed in accordance with Section
2.10.7 by the Company, or which have been reimbursed by the Company
but must be returned, restored or disgorged by the Issuer for any
reason, and each Lender (including the Issuer) shall, to the extent of
its Working Capital Revolving Percentage, be entitled to receive from
the Agent a ratable portion of the accrual fees received by the Agent,
pursuant to Section 2.10.4(a), with respect to such Letter of Credit.
(b) If the Company fails to satisfy its obligations set forth in
the last sentence of Section 2.10.6 and Section 2.10.7 to reimburse to
the Agent, on behalf of the Issuer, in an amount equal to the amount
of any drawing honored by the Issuer under a Letter of Credit, the
Issuer shall promptly notify the Agent and each Lender of the
unreimbursed amount of such drawing and of such Lender's respective
participation therein. If such notice is delivered, each Lender shall
make available to the Agent, on behalf of the Issuer, whether or not
any Default shall have occurred and is continuing, an amount equal to
the amount of the participation, in same day or immediately available
funds, at the Issuer's office specified in such notice, not later than
12:00 noon, Chicago time, on the Business Day after the date notified
by the Issuer. If any Lender fails to make available to the Agent, on
behalf of the Issuer, as provided herein, the amount of such
participation, the Issuer shall be entitled to recover such amount,
together in each case with interest thereon at the Federal Funds Rate
for three Business Days and thereafter at the rate applicable to
Floating Rate Loans, (x) on demand to such Lender, (y)
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by setoff against any payments made to the Issuer hereunder for the
account of such Lender, or (z) by payment to the Issuer by the Agent
of the amounts otherwise payable to such Lender under this Agreement.
Each Lender hereby authorizes the Agent to make the payments
described in clause (z) of the preceding sentence. Nothing in this
Section shall be deemed to prejudice the right of any Lender to
recover from the Issuer any amount made available by such Lender to
the Issuer pursuant to this Section if a court of competent
jurisdiction determines that the making of any payment by the Issuer
with respect to its Letter of Credit, and in respect of which a
participation payment was made by such Lender, constituted gross
negligence or willful misconduct on the part of the Issuer. The Issuer
shall transfer to the Agent, not later than the Business Day following
receipt, all payments received by the Issuer from the Company in, or
otherwise applied to, reimbursement of drawings honored by the Issuer
under any Letter of Credit and the Agent shall promptly distribute to
each Lender that has paid all amounts payable by such Lender under
this Section with respect to any Letter of Credit, such Lender's
Working Capital Revolving Percentage of such payments.
2.10.6 Disbursements. The Issuer will notify the Agent and the
Company in writing promptly following receipt of the presentment of any
demand for payment under any Letter of Credit, together with notice of the
amount of such payment and the date under the time zone of the jurisdiction
of the Issuer (the "Disbursement Date") such payment shall be made. Subject
to the terms and provisions of such Letter of Credit, the Issuer shall make
such payment ("Disbursement") to the respective beneficiary (or its
designee). Prior to 12:00 noon, Chicago time, on the applicable
Disbursement Date, the Company shall reimburse the Issuer for such
Disbursement. To the extent the Issuer is not, by 12:00 noon, Chicago time,
on the Disbursement Date of any Disbursement under a Letter of Credit,
reimbursed in full by the Company, the Issuer will promptly notify the
Agent and the Agent will promptly notify each Bank thereof, and the Company
shall be deemed to have requested that Floating Rate Loans be made by the
Lenders to be disbursed on the Disbursement Date under such Letter of
Credit, subject to the amount of the unutilized portion of the Working
Capital
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Revolving Commitment and subject to the conditions set forth in Section
11.4. Any notice given by the Issuer or pursuant to this Section 2.10.6 may
be oral if immediately confirmed in writing (including by facsimile);
provided that the lack of such an immediate confirmation shall not affect
the conclusiveness or binding effect of such notice. With respect to an
unreimbursed drawing that is not converted into Floating Rate Loans to the
Company in whole or in part, because of the Company's failure to satisfy
the conditions set forth in Section 11.4 or for any other reason, the
Company shall be deemed to have incurred from the Issuer a Letter of Credit
borrowing in the amount of such unreimbursed drawing, which Letter of
Credit borrowing shall be due and payable on demand (together with
interest) and shall bear interest at a rate per annum equal to the
Alternate Reference Rate plus 2% per annum, and each Lender's payment to
the Issuer pursuant to Section 2.10.5(b) shall be deemed payment in respect
of its participation in such Letter of Credit borrowing and shall
constitute a Letter of Credit advance from such Lender in satisfaction of
its participation obligation under Section 2.10.5(b).
2.10.7 Reimbursement. The obligation of the Company ("Reimbursement
Obligations") under the last sentence of Section 2.10.6 to reimburse the
Issuer for each Disbursement (including interest thereon) made under such
Issuer's Letters of Credit, and the obligation of each Lender under Section
2.10.5 to make participation payments in each unreimbursed thereunder,
shall be, to the fullest extent permitted by applicable law, absolute and
unconditional under any and all circumstances and irrespective of any
setoff, counterclaim or defense to payment which the Company may have or
have had against the Agent, the Issuer, any Lender or the beneficiary of
any Letter of Credit, including any defense based upon the occurrence of
any Event of Default or Unmatured Event of Default, any draft, demand or
certificate or other document presented under such Letter of Credit proving
to be forged, fraudulent, invalid or insufficient, the failure of any
Disbursement to conform to the terms of such Letter of Credit (if, in the
Issuer's good faith opinion, such Disbursement is determined to be
appropriate) or any non-application or misapplication by such beneficiary
of the proceeds of such Disbursement, or the legality, validity, form,
regularity or enforceability of such Letter of Credit, it being understood
that the Issuer shall remain liable for any liability or
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expense determined by a final judgment of a court of competent jurisdiction
to have been caused in all material respects by the Issuer's gross
negligence or willful misconduct.
2.10.8 Deemed Disbursements. Upon the occurrence and during the
continuation of any (x) acceleration upon an Event of Default, pursuant to
Section 12.2, or (y) upon any Unmatured Event of Default under Section
12.1.4, amounts equal to the respective amounts undrawn and available under
each Letter of Credit shall, at the option of the Agent or at the direction
of the Required Lenders and without demand upon or notice to the Company,
be deemed to have been paid or disbursed by the Issuer (notwithstanding
that such amounts may not in fact have been so paid or disbursed) and, upon
notification by the Agent to the Issuer and the Company of the Company's
obligations under this Section, the Company shall be immediately obligated
to reimburse the Agent for the benefit of the Issuer the amount deemed to
have been so paid or disbursed with respect to the Letters of Credit;
provided that, with respect to any such amounts deemed disbursed but not
reimbursed by the Company to the Agent, such amounts shall not be deemed to
bear interest until such time as a Reimbursement Obligation with respect
thereto shall arise. All amounts so received by the Agent from the Company
pursuant to this Section shall be held as collateral security for the
repayment of the Company's obligations in connection with the Letters of
Credit. To the extent the aggregate amount deposited by the Company with
the Agent pursuant to this Section and not previously applied by the Agent
to any Reimbursement Obligation exceeds the sum of (x) the aggregate
undrawn stated amounts of Letters of Credit plus (y) all unpaid
Reimbursement Obligations, the Agent will promptly return the amount of
such excess to the Company (except to the extent applied by the Agent to
the payment of amounts then due and owing hereunder). When all Events of
Default have been cured or waived, the Agent shall promptly return to the
Company all amounts, including interest as described in the immediately
succeeding sentence, less expenses, then on deposit pursuant to this
Section with the Agent. All amounts on deposit pursuant to this Section
shall, until their application to any Reimbursement Obligation or their
return to the Company, bear interest at the rate from time to time in
effect generally payable on Cash Equivalent Investments (net of the costs
of any reserve requirements, in respect of
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("Reimbursement Obligations") under the last sentence of Section 2.10.6 to
reimburse the Issuer for each Disbursement (including interest thereon)
made under such Issuer's Letters of Credit, and the obligation of each
Lender under Section 2.10.5 to make participation payments in each
unreimbursed thereunder, shall be, to the fullest extent permitted by
applicable law, absolute and unconditional under any and all circumstances
and irrespective of any setoff, counterclaim or defense to payment which
the Company may have or have had against the Agent, the Issuer, any Lender
or the beneficiary of any Letter of Credit, including any defense based
upon the occurrence of any Event of Default or Unmatured Event of Default,
any draft, demand or certificate or other document presented under such
Letter of Credit proving to be forged, fraudulent, invalid or insufficient,
the failure of any Disbursement to conform to the terms of such Letter of
Credit (if, in the Issuer's good faith opinion, such Disbursement is
determined to be appropriate) or any non-application or misapplication by
such beneficiary of the proceeds of such Disbursement, or the legality,
validity, form, regularity or enforceability of such Letter of Credit, it
being understood that the Issuer shall remain liable for any liability or
expense determined by a final judgment of a court of competent jurisdiction
to have been caused in all material respects by the Issuer's gross
negligence or willful misconduct.
2.10.8 Deemed Disbursements. Upon the occurrence and during the
continuation of any (x) acceleration upon an Event of Default, pursuant to
Section 12.2, or (y) upon any Unmatured Event of Default under Section
12.1.4, amounts equal to the respective amounts undrawn and available under
each Letter of Credit shall, at the option of the Agent or at the direction
of the Required Lenders and without demand upon or notice to the Company,
be deemed to have been paid or disbursed by the Issuer (notwithstanding
that such amounts may not in fact have been so paid or disbursed) and, upon
notification by the Agent to the Issuer and the Company of the Company's
obligations under this Section, the Company shall be immediately obligated
to reimburse the Agent for the benefit of the Issuer the amount deemed to
have been so paid or disbursed with respect to the Letters of Credit;
provided that, with respect to any such amounts deemed disbursed but
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not reimbursed by the Company to the Agent, such amounts shall not be
deemed to bear interest until such time as a Reimbursement Obligation with
respect thereto shall arise. All amounts so received by the Agent from the
Company pursuant to this Section shall be held as collateral security for
the repayment of the Company's obligations in connection with the Letters
of Credit. To the extent the aggregate amount deposited by the Company with
the Agent pursuant to this Section and not previously applied by the Agent
to any Reimbursement Obligation exceeds the sum of (x) the aggregate
undrawn stated amounts of Letters of Credit plus (y) all unpaid
Reimbursement Obligations, the Agent will promptly return the amount of
such excess to the Company (except to the extent applied by the Agent to
the payment of amounts then due and owing hereunder). When all Events of
Default have been cured or waived, the Agent shall promptly return to the
Company all amounts, including interest as described in the immediately
succeeding sentence, less expenses, then on deposit pursuant to this
Section with the Agent. All amounts on deposit pursuant to this Section
shall, until their application to any Reimbursement Obligation or their
return to the Company, bear interest at the rate from time to time in
effect generally payable on Cash Equivalent Investments (net of the costs
of any reserve requirements, in respect of amounts on deposit pursuant to
this Section 2.10.8, pursuant to Regulation D), which interest shall be
held by the Agent as additional collateral security for the repayment of
the Reimbursement Obligations of the Company in connection with the Letters
of Credit.
2.10.9 Nature of Reimbursement Obligations. The Company shall
assume all risks of acts, omissions or misuse by the beneficiary of each
Letter of Credit issued on its behalf. Neither the Issuer (except to the
extent of any liability determined by a final judgment of a court of
competent jurisdiction to have been caused in all material respects by the
Issuer's gross negligence or willful misconduct), any Lender nor the Agent
shall be responsible for:
(a) the form, validity, sufficiency, accuracy, genuineness or
legal effect of such Letter of Credit or any particular conditions
stipulated in the documents or
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superimposed thereon, or any document presented under the Letter of
Credit, or any document submitted by any party in connection with the
application for and issuance of such Letter of Credit, even if it
should be in any or all respects invalid, insufficient, inaccurate,
fraudulent or forged;
(b) the form, validity, sufficiency, accuracy, genuineness or
legal effect of any instrument transferring or assigning or purporting
to transfer or assign such Letter of Credit or the rights or benefits
thereunder or proceeds thereof in whole or in part, which instrument
may be invalid or ineffective for any reason;
(c) failure of such beneficiary to comply fully with conditions
required to demand payment under such Letter of Credit;
(d) errors, omissions, interruptions or delays in transmission
or delivery of any messages, by mail, cable, facsimile, telex or
otherwise;
(e) any loss or delay in the transmission or otherwise of any
document or draft required in order to make a Disbursement under such
Letter of Credit or of the proceeds thereof;
(f) the existence of the property purporting to be represented
by documents;
(g) any difference in character, quality, quantity, condition or
value between any property description in documents presented under
the Letter of Credit and the property purporting to be represented by
such documents;
(h) partial or incomplete shipment or failure or omission to
ship any and all of the property referred to in the Letter of Credit;
(i) the character, validity, adequacy or genuineness of any
insurance or any risk connected with insurance;
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(j) any deviation from instructions, delay, default or fraud by
the shipper or anyone else in connection with the property or shipment
thereof;
(k) the solvency, responsibility or relationship to the property
of any Person issuing any documents relating thereto;
(l) any delay in giving or failure to give any necessary notices;
(m) any breach of contract between the shippers or vendors and
the Company; or
(n) the failure of any instrument to bear any reference or
adequate reference to the Letter of Credit, or the failure of any
draft to be accompanied by documents at negotiation, or the failure of
any Person to note the amount of any draft on the reverse of the
Letter of Credit or to surrender or take up the Letter of Credit or to
send forward documents apart from drafts as required by the terms of
the Letter of Credit.
None of the foregoing shall affect, impair or prevent the vesting of any rights
or powers granted the Issuer, any Lender or the Agent hereunder. In furtherance
of any of the foregoing, any action taken or omitted to be taken by the Issuer
in good faith shall be binding upon the Company and shall not put the Issuer
under any resulting liability to such Person.
SECTION 3 NOTES EVIDENCING LOANS.
3.1 Notes.
(a) The Revolving Loans of each Lender shall be evidenced by a global
promissory note (as amended, supplemented, replaced or otherwise modified
from time to time, the "Working Capital Revolving Note") substantially in
the form of Exhibit A-1, with appropriate insertions, dated June 4, 1996,
payable to the order of the Agent (for the account of the Lenders) in the
amount of $5,000,000 (or, if less, in the aggregate unpaid principal amount
of all Working
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Capital Revolving Loans and Reimbursement Obligations), and
payable in full on the Working Capital Revolving Termination Date.
(b) The Reducing Revolver Loans of each Lender shall be evidenced by a
global promissory note (as amended, supplemented, replaced or otherwise
modified from time to time, the "Reducing Revolver Note") substantially in
the form of Exhibit A-2, with appropriate insertions, dated June 4, 1996,
payable to the order of the Agent for the account of the Lenders in the
amount of $[40,000,000] (or, if less, in the aggregate unpaid principal
amount of all Reducing Revolver Loans), and payable in full on the Reducing
Revolver Termination Date.
(c) As of the Amendment Effective Time, each of the promissory notes
issued under the Existing Credit Agreement shall be null and void (having
been replaced by the Notes hereunder).
3.2 Recordkeeping. The Agent shall hold each of the Reducing Revolver
Note and the Working Capital Revolving Note for the ratable benefit of each
Lender with a Reducing Revolver Loan Commitment or Reducing Revolver Loans and a
Working Capital Revolving Commitment, Working Capital Revolving Loans or
Reimbursement Obligations, as applicable. Each of the Reducing Revolver Note
and the Working Capital Revolving Note shall evidence each such Lender's
Reducing Revolver Loan Percentage and Working Capital Revolving Percentage,
respectively, of the aggregate outstanding Reducing Revolver Loans, Working
Capital Revolving Loans and Reimbursement Obligations, as applicable.
The Agent shall record in its records, or at its option on the schedule
attached to the applicable Note, the date and amount of each Loan or
Reimbursement Obligation, each repayment or prepayment thereof, and, in the case
of any Eurodollar Loan, the dates on which the Interest Period for such Loan
shall begin and end. The aggregate unpaid principal amount so recorded shall be
rebuttable presumptive evidence of the principal amount owing and unpaid on such
Note. The failure to so record or any error in so recording any such amount in
such records or on such schedule shall not, however, limit or otherwise affect
the obligations of the Company
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hereunder or under any Note to repay the principal amount of the applicable
Loans and Reimbursement Obligations evidenced together with all interest
accruing thereon.
SECTION 4 INTEREST.
4.1 Interest Rates. The Company promises to pay interest on the unpaid
principal amount of each Loan for the period commencing on the date of such Loan
until (but excluding the date on which) such Loan is paid in full, as follows:
(a) at all times while such Loan is a Floating Rate Loan, at a rate
per annum equal to the sum of the Alternate Reference Rate from time to
time in effect plus the Margin; and
(b) at all times while such Loan is a Eurodollar Loan, at a rate per
annum equal to the sum of the Eurodollar Rate (Reserve Adjusted) applicable
to each Interest Period for such Loan plus the Margin;
provided, however, that at any time an Event of Default exists, the interest
rate applicable to each Loan shall be the Default Rate.
4.2 Interest Payment Dates. Accrued interest on each Floating Rate Loan
shall be payable in arrears on June 30, 1996, on the last day of each Fiscal
Quarter thereafter and at maturity, commencing with the first of such dates to
occur after the date of such Loan. Accrued interest on each Eurodollar Loan
shall be payable on the last day of each Interest Period relating to such Loan,
at maturity and, with respect to any Interest Period of six months, at the date
three months from the beginning of such Interest Period. After maturity,
accrued interest on all Loans shall be payable on demand.
4.3 Interest Periods. (a) Each "Interest Period" for a Eurodollar Loan
shall commence on the date such Eurodollar Loan is made or converted from a
Floating Rate Loan, or on the expiration of the immediately preceding Interest
Period for such Eurodollar Loan, and shall end on the date which is 7, 14 or 21
days or one, two, three or, if available, six months thereafter, as the Company
may specify:
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(i) in the case of an Interest Period which commences on the date a
Eurodollar Loan is made or converted from a Floating Rate Loan, in the
related notice of borrowing or conversion pursuant to Section 2.3 or 2.4,
or
(ii) in the case of a succeeding Interest Period with respect to any
Eurodollar Loan, by written or telephonic notice to the Agent not later
than noon, Chicago time, at least three Business Days prior to the first
day of such succeeding Interest Period, it being understood that (i) each
such notice shall be effective upon receipt by the Agent and (ii) if the
Company fails to give such notice, such Loan shall automatically become a
Floating Rate Loan at the end of its then-current Interest Period.
(b) Each Interest Period that begins on the last day of a calendar month
(or on a day for which there is no numerically corresponding day in the
appropriate subsequent calendar month) shall end on the last Business Day of the
appropriate subsequent calendar month. Each Interest Period which would
otherwise end on a day which is not a Business Day shall end on the immediately
succeeding Business Day (unless such immediately succeeding Business Day is the
first Business Day of a calendar month, in which case such Interest Period shall
end on the immediately preceding Business Day).
4.4 Setting and Notice of Eurodollar Rates. The applicable Eurodollar
Rate for each Interest Period shall be determined by the Agent, and notice
thereof shall be given by the Agent promptly to the Company and each Lender.
Each determination of the applicable Eurodollar Rate by the Agent shall be
conclusive and binding upon the parties hereto, in the absence of demonstrable
error. The Agent shall, upon written request of the Company or any Lender,
deliver to the Company or such Lender a statement showing the computations used
by the Agent in determining any applicable Eurodollar Rate hereunder.
4.5 Computation of Interest. Interest shall be computed for the actual
number of days elapsed on the basis of a year of 360 days. The applicable
interest rate for each Floating Rate Loan shall change simultaneously with each
change in the Alternate Reference Rate.
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SECTION 5 FEES.
5.1 Working Capital Revolving Loan Non-Use Fee. The Company agrees to pay
to the Agent for the account of each Lender a non-use fee for the period from
and including the Amendment Effective Time to but excluding the Working Capital
Revolving Termination Date of 1/2 of 1% per annum on the daily average of the
unused amount of such Lender's Working Capital Revolving Commitment, it being
understood that the principal amount of any Letters of Credit shall be
considered usage of the aggregate Working Capital Revolving Commitments in such
amount. Such non-use fee shall be payable in arrears on June 30, 1996, on the
last day of each calendar quarter thereafter and on the Working Capital
Revolving Termination Date, in each case for the period then ending for which
such non-use fee shall not have been theretofore paid. Such non-use fee shall
be computed for the actual number of days elapsed on the basis of a year of 360
days.
5.2 Reducing Revolver Loan Non-Use Fee. The Company agrees to pay to the
Agent for the account of each Lender a non-use fee for the period from and
including the Amendment Effective Time to but excluding the Reducing Revolver
Termination Date of 1/2 of 1% per annum on the daily average of the unused
amount of such Lender's Reducing Revolver Loan Commitment. Such non-use fee
shall be payable in arrears on June 30, 1996, on the last day of each calendar
quarter thereafter and on the Reducing Revolver Termination Date, in each case
for the period then ending for which such non-use fee shall not have been
theretofore paid. Such non-use fee shall be computed for the actual number of
days elapsed on the basis of a year of 360 days.
5.3 Additional Fees. The Company agrees to pay to the Agent such
additional fees, in each case at such times and in such amounts, as are mutually
agreed upon by the Company and the Agent.
SECTION 6 REDUCTION OR TERMINATION OF COMMITMENTS;
REPAYMENTS; PREPAYMENTS.
6.1 Reduction or Termination of the Commitments.
6.1.1 Scheduled Mandatory Reductions of Reducing Revolver Loan
Commitments. On the last Business Day of each
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Fiscal Quarter, during the period from September 30, 1998 to and including
June 30, 1999, the aggregate Reducing Revolver Loan Commitments of all
Lenders shall be reduced in an amount equal to 4.0% of the principal amount
of the aggregate Reducing Revolving Loan Commitments in effect as of the
Amendment Effective Time. On the last Business Day of each Fiscal Quarter
during the period from September 30, 1999 to and including June 30, 2002,
the aggregate Reducing Revolver Loan Commitments of all Lenders shall be
reduced in an amount equal to 7.0% of the principal amount of the aggregate
Reducing Revolving Loan Commitments in effect as of the Amendment Effective
Time.
6.1.2 Mandatory Reduction from Asset Sale. By no later than the date
360 days after the consummation of any Asset Sale, if the Net Cash Proceeds
of such Asset Sale have not been invested (or committed, pursuant to a
binding commitment subject only to reasonable customary closing conditions,
to be invested, and in fact is so invested, within an additional 90 days)
in fixed assets or real property which in the good faith judgment of the
Board of Directors of the Company consist of a Golf Course Property or
Properties or in a Designated Non-Recurring Capital Expenditure or in 100%
of the issued and outstanding capital stock of a Person the assets of which
are principally comprised of such fixed assets or real property, then the
Commitments shall be permanently reduced by an amount equal to 100% of the
Net Cash Proceeds of such Asset Sale not so reinvested, with such
reductions to be applied first to the Reducing Revolver Loan Commitments
until reduced to $0 and second to the Working Capital Revolving
Commitments.
6.1.3 Mandatory Reduction from Debt Securities Sale. Concurrently
with the consummation of any Debt Securities Sale, the Commitments shall be
permanently reduced by an amount equal to 100% of the Net Cash Proceeds of
such Debt Securities Sale, with such reductions to be applied first to the
Reducing Revolver Loan Commitments until reduced to $0 and second to the
Working Capital Revolving Commitments; provided that the Company shall not
be required to make such reduction in respect of the first $5,000,000 of
Net Cash Proceeds received by the Company after the Amendment Effective
Time.
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6.1.4 Mandatory Reduction from Equity Securities Sale. Concurrently
with the consummation of any Equity Securities Sale, the Commitments shall
be permanently reduced by an amount equal to 50% of the Net Cash Proceeds
of such Equity Securities Sale, with such reductions to be applied first to
the Reducing Revolver Loan Commitments until reduced to $0 and second to
the Working Capital Revolving Commitments.
6.1.5 Voluntary Reduction or Termination. The Company may from time
to time prior to the Working Capital Revolving Termination Date (in the
case of Working Capital Revolving Commitments) or prior to the Reducing
Revolver Termination Date (in the case of the Reducing Revolver Loan
Commitments), on at least three Business Days' prior written notice
received by the Agent (which shall promptly advise each Lender thereof),
permanently reduce (a) the amount of the Working Capital Revolving
Commitments to an amount not less than the sum of (i) the aggregate
principal amount of all outstanding Working Capital Revolving Loans (after
giving effect to any payment) plus (ii) the aggregate stated amount of all
then outstanding Letters of Credit and Reimbursement Obligations and/or (b)
the amount of the Reducing Revolver Loan Commitments to an amount not less
than the aggregate principal amount of all outstanding Reducing Revolver
Loans (after giving effect to any payment). Any such reduction shall be in
an aggregate amount of $500,000 or a higher integral multiple of $100,000.
The Company may at any time on like notice prior to the Working Capital
Revolving Termination Date (in the case of Working Capital Revolving
Commitments) or prior to the Reducing Revolver Termination Date (in the
case of the Reducing Revolver Loan Commitments) terminate the Working
Capital Revolving Commitments and/or the Reducing Revolver Loan
Commitments, as the case may be, upon payment in full of the applicable
Notes, cancellation of all outstanding Letters of Credit and payment of all
other Obligations of the Company hereunder.
6.1.6 All Reductions. All reductions of the Working Capital
Revolving Commitments and the Reducing Revolver Loan Commitments shall be
pro rata among the Lenders according to their Working Capital Revolving
Percentages or Reducing Revolver Loan Percentages, as the case may be.
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6.2 Repayments. The Working Capital Revolving Loans of each Lender
shall mature and be payable in full on the Working Capital Revolving
Termination Date. The Reducing Revolver Loans of each Lender shall mature
and be payable in full on the Reducing Revolver Termination Date.
6.3 Prepayments.
6.3.1 Mandatory Prepayments from Asset Sales. Within 15 days
after any Asset Sale, the Company shall make a prepayment of the
Reducing Revolver Loans in an amount equal to 100% of the Net Cash
Proceeds of such Asset Sale; provided that the Company shall not be
required to make such prepayment in respect of the first $500,000 of
Net Cash Proceeds received in each Fiscal Year.
6.3.2 Mandatory Prepayments from Debt Securities Sale. Within 15
days after the consummation of any Debt Securities Sale, the Company
shall make a prepayment of the Reducing Revolver Loans in an amount
equal to 100% of the Net Cash Proceeds of such Debt Securities Sale;
provided that the Company shall not be required to make such
prepayment in respect of the first $5,000,000 of Net Cash Proceeds
received by the Company after the Amendment Effective Time.
6.3.3 Mandatory Prepayments from Equity Securities Sale. Within
15 days after the consummation of any Equity Securities Sale, the
Company shall make a prepayment of the Reducing Revolver Loans in an
amount equal to 50% of the Net Cash Proceeds of such Equity Securities
Sale.
6.3.4 Mandatory Prepayments Due to Commitment Reductions. If,
after giving effect to any reduction of the Working Capital Revolving
Commitments or the Reducing Revolver Loan Commitments pursuant to
Section 6.1, (a) the sum of (i) the aggregate principal amount of all
outstanding Working Capital Revolving Loans plus (ii) the aggregate
stated amount of all then-outstanding Letters of Credit and
Reimbursement Obligations exceeds the aggregate amount of the Working
Capital Revolving Commitments or (b) the aggregate principal amount of
all outstanding Reducing Revolver Loans exceeds the aggregate amount
of the Reducing Revolver Loan Commitments,
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respectively, the Company will make an immediate repayment of Working
Capital Revolving Loans or Reducing Revolver Loans, as the case may be, in
an amount equal to such excess; provided that if, after giving effect to
any such repayment of Working Capital Revolving Loans, the sum of (x) the
aggregate principal amount of all outstanding Revolving Loans plus (y) the
aggregate stated amount of all then outstanding Letters of Credit and
Reimbursement Obligations exceeds the aggregate amount of the Working
Capital Revolving Commitments, the Company will deposit with the Agent cash
collateral in the amount of such excess on the same terms as any amounts
held by the Agent pursuant to Section 2.10.8.
6.3.5 Voluntary Prepayments. The Company may from time to time
prepay the Loans in whole or in part, provided that (a) the Company shall
give the Agent (which shall promptly advise each Lender) not less than one
Business Day's prior written notice thereof in the case of Floating Rate
Loans and not less than three Business Days' prior written notice thereof
in the case of Eurodollar Loans, specifying the Loans to be prepaid and the
date and amount of prepayment, (b) each partial prepayment shall be in a
principal amount of at least $500,000 and an integral multiple of $100,000,
(c) any prepayment of a Eurodollar Loan on a day other than the last day of
an Interest Period therefor shall be subject to Section 8.4 and (d) any
prepayment of any Loan shall include accrued interest to the date of
prepayment on the principal amount being repaid.
6.3.6 All Prepayments. All prepayments of Working Capital Revolving
Loans shall be pro rata among the Lenders according to their Working
Capital Revolving Percentages. All prepayments of Reducing Revolver Loans
shall be pro rata among the Lenders according to their Reducing Revolver
Loan Percentages.
SECTION 7 MAKING AND PRORATION OF PAYMENTS; SETOFF; TAXES.
7.1 Making of Payments. All payments of principal of or interest on the
Credit Extensions, and of all fees, shall be made by the Company to BAI, as
agent of the Agent, in immediately available funds at BAI's principal office in
Chicago not later than
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noon, Chicago time, on the date due (and BAI agrees to remit any such funds
received to the Agent); and funds received after that hour shall be deemed to
have been received by the Agent on the next following Business Day. Upon notice
from the Agent to BAI, the Company hereby authorizes BAI to charge the Company's
demand deposit account no. 72-10604 maintained with BAI for the amount of any
such payment on the due date therefor (but only to the extent of funds available
in such account), and hereby authorizes BAI to remit any such amount to the
Agent, but BAI's or the Agent's failure to so charge such account shall in no
way affect the obligation of the Company to make any such payment. The Agent
shall promptly remit to each Lender its share of all such payments received in
collected funds by the Agent for the account of such Lender.
All payments under Sections 8.1 and 8.4 shall be made by the Company
directly to the Lender or Lenders entitled thereto.
7.2 Application of Certain Payments. Except as otherwise expressly
provided herein, each payment of principal shall be applied to such Credit
Extensions as the Company shall direct by notice to be received by the Agent on
or before the date of such payment or, in the absence of such notice, as the
Agent shall determine in its discretion. Concurrently with each remittance to
any Lender of its share of any such payment, the Agent shall advise such Lender
as to the application of such payment.
7.3 Due Date Extension. If any payment of principal or interest with
respect to any of the Credit Extensions, or of any fees, falls due on a day
which is not a Business Day, then such due date shall be extended to the
immediately following Business Day (except, in the case of a Eurodollar Loan, if
the immediately following Business Day is the first Business Day of a calendar
month, in which case such due date shall the be immediately preceding Business
Day) and, in the case of principal, additional interest shall accrue and be
payable for the period of any such extension.
7.4 Setoff. Each of Parent and the Company agrees that the Agent and each
Lender have all rights of set-off and bankers' lien provided by applicable law,
and in addition thereto, each of Parent and the Company agrees that at any time
any Unmatured Event of
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Default under Section 12.1.1 or 12.1.4 or any Event of Default exists, the Agent
and each Lender may apply to any obligation of each of Parent and the Company
hereunder, whether or not then due, any and all balances, credits, deposits,
accounts or moneys of each of Parent and the Company then or thereafter with the
Agent or such Lender.
7.5 Proration of Payments. If any Lender shall obtain any payment or
other recovery (whether voluntary, involuntary, by application of offset or
otherwise) on account of principal of or interest on any Credit Extension in
excess of its pro rata share (based on such Lender's Total Percentage) of
payments and other recoveries obtained by all Lenders on account of principal of
and interest on Credit Extensions then held by them (other than any non-pro rata
interest payment resulting from a Loan being an Affected Loan), such Lender
shall purchase from the other Lenders such participation in the Credit
Extensions held by them as shall be necessary to cause such purchasing Lender to
share the excess payment or other recovery ratably with each of them; provided,
however, that if all or any portion of the excess payment or other recovery is
thereafter recovered from such purchasing Lender, the purchase shall be
rescinded and the purchase price restored to the extent of such recovery.
7.6 Net Payments; Tax Exemptions.
-----------------------------
(a) All payments by Parent or the Company of principal, interest, fees,
indemnities and other amounts payable hereunder and under the Notes shall be
made to the recipient thereof without setoff or counterclaim and free and clear
of, and without withholding or deduction for or on account of, any present or
future Taxes (other than Excluded Taxes) now or hereafter imposed on such
recipient or its income, property, assets or franchises (such recipient's
"Recipient Taxes"), except to the extent that such withholding or deduction (i)
is required by applicable law, (ii) results from the breach by such recipient of
its Exemption Agreement (as defined below) or (iii) would not be required if
such recipient's Exemption Representation (as defined below) were true. If any
such withholding or deduction is required by applicable law, Parent or the
Company (as the case may be) will:
(A) pay to the relevant authorities the full amount so
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required to be withheld or deducted;
(B) promptly forward to the Agent an official receipt or other
documentation satisfactory to the Agent evidencing such payment to such
authorities; and
(C) except to the extent that such withholding or deduction results
from the breach, by the recipient of a payment, of its Exemption Agreement
or would not be required if such recipient's Exemption Representation were
true, pay to the Agent for the account of the relevant recipient such
additional amount as is necessary to ensure that the net amount actually
received by such recipient will equal the full amount such recipient would
have received had no such withholding or deduction been required.
(b) In consideration of Parent's and the Company's agreements in clause (a)
of this Section 7.6, each Lender which is not organized under the laws of the
United States or a State thereof hereby agrees (such Lender's "Exemption
Agreement"), to the extent permitted by applicable law (including any applicable
double taxation treaty of the jurisdiction of its incorporation and the
jurisdiction in which its Eurodollar Office is located), to execute and deliver
to the Company (i) on or before the first scheduled payment date after the
Amendment Effective Time, a United States Internal Revenue Service Form 1001 or
4224 as appropriate (or successor forms), properly completed and claiming a
complete exemption, as the case may be, from withholding or deduction for or on
account of Recipient Taxes of such Lender, and (ii) a new Form 1001 or 4224 (or
successor form), as appropriate, upon the expiration or obsolescence of any
previously delivered Form.
(c) Each Lender hereby represents and warrants (such Lender's "Exemption
Representation") to Parent and the Company that on the Amendment Effective Time
(or, if later, the date it becomes a party to this Agreement) it is entitled to
receive payments of principal of, and interest on, Credit Extensions made by
such Lender without withholding or deduction for or on account of such Lender's
Recipient Taxes imposed by the United States of America or any political
subdivision thereof.
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SECTION 8 INCREASED COSTS; SPECIAL PROVISIONS FOR
EURODOLLAR LOANS.
8.1 Increased Costs. (a) If, after the Amendment Effective Time, the
adoption of any applicable law, rule or regulation, or any change therein, or
any change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Lender (or any Affiliate of such
Lender through which the Credit Extensions and/or Commitments are funded (a
"Lending Office")) with any request or directive (whether or not having the
force of law) of any such authority, central bank or comparable agency which
becomes effective after the Amendment Effective Time,
(A) shall subject any Lender (or any Lending Office of such Lender)
to any tax, duty or other charge (other than Excluded Taxes) with respect
to its Credit Extensions or its obligation to make Credit Extensions, or
shall change the basis of taxation of payments to any Lender of the
principal of or interest on its Credit Extensions or any other amounts due
under this Agreement in respect of its Credit Extensions or its obligation
to make Credit Extensions (except for changes in the rate of tax on the
overall net income of such Lender or its Lending Office imposed by the
jurisdiction in which such Lender's principal executive office or Lending
Office is located); or
(B) shall impose, modify or deem applicable any reserve (including,
without limitation, any reserve imposed by the Board of Governors of the
Federal Reserve System, but excluding any reserve included in the
determination of interest rates pursuant to Section 4), special deposit or
similar requirement against assets of, deposits with or for the account of,
or credit extended by any Lender (or any Lending Office of such Lender); or
(C) shall impose on any Lender (or its Lending Office) any other
condition affecting its Credit Extensions or its obligation to make Credit
Extensions ;
and the result of any of the foregoing is to increase the cost to
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(or in the case of Regulation D of the Board of Governors of the Federal Reserve
System, to impose a cost on) such Lender (or any Lending Office of such Lender)
of making or maintaining any Credit Extension, or to reduce the amount of any
sum received or receivable by such Lender (or its Lending Office) under this
Agreement, then within 10 days after demand by such Lender (which demand shall
be accompanied by a statement setting forth in reasonable detail the basis for
and a calculation of the amount of such demand, a copy of which shall be
furnished to the Agent), the Company shall pay directly to such Lender such
additional amount or amounts as will compensate such Lender for such increased
cost or such reduction.
(b) If any Lender shall reasonably determine that the adoption or phase-in
of any applicable law, rule or regulation regarding capital adequacy, or any
change therein, or any change in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Lender (or its
Lending Office) or any Person controlling such Lender with any request or
directive regarding capital adequacy (whether or not having the force of law) of
any such authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on such Lender's or such controlling
Person's capital as a consequence of such Lender's obligations hereunder
(including, without limitation, such Lender's obligations under the Working
Capital Revolving Commitment or the Reducing Revolver Loan Commitment) to a
level below that which such Lender or such controlling Person could have
achieved but for such adoption, change or compliance (taking into consideration
such Lender's or such controlling Person's policies with respect to capital
adequacy) by an amount deemed by such Lender or such controlling Person to be
material, then from time to time, within 10 days after demand by such Lender
(which demand shall be accompanied by a statement setting forth in reasonable
detail the basis for and a calculation of the amount of such demand, a copy of
which shall be furnished to the Agent), the Company shall pay to such Lender
such additional amount or amounts as will compensate such Lender or such
controlling Person for such reduction.
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8.2 Basis for Determining Interest Rate Inadequate or Unfair. If with
respect to any Interest Period:
(a) deposits in Dollars (in the applicable amounts) are not being
offered to the Agent in the interbank eurodollar market for such Interest
Period, or the Agent otherwise reasonably determines (which determination
shall be binding and conclusive on the Company) that by reason of
circumstances affecting the interbank eurodollar market adequate and
reasonable means do not exist for ascertaining the applicable Eurodollar
Rate;
(b) two or more Lenders having an aggregate Working Capital Revolving
Percentage or Reducing Revolver Loan Percentage, as applicable, of 20% or
more advise the Agent that the Eurodollar Rate (Reserve Adjusted) as
determined by the Agent will not adequately and fairly reflect the cost to
such Lenders of maintaining or funding such Loans for such Interest Period
(taking into account any amount to which such Lenders may be entitled under
Section 8.1); or
(c) Lenders having an aggregate Working Capital Revolving Percentage
or Reducing Revolver Loan Percentage, as applicable, of 20% or more advise
the Agent, that the making or funding of Eurodollar Loans has become
impracticable as a result of an event occurring in the interbank market
after the Amendment Effective Time which in the opinion of such Lenders
materially affects such Loans;
then the Agent shall promptly notify the other parties thereof and, so long as
such circumstances shall continue, (i) no Lender shall be under any obligation
to make or convert into Eurodollar Loans and (ii) on the last day of the current
Interest Period for each Eurodollar Loan, such Loan shall, unless then repaid in
full, automatically convert to a Floating Rate Loan.
8.3 Changes in Law Rendering Eurodollar Loans Unlawful. In the event that
any change in (including the adoption of any new) applicable laws or
regulations, or any change in the interpretation of applicable laws or
regulations by any governmental or other regulatory body charged with the
administration thereof, should make it (or in the good faith judgment of any
Lender cause a
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substantial question as to whether it is) unlawful for any Lender to make,
maintain or fund Eurodollar Loans, then such Lender shall promptly notify each
of the other parties hereto and, so long as such circumstances shall continue,
(a) such Lender shall have no obligation to make or convert into Eurodollar
Loans (but shall make Floating Rate Loans concurrently with the making of or
conversion into Eurodollar Loans by the Lenders which are not so affected, in
each case in an amount equal to such Lender's pro rata share of all Eurodollar
Loans which would be made or converted into at such time in the absence of such
circumstances) and (b) on the last day of the current Interest Period for each
Eurodollar Loan of such Lender (or, in any event, on such earlier date as may be
required by the relevant law, regulation or interpretation), such Eurodollar
Loan shall, unless then repaid in full, automatically convert to a Floating Rate
Loan. Each Floating Rate Loan made by a Lender which, but for the circumstances
described in the foregoing sentence, would be a Eurodollar Loan (an "Affected
Loan") shall remain outstanding for the same period as the Advance of Eurodollar
Loans of which such Affected Loan would be a part absent such circumstances.
8.4 Funding Losses. The Company hereby agrees that upon demand by any
Lender (which demand shall be accompanied by a statement setting forth the basis
for the calculations of the amount being claimed, a copy of which shall be
furnished to the Agent) the Company will indemnify such Lender against any net
loss or expense (including, without limitation, all lost profits) which such
Lender may sustain or incur (including, without limitation, any net loss or
expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by such Lender to fund or maintain any Eurodollar Loan), as
reasonably determined by such Lender, as a result of (a) any payment or
prepayment or conversion of any Eurodollar Loan of such Lender on a date other
than the last day of an Interest Period for such Loan (including, without
limitation, any conversion pursuant to Section 8.3) or (b) any failure of the
Company to borrow or convert any Loans on a date specified therefor in a notice
of borrowing or conversion pursuant to this Agreement. For this purpose, all
notices of borrowing or conversion to the Agent pursuant to this Agreement shall
be deemed to be irrevocable.
8.5 Right of Lenders to Fund through Other Offices. Each
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Lender may, if it so elects, fulfill its commitment as to any Eurodollar Loan by
causing a foreign branch or Affiliate of such Lender to make such Loan, provided
that in such event for the purposes of this Agreement such Loan shall be deemed
to have been made by such Lender and the obligation of the Company to repay such
Loan shall nevertheless be to such Lender and shall be deemed held by it, to the
extent of such Loan, for the account of such branch or Affiliate, and provided,
further, the cost to the Company of causing such foreign branch or Affiliate to
make such Loan shall not be greater than the cost would have been if such Lender
had funded such Loan directly.
8.6 Discretion of Lenders as to Manner of Funding. Notwithstanding any
provision of this Agreement to the contrary, each Lender shall be entitled to
fund and maintain its funding of all or any part of its Loans in any manner it
sees fit, it being understood, however, that for the purposes of this Agreement
all determinations hereunder shall be made as if such Lender had actually funded
and maintained each Eurodollar Loan during each Interest Period for such Loan
through the purchase of deposits having a maturity corresponding to such
Interest Period and bearing an interest rate equal to the Eurodollar Rate for
such Interest Period.
8.7 Mitigation of Circumstances; Replacement of Affected Lender. (a)
Each Lender shall promptly notify the Company and the Agent of any event of
which it has knowledge which will result in, and will use reasonable commercial
efforts available to it (and not, in such Lender's good faith judgment,
otherwise disadvantageous to such Lender) to mitigate or avoid, (i) any
obligation by the Company to pay any amount pursuant to Section 7.6 or 8.1 and
(ii) the occurrence of any circumstances of the nature described in Section 8.2
or 8.3 (and, if any Lender has given notice of any such event described in
clause (i) or (ii) above and thereafter such event ceases to exist, such Lender
shall promptly so notify the Company and the Agent). Without limiting the
foregoing, each Lender will designate a different Lending Office if such
designation will avoid (or reduce the cost to the Company of) any event
described in clause (i) or (ii) of the preceding sentence and such designation
will not, in such Lender's sole judgment, be otherwise disadvantageous to such
Lender.
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(b) At any time any Lender is an Affected Lender, the Company may replace
such Affected Lender as a party to this Agreement with one or more other bank(s)
or financial institution(s) reasonably satisfactory to the Agent (and upon
notice from the Company such Affected Lender shall assign pursuant to an
Assignment Agreement, and without recourse or warranty, its Commitments, if any,
its Loans, its Reimbursement Obligations, and all of its other rights and
obligations hereunder, to such replacement bank(s) or other financial
institution(s) for a purchase price equal to the sum of the principal amount of
the Loans and Reimbursement Obligations so assigned, all accrued and unpaid
interest thereon, its ratable share of all accrued and unpaid non-use fees, any
amounts payable under Section 8.4 as a result of such Lender receiving payment
of any Eurodollar Loan prior to the end of an Interest Period therefor and all
other Obligations owed to such Affected Lender hereunder).
8.8 Conclusiveness of Statements; Survival of Provisions. Determinations
and statements of any Lender pursuant to Section 8.1, 8.2, 8.3 or 8.4 shall be
conclusive absent demonstrable error. Lenders may use reasonable averaging and
attribution methods in determining compensation under Sections 8.1 and 8.4, and
the provisions of such Sections shall survive repayment of the Obligations,
cancellation of the Notes and the Letters of Credit, and any termination of this
Agreement.
SECTION 9 WARRANTIES.
To induce the Agent and the Lenders to enter into this Agreement, and the
Lenders to make Credit Extensions hereunder, each of Parent and the Company
warrants to the Agent and the Lenders that:
9.1 Organization, etc. Each of Parent and the Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware; each Subsidiary which is a corporation is duly organized,
validly existing and in good standing under the laws of the state of its
incorporation; and each Subsidiary which is a joint venture is duly organized
and validly existing as a California general partnership; each of Parent, the
Company and each Subsidiary is duly qualified to do business in each
jurisdiction where the nature of its business makes such qualification
necessary, except where the failure to be so
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qualified would not have a Material
Adverse Effect; and each of Parent, the Company and each Subsidiary has full
corporate power and authority to own its property and conduct its business as
presently conducted by it.
9.2 Authorization; No Conflict. The execution and delivery by Parent and
the Company of this Agreement and each other Transaction Document to which it is
a party, the Credit Extensions hereunder, the execution and delivery by each
Guarantor of each Loan Document to which it is a party, the performance by each
of Parent and the Company of its obligations under each Transaction Document to
which it is a party, and the performance by each Guarantor of its obligations
under each Loan Document to which it is a party are within the corporate powers
of Parent, the Company and each Guarantor, as applicable, have been duly
authorized by all necessary corporate action on the part of Parent, the Company
and each Guarantor (including any necessary shareholder action), (a) have
received all necessary governmental or third party approvals (if any shall be
required), and (b) do not and will not (i) violate any provision of law or any
order, decree or judgment of any court or other government agency which is
binding on Parent, the Company or any Guarantor, (ii) contravene or conflict
with, or result in a breach of, any provision of the Certificate of
Incorporation, By-Laws or other organizational documents of Parent, the Company
or any Guarantor, (iii) contravene or conflict with, or result in a
breach of, any provision of any agreement, indenture, instrument or other
document, or any judgment, order or decree, which is binding on Parent, the
Company, any Guarantor or any other Subsidiary or (iv) result in, or require,
the creation or imposition of any Lien on any property of Parent, the Company,
any Guarantor or any other Subsidiary (other than pursuant to the Loan
Documents), except in the case of clauses (a) and (b)(i) and (iii), such
violations, conflicts, contraventions or breaches that, individually or in the
aggregate, would not be reasonably likely to have a Material Adverse Effect.
9.3 Validity and Binding Nature. This Agreement is, and upon the
execution and delivery thereof each other Transaction Document to which Parent
or the Company is a party will be, the legal, valid and binding obligation of
Parent or the Company, as the case may be, enforceable against Parent or the
Company, as the case may be, in accordance with its terms, except that
enforceability may be
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limited by bankruptcy, insolvency, fraudulent conveyance, fraudulent transfer,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and by general principles of equity
(regardless of whether enforcement is sought in equity or at law); and each Loan
Document to which any Guarantor is a party will be, upon the execution and
delivery thereof by such Guarantor, the legal, valid and binding obligation of
such Guarantor, enforceable against such Guarantor in accordance with its terms,
except that enforceability may be limited by bankruptcy, insolvency, fraudulent
conveyance, fraudulent transfer, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights generally and by
general principles of equity (regardless of whether enforcement is sought in
equity or at law).
9.4 Financial Information. (a) The audited consolidated and unaudited
consolidating financial statements of the Company and its Subsidiaries as at
September 30, 1995 and for the year then ended, and the unaudited, year-to-date
consolidated and consolidating financial statements of the Company and its
Subsidiaries for the three months ended March 31, 1996, together with the
unaudited financial statements for each Pre-Existing Property, for the three
months ended March 31, 1996, (i) are true and correct in all material respects,
subject to normal year-end adjustments, (ii) have been prepared in accordance
with generally accepted accounting principles consistently applied throughout
the periods involved (except as disclosed therein and, in the case of interim
financial statements, for the absence of footnote disclosures and year-end
adjustments) and (iii) present fairly the consolidated financial condition of
the Company and its Subsidiaries at such dates and the results of their
operations for the periods then ended, subject to normal year-end adjustments.
(b) The unaudited consolidated balance sheet of Parent and
its Subsidiaries as of March 31, 1996 (giving effect to the refinancing
contemplated by this Agreement and the other transactions contemplated to occur
on such date), a copy of which has been delivered to each Lender, was prepared
by Parent in accordance with generally accepted accounting principles.
(c) The forecasted consolidated (i) balance sheet, (ii) profit and loss
statement, (iii) cash flow statement and (iv)
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capitalization statement, together with supporting details and a statement of
underlying assumptions, copies of which have been delivered to each Lender, have
been prepared by the Company in light of the past operations of the business of
the Company and its Subsidiaries and are based upon, as of the Amendment
Effective Time, the good faith estimate of the Company and its senior
management, historical financial information and assumptions the Company deems
reasonable and appropriate in light of current circumstances (it being
understood that such forecasted data do not constitute a representation or
warranty that the results stated therein will be achieved).
(d) Other than any liability incident to any litigation or proceedings set
forth in Schedule 9.6 and such other Contingent Liabilities set forth on such
Schedule 9.6 and the guaranties of the Senior Company Notes by the Company's
Subsidiaries, neither Parent nor any of its Subsidiaries has any material
contingent liabilities not provided for or disclosed in the financial statements
referred to in clause (a).
9.5 No Material Adverse Change. Since September 30, 1995, no event or
events have occurred which, individually or in the aggregate, have had or are
reasonably likely to have a Material Adverse Effect.
9.6 Litigation. Except as set forth in Schedule 9.6, no litigation,
arbitration, governmental investigation, proceeding or inquiry is pending, or,
to the best knowledge of Parent and the Company (after due inquiry), threatened
against Parent or any of its Subsidiaries:
(a) (i) which seeks to enjoin or otherwise prevent the consummation
of, or to recover any damages or obtain relief as a result of, (x) the loan
and equity transactions contemplated by the Transaction Documents (other
than any such litigation, arbitration, governmental investigation,
proceeding or inquiry with respect to the Stockholders' Agreement brought
by or against or affecting any Person (except any Lender or any initial or
successive transferee of any Lender) Beneficially Owning less than 5% of
the capital stock of Parent), or (y) any material agreement pursuant to
which equity capital is contributed to Parent or Parent's capital stock is
issued (it
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being understood that a material agreement for purposes of this clause (y)
would be an agreement entered into with a Person Beneficially Owning 5% or
more of the capital stock of Parent), or (ii) which relates to the validity
of any of the foregoing agreements or instruments (subject to the foregoing
qualifications); or
(b) which is a development in the litigation, arbitration,
governmental investigation, proceeding or inquiry set forth in such
Schedule 9.6 (i) that would have or is reasonably likely to have a Material
Adverse Effect or (ii) that is reasonably likely to adversely affect the
Lenders and that arises with respect to any of the agreements described in
clause (a) above or any transactions contemplated hereby or thereby; or
(c) which otherwise could reasonably be expected to have a Material
Adverse Effect.
9.7 Ownership of Properties; Liens. Each of Parent, the Company and each
Subsidiary owns good and marketable title to, or a valid leasehold interest in,
or a valid right to use, all of its Golf Course Properties and all other
properties and assets, real and personal, tangible and intangible, of any nature
whatsoever (including patents, trademarks, trade names, service marks and
copyrights), free and clear of all Liens, charges and claims (including
infringement claims with respect to patents, trademarks, copyrights and the
like) except as permitted pursuant to Section 10.8.
9.8 Subsidiaries; Capitalization.
(a) As of the Amendment Effective Time, the Company has no
Subsidiaries except those listed in Schedule 9.8.
(b) Parent has no Subsidiaries except the Company.
(c) Schedule 9.8 sets forth each class of capital stock of Parent that
is outstanding on a fully diluted basis on the Amendment Effective Time,
and which is intended to be issued promptly following the Amendment
Effective Time, and each person to whom more than 2% of the outstanding
shares of such
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capital stock is or will be issued and the percentage of such common stock
Beneficially Owned by such Person.
9.9 Pension and Welfare Plans. Except as disclosed to the Lenders in
writing prior to the Amendment Effective Time, during the twelve-consecutive-
month period prior to the date of the execution and delivery of this Agreement
or the making of any Credit Extension hereunder, (a) no steps have been taken to
terminate any Pension Plan which would be reasonably likely to result in Parent
or the Company being required to make a contribution to such Pension Plan, or
incurring a liability or obligation to such Pension Plan, in excess of $250,000,
and (b) no contribution failure has occurred with respect to any Pension Plan
sufficient to give rise to a Lien under Section 302(f) of ERISA. No condition
exists or event or transaction has occurred with respect to any Pension Plan
which could result in the incurrence by Parent or the Company of any material
liability, fine or penalty under ERISA or the Internal Revenue Code. Except as
set forth on Schedule 9.9, neither Parent nor the Company has any contingent
liability with respect to any post-retirement benefit under a Welfare Plan,
other than liability for continuation coverage described in Part 6 of subtitle B
of title I of ERISA.
9.10 Investment Company Act. Neither Parent, the Company nor any
Subsidiary is an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
9.11 Public Utility Holding Company Act. Neither Parent, the Company nor
any Subsidiary is a "holding company", or a "subsidiary company" of a "holding
company", or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company", within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
9.12 Regulations G, T, U and X. Neither Parent nor the Company is engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying Margin Stock. None of the
proceeds of any Credit Extension will be used for the purpose of, or be made
available by Parent, the Company or any of its Subsidiaries in any manner to any
other Person to enable or assist such Person in, purchasing or carrying Margin
Stock.
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9.13 Taxes. Each of Parent, the Company and each Subsidiary has filed all
tax returns and reports required by law to have been filed by it and has paid
all taxes and governmental charges thereby shown to be owing, except (a) as
disclosed on Schedule 9.6 and (b) for any such taxes or charges which are being
diligently contested in good faith by appropriate proceedings and for which
adequate reserves in accordance with generally accepted accounting principles
shall have been set aside on its books.
9.14 Solvency, etc. At the Amendment Effective Time (or, in the case of any
Person which becomes a Guarantor after the Amendment Effective Time, on the date
such Person becomes a Guarantor), and immediately prior to and after giving
effect to each borrowing hereunder and the use of the proceeds thereof, (a) each
of Parent's, the Company's and each Guarantor's assets will exceed its
liabilities and (b) each of Parent, the Company and each Guarantor will be
solvent, will be able to pay its debts as they mature, will own property with
fair saleable value greater than the amount required to pay its debts as they
come due and will have capital sufficient to carry on its business as then
constituted.
9.15 Insurance. Set forth on Schedule 9.15 is a complete and accurate
summary of the property and casualty insurance program carried by Parent, the
Company and its Subsidiaries at the Amendment Effective Time, including the
insurer's(s') name(s), policy number(s), expiration date(s), amount(s) of
coverage, type(s) of coverage, the annual premium(s), Best's policyholder's and
financial size ratings of the insurer(s), exclusions, deductibles and self-
insured retention and a description in reasonable detail of (a) any
retrospective rating plan, fronting arrangement or other self-insurance or risk
assumption agreed to by Parent, the Company or any Subsidiary or imposed upon
Parent, the Company or any Subsidiary by any such insurer and (b) any self-
insurance program that is in effect.
9.16 Contracts; Labor Matters. Except as disclosed on Schedule 9.16: (a)
neither Parent, the Company nor any Subsidiary is a party to any contract or
agreement, or is subject to any charge, corporate restriction, judgment, decree
or order, which materially and adversely affects its business, property, assets,
operations or condition, financial or otherwise; (b) no labor
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contract to which Parent, the Company or any Subsidiary is a party or is
otherwise subject is scheduled to expire prior to the Reducing Revolver
Termination Date or the Working Capital Revolving Termination Date; (c) neither
Parent, the Company nor any Subsidiary has, within the two-year period preceding
the Amendment Effective Time, taken any action which would have constituted or
resulted in a "plant closing" or "mass layoff" within the meaning of the Federal
Worker Adjustment and Retraining Notification Act of 1988 or any similar
applicable federal, state or local law, and neither Parent nor the Company has
any reasonable expectation that any such action is or will be required at any
time prior to the Reducing Revolver Termination Date or the Working Capital
Revolving Termination Date; and (d)(i) neither Parent, the Company nor any
Subsidiary is a party to any labor dispute and (ii) there are no strikes or
walkouts relating to any labor contracts to which Parent, the Company or any
Subsidiary is a party or is otherwise subject.
9.17 Environmental and Safety and Health Matters. Except as disclosed on
Schedule 9.17, Parent, the Company and each of its Subsidiaries and each
property, operation and facility that Parent, the Company or any Subsidiary
owns, operates or controls (including, without limitation, each Golf Course
Property) (i) complies in all material respects with (A) all applicable
Environmental Laws and (B) all applicable Occupational Safety and Health Laws;
(ii) is not subject to any judicial or administrative proceeding alleging the
violation of any Environmental Law or Occupational Safety and Health Law; (iii)
has not received any notice (A) that it may be in violation of any Environmental
Law or Occupational Safety and Health Law, or (B) threatening the commencement
of any proceeding relating to allegedly unlawful, unsafe or unhealthy
conditions, or (C) alleging that it is or may be responsible for any response,
cleanup, or corrective action, including but not limited to any remedial
investigation/feasibility study, under any Environmental Law or Occupational
Safety and Health Law; (iv) is not the subject of federal or state investigation
evaluating whether any investigation, remedial action or other response is
needed to respond to (A) a spillage, disposal or release or threatened release
into the environment of any Hazardous Material, or (B) any allegedly unsafe or
unhealthful condition; (v) has not filed any notice under or relating to any
Environmental Law or Occupational Safety and Health Law indicating
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or reporting (A) any past or present spillage, disposal or release into the
environment of, or treatment, storage or disposal of, any Hazardous Material, or
(B) any potentially unsafe or unhealthful condition, and to the best of Parent's
and the Company's knowledge there exists no basis for such notice irrespective
of whether such notice was actually filed; and (vi) has no material contingent
liability in connection with (A) any actual or potential spillage, disposal or
release into the environment of, or otherwise with respect to, any Hazardous
Material, whether on any premises owned or occupied by Parent, the Company or
any Subsidiary or on any other premises, or (B) any unsafe or unhealthful
condition. Except as disclosed on Schedule 9.17, there are no Hazardous
Materials on, in or under any property or facilities owned, operated or
controlled by Parent, the Company or any Subsidiary (including, without
limitation, Golf Course Properties), including but not limited to such Hazardous
Materials that may be contained in underground storage tanks, but excepting
Hazardous Materials used in the ordinary course of the business of Parent, the
Company and its Subsidiaries and used, stored, handled, treated and disposed in
all material respects in accordance with all applicable laws, including
Environmental Laws and Occupational Safety and Health Laws.
9.18 Real Property. Set forth on Schedule 9.18 is a complete and accurate
list, as of the Amendment Effective Time, of the address and legal description
of any real property owned or leased by Parent, the Company or any Subsidiary
(including, without limitation, Golf Course Properties), together with, in the
case of leased property, the name and mailing address of the lessor of such
property.
9.19 Information. All written information heretofore or contemporaneously
herewith furnished by or on behalf of Parent, the Company or any Subsidiary to
any Lender for purposes of or in connection with this Agreement, the other Loan
Documents or the Senior Note Documents and the transactions contemplated hereby
and thereby is, and all written information hereafter furnished by or on behalf
of Parent, the Company or any Subsidiary to any Lender pursuant hereto or in
connection herewith will be true and accurate in every material respect on the
date as of which such information is dated or certified, and none of such
information is or will be incomplete by omitting to state any material fact
necessary to make
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such information not misleading; provided that the foregoing representation and
warranty shall be made not on an absolute basis but rather on the qualified
basis of to the best knowledge of Parent, the Company or such Subsidiary, as the
case may be, after due inquiry if such representation and warranty is made with
respect to historical information as to any Golf Course Property as to any date
prior to its acquisition by the Company or any Subsidiary or with respect to any
other information not prepared by or on behalf of Parent, the Company, any
Subsidiary, Brentwood or any of their respective Affiliates.
9.20 Patents, Trademarks, etc. Parent, the Company and each of its
Subsidiaries owns (or is licensed to use) and possesses all such patents, patent
rights, trademarks, trademark rights, trade names, trade name rights, service
marks, service mark rights, and copyrights as Parent and the Company considers
necessary for the conduct of the businesses of Parent and the Company and its
Subsidiaries as now conducted without, individually or in the aggregate, any
infringement or alleged infringement, except as disclosed in Schedule 9.6, upon
rights of other Persons which might reasonably be expected to have a Material
Adverse Effect, and there is no individual patent or patent license or trademark
or trademark right the loss or which might reasonably be expected to have a
Material Adverse Effect.
9.21 The Collateral Documents. The provisions of the Collateral Documents
executed by Parent, the Company or any Subsidiary in favor of the Agent securing
the Notes and all other Obligations from time to time outstanding hereunder and
under the other Loan Documents are effective to create, in favor of the Agent,
on behalf of the Lenders, a legal, valid and enforceable Lien in all right,
title and interest of Parent, the Company or such Subsidiary, as applicable, in
any and all of the collateral described therein, and when all appropriate
filings and recordings have been made, each of such Collateral Documents will
constitute a fully perfected Lien in all right, title and interest of Parent,
the Company or such Subsidiary in such collateral superior in right to any
Liens, existing or future, which Parent, the Company or such Subsidiary or any
creditors thereof or purchasers therefrom, or any other Person, may have against
such collateral or interests therein, except to the extent, if any, otherwise
provided therein or in this Agreement.
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SECTION 10 COVENANTS.
Until the expiration or termination of the Commitments, the expiration or
cancellation of all Letters of Credit and thereafter until all Obligations of
Parent and the Company hereunder and under the other Loan Documents are paid in
full, each of Parent and the Company agrees that, unless at any time the
Required Lenders shall otherwise expressly consent in writing, it will:
10.1 Reports, Certificates and Other Information. Furnish to each Lender:
10.1.1 Annual Report. Promptly when available and in any event within 90
days after the close of each Fiscal Year, (a) a copy of the annual reports of
Parent and its Subsidiaries and the Company and its Subsidiaries, respectively,
for such Fiscal Year, including therein consolidated balance sheets of Parent
and its Subsidiaries and the Company and its Subsidiaries, respectively, as of
the end of such Fiscal Year and consolidated statements of earnings and cash
flow of Parent and its Subsidiaries and the Company and its Subsidiaries,
respectively, for such Fiscal Year, which reports (i) shall be certified by
Ernst & Young, or other independent auditors of recognized national standing
selected by Parent and reasonably acceptable to the Required Lenders, in an
audit report which shall be without qualification as to going concern or scope
and (ii) shall be accompanied by a written statement from such auditors to the
effect that in making the examination necessary for the signing of such audit
reports they have not become aware of any Event of Default or Unmatured Event of
Default that has occurred and is continuing or, if they have become aware of any
such event, describing it in reasonable detail; and (b) a copy of the
consolidating balance sheets of Parent and its Subsidiaries and the Company and
its Subsidiaries, respectively, as of the end of such Fiscal Year and
consolidating statements of earnings for Parent and its Subsidiaries and the
Company and its Subsidiaries, respectively, for such Fiscal Year, together with
a certificate of a Responsible Officer certifying that such financial statements
in clauses (a) and (b) fairly present the financial condition and results of
operations of Parent and its Subsidiaries and the Company and its Subsidiaries,
respectively, as of the dates and periods indicated.
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10.1.2 Quarterly Reports. Promptly when available and in any event within
45 days after the end of the first three Fiscal Quarters of each Fiscal Year,
consolidated and consolidating balance sheets of Parent and its Subsidiaries and
the Company and its Subsidiaries, respectively, as of the end of such Fiscal
Quarter and consolidated and consolidating statements of earnings and
consolidated statements of cash flow for such Fiscal Quarter and for the period
beginning with the first day of such Fiscal Year and ending on the last day of
such Fiscal Quarter, including with respect to statements of earnings a
comparison with the corresponding Fiscal Quarter and period of the previous
Fiscal Year and a comparison with the Budget for such Fiscal Quarter and for
such period of such Fiscal Year, together with a certificate of a Responsible
Officer to the effect that such financial statements fairly present the
financial condition and results of operations of Parent and its Subsidiaries and
the Company and its Subsidiaries, respectively, as of the dates and periods
indicated, subject to changes resulting from normal year-end adjustments.
10.1.3 Monthly Reports. Promptly when available and in any event within
30 days after the end of each month of each Fiscal Year, consolidated and
consolidating balance sheets of the Company and its Subsidiaries as of the end
of such calendar month and consolidated and consolidating statements of earnings
and consolidated statements of cash flow for such month and for the period
beginning with the first day of such Fiscal Year and ending on the last day of
such month, including with respect to statements of earnings a comparison with
the corresponding month and period of the previous Fiscal Year and a comparison
with the Budget for such month and for such period of such Fiscal Year, together
with (a) a certificate of a Responsible Officer to the effect that such
financial statements fairly present the financial condition and results of
operations of the Company and its Subsidiaries as of the dates and periods
indicated, subject to changes resulting from normal year-end adjustments, and
(b) (i) for those Golf Course Properties with members, a report of the number of
members by membership category per Golf Course Property and (ii) such
information as the Company provided under the Original Credit Agreement in
respect of its Golf Course Properties.
10.1.4 Certificates. Contemporaneously with the furnishing of a copy of
each annual audit report pursuant to Section 10.1.1,
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and each set of quarterly statements pursuant to Section 10.1.2, a duly
completed certificate in the form of Exhibit B-1, with appropriate insertions,
dated the date of such annual report or such quarterly statements and signed by
a Responsible Officer of the Company, containing a computation of each of the
financial ratios and restrictions set forth in this Section 10 and to the effect
that such Responsible Officer has not become aware of any Event of Default or
Unmatured Event of Default that has occurred and is continuing or, if there is
any such event, describing it and the steps, if any, being taken to cure it.
10.1.5 Reports to SEC, Shareholders and Holders of Debt. Promptly upon
the filing or sending thereof, a copy of (a) any annual, periodic or special
report or registration statement (inclusive of exhibits thereto) filed with the
SEC or any securities exchange by Parent or the Company, (b) any report, proxy
statement or similar communication to Parent's or the Company's shareholders
generally and (c) all material notices, documents, or other instruments required
to be delivered pursuant to any agreement governing any Funded Debt of the
Company or any Subsidiary or any Debt of Parent (including, in each case,
without limitation any Senior Note Documents) and not otherwise required to be
delivered hereunder.
10.1.6 Budget, Etc. (i) Promptly upon completion thereof, but in no event
later than October 31 of each Fiscal Year, a copy of the Company's annual
statement of earnings forecast on a consolidated basis, including a forecasted
balance sheet and statement of cash flow, and an earnings forecast for each Golf
Course Property owned or operated by the Company or its Subsidiaries, in each
case on an annual basis for the three succeeding Fiscal Years, and (ii) promptly
upon completion thereof, but in no event later than October 31 of each Fiscal
Year, a copy of Parent's annual statement of earnings forecast on a consolidated
basis (the "Budget"), and an earnings forecast for each Golf Course Property
owned or operated by the Company or its Subsidiaries, in each case on a monthly
basis for the succeeding Fiscal Year.
10.1.7 Stockholders' Agreements. Promptly upon the execution and delivery
thereof, copies of any stockholder or similar agreement entered into by Parent
and any holder of the capital stock of Parent.
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10.1.8 Notice of Default, Litigation and ERISA Matters. Promptly (and in
any event within one Business Day in the case of clause (a) and within three
Business Days in the case of clauses (b) through (e)) after any officer of
Parent or the Company learns of any of the following, written notice describing
the same and the steps being taken by Parent, the Company or the Subsidiary
affected thereby with respect thereto:
(a) the occurrence of an Event of Default or an Unmatured Event of
Default;
(b) any litigation, arbitration or governmental investigation,
proceeding or inquiry not previously disclosed by Parent or the Company to
the Lenders which has been instituted or, to the knowledge of Parent or the
Company, is threatened against Parent, the Company or any Subsidiary or to
which any of the properties of any thereof is subject which has had or is
reasonably likely to have a Material Adverse Effect;
(c) any material adverse development which occurs in any litigation,
arbitration or governmental investigation, proceeding or inquiry previously
disclosed on Schedule 9.6 or pursuant to clause (b);
(d) the institution of any steps by Parent, the Company,
any of its Subsidiaries or any other Person to terminate any Pension Plan,
or the failure to make a required contribution to any Pension Plan if such
failure is sufficient to give rise to a Lien under Section 302(f) of ERISA,
or the taking of any action with respect to a Pension Plan which could
result in the requirement that Parent or the Company furnish a bond or
other security to the PBGC or such Pension Plan, or the occurrence of any
event with respect to any Pension Plan which could result in the incurrence
by Parent or the Company of any material liability, fine or penalty, or any
material increase in the contingent liability of Parent or the Company with
respect to any post-retirement Welfare Plan benefit; and
(e) the occurrence of any other event or circumstance which has had
or is reasonably likely to have a Material Adverse Effect.
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<PAGE>
10.1.9 Subsidiaries. Promptly upon the occurrence thereof, a written
report of any change in the list of Subsidiaries of Parent or the Company.
10.1.10 Management Reports. Promptly upon the request of the Agent or any
Lender, copies of all detailed financial and management reports submitted to
Parent or the Company by independent auditors in connection with any annual or
interim audit made by such auditors of the books of Parent or the Company.
10.1.11 Insurance Information. Not later than 90 days after the end of
each Fiscal Year, a complete and accurate summary of the property and casualty
insurance program of Parent and the Company, containing substantially the same
information with respect to such insurance program as the information set forth
on Schedule 9.15; and promptly upon the occurrence thereof, a written report of
any change in Parent's or the Company's insurance program which will materially
reduce the amount or scope of coverage.
10.1.12 Capital Stock Ownership. Concurrently with the delivery of the
annual and quarterly financial statements described in Sections 10.1.1 and
10.1.2, a report showing the ownership of each class of capital stock of Parent
that is outstanding at the end of such Fiscal Quarter (which report need not
disclose the identity of any Person Beneficially Owning less than 2% of such
capital stock).
10.1.13 Update on Delayed Subsequent Acquisition Capital Expenditures.
Concurrently with the delivery of the annual and quarterly financial statements
described in Sections 10.1.1 and 10.1.2, a report showing changes to projected
Delayed Subsequent Acquisition Capital Expenditures during the previous Fiscal
Quarter, including amounts spent and remaining to be spent per Golf Course
Property.
10.1.14 Other Information. Promptly from time to time, such other
information concerning Parent, the Company and its Subsidiaries as any Lender or
the Agent may reasonably request.
10.2 Books, Records and Inspections. Keep, and cause each Subsidiary to
keep, its books and records in accordance with sound business practices
sufficient to allow the preparation of financial
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statements in accordance with generally accepted accounting principles; permit,
and cause each Subsidiary to permit, on reasonable notice and at reasonable
times and intervals (or at any time without notice during the existence of an
Event of Default or Unmatured Event of Default) any Lender or the Agent or any
representative thereof to inspect the properties and operations of the Company
and of such Subsidiary; and permit, and cause each Subsidiary to permit, on
reasonable notice and at reasonable times and intervals (or at any time without
notice during the existence of an Event of Default or Unmatured Event of
Default) any Lender or the Agent or any representative thereof to visit any or
all of its offices, to perform appraisals and audits of the Company's or such
Subsidiary's real and/or personal property, to discuss its financial matters
with its officers and, after notice to Parent or the Company, its independent
auditors (and each of Parent and the Company hereby authorizes such independent
auditors to discuss such financial matters with the Agent or any representative
thereof), and to examine (and, at the expense of the Company or the applicable
Subsidiary, photocopy extracts from) any of its books or other corporate
records. All such visits, appraisals, audits, discussions, and examinations
shall be at the Company's expense; provided that so long as no Event of Default
or Unmatured Event of Default exists, the Company shall not be required to pay
for more than two such visits, appraisals and audits in any Fiscal Year by the
Lenders (which visits, appraisals and audits shall be coordinated through the
Agent) and provided, further, that the Company shall not be required to pay for
any marketing visits made in the ordinary course of business by any Lender.
10.3 Insurance. Maintain, and cause each Subsidiary to maintain, with
reputable, financially sound insurance companies (rated at least A by A.M. Best
& Co.), insurance to such extent and against such hazards and liabilities as is
customarily maintained by companies similarly situated (and, in any event, such
insurance as may be required by any law or governmental regulation or any court
order or decree); and, upon request of the Agent or any Lender, furnish to the
Agent or such Lender a certificate setting forth in reasonable detail the nature
and extent of all insurance maintained by Parent, the Company and its
Subsidiaries.
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10.4 Compliance with Laws; Maintenance of Property; Payment of Taxes and
Liabilities.
(a) Comply, and cause each Subsidiary to comply, in all material
respects with all applicable laws, rules, regulations and orders the
noncompliance with which would be reasonably likely to have a Material
Adverse Effect;
(b) maintain or cause to be maintained, and cause each Subsidiary to
maintain or cause to be maintained, in good repair, working order and
condition (ordinary wear and tear excepted) all material properties
(including, without limitation, Golf Course Properties) used in its
business, and make, and cause each Subsidiary to make, all appropriate
repairs, renewals and replacements of such properties;
(c) pay, and cause each Subsidiary to pay, prior to delinquency, all
taxes and other governmental charges against it or any of its property;
provided, however, that the foregoing shall not require Parent, the Company
or any Subsidiary to pay any such tax or charge so long as it shall contest
the validity thereof in good faith by appropriate proceedings and shall set
aside on its books such reserves with respect thereto as are required by
generally accepted accounting principles; and
(d) not, and not permit any Subsidiary to, file or consent to the
filing of any consolidated income tax return with any Person other than
Parent.
10.5 Maintenance of Existence, etc. Maintain and preserve, and (subject
to Section 10.13) cause each Subsidiary to maintain and preserve, (a) its
existence and good standing in the jurisdiction of its incorporation and (b) its
qualification and good standing as a foreign corporation in each jurisdiction
where the nature of its business makes such qualification necessary, except
where the failure to be so qualified would not reasonably be expected to have a
Material Adverse Effect.
10.6 Financial Covenants.
10.6.1 Funded Debt to Adjusted EBITDA Ratio. Not permit the Funded Debt
to Adjusted EBITDA Ratio to exceed the following ratios as of the following
dates:
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<TABLE>
<CAPTION>
Fiscal Funded Debt to
Quarter Ending: Adjusted EBITDA Ratio
--------------- ---------------------
<C> <C>
06/30/96 7.00:1.00
09/30/96 7.00:1.00
12/31/96 7.00:1.00
03/31/97 7.00:1.00
06/30/97 6.75:1.00
09/30/97 6.75:1.00
12/31/97 6.75:1.00
03/31/98 6.50:1.00
06/30/98 6.00:1.00
09/30/98 5.70:1.00
12/31/98 5.40:1.00
03/31/99 5.00:1.00
06/30/99 4.60:1.00
09/30/99 4.25:1.00
12/31/99 3.85:1.00
03/31/00 3.55:1.00
06/30/00 3.30:1.00
09/30/00 and thereafter
3.00:1.00;
</TABLE>
10.6.2 Net Worth. Not permit, at any date, Net Worth to be less than the
sum of (a) $55,000,000, plus (b) 50% of Consolidated Net Income (if Consolidated
Net Income is positive) from April 1, 1996 to such date, plus (c) 100% of the
Net Cash Proceeds from any sale of capital stock of Parent, the Company or any
Subsidiary occurring after the Amendment Effective Time, plus (d) 100% of the
increase in Net Worth resulting from the purchase of a Golf Course Property or
any other asset after the Amendment Effective Time using capital stock of Parent
in consideration therefor.
10.6.3 Fixed Charge Coverage Ratio. Not permit the Fixed Charge Coverage
Ratio to be less than the following ratios as of the following dates:
<TABLE>
<CAPTION>
Fiscal Fixed Charge
Quarter Ending: Coverage Ratio
--------------- --------------
<C> <C>
06/30/96 1.00:1.00
09/30/96 1.00:1.00
12/31/96 1.10:1.00
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<C> <C>
03/31/97 1.15:1.00
06/30/97 1.30:1.00
09/30/97 1.35:1.00
12/31/97 1.35:1.00
03/31/98 1.40:1.00
06/30/98 1.40:1.00
09/30/98 1.35:1.00
12/31/98 1.25:1.00
03/31/99 1.15:1.00
06/30/99 1.05:1.00
09/30/99 and thereafter 1.00:1.00;
</TABLE>
10.6.4 Interest Coverage Ratio. Not permit the Interest Coverage Ratio to
be less than the following ratios as of the following dates:
<TABLE>
<CAPTION>
Fiscal Interest
Quarter Ending: Coverage Ratio
--------------- --------------
<C> <C>
06/30/96 1.25:1.00
09/30/96 1.25:1.00
12/31/96 1.35:1.00
03/31/97 1.40:1.00
06/30/97 1.55:1.00
09/30/97 1.60:1.00
12/31/97 1.60:1.00
03/31/98 1.60:1.00
06/30/98 1.70:1.00
09/30/98 1.75:1.00
12/31/98 1.85:1.00
03/31/99 1.95:1.00
06/30/99 2.05:1.00
09/30/99 2.15:1.00
12/31/99 2.30:1.00
03/31/00 2.45:1.00
06/30/00 2.65:1.00
09/30/00 2.80:1.00
12/31/00 2.95:1.00
03/31/01 and thereafter
3.00:1.00;
</TABLE>
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<PAGE>
10.6.5 Bank Debt to Adjusted EBITDA Ratio. Not permit the Bank Debt to
Adjusted EBITDA Ratio to exceed the following ratios as of the following dates:
<TABLE>
<CAPTION>
Fiscal Bank Debt to
Quarter Ending: Adjusted EBITDA Ratio
--------------- ---------------------
<C> <C>
06/30/96 2.85:1.00
09/30/96 2.85:1.00
12/31/96 2.85:1.00
03/31/97 2.85:1.00
06/30/97 2.50:1.00
09/30/97 2.50:1.00
12/31/97 2.50:1.00
03/31/98 2.50:1.00
06/30/98 2.25:1.00
09/30/98 2.00:1.00
12/31/98 1.75:1.00
03/31/99 1.55:1.00
06/30/99 1.35:1.00
09/30/99 1.05:1.00
12/31/99 and thereafter 1.00:1.00;
</TABLE>
10.7 Limitations on Debt. Not, and not permit any Subsidiary to, create,
incur, assume or suffer to exist any Debt, except
(a) obligations arising under (i) the Loan Documents and (ii) the
Senior Note Documents (as such Senior Note Documents may be amended or
modified in compliance with Section 10.22);
(b) Debt of the Company or any Subsidiary in respect of Capital
Leases or Debt secured by a Lien on the assets acquired with the proceeds
thereof (including, without limitation, in each case, such Debt assumed in
connection with a Subsequent Acquisition) in an aggregate principal amount
not to exceed $7,500,000;
(c) unsecured Debt of Subsidiaries to the Company or to other
Subsidiaries; provided that if such Debt is evidenced by a promissory note
or other instrument that may be pledged by possession, such note or other
instrument shall be pledged to the Agent for the benefit of the Lenders;
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<PAGE>
(d) unsecured Debt of the Company to Subsidiaries; provided that if
such Debt is evidenced by a promissory note or other instrument that may be
pledged by possession, such note or other instrument shall be pledged to
the Agent for the benefit of the Lenders;
(e) at any date, Hedging Agreements entered into by the Company or
any Subsidiary intended to hedge interest rate risk relating to the Loans,
in a notional principal amount not to exceed the principal amount of the
Loans outstanding on such date;
(f) Contingent Liabilities of the Company or any Subsidiary in
respect of any obligation of Parent, the Company or any Subsidiary
permitted under this Agreement;
(g) Debt in respect of taxes, assessments or governmental charges to
the extent that payment thereof shall not at the time be required to be
made in accordance with Section 10.4;
(h) other Debt of the Company or any Subsidiary outstanding at the
Amendment Effective Time and listed under the heading "Continuing Debt" in
Schedule 10.7 or hereafter incurred in connection with Liens permitted by
Section 10.8, and extensions, renewals and refinancings of any Debt
described in this clause (h) so long as the principal amount thereof is not
increased;
(i) Debt of the Company or any Subsidiary consisting of usual and
customary purchase price adjustments and indemnities under contracts to
purchase or sell Golf Course Properties or other assets;
(j) the Existing Loans (provided that all such Debt shall be
refinanced in accordance with Section 1.2 at the Amendment Effective Time);
and
(k) other Debt of the Company or any Subsidiary, in addition to Debt
permitted by the foregoing clauses of this Section 10.7, not exceeding
$1,000,000 in the aggregate in outstanding principal amount.
10.8 Liens. Not, and not permit any Subsidiary to, create or
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<PAGE>
permit to exist any Lien on any of its real or personal properties, assets or
rights of whatsoever nature (whether now owned or hereafter acquired), except
(a) Liens for taxes or other governmental charges not at the time
delinquent or thereafter payable without penalty or being contested in good
faith by appropriate proceedings and, in each case, for which it maintains
reserves required by this Agreement;
(b) Liens arising in the ordinary course of business (such as (i)
Liens of carriers, warehousemen, mechanics and materialmen and other
similar Liens imposed by law and (ii) Liens incurred in connection with
worker's compensation, unemployment compensation and other types of social
security (excluding Liens arising under ERISA) or in connection with surety
and appeal bonds, bids, performance bonds and similar obligations) for sums
not overdue or being contested in good faith by appropriate proceedings and
not involving any deposits or advances or borrowed money or the deferred
purchase price of property or services, and, in each case, for which it
maintains adequate reserves;
(c) Liens existing at the Amendment Effective Time and identified on
Schedule 10.8;
(d) Liens in connection with Debt permitted under Section 10.7(b), so
long as such Liens do not encumber any assets other than the assets
financed by such Debt;
(e) attachments, judgments and other similar Liens, for sums not
exceeding $250,000 (excluding any portion thereof which is covered by
insurance so long as the insurer is reasonably likely to be able to pay and
has accepted a tender of defense and indemnification) arising in connection
with court proceedings, provided the execution or other enforcement of such
Liens is effectively stayed and claims secured thereby are being actively
contested in good faith and by appropriate proceedings;
(f) easements, rights of way, restrictions, minor defects or
irregularities in title, rights of lessors or sublessors, and other similar
Liens not interfering in any material respect with the ordinary conduct of
the business of
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<PAGE>
the Company and its Subsidiaries taken as a whole;
(g) leases or subleases granted by the Company or any Subsidiary in
the ordinary course of its business;
(h) extensions, renewals or replacements of any Lien permitted by the
foregoing provisions of this Section 10.8, but only if the principal amount
of the Debt secured thereby immediately prior to such extension, renewal or
replacement is not increased and such Lien is not extended to any other
property;
(i) Liens in favor of the Agent for the benefit of the Lenders; and
(j) escrow accounts, "good faith" deposits or similar deposits in
connection with any Subsequent Acquisition or Asset Sale permitted in
accordance with Section 10.12(i).
10.9 Capital Expenditures. Not, and not permit any Subsidiary to, make or
commit to make any Capital Expenditures except
(a) Delayed Subsequent Acquisition Capital Expenditures relating to
any Golf Course Property acquired after the Amendment Effective Time in
accordance with Section 2.5 or 2.6, as applicable,
(b) Maintenance Capital Expenditures in an amount not to exceed,
without duplication the sum of (x) the first $1,000,000 in Net Cash
Proceeds from all Asset Sales received in any Fiscal Year and (y) the
amount of any proceeds of casualty insurance not required to be prepaid in
accordance with the definition of "Asset Sale",
(c) any Maintenance Capital Expenditures (in addition to those
permitted by clause (b) above) so long as, after giving effect to all
Maintenance Capital Expenditures under this clause (c), the aggregate
amount of all such Maintenance Capital Expenditures under this clause (c)
made by the Company and its Subsidiaries during any Fiscal Year shall not
exceed 3.5% of consolidated net revenues of Parent and its Subsidiaries for
the immediately preceding Fiscal Year; provided that any amounts of
permitted Maintenance Capital
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<PAGE>
Expenditures under this clause (c) not spent in any Fiscal Year may be
carried over and spent in the next succeeding Fiscal Year; provided,
further, that in any such succeeding Fiscal Year, the amount of such
Maintenance Capital Expenditures spent in such Fiscal Year shall be
allocated first against the permitted amount of Maintenance Capital
Expenditures for such Fiscal Year until such entire permitted amount is
used and second against any carryover amount arising from the preceding
proviso,
(d) Capital Expenditures ("Designated Non-Recurring Capital
Expenditures"), in an amount not to exceed $7,500,000 in aggregate during
the term of this Agreement, for purposes of non-recurring improvements at
Golf Course Properties owned by the Company or its Subsidiaries at the
Amendment Effective Time or acquired thereafter in accordance with Section
2.5, in accordance with Section 2.6(c), and
(e) Cash Flow Subsequent Acquisition Capital Expenditures to the
extent such Capital Expenditures would be permitted hereunder as Delayed
Subsequent Acquisition Capital Expenditures.
10.10 Operating Leases. Not permit the aggregate amount of all payments
by the Company and its Subsidiaries as lessee under operating leases to exceed
[$350,000] in any Fiscal Year; provided that the foregoing limitation shall not
apply to the leases relating to (a) the Balboa Park Municipal Golf Course,
located in San Diego, California, (b) the Saticoy Golf Course, located in
Ventura, California and (c) The Vineyard at Escondido Golf Course, located in
Escondido, California; and provided further that the Company and its
Subsidiaries shall be permitted to enter into operating leases for Golf Course
Properties under which the lessor is National Golf Operating Partners, L.P. with
aggregate payments (including payments under the operating leases relating to
the Carmel Mountain Ranch Country Club and Golf Course, located in San Diego,
California and Sweetwater Country Club, located in Houston,
Texas) not to exceed (x) for the period from the Amendment Effective Time
through September 30, 1997, $5,000,000, (y) for the period from October 1, 1997
through September 29, 1998, $7,500,000 and (z) thereafter, $10,000,000 in any
Fiscal Year.
10.11 Dividends, etc. Not, and not permit any Subsidiary to, (a) declare
or pay any dividends on any of its capital stock (other
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<PAGE>
than stock dividends), (b) purchase or redeem any capital stock of Parent or any
of its Subsidiaries or any warrants, options or other rights in respect of such
stock, (c) make any other distribution to shareholders of Parent or any
Subsidiary, (d) prepay, purchase or redeem any Debt issued under the Senior Note
Documents or any Subordinated Debt or (e) set aside funds for any of the
foregoing; except that:
(i) any Subsidiary may pay dividends to the Company or to any other
Wholly-Owned Subsidiary; and
(ii) the Company may make payments to Parent in an amount required
to permit Parent to pay any federal, state or local income tax
liability of Parent; provided that no such amount shall exceed
the amount which the Company and its Subsidiaries would have had
to pay if the Company and its Subsidiaries were not members of an
affiliated group filing consolidated returns with Parent (and
Parent shall immediately return any refund, rebate or credit
received by Parent to the Company if, after giving effect to such
refund, rebate or credit, this proviso would be violated);
(iii) not less than ten Business Days after the Company has delivered
to the Lenders a written statement setting forth a description of
the "put" rights of the holder of capital stock of Parent issued
upon exercise of any Original Bank Warrant then being exercised
in accordance with Article IX of any Original Bank Warrant, and
not more than two Business Days before such amount is due and
payable, the Company may make payments to Parent in an amount
required to permit Parent to repurchase such capital stock of
such holder required by such "put" provisions of such Original
Bank Warrant;
(iv) so long as no Event of Default or Unmatured Event of Default
exists or would result therefrom, the Company or any Subsidiary
may purchase stock of any minority shareholder of a Subsidiary;
provided that the aggregate amount of all such purchases during
the term of this Agreement shall not exceed $950,000;
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<PAGE>
(v) so long as no Event of Default or Unmatured Event of Default
exists or would result therefrom, the Company may make payments
to Parent in an amount required to purchase or redeem capital
stock of Parent from any individual (or the estate or heirs of
any individual) who has ceased to be an officer, director or
employee of Parent, the Company or any of its Subsidiaries;
provided that the aggregate amount of all such purchases in any
Fiscal Year shall not exceed $300,000;
(vi) Parent may make payments to members of Parent's board of
directors for customary directors' fees (so long as such payments
do not exceed $25,000 in any Fiscal Year), and reasonable travel
and other expenses of such directors;
(vii) Ocean Vista Land Company may make payments of dividends with
respect to preferred stock of Ocean Vista Land Company
outstanding on January 31, 1994;
(viii) the Company may make payments to Parent in order to pay
fees and expenses permitted under Section 10.16 and reasonable
general and administrative expenses not to exceed $100,000 in any
consecutive Four Fiscal Quarters; and
(ix) the Company may make distributions to Parent to pay liquidated
damages due on the Senior Zero-Coupon Notes as in effect at the
Amendment Effective Time.
10.12 Investments. Not, and not permit any Subsidiary to, make, incur,
assume or suffer to exist any Investment in any other Person, except:
(a) Investments existing at the Amendment Effective Time and
identified in Schedule 10.12;
(b) Cash Equivalent Investments;
(c) Investments by Parent in the Company, and Investments by the
Company in its Subsidiaries or by any Subsidiary in any other Subsidiary,
in the form of contributions to capital or loans or advances;
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<PAGE>
(d) Investments by the Company or any Subsidiary in any Subsidiary,
in the form of capital contributions existing at the Amendment Effective
Time;
(e) loans or advances made by any Subsidiary to the Company;
(f) loans or advances to officers and employees of the Company or of
any Subsidiary for travel, relocation, or other
ordinary business expenses not in excess of $250,000 in the aggregate at
any time;
(g) advances to Parent permitted in accordance with Sections 10.11
and 10.16;
(h) bank deposits of the Company or any Subsidiary in the ordinary
course of business (i) with any Lender or any financial institution that is
a member of the Federal Reserve System and has a combined capital and
surplus and undivided profits of not less than $500,000,000, (ii) held in
refundable and non-refundable escrow accounts, "good faith" deposits or
similar deposits or payments made in connection with a Subsequent
Acquisition pursuant to the purchase agreement related to such Subsequent
Acquisition, so long as the aggregate amount thereof permitted by this
clause (ii) does not at any time exceed $1,250,000 (provided that (x) no
such accounts, deposits or payments that are non-refundable may be made
prior to the approval of the applicable purchase agreement for such
Subsequent Acquisition by the Board of Directors of the Company and (y) no
more than $750,000 of such accounts, deposits or payments may be non-
refundable), or (iii) with any other commercial banking institution so long
as all deposits permitted by this clause (iii) do not at any time exceed
$250,000;
(i) extensions of credit in the nature of accounts receivable or
notes receivable arising from the sale or lease of goods and services in
the ordinary course of business; and
(j) Subsequent Acquisitions permitted by Section 2.5.
10.13 Mergers, Consolidations, Sales, Capital Stock Issuances, Etc. Not,
and not permit any Subsidiary to, be a party to any merger or consolidation, or
purchase or otherwise acquire
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all or substantially all of the assets or any stock of any class of, or any
partnership or joint venture interest in, any other Person, or, except in the
ordinary course of its business, sell, transfer, convey or lease any of its
assets, or sell or assign with or without recourse any receivables, or issue any
capital stock, except for
(a) so long as no Event of Default or Unmatured Event of Default has
occurred and is continuing or would result therefrom, any such merger or
consolidation, sale, transfer, conveyance, lease or assignment of or by any
Wholly-Owned Subsidiary into the Company or into, with or to any other
Wholly-Owned Subsidiary,
(b) so long as no Event of Default or Unmatured Event of Default has
occurred and is continuing or would result therefrom, any such purchase or
other acquisition by the Company or any Wholly-Owned Subsidiary of the
assets or stock
of any Wholly-Owned Subsidiary,
(c) Investments (including Investments by way of merger) permitted by
Section 10.12,
(d) Subsequent Acquisitions if permitted by Section 2.5,
(e) so long as no Event of Default or Unmatured Event of Default has
occurred and is continuing or would result therefrom, any Asset Sales for
an aggregate purchase price not exceeding $15,000,000 during the term of
this Agreement; provided that the Net Cash Proceeds thereof shall be
applied in accordance with Section 6.3.1,
(f) so long as no Event of Default or Unmatured Event of Default has
occurred and is continuing or would result therefrom, issuances of shares
of Qualified Capital Stock of Parent to (x) members of management or
directors of Parent and/or (y) the Person selling any Golf Course Property
or interest in a Person that holds a Golf Course Property in a Subsequent
Acquisition, in an aggregate amount during the period this Agreement shall
remain in effect, for the shares of any class or series for both clauses
(x) and (y) together, of 15% of the total outstanding shares of such class
or series of capital stock of Parent as of the Amendment Effective Time
(but giving effect to the issuances described in clause (x)(i)
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of the definition of Equity Securities Sale); provided that any issuance of
capital stock described in clause (x)(i) of the definition of Equity
Securities Sale may be made irrespective of the existence of any Unmatured
Event of Default, and
(g) so long as no Event of Default or Unmatured Event of Default has
occurred and is continuing or is reasonably likely to result therefrom, any
other issue of Qualified Capital Stock of the Company or Parent (in
addition to those permitted under clause (f) above), provided that the Net
Cash Proceeds thereof are applied (if required by the definition of Equity
Securities Sale) in accordance with Section 6.3.3.
10.14 Guaranty and Collateral Documents. Immediately upon the creation or
acquisition of any Subsidiary, whether or not in connection with any Subsequent
Acquisition,
(a) cause such Subsidiary to execute and deliver a counterpart of the
Guaranty;
(b) deliver or cause to be delivered all shares of capital stock of
such Subsidiary owned by Parent or any of its Subsidiaries to the Agent in
accordance with the Company Pledge Agreement or a Subsidiary Pledge
Agreement, as applicable;
(c) cause such Subsidiary to execute and deliver a counterpart of the
Security Agreement and to take such action in connection therewith
(including, without limitation, executing UCC financing statements), as the
Agent shall find necessary or convenient to obtain a first priority
perfected security interest on the accounts receivable, inventory,
equipment, general intangibles, and other personal property of such
Subsidiary (subject to Liens permitted by this Agreement); and
(d) grant to the Agent, for the benefit of the Lenders, a Mortgage on
all material real property owned or leased by such Subsidiary.
10.15 Use of Proceeds. Not use or permit any proceeds of any Credit
Extension to be used, either directly or indirectly, for the purpose, whether
immediate, incidental or ultimate, (a) of
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"purchasing or carrying" any Margin Stock, (b) that would be inconsistent with
the second sentence of Section 2.1.1 or 2.1.2, as applicable, or (c) of
purchasing or otherwise acquiring any stock of any Person if such Person (or its
board of directors) has (i) announced that it will oppose such purchase or other
acquisition or (ii) commenced any litigation which alleges that such purchase or
other acquisition violates, or will violate, applicable law.
10.16 Transactions with Affiliates. Not, and not permit any Subsidiary
to, enter into or cause, suffer or permit to exist any transaction, arrangement
or contract with any of its other Affiliates (other than Parent, the Company or
any Subsidiary) which is on terms which are less favorable than are obtainable
from any Person which is not one of its Affiliates. Without limiting the
foregoing, neither Parent nor the Company will, and will not permit any
Subsidiary to, pay any management, consulting or similar fee to any Affiliate
(other than to Parent, the Company or a Subsidiary); provided that, so long as
there exists and is continuing no Event of Default under Section 12.1.1, the
Company may (a) pay fees and reimburse expenses to Brentwood Buyout Partners,
L.P. in accordance with that certain Corporate Development and Administrative
Services Agreement dated as of September 30, 1992 between Brentwood Buyout
Partners, L.P. and The Sticks Group, Inc., as in effect on the Amendment
Effective Time and (b) pay investment banking fees to Brentwood not to exceed
1-1/2% of the amount of Permitted Acquisition Costs for any Subsequent
Acquisition(with such Permitted Acquisition Costs to be calculated without
taking into account such investment banking fees payable to Brentwood).
10.17 Employee Benefit Plans. Maintain, and cause each Subsidiary to
maintain, each Pension Plan in compliance in all material respects with all
applicable requirements of law and regulations, and, without limiting the
generality of the foregoing, not at any time permit the aggregate accumulated
benefit obligations of all Pension Plans to exceed the aggregate assets of all
Pension Plans (as shown on the most recent Form 5500 filed with the Internal
Revenue Service with respect to each such Pension Plan).
10.18 Environmental Covenants.
10.18.1 Environmental Response Obligation. (a) Comply, and cause each
Subsidiary to comply, in all material respects with any Federal or state
judicial or administrative order requiring the
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performance at any real property owned, operated or leased by Parent, the
Company or any Subsidiary (including, without limitation, Golf Course
Properties) of activities in response to the release or threatened release of a
Hazardous Material, except for the period of time that Parent, the Company or
such Subsidiary is diligently in good faith contesting such order; (b) notify
the Agent within ten days of the receipt of any written claim, demand,
proceeding, action or notice of liability by any Person arising out of or
relating to the release or threatened release of a Hazardous Material; and (c)
notify the Agent within ten days of any release, threat of release, or disposal
of Hazardous Material reported by Parent, the Company or any Subsidiary to any
governmental or regulatory authority at any real property owned, operated, or
leased by Parent, the Company or any Subsidiary (including, without limitation,
Golf Course Properties).
10.18.2 Environmental Liabilities. (a) Comply, and cause each Subsidiary
to comply, in all material respects with all material Environmental Laws; (b)
without limiting clause (a), not commence disposal of any Hazardous Material
into or onto any real property owned, operated or leased by Parent, the Company
or any Subsidiary (including, without limitation, Golf Course Properties) except
in compliance in all material respects with Environmental Laws; and (c) without
limiting clause (a), not allow any Lien imposed pursuant to any law, regulation
or order relating to Hazardous Materials or the disposal thereof to remain on
any real property owned, operated or leased by Parent, the Company or any
Subsidiary (including, without limitation, Golf Course Properties).
10.18.3 Environmental Notices. Without limiting Section 10.18.1 or any
other provision of this Agreement,
(a) promptly notify the Agent and provide copies upon receipt of all
written claims, complaints, notices or inquiries relating to the condition
of its facilities and properties (including, without limitation, Golf
Course Properties) or compliance with all Environmental Laws and
Occupational Health and Safety Laws, to the extent that such condition or
non-compliance would reasonably be likely to have a Material Adverse
Effect, and promptly cure and have dismissed with prejudice (or diligently
contest) to the satisfaction of the Agent any actions and proceedings
relating to compliance with such Laws; and
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(b) provide such information and certifications which the Agent may
reasonably request from time to time to evidence compliance with this
Section.
10.19 Unconditional Purchase Obligations. Not, and not permit any
Subsidiary to, enter into or be a party to any contract for the purchase of
materials, supplies or other property or services, if such contract requires
that payment be made by it regardless of whether or not delivery is ever made of
such materials, supplies or other property or services.
10.20 Inconsistent Agreements. Not, and not permit any Subsidiary to,
enter into any agreement containing any provision which would be violated or
breached by any Credit Extension by the Company hereunder or by the performance
by Parent, the Company or any Subsidiary of any of its Obligations hereunder or
under any other Transaction Document.
10.21 Further Assurances. Take, and cause each Subsidiary to take, such
actions as may be required, and such actions as the Agent may reasonably
request, from time to time (including, without limitation, the execution and
delivery of guaranties, security agreements, pledge agreements, mortgages, stock
powers, financing statements and other documents, the filing or recording of any
of the foregoing, and the delivery of stock certificates and other collateral
with respect to which perfection is obtained by possession) to ensure that (a)
the Obligations of Parent and the Company hereunder and under the other Loan
Documents are secured by first priority perfected security interests and Liens
on substantially all assets of Parent and the Company (subject to Liens
permitted hereunder) and guaranteed by all Subsidiaries (including, promptly
upon the acquisition or creation thereof, any Subsidiary created or acquired
after the date hereof) and (b) the Obligations of each Subsidiary under the
Guaranty are secured by substantially all of the assets of such Subsidiary
(subject to Liens permitted hereunder), subject, in the case of both clause (a)
and clause (b) above, to such exceptions as the Agent or the Required Lenders
may permit from time to time.
10.22 Modification, etc. of Certain Agreements. Not consent to or enter
into any amendment, supplement or other modification of
(a) any material term, provision or agreement contained
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in the certificate of incorporation of Parent or the Company if such
amendment, supplement or other modification is reasonably likely to be
adverse in any material respect to the Lenders; or
(b) any material term, provision or agreement of the Stockholders'
Agreement, any Additional Bank Warrant, any Original Bank Warrant, any
Senior Note Document, or any lease relating to the Balboa Park Municipal
Golf Course Golf Course Property located in San Diego, California, Saticoy
Golf Course Property, located in Ventura, California, The Vineyard at
Escondido Golf Course Property located in Escondido, California, and the
Carmel Mountain Ranch Country Club and Golf Course, located in San Diego,
California, if such amendment, supplement or other modification is
reasonably likely to be adverse in any material respect to the Lenders.
10.23 Negative Pledges; Subsidiary Payments. Not, and not permit any
Subsidiary to, enter into any agreement (excluding this Agreement or any
Transaction Document) (a) prohibiting the creation or assumption of any Lien
upon its properties, revenues, or assets, whether now owned or hereafter
acquired, or (b) which would restrict the ability of any Subsidiary to pay or
make dividends or distributions in cash or kind, to make loans, advances or
other payments of whatsoever nature, or to make transfers or distributions of
all or any part of its assets, in each case to the Company or to any corporation
as to which such Subsidiary is a Subsidiary, except (i) non-assignment clauses
in existing leases and future leases or agreements relating to purchase money
financing permitted hereunder (other than future leases or purchase money
agreements of Golf Course Properties) and (ii) security agreements, pledge
agreements and similar instruments existing on the Amendment Effective Time.
10.24 Fiscal Year. Not change its Fiscal Year.
[10.25 TAX SHARING AGREEMENTS. NOT ENTER INTO ANY TAX SHARING OR SIMILAR
AGREEMENT OR ARRANGEMENT OTHER THAN AS MAY BE APPROVED IN WRITING BY THE
REQUIRED LENDERS.]
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10.26 Conduct of Business.
(a) In the case of Parent, not engage in any business other than the
ownership of all of the Company's capital stock and the issuance of the
Senior Zero-Coupon Notes.
(b) In the case of the Company, not, and not permit any Subsidiary to,
engage in any business other than (i) the ownership and management of golf
courses and related facilities located in the United States (excluding
Puerto Rico, and the territories and possessions of the United States) and
(ii) businesses closely related thereto.
SECTION 11 CONDITIONS OF CREDIT EXTENSIONS.
SECTION 11.1 Amendment Effective Time. On and from the first date that the
Agent shall have received counterparts of this Agreement duly executed by the
Company, Parent, the Agent and each Lender listed on the signature pages hereof,
and that each of the conditions in Sections 11.2, 11.3 and 11.4 shall have been
satisfied, the terms and conditions of the Existing Credit Agreement shall be
superseded and restated in their entirety by the terms and conditions of this
Agreement and this Agreement shall take effect. This Agreement shall not
constitute a novation, and the execution and delivery by the Company of this
Agreement and the Notes is in substitution for, but not in payment of, the
Company's obligations incurred under or evidenced by the Existing Credit
Agreement and the "Notes" delivered thereunder and as defined therein. In
addition, it is the intention of the parties that the Liens created under the
"Collateral Documents" (as defined in the Original Agreement) shall remain in
full force and effect under this Agreement and the Collateral Documents
hereunder, without any loss or impairment of perfection or priority.
The Agent shall give notice to the Company and to each Lender that the
Amendment Effective Time has occurred. Each agreement, opinion or certificate
described in Sections 11.2, 11.3 and 11.4 shall be dated the date of the
Amendment Effective Time, unless the applicable subsection of any such Section
explicitly provides otherwise or the Agent in its sole discretion allows
otherwise.
11.2 Documentary Conditions. The occurrence of the Amendment Effective
Time is, in addition to the conditions precedent specified in Sections 11.3 and
11.4, subject to the conditions
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precedent that the Agent shall have received, on or prior to June 28, 1996, all
of the following documents described in this Section 11.2, each duly executed
and dated the Amendment Effective Time (or such earlier date as shall be
satisfactory to the Agent), in form and substance satisfactory to the Agent, and
each (except for the Notes, of which only the originals shall be signed) in
sufficient number of signed counterparts to provide one for each Lender:
11.2.1 Notes. The Notes.
11.2.2 Resolutions. Certified copies of resolutions of the Board of
Directors of each of Parent and the Company authorizing or ratifying the
execution, delivery and performance by each of Parent and the Company, as
applicable, of the Loan Documents and Senior Note Documents to which it is a
party; and certified copies of resolutions of the Board of Directors of each
Guarantor authorizing or ratifying the execution, delivery and performance by
such Guarantor of the Guaranty and the other Loan Documents to which such
Guarantor is a party.
11.2.3 Consents, etc. Certified copies of all documents evidencing any
necessary corporate action, material consents and governmental approvals (if
any) required for the execution, delivery and performance by Parent, the Company
and each Guarantor of the Loan Documents and Senior Note Documents to which such
Person is a party.
11.2.4 Incumbency and Signature Certificates. A certificate of the
Secretary or an Assistant Secretary of Parent, the Company and each Guarantor
certifying the names of the officer or officers of such Person authorized to
sign the Loan Documents and Senior Note Documents to which such Person is a
party, together with a sample of the true signature of each such officer (it
being understood that the Agent and each Lender may conclusively rely on each
such certificate until formally advised by a like certificate of any changes
therein).
11.2.5 Guaranty. An amended and restated guaranty, substantially in the
form of Exhibit C, executed by the Guarantors (other than Parent) (as amended,
supplemented or otherwise modified from time to time, the "Guaranty").
11.2.6 Security Agreement, etc. An amended and restated
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security agreement, substantially in the form of Exhibit D (as amended,
supplemented or otherwise modified from time to time, the "Security Agreement")
issued by Parent, the Company and each Guarantor, together with evidence,
satisfactory to the Agent, that all filings and recordings necessary to maintain
the Agent's Lien on any collateral granted under the Security Agreement have
been duly made and are in full force and effect (subject to such exceptions as
the Agent may approve).
11.2.7 Pledge Agreements. Each of
(a) an amended and restated pledge agreement, substantially in the
form of Exhibit E-1, issued by the Company (as amended, supplemented or
otherwise modified from time to time, the "Company Pledge Agreement"),
(b) amended and restated pledge agreements, each substantially in the
form of Exhibit E-2, issued by each of Foothills Holding Company, Inc., a
Nevada corporation, OVLC Management Corp., a California corporation, and
Ocean Vista Land Company, a California corporation (such pledge agreement,
together with any other pledge agreement executed in the future by a
Subsidiary pursuant hereto, in each case as amended, supplemented or
otherwise modified from time to time, each a "Subsidiary Pledge
Agreement"), and
(c) an amended and restated pledge agreement, substantially in the
form of Exhibit E-3, issued by Parent (as amended, supplemented or
otherwise modified from time to time, the "Parent Pledge Agreement"),
together with, in the case of each Pledge Agreement, the stock certificates to
be pledged thereunder and stock powers executed in blank (to the extent not
previously furnished to the Agent).
11.2.8 Real Estate Documentation. With respect to each parcel of real
property owned or leased by the Company or any Subsidiary as to which the Agent
holds a Mortgage, a duly executed Mortgage Amendment, together with (a) date
down endorsements of the title insurance policies as to each such Mortgage,
effective as of the Amendment Effective Time, in form and substance satisfactory
to the Agent, (b) a Hazardous Materials Indemnity relating to each such
Mortgage, or (c) such other documentation as the Agent may reasonably request,
in form and substance satisfactory to the
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Agent, as to the priority and continued validity of each such Mortgage.
11.2.9 Landlord's Consents. With respect to each material parcel of real
property leased by the Company or any Subsidiary (other than (i) Balboa Park
Municipal Golf Course Property located in San Diego, California, (ii) The
Vineyard at Escondido Golf Course Property located in Escondido, California and
(iii) Carmel Mountain Ranch Country Club and Golf Course, located in San Diego,
California), a duly executed Landlord's Consent (unless already provided in
connection with the Original Credit Agreement or the Existing Credit Agreement).
11.2.10 Opinions of Counsel for Parent, the Company and the Guarantors.
The opinions of
(a) Latham & Watkins, Illinois and California counsel for Parent, the
Company and the Guarantors, in the form of Exhibit F-1; and
(b) Quarles & Brady, special Arizona counsel for the Company and those
of its Subsidiaries organized under the laws of Arizona, in the form of
Exhibit F-2;
(c) Page & Addison, special Texas counsel for the Company and those of
its Subsidiaries organized under the laws of Texas, in the form of Exhibit
F-3;
(d) Lionel, Sawyer & Collins, special Nevada counsel to the Company
and those of its Subsidiaries organized under the laws of Nevada, in the
form of Exhibit F-4;
(e) Mays & Valentine, special Virginia counsel for the Company and
those of its Subsidiaries organized under the laws of Virginia, in the form
of Exhibit F-5.
11.2.11 Insurance. Independent evidence of insurance coverage required
pursuant to Section 10.3 (to the extent not already furnished to Agent).
11.2.12 Senior Note Documents. A certificate of a Responsible Officer of
Parent and the Company, substantially in the form of Exhibit J, certifying as to
fully executed copies of the Senior Note Documents (which shall be attached
thereto), together
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with evidence satisfactory to the Agent that (x) the Company has received the
proceeds of the Senior Company Notes, (y) Parent has received the proceeds of
the issuance of the Units of Parent (consisting of the Senior Zero-Coupon Notes
and the Common Stock) and that such proceeds of the issuance of the Units have
been irrevocably contributed to the capital of the Company by Parent and
accordingly constitute a portion of the equity of the Company, and (z) the
proceeds of the Senior Company Notes and such capital contributions have been
applied by the Company to repay in full all Existing Loans, interest and fees
thereon and all other amounts due under the Existing Credit Agreement.
11.2.13 Other. Such other documents as the Agent or any Lender may
reasonably request.
11.3 Other Conditions to Amendment Effective Time. The occurrence of the
Amendment Effective Time is, in addition to the conditions precedent specified
in Sections 11.2 and 11.4, subject to the following conditions precedent:
11.3.1 Fees. The Company shall have paid all fees and expenses then due
and payable to the Agent or any Lender (including, to the extent then billed,
all amounts payable pursuant to Section 14.6).
11.3.2 No Material Adverse Effect. Since September 30, 1995, there has
not occurred any material adverse effect on (a) the condition (financial or
otherwise), operations, business, properties, assets or prospects of the Company
and its Subsidiaries taken as a whole or (b) the ability of Parent, the Company
and the Guarantors taken as a whole to timely and fully perform any of their
payment or other material Obligations under this Agreement or any other
Transaction Document to which it is a party.
11.3.3 Further Requests. The Agent shall have received all documents any
Lender may reasonably request relating to the existence of Parent, the Company
or any Subsidiary, the corporate authority for and the validity of this
Agreement and each Transaction Document and any other matters relevant hereto.
11.3.4 Satisfactory Legal Form. All documents executed or submitted
pursuant hereto by or on behalf of Parent, the Company and any Subsidiary shall
be reasonably satisfactory in form and substance to the Agent and its counsel;
and the Agent and its
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counsel shall have received all information and such counterpart originals or
such certified or other copies of such materials as any Lender or its counsel
may reasonably request.
11.4 Amendment Effective Time and All Credit Extensions. The occurrence
of the Amendment Effective Time and obligation of each Lender to make each
Credit Extension on or after the Amendment Effective Time is subject to the
following further conditions precedent that:
11.4.1 Required Notice. The Agent shall have received a notice of the
borrowing of such Loan in accordance with Section 2.3, an Issuance Request in
accordance with Section 2.10.2 or a Letter of Credit Amendment Request in
accordance with Section 2.10.3, as applicable.
11.4.2 No Default. Immediately prior to and after making such Credit
Extension or the occurrence of the Amendment Effective Time, no Event of Default
or Unmatured Event of Default shall have occurred and be continuing.
11.4.3 Representations and Warranties Correct. The representations and
warranties of Parent and the Company contained in this Agreement and the other
Loan Documents (except the representations and warranties set forth in Sections
9.6 and 9.8(a) and (c) of this Agreement) shall be true and correct in all
material respects on and as of the date of such Credit Extension, except to the
extent that any such representation and warranty was made as of another date, in
which case it shall have been true and correct as of such other date.
11.4.4 No Litigation, etc. Except as set forth in Schedule 9.6, no
litigation, arbitration, governmental investigation, proceeding or inquiry shall
be pending, or, to the best knowledge of Parent and the Company (after due
inquiry), threatened against Parent, the Company or any Subsidiary:
(a) (i) which seeks to enjoin or otherwise prevent the consummation of
or to recover any damages or obtain relief as a result of (x) the loan and
equity transactions contemplated by the Transaction Documents (other than
any such litigation, arbitration, governmental investigation, proceeding or
inquiry with respect to the Stockholders' Agreement brought by or against
or affecting any Person (except any Lender or any
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initial or successive transferee of any Lender) Beneficially Owning less
than 5% of the capital stock of Parent), or (y) any material agreement
pursuant to which equity capital is contributed to Parent or Parent's
capital stock is issued (it being understood that a material agreement for
purposes of this clause (y) would be an agreement entered into with a
Person Beneficially Owning 5% or more of the capital stock of Parent), or
(ii) which relates to the validity or enforceability of any of the
foregoing agreements or instruments (subject to the foregoing
qualifications);
(b) which is a development in the litigation, arbitration,
governmental investigation, proceeding or inquiry set forth in Schedule 9.6
(i) that has or is reasonably likely to have a Material Adverse Effect or
(ii) that is reasonably likely to adversely affect the Lenders and that
arises with respect to any of the agreements described in clause (a) above
or any transactions contemplated hereby or thereby; or
(c) which has or is reasonably likely to have a Material Adverse
Effect.
11.4.5 Subsequent Acquisitions and Delayed Subsequent Acquisition Capital
Expenditures. With respect to any Reducing Revolver Loan requested by the
Company to fund any Subsequent Acquisition, Delayed Subsequent Acquisition
Capital Expenditures or Designated Non-Recurring Capital Expenditures, the
Company shall have satisfied each of the conditions set forth in Section 2.5 or
2.6, as applicable.
SECTION 12 EVENTS OF DEFAULT AND THEIR EFFECT.
12.1 Events of Default. Each of the following shall constitute an Event of
Default under this Agreement:
12.1.1 Non-Payment of the Loans, etc. Default in the payment when due of
the principal of any Loan or Reimbursement Obligation; or default, and
continuance thereof for three Business Days, in the payment when due of any
interest on any Loan or Reimbursement Obligation, or any fee or other amount
payable by the Company hereunder or under any other Loan Document.
12.1.2 Default under Other Debt. Any default shall occur and shall not
have been waived under the terms applicable to any Debt
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of Parent, the Company or any Subsidiary having an aggregate principal amount
exceeding $250,000 and such default shall (a) consist of the failure to pay such
Debt when due (subject to any applicable grace period), whether by acceleration
or otherwise, (b) accelerate the maturity of such Debt or (c) permit the holder
or holders of such Debt, or any trustee or agent for such holder or holders, to
cause such Debt to become due and payable prior to its expressed maturity.
12.1.3 Other Material Obligations. A default which has not been waived in
the payment when due (subject to any grace period), whether by acceleration or
otherwise, or in the performance or observance of (subject to any grace period),
any material obligation of, or condition agreed to by, Parent, the Company or
any Subsidiary with respect to any material purchase or lease of goods or
services (except only to the extent that the other party has not taken action to
assert such default or the existence of any such default is being contested by
Parent, the Company or such Subsidiary in good faith and by appropriate
proceedings and appropriate reserves have been made in respect of such default),
if the aggregate liability of Parent, the Company and its Subsidiaries in
respect of all such purchases and leases so affected shall exceed $500,000.
12.1.4 Bankruptcy, Insolvency, etc. Parent, the Company or any Subsidiary
becomes insolvent or generally fails to pay, or admits in writing its inability
or refusal to pay, debts as they become due; or Parent, the Company or any
Subsidiary applies for, consents to, or acquiesces in the appointment of a
trustee, receiver or other custodian for Parent, the Company or such Subsidiary
or any property thereof, or makes a general assignment for the benefit of
creditors; or, in the absence of such application, consent or acquiescence, a
trustee, receiver or other custodian is appointed for Parent, the Company or any
Subsidiary or for a substantial part of the property of any thereof and is not
discharged within 60 days; or any bankruptcy, reorganization, debt arrangement,
or other case or proceeding under any bankruptcy or insolvency law, or any
dissolution or liquidation proceeding, is commenced in respect of Parent, the
Company or any Subsidiary, and if such case or proceeding is not commenced by
Parent, the Company or such Subsidiary, it is consented to or acquiesced in by
Parent, the Company or such Subsidiary, or remains for 60 days undismissed.
12.1.5 Non-Compliance with Provisions of This Agreement.
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Failure by Parent or the Company to comply with or to perform any covenant set
forth in Section 10.1.9(a), 10.3, 10.5 through 10.13, 10.15, 10.16, 10.22 or
10.23; failure by Parent or the Company to comply with or to perform any
covenant set forth in Section 10.14 or 10.21 and continuance of such failure for
five days after notice thereof to the Company from the Agent or any Lender; or
failure by Parent or the Company to comply with or to perform any other
provision of this Agreement (and not constituting an Event of Default under any
of the other provisions of this Section 12) and continuance of such failure for
30 days after notice thereof to the Company from the Agent or any Lender.
12.1.6 Warranties. Any warranty made by Parent, the Company or any
Subsidiary in any Transaction Document is false or misleading in any material
respect when made, or any schedule, certificate, financial statement, report,
notice or other writing furnished by or on behalf of Parent, the Company or any
Subsidiary to the Agent or any Lender is false or misleading in any material
respect on the date as of which the facts therein set forth are stated or
certified, it being understood that any such warranty shall have been made to
the best knowledge of Parent, the Company or such Subsidiary, as the case may
be, after due inquiry if made with respect to historical information as to any
Golf Course Property as at any date prior to its acquisition by the Company or
any Subsidiary or with respect to any other information not prepared by Parent,
the Company, any Subsidiary, Brentwood, or any of their respective Affiliates.
12.1.7 Pension Plans. (i) Institution of any steps by Parent, the Company
or any other Person to terminate a Pension Plan if as a result of such
termination Parent or the Company could be required to make a contribution to
such Pension Plan, or could incur a liability or obligation to such Pension
Plan, in excess of $250,000, or (ii) a contribution failure occurs with respect
to any Pension Plan sufficient to give rise to a Lien under section 302(f) of
ERISA.
12.1.8 Judgments. Final judgments which exceed an aggregate of $250,000
(excluding any portion thereof which is covered by insurance so long as the
insurer is reasonably likely to be able to pay and has accepted a tender of
defense and indemnification) shall be rendered against Parent or the Company or
any Subsidiary and shall not have been discharged or vacated or had execution
thereof stayed pending appeal within 30 days after entry or filing of such
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judgments.
12.1.9 Invalidity of Guaranty, etc. The Guaranty (or, as to Parent, the
guaranty of Parent set forth in Section 15 hereof) shall be revoked or otherwise
cease to be in full force and effect (whether with respect to amounts already
advanced or to be advanced) with respect to any Guarantor (other than as
expressly permitted hereunder or thereunder), any Guarantor shall fail (subject
to any applicable grace period) to comply with or to perform any applicable
provision of the Guaranty, or any Guarantor (or any Person by, through or on
behalf of such Guarantor) shall contest in any manner the validity, binding
nature or enforceability of the Guaranty with respect to such Guarantor.
12.1.10 Invalidity of Collateral Documents, etc. Any Collateral Document
shall cease to be in full force and effect with respect to the Company or any
Guarantor (other than as expressly permitted hereunder or thereunder), any
default shall occur (subject to any applicable grace period) under any
Collateral Document, or the Company or any Guarantor (or any Person by, through
or on behalf of the Company or any Guarantor) shall contest in any manner the
validity, binding nature or enforceability of any Collateral Document.
12.1.11 Change in Control. A Change In Control shall occur.
12.1.12 Material Adverse Effect. The Required Lenders shall have
determined in good faith that an event has occurred or a condition exists that
has had or is reasonably likely to have a Material Adverse Effect (other than a
Material Adverse Effect that relates solely to the ability of Parent, the
Company and the Guarantors to perform their material obligations under the
Equity Documents or Senior Note Documents).
12.2 Effect of Event of Default. If any Event of Default described in
Section 12.1.4 shall occur, the Commitments (if they have not theretofore
terminated) shall immediately terminate and the Notes, the Reimbursement
Obligations and all other Obligations hereunder shall become immediately due and
payable, all without presentment, demand, protest or notice of any kind; and, in
the case of any other Event of Default, the Agent may (and upon written request
of the Required Lenders shall) declare the Commitments (if they have not
theretofore terminated) to be terminated and/or declare all Notes, the
Reimbursement Obligations and all other
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Obligations hereunder to be due and payable, whereupon the Commitments (if they
have not theretofore terminated) shall immediately terminate and/or all Notes,
the Reimbursement Obligations and all other Obligations hereunder shall become
immediately due and payable, all without presentment, demand, protest or notice
of any kind. The Agent shall promptly advise the Company of any such
declaration, but failure to do so shall not impair the effect of such
declaration. Notwithstanding the foregoing, the effect as an Event of Default of
any event described in Section 12.1.1 or Section 12.1.4 may be waived by the
written concurrence of all of the Lenders, and the effect as an Event of Default
of any other event described in this Section 12 may be waived by the written
concurrence of the Required Lenders.
SECTION 13 THE AGENT.
13.1 Appointment and Authorization. Each Lender hereby irrevocably
(subject to Section 13.9) appoints, designates and authorizes the Agent to take
such action on such Lender's behalf under the provisions of this Agreement and
each other Transaction Document and to exercise such powers and perform such
duties as are expressly delegated to the Agent by the terms of this Agreement or
any other Transaction Document, together with such powers as are reasonably
incidental thereto. Notwithstanding any provision to the contrary contained
elsewhere in this Agreement or in any other Transaction Document, the Agent
shall not have any duties or responsibilities except those expressly set forth
herein, nor shall the Agent have or be deemed to have any fiduciary relationship
with any Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or any other
Transaction Document or otherwise exist against the Agent.
13.2 Delegation of Duties. The Agent may execute any of its duties under
this Agreement or any other Transaction Document by or through agents, employees
or attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it selects with
reasonable care.
13.3 Liability of Agent. None of the Agent-Related Persons shall (i) be
liable for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other
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Transaction Document or the transactions contemplated hereby (except for
liability caused by its own gross negligence or willful misconduct, and
determined to have been so caused by a final judgment of a court of competent
jurisdiction), or (ii) be responsible in any manner to any of the Lenders for
any recital, statement, representation or warranty made by the Company, Parent
or any Subsidiary or Affiliate of the Company or Parent, or any officer thereof,
contained in this Agreement or in any other Transaction Document, or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Agent under or in connection with, this Agreement or any
other Transaction Document, or the validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Transaction
Document, or for any failure of the Company, Parent or any other party to any
Transaction Document to perform its obligations hereunder or thereunder. No
Agent-Related Person shall be under any obligation to any Lender to ascertain or
to inquire as to the observance or performance of any of the agreements
contained in, or conditions of, this Agreement or any other Transaction
Document, or to inspect the properties, books or records of the Company, Parent
or any of the Company's or Parent's Subsidiaries or Affiliates.
13.4 Reliance by Agent.
(a) The Agent shall be entitled to rely, and shall be fully protected
in relying, upon any writing, resolution, notice, consent, certificate,
affidavit, letter, telegram, facsimile, telex or telephone message,
statement or other document or conversation believed by it to be genuine
and correct and to have been signed, sent or made by the proper Person or
Persons, and upon advice and statements of legal counsel (including counsel
to the Company and/or Parent), independent accountants and other experts
selected by the Agent. The Agent shall be fully justified in failing or
refusing to take any action under this Agreement or any other Transaction
Document unless it shall first receive such advice or concurrence of the
Required Lenders as it deems appropriate and, if it so requests, it shall
first be indemnified to its satisfaction by the Lenders against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement or
any other Transaction Document
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in accordance with a request or consent of the Required Lenders and such
request and any action taken or failure to act pursuant thereto shall be
binding upon all of the Lenders.
(b) For purposes of determining compliance with the conditions
specified in Section 11, each Lender that has executed this Agreement shall
be deemed to have consented to, approved or accepted or to be satisfied
with, each document or other matter either sent by the Agent to such Lender
for consent, approval, acceptance or satisfaction, or required thereunder
to be consented to or approved by or acceptable or satisfactory to the
Lender.
13.5 Notice of Default. The Agent shall not be deemed to have knowledge
or notice of the occurrence of any Event of Default or Unmatured Event of
Default, except with respect to defaults in the payment of principal, interest
and fees required to be paid to the Agent for the account of the Lenders, unless
the Agent shall have received written notice from a Lender or the Company
referring to this Agreement, describing such Event of Default or Unmatured Event
of Default and stating that such notice is a "notice of default". The Agent
will notify the Lenders of its receipt of any such notice. The Agent shall take
such action with respect to such Event of Default or Unmatured Event of Default
as may be requested by the Required Lenders in accordance with Section 12.2;
provided, however, that unless and until the Agent has received any such
request, the Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Event of Default or
Unmatured Event of Default as it shall deem advisable or in the best interest of
the Lenders.
13.6 Credit Decision. Each Lender acknowledges that none of the Agent-
Related Persons has made any representation or warranty to it, and that no act
by the Agent hereinafter taken, including any review of the affairs of the
Company, Parent and their Subsidiaries, shall be deemed to constitute any
representation or warranty by any Agent-Related Person to any Lender. Each
Lender represents to the Agent that it has, independently and without reliance
upon any Agent-Related Person and based on such documents and information as it
has deemed appropriate, made its own appraisal of and investigation into the
business, prospects, operations, property, financial and other condition and
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creditworthiness of the Company, Parent and their Subsidiaries, and all
applicable bank regulatory laws relating to the transactions contemplated
hereby, and made its own decision to enter into this Agreement and to extend
credit to the Company hereunder. Each Lender also represents that it will,
independently and without reliance upon any Agent-Related Person and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under this Agreement and the other Transaction Documents, and
to make such investigations as it deems necessary to inform itself as to the
business, prospects, operations, property, financial and other condition and
creditworthiness of the Company and Parent. Except for notices, reports and
other documents expressly herein required to be furnished to the Lenders by the
Agent, the Agent shall not have any duty or responsibility to provide any Lender
with any credit or other information concerning the business, prospects,
operations, property, financial and other condition or creditworthiness of the
Company which may come into the possession of any of the Agent-Related Persons.
13.7 Indemnification. Whether or not the transactions contemplated hereby
are consummated, the Lenders shall indemnify upon demand the Agent-Related
Persons (to the extent not reimbursed by or on behalf of the Company and without
limiting the obligation of the Company to do so), pro rata (based on the
Lenders' respective Total Percentage), from and against any and all Indemnified
Liabilities; provided, however, that no Lender shall be liable for the payment
to the Agent-Related Persons of any portion of such Indemnified Liabilities
caused solely by such Person's gross negligence or willful misconduct and
determined to have been so caused by a final judgment by a court of competent
jurisdiction. Without limitation of the foregoing, each Lender shall reimburse
the Agent upon demand for its ratable share of any costs or out-of-pocket
expenses (including reasonable fees of attorneys for the Agent (including the
allocable costs of internal legal services and all disbursements of internal
counsel)) incurred by the Agent in connection with the preparation, execution,
delivery, administration, modification, amendment or enforcement (whether
through negotiations, legal proceedings or otherwise) of, or legal advice in
respect of rights or responsibilities under, this Agreement, any other
Transaction Document, or any document contemplated by or referred to herein, to
the extent that the Agent is not reimbursed for such expenses by or on behalf of
the Company. The undertaking in this Section shall survive the expiration or
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termination of the Commitments and payment of the Loans and other liabilities of
the Company hereunder and the resignation or replacement of the Agent.
For the purposes of this Section 13.7, "Indemnified Liabilities" shall
mean: "any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, charges, expenses and disbursements
(including reasonable fees of attorneys for the Agent (including the
allocable costs of internal legal services and all disbursements of
internal counsel)) of any kind or nature whatsoever which may at any time
(including at any time following repayment of the Loans and the
termination, resignation or replacement of the Agent or replacement of any
Lender) be imposed on, incurred by or asserted against any such Person in
any way relating to or arising out of this Agreement, any Transaction
Document or any document contemplated by or referred to herein, or the
transactions contemplated hereby, or any action taken or omitted by any
such Person under or in connection with any of the foregoing, including
with respect to any investigation, litigation or proceeding (including (a)
any case, action or proceeding before any court or other governmental
authority relating to bankruptcy, reorganization, insolvency, liquidation,
receivership, dissolution, winding-up or relief of debtors, or (b) any
general assignment for the benefit of creditors, composition, marshalling
of assets for creditors, or other, similar arrangement in respect of its
creditors generally or any substantial portion of its creditors, whether
undertaken under U.S. Federal, state or foreign law, including the U.S.
bankruptcy code or any appellate proceeding) related to or arising out of
this Agreement, any Transaction Document or the Loans or the use of the
proceeds thereof, whether or not any Agent-Related Person, any Lender or
any of their respective officers, directors, employees, counsel, agents or
attorneys-in-fact is a party thereto."
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13.8 Agent in Individual Capacity. BofA and its Affiliates may make loans
to, issue letters of credit for the account of, accept deposits from, acquire
equity interests in and generally engage in any kind of banking, trust,
financial advisory, underwriting or other business with the Company, Parent and
their Subsidiaries and Affiliates as though BofA were not the Agent hereunder
and without notice to or consent of the Lenders. The Lenders acknowledge that,
pursuant to such activities, BofA or its Affiliates may receive information
regarding the Company, Parent or their Affiliates (including information that
may be subject to confidentiality obligations in favor of the Company, Parent or
any such Affiliate) and acknowledge that the Agent shall be under no obligation
to provide such information to them. With respect to their Loans, BofA and its
Affiliates shall have the same rights and powers under this Agreement as any
other Lender and may exercise the same as though BofA were not the Agent, and
the terms "Lender" and "Lenders" may include BofA and its Affiliates, to the
extent applicable, in their individual capacities.
13.9 Successor Agent. The Agent may, and at the request of the Required
Lenders shall, resign as Agent upon 30 days' notice to the Lenders. If the
Agent resigns under this Agreement, the Required Lenders shall appoint from
among the Lenders (with, so long as no Event of Default or Unmatured Event of
Default exists, the prior written consent of the Company, which shall not be
unreasonably withheld or delayed) a successor agent for the Lenders. If no
successor agent is appointed prior to the effective date of the resignation of
the Agent, the Agent may appoint, after consulting with the Lenders and the
Company, a successor agent from among the Lenders (with, so long as no Event of
Default or Unmatured Event of Default exists, the prior written consent of the
Company, which shall not be unreasonably withheld or delayed). Upon the
acceptance of its appointment as successor agent hereunder, such successor agent
shall succeed to all the rights, powers and duties of the retiring Agent and the
term "Agent" shall mean such successor agent and the retiring Agent's
appointment, powers and duties as Agent shall be terminated. After any retiring
Agent's resignation hereunder as Agent, the provisions of this Section 13,
Section 14.6 and Section 14.12 shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent under this Agreement. If
no successor agent has accepted appointment as Agent by the date which is 30
days following a retiring Agent's notice of resignation, the retiring Agent's
resignation shall nevertheless thereupon become effective
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and the Lenders shall perform all of the duties of the Agent hereunder until
such time, if any, as the Required Lenders appoint a successor agent as provided
for above.
13.10 Collateral Matters. The Lenders irrevocably authorize the Agent, at
its option and in its discretion, to release any Lien granted to or held by the
Agent upon any collateral held pursuant to any Collateral Document and to
release any Guarantor from its obligations under the Guaranty (or, as to Parent,
the guaranty set forth in Section 15 hereof) (a) upon termination of the
Commitments, cancellation, expiration or cash collateralization in full of all
Letters of Credit and payment in full of all Credit Extensions and all other
Obligations of the Company; (b) in the case of any Lien, constituting property
sold or to be sold or disposed of as part of or in connection with any
disposition permitted hereunder; (c) in the case of any Lien, constituting
property in which the Company or any Subsidiary owned no interest at the time
the Lien was granted or at any time thereafter; (d) in the case of any Lien,
constituting property leased to the Company or any Subsidiary under a lease
which has expired or been terminated in a transaction permitted under this
Agreement or is about to expire and which has not been, and is not intended by
the Company or such Subsidiary to be, renewed or extended; (e) in the case of
any Lien, constituting property leased to the Company pursuant to a Capital
Lease or property financed through a purchase money financing, in each case
permitted hereunder if the Lien on such property is prohibited by the terms of
such Capital Lease or purchase money financing; (f) in the case of any
Guarantor, if such Guarantor or any Person owning such Guarantor is sold or to
be sold or disposed of as part of or in connection with any disposition
permitted hereunder; or (g) subject to the penultimate sentence of Section 14.1,
if approved, authorized or ratified in writing by the Required Lenders. Upon
request by the Agent at any time, the Lenders will confirm in writing the
Agent's authority to release particular types or items of Collateral pursuant to
this Section 13.10.
13.11 Issuer. The Issuer shall enjoy all the rights of the Agent under
this Article XIII mutatis mutandis as if the provisions of this Article XIII
referred to the Issuer.
SECTION 14 GENERAL.
14.1 Waiver; Amendments. No delay on the part of the Agent
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or any Lender in the exercise of any right, power or remedy shall operate as a
waiver thereof, nor shall any single or partial exercise by any of them of any
right, power or remedy preclude other or further exercise thereof, or the
exercise of any other right, power or remedy. No amendment, modification or
waiver of, or consent with respect to, any provision of this Agreement or any
other Loan Documents shall in any event be effective unless the same shall be in
writing and signed and delivered by the Company and by Lenders having an
aggregate Total Percentage of not less than the aggregate Total Percentage
expressly designated herein with respect thereto or, in the absence of such
designation as to any provision of this Agreement or any other Loan Documents,
by the Required Lenders, and then any such amendment, modification, waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given. No amendment, modification, waiver or consent (a) shall
amend, modify or waive the Incurrence Test relating to the making of any
Subsequent Acquisition, any Designated Non-Recurring Capital Expenditures or the
funding thereof without the consent of all Lenders or (b) shall (i) extend or
increase the amount of any Commitment, (ii) extend the date for any scheduled
payment of any principal of or interest on the Credit Extensions or any fees
payable hereunder, (iii) reduce the principal amount of any Loan or
Reimbursement Obligation, the rate of interest thereon or any fees payable
hereunder, (iv) release any Guarantor from its obligations under the Guaranty
(except as provided hereunder or thereunder) or release all or substantially all
of the collateral granted under the Collateral Documents (except as provided
hereunder or thereunder), or (v) change the aggregate Total Percentage required
to effect an amendment, modification, waiver or consent without, in each case,
the consent of all Lenders. No provisions of Section 2.10 shall be amended,
modified or waived without the consent of the Issuer. No provisions of Section
13 shall be amended, modified or waived without the consent of the Agent or the
Issuer.
14.2 Confirmations. The Company and each holder of a Note agree from time
to time, upon written request received by it from the other, to confirm to the
other in writing (with a copy of each such confirmation to the Agent) the
aggregate unpaid principal amount of the Loans and Reimbursement Obligations
then outstanding under such Note.
14.3 Notices. Except as otherwise provided in Sections 2.3, 2.4 and 4.3,
all notices hereunder shall be in writing (including,
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without limitation, facsimile transmission) and shall be sent to the applicable
party at its address shown below its signature hereto or at such other address
as such party may, by written notice received by the other parties hereto, have
designated as its address for such purpose. Notices sent by facsimile
transmission shall be deemed to have been given when sent; notices sent by mail
shall be deemed to have been given three Business Days after the date when sent
by registered or certified mail, postage prepaid; and notices sent by hand
delivery shall be deemed to have been given when received. For purposes of
Sections 2.3, 2.4 and 4.3, the Agent shall be entitled to rely on telephonic
instructions from any person that the Agent in good faith believes is an
authorized officer or employee of the Company, and the Company shall hold the
Agent and each Lender harmless from any loss, cost or expense resulting from any
such reliance.
14.4 Computations. Where the character or amount of any asset or
liability or item of income or expense is required to be determined, or any
consolidation or other accounting computation is required to be made, for the
purpose of this Agreement, such determination or calculation shall, to the
extent applicable and except as otherwise specified in this Agreement, be made
in accordance with generally accepted accounting principles applied on a basis
consistent with those used in the preparation of the Company's audited financial
statements referred to in clause (a) of Section 9.4.
14.5 Regulation U. Each Lender represents that it in good faith is not
relying, either directly or indirectly, upon any Margin Stock as collateral
security for the extension or maintenance by it of any credit provided for in
this Agreement.
14.6 Costs, Expenses and Taxes. The Company agrees to pay on demand (a) all
reasonable out-of-pocket costs and expenses of the Agent and the Issuer
(including (x) the reasonable fees and charges of counsel for the Agent and the
Issuer, (y) the fees and charges of local counsel, if any, who may be retained
by such counsel, and (z) the allocable costs of internal legal services and all
disbursements of internal counsel) in connection with the negotiation,
preparation, execution, delivery and administration of this Agreement, the other
Transaction Documents and all other documents provided for herein or delivered
or to be delivered hereunder or in connection herewith (including, without
limitation, any amendment, supplement or waiver to any Transaction Document and
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the arrangement and syndication of the financing provided under the Transaction
Documents), and (b) all reasonable out-of-pocket costs and expenses (including
(x) attorneys' fees, court costs and other legal expenses of all counsel and (y)
the allocable costs of internal legal services and all disbursements of internal
counsel) incurred by the Agent, the Issuer and each Lender in connection with
the enforcement of this Agreement, the other Transaction Documents or any such
other documents. In addition, the Company agrees to pay, and to save the Agent,
the Issuer and the Lenders harmless from all liability for, any stamp or other
similar taxes which may be payable in connection with the execution and delivery
of this Agreement, the Credit Extensions hereunder, the issuance of the Notes or
the execution and delivery of any other Transaction Document or any other
document provided for herein or delivered or to be delivered hereunder or in
connection herewith. All obligations provided for in this Section 14.6 shall
survive repayment of the Obligations, cancellation of the Notes and Letters of
Credit and termination of each Transaction Document.
14.7 Captions. Section captions used in this Agreement are for
convenience only and shall not affect the construction of this Agreement.
14.8 Assignments; Participations.
14.8.1 Assignments. Any Lender may at any time assign and delegate to one
or more Affiliates or may, with the prior written consent of the Agent, the
Issuer and the Company (which consents shall not be unreasonably delayed or
withheld, it being understood that an assignment to a business competitor of the
Company shall be a reasonable basis for withholding such consent), at any time
assign and delegate to one or more commercial banks or other Persons (any Person
to whom such an assignment and delegation is to be made being herein called an
"Assignee"), all or any fraction of such Lender's Credit Extensions and
Commitments (which assignment and delegation shall be of a constant, and not a
varying, percentage of all the assigning Lender's Working Capital Revolving
Commitments and Working Capital Revolving Loans and Reimbursement Obligations
and/or all of such Lender's Reducing Revolver Loan Commitment and Reducing
Revolver Loans, as the case may be) in a minimum aggregate amount equal to the
lesser of (i) the sum of the assigning Lender's remaining Credit Extensions and
(to the extent not used) Commitments, and (ii) $5,000,000; provided, however,
that the Company and the Agent shall be entitled to continue to deal
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solely and directly with such Lender in connection with the interests so
assigned and delegated to an Assignee until the date when all of the following
conditions shall have been met:
(a) five Business Days (or such lesser period of time as the Agent
and the assigning Lender shall agree) shall have passed after written
notice of such assignment and delegation, together with payment
instructions, addresses and related information with respect to such
Assignee, shall have been given to the Company, the Issuer and the Agent by
such assigning Lender and the Assignee,
(b) the assigning Lender and the Assignee shall have executed and
delivered to the Company, the Issuer and the Agent an assignment agreement
substantially in the form of Exhibit G (an "Assignment Agreement"),
together with any documents required to be delivered thereunder, which
Assignment Agreement shall have been consented to (if required) and
accepted by the Agent, the Issuer and the Company,
(c) the Assignee, if not organized under the laws of the United
States or a State thereof, shall have delivered to the Company a United
States Internal Revenue Service Form 1001 or 4224 as appropriate (or
successor forms), properly completed and claiming a complete exemption, as
the case may be, from withholding or deduction for or on account of
Recipient Taxes of such Assignee; and
(d) the assigning Lender or the Assignee shall have paid the Agent a
processing fee of $3,500.
From and after the date on which the conditions described above have been met,
(x) such Assignee shall be deemed automatically to have become a party hereto
and, to the extent that rights and obligations hereunder have been assigned and
delegated to such Assignee pursuant to such Assignment Agreement, shall have the
rights and obligations of a Lender hereunder, and (y) the assigning Lender, to
the extent that rights and obligations hereunder have been assigned and
delegated by it pursuant to such Assignment Agreement, shall be released from
its obligations hereunder. Accrued interest on that part of the Loans being
assigned shall be paid as provided in the Assignment Agreement. Accrued interest
and accrued fees shall be paid at the same time or times provided in
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this Agreement. Any attempted assignment and delegation not made in accordance
with this Section 14.8.1 shall be null and void.
14.8.2 Participations. Any Lender may at any time sell to one or more
commercial banks or other Persons participating interests in any Credit
Extension owing to such Lender, the Working Capital Revolving Commitment of such
Lender, the Reducing Revolver Loan Commitment of such Lender, or any other
interest of such Lender hereunder (any Person purchasing any such participating
interest being herein called a "Participant"). In the event of a sale by a
Lender of a participating interest to a Participant, (x) such Lender shall
remain the Lender for all purposes of this Agreement, (y) the Company, the
Issuer and the Agent shall continue to deal solely and directly with such Lender
in connection with such Lender's rights and obligations hereunder and (z) all
amounts payable by the Company shall be determined as if such Lender had not
sold such participation and shall be paid directly to such Lender. No
Participant shall have any direct or indirect voting rights hereunder except
with respect to any of the events described in the penultimate sentence of
Section 14.1. Each Lender agrees to incorporate the requirements of the
preceding sentence into each participation agreement which such Lender enters
into with any Participant. The Company agrees that if amounts outstanding under
this Agreement and the Notes are due and payable (as a result of acceleration or
otherwise), each Participant shall be deemed to have the right of setoff in
respect of its participating interest in amounts owing under this Agreement and
any Note to the same extent as if the amount of its participating interest were
owing directly to it as a Lender under this Agreement; provided that such right
of setoff shall be subject to the obligation of each Participant to share with
the Lenders, and the Lenders agree to share with each Participant, as provided
in Section 7.5. The Company also agrees that each Participant shall be entitled
to the benefits of Section 8 as if it were a Lender (provided that no
Participant shall receive any greater compensation pursuant to Section 8 than
would have been paid to the participating Lender if no participation had been
sold).
14.9 Governing Law. This Agreement and each Note shall be a contract made
under and governed by the internal laws of the State of Illinois. Whenever
possible each provision of this Agreement shall be interpreted in such manner as
to be effective and valid under applicable law, but if any provision of this
Agreement shall be prohibited by or invalid under applicable law, such provision
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shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement. All obligations of Parent, the Issuer and the Company and rights of
the Agent, the Issuer and the Lenders expressed herein or in any other
Transaction Document shall be in addition to and not in limitation of those
provided by applicable law.
14.10 Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts and
each such counterpart shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same Agreement.
14.11 Successors and Assigns. This Agreement shall be binding upon
Parent, the Company, the Lenders, the Issuer and the Agent and their respective
successors and assigns, and shall inure to the benefit of Parent, the Company,
the Lenders, the Issuer and the Agent and the permitted successors and assigns
of the Lenders and the Agent.
14.12 Indemnification by the Company.
(a) In consideration of the execution and delivery of this Agreement by
the Agent, the Issuer and the Lenders and the agreement to extend the
Commitments provided hereunder, the Company hereby agrees to indemnify,
exonerate and hold the Agent, the Issuer, each Lender and each of the officers,
directors, employees, agents and attorneys-in-fact of the Agent, the Issuer and
each Lender (collectively the "Lender Parties" and individually each a "Lender
Party") free and harmless from and against any and all actions, causes of
action, suits, losses, liabilities, damages and expenses, including, without
limitation, reasonable attorneys' fees and charges (collectively therein called
the "Indemnified Liabilities"), incurred by the Lender Parties or any of them as
a result of, or arising out of, or relating to
(i) any tender offer, merger, purchase of stock, purchase of
assets or other similar transaction financed or proposed to be
financed in whole or in part, directly or indirectly, with the
proceeds of any of the Credit Extensions,
(ii) the execution, delivery, performance or
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enforcement of this Agreement or any other Transaction Document by any
of the Lender Parties, or
(iii) any investigation, litigation or proceeding related to any
violation or alleged violation of any Environmental Law or
Occupational Safety and Health Law,
except for any such Indemnified Liabilities arising for the account of a
particular Lender Party that are determined in a final judgment of a court of
competent jurisdiction to have been caused in all material respects by such
Lender Party's gross negligence or willful misconduct. If and to the extent that
the foregoing undertaking may be unenforceable for any reason, the Company
hereby agrees to make the maximum contribution to the payment and satisfaction
of each of the Indemnified Liabilities which is permissible under applicable
law. Nothing set forth above shall be construed to relieve any Lender Party from
any obligation it may have under this Agreement.
(b) All obligations provided for in this Section 14.12 shall survive
repayment of the Loans, cancellation of the Notes, cancellation or expiration of
the Letters of Credit and any termination of the Transaction Documents.
14.13 Confidentiality. The Agent and the Lenders shall hold all non-
public information obtained pursuant to the requirements of this Agreement in
accordance with their customary procedures for handling confidential information
of this nature and in accordance with safe and sound banking practices and, in
any event, may make disclosure on the same confidential basis as provided for
herein that is reasonably required by any actual or bona fide potential
transferee or participant in connection with the contemplated transfer of any
Note or participation therein, or as required or requested by any governmental
agency or representative thereof or pursuant to legal process; provided that,
unless prohibited by applicable law or court order, each of the Agent and each
Lender shall promptly notify the Company of any request by any governmental
agency or representative thereof (other than any such request in connection with
an examination of the financial condition of the Agent or such Lender by such
governmental agency) for disclosure of any such non-public information prior to
disclosure of such information, and at the request of the Company will take
reasonable efforts to maintain the confidentiality of such information.
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14.14 Maximum Interest. Anything in this Agreement or any Note or any other
Loan Document to the contrary notwithstanding, the Company shall never be
required to pay unearned interest on any Note and shall never be required to pay
interest on any Note or on any other Loan Document at a rate in excess of the
Highest Lawful Rate, and if the effective rate of interest which would otherwise
be payable under this Agreement and any Note and the other Loan Documents would
exceed the Highest Lawful Rate, or if the holder of any Note shall receive
monies that are deemed to constitute interest which would increase the effective
rate of interest payable by the Company under this Agreement and any Note and
the other Loan Documents to a rate in excess of the Highest Lawful Rate, then
(i) the amount of interest which would otherwise be payable by the Company under
this Agreement and such Note and the other Loan Documents shall be reduced to
the amount allowed by applicable law, and (ii) any unearned interest paid by the
Company or any interest paid by the Company in excess of the Highest Lawful Rate
shall, at the option of the holder of such Note, be either refunded to the
Company or credited on the principal of such Note. It is further agreed that,
without limitation of the foregoing, all calculations of the rate of interest
contracted for, charged or received by the Lenders under any Note, or under this
Agreement or any other Loan Document, are made for the purpose of determining
whether such rate exceeds the Highest Lawful Rate applicable to the Lenders
(such Highest Lawful Rate being the "Maximum Permissible Rate"), and shall be
made, to the extent permitted by usury laws applicable to the Lenders (now or
hereafter enacted), by amortizing, prorating and spreading in equal parts during
the period of the full stated term of the Loans evidenced by the Notes and other
Loan Documents all interest at any time contracted for, charged or received by
the Lenders in connection therewith. If at any time and from time to time (i)
the amount of interest payable to the Lenders on any date shall be computed at
the Maximum Permissible Rate pursuant to this Section 14.14 and (ii) in respect
of any subsequent interest computation period the amount of interest otherwise
payable to the Lender would be less than the amount of interest payable to the
Lenders computed at the Maximum Permissible Rate, then the amount of interest
payable to the Lenders in respect of such subsequent interest computation period
shall continue to be computed at the Maximum Permissible Rate until the total
amount of interest payable to the Lenders shall equal the total amount of
interest which would have been payable to the Lenders if the total amount of
interest had been computed without giving effect to this Section 14.14.
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14.15 FORUM SELECTION AND CONSENT TO JURISDICTION. ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT OR ANY
OTHER TRANSACTION DOCUMENT, SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE
COURTS OF THE STATE OF ILLINOIS OR IN THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF ILLINOIS; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING
ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE
AGENT'S OR ISSUER'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH
COLLATERAL OR OTHER PROPERTY MAY BE FOUND. EACH OF PARENT, THE COMPANY, THE
AGENT, THE ISSUER AND EACH LENDER HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO
THE JURISDICTION OF THE COURTS OF THE STATE OF ILLINOIS AND OF THE UNITED STATES
DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS FOR THE PURPOSE OF ANY SUCH
LITIGATION AS SET FORTH ABOVE. EACH OF PARENT, THE COMPANY, THE AGENT, THE
ISSUER AND EACH LENDER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY
REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE
STATE OF ILLINOIS. EACH OF PARENT AND THE COMPANY HEREBY EXPRESSLY AND
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH
IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION
BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH
LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
14.16 WAIVER OF JURY TRIAL. EACH OF PARENT, THE COMPANY, THE AGENT, THE
ISSUER AND EACH LENDER HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION
OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT OR ANY OTHER
TRANSACTION DOCUMENT AND ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT
DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR
THEREWITH OR ARISING FROM ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH
ANY OF THE FOREGOING, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE
TRIED BEFORE A COURT AND NOT BEFORE A JURY.
SECTION 15 GUARANTY OF PARENT.
Parent hereby unconditionally, as primary obligor and not merely as surety,
guarantees the full and prompt payment when due, whether by acceleration or
otherwise, and at all times thereafter, of all obligations (monetary or
otherwise) of the Company to the Lenders and the Agent, under or in connection
with the Credit Agreement, the Notes, the Letters of Credit any other Loan
Document and any other document or instrument (including, without limitation,
any Hedging Agreement entered into with any Lender or any Affiliate thereof)
executed in connection therewith, in each
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case howsoever created, arising or evidenced, whether direct or indirect,
absolute or contingent, now or hereafter existing, or due or to become due, in
each case as the same may be amended, modified, extended or renewed from time to
time (all such obligations being herein collectively called the "Liabilities");
provided, however, that the liability of Parent hereunder shall be limited to
the maximum amount of the Liabilities which Parent may guaranty without
violating any fraudulent conveyance or fraudulent transfer law (plus all costs
and expenses paid or incurred by the Agent or any Lender in enforcing this
guaranty of Parent (this "Parent Guaranty") under this Section 15 against
Parent.
This Parent Guaranty shall in all respects be a continuing, absolute and
unconditional guaranty, and shall remain in full force and effect
(notwithstanding, without limitation, the dissolution of Parent or Company or
that at any time or from time to time no Liabilities are outstanding) until all
Commitments have terminated and all Liabilities have been paid in full.
Parent further agrees that if at any time all or any part of any payment
theretofore applied by the Agent or any Lender to any of the Liabilities is or
must be rescinded or returned by the Agent or such Lender for any reason
whatsoever (including, without limitation, the insolvency, bankruptcy or
reorganization of the Company or Parent), such Liabilities shall, for the
purposes of this Guaranty, to the extent that such payment is or must be
rescinded or returned, be deemed to have continued in existence, notwithstanding
such application by the Agent or such Lender, and this Parent Guaranty shall
continue to be effective or be reinstated, as the case may be, as to such
Liabilities, all as though such application by the Agent or such Lender had not
been made.
The Agent or any Lender may, from time to time, at its sole discretion and
without notice to Parent, take any or all of the following actions: (a) retain
or obtain a security interest in any property to secure any of the Liabilities
or any obligation hereunder, (b) retain or obtain the primary or secondary
obligation of any obligor or obligors, in addition to Parent, with respect to
any of the Liabilities, (c) extend or renew any of the Liabilities for one or
more periods (whether or not longer than the original period), alter or exchange
any of the Liabilities, or release or compromise any obligation of any of the
undersigned hereunder or any obligation of any nature of any other obligor with
respect to
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any of the Liabilities, (d) release its security interest in, or surrender,
release or permit any substitution or exchange for, all or any part of any
property securing any of the Liabilities or any obligation hereunder, or extend
or renew for one or more periods (whether or not longer than the original
period) or release, compromise, alter or exchange any obligations of any nature
of any obligor with respect to any such property, and (e) resort to Parent for
payment of any of the Liabilities when due (subject to any applicable grace
period), whether or not the Agent or such Lender shall have resorted to any
property securing any of the Liabilities or any obligation hereunder or shall
have proceeded against any other Guarantor or any other obligor primarily or
secondarily obligated with respect to any of the Liabilities.
Parent hereby waives each of the following, to the fullest extent allowed
by law:
(a) all statutes of limitations as a defense to any action brought by
Agent against Parent;
(b) any defense based upon:
(i) the unenforceability or invalidity of all or any part of the
Credit Agreement or the Liabilities, or any security or other guaranty
for the Liabilities or the lack of perfection or failure of priority
of any security for the Liabilities; or
(ii) any act or omission of the Company or any other Person that
directly or indirectly results in the discharge or release of the
Company or any other Person or any of the Liabilities or any security
therefor; or
(iii) any disability or any other defense of the Company or any
other Person with respect to the Liabilities, whether consensual or
arising by operation of law or any bankruptcy, insolvency or debtor-
relief proceeding, or from any other cause;
(c) any right (whether now or hereafter existing) to require Agent, as
a condition to the enforcement of this Parent Guaranty, to:
(i) accelerate the Liabilities; or
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(ii) give notice to Parent of the terms, time and place of any
public or private sale of any security for the Liabilities; or
(iii) proceed against the Company, Parent or any other Person,
or proceed against or exhaust any security for the Liabilities;
(d) until payment in full of the Liabilities and termination of the
Commitments, all rights of subrogation, all rights to enforce any remedy
that Agent now or hereafter has against the Company or any other Person,
and any benefit of, and right to participate in, any security now or
hereafter held by the Company with respect to the Liabilities;
(e) presentment, demand, protest and notice of any kind, including
without limitation notices of default and notice of acceptance of this
Parent Guaranty;
(f) all suretyship defenses and rights of every nature otherwise
available under California law and the laws of any other jurisdiction,
including without limitation all defenses arising under Sections 2787
through 2855, and Sections 2899 and 3433 of the California Civil Code and
any successor provisions of those Sections; and
(g) all other rights and defenses the assertion or exercise of which
would in any way diminish the liability of Parent hereunder.
Parent further agrees to pay all expenses (including attorneys' fees and
legal expenses) paid or incurred by the Agent or any Lender in endeavoring to
collect the Liabilities of Parent, or any part thereof, and in enforcing this
Parent Guaranty against Parent.
The creation or existence from time to time of additional Liabilities to
the Agent or the Lenders or any of them is hereby authorized, without notice to
Parent, and shall in no way affect or impair the rights of the Agent or the
Lenders or the obligations of Parent under this Parent Guaranty, including
Parent's guaranty of such additional Liabilities.
The Agent and any Lender may from time to time without notice
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to Parent, assign or transfer any or all of the Liabilities or any interest
therein to the extent permitted by this Agreement; and, notwithstanding any such
assignment or transfer or any subsequent permitted assignment or transfer
thereof, such Liabilities shall be and remain Liabilities for the purposes of
this Parent Guaranty, and each and every immediate and successive permitted
assignee or transferee of any of the Liabilities or of any interest therein
shall, to the extent of the interest of such assignee or transferee in the
Liabilities, be entitled to the benefits of this Parent Guaranty to the same
extent as if such assignee or transferee were a Lender.
No delay on the part of the Agent or any Lender in the exercise of any
right or remedy shall operate as a waiver thereof, and no single or partial
exercise by the Agent or any Lender of any right or remedy shall preclude other
or further exercise thereof or the exercise of any other right or remedy; nor
shall any modification or waiver of any provision of this Parent Guaranty be
binding upon the Agent or the Lenders except as expressly set forth in a writing
duly signed and delivered on behalf of the Agent. No action of the Agent or any
Lender permitted hereunder shall in any way affect or impair the rights of the
Agent or any Lender or the obligations of Parent under this Parent Guaranty. For
purposes of this Parent Guaranty, Liabilities shall include all obligations of
the Company to the Agent or any Lender arising under or in connection with the
Credit Agreement, any Note, any Letter of Credit or any other Loan Document
notwithstanding any right or power of the Company or anyone else to assert any
claim or defense as to the invalidity or unenforceability of any obligation, and
no such claim or defense shall affect or impair the obligations of Parent
hereunder.
Parent authorizes Agent, at its sole option, without notice or demand and
without affecting the liability of Parent hereunder, to release and reconvey
(with or without the receipt of any consideration) any Lien against any or all
security for the Credit Agreement, and to foreclose any or all deeds of trust,
mortgages or other instruments or agreements by judicial or nonjudicial sale,
all without affecting the liability of Parent hereunder. Parent expressly
waives any defense to the recovery by Agent from Parent of any deficiency after
a nonjudicial sale, including without limitation any defense arising as a result
of any election of remedies by Agent which limits or destroys Parent's
subrogation rights or Parent's right to proceed against the Company for
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reimbursement (including without limitation any election by Agent to exercise
its rights under the power of sale in any mortgage or deed of trust and any
consequential loss by Parent of the right to recover any deficiency from the
Company). Parent waives any defenses or benefits that may be derived from
California Code of Civil Procedure Sections 580a, 580b, 580d or 726, or
comparable provisions of the laws of the State of California or any other
jurisdiction, and all other suretyship defenses it would otherwise have under
California law or the laws of any other jurisdiction. Parent waives any right to
receive notice of any judicial or nonjudicial sale or foreclosure of any real
property, and the failure of Parent to receive such notice shall not impair or
affect Parent's liability hereunder.
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Delivered at New York, New York, as of the day and year first above written.
COBBLESTONE HOLDINGS, INC.
By: ---------------------------------------------
Title: Vice President and Chief Financial Officer
Name Printed: Stefan C. Karnavas
Address: 3702 Via de la Valle
Suite 202
Del Mar, California 92104
Attention: Stefan C. Karnavas
Telephone: 619-794-2602
Facsimile: 619-794-7805
COBBLESTONE GOLF GROUP, INC.
By: ---------------------------------------------
Title: Vice President and Chief Financial Officer
Name Printed: Stefan C. Karnavas
Address: 3702 Via de la Valle
Suite 202
Del Mar, California 92104
Attention: Stefan C. Karnavas
Telephone: 619-794-2602
Facsimile: 619-794-7805
<PAGE>
BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION,
as Agent
By:_________________________________________________
Address: 1455 Market Street, 12th Floor
San Francisco, California 94103
Attention: Leandro Balidoy
Telephone: 415-436-4008
Facsimile: 415-436-3359
with a copy to:
Address: 231 South LaSalle Street
Chicago, Illinois 60697
Attention: Patrick A. Dunbar
Telephone: 312-828-3065
Facsimile: 312-828-3555
BANK OF AMERICA ILLINOIS, individually and as Issuer
By:_________________________________________________
Address: 231 South LaSalle Street
Chicago, Illinois 60697
Attention: Patrick A. Dunbar
Telephone: 312-828-3065
Facsimile: 312-828-3555
<PAGE>
THE FIRST NATIONAL BANK OF BOSTON
By:_______________________________________
Address: Diversified Finance
MS 01-08-05
100 Federal Street
Boston, Massachusetts 02110
Attention: Drew Piculell
Telephone: 617-434-4060
Facsimile: 617-434-4929
<PAGE>
STATE STREET BANK AND TRUST COMPANY
By:__________________________________________
Address: 225 Franklin Street
Boston, Massachusetts 02110-2804
Attention: Karen E. Pellegrini
Telephone: 617-654-3248
Facsimile: 617-338-4041
<PAGE>
UNION BANK OF CALIFORNIA, N.A.
By:________________________________________
Address: Asset Based Finance Group
70 South Lake Avenue
Suite 900
Pasadena, California 91101
Attention: Stephen R. Sweeney/Sean Spring
Telephone: 818-304-1816
Facsimile: 818-304-1845
<PAGE>
Solely as an Existing Lender:
FLEET BANK
By:_________________________________
Address: Mail Stop: MA BO F40
75 State Street
Boston, MA 02109
Attention: William M. Clark
Telephone: 617/346-1623
Facsimile: 617/346-1561
<PAGE>
Solely as an Existing Lender:
PILGRIM AMERICA PRIME RATE TRUST
By:__________________________________
Address: Two Renaissance Square
40 North Central Avenue
Suite 1200
Phoenix, Arizona 85004
Attention: Michael Bacevich
Telephone: 602/417-8301
Facsimile: 602/417-8258
<PAGE>
Solely as an Existing Lender:
VAN KAMPEN AMERICAN CAPITAL PRIME RATE
INCOME TRUST
By:_____________________________________
Address: One Parkview Plaza
Oakbrook Terrace, IL 60181
Attention: Brian Good
Telephone: 708/684-6740
Facsimile: 708/684-6425
<PAGE>
EXHIBIT 10.2
COBBLESTONE GOLF GROUP, INC.
11 1/2% Series A Senior Notes due 2003
PURCHASE AGREEMENT
------------------
May 29, 1996
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BA SECURITIES, INC.
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, New York 10172
Ladies and Gentlemen:
Subject to the terms and conditions herein contained, Cobblestone Golf
Group, Inc., a Delaware corporation (the "Company"), and all of its subsidiaries
(collectively the "Guarantors" and, together with the Company, the "Issuers"),
jointly and severally propose to issue and sell to Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJ") and BA Securities, Inc. (together with DLJ, the
"Initial Purchasers"), an aggregate of $70,000,000 principal amount of 11 1/2%
Series A Senior Notes due 2003 (the "Notes") and the related irrevocable and
unconditional guarantees (the "Guarantees") by the Guarantors (collectively, the
"Securities"). The Securities are to be issued pursuant to the provisions of an
Indenture (the "Indenture"), to be dated as of June 4, 1996, by and among the
Issuers and Norwest Bank Minnesota, National Association, as trustee (the
"Trustee"). In connection with the closing contemplated by this Agreement, the
Issuers will enter into (i) the Registration Rights Agreement (as hereinafter
defined) and (ii) a credit facility and each of its related documents with a
syndicate of banks represented by Bank of America NT&SA which
<PAGE>
is evidenced by that certain Second Amended and Restated Credit Agreement to be
dated as of June 4, 1996, by and among the Company, Cobblestone Holdings, Inc.
("Holdings"), the various financial institutions party thereto and Bank of
America NT&SA (collectively, with each of the documents related thereto, the
"New Credit Facility"). The Securities and the Indenture are more fully
described in the Offering Memorandum (as hereinafter defined). Capitalized terms
used herein without definition shall have the respective meanings ascribed
thereto in the Offering Memorandum.
1. Delivery and Payment. Delivery to you of and payment for the
--------------------
Securities shall be made at 10:00 A.M., New York City time, on June 4, 1996
(such time and date being referred to as the "Closing Date") at the offices of
Latham & Watkins at 885 Third Avenue, New York, New York 10022, or such other
place as DLJ shall reasonably designate. The Closing Date and the location of
delivery of, and the form of payment for the Securities may be varied by
agreement between DLJ and the Company.
One or more of the Securities in definitive form, registered in the
name of Cede and Co., as nominee of The Depository Trust Company ("DTC"), or
such other names as you shall request in writing not later than one full
business day prior to the Closing Date, having an aggregate principal amount
corresponding to the aggregate principal amount of Securities resold pursuant to
Rule 144A under the Securities Act of 1933, as amended, and the rules and
regulations promulgated by the Securities and Exchange Commission (the
"Commission"), thereunder (the "Act"), as such rule may be amended from time to
time ("Rule 144A"), to qualified institutional buyers ("QIBs") within the
meaning of Rule 144A (collectively, the "Global Securities"), and one or more
Securities in definitive form shall be registered in such names and issued in
such denominations as you shall request in writing not later than one business
day prior to the Closing Date, having an aggregate principal amount
corresponding to the aggregate principal amount of the Securities sold to
Institutional Accredited Investors (as defined herein) (collectively, the
"Certificated Securities"), shall be delivered by the Issuers to you on the
Closing Date with any transfer taxes payable upon initial issuance thereof duly
paid by the Company, for your respective accounts against payment of the
Purchase Price (as hereinafter defined) by wire transfer of same day funds to
such bank account as the Company shall designate at least two business days
prior to the Closing Date. The Global Securities and Certificated Securities in
definitive form shall be made available to you at the offices of DLJ (or at such
other place as shall be acceptable to you) for inspection not later than 9:30
A.M., New York City time, on the business day next preceding the Closing Date.
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2. Offering of the Securities and the Initial Purchasers'
------------------------------------------------------
Representations.
- ---------------
(a) You have advised the Company that it is your intention, as
promptly as you deem appropriate after the Company shall have furnished you
with copies of the Offering Memorandum, to resell the Securities pursuant
to the procedures and upon the terms set forth in the Offering Memorandum.
(b) Each Initial Purchaser, severally and not jointly, represents,
warrants and agrees that it:
(i) is not acquiring the Securities with a view to any
distribution thereof or with any present intention of offering or
selling any of the Securities in a transaction that would violate the
Act or the securities laws of any state of the United States or any
other applicable jurisdiction;
(ii) will solicit offers for Securities only from, and will
offer Securities only to, persons that it reasonably believes are (y)
QIBs in transactions meeting the requirements of Rule 144A, or (z)
other institutional "accredited investors" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Act ("Institutional Accredited
Investors"));
(iii) will offer and sell the Securities only (y) to persons
who it reasonably believes to be QIBs or (z) to institutions which it
reasonably believes are Institutional Accredited Investors that
execute and deliver a letter containing certain representations and
agreements in the form attached as Annex A to the Offering Memorandum;
(iv) is an Institutional Accredited Investor with such
knowledge and experience in financial and business matters as are
necessary in order to evaluate the merits and risks of an investment
in the Securities;
(v) has not and will not offer or sell the Securities by any
form of general solicitation or general advertising, including but not
limited to, the methods described in Rule 502(c) under the Act; and
(vi) will, during its initial distribution of the
Securities, unless prohibited by applicable law, furnish to each
person to whom
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it offers any Securities a copy of the preliminary offering memorandum
(as defined) or inform each such person that a copy of such
preliminary offering memorandum is available upon request and will,
during its initial distribution of the Securities, furnish to each
person to whom it sells any Securities a copy of the Offering
Memorandum (as then amended or supplemented).
3. Agreements to Sell and Purchase. On the basis of the
-------------------------------
representations and warranties contained in this Agreement, and subject to the
terms and conditions contained in this Agreement, the Issuers jointly and
severally agree to issue and sell to the Initial Purchasers, and each Initial
Purchaser agrees, severally and not jointly, to purchase from the Issuers,
Securities in the respective principal amount set forth opposite the name of
such Initial Purchaser in Schedule I hereto, plus such amount as they may
individually become obligated to purchase pursuant to Section 8 hereof, at a
purchase price per Security equal to the percentage of the principal amount
thereof set forth in the table on the cover page of the Offering Memorandum
under the heading "Proceeds to the Company" (the "Purchase Price").
The Securities will be offered and sold to you without being
registered under the Act in reliance on an exemption therefrom. The Issuers
have prepared a preliminary offering memorandum dated May 13, 1996 (such
preliminary offering memorandum is referred to herein as the "preliminary
offering memorandum"), and an offering memorandum dated May 29, 1996 (such
offering memorandum, in the form first furnished to the Initial Purchasers for
use in connection with the offering of the Securities, is referred to herein as
the "Offering Memorandum"), setting forth information regarding the Issuers and
the Securities. The Issuers hereby confirm that they have authorized the use of
the preliminary offering memorandum and the Offering Memorandum in connection
with the offering and resale of the Securities.
Holders (including subsequent transferees) of the Securities will have
the registration rights set forth in the Registration Rights Agreement (the
"Registration Rights Agreement"), to be dated the Closing Date, in substantially
the form of Exhibit A hereto, for so long as such Securities constitute
"Registrable Securities" (as defined in the Registration Rights Agreement).
Pursuant to the Registration Rights Agreement, the Issuers will agree to file
with the Commission under the circumstances set forth therein (i) a registration
statement under the Act (the "Exchange Offer Registration Statement"),
registering an issue of senior notes and related guarantees identical in all
material respects to the Securities (the "Exchange Securities"), to be offered
in exchange for the Securities (the "Exchange Offer"), or (ii), under certain
circumstances, a registration statement pursuant to Rule 415 under the Act (the
"Shelf
4
<PAGE>
Registration Statement" and collectively, with the Exchange Offer Registration
Statement, the "Registration Statements").
4. Agreements of the Issuers. Each of the Issuers, jointly and
-------------------------
severally, agrees with each of you that:
(a) It will advise you promptly and, if requested by you, confirm
such advice in writing, of the happening of any event during the period as
in your judgment you are required to deliver an Offering Memorandum in
connection with sales of the Securities by you which makes any statement of
a material fact made in the Offering Memorandum untrue or which requires
the making of any additions to or changes in the Offering Memorandum (as
amended or supplemented from time to time) in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(b) It will notify you promptly of (i) the receipt of any comments
from any state securities commission or any other regulatory authority that
relate to the preliminary offering memorandum or the Offering Memorandum,
(ii) of the suspension of qualification of the Securities for offering or
sale in any jurisdiction, or the initiation of any proceeding for such
purpose by any state securities commission or any other regulatory
authority. Each of the Issuers shall use its best efforts to prevent the
issuance of any stop order or order suspending the qualification or
exemption of the Securities under any state securities or Blue Sky laws,
and, if at any time any state securities commission or any other regulatory
authority shall issue an order suspending the qualification or exemption of
the Securities under any state securities or Blue Sky laws, the Issuers
shall use every reasonable effort to obtain the withdrawal or lifting of
such order at the earliest possible time.
(c) Promptly after the execution of this Agreement, and from time to
time thereafter for such period as in your judgment the Offering Memorandum
is required to be delivered in connection with sales of the Securities by
you, it will furnish to you, without charge, as many copies of the Offering
Memorandum (and of any amendment or supplement to the Offering Memorandum)
as you may reasonably request.
(d) If, during such period as in your judgment you are required to
deliver the Offering Memorandum in connection with sales of the Securities
by you, any event shall occur as result of which it becomes necessary to
amend or supplement the Offering Memorandum in order to make the
5
<PAGE>
statements therein, in light of the circumstances existing as of the date
the Offering Memorandum is delivered to a purchaser, not misleading, or if
it is necessary to amend or supplement the Offering Memorandum so that the
statements in the Offering Memorandum, as so amended or supplemented, will
not, in light of the circumstances existing as of the date the Offering
Memorandum is so delivered, be misleading, or so that the Offering
Memorandum will comply with applicable law, it will so amend or supplement
the Offering Memorandum and will furnish to you without charge such number
of copies thereof as you may reasonably request.
(e) Whether or not the transactions contemplated hereby are
consummated or this Agreement is terminated, it will pay and be responsible
for all costs, expenses, fees and taxes incurred in connection with or
incident to (i) the printing, filing, processing and distribution and
delivery of the Offering Memorandum, each preliminary offering memorandum
and all amendments and supplements thereto, (ii) the printing, processing,
execution, distribution and delivery of this Agreement, the Indenture, any
memoranda describing state securities or Blue Sky laws and all other
agreements, memoranda, correspondence and other documents printed,
distributed and delivered in connection with the offering of the
Securities, (iii) the registration or qualification of the Securities for
offer and sale under the securities or Blue Sky laws of the jurisdictions
referred to in paragraph (h), below (including, in each case, the
reasonable fees and disbursements of counsel relating to such registration
or qualification and memoranda relating thereto and any filing fees in
connection therewith), (iv) furnishing such copies of the preliminary
offering memorandum and the Offering Memorandum, all amendments and
supplements to any of them as may be reasonably requested by the Initial
Purchasers, (v) the inclusion of the Securities on the National
Association of Securities Dealers, Inc. (the "NASD"), Automatic Quotation
System-PORTAL ("PORTAL") and the approval of the Securities by DTC for
"book-entry" transfer, (vi) the rating of the Securities by investment
rating agencies and (vii) the performance by each of the Issuers of its
other obligations under this Agreement, including (without limitation) the
fees of the Trustee, the cost of its personnel and other internal costs,
the cost of printing and engraving the certificates representing the
Securities and all expenses and taxes incident to the sale and delivery of
the Securities to the Initial Purchasers.
(f) It will furnish to each Initial Purchaser, without charge, two
(2) signed copies (plus one additional signed copy to your legal counsel)
of the Registration Statements as first filed with the Commission and of
each
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<PAGE>
amendment or supplement to it, including each post effective amendment and
all exhibits filed therewith.
(g) It will not make any amendment or supplement to any preliminary
offering memorandum or the Offering Memorandum, of which you shall not
previously have been advised and provided a copy within two business days
prior to the first use thereof (or such reasonable amount of time as is
necessitated by the exigency giving rise to the need for such amendment or
supplement), or to which you shall reasonably object; and it will prepare
and provide you with, promptly upon your reasonable request, any amendment
or supplement to the Offering Memorandum which may be necessary or
advisable in connection with the resale of the Securities by you.
(h) It will cooperate with you and your counsel in connection with
the registration or qualification of the Securities for offer and sale to
and by the Initial Purchasers under the state securities or Blue Sky laws
of such jurisdictions as you may request. The Issuers will continue such
qualification in effect so long as required by law for distribution of the
Securities (provided, that the Issuers shall not be obligated to qualify as
--------
a foreign corporation or a foreign partnership, as the case may be, in any
jurisdiction in which it is not so qualified or to take any action that
would subject it to taxation or to general consent to service of process in
any jurisdiction in which it is not now so subject).
(i) For so long as and at any time that it is not subject to Section
13 or 15(d) of the Securities Exchange Act of 1934 and the Commission's
rules and regulations thereunder (the "Exchange Act"), the Company, upon
request of any holder of the Securities, will furnish to such holder, and
to any prospective purchaser or purchasers of the Securities designated by
such holder, information satisfying the requirements of subsection
(d)(4)(i) of Rule 144A under the Act; provided, however, that the Company's
-------- -------
obligations under this Section 4(i) shall terminate upon the earlier of (i)
the date the Exchange Offer is concluded and the exchange of the Exchange
Securities for the Securities tendered therein is consummated or (ii) the
date the Shelf Registration Statement is declared effective by the
Commission; provided further that, notwithstanding the foregoing proviso,
-------- -------
the Company shall be obligated to deliver, upon request, any information
required by Rule 144A(d)(4) under the Act to prospective purchasers of the
Securities during any period during which, pursuant to the Registration
Rights Agreement, the Shelf Registration Statement is required to be
effective, but such effectiveness has been suspended or revoked for any
reason
7
<PAGE>
(j) It will, so long as any of the Securities are outstanding,
deliver to the Initial Purchasers, without charge, a copy of each report or
such other publicly available information furnished to holders of the
Securities, or filed with the Commission, whether or not required by law or
pursuant to the Indenture, and such other publicly available information
concerning the Company and its subsidiaries as you may reasonably request,
at the same time as such reports or other information are furnished to such
holders.
(k) It will not voluntarily claim, and will actively resist any
attempts to claim, the benefit of any usury laws against the holders of the
Securities.
(l) It will use the proceeds from the sale of the Securities in the
manner described in the Offering Memorandum under the caption "Use of
Proceeds."
(m) It will cooperate with you to cause the Securities to be
designated as eligible for trading through PORTAL in accordance with the
rules and regulations of the NASD.
(n) It will not, and will ensure that no affiliate (as such term is
defined in the Commission's Rule 501(b) under the Act) of the Company will
offer, sell or solicit offers to buy or otherwise negotiate in respect of
any "security" (as defined in the Act) which could be integrated with the
offer and sale of the Securities in a manner that would require the
registration of the Securities under the Act.
(o) Except in connection with the Exchange Offer or the filing of the
Shelf Registration Statement, as the case may be, it will not, and will not
authorize or knowingly permit any person acting on its behalf to, solicit
any offer to buy or offer to sell the Securities by means of any form of
general solicitation or general advertising (as such terms are used in
Regulation D under the Act), or in any manner involving a public offering
within the meaning of Section 4(2) of the Act.
(p) It will cause each Security to bear the following legend until
such legend shall no longer be necessary or advisable because the
Securities are no longer subject to the restrictions on transfer described
therein:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSAC-
8
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TION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED
HEREBY MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR ANY APPLICABLE EXEMPTION
THEREFROM.
EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED
THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE
HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE
COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED, ONLY (1)(a) TO A PERSON WHO THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (b) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE
MEANING OF SUBPARAGRAPH (A)(1), (2), (3) OR (7) OF RULE 501 UNDER THE
SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR
FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN
CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT,
(c) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, (d) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES
ACT OR (e) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF
COUNSEL IF THE COMPANY SO REQUESTS) (2) TO THE COMPANY OR (3) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN
9
<PAGE>
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNTIED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER
WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO NOTIFY ANY PURCHASER
FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS
SET FORTH IN (A) ABOVE.
(q) It will use its best efforts to do and perform all things
required to be done and performed under this Agreement by it prior to or
after the Closing Date and to satisfy all conditions precedent to the
delivery of the Securities.
5. Representations and Warranties. Each of the Issuers jointly and
------------------------------
severally, represents and warrants to each of you that:
(a) Each of the preliminary offering memorandum and the Offering
Memorandum, as of its date, contains all the information that, if requested
by a prospective purchaser of the Securities, would be required to be
provided pursuant to Rule 144A(d)(4) under the Act. The Offering Memorandum
does not, and at the Closing Date will not, contain any untrue statement of
a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that the
representations and warranties contained in this paragraph (a) shall not
apply to statements in or omissions from the preliminary offering
memorandum or the Offering Memorandum (or any supplement or amendment to
them), made in reliance upon and in conformity with information relating
to the Initial Purchasers furnished to the Issuers in writing by or on
behalf of the Initial Purchasers expressly for use therein. Each of the
Issuers acknowledges for all purposes under this Agreement (including this
paragraph and Section 6 hereof) that the statements set forth in the third
paragraph (first four sentences), fourth paragraph (second sentence), under
the caption "Plan of Distribution" and in the last paragraph of the cover
page in any preliminary offering memorandum and in the Offering Memorandum
constitute the only written information furnished to the Issuers by or on
behalf of the Initial Purchasers expressly for use in the Offering
Memorandum (or any amendment or supplement to any of them), and that the
Initial Purchasers shall not be deemed to have provided any information
(and therefore are not responsible for any statements or omissions),
pertaining to any arrangement or agreement with respect to any party other
than the Initial Purchasers. On the date hereof, at the date of the
10
<PAGE>
Offering Memorandum, and any amendment or supplement thereto (if
different), and at the Closing Date, the Indenture will conform in all
material respects to the requirements of the Trust Indenture Act of 1939,
as amended, and the rules and regulations promulgated pursuant thereto
(collectively, the "TIA"), which would be applicable to an Indenture
qualified under the TIA. No contract or document of a character required
to be described in the Offering Memorandum, were the Offering Memorandum to
be the form of prospectus contained in a registration statement under the
Act on Form S-1, has not been described as so required.
(b) No action has been taken and no statute, rule, regulation or
order has been enacted, adopted or issued by any governmental body, agency
or official which prevents the issuance of the Securities, suspends the
effectiveness of the Offering Memorandum, prevents or suspends the use of
any preliminary offering memorandum or suspends the sale of the Securities
in any jurisdiction referred to in Section 4(h) hereof; no injunction,
restraining order or order of any nature by any Federal or state court of
competent jurisdiction has been issued with respect to the Issuers which
would prevent or suspend the issuance or sale of the Securities, the
effectiveness of the Offering Memorandum, or the use of any preliminary
offering memorandum or the Offering Memorandum in any jurisdiction referred
to in Section 4(h) hereof; no action, suit or proceeding before any court
or arbitrator or any governmental body, agency or official, domestic or
foreign, is pending against or, to the best knowledge of the Issuers, could
reasonably be expected to be threatened against the Issuers which, if
adversely determined, could materially interfere with or adversely affect
the issuance of the Securities or in any manner draw into question the
validity of the New Credit Facility or the Registration Rights Agreement,
this Agreement, the Indenture or the Securities; and the Issuers have
complied, in all material respects, with every request of the Commission,
or any securities authority or agency of any jurisdiction for additional
information (to be included in the Offering Memorandum or otherwise).
(c) The Indenture has been duly authorized by each of the Issuers
and, when duly executed and delivered by each of the Issuers in accordance
with its terms, will be a legal, valid and binding agreement of each of the
Issuers, enforceable against each of the Issuers in accordance with its
terms, except as rights of indemnity or contribution, or both, may be
limited by state and Federal laws and except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and similar laws affecting creditors' rights and
remedies generally and to
11
<PAGE>
general principles of equity (regardless of whether enforcement is sought
in a proceeding at law or in equity) and except to the extent that a waiver
of rights or defenses under any usury laws may be unenforceable.
(d) The Notes have been duly authorized by the Company and, on the
Closing Date, will have been duly executed by the Company and will, when
issued, executed, authenticated and delivered in accordance with the
Indenture and paid for in accordance with the terms of this Agreement,
constitute legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms, except as rights of
indemnity or contribution, or both, may be limited by state and Federal
laws and except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and
similar laws affecting creditors' rights and remedies generally and to
general principles of equity (regardless of whether enforcement is sought
in a proceeding at law or in equity), and except to the extent that a
waiver of rights or defenses under any usury laws may be unenforceable. The
Notes will be entitled to the benefits of the Indenture and will conform in
all material respects to the descriptions thereof in the Offering
Memorandum.
(e) The Guarantees have been duly authorized by each of the
Guarantors and, on the Closing Date, will have been duly executed by each
of the Guarantors and will, when issued, executed and delivered in
accordance with the Indenture, constitute legal, valid and binding
obligations of each of the Guarantors, enforceable against each of the
Guarantors in accordance with their terms, except as rights of indemnity or
contribution, or both, may be limited by state and Federal laws and except
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws affecting
creditors' rights and remedies generally and to general principles of
equity (regardless of whether enforcement is sought in a proceeding at law
or in equity), and except to the extent that a waiver of rights or defenses
under any usury laws may be unenforceable. The Guarantees will be entitled
to the benefits of the Indenture and will conform in all material respects
to the descriptions thereof in the Offering Memorandum.
(f) This Agreement has been duly authorized and validly executed and
delivered by each of the Issuers and constitutes a valid and legally
binding agreement of each of the Issuers, enforceable against each of the
Issuers in accordance with its terms (assuming due execution and delivery
by you of this Agreement), except as rights of indemnity or contribution,
or both, may be
12
<PAGE>
limited by state and Federal laws and except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and similar laws affecting creditors' rights and
remedies generally and to general principles of equity (regardless of
whether enforcement is sought in a proceeding at law or in equity) and
except to the extent that a waiver of rights or defenses under any usury
laws may be unenforceable.
(g) The execution and delivery of this Agreement, the Indenture and
the Securities by the Issuers, the issuance and sale of the Securities, the
performance of this Agreement and the Indenture and the consummation of the
transactions contemplated by this Agreement and the Indenture will not
conflict with or result in a breach or violation of (A) any of the
respective charters, bylaws or partnership agreement, as the case may be,
of each of the Issuers or (B) any of the terms or provisions of, or
constitute a default or cause an acceleration of any obligation under or
result in the imposition or creation of (or the obligation to create or
impose) any security interest, mortgage, pledge, claim, lien, encumbrance
or adverse interest of any nature (each, a "Lien"), with respect to, any
obligation, bond, agreement, note, debenture, or other evidence of
indebtedness, or any indenture, mortgage, deed of trust or other agreement,
lease or instrument to which the Issuers are a party or by which it or any
of them is bound, or to which any properties of the Issuers is or may be
subject, or (C) contravene any order of any court or governmental agency,
body or official having jurisdiction over the Issuers or any of their
properties, or violate or conflict with any statute, rule or regulation or
administrative regulation or decree or court decree applicable to the
Issuers, or any of their respective assets or properties except in the case
of (B) or (C) above, where such conflict, breach, violation, acceleration
or default could not reasonably be expected to result in a Material Adverse
Effect (as hereinafter defined).
(h) The New Credit Facility and the Registration Rights Agreement
have each been duly and validly authorized by each of the Issuers, as
applicable, and on the Closing Date will have been duly executed and
delivered by each of the Issuers, as applicable, and when duly executed and
delivered by each of the other parties thereto in accordance with its
terms, will be a legal, valid and binding agreement of each of the Issuers,
as applicable, in accordance with its terms, except as rights of indemnity
or contribution, or both, may be limited by state and Federal laws and
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and similar
laws affecting
13
<PAGE>
creditors' rights and remedies generally and to general principles of
equity (regardless of whether enforcement is sought in a proceeding at law
or in equity) and except to the extent that any waiver of rights or
defenses under any usury laws may be unenforceable. The New Credit Facility
and the Registration Rights Agreement conform in all material respects with
the descriptions thereof in the Offering Memorandum.
(i) No authorization, approval or consent or order of, or filing
with, any court or governmental body, agency or official is necessary in
connection with the transactions contemplated by this Agreement, the New
Credit Facility and the Registration Rights Agreement, except such as may
be required by the NASD or have been obtained and made under the Act, the
TIA or state securities or Blue Sky laws or regulations. None of the
Issuers nor any of their affiliates is presently doing business with the
government of Cuba or with any person or affiliate located in Cuba.
(j) Each of the Issuers has been duly organized, is validly existing
as a corporation or a general partnership, as the case may be, under the
laws of its jurisdiction of incorporation or organization, as the case may
be, and has the requisite power and authority to carry on its business as
it is currently being conducted or as described in the Offering Memorandum
as proposed to be conducted, and to own, lease and operate its properties,
as applicable, to authorize the offering of the Securities, to execute,
deliver and perform this Agreement, the New Credit Facility and the
Registration Rights Agreement and to issue, sell and deliver the
Securities, and each of the Issuers is duly qualified and is in good
standing as a foreign corporation or a foreign general partnership, as the
case may be, authorized to do business in each jurisdiction where the
operation, ownership or leasing of property or the conduct of its business
requires such qualification, except where the failure to be so qualified
could not reasonably be expected to have a material adverse effect, whether
singly or in the aggregate, on the properties, business, results of
operations, affairs, condition (financial or otherwise), or prospects of
the Issuers taken as a whole (a "Material Adverse Effect");
(k) The consolidated capitalization of the Issuers is as set forth in
the Offering Memorandum, under the caption "Capitalization" in the column
"Actual" and, after consummation of the Offering, will be as set forth in
the column "As Adjusted."
(l) All of the issued and outstanding shares of capital stock of, or
other ownership interests in, each Guarantor have been duly authorized and
14
<PAGE>
validly issued, and all, except for the minority interests disclosed in the
Offering Memorandum under the caption "Business-Organizational Structure,"
of the shares of capital stock of or other ownership interests in each
Guarantor are owned directly or indirectly by the Company. All such shares
of capital stock or other ownership interests are fully paid and
nonassessable, and are owned free and clear of any Lien except Liens that
arise under the New Credit Facility. There are no outstanding
subscriptions, rights, warrants, options, calls, convertible or
exchangeable securities, commitments of sale, or Liens related to or
entitling any person to purchase or otherwise to acquire any shares of the
capital stock of, or other ownership interest in, any Guarantor (except for
the minority interests disclosed in the Offering Memorandum under the
caption "Business-Organizational Structure").
(m) None of the Issuers are (A) in violation of its respective
charter or bylaws or (B) in default in the performance of any obligation,
bond, agreement, debenture, note or any other evidence of indebtedness, or
any indenture, mortgage, deed of trust or other contract, lease or other
instrument to which the Issuers is a party or by which any of them is
bound, or to which any of the property or assets of the Issuers is subject,
except in the case of (B) as could not reasonably be excepted to have a
Material Adverse Effect.
(n) There is no action, suit or proceeding before or by any court or
governmental agency or body, domestic or foreign, pending against or
affecting the Issuers or any of their respective assets or properties,
which is required to be disclosed in the Offering Memorandum (except as
disclosed therein), or which could have a Material Adverse Effect, or which
might materially and adversely affect the performance by any of the Issuers
of its obligations pursuant to this Agreement or the transactions
contemplated hereby or thereby and, to the best knowledge of the Issuers,
no such action, suit or proceeding is contemplated or threatened.
(o) (i) The Issuers are not in violation of any Federal, state or
local laws and regulations relating to pollution or protection of human
health or the environment (including, without limitation, ambient air,
surface water, ground water, land surface or subsurface strata), including,
without limitation, laws and regulations relating to emissions, discharges,
releases or threatened releases of toxic or hazardous substances, materials
or wastes, or petroleum and petroleum products ("Materials of Environmental
Concern"), or otherwise relating to the protection of human health and
safety, or the use, treatment, storage, disposal, transport or handling of
Materials of Environmental Concern (collectively, "Environmental Laws"),
which violation includes, but
15
<PAGE>
is not limited to, noncompliance with, or lack of, any permits or other
governmental authorizations, except to the extent that any such violation
could not reasonably be expected to have a Material Adverse Effect or
otherwise require disclosure in the Offering Memorandum; and (ii) (A) the
Issuers have not received any communication (written or oral), whether from
a governmental authority or otherwise, alleging any such violation or
noncompliance, and, to the best knowledge of the Issuers, there are no
circumstances, either past, present or that are reasonably foreseeable,
that may lead to such violation in the future, (B) there is no pending or,
to the best knowledge of the Issuers, threatened claim, action,
investigation or notice (written or oral) by any person or entity alleging
potential liability for investigatory, cleanup, or governmental responses
costs, or natural resources or property damages, or personal injuries,
attorney's fees or penalties relating to (x) the presence, or release into
the environment, of any Material of Environmental Concern at any location
owned or operated by the Issuers now or in the past, or (y) circumstances
forming the basis of any violation, or alleged violation, of any
Environmental Law (collectively, "Environmental Claims"), and (C) to the
best knowledge of the Issuers, there are no past or present actions,
activities, circumstances, conditions, events or incidents that could form
the basis of any Environmental Claim against the Issuers or against any
person or entity whose liability for any Environmental Claim the Issuers
had retained or assumed either contractually or by operation of law, that
in the case of either (A), (B) or (C) of this subparagraph (ii), could
reasonably be expected to have a Material Adverse Effect or otherwise
require disclosure in the Offering Memorandum. In the ordinary course of
its business, the Issuers have conducted "Phase I assessments", which
generally consist of an investigation of environmental conditions at the
subject property (not including soil or groundwater sampling or analysis),
as well as a review of available information regarding the site and
conditions at other sites in the vicinity. Based upon these Phase I
assessments, the Issuers have conducted additional investigations, as
recommended, regarding environmental conditions at the properties; on the
basis of such investigations, the Issuers have reasonably concluded that
the costs and liabilities identified as a result of any such investigations
could not reasonably be expected to have a Material Adverse Effect.
(p) The Issuers are not in violation of any Federal, state or local
law relating to discrimination in the hiring, promotion or pay of employees
nor any applicable wage or hour laws, except as could not reasonably be
expected to have a Material Adverse Effect. There is (A) no significant
unfair labor practice complaint pending against the Issuers or, to the best
knowledge
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<PAGE>
of the Issuers, threatened against any of them, before the National Labor
Relations Board or any state or local labor relations board, and no
material grievance or material arbitration proceeding arising out of or
under any collective bargaining agreement is so pending against the Issuers
or, to the best knowledge of the Issuers, threatened against any of them,
and (B) no labor dispute in which the Issuers are involved nor, to the best
knowledge of the Issuers, is any labor dispute imminent, other than routine
disciplinary and grievance matters. The Issuers are in compliance with all
applicable provisions of the Employee Retirement Income Security Act of
1974, as amended, and the regulations and published interpretations
thereunder, except for such non-compliance as could not reasonably be
expected to result in a Material Adverse Effect.
(q) Except as could not reasonably be expected to have a Material
Adverse Effect, each of the Issuers has good and marketable title, free and
clear of all Liens (except for Permitted Liens (as defined in the
Indenture)), to all property and assets described in the Offering
Memorandum as being owned by it and such properties and assets are in the
condition and suitable for use as so described. All leases to which any of
the Issuers is a party are valid and binding and no default has occurred
and is continuing thereunder (in the case of defaults by persons other than
the Issuers, to the best knowledge of the Issuers), which could result in a
Material Adverse Effect, and the Issuers enjoy peaceful and undisturbed
possession under all such leases to which any of them is a party as lessee
with such exceptions as do not interfere with the use made or proposed to
be made by the Issuers.
(r) The Issuers maintain insurance at least in such amounts and
covering at least such risks as is adequate for the conduct of their
respective businesses and the value of their respective properties and as
is customary for companies engaged in similar businesses in similar
industries.
(s) Ernst & Young LLP, the firm of accountants that has certified or
shall certify the applicable consolidated financial statements of the
Company and subsidiaries and the other financial statements included or to
be included as part of the Offering Memorandum, are independent public
accountants with respect to the Issuers, as would be required under the
Act. The consolidated financial statements and the other financial
statements, together with related schedules and notes, set forth in the
Offering Memorandum, comply as to form in all material respects with the
requirements applicable to registration statements on Form S-1 under the
Act and fairly present the consolidated financial position of the Company
and the financial position of its subsidiaries
17
<PAGE>
at the respective dates indicated and the results of their operations and
their cash flows, as applicable, for the respective periods indicated, and
were prepared in accordance with generally accepted accounting principles
in the United States of America ("GAAP"), consistently applied throughout
such periods subject in the case of interim statements to normal recurring
adjustments. The consolidated historical ratios of earnings to fixed
charges of the Company and the consolidated pro forma ratios of earnings to
--- -----
fixed charges of the Company included in the Offering Memorandum under the
caption "Selected Consolidated Financial Information" have been calculated
in compliance with Item 503(d) of the Commission's Regulation S-K. The
other financial and statistical information and data included in the
Offering Memorandum, historical and pro forma, are accurately presented and
--- -----
prepared on a basis consistent with the financial statements and the books
and records of the Issuers.
(t) Subsequent to the respective dates as of which information is
given in the Offering Memorandum and up to the Closing Date, except as set
forth in the Offering Memorandum, neither the Company nor any of the
Guarantors has incurred any liabilities or obligations, direct or
contingent, which are material to the Company and the Guarantors, taken as
a whole, nor entered into any transaction not in the ordinary course of
business and there has not been, singly or in the aggregate, any material
adverse change, or any development which could reasonably be expected to
involve a material adverse change, in the properties, business, results of
operations, condition (financial or otherwise), affairs or prospects of the
Company and the Guarantors, taken as a whole (a "Material Adverse Change").
(u) The Company and each of the Guarantors have filed (or have had
filed on their behalf) all material tax returns required to be filed by any
of them prior to the date hereof under applicable law, other than those
filings being contested in good faith. All such tax returns and amendments
thereto are true, correct and complete in all material respects. The
Company and each of the Guarantors have paid (or have had paid on their
behalf) all material taxes, including all Federal, state, local and foreign
taxes, and other assessments of a similar nature (whether imposed directly
or through withholding), including any interest, additions to tax, or
penalties applicable thereto, other than those taxes being contested in
good faith and for which adequate reserves have been provided or those
currently payable without penalty or interest. To the best of the
Company's and each of the Guarantors' knowledge, there are no tax items of
a material nature that are currently under
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examination by the Internal Revenue Service or any other domestic or
foreign governmental authority responsible for the administration of any
such taxes.
(v) (i) Each of the Issuers has all certificates, consents,
exemptions, orders, permits, licenses, authorizations, or other approvals
or rights (each, an "Authorization"), of and from, and has made all
declarations and filings with, all Federal, state, local and other
governmental authorities, all self-regulatory organizations and all courts
and other tribunals, necessary or required to own, lease, license and use
its properties and assets and to conduct its business in the manner
described in the Offering Memorandum, except to the extent that the failure
to obtain or file could not reasonably be expected to have a Material
Adverse Effect, (ii) all such Authorizations are valid and in full force
and effect, except as could not reasonably be expected to have a Material
Adverse Effect, (iii) the Issuers are in compliance in all material
respects with the terms and conditions of all such Authorizations and with
the rules and regulations of the regulatory authorities and governing
bodies having jurisdiction with respect thereto and (iv) the Issuers have
received no notice of proceedings relating to the revocation or
modification of any such Authorization. The Issuers possess the patents,
patent rights, licenses, inventions, copyrights, know-how (including trade
secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures), trademarks, service marks
and trade names (collectively, "Intellectual Property"), presently employed
by them in connection with the businesses now operated by them, and the
Issuers have not received any notice of infringement of or conflict with
asserted rights of others with respect to the foregoing except as could not
reasonably be expected to have a Material Adverse Effect. The use of such
Intellectual Property in connection with the business and operations of the
Issuers does not infringe on the rights of any person.
(w) The Issuers maintain a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset accountability; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv)
the recorded accountability for assets is compared with the existing assets
at reasonable intervals and appropriate action is taken with respect to any
differences.
(x) Neither the Issuers nor any agent acting on their behalf has
taken or will take any action that is reasonably likely to cause the
issuance or
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sale of the Securities to violate Regulation G, T, U, or X of the Board of
Governors of the Federal Reserve System, in each case as in effect on the
Closing Date.
(y) None of the Issuers is (i) an "investment company" or a company
"controlled" by an investment company within the meaning of the Investment
Company Act of 1940, as amended, or (ii) a "holding company" or a
"subsidiary company" of a holding company, or an "affiliate" thereof within
the meaning of the Public Utility Holding Company Act of 1935, as amended.
(z) No holder of any security of any Issuer has any right to require
registration of any security of any Issuer except for the rights under the
Registration Rights Agreement. No holder of any security of any Issuer has
or will have any right to require registration of such security by virtue
of the transactions contemplated by this Agreement.
(aa) Except as disclosed in the Offering Memorandum, there are no
business relationships or related party transactions which would be
required to be disclosed therein by Item 404 of Regulation S-K of the
Commission if the Offering Memorandum were a prospectus contained in a
registration statement on Form S-1 filed under the Act.
(bb) On the Closing Date, the Securities will have been approved for
inclusion on the PORTAL system, subject to official notice of issuance.
(cc) Neither the Company nor any affiliate (as such term is defined in
Rule 501(b) under the Act) of the Company has, directly or through any
agent, sold, offered for sale, solicited offers to buy or otherwise
negotiated in respect of, any "security" (as defined in the Act) which is
or will be integrated with the sale of the Securities in a manner that
would require registration of the offering and sale of the Securities under
the Act.
(dd) None of the Issuers and any officer, director or other person
(other than you, as to whom the Issuers make no representation), acting on
their behalf has engaged, in connection with the offering of the
Securities, in any form of general solicitation or general advertising,
including but not limited to the methods described in Rule 502(c) under the
Act.
(ee) Assuming the accuracy of your representations contained in
Section 3 hereof and your compliance with your agreements therein set
forth;
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<PAGE>
it is not necessary, in connection with the sale and delivery of the
Securities to you and the offer and resale of the Securities by you, in
each case in the manner contemplated by this Agreement and the Offering
Memorandum, to register the Securities under the Act or to qualify the
Indenture under the TIA.
(ff) The Company has delivered to the Initial Purchasers a true and
correct copy of the New Credit Facility in the form substantially as it
will be executed and delivered on the Closing Date, together with all
related agreements and all schedules and exhibits thereto, and there have
been no amendments, alterations, modifications or waivers of any of the
provisions of the New Credit Facility from the form which has been
delivered to the Initial Purchasers; there exists as of the date hereof
(after giving effect to the transactions contemplated by the New Credit
Facility), no event or condition which would constitute a default or an
event of default (in each case as defined in the New Credit Facility),
under the New Credit Facility which would result in a Material Adverse
Effect or materially adversely effect the ability of the Issuers to
consummate the transactions contemplated by this Agreement.
(gg) Each certificate signed by any officer of any of the Issuers and
delivered to the Initial Purchasers or counsel for the Initial Purchasers
in connection with the transactions contemplated by this Agreement shall be
deemed to be a representation and warranty by the Issuers to each Initial
Purchaser as to the matters covered thereby.
(hh) At the Closing Date after giving effect to the transactions
contemplated hereby, (a) each of the Company's and the Guarantors' assets
will exceed its respective liabilities and (b) each of the Company and the
Guarantors will be solvent, will be able to pay its respective debts as
they mature, will own property with fair saleable value greater than the
amount required to pay its respective debts as they come due and will have
capital sufficient to carry on its business as then constituted.
(ii) CEL Golf Group, Inc., a Georgia corporation and wholly owned
subsidiary of the Company does not currently have, and has not engaged in,
any business.
6. Indemnification.
---------------
(a) The Issuers, jointly and severally, agree to indemnify and
hold harmless (i) each of the Initial Purchasers and (ii) each person, if
any, who controls (within the meaning of Section 15 of the Act or Section
20
21
<PAGE>
of the Exchange Act), any of the Initial Purchasers (any of the persons
referred to in this clause (ii) being hereinafter referred to as a
"controlling person"), and (iii) the respective officers, directors,
partners, employees, representatives and agents of any of the Initial
Purchasers or any controlling person (any person referred to in clause (i),
(ii) or (iii) may hereinafter be referred to as an "Indemnified Person"),
to the fullest extent lawful, from and against any and all losses, claims,
damages, judgments, actions, expenses and other liabilities (collectively,
"Liabilities"), including without limitation and as incurred, reimbursement
of all reasonable costs of investigating, preparing, pursuing or defending
any claim or action, or any investigation or proceeding by any governmental
agency or body, commenced or threatened, including the reasonable fees and
expenses of counsel to any Indemnified Person, directly or indirectly
caused by, related to, based upon, arising out of or in connection with any
untrue statement or alleged untrue statement of a material fact contained
in the Offering Memorandum (including any amendment or supplement thereto),
or any preliminary offering memorandum, or any 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 under which
they were made), not misleading, except insofar as such Liabilities are
caused by an untrue statement or omission or alleged untrue statement or
omission that is (x) made in reliance upon and in conformity with
information relating to either of the Initial Purchasers furnished in
writing to the Company by or on behalf of such Initial Purchaser expressly
for use in any preliminary offering memorandum or the Offering Memorandum
(or any amendment or supplement thereto), or (y) with respect to the
Initial Purchaser from whom the person asserting the Liabilities purchased
Securities, made in any preliminary offering memorandum if a copy of the
Offering Memorandum (as amended or supplemented, if the Company shall have
furnished the Initial Purchasers with such amendments or supplements
thereto on a timely basis), was not delivered by or on behalf of such
Initial Purchaser to the person asserting the Liabilities, if required by
law to have been so delivered by the Initial Purchaser seeking
indemnification, at or prior to the written confirmation of the sale of the
Securities, and it shall be finally determined by a court of competent
jurisdiction, in a judgment not subject to appeal or review, that the
Offering Memorandum (as so amended or supplemented), would have completely
corrected such untrue statement or omission. The Issuers shall notify you
promptly of the institution, threat or assertion of any claim, proceeding
(including any governmental investigation), or litigation in connection
with the matters addressed by this Agreement which involves the Issuers or
an Indemnified Person.
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(b) In case any action or proceeding (for all purposes of this Section
6, including any governmental investigation), shall be brought or asserted
against any of the Indemnified Persons with respect to which indemnity may
be sought against any Issuer, such Indemnified Person shall promptly notify
the Company in writing; provided, that the failure to give such notice
--------
shall not relieve the Issuers of their obligations pursuant to this
Agreement. Upon receiving such notice, the Issuers shall assume, at its
sole expense, the defense thereof, with counsel reasonably satisfactory to
such Indemnified Person and, after written notice from the Issuers to such
Indemnified Person of its election so to assume the defense thereof made
within five business days after receipt of the notice from the Indemnified
Person of such action or proceeding. The Issuers shall not be liable to
such Indemnified Person hereunder for legal expenses of other counsel
subsequently incurred by such Indemnified Person in connection with the
defense thereof, other than costs of investigation, unless (i) the Issuers
agree in writing to pay such fees and expenses, or (ii) the Issuers fail
promptly to assume such defense or fails to employ counsel reasonably
satisfactory to such Indemnified Person or (iii) the named parties to any
such action or proceeding (including any impleaded parties), include both
such Indemnified Person and any of the Issuers or an affiliate of the
Issuers, and either (x) such Indemnified Person shall have been advised by
counsel that there may be one or more legal defenses available to such
Indemnified Person that are different from or additional to those available
to one or more of the Issuers or such affiliate or (y) a conflict may exist
between such Indemnified Person and any of the Issuers or such affiliate.
In the event of any of clause (i), (ii) and (iii) of the immediately
preceding sentence, if such Indemnified Person notifies the Company in
writing, the Issuers shall not have the right to assume the defense thereof
and such Indemnified Person shall have the right to employ its own counsel
in any such action and the reasonable fees and expenses of such counsel
shall be paid, as incurred, by the Issuers, regardless of whether it is
ultimately determined that an Indemnified Person is not entitled to
indemnification hereunder, it being understood, however, that the Issuers
shall not, in connection with any one such action or proceeding or separate
but substantially similar or related actions or proceedings arising out of
the same general allegations or circumstances, be liable for the fees and
expenses of more than one separate firm of attorneys (in addition to any
local counsel) at any time for all such Indemnified Persons. Each of the
Issuers agrees to be liable for any settlement of such action or proceeding
effected with the Company's prior written consent, which consent will not
be unreasonably withheld, and the Issuers agree to indemnify and hold
harmless any Indemnified Person from and against any Liabilities by reason
of any settlement of any action effected with the written consent of the
Company.
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Each of the Issuers agrees to be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than ten business days after receipt by the Issuers of
the aforesaid request for payment in respect of an indemnification
obligation pursuant hereto and (ii) the Indemnified Person shall not have
been reimbursed in accordance with such request prior to the date of such
settlement. None of the Issuers shall, without the prior written consent of
each Indemnified Person, settle or compromise or consent to the entry of
any judgment in or otherwise seek to terminate any pending or threatened
action, claim, litigation or proceeding in respect of which indemnification
or contribution may be sought pursuant hereto (whether or not any
Indemnified Person is a party thereto), unless such settlement, compromise,
consent or termination includes an unconditional release of each
Indemnified Person from all liability arising out of such action, claim,
litigation or proceeding.
(c) Each of the Initial Purchasers agrees, severally and not jointly,
to indemnify and hold harmless the Issuers and any person controlling
(within the meaning of Section 15 of the Act or Section 20 of the Exchange
Act) the Issuers, and the officers, directors, partners, employees,
representatives and agents of each such person, to the same extent as the
foregoing indemnity from the Issuers to each of the Indemnified Persons,
but only with respect to claims and actions based on information relating
to such Initial Purchaser and conforming to information furnished in
writing by or on behalf of such Initial Purchaser expressly for use in the
Offering Memorandum or any preliminary offering memorandum, as applicable.
In case any action or proceeding (including any governmental
investigation), shall be brought or asserted against the Issuers, any of
their directors, any such officer, or any such controlling person based on
the Offering Memorandum or any preliminary offering memorandum in respect
of which indemnity is sought against any Initial Purchaser pursuant to the
foregoing sentence, the Initial Purchaser shall have the rights and duties
given to the Issuers (except that if the Issuers shall have assumed the
defense thereof, such Initial Purchaser shall not be required to do so, but
may employ separate counsel therein and participate in the defense thereof
but the fees and expenses of such counsel shall be at the expense of such
Initial Purchaser), and the Issuers, their directors, any such officers and
each such controlling person shall have the rights and duties given to the
Indemnified Person by Section 7(b) above.
(d) If the indemnification provided for in this Section 6 is finally
determined by a court of competent jurisdiction to be unavailable to an
indemnified party in respect of any Liabilities referred to herein, then
each
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indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a
result of such Liabilities (i) in such proportion as is appropriate to
reflect the relative benefits received by the Issuers, on the one hand, and
such Initial Purchaser, on the other hand, from the offering of the
Securities or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above, but
also the relative fault of the indemnifying parties and the indemnified
party, as well as any other relevant equitable considerations. The relative
benefits received by the Issuers, on the one hand, and any of the Initial
Purchasers (and its related Indemnified Persons), on the other hand, shall
be deemed to be in the same proportion as the total proceeds from the
Securities (net of discounts and commissions but before deducting
expenses), received by the Issuers bears to the total discounts and
commissions received by such Initial Purchaser, in each case as set forth
in the Offering Memorandum. The relative fault of the Issuers, on the one
hand, and such Initial Purchaser, on the other hand, shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact related to information supplied by the Issuers, on the one
hand, or by such Initial Purchaser, on the other, and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The indemnity and contribution
obligations of the Issuers set forth herein shall be in addition to any
liability or obligation the Issuers may otherwise have to any Indemnified
Person.
The Issuers and the Initial Purchasers agree that it would not be just
and equitable if contribution pursuant to this Section 6(d) were determined
by pro rata allocation (even if the Initial Purchasers were treated as one
--- ----
entity for such purpose), or by any other method of allocation which does
not take account of the equitable considerations referred to in the
immediately preceding paragraph. The amount paid or payable by an
indemnified party as a result of any Liabilities, referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or
defending any such action or claim. Notwithstanding the provisions of this
Section 6, none of the Initial Purchasers (and their related Indemnified
Persons) shall be required to contribute, in the aggregate, any amount in
excess of the amount by which the total discounts and commissions
applicable to the Securities purchased by such Initial Purchaser exceeds
the amount of any damages and related expenses which such Initial Purchaser
(and
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<PAGE>
its related Indemnified Persons), has otherwise been required to pay or
incur by reason of such untrue or alleged untrue statement or omission or
alleged omission. The Initial Purchasers' obligations to contribute
pursuant to this Section 6(d) are several in proportion to the respective
aggregate principal amount of Securities purchased by each of the Initial
Purchasers hereunder and not joint.
7. Conditions to Initial Purchasers' Obligations. The respective
---------------------------------------------
obligations of the several Initial Purchasers to purchase any Securities under
this Agreement are subject to the satisfaction of each of the following
conditions on the Closing Date:
(a) All the representations and warranties of the Issuers contained
in this Agreement shall be true and correct on the Closing Date with the
same force and effect as if made on and as of the Closing Date. The Issuers
shall have performed or complied with all of their obligations and
agreements herein contained and required to be performed or complied with
by them at or prior to the Closing Date.
(b) At the Closing Date, no stop order suspending the sale of the
Securities in the United States or any jurisdiction referred to in Section
4(h) shall have been issued and no proceeding for that purpose shall have
been commenced or shall be pending or threatened.
(c) No action shall have been taken and no statute, rule, regulation
or order shall have been enacted, adopted or issued by any governmental
agency, body or official which would, as of the Closing Date, prevent the
issuance of the Securities; and no injunction, restraining order or order
of any nature by any Federal or state court of competent jurisdiction shall
have been issued as of the Closing Date which would prevent the issuance of
the Securities. Subsequent to the execution and delivery of this Agreement
and prior to the Closing Date, there shall not have been any downgrading or
indication that such securities have been placed on any "watch list" for
possible downgrading, nor shall any review for a possible change that does
not indicate the direction of the possible change, in the rating accorded
any of the Issuers' securities by any nationally recognized statistical
rating organization, as such term is defined for purposes of Rule 436(g)(2)
of the Act.
(d) (i) Since the earlier of the date hereof or the dates of which
information is given in the Offering Memorandum, there shall not have been
any material adverse change, (ii) since the date of the latest balance
sheet
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<PAGE>
included in the Offering Memorandum, there shall not have been any material
adverse change, or any development involving a prospective material adverse
change, in the capital stock or debt, of the Issuers and (iii) the Issuers
shall have no liability or obligation, direct or contingent, that is
material to the Issuers, taken as a whole, and which is not disclosed in
the Offering Memorandum.
(e) You shall have received a certificate of the Company, dated the
Closing Date, executed on behalf of the Company and the Guarantors, by the
chief executive officer and the principal financial officer of the Company
confirming, as of the Closing Date, the matters set forth in paragraphs
(a), (b), (c) and (d) of this Section 7.
(f) On the Closing Date, you shall have received:
(1) an opinion (satisfactory to you and your counsel), dated the
Closing Date, of Latham & Watkins, special counsel for the
Issuers, to the effect that:
(i) the Company and each of the following Guarantors:
Escondido Consulting, Inc., a California corporation,
Carmel Mountain Ranch Golf Club, Inc., a California
corporation, OVLC Management Corporation, a California
corporation, OVLC Financial Corporation, a California
corporation, Ocean Vista Land Company, a California
corporation, Golf Course Inns of America, Inc., a
California corporation, C-RHK, Inc., a California
corporation and Whispering Palms Country Club Joint
Venture, a California general partnership, (collectively,
the "California Guarantors"), has the requisite corporate
or partnership power, as the case may be, and authority to
execute, deliver and perform its obligations under this
Agreement; this Agreement has been duly authorized by all
necessary corporate or partnership action, as the case may
be, executed and delivered by the Company and each of the
California Guarantors;
(ii) the Company has the requisite corporate power and
authority to execute, deliver and perform its obligations
under the Notes, the Indenture and the Registration Rights
Agreement and to authorize, issue, sell and
27
<PAGE>
deliver the Notes; each of the Notes and the Indenture
have been duly authorized by all necessary corporate
action, executed and delivered by the Company;
(iii) each of the California Guarantors has the requisite
corporate or partnership power, as the case may be, to
execute, deliver, and perform its obligations under its
respective Guarantees, the Indenture and the Registration
Rights Agreement, and to authorize, issue and deliver the
Guarantees; each of the Guarantees, the Indenture and the
Registration Rights Agreement have been duly authorized by
all necessary corporate or partnership action, as the case
may be, executed and delivered by each of the California
Guarantors;
(iv) when issued, executed and authenticated and delivered in
accordance with the provisions of the Indenture and paid
for by you in accordance with the terms of this Agreement,
the Notes will constitute legal, valid and binding
obligations of the Company, enforceable against the
Company in accordance with their terms and entitled to the
benefits of the Indenture, except as rights of indemnity
or contribution, or both, may be limited by laws or court
decisions and except as such enforceability may be limited
by the effect of bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and other similar laws now
or hereafter in effect relating to or affecting the rights
or remedies of creditors and to general principles of
equity (regardless of whether enforcement is considered in
a proceeding at law or in equity) and the discretion of
the court before which any proceeding therefor may be
brought, and except to the extent that a waiver of rights
or defenses under any usury laws may be unenforceable;
(v) when executed in accordance with the provisions of the
Indenture and delivered to you in accordance with the
terms of this Agreement, the Guarantees, assuming due
authorization, execution and delivery thereof by the Non-
California Guarantors (as hereinafter defined) will
constitute legal, valid and binding obligations of each of
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the Guarantors, enforceable against each of the Guarantors
in accordance with their respective terms and entitled to
the benefits of the Indenture, except as rights of
indemnity or contribution, or both, may be limited by laws
or court decisions and except as such enforceability may
be limited by the effect of bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and other
similar laws now or hereafter in effect relating to or
affecting the rights or remedies of creditors and to
general principles of equity (regardless of whether
enforcement is considered in a proceeding at law or in
equity) and the discretion of the court before which any
proceeding therefor may be brought, and except to the
extent that a waiver of rights or defenses under any usury
laws may be unenforceable;
(vi) the Indenture, assuming due authorization, execution and
delivery thereof by the Trustee and the Non-California
Guarantors, will be a legal, valid and binding agreement
of each of the Issuers, enforceable against each of the
Issuers in accordance with its terms, except as rights of
indemnity or contribution, or both, may be limited by laws
or court decisions and except as such enforceability may
be limited by the effect of bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and other
similar laws now or hereafter in effect relating to or
affecting the rights or remedies of creditors and to
general principles of equity (regardless of whether
enforcement is considered in a proceeding at law or in
equity) and the discretion of the court before which any
proceeding therefor may be brought, and except to the
extent that a waiver of rights or defenses under any usury
laws may be unenforceable;
(vii) the Company and each of the California Guarantors is a
duly incorporated, or in the case of a partnership,
formed, and a validly existing corporation or general
partnership, as the case may be, and with respect to each
corporate California Guarantor, in good standing under the
laws of its jurisdiction of organization, has
29
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the requisite corporate or partnership power and
authority, as the case may be, to own, lease and operate
its properties and to conduct its business as described in
the Offering Memorandum; based solely on certificates from
public officials, such counsel shall confirm that the
Company is qualified as a foreign corporation and is in
good standing in the State of California;
(viii) neither the Company nor any of its subsidiaries is (a) an
"investment company" or a company "controlled" by an
investment company within the meaning of the Investment
Company Act of 1940, as amended, or (b) a "holding
company" or a "subsidiary company" of a holding company,
or an "affiliate" thereof within the meaning of the Public
Utility Holding Company Act of 1935, as amended;
(ix) no authorization, approval, consent or order of, or filing
with, any court or governmental body or agency is required
for the consummation by the Issuers of the transactions
contemplated by this Agreement and the Registration Rights
Agreement, except that such counsel need express no
opinion with respect to state securities or Blue Sky laws
or regulations;
(x) the execution and delivery of this Agreement, the
Indenture and the Registration Rights Agreement, the
issuance and sale of the Securities, the performance of
its obligations under this Agreement, the Securities, the
Indenture and the Registration Rights Agreement and the
consummation of the transactions contemplated by this
Agreement, the Indenture and the Registration Rights
Agreement will not conflict with or result in a breach or
violation of any of the respective charters, bylaws or
partnership agreements of the Company or any of the
California Guarantors or the terms or provi-sions of, or
constitute a default under, any statute, rule or
regulation or any agreement or instrument (identified to
such counsel in writing by the Company as material to the
Company and its subsidiaries, taken as a whole), any order
of any court or governmental agency, body
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<PAGE>
or official having jurisdiction over the Company or any of
the Guarantors or any of their properties (identified to
such counsel in writing by the Company as material to the
Company and its subsidiaries, taken as a whole);
(xi) the Registration Rights Agreement (A) has been duly and
validly authorized by each of the Company and the
California Guarantors, as applicable, and on the Closing
Date will have been duly executed and delivered by each of
the Company and the California Guarantors, as applicable,
in accordance with its terms, and (B) assuming due
authorization, execution and delivery thereof by the Non-
California Guarantors, will be a legal, valid and binding
agreement of each of the Issuers, as applicable,
enforceable against each of the Issuers, as applicable, in
accordance with its terms, except as rights of indemnity
or contribution, or both, may be limited by laws or court
decisions and except as such enforceability may be limited
by the effect of bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and other similar laws now
or hereafter in effect relating to or affecting the rights
or remedies of creditors and to general principles of
equity (regardless of whether enforcement is considered in
a proceeding at law or in equity) and the discretion of
the court before which any proceeding therefor may be
brought, and except to the extent that a waiver of rights
or defenses under any usury laws may be unenforceable. The
Registration Rights Agreement conforms in all material
respects with the descriptions thereof in the Offering
Memorandum;
(xii) all of the issued and outstanding shares of capital stock
of, or other ownership interests in each California
Guarantor have been duly and validly authorized and
issued, and based solely on such counsel's review of the
relevant stock records and the recitations as to such
matters in the resolutions authorizing the issuance
thereof, the shares of capital stock of, or other
ownership interests in, each California Guarantor are
owned of record, directly or through subsidiaries, by the
Com-
31
<PAGE>
pany, except for the minority interests disclosed in the
Offering Memorandum under the caption "Business-
Organizational Structure," and are fully paid and non-
assessable, and; to the best of such counsel's knowledge,
there are no outstanding subscriptions, rights, warrants,
options, calls, convertible securities or commitments for
sale, or liens related to or entitling any person to
purchase or otherwise acquire any shares of capital stock
or any other equity interest in each California Guarantor;
(xiii) all of the outstanding shares of capital stock of the
Company have been duly and validly authorized and issued
and are fully paid and non-assessable; and based solely on
such counsel's review of the relevant stock records and
the recitations as to such matters in the resolutions
authorizing the issuance thereof, all of the outstanding
shares of capital stock in the Company are owned of record
by Holdings and; to the best of such counsel's knowledge,
there are no outstanding subscriptions, rights, warrants,
options, calls, convertible securities or commitments for
sale, or liens related to or entitling any person to
purchase or otherwise acquire any shares of capital stock
or any other equity interest in the Company;
(xiv) the Securities conform in all material respects to the
description thereof in the Offering Memorandum under the
caption "Description of Senior Notes"; and
(xv) assuming the accuracy of the representations and
warranties of the Initial Purchasers in Section 2(b) of
this Purchase Agreement and of the Issuers in Section
5(ad) of this Purchase Agreement, the issuance and sale of
the Securities to the Initial Purchasers and the offering,
resale and delivery of the Securities by the Initial
Purchasers, in each case, in the manner disclosed in the
Offering Memorandum, are exempt from the registration
requirements of Section 5 of the Act and it is not
necessary to qualify the Indenture under the TIA.
32
<PAGE>
In giving their opinion required by subsection (f)(1) of this Section
7, such counsel (i) may state that such opinions are limited to matters
governed by the Federal laws of the United States of America, the laws of
the States of New York and California, and the General Corporation Law of
the State of Delaware, and (ii) shall state that such counsel has
participated in conferences with officers and other representatives of the
Issuers, representatives of the independent public accountants for the
Issuers, your representatives and your counsel in connection with the
preparation of the Offering Memorandum and such counsel shall advise you
that, on the basis of the foregoing, although such counsel has not
independently verified the accuracy, completeness or fairness of such
statements (except as indicated above) and relying to a large extent as to
materiality on management of the Company, no facts came to such counsel's
attention that caused such counsel to believe that the Offering Memorandum
(as amended or supplemented), as of its date and as of the Closing Date
contained an untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. Without
limiting the foregoing, such counsel may further state that it assumes no
responsibility for, and has not independently verified, the accuracy,
completeness or fairness of the financial statements, notes and schedules
and other financial, statistical, numerical and accounting data included in
or omitted from the Offering Memorandum.
(2) an opinion (satisfactory to you and your counsel), dated the
Closing Date, of Quarles & Brady, special Arizona counsel for the Company,
to the effect that:
(i) Bellows Golf Group, Inc., (the "Arizona Guarantor"), has
the requisite corporate power and authority to execute,
deliver and perform its obligations under this Agreement;
this Agreement has been duly authorized by all necessary
corporate action, executed and delivered by the Arizona
Guarantor;
(ii) the Arizona Guarantor has the requisite corporate power to
execute, deliver, and perform its obligations under its
Guarantees, the Indenture and the Registration Rights
Agreement, and to authorize, issue and deliver its
Guarantees; each of its Guarantees and the Indenture have
been duly authorized by all necessary corporate
33
<PAGE>
action executed and delivered by the Arizona Guarantor;
(iii) the Arizona Guarantor is a duly incorporated and validly
existing corporation, in good standing under the laws of
the State of Arizona, has the requisite corporate power and
authority to own, lease and operate its properties and to
conduct its business as described in the Offering
Memorandum;
(iv) the execution and delivery of this Agreement, the Indenture
and the Registration Rights Agreement to the issuance and
sale of its Guarantees, the performance of its obligations
under this Agreement, the Guarantees, the Indenture and the
Registration Rights Agreement and the consummation of the
transactions contemplated by this Agreement, the Indenture
and the Registration Rights Agreement will not conflict
with or result in a breach or violation of the charter or
bylaws of the Arizona Guarantor;
(v) all of the issued and outstanding shares of capital stock
of, or other ownership interests in, the Arizona Guarantor
have been duly and validly authorized and issued, and based
solely on such counsel's review of the relevant stock
records and the recitations as to such matters in the
resolutions authorizing the issuance thereof, the shares of
capital stock of, or other ownership interests in, the
Arizona Guarantor are owned of record, directly or through
subsidiaries, by the Company, and are fully paid and non-
assessable, and; to the best of such counsel's knowledge,
there are no outstanding subscriptions, rights, warrants,
options, calls, convertible securities or commitments for
sale, or liens related to or entitling any person to
purchase or otherwise acquire any shares of capital stock
or any other equity interest in the Arizona Guarantor.
In giving their opinion required by subsection (f)(2) of this Section
7, such counsel may state that such opinion is limited to matters governed
by the Federal laws of the United States of America and the laws of the
State of Arizona.
34
<PAGE>
(3) an opinion (satisfactory to you and your counsel), dated the Closing
Date, of Page & Addison, special Texas counsel for the company, to the effect
that:
(i) Each of Cobblestone Texas, Inc., a Texas corporation, Pecan
Grove Golf Club, Inc., a Texas corporation, CSR Golf Group,
Inc., a Texas corporation, Lakeway Golf Clubs, Inc., a
Texas corporation, Woodcrest Golf Club, Inc., a Texas
corporation, Liquor Club at Pecan Grove, Inc., a Texas
corporation and TGFC, Inc., a Texas corporation,
(collectively, the "Texas Guarantors") has the requisite
corporate power and authority to execute, deliver and
perform its obligations under this Agreement; this
Agreement has been duly authorized by all necessary
corporate action, executed and delivered by the Texas
Guarantors;
(ii) each of the Texas Guarantors has the requisite corporate
power to execute, deliver, and perform its obligations
under their respective Guarantees, the Indenture and the
Registration Rights Agreement, and to authorize, issue and
deliver their respective Guarantees; each of their
respective Guarantees and the Indenture have been duly
authorized by all necessary corporate action, executed and
delivered by each of the Texas Guarantors;
(iii) each of the Texas Guarantors is a duly incorporated and
validly existing corporation, in good standing under the
laws of its jurisdiction of organization, has the requisite
corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the
Offering Memorandum;
(iv) the execution and delivery of this Agreement, the
Indenture, and the Registration Rights Agreement, the
issuance and sale of their respective Guarantees, the
performance of their obligations under this Agreement,
their respective Guarantees, the Indenture and the
Registration Rights Agreement and the consummation of the
transactions contemplated by this Agreement, the Indenture
and the Registration Rights Agreement will not conflict
with or result in a breach or violation of the
35
<PAGE>
respective charters or bylaws of each of the Texas
Guarantors; and
(v) all of the issued and outstanding shares of capital stock
of, or other ownership interests in, each Texas Guarantor
have been duly and validly authorized and issued, and based
solely on such counsel's review of the relevant stock
records and the recitations as to such matters in the
resolutions authorizing the issuance thereof, the shares of
capital stock of, or other ownership interests in, each of
the Texas Guarantors are owned of record, directly or
through subsidiaries, by the Company, except for the
minority interests disclosed in the Offering Memorandum
under the caption "Business-Organizational Structure," and
are fully paid and non-assessable, and; to the best of such
counsel's knowledge, there are no outstanding
subscriptions, rights, warrants, options, calls,
convertible securities or commitments for sale, or liens
related to or entitling any person to purchase or otherwise
acquire any shares of capital stock or any other equity
interest in each Texas Guarantor.
In giving their opinion required by subsection (f)(3) of this Section
7, such counsel may state that such opinion is limited to matters governed
by the Federal laws of the United States of America and the laws of the
State of Texas.
(4) an opinion (satisfactory to you and your counsel), dated the Closing
Date, of Lionel, Sawyer & Collins, special Nevada counsel to the Company, to the
effect that:
(i) Foothills Holding Company, a Nevada corporation (the
"Nevada Guarantor"), has the requisite corporate power and
authority to execute, deliver and perform its obligations
under this Agreement; this Agreement has been duly
authorized by all necessary corporate action, executed and
delivered by the Nevada Guarantor;
(ii) the Nevada Guarantor has the requisite corporate power to
execute, deliver, and perform its obligations under
36
<PAGE>
its Guarantees and the Indenture, and to authorize, issue
and deliver its Guarantees; each of its Guarantees and the
Indenture have been duly authorized by all necessary
corporate action executed and delivered by the Nevada
Guarantor;
(iii) the Nevada Guarantor is a duly incorporated and validly
existing corporation, in good standing under the laws of
its jurisdiction of organization, has the requisite
corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the
Offering Memorandum; based solely on certificates from
public officials, the Nevada Guarantor is qualified as a
foreign corporation and is in good standing in the State of
Arizona;
(iv) the execution and delivery of this Agreement, the Indenture
and the Registration Rights Agreement, the issuance and
sale of its Guarantees, the performance of its obligations
under this Agreement, its Guarantees, the Indenture and the
Registration Rights Agreement and the consummation of the
transactions contemplated by this Agreement, the Indenture
and the Registration Rights Agreement will not conflict
with or result in a breach or violation of the charter or
bylaws of the Nevada Guarantor;
(v) all of the issued and outstanding shares of capital stock
of, or other ownership interests in, the Nevada Guarantor
have been duly and validly authorized and issued, and based
solely on such counsel's review of the relevant stock
records and the recitations as to such matters in the
resolutions authorizing the issuance thereof, the shares of
capital stock of, or other ownership interests in, the
Nevada Guarantor are owned of record, directly or through
subsidiaries, by the Company, and are fully paid and non-
assessable, and; to the best of such counsel's knowledge,
there are no outstanding subscriptions, rights, warrants,
options, calls, convertible securities or commitments for
sale, or liens related to or entitling any person to
purchase or
37
<PAGE>
otherwise acquire any shares of capital stock or any other
equity interest in the Nevada Guarantor.
In giving their opinion required by subsection (f)(4) of this Section
7, such counsel may state that such opinion is limited to matters governed
by the Federal laws of the United States of America and the laws of the
State of Nevada.
(5) an opinion (satisfactory to you and your counsel), dated the
Closing Date, of Young, Goldman & Van Beek, special Virginia counsel to the
Company, to the effect that:
(i) Virginia Golf Country Club, Inc., a Virginia corporation
(the "Virginia Guarantor"), has the requisite corporate
power and authority to execute, deliver and perform its
obligations under this Agreement; this Agreement has been
duly authorized by all necessary corporate action, executed
and delivered by the Virginia Guarantor;
(ii) the Virginia Guarantor has the requisite corporate power to
execute, deliver, and perform its obligations under its
Guarantees and the Indenture, and to authorize, issue and
deliver its Guarantees; each of its Guarantees and the
Indenture have been duly authorized by all necessary
corporate action executed and delivered by the Virginia
Guarantor;
(iii) the Virginia Guarantor is a duly incorporated and validly
existing corporation, in good standing under the laws of
the Commonwealth of Virginia has the requisite corporate
power and authority to own, lease and operate its
properties and to conduct its business as described in the
Offering Memorandum;
(iv) the execution and delivery of this Agreement, the Indenture
and the Registration Rights Agreement, the issuance and
sale of its Guarantees, the performance of its obligations
under this Agreement, its Guarantees, the Indenture and the
Registration Rights Agreement and the consummation of the
transactions contemplated
38
<PAGE>
by this Agreement, the Indenture and the Registration
Rights Agreement will not conflict with or result in a
breach or violation of the charter or bylaws of the
Virginia Guarantor;
(v) all of the issued and outstanding shares of capital stock
of, or other ownership interests in, the Virginia Guarantor
have been duly and validly authorized and issued, and based
solely on such counsel's review of the relevant stock
records and the recitations as to such matters in the
resolutions authorizing the issuance thereof, the shares of
capital stock of, or other ownership interests in, the
Virginia Guarantor are owned of record, directly or through
subsidiaries, by the Company, and are fully paid and non-
assessable, and; to the best of such counsel's knowledge,
there are no outstanding subscriptions, rights, warrants,
options, calls, convertible securities or commitments for
sale, or liens related to or entitling any person to
purchase or otherwise acquire any shares of capital stock
or any other equity interest in the Virginia Guarantor.
In giving their opinion required by subsection (f)(5) of this Section
7, such counsel may state that such opinion is limited to matters governed
by the Federal laws of the United States of America and the laws of the
Commonwealth of Virginia.
(6) In addition, you shall be entitled to rely on an opinion in form and
substance satisfactory to you and your counsel with respect to the New Credit
Facility.
(g) You shall have received an opinion dated the Closing Date, of
Skadden, Arps, Slate, Meagher & Flom, counsel for the Initial Purchasers,
in form and substance reasonably satisfactory to you.
(h) You shall have received letters on and as of the date hereof as
well as on and as of the Closing Date, in form and substance satisfactory
to you, from Ernst & Young LLP, independent public accountants complying
with Rule 2-01 of Regulation S-X of the Commission, with respect to the
financial statements and certain financial and statistical information
contained in the Offering Memorandum as you shall reasonably request.
39
<PAGE>
(i) Prior to the Closing Date, the Issuers shall have furnished to
you such further information, certificates and documents as you may
reasonably request.
(j) The Issuers shall not have failed at or prior to the Closing Date
to perform or comply with any of the agreements herein contained and
required to be performed or complied with by the Issuers at or prior to the
Closing Date.
(k) The Securities shall have been approved for inclusion on the
PORTAL system, subject to notice of official issuance.
(l) All transactions that are contemplated by the Registration Rights
Agreement and the New Credit Facility to have been consummated at or prior
to the Closing Date shall have been consummated prior to or simultaneously
with the consummation of the purchase and sale of the Securities hereunder.
(m) The Unit Offering shall have been consummated and the proceeds
therefrom shall have been contributed to the Company.
(n) You shall have received a certificate of the Company, dated the
Closing Date, executed on behalf of the Company, by the chief executive
officer and the chief financial officer of the Company as to the solvency
of the Company and its subsidiaries, taken as a whole, in form and
substance, satisfactory to you.
8. Effective Date of Agreement, Defaults and Termination. This
-----------------------------------------------------
Agreement shall become effective upon the later of (i) the execution and
delivery of this Agreement by the parties hereto, and (ii) the delivery of the
Offering Memorandum to the Initial Purchasers for their use in connection with
sales of the Securities. Notwithstanding the foregoing, this Agreement shall
not become effective until the purchase agreement for the Unit Offering shall
have been executed and delivered by the parties thereto.
This Agreement may be terminated at any time on or prior to the
Closing Date by the Initial Purchasers by notice to the Company if any of the
following has occurred: (i) subsequent to the date of the Offering Memorandum
or the date of this Agreement, any Material Adverse Change which, in the
judgment of DLJ, impairs the investment quality of the Securities, (ii) any
outbreak or escalation of hostilities or other national or international
calamity or crisis or material adverse change in the financial markets of the
United States or elsewhere or any other substantial
40
<PAGE>
national or international calamity or emergency if the effect of such outbreak,
escalation, calamity, crisis or emergency would, in DLJ's judgment, make it
impracticable or inadvisable to market the Securities or to enforce contracts
for the sale of the Securities, (iii) any suspension or limitation of trading
generally in securities on the New York or American Exchanges or the National
Association of Securities Dealers Automated Quotation National Market, PORTAL or
the over-the-counter markets or any setting of minimum prices for trading on
such exchanges or markets, (iv) any declaration of a general banking moratorium
by either Federal or New York state authorities, (v) the taking of any action by
any Federal, state or local government or agency in respect of its monetary or
fiscal affairs that in DLJ's judgment has a material adverse effect on the
financial markets in the United States, and would, in DLJ's judgment, make it
impracticable or inadvisable to market the Securities or to enforce contracts
for the sale of the Securities, (vi) any securities of the Issuers shall have
been downgraded or placed on any "watch list" for possible downgrading or
reviewed for a possible change that does not indicate the direction of the
possible change by any "nationally recognized statistical rating organization,"
as such term is defined for purposes of Rule 436(g)(2) of the Act, or (vii) the
enactment, publication, decree or other promulgation of any Federal, state or
local statute, regulation, rule or order of any court or other governmental
authority which would in the judgment of DLJ have a Material Adverse Effect or
make it inadvisable or impractical to market the Securities.
If this Agreement shall be terminated by the Initial Purchasers
pursuant to clause (i), (vi) or (vii) of the second paragraph of this Section 8
or because of the failure or refusal on the part of the Issuers to comply with
the terms or to fulfill any of the conditions of this Agreement, the Issuers
jointly and severally agree to reimburse you for all reasonable out-of-pocket
expenses (including the reasonable fees and disbursements of counsel) incurred
by you. Notwithstanding any termination of this Agreement, the Issuers shall be
liable, jointly and severally, for all expenses which they agree to pay pursuant
to Section 4 hereof. If this Agreement is terminated pursuant to this Section
8, such termination shall be without liability of any Initial Purchaser to the
Issuers.
If on the Closing Date either of the Initial Purchasers shall fail or
refuse to purchase the Securities which it has agreed to purchase hereunder on
such date, and the aggregate principal amount of such Securities that such
defaulting Initial Purchaser or Initial Purchasers, as the case may be, agreed
but failed or refused to purchase does not exceed 10% of the total principal
amount of such Securities to be purchased on such date by all Initial
Purchasers, each non-defaulting Initial Purchaser shall be obligated to purchase
the Securities that such defaulting Initial Purchaser agreed but failed or
refused to purchase on such date; provided that in no event shall the aggregate
--------
41
<PAGE>
principal amount of Securities that any Initial Purchaser has agreed to purchase
pursuant to Section 2 hereof be increased pursuant to this Section 8 by an
amount in excess of one-ninth of such principal amount of Securities without the
written consent of such Initial Purchaser. If, on the Closing Date, any of the
Initial Purchasers shall fail or refuse to purchase the Securities and the total
principal amount of Securities with respect to which such default occurs exceeds
10% of the total amount of Securities to be purchased on such date by all
Initial Purchasers and arrangements satisfactory to you and the Issuers for the
purchase of such Securities are not made within 48 hours after such default,
this Agreement shall terminate without liability on the part of the non-
defaulting Initial Purchaser and the Issuers, except as otherwise provided in
this Section 8. In any such case that does not result in termination of this
Agreement, either you or the Issuers may postpone the Closing Date for not
longer than seven (7) days, in order that the required changes, if any, in the
Offering Memorandum or any other documents or arrangements may be effected. Any
action taken under this paragraph shall not relieve a defaulting Initial
Purchaser from liability in respect of any default of any such Initial Purchaser
under this Agreement.
9. Notices. Notices given pursuant to any provision of this
-------
Agreement shall be addressed as follows: (a) if to any of the Issuers, to them
at 3702 Via De La Valle, Suite 202, Del Mar, California 92014, with a copy to
Latham & Watkins, 633 W. Fifth Street, Suite 4000, Los Angeles, California
90071-20007, Attention: Elizabeth A. Blendell, Esq. (b) if to any Initial
Purchaser, to Donaldson, Lufkin & Jenrette Securities Corporation, 277 Park
Avenue, New York, New York 10172, Attention: Debt Capital Markets, with a copy
to Skadden, Arps, Slate, Meagher & Flom at 300 South Grand Avenue, Suite 3400,
Los Angeles, California 90071, Attention: Gregg A. Noel, Esq. or (c) in any
case to such other address as the person to be notified may have requested in
writing.
10. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK AS APPLIED TO
CONTRACTS MADE AND PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
11. Severability. Any determination that any provision of this
------------
Agreement may be, or is, unenforceable shall not affect the enforceability of
the remainder of this Agreement.
12. Successors. Except as otherwise provided, this Agreement has
----------
been and is made solely for the benefit of and shall be binding upon the
Issuers, the Initial Purchasers, any Indemnified Person referred to herein and
their respective
42
<PAGE>
successors and assigns, all as and to the extent provided in this Agreement, and
no other person shall acquire or have any right under or by virtue of this
Agreement. The terms "successors and assigns" shall not include a purchaser of
any of the Securities from any of the several Initial Purchasers merely because
of such purchase.
13. Certain Definitions. For purposes of this Agreement, (a)
-------------------
"business day" means any day on which the New York Stock Exchange, Inc. is open
for trading and (b) "subsidiary" has the meaning set forth in Rule 405 of the
Securities Act.
14. Counterparts. This Agreement may be executed in one or more
------------
counterparts and, if executed in one or more counterparts, the executed
counterparts shall each be deemed to be an original, and all such counterparts
shall together constitute one and the same instrument.
15. Headings. The headings herein are inserted for convenience of
--------
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
16. Survival. The indemnity and contribution provisions and the
--------
other agreements, representations and warranties of the Issuers, their officers
and directors and of the Initial Purchasers set forth in or made pursuant to
this Agreement shall remain operative and in full force and effect, and will
survive delivery of and payment for the Securities, regardless of (i) any
investigation, or statement as to the results thereof, made by or on behalf of
any of the Initial Purchasers or by or on behalf of the Issuers or the officers
or directors of the Issuers or any controlling person of the Issuers, (ii)
acceptance of the Securities and payment for them hereunder and (iii)
termination of this Agreement.
43
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
among the Issuers and you.
Very truly yours,
COBBLESTONE GOLF GROUP, INC.,
BELLOWS GOLF GROUP, INC., CARMEL MOUNTAIN RANCH GOLF,
COBBLESTONE TEXAS, INC., C-RHK, INC., CSR GOLF GROUP,
INC.. ESCONDIDO CONSULTING, INC., FOOTHILLS HOLDING
COMPANY, INC., GOLF COURSE INNS OF AMERICA, INC.,
LAKEWAY GOLF CLUBS, INC., OCEANSIDE GOLF MANAGEMENT
CORPORATION, OCEAN VISTA LAND COMPANY, OVLC FINANCIAL
CORPORATION, OVLC MANAGEMENT CORPORATION, PECAN GROVE
GOLF CLUB, INC., TGFC CORPORATION, VIRGINIA GOLF COUNTRY
CLUB, INC., WHISPERING PALMS COUNTRY CLUB JOINT VENTURE,
A GENERAL PARTNERSHIP, WOODCREST GOLF CLUB, INC.
By: /s/ Stefan C. Karnavas
---------------------------------------
Name: Stefan C. Karnavas
Title: Vice President, Chief Financial
Officer, Treasurer and Secretary
<PAGE>
LAKEWAY CLUBS, INC.
By: /s/ Laurie Ann Wright
--------------------------------------
Name: Laurie Ann Wright
Title: President, Treasurer and
Secretary
LIQUOR CLUB AT PECAN GROVE, INC.
By: /s/ Timothy S. O'Hern
--------------------------------------
Name: Timothy S. O'Hern
Title: President, Treasurer and
Secretary
<PAGE>
The foregoing Purchase Agreement
is hereby confirmed and accepted
as of the date first above written.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ David F. Posnick
--------------------------
Name: David F. Posnick
Title: Vice President
BA SECURITIES, INC.
By: /s/
--------------------------
Name:
Title:
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Principal
Amount
---------
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation $56,000,000
BA Securities, Inc. 14,000,000
----------
$70,000,000
===========
</TABLE>
47
<PAGE>
________________________________________________________________________________
EXHIBIT 10.3
REGISTRATION RIGHTS AGREEMENT
DATED AS OF JUNE 4, 1996
BY AND AMONG
COBBLESTONE GOLF GROUP, INC.
AS ISSUER,
THE GUARANTORS NAMED HEREIN
AND
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
AND
BA SECURITIES, INC.
AS INITIAL PURCHASERS
________________________________________________________________________________
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement"), is made and
entered into as of June 4, 1996, among COBBLESTONE GOLF GROUP, INC., a Delaware
corporation (the "Issuer"), the Guarantors named herein and DONALDSON, LUFKIN &
JENRETTE SECURITIES CORPORATION and BA SECURITIES, INC. (collectively, the
"Initial Purchasers").
This Agreement is made pursuant to the Purchase Agreement, dated May
29, 1996, among the Issuer, the Guarantors and the Initial Purchasers (the
"Purchase Agreement"), which provides for the sale by the Issuer and the
Guarantors to the Initial Purchasers of $70,000,000 aggregate principal amount
of 11 1/2 Senior Notes due 2003 and the related guarantees by the Guarantors
(collectively, the "Notes"). In order to induce the Initial Purchasers to enter
into the Purchase Agreement, the Issuer and the Guarantors have agreed to
provide to the Initial Purchasers and their respective direct and indirect
transferees, among other things, the registration rights for the Notes set forth
in this Agreement. The execution of this Agreement is a condition to the closing
of the transactions contemplated by the Purchase Agreement.
The parties hereby agree as follows:
1. Definitions
-----------
As used in this Agreement, the following terms shall have the
following meanings (and, unless otherwise indicated, capitalized terms used
herein without definition shall have the respective meanings ascribed to them by
the Purchase Agreement):
Applicable Period: See Section 2(b) hereof.
-----------------
Closing Date: The Closing Date as defined in the Purchase Agreement.
------------
Effectiveness Period: See Section 3(a) hereof.
--------------------
Effectiveness Target Date: See Section 4(a)(ii) hereof.
-------------------------
1
<PAGE>
Exchange Act: The Securities Exchange Act of 1934, as amended, and
------------
the rules and regulations of the SEC promulgated thereunder.
Exchange Notes: See Section 2(a) hereof.
--------------
Exchange Offer: See Section 2(a) hereof.
--------------
Exchange Offer Registration Statement: See Section 2(a) hereof.
-------------------------------------
Guarantors: The Guarantors, as defined in the Indenture.
----------
Holder: Any holder of Transfer Restricted Notes.
------
Indemnified Party: See Section 7 hereof.
-----------------
Indemnified Person: See Section 7 hereof.
------------------
Indemnifying Person: See Section 7 hereof.
-------------------
Indenture: The Indenture, dated as of June 4, 1996, by and among the
---------
Issuer, the Guarantors and Norwest Bank Minnesota, National Association, as
trustee, pursuant to which the Notes are being issued, as amended or
supplemented from time to time in accordance with the terms thereof.
Initial Purchasers: See the introductory paragraph to this Agreement.
------------------
Inspectors: See Section 3(m) hereof.
----------
Issuer: See the introductory paragraph of this Agreement.
------
Liquidated Damages: See Section 4(a) hereof.
------------------
Notes: See the introductory paragraphs to this Agreement.
-----
Participating Broker-Dealer: See Section 2(b) hereof.
---------------------------
Person or person: An individual, trustee, corporation, partnership,
------ ------
joint stock company, trust, unincorporated association, union, business
association, limited liability company, limited liability partnership, firm or
other legal entity.
2
<PAGE>
Prospectus: The prospectus included in any Registration Statement
----------
(including, without limitation, any prospectus subject to completion and a
prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act), as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering of any portion
of the Exchange Notes and/or the Transfer Restricted Notes (as applicable),
covered by such Registration Statement, and all other amendments and supplements
to the Prospectus, including post-effective amendments, and all material
incorporated by reference or deemed to be incorporated by reference in such
Prospectus.
Records: See Section 4(m) hereof.
-------
Registration Default: See Section 4(a) hereof.
--------------------
Registration Statement: Any registration statement of the Issuer and
----------------------
the Guarantors, including, but not limited to, the Exchange Offer Registration
Statement or a registration statement of the Issuer and the Guarantors that
otherwise covers any of the Transfer Restricted Notes pursuant to the provisions
of this Agreement, including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits, and
all material incorporated by reference or deemed to be incorporated by reference
in such registration statement.
Rule 144: Rule 144 promulgated pursuant to the Securities Act, as
--------
currently in effect, as such rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the SEC.
Rule 144A: Rule 144A promulgated pursuant to the Securities Act, as
---------
currently in effect, as such rule may be amended from time to time, or any
simalar rule or regulation hereafter adopted by the SEC.
Rule 415: Rule 415 promulgated pursuant to the Securities Act, as
--------
such rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC.
SEC: The Securities and Exchange Commission.
---
Securities Act: The Securities Act of 1933, as amended, and the rules
--------------
and regulations of the SEC promulgated thereunder.
3
<PAGE>
Shelf Notice: See Section 2(c) hereof.
------------
Shelf Registration: See Section 3(a) hereof.
------------------
TIA: The Trust Indenture Act of 1939, as amended, and the rules
---
and regulations of the SEC promulgated thereunder.
Transfer Restricted Notes: The Notes upon original issuance thereof
-------------------------
and at all times subsequent thereto, until (i) a Registration Statement covering
such Notes has been declared effective by the SEC and such Notes have been
disposed of in accordance with such effective Registration Statement, (ii) such
Notes are sold in compliance with Rule 144 or (iii) such Notes cease to be
outstanding.
Trustee: The trustee under the Indenture and, if existent, the
-------
trustee under any indenture governing the Exchange Notes.
Underwritten registration or underwritten offering: A registration in
--------------------------------------------------
which securities of the Issuer or a Guarantor are sold to an underwriter for
reoffering to the public.
2. Exchange Offer
--------------
(a) The Issuer and the Guarantors agree to file with the SEC within
60 days after the Closing Date an offer to exchange (the "Exchange Offer"), any
and all of the Transfer Restricted Notes for a like aggregate principal amount
of debt securities of the Issuer and the Guarantors (the "Exchange Notes"),
which Exchange Notes will be (i) substantially identical in all material
respects to the Notes, except that such Exchange Notes will not contain terms
with respect to transfer restrictions and the identity of the Guarantors may
change in accordance with the terms of the Indenture, (ii) entitled to the
benefits of the Indenture or a trust indenture which is identical to the
Indenture (other than such changes to the Indenture or any such identical trust
indenture as are necessary to comply with any requirements of the SEC to effect
or maintain the qualification thereof under the TIA), and which, in either case,
has been qualified under the TIA, and (iii) registered pursuant to an effective
Registration Statement in compliance with the Securities Act. The Exchange
Offer will be registered pursuant to the Securities Act on an appropriate form
of Registration Statement (the "Exchange Offer Registration Statement"), and
will comply with all applicable tender offer rules and regulations promulgated
pursuant to the Exchange Act and shall be duly registered or qualified pursuant
to all applicable state securities or Blue Sky laws. The Exchange Offer shall
not be subject to
4
<PAGE>
any condition, other than that the Exchange Offer does not violate any
applicable law, policy or interpretation of the staff of the SEC. No securities
shall be included in the Exchange Offer Registration Statement other than the
Transfer Restricted Notes and the Exchange Notes. The Issuer and the Guarantors
agree to use their reasonable best efforts to (x) cause the Exchange Offer
Registration Statement to become effective pursuant to the Securities Act within
120 days after the Closing Date; and (y) keep the Exchange Offer open for not
less than 20 business days (or such longer period required by applicable law),
after the date that the notice of the Exchange Offer referred to below is mailed
to Holders. Each Holder who participates in the Exchange Offer will be
required to represent that any Exchange Notes received by it will be acquired in
the ordinary course of its business, that at the time of the consummation of the
Exchange Offer such Holder will have no arrangement or understanding with any
person to participate in the distribution of the Exchange Notes, and that such
Holder is not an "affiliate" of the Issuer within the meaning of Rule 405 of the
Securities Act (or that if it is such an affiliate, it will comply with the
registration and prospectus delivery requirements of the Securities Act to the
extent applicable). Each Holder that is not a Participating Broker-Dealer will
be required to represent that it is not engaged in, and does not intend to
engage in, the distribution of the Exchange Notes. Each Holder that (i) is a
Participating Broker-Dealer and (ii) will receive Exchange Notes for its own
account in exchange for the Transfer Restricted Notes that it acquired as the
result of market-making or other trading activities will be required to
acknowledge that it will deliver a Prospectus as required by law in connection
with any resale of such Exchange Notes. Upon consummation of the Exchange
Offer in accordance with this Agreement, the Issuer and the Guarantors shall
have no further obligation to register Transfer Restricted Notes pursuant to
Section 3 of this Agreement.
(b) The Issuer and the Guarantors shall include within the Prospectus
contained in the Exchange Offer Registration Statement a section entitled "Plan
of Distribution," reasonably acceptable to the Initial Purchasers, which shall
contain a summary statement of the positions taken or policies made by the staff
of the SEC with respect to the potential "underwriter" status of any broker-
dealer that is the beneficial owner (as defined in Rule 13d-3 under the Exchange
Act), of Exchange Notes received by such broker-dealer in the Exchange Offer (a
"Participating Broker-Dealer"). Such "Plan of Distribution" section shall also
allow the use of the Prospectus by all persons subject to the prospectus
delivery requirements of the Securities Act, including all Participating Broker-
Dealers, and include a statement describing the means by which Participating
Broker-Dealers may resell the Exchange Notes.
5
<PAGE>
The Issuer and the Guarantors shall use their reasonable best efforts
to keep the Exchange Offer Registration Statement effective and to amend and
supplement the Prospectus contained therein, in order to permit such Prospectus
to be lawfully delivered by all persons subject to the prospectus delivery
requirements of the Securities Act for such period of time as such persons must
comply with such requirements in order to resell the Exchange Notes; provided
--------
that such period shall not exceed 180 days after consummation of the Exchange
Offer (or such longer period if extended pursuant to the last paragraph of
Section 5 hereof) (the "Applicable Period").
In connection with the Exchange Offer, the Issuer and the Guarantors
shall:
(a) mail as promptly as practicable to each Holder a copy of the
Prospectus forming part of the Exchange Offer Registration Statement,
together with an appropriate letter of transmittal and related documents;
(b) utilize the services of a depositary for the Exchange Offer with
an address in the Borough of Manhattan, The City of New York; and
(c) permit Holders to withdraw tendered Notes at any time prior to
the close of business, New York time, on the last business day on which the
Exchange Offer shall remain open by sending to the institution and at the
address (located in the Borough of Manhattan, The City of New York)
specified in the notice, a telegram, telex, facsimile transmission or
letter setting forth the name of such Holder, the principal amount of
Transfer Restricted Securities delivered for exchange and a statement that
such Holder is withdrawing his or her election to have such Transfer
Restricted Securities exchanged.
As soon as practicable after the close of the Exchange Offer, the
Issuer and the Guarantors shall:
(i) accept for exchange all Notes tendered and not validly withdrawn
pursuant to the Exchange Offer;
(ii) deliver, or cause to be delivered, to the Trustee for
cancellation all Notes so accepted for exchange; and
6
<PAGE>
(iii) cause the Trustee to authenticate and deliver promptly to each
Holder of Notes, Exchange Notes equal in principal amount to the Notes of
such Holder so accepted for exchange.
(c) If (1) prior to the consummation of the Exchange Offer,
applicable interpretations of the staff of the SEC do not permit the Issuer and
the Guarantors to effect the Exchange Offer, or (2) if for any other reason the
Exchange Offer is not consummated within 165 days of the Closing Date, then the
Issuer shall promptly deliver to the Holders and the Trustee written notice
thereof (the "Shelf Notice"), and the Issuer and the Guarantors shall file a
Registration Statement pursuant to Section 3 hereof. Following the delivery of
a Shelf Notice to the Holders of Transfer Restricted Notes, the Issuer and the
Guarantors shall not have any further obligation to conduct the Exchange Offer
pursuant to this Section 2, provided, that the Issuer and the Guarantors shall
--------
have the right, nonetheless, to proceed to consummate the Exchange Offer
notwithstanding their obligations pursuant to this Section 2(c) (and, upon such
consummation, their obligation to consummate a Shelf Registration shall
terminate).
3. Shelf Registration
------------------
If the Issuer and the Guarantors are required to deliver a Shelf
Notice as contemplated by Section 2(c) hereof, then:
(a) Shelf Registration. The Issuer and the Guarantors shall prepare
------------------
and file with the SEC, within 60 days after such filing obligation arises, a
Registration Statement for an offering to be made on a continuous basis
pursuant to Rule 415 covering all of the Transfer Restricted Notes (the "Shelf
Registration"). The Shelf Registration shall be on Form S-1 or another
appropriate form permitting registration of the Transfer Restricted Notes for
resale by the Holders in the manner or manners reasonably designated by them
(including, without limitation, one or more underwritten offerings). The
Issuer and the Guarantors shall not permit any securities other than the
Transfer Restricted Notes to be included in the Shelf Registration. The Issuer
and the Guarantors shall use their reasonable best efforts, as described in
Section 5(b) hereof, to cause the Shelf Registration to be declared effective
pursuant to the Securities Act on or prior to 60 days after the filing of such
Shelf Registration Statement and to keep the Shelf Registration continuously
effective under the Securities Act until the earlier of (i) the date which is 36
months after the Closing Date, (ii) the date that all Transfer Restricted Notes
covered by the Shelf Registration have been sold in the manner set forth and as
contemplated in the Shelf
7
<PAGE>
Registration or (iii) the date that there ceases to be outstanding any Transfer
Restricted Notes (the "Effectiveness Period").
(b) Supplements and Amendments. The Issuer and the Guarantors shall
--------------------------
use their reasonable best efforts to keep the Shelf Registration Statement
continuously effective by supplementing and amending the Shelf Registration if
required by the rules, regulations or instructions applicable to the
registration form used for such Shelf Registration, if required by the
Securities Act, or if reasonably requested by the Holders of a majority in
aggregate principal amount of the Transfer Restricted Notes covered by such
Registration Statement or by any underwriter of such Transfer Restricted Notes.
4. Liquidated Damages
------------------
(a) The Issuer, the Guarantors and the Initial Purchasers agree that
the Holders of Transfer Restricted Notes will suffer damages if the Issuer or
the Guarantors fail to fulfill their obligations pursuant to Section 2 or
Section 3 hereof and that it would not be possible to ascertain the extent of
such damages. Accordingly, in the event of such failure by the Issuer or the
Guarantors to fulfill such obligations, the Issuer and the Guarantors hereby
agree to pay liquidated damages ("Liquidated Damages"), to each Holder of
Transfer Restricted Notes under the circumstances and to the extent set forth
below:
(i) if neither the Exchange Offer Registration Statement nor the
Shelf Registration has been filed with the SEC on or prior to the date
specified for such filing; or
(ii) if neither the Exchange Offer Registration Statement nor the
Shelf Registration is declared effective by the SEC on or prior to the date
specified for such effectiveness (the "Effectiveness Target Date"); or
(iii) if an Exchange Offer Registration Statement is declared
effective by the SEC, and on or prior to 45 days following the earlier of
(A) the effectiveness thereof or (B) the Effectiveness Target Date, the
Issuer and the Guarantors have not exchanged Exchange Notes for all Notes
validly tendered in accordance with the terms of the Exchange Offer; or
(iv) the Shelf Registration has been declared effective by the SEC
and such Shelf Registration ceases to be effective or usable at any time
during the Effectiveness Period, without being succeeded on the same day
immediately
8
<PAGE>
by a post-effective amendment to such Shelf Registration that cures such
failure and that is itself immediately declared effective on the same day;
(any of the foregoing, a "Registration Default"), then, with respect to the
first 90-day period following such Registration Default, the Issuer and the
Guarantors shall pay to each Holder of Transfer Restricted Notes Liquidated
Damages in an amount equal to $0.05 per week per $1,000 principal amount of
Transfer Restricted Notes held by such Holder for each week or portion thereof
that the Registration Default continues. The amount of such Liquidated Damages
will increase by an additional $0.05 per week per $1,000 principal amount of
Transfer Restricted Notes with respect to each subsequent 90-day period until
all Registration Defaults have been cured; provided, however, that Liquidated
-------- -------
Damages shall not at any time exceed $0.25 per week per $1,000 principal amount
of Transfer Restricted Notes (regardless of whether one or more than one
Registration Defaults has occurred and is continuing). Following the cure of
all Registration Defaults relating to any Transfer Restricted Notes, the accrual
of Liquidated Damages with respect to such Transfer Restricted Notes will cease.
A Registration Default under clause (i) above shall be cured on the date that
either the Exchange Offer Registration Statement or the Shelf Registration is
filed with the SEC; a Registration Default under clause (ii) above shall be
cured on the date that either the Exchange Offer Registration Statement or the
Shelf Registration is declared effective by the SEC; a Registration Default
under clause (iii) above shall be cured on the earlier of the date (A) the
Exchange Offer is consummated or (B) the Issuer and the Guarantor deliver a
Shelf Notice to the Holders of Transfer Restricted Notes; and a Registration
Default under clause (iv) above shall be cured on the earlier of (A) the date
the Shelf Registration is declared effective or (B) the Effectiveness Period
expires.
(b) The Issuer shall notify the Trustee within one business day after
each and every date on which a Registration Default first occurs. Liquidated
Damages shall be paid by the Issuer and the Guarantors to the Holders by wire
transfer of immediately available funds to the accounts specified by them or by
mailing checks to their registered addresses if no such accounts have been
specified on or before the semi-annual interest payment date provided in the
Indenture (whether or not any interest is then payable on the Notes) and on each
payment date provided in the Indenture including, without limitation, whether
upon redemption, maturity (by acceleration or otherwise), purchase upon a change
of control or purchase upon a sale of assets. Each obligation to pay Liquidated
Damages shall be deemed to commence accruing on the date of the applicable
Registration Default and to cease accruing when all Registration Defaults have
been cured. In no event shall the Issuer pay Liquidated Damages in excess of
the applicable maximum weekly
9
<PAGE>
amount set forth above, regardless of whether one or multiple Registration
Defaults exist.
(c) The parties hereto agree that the Liquidated Damages provided for
in this Section 4 constitute a reasonable estimate of the damages that will be
suffered by Holders by reason of the failure to file the Exchange Offer
Registration Statement or the Shelf Registration Statement, the failure of the
Exchange Offer Registration Statement or the Shelf Registration Statement to be
declared effective, the failure to consummate the Exchange offer or the failure
of the Shelf Registration Statement to remain effective, as the case may be, in
accordance with this Agreement.
5. Registration Procedures
-----------------------
In connection with the registration of any Exchange Notes or Transfer
Restricted Notes pursuant to Sections 2 or 3 hereof, the Issuer and the
Guarantors shall effect such registration to permit the sale of such Exchange
Notes or Transfer Restricted Notes (as applicable), in accordance with the
intended method or methods of disposition thereof, and pursuant thereto the
Issuer and the Guarantors shall:
(a) prepare and file with the SEC, a Registration Statement or
Registration Statements as prescribed by Section 2 or Section 3 hereof, and to
use their reasonable best efforts to cause such Registration Statement to become
effective and remain effective as provided herein; provided that, if (1) such
--------
filing is pursuant to Section 3 hereof, or (2) a Prospectus contained in an
Exchange Offer Registration Statement filed pursuant to Section 2 hereof is
required to be delivered under the Securities Act by any Participating Broker-
Dealer who seeks to sell Exchange Notes during the Applicable Period, before
filing any Registration Statement or Prospectus or any amendments or supplements
thereto, the Issuer and the Guarantors shall furnish to and afford the Holders
of the Transfer Restricted Notes and each such Participating Broker-Dealer, as
the case may be, covered by such Registration Statement, their counsel,
previously identified to the Issuer and the Guarantors and the managing
underwriters, if any, a reasonable opportunity to review copies of all such
documents (including copies of any documents to be incorporated by reference
therein and all exhibits thereto), proposed to be filed (at least 3 business
days prior to such filing, or such later date as is reasonable under the
circumstances). The Issuer and the Guarantors shall not file any Registration
Statement or Prospectus or any amendments or supplements thereto in respect of
which the Holders, pursuant to this Agreement, must be afforded an opportunity
to review prior to the filing of such document, if the Holders of a majority in
aggregate principal amount of the
10
<PAGE>
Transfer Restricted Notes covered by such Registration Statement, or such
Participating Broker-Dealer, as the case may be, their counsel, or the managing
underwriters, if any, shall reasonably object on a timely basis (except that
documents filed as exhibits that are incorporated by reference or deemed to be
incorporated by reference shall not be subject to such objections);
(b) prepare and file with the SEC such amendments and post-effective
amendments to each Shelf Registration or Exchange Offer Registration Statement,
as the case may be, as may be necessary to keep such Registration Statement
continuously effective for the Effectiveness Period or the Applicable Period, as
the case may be, or such shorter period as will terminate when all Transfer
Restricted Notes covered by such Registration Statement have been sold; cause
the related Prospectus to be supplemented by any required Prospectus supplement,
and as so supplemented to be filed pursuant to Rule 424 (or any similar
provisions then in force), under the Securities Act; and comply with the
provisions of the Securities Act, the Exchange Act and the rules and regulations
of the SEC promulgated thereunder with respect to the disposition of all
securities covered by such Registration Statement, as so amended, or in such
Prospectus, as so supplemented, and with respect to the subsequent resale of any
Notes being sold by a Participating Broker-Dealer covered by any such
Prospectus; the Issuer and the Guarantors shall be deemed not to have used their
reasonable best efforts to keep a Registration Statement effective during the
Applicable Period if they voluntarily take any action that would result in
selling Holders of the Transfer Restricted Notes covered thereby or
Participating Broker-Dealers seeking to sell Exchange Notes not being able to
sell such Transfer Restricted Notes or such Exchange Notes during that period,
unless (i) such action is required by applicable law, or (ii) such action is
taken by them in good faith and for valid business reasons (not including
avoidance of their obligations hereunder), including the acquisition or
divestiture of assets;
(c) if (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, notify the selling Holders of Transfer
Restricted Notes, or each known Participating Broker-Dealer, as the case may be,
their counsel and the managing underwriters, if any, promptly and confirm such
notice in writing, (i) when a Prospectus, any prospectus supplement or post-
effective amendment has been filed, and, with respect to a Registration
Statement or any post-effective amendment, when the same has become effective
(including in such notice a written statement that any Holder may, upon request,
obtain, without charge, one conformed copy of
11
<PAGE>
such Registration Statement or post-effective amendment including financial
statements and schedules, documents incorporated or deemed to be incorporated
by reference and exhibits), (ii) of the issuance by the SEC of any stop order
suspending the effectiveness of a Registration Statement or of any order
preventing or suspending the use of any preliminary prospectus or the initiation
of any proceedings for that purpose, (iii) if at any time when a Prospectus is
required by the Securities Act to be delivered in connection with sales of the
Transfer Restricted Notes the representations and warranties of the Issuer or
any Guarantor contained in any agreement (including any underwriting agreement),
contemplated by Section 5(l) hereof cease to be true and correct in all material
respects, (iv) of the receipt by the Issuer or any Guarantor of any notification
with respect to the suspension of the qualification or exemption from
qualification of a Registration Statement or any of the Transfer Restricted
Notes or the Exchange Notes to be sold by any Participating Broker-Dealer for
offer or sale in any jurisdiction, or the initiation of any proceeding for such
purpose, (v) of the happening of any event or any information becoming known
that makes any statement made in such Registration Statement or related
Prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires the making of any
changes in such Registration Statement, Prospectus or documents so that, in the
case of the Registration Statement, it will not contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, and that in the case
of the Prospectus, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and (vi) of the Issuer's and the Guarantors' reasonable
determination that a post-effective amendment to a Registration Statement would
be appropriate;
(d) if (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, use their best efforts to prevent the
issuance of any order suspending the effectiveness of a Registration Statement
or of any order preventing or suspending the use of a Prospectus or suspending
the qualification (or exemption from qualification), of any of the Transfer
Restricted Notes or the Exchange Notes (as applicable), to be sold by any
Participating Broker-Dealer, for sale in any jurisdiction, and, if any such
order is issued, to use their reasonable best efforts to obtain the withdrawal
of any such order at the earliest possible moment;
12
<PAGE>
(e) if a Shelf Registration is filed pursuant to Section 3 hereof and
if requested by the managing underwriters, if any, or the Holders of a majority
in aggregate principal amount of the Transfer Restricted Notes being sold in
connection with an underwritten offering, (i) promptly incorporate in a
prospectus supplement or post-effective amendment such information relating to
underwriters, if any, any Holder of Transfer Restricted Notes or the plan of
distribution of the Transfer Restricted Notes as the managing underwriter, if
any, or such Holders may reasonably request to be included therein, (ii) make
all required filings of such prospectus supplement or such post-effective
amendment as soon as practicable after the Issuer has received notification of
the matters to be incorporated in such prospectus supplement or post-effective
amendment pursuant to clause (i), and (iii) supplement or make amendments to
such Registration Statement with such information as is required in connection
with any request made pursuant to clause (i);
(f) if (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, furnish to each selling Holder of Transfer
Restricted Notes and to each such Participating Broker-Dealer who so requests
and to counsel and each managing underwriter, if any, without charge, one
conformed copy of the Registration Statement or Registration Statements and each
post-effective amendment thereto, including financial statements and schedules,
and, if requested, all documents incorporated or deemed to be incorporated
therein by reference and all exhibits;
(g) if (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, deliver to each selling Holder of Transfer
Restricted Notes, or each such Participating Broker-Dealer, as the case may be,
its counsel, and the underwriters, if any, without charge, as many copies of the
Prospectus or Prospectuses (including each form of preliminary Prospectus), and
each amendment or supplement thereto and any documents incorporated by reference
therein, as such Persons may reasonably request; and, subject to the last
paragraph of this Section 5 hereof, the Issuer and the Guarantors hereby consent
to the use of such Prospectus and each amendment or supplement thereto by each
of the selling Holders of Transfer Restricted Notes or each such Participating
Broker-Dealer, as the case may be, and their underwriters or agents, if any, and
dealers, if any, in connection with the offering and sale of the Transfer
Restricted Notes covered by or the sale by
13
<PAGE>
Participating Broker-Dealers of the Exchange Notes pursuant to such Prospectus
and any amendment or supplement thereto;
(h) prior to any public offering of Transfer Restricted Notes or any
delivery of a Prospectus contained in the Exchange Offer Registration Statement
by any Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, to use their reasonable best efforts to register or qualify,
and to cooperate with the selling Holders of Transfer Restricted Notes or each
such Participating Broker-Dealer, as the case may be, the underwriters, if any,
and their respective counsel in connection with the registration or
qualification (or exemption from such registration or qualification), of such
Transfer Restricted Notes for offer and sale under the securities or Blue Sky
laws of such jurisdictions as any selling Holder, Participating Broker-Dealer,
or the managing underwriters reasonably request in writing; keep each such
registration or qualification (or exemption therefrom), effective during the
period such Registration Statement is required to be kept effective and do any
and all other acts or things reasonably necessary or advisable to enable the
disposition in such jurisdictions of the Exchange Notes held by Participating
Broker-Dealers or the Transfer Restricted Notes covered by the applicable
Registration Statement; provided that the Issuer and the Guarantors shall not be
--------
required to (A) qualify generally to do business in any jurisdiction where they
are not then so qualified, (B) take any action that would subject them to
general service of process in any such jurisdiction where they are not then so
subject or (C) subject themselves to taxation in any such jurisdiction where
they are not so subject;
(i) if a Shelf Registration is filed pursuant to Section 3 hereof,
cooperate with the selling Holders of Transfer Restricted Notes and the managing
underwriters, if any, to facilitate the timely preparation and delivery of
certificates representing Transfer Restricted Notes to be sold, which
certificates shall not bear any restrictive legends and shall be in a form
eligible for deposit with The Depository Trust Company ("DTC"), and enable such
Transfer Restricted Notes to be in such denominations and registered in such
names as the managing underwriters, if any, or Holders may reasonably request
at least two business days prior to any sale of the Transfer Restricted Notes;
(j) if (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, upon the occurrence of any event
contemplated by paragraph 5(c)(v) or 5(c)(vi) above, as promptly as practicable
prepare and (subject to Section
14
<PAGE>
5(a) hereof), file with the SEC, at the expense of the Issuer and the
Guarantors, a supplement or post-effective amendment to the Registration
Statement or a supplement to the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference, or file any
other required document so that, as thereafter delivered to the purchasers of
the Transfer Restricted Notes being sold thereunder or to the purchasers of the
Exchange Notes to whom such Prospectus will be delivered by a Participating
Broker-Dealer, any such Prospectus will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading;
(k) prior to the effective date of the first Registration Statement
relating to the Transfer Restricted Notes, (i) provide the Trustee with
certificates for the Transfer Restricted Notes in a form eligible for deposit
with DTC and (ii) use its reasonable best efforts to provide a CUSIP number for
the Transfer Restricted Notes;
(l) in connection with an underwritten offering of Transfer
Restricted Notes pursuant to a Shelf Registration, enter into an underwriting
agreement as is customary in underwritten offerings and take all such other
actions as are reasonably requested by the managing underwriters in order to
expedite or facilitate the registration or the disposition of such Transfer
Restricted Notes, and in such connection, (i) make such representations and
warranties to the underwriters, with respect to the business of the Issuer, the
Guarantors and the Registration Statement, Prospectus and documents, if any,
incorporated or deemed to be incorporated by reference therein, in each case, as
are customarily made by issuers to underwriters in underwritten offerings, and
confirm the same if and when requested; (ii) obtain opinions of counsel to the
Issuer and Guarantors and updates thereof in form and substance reasonably
satisfactory to the managing underwriters, addressed to the underwriters
covering the matters customarily covered in opinions requested in underwritten
offerings and such other matters as may be reasonably requested by underwriters;
(iii) obtain "cold comfort" letters and updates thereof in form and substance
reasonably satisfactory to the managing underwriters from the independent
certified public accountants of the Issuer and the Guarantors (and, if
necessary, any other independent certified public accountants of any subsidiary
of the Issuer or the Guarantors or of any business acquired by any of them for
which financial statements and financial data are, or are required to be,
included in the Registration Statement), addressed to each of the underwriters,
such letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters in connection with underwritten
offerings and such other matters as are reasonably re-
15
<PAGE>
quested by underwriters as permitted by Statement on Auditing Standards No. 72;
--------------------------------------
and (iv) if an underwriting agreement is entered into, the same shall contain
indemnification provisions and procedures no less favorable than those set
forth in Section 7 hereof (or such other provisions and procedures acceptable to
Holders of a majority in aggregate principal amount of outstanding Transfer
Restricted Notes covered by such Registration Statement and the managing
underwriters or agents), with respect to all parties to be indemnified pursuant
to said Section. The above shall be done at each closing under such
underwriting agreement, or as and to the extent required thereunder;
(m) if (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, make available for inspection by any selling
Holder of such Transfer Restricted Notes being sold, or each such Participating
Broker-Dealer, as the case may be, any underwriter participating in any such
disposition of Transfer Restricted Notes, if any, and any attorney, accountant
or other agent retained by any such selling Holder or each such Participating
Broker-Dealer, as the case may be, or underwriter (collectively, the
"Inspectors"), at the offices where normally kept, during reasonable business
hours, all financial and other records, pertinent corporate documents and
properties of the Issuer, the Guarantors and their subsidiaries (collectively,
the "Records"), as shall be reasonably necessary to enable them to exercise any
applicable due diligence responsibilities, and cause the officers, directors and
employees of the Issuer, the Guarantors and their subsidiaries to supply all
information in each case reasonably requested by any such Inspector in
connection with such Registration Statement. Records which the Issuer
determines, in good faith, to be confidential and any Records which it notifies
the Inspectors are confidential shall not be disclosed by the Inspectors, unless
(i) the disclosure of such Records is necessary to avoid or correct a
misstatement or omission in such Registration Statement, (ii) the release of
such Records is ordered pursuant to a subpoena or other order from a court of
competent jurisdiction or (iii) the information in such Records has been made
generally available to the public, other than as a result of the disclosure or
failure to safeguard by such Inspector;
(n) provide an indenture trustee for the Transfer Restricted Notes or
the Exchange Notes, as the case may be, and cause the Indenture to be qualified
under the TIA not later than the effective date of the Exchange Offer or the
first Registration Statement relating to the Transfer Restricted Notes; and in
connection therewith, cooperate with the trustee under any such indenture and
the Holders of
16
<PAGE>
the Transfer Restricted Notes, to effect such changes to such indenture as may
be required for such indenture to be so qualified in accordance with the terms
of the TIA; and execute, and use their best efforts to cause such trustee to
execute, all customary documents as may be required to effect such changes, and
all other forms and documents required to be filed with the SEC to enable such
indenture to be so qualified in a timely manner;
(o) comply with all applicable rules and regulations of the SEC and,
as soon as reasonably practicable, make generally available to the holders of
Exchange Notes and the Holders, if any, consolidated earning statements of the
Issuer (including a condensed consolidating footnote if required under SEC
rules) (which need not be certified by an independent public accountant), that
satisfy the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder;
(p) If an Exchange Offer is to be consummated, upon delivery of the
Transfer Restricted Notes by Holders to the Issuer (or to such other Person as
direct ed by the Issuer), in exchange for the Exchange Notes, the Issuer and the
Guarantors shall mark, or cause to be marked, on such Transfer Restricted Notes
that such Transfer Restricted Notes are being cancelled in exchange for the
Exchange Notes; in no event shall such Transfer Restricted Notes be marked as
paid or otherwise satisfied.
(q) cooperate with each seller of Transfer Restricted Notes covered
by any Registration Statement and each underwriter, if any, participating in the
disposition of such Transfer Restricted Notes and their respective counsel in
connection with any filings required to be made with the National Association of
Securities Dealers, Inc. (the "NASD");
(r) use their best efforts to take all other steps necessary to
effect the registration of the Transfer Restricted Notes covered by a
Registration Statement contemplated hereby; and
(s) use their best efforts to cause the Transfer Restricted Notes or
the Exchange Notes, as applicable, covered by an effective registration
statement required by Section 2 or Section 3 hereof to be rated with the
appropriate rating agencies, if so requested by the Holders of a majority in
aggregate principal amount of Transfer Restricted Notes relating to such
registration statement or the managing underwriters in connection therewith, if
any.
17
<PAGE>
The Issuer and the Guarantors may require each seller of Transfer
Restricted Notes or Participating Broker-Dealer as to which any registration is
being effected to furnish to the Issuer such information regarding such seller
or Participating Broker-Dealer and the distribution of such Transfer Restricted
Notes or Exchange Notes to be sold by such Participating Broker-Dealer, as the
case may be, as the Issuer may, from time to time, reasonably request. The
Issuer may exclude from such registration the Transfer Restricted Notes or
Exchange Notes of any seller or Participating Broker-Dealer, as the case may be,
who fails to furnish such information within a reasonable time after receiving
such request.
Each Holder of Transfer Restricted Notes and each Participating
Broker-Dealer agrees by acquisition of such Transfer Restricted Notes or
Exchange Notes to be sold by such Participating Broker-Dealer, as the case may
be, that, upon receipt of any notice from the Issuer of the happening of any
event of the kind described in Section 5(c)(ii), 5(c)(iv), 5(c)(v) or 5(c)(vi)
hereof, such Holder shall forthwith discontinue disposition of such Transfer
Restricted Notes covered by such Registration Statement or Prospectus or such
Exchange Notes to be sold by such Participating Broker-Dealer, as the case may
be, until such Holder's receipt of the copies of the supplemented or amended
Prospectus contemplated by Section 5(j) hereof, or until it is advised in
writing by the Issuer that the use of the applicable Prospectus may be resumed,
and has received copies of any amendments or supplements thereto.
6. Registration Expenses
---------------------
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Issuer and the Guarantors shall be borne
by the Issuer and the Guarantors, whether or not the Exchange Offer or a Shelf
Registration is filed or becomes effective, including, without limitation, (i)
all registration and filing fees (including, without limitation, (A) fees with
respect to filings required to be made with the NASD in connection with an
underwritten offering and (B) fees and expenses of compliance with state
securities or Blue Sky laws (including, without limitation, reasonable fees and
disbursements of counsel in connection with Blue Sky qualifications of the
Transfer Restricted Notes or Exchange Notes and determination of the eligibility
of the Transfer Restricted Notes or Exchange Notes for investment under the laws
of such jurisdictions (x) where the Holders of Transfer Restricted Notes are
located, in the case of the Exchange Notes, or (y) as provided in Section 5(h)
hereof, in the case of Transfer Restricted Notes or Exchange Notes to be sold by
a Participating Broker-Dealer during the Applicable Period)), (ii) printing
expenses (including, without limitation, expenses of printing certificates for
18
<PAGE>
Transfer Restricted Notes or Exchange Notes in a form eligible for deposit with
DTC and of printing Prospectuses if the printing of Prospectuses is requested by
the managing underwriters, if any, or, in respect of Transfer Restricted Notes
or Exchange Notes to be sold by any Participating Broker-Dealer during the
Applicable Period, by the Holders of a majority in aggregate principal amount of
the Transfer Restricted Notes included in any Registration Statement or of such
Exchange Notes, as the case may be), (iii) messenger, telephone and delivery
expenses, (iv) fees and disbursements of counsel for the Issuer and the
Guarantors, (v) fees and disbursements of all independent certified public
accountants referred to in Section 5(l)(iii) hereof (including, without
limitation, the expenses of any special audit and "cold comfort" letters
required by or incident to such performance), (vi) the fees and expenses of any
"qualified independent underwriter" or other independent appraiser participating
in an offering pursuant to Section 3 of Schedule E to the By-laws of the NASD,
(vii) rating agency fees, (viii) Securities Act liability insurance, if the
Issuer and the Guarantors desire such insurance, (ix) fees and expenses of all
other Persons retained by the Issuer and the Guarantors, (x) internal expenses
of the Issuer and the Guarantors (including, without limitation, all salaries
and expenses of officers and employees of the Issuer and the Guarantors
performing legal or accounting duties), (xi) the expense of any annual audit and
(xii) the fees and expenses incurred in connection with the listing of the
securities to be registered on any securities exchange. Nothing contained in
this Section 6 shall create an obligation on the part of the Issuer or any
Guarantor to pay or reimburse any Holder for any underwriting commission or
discount attributable to any such Holder's Transfer Restricted Notes included in
an underwritten offering pursuant to a Registration Statement filed in
accordance with the terms of this Agreement, or to guarantee such Holder any
profit or proceeds from the sale of such Notes.
(b) In connection with any Shelf Registration hereunder, the Issuer
and the Guarantors shall reimburse the Holders of the Transfer Restricted Notes
being registered in such registration for the reasonable fees and disbursements
of not more than one counsel (in addition to appropriate local counsel), chosen
by the Holders of a majority in aggregate principal amount of the Transfer
Restricted Notes to be included in such Registration Statement.
7. Indemnification
---------------
The Issuer and the Guarantors jointly and severally agree to indemnify
and hold harmless (i) the Initial Purchasers, each Holder of Transfer Restricted
Notes, each initial Holder of Exchange Notes and each Participating Broker-
Dealer, (ii) each person, if any, who controls (within the meaning of Section 15
of the
19
<PAGE>
Securities Act or Section 20 of the Exchange Act), any such Person (any of the
persons referred to in this clause (ii) being hereinafter referred to as a
"controlling person"), and (iii) the respective officers, directors, partners,
employees, representatives and agents of any of such Person or any controlling
person (any person referred to in clause (i), (ii) or (iii) may hereinafter be
referred to as an "Indemnified Person"), to the fullest extent lawful, from and
against any and all losses, claims, damages, liabilities, judgments, actions and
expenses (including, without limitation, and as incurred, reimbursement of all
reasonable costs of investigating, preparing, pursuing or defending any claim or
action, or any investigation or proceeding by any governmental agency or body,
commenced or threatened, including the reasonable fees and expenses of counsel
to any Indemnified Person), directly or indirectly based upon or arising out of
any untrue statement or alleged untrue statement of a material fact contained in
any Registration Statement or Prospectus (as amended or supplemented if the
Issuer shall have furnished to such Indemnified Person any amendments or
supplements thereto), or any preliminary prospectus, arising out of or based
upon any 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 under which they were made, not misleading, except insofar as
such losses, claims, damages or liabilities arise out of or are based upon (i)
any untrue statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with information relating to any Indemnified
Person furnished to the Issuer or any underwriter in writing by such Indemnified
Person expressly for use therein, or (ii) any untrue statement contained in or
omission from a preliminary Prospectus if a copy of the Prospectus (as then
amended or supplemented, if the Issuer shall have furnished to or on behalf of
the Holder participating in the distribution relating to the relevant
Registration Statement any amendments or supplements thereto) was not sent or
given by or on behalf of such Holder to the person asserting any such losses,
liabilities, claims, damages or expenses who purchased Notes, if such Prospectus
(or Prospectus as amended or supplemented), is required by law at or prior to
the written confirmation of the sale of such Notes to such person and the untrue
statement contained in or omission from such preliminary Prospectus was
corrected in the Prospectus (or the Prospectus as amended or supplemented) or
(iii) the Holder has not complied with the last paragraph of Section 5 of this
Agreement. The Issuer and the Guarantors shall notify the Holders promptly of
the institution, threat or assertion of any claim, proceeding (including any
governmental investigation), or litigation of which it or they shall have become
aware in connection with the matters addressed by this Agreement which involves
the Issuer, any Guarantor or an Indemnified Person.
20
<PAGE>
In connection with any Registration Statement in which a Holder of
Transfer Restricted Notes is participating, such Holder of Transfer Restricted
Notes agrees, severally and not jointly, to indemnify and hold harmless the
Issuer, each Guarantor, each person who controls the Issuer or the Guarantors
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act and the respective partners, directors, officers, representatives,
employees and agents of such person or controlling person to the same extent as
the foregoing indemnity from the Issuer and the Guarantors to each Indemnified
Person, but only with reference to information relating to such Indemnified
Person furnished to the Issuer in writing by such Indemnified Person expressly
for use in any Registration Statement or Prospectus, any amendment or
supplement thereto, or any preliminary Prospectus. The liability of any
Indemnified Person pursuant to this paragraph shall in no event exceed the net
proceeds received by such Indemnified Person from sales of Transfer Restricted
Notes giving rise to such obligations.
If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any person in respect of which indemnity may be sought pursuant to either of the
two preceding paragraphs, such person (the "Indemnified Party"), shall promptly
notify the person against whom such indemnity may be sought (the "Indemnifying
Person"), in writing, and the Indemnifying Person, upon request of the
Indemnified Party, shall retain counsel reasonably satisfactory to the
Indemnified Party to represent the Indemnified Party and any others the
Indemnifying Person may reasonably designate in such proceeding and shall pay
the reasonable fees and expenses actually incurred by such counsel related to
such proceeding. In any such proceeding, any Indemnified Party shall have the
right to retain its own counsel, but the fees and expenses of such counsel shall
be at the expense of such Indemnified Party, unless (i) the Indemnifying Person
and the Indemnified Party shall have mutually agreed in writing to the contrary,
(ii) the Indemnifying Person failed promptly to assume the defense and employ
counsel reasonably satisfactory to the Indemnified Party or (iii) the named
parties to any such action (including any impleaded parties), include both such
Indemnified Party and the Indemnifying Person, or any affiliate of the
Indemnifying Person, and such Indemnified Party shall have been reasonably
advised by counsel that, either (x) there may be one or more legal defenses
available to it which are different from or additional to those available to the
Indemnifying Person or such affiliate of the Indemnifying Person or (y) a
conflict may exist between such Indemnified Party and the Indemnifying Person or
such affiliate of the Indemnifying Person (in which case the Indemnifying Person
shall not have the right to assume the defense of such action on behalf of such
Indemnified Party, it being understood, however, that the Indemnifying Person
shall
21
<PAGE>
not, in connection with any one such action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the fees and expenses of
more than one separate firm of attorneys (in addition to any local counsel), for
all such indemnified parties, which firm shall be designated in writing by those
indemnified parties who sold a majority in outstanding aggregate principal
amount of Transfer Restricted Notes sold by all such indemnified parties and any
such separate firm for the Issuer and the Guarantors, their directors, their
officers and such control persons of the Issuer and the Guarantors shall be
designated in writing by the Issuer. The Indemnifying Person shall not be
liable for any settlement of any proceeding effected without its written
consent, which consent shall not be unreasonably withheld, and the Indemnifying
Party agrees to hold harmless any Indemnified Party from any loss or liability
by reason of such unconsented settlement, but if settled with such consent or if
there be a final judgment for the plaintiff, the Indemnifying Person agrees to
indemnify any Indemnified Party from and against any loss or liability by reason
of such settlement or judgment. No Indemnifying Person shall, without the prior
written consent of the Indemnified Party, effect any settlement of any pending
or threatened proceeding in respect of which any Indemnified Party is or could
have been a party and indemnity could have been sought hereunder by such
Indemnified Party, unless such settlement includes an unconditional release of
such Indemnified Party from all liability on claims that are the subject matter
of such proceeding.
If the indemnification provided for in the first and second paragraphs
of this Section 7 is unavailable to an Indemnified Party in respect of any
losses, claims, damages, liabilities, judgments, actions or expenses referred to
therein (other than by reason of the exceptions provided therein), then each
Indemnifying Person under such paragraphs, in lieu of indemnifying such
Indemnified Party thereunder, shall contribute to the amount paid or payable by
such Indemnified Party as a result of such losses, claims, damages, liabilities,
or expenses (i) in such proportion as is appropriate to reflect the relative
benefits of the Indemnified Party on the one hand and the Indemnifying Person(s)
on the other in connection with the statements or omissions that resulted in
such losses, claims, damages, liabilities, or expenses or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Indemnified Person(s)
and the Indemnified Party, as well as any other relevant equitable
considerations. The relative fault of the Issuer and the Guarantors on the
one hand and any Indemnified Persons on the other shall be determined by
reference to, among other things, wheth er the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Issuer and the
22
<PAGE>
Guarantors or by such Indemnified Persons and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The parties agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by pro rata allocation
--- ----
(even if such indemnified parties were treated as one entity for such purpose),
or by any other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an Indemnified Party as a result of the losses, liabilities,
claims, damages, judgments, actions and expenses referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any reasonable legal or other expenses actually incurred by such
Indemnified Party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 7, in no event shall
an Indemnified Person be required to contribute any amount in excess of the
amount by which proceeds received by such Indemnified Person from sales of
Transfer Restricted Notes or Exchange Notes exceeds the amount of any damages
that such Indemnified Person has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act), shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section 7
will be in addition to any liability which the indemnifying parties may
otherwise have to the indemnified parties referred to above. The Indemnified
Persons' obligations to contribute pursuant to this Section 7 are several in
proportion to the respective principal amount of Notes sold by each of the
Indemnified Persons hereunder and not joint.
8. Rules 144 and 144A
------------------
The Issuer and the Guarantors covenant that they will file the reports
required to be filed by them pursuant to the Securities Act and the Exchange Act
and the rules and regulations adopted by the SEC thereunder in a timely manner
and, if at any time the Issuer and the Guarantors are not required to file such
reports, they will, upon the request of any Holder of Transfer Restricted Notes,
make available information required by Rule 144 and Rule 144A under the
Securities Act in order to permit sales pursuant to Rule 144 and Rule 144A. The
Issuer and the Guarantors further covenant that they will take such further
action as any Holder of Transfer Re-
23
<PAGE>
stricted Notes may reasonably request, all to the extent required from time to
time to enable such Holder to sell Transfer Restricted Notes without
registration under the Securities Act within the limitation of the exemptions
provided by (a) Rule 144 and Rule 144A or (b) any similar rule or regulation
hereafter adopted by the SEC.
9. Underwritten Registrations
--------------------------
(a) If any of the Transfer Restricted Notes covered by any Shelf
Registration are to be sold in an underwritten offering, the investment banker
or investment bankers and manager or managers that will manage the offering
will be selected by the Holders of a majority in aggregate principal amount of
such Transfer Restricted Notes included in such offering and shall be reasonably
acceptable to the Issuer.
No Holder of Transfer Restricted Notes may participate in any
underwritten registration hereunder, unless such Holder (a) agrees to sell such
Holder's Transfer Restricted Notes on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to approve such
arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements.
(b) Each Holder of Transfer Restricted Notes agrees, if requested
(pursuant to a timely written notice), by the managing underwriters in an
underwritten offering or by a placement agent in a private offering of the
Company's or the Guarantors' debt securities, not to effect any private sale or
distribution (including a sale pursuant to Rule 144(k) or Rule 144A under the
Securities Act, but excluding non-public sales to any of its affiliates,
officers, directors, employees and controlling persons), of any of the Notes
except pursuant to an Exchange Offer, during the period beginning 10 days prior
to, and ending 90 days after, the closing date of the underwritten offering.
The foregoing provisions shall not apply to any Holder of Transfer
Restricted Notes if such Holder is prevented by applicable statute or regulation
from entering into any such agreement.
The Issuer and the Guarantors agree not to effect any public or
private sale or distribution of its respective debt securities (excluding
commercial paper issued in the ordinary course of business), including a sale
pursuant to Regulation D or Rule 144A under the Securities Act, during the
period beginning 10 days prior
24
<PAGE>
to, and ending 90 days after, the closing date of each underwritten offering
made pursuant to such Registration Statement without the written consent of the
managing underwriters in an underwritten offering of Transfer Restricted Notes
covered by a Registration Statement filed pursuant to Section 3 hereof,
(provided, however, that such period shall be extended by the number of days
-------- -------
from and including the date of the giving of any notice pursuant to Section
5(c)(v) or (c)(vi) hereof to and including the date when each seller of Transfer
Restricted Notes covered by such Registration Statement shall have received the
copies of the supplemented or amended Prospectus contemplated by Section 5(j)
hereof).
10. Miscellaneous
-------------
(a) Remedies. In the event of a breach by the Issuer or any
--------
Guarantor of any of its obligations under this Agreement, each Holder of
Transfer Restricted Notes, in addition to being entitled to exercise all rights
provided herein, in the Indenture or, in the case of the Initial Purchasers, in
the Purchase Agreement, or granted by law, including recovery of damages, will
be entitled to specific performance of its rights under this Agreement.
Subject to Section 4, the Issuer and the Guarantors agree that monetary damages
would not be adequate compensation for any loss incurred by reason of a breach
by any of them of any of the provisions of this Agreement and hereby further
agree that, in the event of any action for specific performance in respect of
such breach, they shall waive the defense that a remedy at law would be
adequate.
(b) No Inconsistent Agreements. The Issuer and the Guarantors have
--------------------------
not, as of the date hereof, and they shall not, after the date of this
Agreement, enter into any agreement with respect to any of their respective
securities that is inconsistent with the rights granted to the Holders of
Transfer Restricted Notes in this Agreement or otherwise conflicts with the
provisions hereof. The Issuer and the Guarantors have not entered, and will not
enter, into any agreement with respect to any of their respective securities
which will grant to any Person piggy-back registration rights with respect to a
Registration Statement.
(c) Amendments and Waivers. The provisions of this Agreement,
----------------------
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to or departures from the provisions
hereof may not be given, unless the Issuer has obtained the written consent of
Holders of at least a majority of the then outstanding aggregate principal
amount of Transfer Restricted Notes. Notwithstanding the foregoing, a waiver or
consent to or departure from the provisions hereof with respect to a matter that
relates exclusively
25
<PAGE>
to the rights of Holders whose securities are being sold pursuant to a
Registration Statement and that does not directly or indirectly affect, impair,
limit or compromise the rights of other Holders may be given by Holders of at
least a majority in aggregate principal amount of the Transfer Restricted Notes
being sold by such Holders pursuant to such Registration Statement; provided
--------
that the provisions of this sentence may not be amended, modified or
supplemented except in accordance with the provisions of the immediately
preceding sentence.
(d) Notices. All notices and other communications (including,
-------
without limitation, any notices or other communications to the Trustee),
provided for or permitted hereunder shall be made in writing by hand-delivery,
registered first-class mail, next-day air courier or telecopier:
(i) if to a Holder of Transfer Restricted Notes, at the most current
address given by the Trustee to the Issuer; and
(ii) if to the Issuer or the Guarantors, Cobblestone Golf Group,
Inc., 3702 Via De La Valle, Suite 202, Del Mar, California 92014,
Attention: Chief Financial Officer, with a copy to Latham & Watkins, 633
West 5th Street, Suite 4000, Los Angeles, California 90071-2007, Attention:
Elizabeth A. Blendell.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days after
being deposited in the mail, postage prepaid, if mailed; one business day after
being timely delivered to a nationally recognized next-day air courier, if made
by next-day air courier; and when receipt is acknowledged by the addressee, if
telecopied on a business day on such business day, if not on a business day, on
the first business day thereafter.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee under the
Indenture at the address specified in such Indenture.
(e) Successors and Assigns. This Agreement shall inure to the
----------------------
benefit of and be binding upon the successors and assigns of each of the parties
hereto, including, without limitation and without the need for an express
assignment, subsequent Holders of Transfer Restricted Notes. The Issuer and the
Guarantors agree that the Holders of the Notes shall be third party creditor
beneficiaries to the agreements made hereunder by the Initial Purchasers, the
Issuer and the Guarantors,
26
<PAGE>
and each Holder shall have the right to enforce such agreements directly to the
extent it deems such enforcement necessary or advisable to protect its rights
hereunder.
(f) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
-------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH
OF MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE
BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND IRREVOCABLY ACCEPTS
FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE
JURISDICTION OF THE AFORESAID COURTS. EACH OF THE PARTIES HERETO IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY
SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY
SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
(i) Severability. If any term, provision, covenant or restriction of
------------
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the
27
<PAGE>
same result as that contemplated by such term, provision, covenant or
restriction. It is hereby stipulated and declared to be the intention of the
parties hereto that they would have executed the remaining terms, provisions,
covenants and restrictions without including any of such that may be hereafter
declared invalid, illegal, void or unenforceable.
(j) Entire Agreement. This Agreement, together with the Purchase
----------------
Agreement, is intended by the parties hereto as a final expression of their
agreement, and is intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein and therein.
(k) Notes Held by the Issuer, the Guarantors or their Respective
------------------------------------------------------------
Affiliates. Whenever the consent or approval of Holders of a specified
- ----------
percentage of Transfer Restricted Notes is required hereunder, Transfer
Restricted Notes held by the Issuer, the Guarantors, or their respective
affiliates (as such term is defined in Rule 405 under the Securities Act), shall
not be counted in determining whether such consent or approval was given by the
Holders of such required percentage.
(l) Survival. This Agreement is intended to survive the consummation
--------
of the transactions contemplated by the Purchase Agreement. The indemnification
and contribution obligations under section 7 of this Agreement shall survive the
termination of the Issuer's and the Guarantors' obligations under sections 2 and
3 of this Agreement.
28
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
COBBLESTONE GOLF GROUP, INC.
ESCONDIDO CONSULTING, INC.
CARMEL MOUNTAIN RANCH GOLF CLUB, INC.
OVLC MANAGEMENT CORPORATION
OVLC FINANCIAL CORPORATION
OCEAN VISTA LAND COMPANY
GOLF COURSE INNS OF AMERICA, INC.
OCEANSIDE GOLF MANAGEMENT COR PORATION
WHISPERING PALMS COUNTRY CLUB JOINT VENTURE
C-RHK, INC.
COBBLESTONE TEXAS, INC.
PECAN GROVE GOLF CLUB, INC.
CSR GOLF GROUP, INC.
LAKEWAY GOLF CLUBS, INC.
WOODCREST GOLF CLUB, INC.
TGFC CORPORATION
FOOTHILLS HOLDING COMPANY, INC.
VIRGINIA GOLF COUNTRY CLUB, INC.
CEL GOLF GROUP, INC.
BELLOWS GOLF GROUP, INC.
By: /s/ Stefan C. Karnavas
----------------------
Name: Stefan C. Karnavas
Title: Chief Financial Officer
<PAGE>
THE LIQUOR CLUB AT PECAN GROVE, INC., as Guarantor
By: /s/ Laurie Ann Wright
---------------------
Name: Laurie Ann Wright
Title: President, Treasurer and
Secretary
LAKEWAY CLUBS, INC., as Guarantor
By: /s/ Timothy S. O' Hern
----------------------
Name: Timothy S. O'Hern
Title: President, Treasurer and
Secretary
<PAGE>
The foregoing Registration Rights
Agreement is hereby confirmed and
accepted as of the date first
above written.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ David F. Posnick
-----------------------
Name: David F. Posnick
Title: Vice President
BA SECURITIES, INC.
By: /s/ Blaine Crissman
----------------------
Name: Blaine Crissman
Title: Vice President
<PAGE>
EXHIBIT 10.4
INDEMNIFICATION AGREEMENT
This Agreement is made as of the ___ day of ______ 1996, by and between
Cobblestone Golf Group, Inc., a Delaware Corporation ("the Company"), and the
undersigned Director of the Company (the "Indemnitee"), with reference to the
following facts:
The Indemnitee is currently serving as a Director of the Company and the
Company wishes the Indemnitee to continue in such capacity. The Indemnitee is
willing, under certain circumstances, to continue serving as a Director of the
Company.
The Indemnitee has indicated that he does not regard the indemnities
available under the Company's By-Laws as adequate to protect him against the
risks associated with his service to the Company and has noted that the
directors' and officers' liability insurance policy of the Company has numerous
exclusions and a deductible and thus does not adequately protect the Indemnitee.
In this connection the Company and the Indemnitee now agree they should enter
into this Indemnification Agreement in order to provide greater protection to
Indemnitee against such risks of service to the Company.
Section 145 of the General Corporation Law of the State of Delaware, under
which law the Company is organized, empowers corporations to indemnify a person
serving as a director, officer, employee or agent of the corporation and a
person who serves at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust, or
other enterprise, and said Section 145 and the By-Laws of the Company specify
that the indemnification set forth in said Section 145 and in the By-Laws,
respectively, shall not be deemed exclusive of any other rights to which those
seeking indemnification may be entitled under any By-Law, agreement, vote of
stockholders or disinterested directors or otherwise.
In order to induce the Indemnitee to continue to serve as a Director of the
Company and in consideration of his continued service, the Company hereby agrees
to indemnify the Indemnitee as follows:
1. Indemnity. The Company will indemnify the Indemnitee, his
---------
executors, administrators or assigns, for any Expenses (as defined below)
which the Indemnitee is or becomes legally obligated to pay in connection
with any Proceeding. As used in this Agreement the term "Proceeding" shall
include any threatened, pending or completed claim, action, suit or
proceeding, whether brought by or in the right of the Company or otherwise
and whether of a civil, criminal, administrative or investigative nature,
in which the Indemnitee may be or may have been involved as a party or
otherwise, by reason of the fact that Indemnitee is or was a director or
officer of the Company, by reason of any actual or alleged error or
misstatement or misleading statement made or suffered by the Indemnitee, by
reason of any action taken by him or of any inaction on his part while
acting as such director or officer, or by reason of the fact that he was
serving at the request of the Company as a director, trustee, officer,
employee or agent of another corporation, partnership, joint venture, trust
or other enterprise; provided,
<PAGE>
that in each such case Indemnitee acted in good faith and in a manner which
he reasonably believed to be in or not opposed to the best interests of the
Company, and, in the case of a criminal proceeding, in addition had no
reasonable cause to believe that his conduct was unlawful. As used in this
Agreement, the term "other enterprise" shall include (without limitation)
employee benefit plans and administrative committees thereof, and the term
"fines" shall include (without limitations) any excise tax assessed with
respect to any employee benefit plan.
2. Expenses. As used in this Agreement, the term "Expenses" shall
--------
include, without limitation, damages, judgments, fines, penalties,
settlements and costs, attorneys' fees and disbursements and costs of
attachment or similar bonds, investigations, and any expenses of
establishing a right to indemnification under this Agreement.
3. Enforcement. If a claim or request under this Agreement is not
-----------
paid by the Company, or on its behalf, within thirty days after a written
claim or request has been received by the Company, the Indemnitee may at
any time thereafter bring suit against the Company to recover the unpaid
amount of the claim or request and if successful in whole or in part, the
Indemnitee shall be entitled to be paid also the Expenses of prosecuting
such suit. The Company shall have the right to recoup from the Indemnitee
the amount of any item or items of Expenses theretofore paid by the Company
pursuant to this Agreement, to the extent such Expenses are not reasonable
in nature or amounts; provided, however, that the Company shall have the
burden of proving such Expenses to be unreasonable. The burden of proving
that the Indemnitee is not entitled to indemnification for any other reason
shall be upon the Company.
4. Subrogation. In the event of payment under this Agreement, the
-----------
Company shall be subrogated to the extent of such payment to all of the
rights of recovery of the Indemnitee, who shall execute all papers required
and shall do everything that may be necessary to secure such rights,
including the execution of such documents necessary to enable the Company
effectively to bring suit to enforce such rights.
5. Exclusions. The Company shall not be liable under this Agreement
----------
to pay any Expenses in connection with any claim made against the
Indemnitee:
(a) to the extent that payment is actually made to the Indemnitee
under a valid, enforceable and collectible insurance policy;
(b) to the extent that the Indemnitee is indemnified and actually
paid otherwise than pursuant to this Agreement;
2
<PAGE>
(c) in connection with a judicial action by or in the right of
the Company, in respect of any claim, issue or matter as to which the
Indemnitee shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the Company unless and
only to the extent that any court in which such action was brought
shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, the
Indemnitee is fairly and reasonably entitled to indemnity for such
expenses as such court shall deem proper;
(d) if it is proved by final judgment in a court of law or other
final adjudication to have been based upon or attributable to the
Indemnitee's in fact having gained any personal profit or advantage to
which he was not legally entitled;
(e) for a disgorgement of profits made from the purchase and sale
by the Indemnitee of securities pursuant to Section 16(b) of the
Securities Exchange Act of 1934 and amendments thereto or similar
provisions of any state statutory law or common law;
(f) brought about or contributed to by the dishonesty of the
Indemnitee seeking payment hereunder; however, notwithstanding the
foregoing, the Indemnitee shall be protected under this Agreement as
to any claims upon which suit may be brought against him by reason of
any alleged dishonesty on his part, unless a judgment or other final
adjudication thereof adverse to the Indemnitee shall establish that he
committed (i) acts of active and deliberate dishonesty, (ii) with
actual dishonest purpose and intent, (iii) which acts were material to
the cause of action so adjudicated; or
(g) for any judgment, fine or penalty which the Company is
prohibited by applicable law from paying as indemnity or for any other
reason.
6. Indemnification of Expenses of Successful Party. Notwithstanding
-----------------------------------------------
any other provision of this Agreement, to the extent that the Indemnitee
has been successful on the merits or otherwise in defense of any Proceeding
or in defense of any claim, issue or matter therein, including dismissal
without prejudice, Indemnitee shall be indemnified against any and all
Expenses incurred in connection therewith.
7. Partial Indemnification. If the Indemnitee is entitled under any
-----------------------
provision of this Agreement to indemnification by the Company for some or a
portion of Expenses, but not, however, for the total amount thereof, the
Company
3
<PAGE>
shall nevertheless indemnify the Indemnitee for the portion of such
Expenses to which the Indemnitee is entitled.
8. Advance of Expenses. Expenses incurred by the Indemnitee in
-------------------
connection with any Proceeding, except the amount of any settlement, shall
be paid by the Company in advance upon request of the Indemnitee that the
Company pay such Expenses. The Indemnitee hereby undertakes to repay to
the Company the amount of any Expenses theretofore paid by the Company to
the extent that it is ultimately determined that such Expenses were not
reasonable or that the Indemnitee is not entitled to indemnification.
9. Approval of Expenses. No Expenses for which indemnity shall be
--------------------
sought under this Agreement, other than those in respect of judgments and
verdicts actually rendered, shall be incurred without the prior consent of
the Company, which consent shall not be unreasonably withheld.
10. Notice of Claim. The Indemnitee, as a condition precedent to his
---------------
right to be indemnified under this Agreement, shall give to the Company
notice in writing as soon as practicable of any claim made against him for
which indemnity will or could be sought under this Agreement. Notice to
the Company shall be given at its principal office and shall be directed to
the Corporate Secretary (or such other address as the Company shall
designate in writing to the Indemnitee); notice shall be deemed received if
sent by prepaid mail properly addressed, the date of such notice being the
date postmarked. In addition, the Indemnitee shall give the Company such
information and cooperation as it may reasonably require and as shall be
within the Indemnitee's power.
11. Counterparts. This Agreement may be executed in any number of
------------
counterparts, all of which taken together shall constitute one instrument.
12. Indemnification Hereunder Not Exclusive. Nothing herein shall be
---------------------------------------
deemed to diminish or otherwise restrict the Indemnitee's right to
indemnification under any provision of the Certificate of Incorporation or
By-Laws of the Company and amendments thereto or under law.
13. Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with Delaware law.
14. Saving Clause. Wherever there is conflict between any provision
-------------
of this Agreement and any applicable present or future statute, law or
regulation contrary to which the Company and the Indemnitee have no legal
right to contract, the latter shall prevail, but in such event the affected
provisions of this Agreement
4
<PAGE>
shall be curtailed and restricted only to the extent necessary to bring
them within applicable legal requirements.
15. Coverage. The provisions of this Agreement shall apply with
--------
respect to the Indemnitee's service as a Director of the Company prior to
the date of this Agreement and with respect to all periods of such service
after the date of this Agreement, even though the Indemnitee may have
ceased to be a Director of the Company.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and signed as of the day and year first above written.
COBBLESTONE GOLF GROUP, INC.
By:_________________________
Stefan C. Karnavas
Chief Financial Officer
_________________________
(Name of Director)
S-1
<PAGE>
EXHIBIT 12.1
COMPUTATION OF DEFICIENCY OF EARNINGS TO COVER FIXED CHARGES
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER SIX MONTHS ENDED MARCH
30, 31,
------------------------------- ------------------------
1993 1994 1995 1995 1996
--------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Loss before income tax.. $(846,102) $(906,461) $(497,812) $(1,661,663) $(2,438,480)
Interest expense........ 529,720 3,515,752 8,019,072 3,205,346 5,118,027
--------- --------- --------- ----------- -----------
Earnings (Loss) to
cover fixed charges.. (316,382) 2,609,291 7,521,260 1,543,683 2,679,547
========= ========= ========= =========== ===========
Interest expense........ 529,720 3,515,752 8,019,072 3,205,346 5,118,027
--------- --------- --------- ----------- -----------
Fixed Charges......... 529,720 3,515,752 8,019,072 3,205,346 5,118,027
========= ========= ========= =========== ===========
Deficiency of Earnings
to Cover Fixed
Charges(1)............. $ 846,102 $ 906,461 $ 497,812 $ 1,661,663 $ 2,438,480
========= ========= ========= =========== ===========
</TABLE>
- ---------------------
(1) Represents the amount earnings are deficient to cover the fixed charges.
This was calculated by subtracting the earnings from fixed charges.
<PAGE>
EXHIBIT 21.1
------------
SUBSIDIARIES OF COBBLESTONE GOLF GROUP, INC.
Escondido Consulting, Inc.
Cobblestone Texas, Inc.
Pecan Grove Golf Club, Inc.
Foothills Holding Company, Inc.
Bellows Golf Group, Inc.
Carmel Mountain Ranch Golf Club, Inc.
OVLC Management Corp.
OVLC Financial Corp.
CSR Golf Group, Inc.
Lakeway Golf Clubs, Inc.
Woodcrest Golf Clubs, Inc.
Virginia Golf Country Club, Inc.
Ocean Vista Land Company
Golf Course Inns of America, Inc.
Oceanside Golf Management Corp.
Whispering Palms Country Club Joint Venture
Lakeway Clubs, Inc.
The Liquor Club at Pecan Grove, Inc.
TGFC Corporation
C-RHK, Inc.
CEL Golf Group, Inc.
SWC Golf Club, Inc.
<PAGE>
EXHIBIT 23.2
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated December 8, 1995 with respect to Cobblestone Golf
Group, Inc., our report dated July 3, 1996 with respect to Lakeway Country
Club, our combined report dated June 21, 1996 with respect to Stonebridge
Country Club Inc, and The Ranch Country Club, Inc., our report dated July 19,
1996 with respect to Brandermill Country Club, L.P., our report dated July 19,
1996 with respect to Pecan Grove Plantation Country Club, Inc., our report
dated July 19, 1996 with respect to Ocean Vista Land Company, and our report
dated July 19, 1996 with respect to Saticoy Regional Golf Course, in the
Registration Statement (Form S-4) of Cobblestone Golf Group, Inc. dated August
1, 1996.
ERNST & YOUNG, LLP
San Diego, California
July 30, 1996
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of Cobblestone Golf Group, Inc. of our
report dated July 26, 1996 relating to the financial statements of Sweetwater
Golf Partnership, which appears in such Prospectus. We also consent to the
reference to us under the heading "Experts" in such Prospectus.
PRICE WATERHOUSE LLP
Houston, Texas
July 30, 1996
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Cobblestone Golf Group, Inc.
We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement of our report dated April 12, 1994, relating to the
financial statements of the Brandermill Country Club, L.P. which is contained
in that Prospectus.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
BDO SEIDMAN, LLP
Richmond, Virginia
July 31, 1996
<PAGE>
EXHIBIT 25.1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
_____________________________
[_] CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
A NATIONAL BANKING ASSOCIATION 41-1592157
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national Identification No.)
bank)
SIXTH STREET AND MARQUETTE AVENUE
Minneapolis, Minnesota 55479
(Address of principal executive offices) (Zip code)
_____________________________
COBBLESTONE GOLF GROUP, INC.
(Exact name of obligor as specified in its charter)
DELAWARE 95-4391248
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
COBBLESTONE GOLF GROUP, INC.
3702 VIA DE LA VALLE, SUITE 202
DEL MAR, CALIFORNIA 92014
(Address of principal executive offices) (Zip code)
_____________________________
$70,000,000
11 1/2% SENIOR NOTES DUE 2003
(Title of the indenture securities)
================================================================================
<PAGE>
Item 1. General Information. Furnish the following information as to the
--------------------
trustee:
(a) Name and address of each examining or supervising authority
to which it is subject.
Comptroller of the Currency
Treasury Department
Washington, D.C.
Federal Deposit Insurance Corporation
Washington, D.C.
The Board of Governors of the Federal Reserve System
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust
powers.
Item 2. Affiliations with Obligor. If the obligor is an affiliate of the
--------------------------
trustee, describe each such affiliation.
None with respect to the trustee.
No responses are included for Items 3-15 of this Form T-1 because the obligor is
not in default as provided under Item 13.
Item 16. List of Exhibits. List below all exhibits filed as a part of this
-----------------
Statement of Eligibility. Norwest Bank incorporates
by reference into this Form T-1 the exhibits
attached hereto.
Exhibit 1. a. A copy of Articles of Association of the trustee
now in effect. *
Exhibit 2. a. A copy of the certificate of authority of the
trustee to commence business issued June 28, 1872,
by the Comptroller of the Currency to The
Northwestern National Bank of Minneapolis.*
b. A copy of the certificate of the Comptroller of the
Currency dated January 2, 1934, approving the
consolidation of the Northwestern National Bank of
Minneapolis and the Minnesota Loan and Trust
Company of Minneapolis.*
c. A copy of the certificate of the Acting Comptroller
of the Currency dated January 12, 1943, as to
change of corporate title of Northwestern National
Bank and Trust Company of Minneapolis to
Northwestern National Bank of Minneapolis.*
d. A copy of the certificate of the Comptroller of
the Currency dated
<PAGE>
May 1, 1983, authorizing Norwest Bank Minneapolis,
National Association, to act as fiduciary.*
<PAGE>
Exhibit 3. A copy of the authorization of the trustee to exercise
corporate trust powers issued January 2, 1934, by the
Federal Reserve Board.*
Exhibit 4. Copy of By-laws of the trustee as now in effect.*
Exhibit 5. Not applicable.
Exhibit 6. The consent of the trustee required by Section 321(b) of
the Act.
Exhibit 7. A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority.
Exhibit 8. A copy of the certificate dated May 10, 1983 of name change
from Northwestern National Bank Minneapolis to Norwest
Bank Minneapolis, National Association.*
Exhibit 9. A copy of the certificate dated January 11, 1988, of name
change from Norwest Bank Minneapolis, National Association
to Norwest Bank Minnesota, National Association.*
* Incorporated by reference to the exhibit of the same number filed with
the registration statement number 33-66086.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the
trustee, Norwest Bank Minnesota, National Association, a national banking
association organized and existing under the laws of the United States of
America, has duly caused this statement of eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of
Minneapolis and State of Minnesota on the 27th day of June, 1996.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
/s/ Raymond S. Haverstock
---------------------------
Raymond S. Haverstock
Vice President
<PAGE>
EXHIBIT 6
June 27, 1996
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
In accordance with Section 321 (b) of the Trust Indenture Act of 1939, as
amended, the undersigned hereby consents that reports of examination of the
undersigned made by Federal or State authorities authorized to make such
examination may be furnished by such authorities to the Securities and Exchange
Commission upon its request therefor.
Very truly yours,
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
Raymond S. Haverstock
Vice President
<PAGE>
Federal Financial Institutions Examination Council
Board of Governors of the Federal Reserve System
OMB Number: 7100-0036
Federal Deposit Insurance Corporation
OMB Number: 3064-0052
Office of the Comptroller of the Currency
OMB Number: 1557-0081
Expires March 31, 1999
- --------------------------------------------------------------------------------
[LOGO]
Please refer to page i,
Table of Contents, for
the required disclosure
of estimated burden.
- --------------------------------------------------------------------------------
Consolidated Reports of Condition and Income for
A Bank With Domestic and Foreign Offices - FFIEC 031
Report at the close of business March 31, 1996
This report is required by law: 12 U.S.C. (S)324 (State member banks); 12 U.S.C.
(S)1817 (State nonmember banks); and 12 U.S.C. (S)161 (National banks).
(960331)
- -----------
(RCRI 9999)
This report form is to be filed by banks with branches and consolidated
subsidiaries in U.S. territories and possessions, Edge or Agreement
subsidiaries, foreign branches, consolidated foreign subsidiaries, or
International Banking Facilities.
- --------------------------------------------------------------------------------
NOTE: The Reports of Condition and Income must be signed by an authorized
officer and the Report of Condition must be attested to by not less than two
directors (trustee) for State nonmember banks and three directors for State
member and National banks.
The Reports of Condition and Income are to be prepared in accordance with
Federal regulatory authority instructions. NOTE: These instructions may in
some cases differ from generally accepted accounting principles.
I, Mark P. Wagener, Director of Bank & Service Accounting
------------------------------------------------------
Name and Title of Officer Authorized to Sign Report
of the named bank do hereby declare that these Reports of Condition and Income
(including the supporting schedules) have been prepared in conformance with
the instructions issed by the appropriate Federal regulatory authority and are
true to the best of my knowledge and belief.
/s/ Mark P. Wagener
- ----------------------------------
Signature of Officer Authorized to Sign Report
4/26/96
- ----------------------------------
Date of Signature
We, the undersigned directors (trustees), attest to the correctness of this
Report of Condition (including the supporting schedules) and declare that it has
been examined by us and to the best of our knowledge and belief has been
prepared in conformance with the instructions issued by the appropriate Federal
regulatory authority and is true and correct.
/s/
- ----------------------------------
Director (Trustee)
/s/
- ----------------------------------
Director (Trustee)
/s/
- ----------------------------------
Director (Trustee)
- --------------------------------------------------------------------------------
For Banks Submitting Hard Copy Report Forms:
State Member Banks: Return the original and one copy to the appropriate Federal
Reserve District Bank.
State Nonmember Banks: Return the original only in the special return address
envelope provided. If express mail is used in lieu of the special return
address envelope, return the original only to the FDIC, c/o Quality Data
Systems, 2127 Espey Court, Suite 204, Crofton, MD 21114.
National Banks: Return the original only in the special return address envelope
provided. If express mail is used in lieu of the special return address
envelope, return the original only to the FDIC, c/o Quality Data Systems, 2127
Espey Court, Suite 204, Crofton, MD 21114.
- --------------------------------------------------------------------------------
FDIC Certificate Number 0 5 2 0 8
---------------
(RCRI 9050)
Banks should affix the address label in this space.
NORWEST BANK MINNESOTA, NATIONAL ASSN.
- --------------------------------------------
Legal Title of Bank (TEXT 9010)
MINNEAPOLIS
- --------------------------------------------
City (TEXT 9130)
MN 55479-0016
- --------------------------------------------
State Abbrev. (TEXT 9200) ZIP Code (TEXT 9220)
Board of Governors of the Federal Reserve System, Federal Deposit Insurance
Corporation, Office of the Comptroller of the Currency
<PAGE>
FFIEC 031
Page i
2
Consolidated Reports of Condition and Income for
A Bank with Domestic and Foreign Offices
- --------------------------------------------------------------------------------
Table of Contents
<TABLE>
<CAPTION>
Signature Page Cover
Report of Income
- ----------------
<S> <C>
Schedule RI - Income Statement ............... R1-1, 2, 3
Schedule RI-A - Changes in Equity Capital .......... RI-4
Schedule RI-B - Charge-offs and Recoveries and
Changes in Allowance for Loan and Lease
Losses ........................................ RI-4, 5
Schedule RI-C - Applicable Income Taxes by
Taxing Authority ................................. RI-5
Schedule RI-D - Income from International
Operations ....................................... RI-6
Schedule RI-E - Explanations .................... RI-7, 8
Report of Condition
- -------------------
Schedule RC - Balance Sheet ..................... RC-1, 2
Schedule RC-A - Cash and Balances Due From
Depository Institutions .......................... RC-3
Schedule RC-B - Securities ................... RC-3, 4, 5
Schedule RC-C - Loans and Lease Financing
Receivables:
Part I. Loans and Leases ................... RC-6, 7
Part II. Loans to Small Businesses and
Small Farms (included in the forms for
June 30 only) ........................... RC-7a, 7b
Schedule RC-D - Trading Assets and Liabilities
(to be completed only by selected banks) ......... RC-8
Schedule RC-E - Deposit Liabilities ........ RC-9, 10, 11
Schedule RC-F - Other Assets ...................... RC-11
Schedule RC-G - Other Liabilities ................. RC-11
Schedule RC-H - Selected Balance Sheet Items
for Domestic Offices ............................ RC-12
Schedule RC-I - Selected Assets and Liabilities of
IBFs ............................................ RC-13
Schedule RC-K - Quarterly Averages ................ RC-13
Schedule RC-L - Off-Balance Sheet
Items ................................... RC-14, 15, 16
Schedule RC-M - Memoranda ..................... RC-17, 18
Schedule RC-N - Past Due and Nonaccrual Loans,
Leases, and Other Assets .................... RC-19, 20
Schedule RC-O - Other Data for Deposit
Insurance Assessments ....................... RC-21, 22
Schedule RC-R - Regulatory Capital ............ RC-23, 24
Optional Narrative Statement Concerning the
Amounts Reported in the Reports of
Condition and Income ............................ RC-25
Special Report (to be completed by all banks)
Schedule RC-J - Repricing Opportunities (sent only to
and to be completed only by savings banks)
</TABLE>
Disclosure of Estimated Burden
The estimated average burden associated with this infomration collection is 32.2
hours per respondent and is estimated to vary from 15 to 230 hours per response,
depending on individual circumstances. Burden estimates include the time for
reviewing instructions, gathering and maintaining data in the required form, and
completing the information collection, but exclude the time for compiling and
maintaining business records in the normal course of a respondent's activities.
Comments concerning the accuracy of this burden estimate and suggestions for
reducing this burden should be directed to the Office of Information and
Regulatory Affairs, Office of Management and Budget, Washington, D.C. 20503, and
to one of the following:
Secretary
Board of Governors of the Federal Reserve System
Washington, D.C. 20551
Legislative and Regulatory Analysis Division
Office of the Comptroller of the Currency
Washington, D.C. 20219
Assistant Executive Secretary
Federal Deposit Insurance Corporation
Washington, D.C. 20429
For information or assistance, National and State nonmember banks should contact
the FDIC's Call Reports Analysis Unit, 550 17th Street, NW, Washington, D.C.
20429, toll free on (800) 688-FDIC(3342), Monday through Friday between 8:00
a.m. and 5:00 p.m., Eastern time. State member banks should contact their
Federal Reserve District Bank.
<PAGE>
<TABLE>
<S> <C> <C> <C>
Norwest Bank Minnesota, N.A. Call Date: 03/31/96 ST-BK 27-4095 FFIEC 031
Sixth Street and Marquette Avenue Page RI - 1
Minneapolis, MN 55479 Vendor ID: D CERT: 05208 3
Transit Number: 91000019
</TABLE>
Consolidated Report of Income
for the period January 1, 1996 - March 31, 1996
All Report of Income schedules are to be reported on a calendar year-to-date
basis in thousands of dollars.
Schedule RI - Income Statement
<TABLE>
<CAPTION>
I480 -
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Interest income:
a. Interest and fee income on loans:
(1) In domestic offices: RIAD
(a) Loans secured by real estate__________________________________________________________4011.. 79,875 1.a.1a
(b) Loans to depository institutions______________________________________________________4019.. 4,266 1.a.1b
(c) Loans to finance agricultural production and other loans to farmers___________________4024.. 286 1.a.1c
(d) Commercial and industrial loans_______________________________________________________4012.. 73,340 1.a.1d
(e) Acceptances of other banks____________________________________________________________4026.. 88 1.a.1e
(f) Loans to individuals for household, family, and other personal expenditures:
(1) Credit cards and related plans____________________________________________________4054.. 5,750 1.a.1f1
(2) Other_____________________________________________________________________________4055.. 14,502 1.a.1f2
(g) Loans to foreign governments and official institutions________________________________4056.. 0 1.a.1g
(h) Obligations (other than securities and leases) of states and political
subdivisions in the U.S.:
(1) Taxable obligations_______________________________________________________________4503.. 3 1.a.1h1
(2) Tax-exempt obligations____________________________________________________________4504.. 482 1.a.1h2
(i) All other loans in domestic offices___________________________________________________4058.. 282 1.a.1i
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs______________________________4059.. 2,421 1.a.2
b. Income from lease financing receivables:
(1) Taxable leases____________________________________________________________________4505.. 9,744 1.b.1
(2) Tax-exempt leases_________________________________________________________________4307.. 98 1.b.2
c. Interest income on balances due from depository institutions:(1)
(1) In domestic offices_______________________________________________________________4105.. 49 1.c.1
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs_____________________4106.. 29 1.c.2
d. Interest and divident income on securities:
(1) U.S. Treasury securities and U.S. Government agency and corporation
obligations_______________________________________________________________________4027.. 17,391 1.d.1
(2) Securities issued by states and political subdivisions in the U.S.:
(a) Taxable securities____________________________________________________________4506.. 28 1.d.2a
(b) Tax-exempt securities_________________________________________________________4507.. 1,735 1.d.2b
(3) Other domestic debt securities____________________________________________________3657.. 401 1.d.3
(4) Foreign debt securities___________________________________________________________3658.. 0 1.d.4
(5) Equity securities (including investments in mutual funds)_________________________3659.. 4,542 1.d.5
e. Interest income from trading assets___________________________________________________4069.. 2,107 1.e
</TABLE>
- --------
(1) Includes interest income on time certificates of deposit not held for
trading.
<PAGE>
<TABLE>
<S> <C> <C> <C>
Norwest Bank Minnesota, N.A. Call Date: 03/31/96 ST-BK 27-4095 FFIEC 031
Sixth Street and Marquette Avenue Page RI - 2
Minneapolis, MN 55479 Vendor ID: D CERT: 05208 4
Transit Number: 91000019
</TABLE>
<TABLE>
<CAPTION>
Schedule RI - Continued
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. Interest income (continued)
f. Interest income on federal funds sold and securities purchased
under agreements to resell in domestic offices of the bank RIAD Year-to-date
and of its Edge and Agreement subsidiaries, and in IBFs______________________4020. . 64,777 . . . . . . . 1.f
g. Total interest income (sum of items 1.a through 1.f)_________________________4107. . 282,196 . . . . . . . 1.g
2. Interest expense:
a. Interest on deposits:
(1) Interest on deposits in domestic offices:
(a) Transaction accounts (NOW accounts, ATS accounts, and
telephone and preauthorized transfer accounts) ______________________4508. . 2,844 . . . . . . . 2.a.1a
(b) Nontransaction accounts:
(1) Money market deposit accounts (MMDAs)_____________________________4509. . 10,380 . . . . . . . 2.a.1b1
(2) Other savings deposits____________________________________________4511. . 1,696 . . . . . . . 2.a.1b2
(3) Time certificates of deposit of $ 100,000 or more_________________4174. . 2,732 . . . . . . . 2.a.1b3
(4) All other time deposits___________________________________________4512. . 25,437 . . . . . . . 2.a.1b4
(2) Interest on deposits in foreign offices, Edge and
Agreement subsidiaries, and IBFs__________________________________________4172. . 7,688 . . . . . . . 2.a.2
b. Expense of federal funds purchased and securities sold under
agreements to repurchase in domestic offices of the bank and
of its Edge and Agreement subsidiaries, and in IBFs___________________________4180. . 62,237 . . . . . . . 2.b
c. Interest on demand notes issued to the U.S. Treasury, trading
liabilities, and other borrowed money_________________________________________4185. . 36,716 . . . . . . . 2.c
d. Interest on mortgage indebtedness and obligations under
capitalized leases____________________________________________________________4072. . 26 . . . . . . . 2.d
e. Interest on subordinated notes and debentures_________________________________4200. . 2,466 . . . . . . . 2.e
f. Total interest expense (sum of items 2.a through 2.e)_________________________4073. . 152,222 . . . . . . . 2.f
3. Net interest income (item 1.g minus 2.f)_________________________________________4074. . . . . . . . 129,974 3.
4. Provisions:
a. Provision for loan and lease losses___________________________________________4230. . . . . . . . 4,762 4.a
b. Provision for allocated transfer risk_________________________________________4243. . . . . . . . 0 4.b
5. Noninterest income:
a. Income from fiduciary activities______________________________________________4070. . 43,257 . . . . . . . 5.a
b. Service charges on deposit accounts in domestic offices_______________________4080. . 19,037 . . . . . . . 5.b
c. Trading revenue (must equal Schedule RI, sum of Memorandum
items 8.a through 8.d)________________________________________________________A220. . (20,258) . . . . . . . 5.c
d. Other foreign transaction gain (losses)_______________________________________4076. . 547 . . . . . . . 5.d
e. Not applicable
f. Other noninterest income:
(1) Other fee income__________________________________________________________5407. . 30,637 . . . . . . . 5.f.1
(2) All other noninterest income*_____________________________________________5408. . 16,211 . . . . . . . 5.f.2
g. Total noninterest income (sum of items 5.a through 5.f)_______________________4076. . . . . . . 89,431 5.g
6. a. Realized gains (losses) on held-to-maturity securities________________________3521. . . . . . . 0 6.a
b. Realized gains (losses) on available-for-sale securities______________________3196. . . . . . . 6,666 6.b
7. Noninterest expense:
a. Salaries and employee benefits________________________________________________4135. . 76,555 . . . . . . . 7.a
b. Expenses of premises and fixed assets (net of rental income)
(excluding salaries and employee benefits and mortgage
interest)_____________________________________________________________________4217. . 19,505 . . . . . . . 7.b
c. Other noninterest expense*____________________________________________________4092. . 75,737 . . . . . . . 7.c
d. Total noninterest expense (sum of items 7.a through 7.c)______________________4093. . . . . . . 171,797 7.d
8. Income (loss) before income taxes and extraordinary items and
other adjustments (item 3 plus or minus items 4.a, 4.b, 5.g,
6.a, 6.b, and 7.d)_______________________________________________________________4301. . . . . . . 49,512 8.
9. Applicable income taxes (on item 8)______________________________________________4302. . . . . . . 16,869 9.
10. Income (loss) before extraordinary items and other adjustments
(item 8 minus 9)_________________________________________________________________4300. . . . . . . 32,643 10.
___________
</TABLE>
*Describe on Schedule RI-E - Explanations.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Norwest Bank Minnesota, N.A. Call Date: 03/31/96 ST-BK 27-4095 FFIEC 031
Sixth Street and Marquette Avenue Page RI - 3
Minneapolis, MN 55479 Vendor ID: D CERT: 05208 5
Transit Number: 91000019
</TABLE>
Schedule RI - Continued
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
11. Extraordinary items and other adjustments:
RIAD Year-to-date
a. Extraordinary items and other adjustments, gross of income ----
taxes * ____________________________________________________________4310. . 0 . . . . . . . . . 11.a
b. Applicable income taxes (on item 11.a) * ___________________________4315. . 0 . . . . . . . . . 11.b
c. Extraordinary items and other adjustments, net of
income taxes (item 11.a minus 11.b)_________________________________4320. . . . . . . . 0 11.c
12. Net income (loss) (sum of items 10 and 11.c)____________________________4340. . . . . . . . 32,643 12.
</TABLE>
<TABLE>
<CAPTION>
Memoranda
I481 (-
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
RIAD Year-to-date
1. Interest expense incurred to carry tax-exempt securities, loans, and leases acquired ----
after August 7, 1986, that is not deductible for federal income tax purposes____________________4513. . 2 M.1
2. Income from the sale and servicing of mutual funds and annuities in domestic
offices (included in Schedule RI, item 8)_______________________________________________________8431. . 496 M.2
3. Not applicable
4. Not applicable
Number
5. Number of full-time equivalent employees on payroll at end of current period (round to ------
nearest whole number)___________________________________________________________________________4150. . 5,607 M.5
6. Not applicable
7. If the reporting bank has restated its balance sheet as a result of applying push down MM DD YY
accounting this calendar year, report the date of the bank's acquisition________________________9106. . N/A M.7
8. Trading revenue (from cash instruments and off-balance sheet derivative instruments)
(Sum of Memorandum items 8.a through 8.d must equal Schedule RI, item 5.c): RIAD Year-to-date
----
a. Interest rate exposures_____________________________________________________________________8757. . ( 23,362) M.8.a
b. Foreign exchange exposures__________________________________________________________________8758. . 2,104 M.8.b
c. Equity security and index exposures_________________________________________________________8759. . 0 M.8.c
d. Commodity and other exposures_______________________________________________________________8760. . 0 M.8.d
9. Impact on income of off-balance sheet derivatives held for purposes other than trading:
a. Net increase (decrease) to interest income__________________________________________________8761. . ( 89) M.9.a
b. Net (increase) decrease to interest income__________________________________________________8762. . ( 4,918) M.9.b
c. Other (noninterest) allocations_____________________________________________________________8763. . 0 M.9.c
10.Credit losses on off-balance sheet derivatives (see instructions)_______________________________A251. . 0 M.10
</TABLE>
- --------
* Describe on Schedule RI-E - Explanations.
<PAGE>
<TABLE>
<S> <C> <C> <C>
Norwest Bank Minnesota, N.A. Call Date: 03/31/96 ST-BK 27-4095 FFIEC 031
Sixth Street and Marquette Avenue Page RI - 4
Minneapolis, MN 55479 Vendor ID: D CERT: 05208 6.
Transit Number: 91000019
</TABLE>
<TABLE>
<CAPTION>
Schedule RI - A - Changes in Equity Capital
Indicate decreases and losses in parentheses. I483 ( -
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Total equity capital originally reported in the December 31, 1995, Reports of RIAD
----
Condition and Income____________________________________________________________________________3215.. 1,125,067 1.
2. Equity capital adjustments from amended Reports of Income, net * _______________________________3216.. 0 2.
3. Amended balance end of previous calendar year (sum of items 1 and 2)____________________________3217.. 1,125,067 3.
4. Net income (loss) (must equal Schedule RI, item 12)_____________________________________________4340.. 32,643 4.
5. Sale, conversion, acquisition, or retirement of capital stock, net______________________________4346.. 0 5.
6. Changes incident to business combinations, net__________________________________________________4356.. 0 6.
7. LESS: Cash dividends declared on preferred stock_______________________________________________4470.. 0 7.
8. LESS: Cash dividends declared on common stock__________________________________________________4460.. 15,000 8.
9. Cumulative effect of changes in accounting principles from prior years * (see
instructions for this schedule)_________________________________________________________________4411.. 0 9.
10. Corrections of material accounting errors from prior years * (see instructions for
this schedule)__________________________________________________________________________________4412.. 0 10.
11. Change in net unrealized holding gains (losses) on available-for-sale securities________________8433.. ( 7,513) 11.
12. Foreign currency translation adjustments________________________________________________________4414.. 2 12.
13. Other transactions with parent holding company * (not included in items 5, 7, or
8 above)________________________________________________________________________________________4415.. 0 13.
14. Total equity capital end of current period (sum of items 3 through 13) (must equal
Schedule RC, item 28)___________________________________________________________________________3210.. 1,135,199 14.
_______________
* Describe on Schedule RI-E - Explanations.
</TABLE>
<TABLE>
<CAPTION>
Schedule RI - B - Charge-offs and Recoveries and Changes in Allowance
for Loan and Lease Losses
Part I. Charge-offs and Recoveries on Loans and Leases
Part I excludes charge-offs and recoveries through the allocated transfer risk reserve.
I486 ( -
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
--------------------calendar year-to-date--------------------
(Column A) (Column B)
Charge-offs Recoveries
--------------------------- -----------------------------
<S> <C> <C> <C> <C> <C>
1. Loans secured by real estate: RIAD RIAD
---- ----
a. To U.S. addressees (domicile)_________________________4651.. 380 4661.. 889 1.a
b. To non-U.S. addressees (domicile)_____________________4652.. 0 4662.. 0 1.b
2. Loans to depository institutions and acceptances of
other banks:
a. To U.S. banks and other U.S. depository
institutions__________________________________________4653.. 0 4663.. 0 2.a
b. To foreign banks______________________________________4654.. 0 4664.. 0 2.b
3. Loans to finance agricultural production and other
loans to farmers_________________________________________4655.. 0 4665.. 3 3.
4. Commercial and industrial loans:
a. To U.S. addressees (domicile)_________________________4645.. 4,637 4617.. 1,291 4.a
b. To non-U.S. addressees (domicile)_____________________4646.. 0 4618.. 181 4.b
5. Loans to individuals for household, family, and other
personal expenditures:
a. Credit cards and related plans________________________4656.. 360 4666.. 59 5.a
b. Other (includes single payment, installment, and
all student loans)____________________________________4657.. 1,711 4667.. 587 5.b
6. Loans to foreign governments and official
institutions_____________________________________________4643.. 344 4627.. 63 6.
7. All other loans__________________________________________4644.. 0 4628.. 0 7.
8. Lease financing receivables:
a. Of U.S. addressees (domicile)_________________________4658.. 545 4668.. 229 8.a
b. Of non-U.S. addressees (domicile)_____________________4659.. 0 4669.. 0 8.b
9. Total (sum of items 1 through 8)_________________________4635.. 7,977 4605.. 3,302 9.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Norwest Bank Minnesota, N.A. Call Date: 03/31/96 ST-BK: 27-4095 FFIEC 031
Sixth Street and Marquette Avenue Page RI - 5
Minneapolis, MN 55479 Vendor ID: D CERT: 05208 7
Transit Number: 91000019
</TABLE>
Schedule RI-B - Continued
Part I. Continued
Memoranda
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
----------------calendar year-to-date----------------
(Column A) (Column B)
Charge-offs Recoveries
-------------------- -----------------------------
1.-3. Not applicable.
RIAD RIAD
4. Loans to finance commercial real estate, construction, ---- ----
and land development activities (not secured by real
estate) included in Schedule RI-B, part I,
items 4 and 7, above_____________________________________________________5409. . 0 5410. . 0 M.4
5. Loans secured by real estate in domestic offices
(included in Schedule RI-B, part I, item 1, above):
a. Construction and land development____________________________________3582. . 0 3583. . 0 M.5.a
b. Secured by farmland__________________________________________________3584. . 0 3585. . 0 M.5.b
c. Secured by 1-4 family residential properties:
(1) Revolving, open-end loans secured by 1-4
family residential properties and extended
under lines of credit____________________________________________5411. . 0 5412. . 0 M.5.c1
(2) All other loans secured by 1-4 family
residential properties___________________________________________5413. . 303 5414. . 98 M.5.c2
d. Secured by multifamily (5 or more) residential
properties___________________________________________________________3588. . 0 3589. . 0 M.5.d
e. Secured by nonfarm nonresidential properties_________________________3590. . 77 3591. . 791 M.5.e
</TABLE>
<TABLE>
<CAPTION>
Part II. Changes in Allowance for Loan and Lease Losses
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
RIAD
----
1. Balance originally reported in the December 31, 1995, Reports of Condition and Income___________3124. . 187,020 1.
2. Recoveries (must equal part I, item 9, column B above)__________________________________________4605. . 3,302 2.
3. LESS: Charge-offs (must equal part I, item 9, column A above)__________________________________4635. . 7,977 3.
4. Provision for loan and lease losses (must equal Schedule RI, item 4.a)__________________________4230. . 4,762 4.
5. Adjustments * (see instructions for this schedule)______________________________________________4815. . ( 2) 5.
6. Balance end of current period (sum of items 1 through 5) (must equal Schedule RC,
item 4.b)_______________________________________________________________________________________3123. . 187,105 6.
- --------
* Describe on Schedule RI-E - Explanations.
</TABLE>
<TABLE>
<CAPTION>
Schedule RI-C - Applicable Income Taxes by Taxing Authority
I489 (-
Schedule RI-C is to be reported with the December Report of Income. Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
RIAD
----
1. Federal_________________________________________________________________________________________4780. . N/A 1.
2. State and local_________________________________________________________________________________4790. . N/A 2.
3. Foreign_________________________________________________________________________________________4795. . N/A 3.
4. Total (sum of items 1 through 3) (must equal sum of Schedule RI, items 9 and 11.b)______________4770. . N/A 4.
RIAD
----
5. Deferred portion of item 4_____________________________4772 N/A . . . . . . . 5.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Norwest Bank Minnesota, N.A. Call Date: 03/31/96 ST-BK 27-4095 FFIEC 031
Sixth Street and Marquette Avenue Page RI - 6
Minneapolis, MN 55479 Vendor ID: D CERT: 05208 8
Transit Number: 91000019
</TABLE>
Schedule RI-D - Income from International Operations
For all banks with foreign offices, Edge or Agreement subsidiaries, or IBFs
where international operations account for more than 10 percent of total
revenues, total assets, or net income.
Part I. Estimated Income from International Operations
<TABLE>
<CAPTION>
I492 (-
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Interest income and expense booked at foreign offices, Edge and Agreement subsidiaries, RIAD Year-to-date
and IBFs: ----
a. Interest income booked________________________________________________________________________4837.. N/A 1.a
b. Interest expense booked_______________________________________________________________________4838.. N/A 1.b
c. Net interest income booked at foreign offices, Edge and Agreement subsidiaries,
and IBFs (item 1.a minus 1.b)_________________________________________________________________4839.. N/A 1.c
2. Adjustments for booking location of international operations:
a. Net interest income attributable to international operations booked at domestic offices_______4840.. N/A 2.a
b. Net interest income attributable to domestic business booked at foreign
offices_______________________________________________________________________________________4841.. N/A 2.b
c. Net booking location adjustment (item 2.a minus 2.b)__________________________________________4842.. N/A 2.c
3. Noninterest income and expense attributable to international operations:
a. Noninterest income attributable to international operations___________________________________4097.. N/A 3.a
b. Provision for loan and lease losses attributable to international operations__________________4235.. N/A 3.b
c. Other noninterest expense attributable to international operations____________________________4239.. N/A 3.c
d. Net noninterest income (expense) attributable to international operations
(item 3.a minus 3.b and 3.c)__________________________________________________________________4843.. N/A 3.d
4. Estimated pretax income attributable to international operations before capital allocation
adjustment (sum of items 1.c, 2.c, and 3.d)______________________________________________________4844.. N/A 4.
5. Adjustment to pretax income for internal allocations to international operations to
reflect the effects of equity capital on overall bank funding costs______________________________4845.. N/A 5.
6. Estimated pretax income attributable to international operations after capital allocation
adjustment (sum of items 4 and 5)________________________________________________________________4846.. N/A 6.
7. Income taxes attributable to income from international operations as estimated in item 6_________4797.. N/A 7.
8. Estimated net income attributable to international operations (item 6 minus 7)___________________4341.. N/A 8.
</TABLE>
<TABLE>
<CAPTION>
Memoranda
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Intracompany interest income included in item 1.a above__________________________________________4847.. N/A M.1
2. Intracompany interest expense included in item 1.b above_________________________________________4848.. N/A M.2
</TABLE>
Part II. Supplementary Details on Income from International Operations Required
by the Departments of Commerce and Treasury for Purposes of the U.S.
International Accounts and the U.S. National Income and Product Accounts
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
RIAD Year-to-date
----
1. Interest income booked at IBFs___________________________________________________________________4849.. N/A 1.
2. Interest expense booked at IBFs__________________________________________________________________4850.. N/A 2.
3. Noninterest income attributable to international operations booked at domestic offices
(excluding IBFs):
a. Gains (losses) and extraordinary items________________________________________________________5491.. N/A 3.a
b. Fees and other noninterest income_____________________________________________________________5492.. N/A 3.b
4. Provision for loan and lease losses attributable to international operations booked at
domestic offices (excluding IBFs)________________________________________________________________4852.. N/A 4.
5. Other noninterest expense attributable to international operations booked at domestic
offices (excluding IBFs)_________________________________________________________________________4853.. N/A 5.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Norwest Bank Minnesota, N.A. Call Date: 03/31/96 ST-BK: 27-4095 FFIEC 031
Sixth Street and Marquette Avenue Page RI - 7
Minneapolis, MN 55479 Vendor ID: D CERT: 05208 9
Transit Number: 91000019
</TABLE>
Schedule RI-E - Explanations
Schedule RI-E is to be completed each quarter on a calendar year-to-date basis.
Detail all adjustments in Schedules RI-A and RI-B, all extraordinary items and
other adjustments in Schedule RI, and all significant items of other noninterest
income and other noninterest expense in Schedule RI.
(See instructions for details.)
<TABLE>
<CAPTION>
I495 (-
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. All other noninterest income (from Schedule RI, item 5.f.(2))
Report amounts that exceed 10% of Schedule RI, item 5.f.(2): RIAD Year-to-date
------
a. Net gains on other real estate owned__________________________________________________________5415.. N/A 1.a
b. Net gains on sales of loans___________________________________________________________________5416.. N/A 1.b
c. Net gains on sales of premises and fixed assets_______________________________________________5417.. N/A 1.c
Itemize and describe the three largest other amounts that exceed 10% of
Schedule RI, item 5.f.(2):
TEXT RIAD
---- ------
d. 4461: Gain on Sales of Loan Servicing Rights______________________________________________4461.. 6,754 1.d
e. 4462: Processing Fees_____________________________________________________________________4462.. 4,761 1.e
f. 4463: Rental Income_______________________________________________________________________4463.. 2,016 1.f
2. Other noninterest expense (from Schedule RI, item 7.c):
a. Amortization expense of intangible assets_____________________________________________________4531.. 1,579 2.a
Report amounts that exceed 10% of Schedule RI, item 7.c:
b. Net losses on other real estate owned_________________________________________________________5418.. N/A 2.b
c. Net losses on sales of loans__________________________________________________________________5419.. N/A 2.c
a. Net losses on sales of premises and fixed assets______________________________________________5420.. N/A 2.d
Itemize and describe the three largest other amounts that exceed 10% of
Schedule RI, item 7.c:
TEXT RIAD
---- ------
e. 4464: Processing Fees_____________________________________________________________________4464.. 22,195 2.e
f. 4467: ____________________________________________________________________________________4467.. N/A 2.f
f. 4468: ____________________________________________________________________________________4468.. N/A 2.g
3. Extraordinary items and other adjustments (from Schedule RI, item 11.a) and applicable
income tax effect (from Schedule RI, item 11.b) (itemize and describe all extraordinary
items and other adjustments):
TEXT RIAD
---- ------
a. (1) 4469: _______________________________________ ................................. 4469.. 0 3.a.1
(2) Applicable income tax effect__________________4486 .. 0 .......... 3.a.2
b. (1) 4487: _______________________________________ ................................. 4487.. 0 3.b.1
(2) Applicable income tax effect__________________4488 .. 0 .......... 3.b.2
c. (1) 4489: _______________________________________ ................................. 4489.. 0 3.c.1
(2) Applicable income tax effect__________________4491 .. 0 .......... 3.c.2
4. Equity capital adjustments from amended Reports of Income (from Schedule RI-A,
item 2) (itemize and describe all adjustments):
TEXT RIAD
---- ------
a. 4492: ______________________________________________________________________________________4492.. N/A 4.a
b. 4493: ______________________________________________________________________________________4493.. N/A 4.b
5. Cumulative effect of changes in accounting principles from prior years (from Schedule
RI-A, item 9) (itemize and describe all changes in accounting principles):
TEXT RIAD
---- ------
a. 4494: ______________________________________________________________________________________4494.. N/A 5.a
b. 4495: ______________________________________________________________________________________4495.. N/A 5.b
6. Corrections of material accounting errors from prior years (from Schedule RI-A, item
10) (itemize and describe all corrections):
TEXT RIAD
---- ------
a. 4496: ______________________________________________________________________________________4496.. N/A 6.a
b. 4497: ______________________________________________________________________________________4497.. N/A 6.b
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Norwest Bank Minnesota, N.A. Call Date: 03/31/96 ST-BK 27-4095 FFIEC 031
Sixth Street and Marquette Avenue Page RI - 8
Minneapolis, MN 55479 Vendor ID: D CERT: 05208 10
Transit Number: 91000019
</TABLE>
Schedule RI-E - Continued
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
7. Other transactions with parent holding company (from Schedule RI-A, item 13) (itemize
and describe all such transactions):
TEXT RIAD Year-to-date
a. 4498: ____________________________________________________________________________________ 4498.. N/A 7.a
b. 4499: ____________________________________________________________________________________ 4499.. N/A 7.b
8. Adjustments to allowance for loan and lease losses (from Schedule RI-B, part II,
item 5) (itemize and describe all adjustments):
TEXT
a. 4521: Sale of Loans_______________________________________________________________________ 4521.. ( 2) 8.a
b. 4522: ____________________________________________________________________________________ 4522.. N/A 8.b
I498 I499 (-
</TABLE>
9. Other explanations (the space below is provided for the bank to briefly
describe, at its option, any other significant items affecting the Report of
Income):
No comment: X (RIAD 4769)
Other explanations (please type or print clearly):
(TEXT 4769)
<PAGE>
<TABLE>
<S> <C> <C> <C>
Norwest Bank Minnesota, N.A. Call Date: 03/31/96 ST-BK 27-4095 FFIEC 031
Sixth Street and Marquette Avenue Page RC - 1
Minneapolis, MN 55479 Vendor ID: D CERT: 05208 11
Transit Number: 91000019
</TABLE>
Consolidated Report of Condition for Insured Commercial and
State-Chartered Savings Banks for March 31, 1996
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
quarter.
Schedule RC - Balance Sheet
<TABLE>
<CAPTION>
C400 (-)
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
1. Cash and balances due from depository institutions (from Schedule RC-A): RCFD
a. Noninterest-bearing balances and currency and coin (1)______________________________________0081. . 799,948 1.a
b. Interest-bearing balances (2)_______________________________________________________________0071. . 8,680 1.b
2. Securities:
a. Held-to-maturity securities (from Schedule RC-B, column A)__________________________________1754. . 0 2.a
b. Available-for-sale securities (from Schedule RC-B, column D)________________________________1773. . 1,248,762 2.b
3. Federal funds sold and securities purchased under agreements to resell in domestic
offices of the bank and of its Edge and Agreement subsidiaries, and in 1BFs:
a. Federal funds sold__________________________________________________________________________0276. . 4,849,904 3.a
b. Securities purchased under agreements to resell_____________________________________________0277. . 166,612 3.b
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income RCFD
(from Schedule RC-C)________________________2122. . 9,047,263 . . . . . . . 4.a
b. LESS: Allowance for loan and lease losses___3123. . 187,105 . . . . . . . 4.b
c. LESS: Allocated transfer risk reserve_______3128. . 0 . . . . . . . 4.c
d. Loans and leases, net of unearned income,
allowance, and reserve (item 4.a minus 4.b and 4.c)_________________________________________2125. . 8,860,158 4.d
5. Trading assets (from Schedule RC-D)_____________________________________________________________3545. . 218,920 5.
6. Premises and fixed assets (including capitalized leases)________________________________________2145. . 109,833 6.
7. Other real estate owned (from Schedule RC-M)____________________________________________________2150. . 3,507 7.
8. Investments in unconsolidated subsidiaries and associated companies (from
Schedule RC-M)__________________________________________________________________________________2130. . 0 8.
9. Customers' liability to this bank on acceptances outstanding____________________________________2155. . 26,494 9.
10. Intangible assets (from Schedule RC-M)__________________________________________________________2143. . 12,617 10.
11. Other assets (from Schedule RC-F)_______________________________________________________________2160. . 241,962 11.
12. Total assets (sum of items 1 through 11)________________________________________________________2170. . 16,547,397 12.
____________
1) Includes cash items in process of collection and unposted debits.
2) Includes time certificates of deposit not held for trading.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Norwest Bank Minnesota, N.A. Call Date: 03/31/96 ST-BK: 27-4095 FFIEC 031
Sixth Street and Marquette Avenue Page RC - 2
Minneapolis, MN 55479 Vendor ID: D CERT: 05208 12
Transit Number: 91000019
Schedule RC - Continued
</TABLE>
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LIABILITIES
13. Deposits: RCON
----
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, part I)___________2200.. 7,689,048 13.a
RCON
----
(1) Noninterest-bearing (1)________________________________________6631.. 2,511,465 ............ 13.a.1
(2) Interest-bearing_______________________________________________6636.. 5,177,583 ............ 13.a.2
RCFN
----
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E, part II)_2200 1,153,638 13.b
RCFN
----
(1) Noninterest-bearing ___________________________________________6631.. 14,651 ............ 13.b.1
(2) Interest-bearing_______________________________________________6636.. 1,138,987 ............ 13.b.2
14. Federal funds purchased and securities sold under agreements to repurchase in domestic
offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: RCFD
----
a. Federal funds purchased_____________________________________________________________________0278.. 2,757,413 14.a
b. Securities sold under agreements to repurchase______________________________________________0279.. 604,944 14.b
RCON
----
15. a. Demand notes issued to the U.S. Treasury____________________________________________________2840.. 166,014 15.a
RCFD
----
b. Trading liabilities (from Schedule RC-D)____________________________________________________3548.. 15,346 15.b
16. Other borrowed money:
a. With a remaining maturity of one year or less_______________________________________________2332.. 80,846 16.a
b. With a remaining maturity of more than one year_____________________________________________2333.. 2,288,426 16.b
17. Mortgage indebtedness and obligations under capitalized leases__________________________________2910.. 1,171 17.
18. Bank's liability on acceptances executed and outstanding________________________________________2920.. 26,494 18.
19. Subordinated notes and debentures_______________________________________________________________3200.. 161,695 19.
20. Other liabilities (from Schedule RC-G)__________________________________________________________2930.. 467,163 20.
21. Total liabilities (sum of items 13 through 20)__________________________________________________2948.. 15,412,198 21.
22. Limited-life preferred stock and related surplus________________________________________________3282.. 0 22.
EQUITY CAPITAL
RCFD
----
23. Perpetual preferred stock and related surplus___________________________________________________3838.. 0 23.
24. Common stock____________________________________________________________________________________3230.. 100,000 24.
25. Surplus (exclude all surplus related to preferred stock_________________________________________3839.. 594,981 25.
26. a. Undivided profits and capital reserves______________________________________________________3632.. 431,558 26.a
b. Net unrealized holding gains (losses) on available-for-sale securities______________________8434.. 9,005 26.b
27. Cumulative foreign currency translation adjustments_____________________________________________3284.. (345) 27.
28. Total equity capital (sum of items 23 through 27)_______________________________________________3210.. 1.135,199 28.
29. Total liabilities, limited-life preferred stock, and equity capital
(sum of items 21, 22, and 28)___________________________________________________________________3300.. 16,547,397 29.
MEMORANDUM
To be reported only with the March Report of Condition.
RCFD Number
---- ------
1. Indicate in the box at the right the number of the statement below that best describes the most
comprehensive level of auditing work performed for the bank by independent external auditors as
of any date during 1995_________________________________________________________________________6724.. 2 M.1
</TABLE>
1 = Independent audit of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm which
submits a report on the bank
2 = Independent audit of the bank's parent holding company conducted in
accordance with generally accepted auditing standards by a certified public
accounting firm which submits a report on the consolidated holding company
(but not on the bank separately)
3 = Directors' examination of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm (may be
required by state chartering authority)
4 = Directors' examination of the bank performed by other external auditors (may
be required by state chartering authority)
5 = Review of the bank's financial statements by external auditors
6 = Compilation of the bank's financial statements by external auditors
7 = Other audit procedures (excluding tax preparation work)
8 = No external audit work
- --------
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Norwest Bank Minnesota, N.A. Call Date: 03/31/96 ST-BK: 27-4095 FFIEC 031
Sixth Street and Marquette Avenue Page RC - 3
Minneapolis, MN 55479 Vendor ID: D CERT: 05208 13
Transit Number: 91000019
</TABLE>
<TABLE>
<CAPTION>
Schedule RC - A - Cash and Balances Due From Depository Institutions
Exclude assets held for trading.
C405 ( -
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(Column A) (Column B)
Consolidated Bank Domestic Offices
-------------------------- -------------------------
RCFD RCON
1. Cash items in process of collection, unposted ---- ------
debits, and currency and coin_____________________________0022.. 661,057 ............ 1.
a. Cash items in process of collection and unposted
debits_________________________________________________ ............ 0020.. 569,258 1.a
b. Currency and coin______________________________________ ............ 0080.. 91,778 1.b
2. Balances due from depository institutions in the U.S._____ ............ 0082.. 81,946 2.
a. U.S. branches and agencies of foreign banks
(including their IBFs)_________________________________0083.. 0 ............ 2.a
b. Other commercial banks in the U.S. and other
depository institutions in the U.S. (including
their IBFs)____________________________________________0085.. 90,620 ............ 2.b
3. Balances due from banks in foreign countries and
foreign central banks_____________________________________ ............ 0070.. 7,549 3.
a. Foreign branches of other U.S. banks___________________0073.. 7,549 ............ 3.a
b. Other banks in foreign countries and foreign
central banks__________________________________________0074.. 2,714 ............ 3.b
4. Balances due from Federal Reserve Banks___________________0090.. 46,688 0090.. 46,451 4.
5. Total (sum of items 1 through 4) (total of column A
must equal Schedule RC, sum of items 1.a and 1.b)_________0010.. 808,628 0010.. 796,982 5.
- -----------------------------------------------------------------------------------------------------------------------------------
Memorandum
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
RCON
------
1. Noninterest-bearing balances due from commercial banks in the U.S.
(included in item 2, column B above)_________________________________________________________0050.. 74,367 M.1
Schedule RC-B - Securities
Exclude assets held for trading.
C410 ( -
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
Held-to-Maturity Available-for-sale
(Column A) (Column B) (Column C) (Column D)
Amortized Cost Fair Value Amortized Cost Fair Value (1)
________________ ____________________ ________________________ _____________________________
<S> <C> <C> <C> <C> <C> <C>
RCFD RCFD RCFD RCFD
1. U.S. Treasury ------ ------ ------ ------
securities_____________0211.. 0 0213.. 0 1286.. 285,450 1287.. 286,976 1.
2. U.S. Government
agency and
corporation
obligations (exclude
mortgage-backed
securities):
a. Issued by U.S. RCFD RCFD RCFD RCFD
Government ------ ------ ------ ------
agencies (2)________1289.. 0 1290.. 0 1291.. 0 1293.. 0 2.a
b. Issued by U.S.
Government-
sponsored
agencies (3)________1294.. 0 1295.. 0 1297.. 11,725 1298.. 11,678 2.b
- ------------
(1) Includes equity securities without readily determinable fair values at historical cost in item 6.c, column D.
(2) Includes Small Business Administration "Guaranteed Loan Pool Certificates," U.S. Maritime Administration obligations, and
Export-Import Bank participation certificates.
(3) Includes obligations (other than mortgage-backed securities) issued by the Farm Credit System, the Federal Home Loan Bank
System, the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association, the Financing Corporation,
Resolution Funding Corporation, the Student Loan Marketing Association, and the Tennessee Valley Authority.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Norwest Bank Minnesota, N.A. Call Date: 03/31/96 ST-BK: 27-4095 FFIEC 031
Sixth Street and Marquette Avenue Page RC - 4
Minneapolis, MN 55479 Vendor ID: D CERT: 05208 14
Transit Number: 91000019
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-B - Continued
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
Held-to-maturity Available-for-sale
(Column A) (Column B) (Column C) (Column D)
Amortized Cost Fair Value Amortized Cost Fair Value (1)
---------------------- ---------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3. Securities issued by
states and political
subdivisions in the U.S.:
a. General RCFD RCFD RCFD RCFD
obligations_____1676.. 0 1677.. 0 1678.. 21,741 1679.. 22,097 3.a
b. Revenue
obligations_____1681.. 0 1686.. 0 1690.. 78,332 1691.. 81,852 3.b
c. Industrial
development
and similar
obligations_____1694.. 0 1695.. 0 1696.. 4,500 1697.. 5,170 3.c
4. Mortgage-backed
securities (MBS):
a. Pass-through
securities:
(1) Guaranteed
by GNMA_____1698.. 0 1699.. 0 1701.. 82,072 1702.. 83,608 4a1
(2) Issued by
FNMA and
FHLMC_______1703.. 0 1705.. 0 1706.. 430,355 1707.. 437,175 4a2
(3) Other pass-
through
securities__1709.. 0 1710.. 0 1711.. 0 1713.. 0 4a3
b. Other mortgage-
backed securities
(include CMOs,
REMICs, and
stripped MBS):
(1) Issued or
guaranteed
by FNMA, or RCFD RCFD RCFD RCFD
GNMA____________1714.. 0 1715.. 0 1716.. 26,261 1717.. 26,300 4b1
(2) Collateralized
by MBS issued
or guaranteed
by FNMA,
FHLMC, RCFD RCFD RCFD RCFD
or GNMA_____1718.. 0 1719.. 0 1731.. 41 1732.. 41 4b2
(3) All other
mortgage-
backed
securities_1733.. 0 1734.. 0 1735.. 108 1736.. 108 4b3
5. Other debt securities:
a. Other domestic
debt RCFD RCFD RCFD RCFD
securities______1737.. 0 1738.. 0 1739.. 2,149 1741.. 2,207 5.a
b. Foreign debt
securities______1742.. 0 1743.. 0 1744.. 0 1746.. 0 5.b
6. Equity securities:
a. Investments
in mutual RCFD RCFD RCFD RCFD
funds__________ .. . . . . . . . . . .. . . . . . . . . . 1747.. 143 1748.. 143 6.a
b. Other equity
securities
with readily
determinable
fair values____ .. . . . . . . . . . .. . . . . . . . . . 1749.. 0 1751.. 0 6.b
c. All other
equity
securities(1)__ .. . . . . . . . . . .. . . . . . . . . . 1752.. 291,407 1753.. 291,407 6.c
7. Total (sum of items
1 through 6) (total
of column A must
equal Schedule RC,
item 2.a)(total
of column D must
equal Schedule RC,
item 2.b)__________1754.. 0 1771.. 0 1772.. 1,234,284 1773.. 1,248,762 7.
</TABLE>
- --------
(1) Includes equity securities without readily determinable fair values at
historical cost in item 6.c, column D.
<PAGE>
<TABLE>
<S> <C> <C> <C>
Norwest Bank Minnesota, N.A. Call Date: 03/31/96 ST-BK 27-4095 FFIEC 031
Sixth Street and Marquette Avenue Page RC - 5
Minneapolis, MN 55479 Vendor ID: D CERT: 05208 15
Transit Number: 91000019
</TABLE>
Schedule RC-B - Continued
Memoranda
<TABLE>
<CAPTION>
C412 (-
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
RCFD
1. Pledged securities (2)__________________________________________________________________________0416.. 120,386 M.1
2. Maturity and repricing data for debt securities (2,3,4)(excluding those in nonaccrual status):
a. Fixed rate debt securities with a remaining maturity of:
(1) Three months or less____________________________________________________________________0343.. 173,710 M.2.a1
(2) Over three months through 12 months_____________________________________________________0344.. 123,524 M.2.a2
(3) Over one year through five years________________________________________________________0345.. 15,063 M.2.a3
(4) Over five years_________________________________________________________________________0346.. 457,854 M.2.a4
(5) Total fixed rate debt securities (sum of Memorandum items 2.a.(1) through 2.a(4))_______0347.. 770,151 M.2.a5
b. Floating rate debt securities with a repricing frequency of:
(1) Quarterly or more frequently____________________________________________________________4544.. 106,107 M.2.b1
(2) Annually or more frequently, but less frequently than quarterly_________________________4545.. 80,954 M.2.b2
(3) Every five years or more frequently, but less frequently than annually__________________4551.. 0 M.2.b3
(4) Less frequently than every five years___________________________________________________4552.. 0 M.2.b4
(5) Total floating rate debt securities (sum of Memorandum items 2.b(1) through 2.b(4))_____4553.. 187,061 M.2.b5
c. Total debt securities (sum of Memorandum items 2.a.(5) and 2.b.(5)) (must equal total debt
securities from Schedule RC-8, sum of items 1 through 5, columns A and D, minus nonaccrual
debt securities included in Schedule RC-N, item 9, column C)________________________________0393.. 957,212 M.2.c
3. Not applicable__________________________________________________________________________________ ......
4. Held to maturity debt securities restructured and in compliance with modified terms (included
in Schedule RC-B, items 3 through 5, column A above)____________________________________________5365.. 0 M.4
5. Not applicable__________________________________________________________________________________ ......
6. Floating rate debt securities with a remaining maturity of one year or less (2,4) (included in
Memorandum items 2.b.(1) through 2.b.(4) above)_________________________________________________5519.. 901 M.6
7. Amortized cost of held-to-maturity securities sold or transferred to available-for-sale or
trading securities during the calendar year-to-date (report the amortized cost at date of sale
or transfer)____________________________________________________________________________________1778.. 0 M.7
8. High-risk mortgage securities (included in the held-to-maturity and available-for-sale accounts
in Schedule RC-B, item 4.b):
a. Amortized cost______________________________________________________________________________8780.. 115 M.8.a
b. Fair value__________________________________________________________________________________8781.. 109 M.8.b
9. Structured notes (included in the held-to-maturity and available-for-sale accounts in Schedule
RC-B, items 2,3, and 5):
a. Amortized cost______________________________________________________________________________8782.. 3,502 M.9.a
b. Fair value__________________________________________________________________________________8783.. 3,456 M.9.b
- ---------
</TABLE>
(2) Includes held-to-maturity securities at amortized cost and available-for-
sale securities at fair value.
(3) Excludes equity securities, e.g., investments in mutual funds, Federal
Reserve stock, common stock, and preferred stock.
(4) Memorandum items 2 and 6 are not applicable to savings banks that must
complete supplemental Schedule RC-J.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Norwest Bank Minnesota, N.A. Call Date: 03/31/96 ST-BK: 27-4095 FFIEC 031
Sixth Street and Marquette Avenue Page RC - 6
Minneapolis, MN 55479 Vendor ID: D CERT: 05208 16
Transit Number: 91000019
Schedule RC-C - Loans and Lease Financing Receivables
Part I. Loans and Leases
Do not deduct the allowance for loan and lease losses from amounts reported in
this schedule. Report total loans and leases, net of unearned income. Exclude
assets held for trading.
</TABLE>
<TABLE>
<CAPTION> C415 (-
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
(Column A) (Column B)
RCFD Consolidated Bank RCON Domestic Offices
---- ----------------- ---- ----------------
<S> <C> <C> <C> <C> <C>
1. Loans secured by real estate___________________________________________1410.. 3,520,733 .......... 1.
a. Construction and land development__________________________________ .......... 1415.. 34,868 1.a
b. Secured by farmland (including farm residential and other
improvements)____________________________________________________ .......... 1420.. 1,640 1.b
c. Secured by 1-4 family residential properties:
(1) Revolving, open-end loans secured by 1-4 family
residential properties and extended under lines
of credit______________________________________________________ .......... 1797.. 103,321 1.c1
(2) All other loans secured by 1-4 family
residential properties:
(a) Secured by first liens_____________________________________ .......... 5367.. 2,637,682 1.c2a
(b) Secured by junior liens____________________________________ .......... 5368.. 301,422 1.c2b
d. Secured by multifamily (5 or more) residential properties__________ .......... 1460.. 57,978 1.d
e. Secured by nonfarm nonresidential properties_______________________ .......... 1480.. 383,822 1.e
2. Loans to depository institutions:
a. To commercial banks in the U.S.____________________________________ .......... 1505.. 35,153 2.a
(1) To U.S. branches and agencies of foreign banks_________________1506.. 0 .......... 2.a1
(2) To other commercial banks in the U.S.__________________________1507.. 40,935 .......... 2.a2
b. To other depository institutions in the U.S._______________________1517.. 0 1517.. 0 2.b
c. To banks in foreign countries______________________________________ .......... 1510.. 466 2.c
(1) To foreign branches of other U.S. banks________________________1513.. 265 .......... 2.c1
(2) To other banks in foreign countries____________________________1516.. 73,193 .......... 2.c2
3. Loans to finance agricultural production and other loans
to farmers___________________________________________________________1590.. 19,942 1590.. 19,942 3.
4. Commercial and industrial loans:
a. To U.S. addressees (domicile)______________________________________1763.. 3,117,994 1763.. 3,081,820 4.a
b. To non-U.S. addressees (domicile)__________________________________1764.. 45,174 1764.. 1,259 4.b
5. Acceptances of other banks:
a. Of U.S. banks______________________________________________________1756.. 0 1756.. 0 5.a
b. Of foreign banks___________________________________________________1757.. 2,351 1757.. 2,351 5.b
6. Loans to individuals for household, family, and other personal
expenditures (i.e., consumer loans) (includes purchased
paper)_______________________________________________________________ .......... 1975.. 1,001,690 6.
a. Credit cards and related plans (includes check credit and other
revolving credit plans___________________________________________2008.. 194,157 .......... 6.a
b. Other (includes single payment, installment, and all student
loans)___________________________________________________________2011.. 807,803 .......... 6.b
7. Loans to foreign governments and official institutions (including
foreign central banks)_______________________________________________2081.. 5,000 2081.. 5,000 7.
8. Obligations (other than securities and leases) of states and
political subdivisions in the U.S. (includes nonrated
industrial development obligations)__________________________________2107.. 22,612 2107.. 22,612 8.
9. Other loans____________________________________________________________1563.. 549,365 .......... 9.
a. Loans for purchasing or carrying securities (secured and
unsecured)_______________________________________________________ .......... 1545.. 32,160 9.a
b. All other loans (exclude consumer loans)___________________________ .......... 1564.. 517,205 9.b
10. Lease financing receivables (net of unearned income)___________________ .......... 2165.. 650,824 10.
a. Of U.S. addressess (domicile)_______________________________________2182.. 650,824 .......... 10.a
b. Of non-U.S. addressees (domicile)___________________________________2183.. 0 .......... 10.b
11. LESS: Any unearned income on loans reflected in items 1-9 above________2123.. 3,085 2123.. 2,062 11.
12. Total loans and leases, net of unearned income (sum of items 1
through 10 minus item 11) (total of column A must equal Schedule RC,
item 4.a)______________________________________________________________2122.. 9,047,263 2122.. 8,889,153 12.
</TABLE>
- --------
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Norwest Bank Minnesota, N.A. Call Date: 03/31/96 ST-BK: 27-4095 FFIEC 031
Sixth Street and Marquette Avenue Page RC - 7
Minneapolis, MN 55479 Vendor ID: D CERT: 05208 17
</TABLE>
Transit Number: 91000019
Schedule RC - C - Continued
Part I. Continued
Memoranda
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
(Column A) (Column B)
Consolidated Bank Domestic Offices
--------------------------- -----------------------------
<S> <C> <C> <C>
RCFD RCON
---- ----
1. Commercial paper included in Schedule RC-C, part I,
above____________________________________________________1496.. 0 1496.. 0 M.1
2. Loans and leases restructured and in compliance with
modified terms (included in Schedule RC-C, part I,
above, and not reported as past due or nonaccrual
in Schedule RC-N, Memorandum item 1):
a. Loans secured by real estate:
(1) To U.S. addressees (domicile)_____________________1687.. 0 M.2.a1
(2) To non-U.S. addressees (domicile)_________________1689.. 0 M.2.a2
b. All other loans and all lease financing receivables
(exclude loans to individuals for household, family,
and other personal expenditures)______________________8691.. 0 M.2.b
c. Commercial and industrial loans to and lease
financing receivables of non-U.S. addressees
(domicile) included in Memorandum item 2.b above______8692.. 0 M.2.c
3. Maturity and repricing data for loans and leases (1)
(excluding those in nonaccrual status):
a. Fixed rate loans and leases with a remaining maturity
of:
(1) Three months or less______________________________0348.. 3,492,538 M.3.a1
(2) Over three months through 12 months_______________0349.. 583,439 M.3.a2
(3) Over one year through five years__________________0356.. 1,710,367 M.3.a3
(4) Over five years___________________________________0357.. 934,727 M.3.a4
(5) Total fixed rate loans and leases (sum of
Memorandum items 3.a.(1) through 3.a.(4))_________0358.. 6,721,071 M.3.a5
b. Floating rate loans with a repricing frequency of:
(1) Quarterly or more frequently______________________4554.. 1,986,188 M.3.b1
(2) Annually or more frequently, but less frequently
than quarterly____________________________________4555.. 273,537 M.3.b2
(3) Every five years or more frequently, but less
frequently than annually__________________________4561.. 20,782 M.3.b3
(4) Less frequently than every five years_____________4564.. 0 M.3.b4
(5) Total floating rate loans (sum of Memorandum
items 3.b.(1) through 3.b.(4))____________________4567.. 2,280,507 M.3.b5
c. Total loans and leases (sum of Memorandum items
3.a.(5) and 3.b.(5)) (must equal the sum of total
loans and leases, net, from Schedule RC-C, part I,
item 12, plus unearned income from Schedule RC-C,
part item I, item 11, minus total nonaccrual loans and
leases from Schedule RC-N, sum of items 1 through 8,
column C)_____________________________________________1479.. 9,001,578 M.3.c
d. Floating rate loans with a remaining maturity of
one year or less (included in Memorandum items 3.b.(1)
through 3.b.(4) above)________________________________A246.. 658,691 M.3.d
4. Loans to finance commercial real estate, construction,
and land development activities (not secured by real
estate) included in Schedule RC-C, part I, items 4 and
9, column A, page RC-6 (2)_______________________________2746.. 0 M.4
5. Loans and leases held for sale (included in
Schedule RC-C, part I, above)____________________________5369.. 1,701,670 M.5
6. Adjustable rate closed-end loans secured by first liens
on 1-4 family residential properties (included in
Schedule RC-C, part I, item 1.c.(2)(a), column B,
page RC-6)________________________________________________ ............ 5370.. 397,465 M.6
- -----------------
(1) Memorandum item 3 is not applicable to savings banks that must complete supplemental Schedule RC-J.
(2) Exclude loans secured by real estate that are included in Schedule RC-C, part I, item 1, column A.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Norwest Bank Minnesota, N.A. Call Date: 03/31/96 ST-BK: 27-4095 FFIEC 031
Sixth Street and Marquette Avenue Page RC - 8
Minneapolis, MN 55479 Vendor ID: D CERT: 05208 18
Transit Number: 91000019
</TABLE>
Schedule RC-D - Trading Assets and Liabilities
<TABLE>
<CAPTION>
Schedule RC-D is to be completed only by banks with $1 billion or more in total assets or with $2 billion or more in par/notional
amount of off-balance sheet derivative contracts (as reported in Schedule RC-L, items 14.a through 14.e, columns A through D).
C420 (-
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
<S> <C> <C> <C>
RCON
----
1. U.S. Treasury securities in domestic offices____________________________________________________3531. . 188,479 1.
2. U.S. Government agency and corporation obligations in domestic offices (exclude
mortgage-backed securities)_____________________________________________________________________3532. . N/A 2.
3. Securities issued by states and political subdivisions in the U.S. in domestic
offices_________________________________________________________________________________________3533. . N/A 3.
4. Mortgage-backed securities (MBS) in domestic offices:
a. Pass-through securities issued or guaranteed by FNMA, FHLMC, or GNMA_________________________3534. . 19,490 4.a
b. Other mortgage-backed securities issued or guaranteed by FNMA, FHLMC, or
GNMA (include CMOs, REMICs, and stripped MBS)________________________________________________3535. . N/A 4.b
c. All other mortgage-backed securities_________________________________________________________3536. . N/A 4.c
5. Other debt securities in domestic offices_______________________________________________________3537. . N/A 5.
6. Certificates of deposit in domestic offices_____________________________________________________3538. . N/A 6.
7. Commercial paper in domestic offices____________________________________________________________3539. . N/A 7.
8. Bankers acceptances in domestic offices_________________________________________________________3540. . N/A 8.
9. Other trading assets in domestic offices________________________________________________________3541. . N/A 9.
RCFN
----
10. Trading assets in foreign offices_______________________________________________________________3542. . N/A 10.
11. Revaluation gains on interest rate, foreign exchange rate, and other commodity and
equity contracts: RCON
----
a. In domestic offices__________________________________________________________________________3543. . 10,951 11.a
RCFN
----
b. In foreign offices___________________________________________________________________________3544. . N/A 11.b
RCFD
----
12. Total trading assets (sum of items 1 through 11)
(must equal Schedule RC, item 5)________________________________________________________________3545. . 218,920 12.
LIABILITIES
13. Liability for short positions___________________________________________________________________3546. . 4,745 13.
14. Revaluation losses on interest rate, foreign exchange rate, and other commodity and
equity contracts________________________________________________________________________________3547. . 10,601 14.
15. Total trading liabilities (sum of items 13 and 14) (must equal Schedule RC,
item 15.b)______________________________________________________________________________________3548. . 15,346 15.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Norwest Bank Minnesota, N.A. Call Date: 03/31/96 ST-BK: 27-4095 FFIEC 031
Sixth Street and Marquette Avenue Page RC: 9
Minneapolis, MN 55479 Vendor ID: D CERT: 05208 19
Transit Number: 91000019
</TABLE>
Schedule RC-E - Deposit Liabilities
Part I. Deposits in Domestic Offices
<TABLE>
<CAPTION>
C425 (-
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
--------------Transaction Accounts-------------- --Nontransaction Accounts--
(Column A) (Column B) (Column C)
Total transaction Memo: Total demand
accounts (including total deposits (included in Total nontransaction
demand deposits) column A) accounts (including MMDAs)
- ---------------------------------------------------- ------------------------- --------------------- ---------------------------
<S> <C> <C> <C>
Deposits of: RCON RCON RCON
---- ---- ----
1. Individuals, partnerships and corporations__________2201.. 3,168,529 2240.. 2,127,218 2346.. 4,120,216 1.
2. U.S. Government_____________________________________2202.. 23,933 2280.. 23,933 2520.. 0 2.
3. States and political subdivisions in the U.S._______2203.. 29,811 2290.. 24,414 2530.. 10,559 3.
4. Commercial banks in the U.S.________________________2206.. 284,025 2310.. 284,025 2550.. 100 4.
5. Other depository institutions in the U.S.___________2207.. 6,857 2312.. 6,857 2349.. 0 5.
6. Banks in foreign countries__________________________2213.. 14,291 2320.. 14,291 2236.. 0 6.
7. Foreign governments and official institutions
(including foreign central banks)___________________2216.. 0 2300.. 0 2377.. 0 7.
8. Certified and official checks_______________________2330.. 30,727 2330.. 30,727 ........... 8.
9. Total (sum of items 1 through 8) (sum of
columns A and C must equal Schedule RC,
item 13.a)__________________________________________2215.. 3,558,173 2210.. 2,511,465 2385.. 4,130,875 9.
</TABLE>
Memoranda
<TABLE>
<CAPTION> Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
RCON
1. Selected components of total deposits (i.e., sum of item 9, column A and C): ----
a. Total Individual Retirement Accounts (IRAs) and Keogh Plan accounts___________________________6835.. 553,583 M.1.a
b. Total brokered deposits_______________________________________________________________________2365.. 0 M.1.b
c. Fully insured brokered deposits (included in Memorandum item 1.b above):
(1) Issued in denominations lf less than $100,000_____________________________________________2343.. 0 M.1.c1
(2) Issued either in denominations of $100,000 or in denominations greater than
$100,000 and participated out by the broker in shares of $100,000 or less_________________2344.. 0 M.1.c2
d. Maturity data for brokered deposits:
(1) Brokered deposits issued in denominations of less than $100,000 with a remaining
maturity of one year or less (included in Memorandum item 1.c.(1) above)__________________A243.. 0 M.1.d1
(2) Brokered deposits issued in denominations of $100,000 or more with a remaining
maturity of one year or less (included in Memorandum item 1.b above)______________________A244.. 0 M.1.d2
e. Preferred deposits (uninsured deposits of states and political subdivisions in the U.S.
reported in item 3 above which are secured or collateralized as required under state law)_____5590.. 34,792 M.1.e
2. Components of total nontransaction accounts (sum of Memorandum items 2.a through 2.d
must equal item 9, column C above):
a. Savings deposits:
(1) Money market deposit accounts (MMDAs)_____________________________________________________6810.. 1,715,121 M.2.a1
(2) Other savings deposits (excludes MMDAs)___________________________________________________0352.. 428,864 M.2.a2
b. Total time deposits of less than $100,000_____________________________________________________6648.. 1,736,275 M.2.b
c. Time certificates of deposit of $100,000______________________________________________________6645.. 170,411 M.2.c
d. Open-account time deposits of $100,000 or more________________________________________________6646.. 80,204 M.2.d
3. All NOW accounts (included in column A above)____________________________________________________2398.. 1,046,708 M.3
4. Not applicable
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Norwest Bank Minnesota, N.A. Call Date: 03/31/96 ST-BK: 27-4095 FFIEC 031
Sixth Street and Marquette Avenue Page RC - 10
Minneapolis, MN 55479 Vendor ID: D CERT: 05208 20
Transit Number: 91000019
</TABLE>
Schedule RC - E - Continued
Part I. Continued
Memoranda (Continued)
<TABLE>
<CAPTION> Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
5. Maturity and repricing data for time deposits of less than $100,000 (sum of Memorandum
items 5.a.(1) through 5.b.(3) must equal Memorandum item 2.b above): (1)
a. Fixed rate time deposits of less than $100,000 with a remaining maturity of: RCON
(1) Three months or less_________________________________________________________________A225. . 194,917 M.5.a1
(2) Over three months through 12 months__________________________________________________A226. . 749,354 M.5.a2
(3) Over one year________________________________________________________________________A227. . 792,004 M.5.a3
b. Floating rate time deposits of less than $100,000 with a repricing frequency of:
(1) Quarterly or more frequently_________________________________________________________A228. . 0 M.5.b1
(2) Annually or more frequently, but less frequently than quarterly______________________A229. . 0 M.5.b2
(3) Less frequently than annually________________________________________________________A230. . 0 M.5.b3
c. Floating rate time deposits of less than $100,000 with a remaining maturity of
one year or less (included in Memorandum items 5.b.(1) through 5.b.(3) above)____________A231. . 0 M.5.c
6. Maturity and repricing data for time deposits of $100,000 or more (i.e., time
certificates of deposit of $100,000 or more and open-account time deposits of
$100,000 or more) (sum of Memorandum items 6.a.(1) through 6.b.(4) must equal
the sum of Memorandum items 2.c and 2.d above): (1)
a. Fixed rate time deposits of $100,000 or more with a remaining maturity of:
(1) Three months or less_________________________________________________________________A232. . 104,590 M.6.a1
(2) Over three months through 12 months__________________________________________________A233. . 75,660 M.6.a2
(3) Over one year through five years_____________________________________________________A234. . 64,039 M.6.a3
(4) Over five years______________________________________________________________________A235. . 6,326 M.6.a4
b. Floating rate time deposits of $100,000 or more with a repricing frequency of:
(1) Quarterly or more frequently_________________________________________________________A236. . 0 M.6.b1
(2) Annually or more frequently, but less frequently than quarterly______________________A237. . 0 M.6.b2
(3) Every five years or more frequently, but less frequently annually____________________A238. . 0 M.6.b3
(4) Less frequently than every five years________________________________________________A239. . 0 M.6.b4
c. Floating rate time deposits of $100,000 or more with a remaining maturity of
one year or less (included in Memorandum items 6.b.(1) through 6.b.(4) above)____________A240. . 0 M.6.c
</TABLE>
- --------
(1) Memorandum items 5 and 6 are not applicable to savings banks that must
complete supplemental Schedule RC-J.
<PAGE>
<TABLE>
<S> <C> <C> <C>
Norwest Bank Minnesota, N.A. Call Date: 03/31/96 ST-BK: 27-4095 FFIEC 031
Sixth Street and Marquette Avenue Page RC - 1
Minneapolis, MN 55479 Vendor ID: D CERT: 05208 21
Transit Number: 91000019
</TABLE>
Schedule RC-E - Continued
Part II. Deposits in Foreign Offices (including Edge and
Agreement subsidiaries and IBFs)
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Deposits of : RCFN
____
1. Individuals, partnerships, and corporations______________________________________________________2621. . 354,003 1.
2. U.S. banks (including IBFs and foreign branches of U.S. banks)___________________________________2623. . 767,632 2.
3. Foreign banks (including U.S. branches and agencies of foreign banks,
including their IBFs)____________________________________________________________________________2625. . 31,449 3.
4. Foreign governments and official institutions (including foreign central banks)__________________2650. . 0 4.
5. Certified and official checks____________________________________________________________________2330. . 82 5.
6. All other deposits_______________________________________________________________________________2668. . 472 6.
7. Total (sum of items 1 through 6) (must equal Schedule RC, item 13.b)_____________________________2200. . 1,153,638 7.
</TABLE>
Memorandum
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
RCFN
----
1. Time deposits with a remaining maturity of one year or less (included in Part II,
item 7 above)___________________________________________________________________________________A245. . 1,096,600 M.1
</TABLE>
Schedule RC-F - Other Assets
<TABLE>
<CAPTION>
C430 (-
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
RCFD
----
1. Income earned, not collected on loans___________________________________________________________2164. . 52,572 1.
2. Net deferred tax assets (1)_____________________________________________________________________2148. . 0 2.
3. Excess residential mortgage servicing fees receivable___________________________________________5371. . 0 3.
4. Other (itemize and describe amounts that exceed 25% of this item)_______________________________2168. . 189,390 4.
TEXT RCFD
---- ----
a. 3549: ____________________________________________ 3549 . . N/A . . . . . . 4.a
b. 3550: ____________________________________________ 3550 . . N/A . . . . . . 4.b
c. 3551: ____________________________________________ 3551 . . N/A . . . . . . 4.c
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 11)______________________________2160. . 241,962 5.
</TABLE>
Memorandum
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
RCFD
----
1. Deferred tax assets disallowed for regulatory capital purposes__________________________________5610. . 0 M.1
</TABLE>
Schedule RC-G - Other Liabilities
<TABLE>
<CAPTION>
C435 (-
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
RCON
----
1. a. Interest accrued and unpaid on deposits in domestic offices (2)_____________________________3645. . 29,080 1.a
RCFD
----
1. b. Other expenses accrued and unpaid (includes accrued
income taxes payable)_______________________________________________________________________3646. . 292,093 1.b
2. Net deferred tax liabilities (1)________________________________________________________________3049. . 124,500 2.
3. Minority interest in consolidated subsidiaries__________________________________________________3000. . 1,049 3.
4. Other (itemize and describe amounts that exceed 25% of this item)_______________________________2938. . 20,441 4.
TEXT RCFD
---- ----
a. 3552: Unearned Income
___________________________________________ 3552. . 12,645 . . . . . . 4.a
b. 3553: ___________________________________________ 3553. . N/A . . . . . . 4.b
c. 3554: ___________________________________________ 3554. . N/A . . . . . . 4.c
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 20)______________________________2930. . 467,163 5.
_______________
(1) See discussion of deferred income taxes in Glossary entry on "income taxes."
(2) For savings banks, include "dividends" accrued and unpaid on deposits.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Norwest Bank Minnesota, N.A. Call Date: 03/31/96 ST-BK: 27-4095 FFIEC 031
Sixth Street and Marquette Avenue Page RC - 12
Minneapolis, MN 55479 Vendor ID: D CERT: 05208 22
Transit Number: 91000019
</TABLE>
Schedule RC-H - Selected Balance Sheet Items for Domestic Offices
C440 (-
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic Offices
--------------------
RCON
----
1. Customers' liability to this bank on acceptances outstanding____________________________________2155.. 13,761 1.
2. Bank's liability on acceptances executed and outstanding________________________________________2920.. 13,761 2.
3. Federal funds sold and securities purchased under agreements to resell__________________________1350.. 5,016,516 3.
4. Federal funds purchased and securities sold under agreements to repurchase______________________2800.. 3,362,357 4.
5. Other borrowed money____________________________________________________________________________3190.. 2,369,272 5.
EITHER
6. Net due from own foreign offices, Edge and Agreement subsidiaries, and IBFs_____________________2163.. N/A 6.
OR
7. Net due to own foreign offices, Edge and Agreement subsidiaries, and IBFs_______________________2941.. 972,744 7.
8. Total assets (excludes net due from foreign offices, Edge and Agreement subsidiaries, and
IBFs)___________________________________________________________________________________________2192.. 16,387,885 8.
9. Total liabilities (excludes net due to foreign offices, Edge and Agreement subsidiaries, and
IBFs)___________________________________________________________________________________________3129.. 14,279,942 9.
Items 10-17 include held-to-maturity and available-for-sale securities in domestic offices.
10. U.S. Treasury securities________________________________________________________________________1779.. 286,976 10.
11. U.S. Government agency and corporation obligations (excludes mortgage-backed securities)________1785.. 11,678 11.
12. Securities issued by states and political subdivisions in the U.S.______________________________1786.. 109,119 12.
13. Mortgage-backed securities (MBS):
a. Pass-through securities:
(1) Issued or guaranteed by FNMA, FHLMC, or GNMA____________________________________________1787.. 520,783 13.a.1
(2) Other pass-through securities___________________________________________________________1869.. 0 13.a.2
b. Other mortgage-backed securities (including CMOs, REMICs, and stripped MBS):
(1) Issued or guaranteed by FNMA, FHLMC, or GNMA____________________________________________1877.. 26,341 13.b.1
(2) Other pass-through securities___________________________________________________________2253.. 108 13.b.2
14. Other domestic debt securities__________________________________________________________________3159.. 2,207 14.
15. Foreign debt securities_________________________________________________________________________3160.. 0 15.
16. Equity securities:
a. Investments in mutual funds_________________________________________________________________3161.. 143 16.a
b. Other equity securities with readily determinable fair values_______________________________3162.. 0 16.b
c. All other equity securities_________________________________________________________________3169.. 291,407 16.c
17. Total held-to-maturity and available-for-sale securities (sum of items 10 through 16)___________3170.. 1,248,762 17.
Memorandum (to be completed only by banks with IBFs and other "foreign" offices)
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
EITHER
1. Net due from the IBF of the domestic offices of the reporting bank______________________________3051.. N/A M.1
OR
2. Net due to the IBF of the domestic offices of the reporting bank________________________________3059.. 0 M.2
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Norwest Bank Minnesota, N.A. Call Date: 03/31/96 ST-BK: 27-4095 FFIEC 031
Sixth Street and Marquette Avenue Page RC- 13
Minneapolis, MN 55479 Vendor ID: D CERT: 05208 23
Transit Number: 91000019
</TABLE>
Schedule RC-I - Selected Assets and Liabilities of IBFs
To be completed only by banks with IBFs and other "foreign" offices.
<TABLE>
<CAPTION>
C 445 (-
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
RCFN
----
1. Total IBF assets of the consolidated bank (component of Schedule RC, item 12)___________________2133.. N/A 1.
2. Total IBF loans and lease financing receivables (component of Schedule RC-C, part 1,
item 12, column A)______________________________________________________________________________2076.. N/A 2.
3. IBF commercial and industrial loans (component of Schedule RC-C, part I, item 4,
column A)_______________________________________________________________________________________2077.. N/A 3.
4. Total IBF liabilities (component of Schedule RC, item 21)_______________________________________2898.. N/A 4.
5. IBF deposit liabilities due to banks, including other IBFs (component of Schedule
RC-E, part II, items 2 and 3)___________________________________________________________________2379.. N/A 5.
6. Other IBF deposit liabilities (component of Schedule RC-E, part II, items 1, 4, 5,
and 6)__________________________________________________________________________________________2381.. N/A 6.
Schedule RC-K - Quarterly Averages (1)
C455 (-
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS RCFD
----
1. Interest-bearing balances due from depository institutions_______________________________________3381.. 5,998 1.
2. U.S. Treasury securities and U.S. Government agency and corporation obligations(2)_______________3382.. 1,001,802 2.
3. Securities issued by states and political subdivisions in the U.S.(2)____________________________3383.. 103,328 3.
4. a. Other debt securities(2)______________________________________________________________________3647.. 17,456 4.a
b. Equity securities (3) (includes investments in mutual funds and Federal Reserve stock)________3648.. 272,439 4.b
5. Federal funds sold and securities purchased under agreements to resell in domestic
offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs______________________3365.. 4,677,186 5.
6. Loans:
a. Loans in domestic offices: RCON
----
(1) Total loans_______________________________________________________________________________3360.. 9,994,223 6.a.1
(2) Loans secured by real estate______________________________________________________________3385.. 4,398,072 6.a.2
(3) Loans to finance agricultural production and other loans to farmers_______________________3386.. 18,110 6.a.3
(4) Commercial and industrial loans___________________________________________________________3387.. 3,607,561 6.a.4
(5) Loans to individuals for household, family, and other personal expenditures_______________3388.. 1,024,361 6.a.5
RCFN
b. Total loans in foreign offices, Edge and Agreement subsidiaries, ----
and IBFs_______________________________________________________________________________________3360.. 130,108 6.b
RCFD
7. Trading ----
assets___________________________________________________________________________________________3401.. 134,219 7.
8. Lease financing receivables (net of unearned income)_____________________________________________3484.. 651,401 8.
9. Total assets(4)__________________________________________________________________________________3468.. 17,547,871 9.
LIABILITIES
10. Interest-bearing transaction accounts in domestic offices (NOW accounts, ATS RCON
accounts, and telephone and preauthorized transfer accounts) (exclude demand ----
deposits)_______________________________________________________________________________________3485.. 1,004,412 10.
11. Nontransaction accounts in domestic offices:
a. Money market deposit accounts (MMDAs)________________________________________________________3486.. 1,697,619 11.a
b. Other savings deposits_______________________________________________________________________3487.. 418,939 11.b
c. Time certificates of deposit of $100,000 or more_____________________________________________3345.. 172,740 11.c
d. All other time deposits______________________________________________________________________3469.. 1,917,949 11.d
RCFN
12. Interest-bearing deposits in foreign offices, Edge and Agreement ----
subsidiaries, and IBFs__________________________________________________________________________3404.. 619,999 12.
RCFD
13. Federal funds purchased and securities sold under agreements to repurchase in ----
domestic offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs____________3353.. 4,694,049 13.
14. Other borrowed money____________________________________________________________________________3355.. 2,498,775 14.
</TABLE>
______________
(1) For all items, banks have the option of reporting either (1) an average of
daily figures for the quarter, or (2) an average of weekly figures
(i.e., the Wednesday of each week of the quarter).
(2) Quarterly averages for all debt securities should be based on amortized
cost.
(3) Quarterly averages for all equity securities should be based on historical
cost.
(4) The quarterly average for total assets should reflect all debt securities
(not held for trading) at amortized cost, equity securities with readily
determinable fair values at the lower of cost or fair value, and equity
securities without readily determinable fair values at historical cost.
<PAGE>
<TABLE>
<S> <C> <C> <C>
Norwest Bank Minnesota, N.A. Call Date: 03/31/96 ST-BK: 27-4095 FFIEC 031
Sixth Street and Marquette Avenue Page RI - 14
Minneapolis, MN 55479 Vendor ID: D CERT: 05208 24
Transit Number: 91000019
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-L - Off-Balance Sheet Items
Please read carefully the instructions for the preparation of Schedule RC-L. Some of the amounts reported
in Schedule RC-L are regarded as volume indicators and not necessarily as measures of risk.
C460 ( -
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
RCFD
----
1. Unused commitments:
a. Revolving, open-end lines secured by 1-4 family residential properties,
e.g., home equity lines_______________________________________________________3814. . 158,989 1.a
b. Credit card lines_____________________________________________________________3815. . 0 1.b
c. Commercial real estate, construction, and land development:
(1) Commitments to fund loans secured by real estate__________________________3816. . 43,972 1.c.1
(2) Commitments to fund loans not secured by real estate______________________6550. . 38 1.c.2
d. Securities underwriting_______________________________________________________3817. . 0 1.d
e. Other unused commitments______________________________________________________3818. . 3,576,381 1.e
2. Financial standby letters of credit and foreign office guarantees________________3819. . 723,895 2.
a. Amount of financial standby letter of credit RCFD
----
conveyed to others________________________________3820. . 286,936 . . . . . . . 2.a
3. Performance standby letters of credit and foreign office guarantees______________3821. . 67,278 3.
a. Amount of performance standby letters of credit RCFD
----
conveyed to others________________________________3822. . 18,113 . . . . . . . 3.a
4. Commercial and similar letters of credit_________________________________________3411. . 404,317 4.
5. Participations in acceptances (as described in the instructions) conveyed to others
by the reporting bank____________________________________________________________3428. . 0 5.
6. Participations in acceptances (as described in the instructions) acquired by the
(nonaccepting) bank______________________________________________________________3429. . 0 6.
7. Securities borrowed______________________________________________________________3432. . 3,027,443 7.
8. Securities lent (including customers' securities lent where the customer is
indemnified against loss by the reporting bank)__________________________________3433. . 207,795 8.
9. Loans transferred (i.e., sold or swapped) with recourse that have been treated
as sold for Call Report purposes:
a. FNMA and FHLMC residential mortgage loan pools:
(1) Outstanding principal balance of mortgages transferred as of the
report date_______________________________________________________________3650. . 25,817 9.a.1
(2) Amount of recourse exposure on these mortgages as of the report date______3651. . 25,817 9.a.2
b. Private (nongoverment-issued or -guaranteed) residential mortgage loan pools:
(1) Outstanding principal balance of mortgages transferred as of the report
date______________________________________________________________________3652. . 0 9.b.1
(2) Amount of recourse exposure on these mortgages as of the report date______3653. . 0 9.b.2
c. Farmer Mac agricultural mortgage loan pools:
(1) Outstanding principal balance of mortgages transferred as of the report
date______________________________________________________________________3654. . 0 9.c.1
(2) Amount of recourse exposure on these mortgages as of the report date______3655. . 0 9.c.2
d. Small business obligations transferred with recourse under Section 208 of the
Riegle Community Development and Regulatory Improvement Act of 1994:
(1) Outstanding principal balance of small business obligations transferred as
of the report date________________________________________________________A249. . 0 9.d.1
(2) Amount of retained recourse on these obligations as of the report date____A250. . 0 9.d.2
10. When-issued securities:
a. Gross commitments to purchase_________________________________________________3434. . 0 10.a
b. Gross commitments to sell_____________________________________________________3435. . 0 10.b
11. Spot foreign exchange contracts__________________________________________________8765. . 320,819 11.
12. All other off-balance sheet liabilities (exclude off-balance sheet derivatives)
(itemize and describe each component of this item over 25% of Schedule RC,
item 28, "Total equity capital")_________________________________________________3430. . 0 12.
TEXT RCFD
---- ----
a. 3555:______________________________________________3555. . N/A . . . . . . . . . 12.a
b. 3556:______________________________________________3556. . N/A . . . . . . . . . 12.b
c. 3557:______________________________________________3557. . N/A . . . . . . . . . 12.c
d. 3558:______________________________________________3558. . N/A . . . . . . . . . 12.d
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Norwest Bank Minnesota, N.A. Call Date: 03/31/96 ST-BK: 27-4095 FFIEC 031
Sixth Street and Marquette Avenue Page RC - 15
Minneapolis, MN 55479 Vendor ID: D CERT: 05208 25
Transit Number: 91000019
</TABLE>
Schedule RC-L - Continued
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
13. All other off-balance sheet assets (exclude off-balance sheet derivatives)
(itemize and describe each component of this item over 25% of Schedule RC,
item 28, "Total equity capital")________________________________________________5591. . 0 13.
TEXT RCON
---- ----
a. 5592: _______________________________________________5592. . N/A . . . . . . 13.a
b. 5593: _______________________________________________5593. . N/A . . . . . . 13.b
c. 5594: _______________________________________________5594. . N/A . . . . . . 13.c
d. 5595: _______________________________________________5595. . N/A . . . . . . 13.d
</TABLE>
<TABLE>
<CAPTION>
C461 (-
Dollar Amounts in Thousands
- ---------------------------------------------------------------------------------------------------------------------------------
(Column A) (Column B) (Column C) (Column D)
Off-balance Sheet Equity Commodity
Derivatives Interest Rate Foreign Exchange Derivative And Other
Position Indicators Contracts Contracts Contracts Contracts
- ------------------------------------------------------ -------------------- -------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
14. Gross amounts (e.g.,
notional amounts)(for
each column, sum of
items 14.a through 14.e
must equal sum of items
15, 16.a, and 16.b):
a. Futures contracts__ 249,100 1,000 0 0 14.a
RCFD 8693 RCFD 8694 RCFD 8695 RCFD 8696
b. Forward contracts__ 0 358,121 0 0 14.b
RCFD 8697 RCFD 8698 RCFD 8699 RCFD 8700
c. Exchange-traded
option contracts:
(1) Written
options________ 0 0 0 0 14.c1
RCFD 8701 RCFD 8702 RCFD 8703 RCFD 8704
(2) Purchased
options________ 0 0 0 0
RCFD 8705 RCFD 8706 RCFD 8707 RCFD 8708 14.c2
d. Over-the-counter
option contracts:
(1) Written
options________ 1,017,628 50,131 0 0 14.d1
RCFD 8709 RCFD 8710 RCFD 8711 RCFD 8712
(2) Purchased
options________ 598,342 25,617 0 0 14.d2
RCFD 8713 RCFD 8714 RCFD 8715 RCFD 8716
e. Swaps______________ 4,323,376 55,108 0 0 14.e
RCFD 3450 RCFD 3826 RCFD 8719 RCFD 8720
15. Total gross notional
amount of derivative
contracts held for
trading_______________ 3,315,446 485,758 0 0 15.
RCFD A126 RCFD A127 RCFD 8723 RCFD 8724
16. Total gross notional
amount of derivative
contracts held for
purposes other than
trading:
a. Contracts marked
to market__________ 0 4,219 0 0 16.a
RCFD 8725 RCFD 8726 RCFD 8727 RCFD 8728
b. Contracts not
marked to market___ 2,918,000 0 0 0 16.b
RCFD 8729 RCFD 8730 RCFD 8731 RCFD 8732
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Norwest Bank Minnesota, N.A. Call Date: 03/31/96 ST-BK: 27-4095 FFIEC 031
Sixth Street and Marquette Avenue Page RC - 16
Minneapolis, MN 55479 Vendor ID: D CERT: 05208 26
Transit Number: 91000019
</TABLE>
Schedule RC-L - Continued
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
(Column A) (Column B) (Column C) (Column D)
Off Balance Sheet Equity Commodity
Derivatives Position Interest Rate Foreign Exchange Derivative And Other
Indicators Contracts Contracts Contracts Contracts
____________________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
X. Gross fair
values of
derivative
contracts:
a. Contracts
held for
trading: RCFD RCFD RCFD RCFD
---- ---- ---- ----
(1) Gross
positive
fair
value___________8733.. 7,124 8734.. 3,826 8735.. 0 8736.. 0 17.a1
(2) Gross
negative
fair
value___________8737.. 6,287 8738.. 4,312 8739.. 0 8740.. 0 17.a2
b. Contracts
held for
purposes
other than
trading that
are marked to
market:
(1) Gross
positive
fair
value___________8741.. 0 8742.. 0 8743.. 0 8744.. 0 17.b1
(2) Gross
negative
fair
value___________8745.. 0 8746.. 0 8747.. 0 8748.. 0 17.b2
c. Contracts
held for
purposes
other than
trading that
are not
marked
to market:
(1) Gross
positive
fair
value___________8749.. 11,495 8750.. 0 8751.. 0 8752.. 0 17.c1
(2) Gross
negative
fair
value___________8753.. 34,370 8754.. 0 8755.. 0 8756.. 0 17.c2
</TABLE>
Memoranda
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
RCFD
----
1.-2. Not applicable_______________________________________________________________________________ . . . . . . .
3. Unused commitments with an original maturity exceeding one year that are reported
in Schedule RC-L, items 1.a through 1.e above (report only the unused portions of
commitments that are fee paid or otherwise legally binding)_____________________________________3833. . 3,336,356 M.3
RCFD
a. Participations in commitments with an original ----
maturity exceeding one year conveyed to others______3834. . 58,699 . . . . . . . M.3a
4. To be completed only by banks with $1 billion or more in total assets:
Standby letters of credit and foreign office guarantees (both financial and
performance) issued to non-U.S. addressees (domicile) included in Schedule RC-L,
items 2 and 3, above____________________________________________________________________________3377. . 150 M.4
5. Installment loans to individuals for household, family, and other personal
expenditures that have been securitized and sold without recourse (with servicing
retained), amounts outstanding by type of loan:
a. Loans to purchase private passenger automobiles (to be completed for the September
report only)_________________________________________________________________________________2741. . N/A M.5.a
b. Credit cards and related plans (TO BE COMPLETED QUARTERLY)___________________________________2742. . 0 M.5.b
c. All other consumer installment credit (including mobile home loans) (to be completed
for the September report only)_______________________________________________________________2743. . N/A M.5.c
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Norwest Bank Minnesota, N.A. Call Date: 03/31/96 ST-BK: 27-4095 FFIEC 031
Sixth Street and Marquette Avenue Page RC - 17
Minneapolis, MN 55479 Vendor ID: D CERT: 05208 27
Transit Number: 91000019
</TABLE>
Schedule RC - M - Memoranda
<TABLE>
<CAPTION>
C465
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Extensions of credit by the reporting bank to its executive officers, directors,
principal shareholders, and their related interests as of the report date:
a. Aggregate amount of all extensions of credit to all executive officers, directors, RCFD
----
principal shareholders, and their related interests_________________________________________6164. . 35,324 1.a
b. Number of executive officers, directors, and principal
shareholders to whom the amount of all extensions of
credit by the reporting bank (including extensions of
credit to related interest) equals or exceeds the
lesser of $500,000 or 5 percent of total capital RCFD Number
---- ------
as defined for this purpose in agency regulations____6165 6 . . . . . 1.b
2. Federal funds sold and securities purchased under agreements to resell with U.S.
branches and agencies of foreign banks (1) (included in Schedule RC,
items 3.a and 3.b)______________________________________________________________________________3405. . 0 2.
3. Not applicable.
4. Outstanding principal balance of 1-4 family residential mortgage loans serviced for
others (include both retained servicing and purchased servicing):
a. Mortgages serviced under a GNMA contract____________________________________________________5500. . 0 4.a
b. Mortgage serviced under a FHLMC contract:
(1) Serviced with recourse to servicer______________________________________________________5501. . 0 4.b.1
(2) Serviced without recourse to servicer___________________________________________________5502. . 0 4.b.2
c. Mortgage serviced under a FNMA contract:
(1) Serviced under a regular option contract________________________________________________5503. . 0 4.c.1
(2) Serviced under a special option contract________________________________________________5504. . 0 4.c.2
d. Mortgage serviced under other servicing contracts___________________________________________5505. . 0 4.d
5. To be completed only by banks with $1 billion or more in total assets:
Customers' liability to this bank on acceptances outstanding (sum of items 5.a and 5.b
must equal Schedule RC, item 9):
a. U.S. addressees (domicile)__________________________________________________________________2103. . 19,935 5.a
b. Non-U.S. addressees (domicile)______________________________________________________________2104. . 6,559 5.b
6. Intangible assets:
a. Mortgage servicing rights___________________________________________________________________3164. . 0 6.a
b. Other identifiable intangible assets:
(1) Purchased credit card relationships_____________________________________________________5506. . 0 6.b.1
(2) All other identifiable intangible assets________________________________________________5507. . 491 6.b.2
c. Goodwill____________________________________________________________________________________3163. . 12,126 6.c
d. Total (sum of items 6.a through 6.c) (must equal Schedule RC, item 10)______________________2143. . 12,617 6.d
e. Amount of intangible assets (included in item 6.b.(2) above) that have been
grandfathered or are otherwise qualifying for regulatory capital purposes___________________6442. . 0 6.e
7. Mandatory convertible debt, net of common or perpetual preferred stock dedicated to
redeem the debt_________________________________________________________________________________3295. . 0 7.
</TABLE>
______________
(1) Do not report federal funds sold and securities purchased under agreements
to resell with other commercial banks in the U.S. in this item.
<PAGE>
<TABLE>
<S> <C> <C> <C>
Norwest Bank Minnesota, N.A. Call Date: 03/31/96 ST-BK: 27-4095 FFIEC 031
Sixth Street and Marquette Avenue Page RC- 18
Minneapolis, MN 55479 Vendor ID: D CERT: 05208 28
Transit Number: 91000019
</TABLE>
Schedule RC-M - Continued
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
RCFD
8. a. Other real estate owned: ----
(1) Direct and indirect investments in real estate ventures_________________________________5372. . 0 8.a.1
RCON
(2) All other real estate owned: ----
(a) Construction and land development in domestic offices_______________________________5508. . 0 8.a.2a
(b) Farmland in domestic offices________________________________________________________5509. . 0 8.a.2b
(c) 1-4 family residential properties in domestic offices_______________________________5510. . 3,327 8.a.2c
(d) Multifamily (5 or more) residential properties in domestic offices__________________5511. . 0 8.a.2d
(e) Nonfarm nonresidential properties in domestic offices_______________________________5512. . 180 8.a.2e
RCFN
(f) In foreign ----
offices_____________________________________________________________________________5513. . 0 8.a.2f
RCFD
(3) Total (sum of items 8.a.(1) and 8.a.(2)) ----
(must equal Schedule RC, item 7)________________________________________________________2150. . 3,507 8.a.3
b. Investments in unconsolidated subsidiaries and associated companies:
(1) Direct and indirect investments in real estate ventures_________________________________5374. . 0 8.b.1
(2) All other investments in unconsolidated subsidiaries and associated companies___________5375. . 0 8.b.2
(3) Total (sum of items 8.b.(1) and 8.b.(2)) (must equal Schedule RC, item 8)_______________2130. . 0 8.b.3
c. Total assets of unconsolidated subsidiaries and associate companies_________________________5376. . 0 8.c
9. Noncumulative perpetual preferred stock and related surplus included in Schedule RC,
item 23, "Perpetual preferred stock and related surplus"________________________________________3778. . 0 9.
10. Mutual fund and annuity sale in domestic offices during the quarter (include
proprietary, private label, and third party mutual funds):
RCON
----
a. Money market funds__________________________________________________________________________6441. . 3,324,154 10.a
b. Equity securities funds_____________________________________________________________________8427. . 0 10.b
c. Debt securities funds_______________________________________________________________________8428. . 0 10.c
d. Other mutual funds__________________________________________________________________________8429. . 31,178 10.d
e. Annuities___________________________________________________________________________________8430. . 12,612 10.e
f. Sales of proprietary mutual funds and annuities (included in items 10.a through
10.e above)_________________________________________________________________________________8784. . 2,933,010 10.f
</TABLE>
Memorandum
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Interbank holdings of capital instruments (to be completed for the December report only):
RCFD
----
a. Reciprocal holdings of banking organizations' capital instruments_________________3836. . N/A M.1.a
b. Nonreciprocal holdings of banking organizations' capital instruments______________3837. . N/A M.1.b
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Norwest Bank Minnesota, N.A. Call Date: 03/31/96 ST-BK: 27-4095 FFIEC 031
Sixth Street and Marquette Avenue Page RC - 19
Minneapolis, MN 55479 Vendor ID: D CERT: 05208 29
Transit Number: 91000019
</TABLE>
Schedule RC-N - Past Due and Nonaccrual Loans, Leases, and Other Assets
The FFIEC regards the information reported in all of Memorandum item 1, in
items 1 through 10, column A, and in Memorandum items 2 through 4, column A,
as confidential.
<TABLE>
<CAPTION> C470 (-
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
--------(Column A)-------- -------(Column B)------- --(Column C)---
Past due 30 through 89 Past due 90 days or more Nonaccrual
days and still accruing and still accruing
-------------------------- ------------------------ ---------------
RCFD RCFD RCFD
---- ---- ----
1. Loans secured by real estate:
a. To U.S. addressees (domicile)_____________ 1245.. 14,529 1246.. 2,904 1247.. 10,623 1.a
b. To non-U.S. addressees (domicile)_________ 1248.. 0 1249.. 0 1250.. 0 1.b
2. Loans to depository institutions and
acceptances of other banks:
a. To U.S. banks and other U.S.
depository institutions___________________ 5377.. 0 5378.. 0 5379.. 0 2.a
b. To foreign banks__________________________ 5380.. 0 5381.. 0 5382.. 0 2.b
3. Loans to finance agricultural production
and other loans to farmers___________________ 1594.. 0 1597.. 2 1583.. 0 3.
4. Commercial and industrial loans:
a. To U.S. addressees (domicile)_____________ 1251.. 51,906 1252.. 0 1253.. 15,562 4.a
b. To non-U.S. addressees (domicile)_________ 1254.. 0 1255.. 0 1256.. 0 4.b
5. Loans to individuals for household,
family, and other personal expenditures:
a. Credit cards and related plans____________ 5383.. 288 5384.. 895 5385.. 0 5.a
b. Other (includes single payment,
installment, and all student loans)_______ 5386.. 7,182 5387.. 1,193 5388.. 98 5.b
6. Loans to foreign governments and
official institutions________________________ 5389.. 0 5390.. 0 5391.. 0 6.
7. All other loans______________________________ 5459.. 387 5460.. 38 5461.. 7,911 7.
8. Lease financing receivables:
a. Of U.S. addressees (domicile)_____________ 1257.. 0 1258.. 0 1259.. 14,576 8.a
b. Of non-U.S. addressees (domicile)_________ 1271.. 0 1272.. 0 1791.. 0 8.b
9. Debt securities and other assets (exclude
other real estate owned and other
repossessed assets)__________________________ 3505.. 0 3506.. 0 3507.. 0 9.
====================================================================================================================================
</TABLE>
Amounts reported in items 1 through 8 above include guaranteed portions of past
due and nonaccrual loans and leases. Report in item 10 below certain guaranteed
loans and leases that have already been included in the amounts reported in
items 1 through 8.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
10. Loans and leases reported in items 1
through 8 above which are wholly or RCFD RCFD RCFD
partially guaranteed by the U.S. ---- ---- ----
Government___________________________________ 5612.. 683 5613.. 50 5614.. 507 10.
a. Guaranteed portion of loans and leases
included in item 10 above_________________ 5615.. 559 5616.. 48 5617.. 328 10.a
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Norwest Bank Minnesota, N.A. Call Date: 03/31/96 ST-BK: 27-4095 FFIEC 031
Sixth Street and Marquette Avenue Page RC - 20
Minneapolis, MN 55479 Vendor ID: D CERT: 05208 30
</TABLE>
Transit Number: 91000019
Schedule RC-N - Continued
<TABLE>
<CAPTION>
Memoranda C473 (-
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
-------(Column A)-------- --------(Column B)-------- --------(Column C)-------
Past due 30 through 89 Past due 90 days or more Nonaccrual
days and still accruing and still accruing
------------------------- -------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
1. Restructured Loans and Leases included in
Schedule RC-N, items 1 through 8, above RCFD RCFD RCFD
(and not reported in Schedule RC-C, ---- ---- ----
Part I, Memorandum item 2)_______________________1658.. 0 1659.. 0 1661.. 0 M.1
2. Loans to finance commercial real estate,
construction, and land development
activities (not secured by real estate)
included in Schedule RC-N, items 4 and
7, above_________________________________________6558.. 0 6559.. 0 6560.. 0 M.2
3. Loans secured by real estate in domestic
offices (included in Schedule RC-N, item RCON RCON RCON
1, above): ---- ---- ----
a. Construction and land development_____________2759.. 0 2769.. 0 3492.. 145 M.3a
b. Secured by farmland___________________________3493.. 89 3494.. 0 3495.. 0 M.3b
c. Secured by 1-4 family residential
properties:
(1) Revolving, open-end loans secured
by 1-4 family residential properties
and extended under lines of credit________5398.. 0 5399.. 146 5400.. 0 M.3c1
(2) All other loans secured by 1-4
family residential properties_____________5401.. 12,476 5402.. 2,758 5403.. 7,161 M.3c2
d. Secured by multifamily (5 or more)
residential properties________________________3499.. 0 3500.. 0 3501.. 1,168 M.3d
e. Secured by nonfarm nonresidential
properties____________________________________3502.. 1,964 3503.. 0 3504.. 2,149 M.3e
</TABLE>
<TABLE>
<CAPTION>
--------(Column A)-------- --------(Column B)--------
Past due 30 through 89 Past due 90 days or more
days
-------------------------- --------------------------
<S> <C> <C> <C> <C>
4. Interest rate, foreign exchange rate, and
other commodity and equity contracts: RCFD RCFD
a. Book value of amounts carried as ---- ----
assets________________________________________3522.. 0 3528.. 0 M.4.a
e. Replacement cost of contracts with a
positive replacement cost_____________________3529.. 0 3530.. 0 M.4.b
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Norwest Bank Minnesota, N.A. Call Date: 03/31/96 ST-BK: 27-4095 FFIEC 031
Sixth Street and Marquette Avenue Page RC- 21
Minneapolis, MN 55479 Vendor ID: D CERT: 05208 31
Transit Number: 91000019
Schedule RC-O - Other Data for Deposit Insurance Assessments
</TABLE>
<TABLE>
<CAPTION>
C475 (-)
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. Unposted debits (see instructions): RCON
----
a. Actual amount of all unposted debits____________________________________________0030.. N/A 1.a
OR
b. Separate amount of unposted debits:
(1) Actual amount of unposted debits to demand deposits_________________________0031.. 0 1.b1
(2) Actual amount of unposted debits to time and savings deposits (1)___________0032.. 0 1.b2
2. Unposted credits (see instructions):
a. Actual amount of all unposted credits___________________________________________3510.. N/A 2.a
OR
b. Separate amount of unposted credits:
(1) Actual amount of unposted credits to demand deposits________________________3512.. 0 2.b1
(2) Actual amount of unposted credits to time and savings deposits (1)__________3514.. 0 1.b2
3. Uninvested trust funds (cash) held in bank's own trust department (not included in
total deposits in domestic offices)________________________________________________3520.. 0 3.
4. Deposits of consolidated subsidiaries in domestic offices and in insured branches in
Puerto Rico and U.S. territories and possessions (not included in total deposits):
a. Demand deposits of consolidated subsidiaries____________________________________2211.. 17,265 4.a
b. Time and savings deposits (1) of consolidated subsidiaries______________________2351.. 0 4.b
c. Interest accrued and unpaid on deposits of consolidated subsidiaries____________5514.. 0 4.c
5. Deposits in insured branches in Puerto Rico and U.S. territories and possessions:
a. Demand deposits in insured branches (included in Schedule RC-E, part II)________2229.. 0 5.a
b. Time and savings deposits (1) in insured branches (included in Schedule RC-E,
part II)________________________________________________________________________2383.. 0 5.a
c. Interest accrued and unpaid on deposits in insured branches (included in
Schedule RC-G, item 1.b)________________________________________________________5515.. 0 5.c
Item 6 is not applicable to state nonmember banks that have not been authorized
by the Federal Reserve to act as pass-through correspondents.
6. Reserve balances actually passed through to the Federal Reserve by the
reporting bank on behalf of its respondent depository institutions that are
also reflected as deposit liabilities of the reporting bank: RCON
a. Amount reflected in demand deposits (included in Schedule RC-E, Part I, ----
Memorandum item 4.a)____________________________________________________________2314.. 341 6.a
b. Amount reflected in time and savings deposits (1) (included in Schedule RC-E,
Part I, Memorandum item 4.b)____________________________________________________2315.. 0 6.b
7. Unamortized premiums and discounts on time and savings deposits:(1)
a. Unamortized premiums____________________________________________________________5516.. 59 7.a
b. Unamortized discounts___________________________________________________________5517.. 28,532 7.b
8. To be completed by banks with "Oakar deposits."
Total "Adjusted Attributable Deposits" of all institutions acquired under
Section 5(d)(3) of the Federal Deposit Insurance Act (from most recent FDIC Oakar
Transaction Worksheet(s))__________________________________________________________5518.. 2,403,177 8.
9. Deposits in lifeline accounts______________________________________________________ ......................... 9.
10.Benefit-responsive "Depository Institution Investment Contracts" (included in
total deposits in domestic offices)________________________________________________8432.. 0 10.
___________________
(1) For FDIC insurance assessment purposes, "time and savings deposits" consists of nontransaction accounts and all
transaction accounts other than demand deposits.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Norwest Bank Minnesota, N.A. Call Date: 03/31/96 ST-BK: 27-4095 FFIEC 031
Sixth Street and Marquette Avenue Page RC - 22
Minneapolis, MN 55479 Vendor ID: D CERT: 05208 32
Transit Number: 91000019
</TABLE>
Schedule RC-O - Continued
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
11. Adjustments to demand deposits reported in Schedule RC-E for certain reciprocal
demand balances:
a. Amount by which demand deposits would be reduced if reciprocal demand balances RCON
between the reporting bank and savings associations were reported on a net basis ----
rather than a gross basis in Schedule RC-E__________________________________________________8785 0 11.a
b. Amount by which demand deposits would be increased if reciprocal demand balances
between the reporting bank and U.S. branches and agencies of foreign banks were
reported on a gross basis rather than a net basis in Schedule RC-E__________________________A181 0 11.b
c. Amount by which demand deposits would be reduced if cash items in process of
collection were included in the calculation of net reciprocal demand balances
between the reporting bank and the domestic offices of U.S. banks and savings
associations in Schedule RC-E_______________________________________________________________A182 0 11.c
</TABLE>
Memoranda
<TABLE>
<CAPTION>
(to be completed each quarter except as noted) Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Total deposits in domestic offices of the bank
(sum of Memorandum items 1.a.(1) and 1.b.(1) must equal Schedule RC, item 13.a):
a. Deposit accounts of $100,000 or less___________________________________________RCON
----
(1) Amount of deposit accounts of $100,000 or less_____________________________2702. . 4,942,185 M.1a1
(2) Number of deposit accounts of $100,000 or less RCON Number
---- ------
(to be completed for the June report only)______3779. . N/A . . . . . M.1a2
b. Deposit accounts of more than $100,000:
(1) Amount of deposit accounts of more than $100,000___________________________2710. . 2,746,863 M.1b1
(2) Number of deposit accounts of more than RCON Number
---- ------
$100,000________________________________________2722. . 5,998 . . . . . M.1b2
2. Estimated amount of uninsured deposits in domestic offices of the bank:
a. An estimate of your bank's uninsured deposits can be determined by
multiplying the number of deposit accounts of more than $100,000 reported
in Memorandum item 1.b.(2) above by $100,000 and subtracting the result
from the amount of deposit accounts of more than $100,000 reported in
Memorandum item 1.b.(1) above.
Indicate in the appropriate box at the right whether your bank has a RCON YES NO
method or procedure for determining a better estimate of uninsured ----
deposits than the estimate described above_____________________________________6861. . X M.2.a
b. If the box marked YES has been checked, report the estimate of uninsured
deposits determined by using your bank's method or procedure___________________5597. . N/A M.2.b
C477
- ------------------------------------------------------------------------------------------------------------------------------------
Person to whom questions about the Reports of Condition and Income should be
directed:
</TABLE> 612 667 9895
Chris Hupp, SUPERVISOR REG REPORTING
- --------------------------------------------------------------------------------
Name and Title (TEXT) 8901) Area code/phone number/extension (TEXT 8902)
<PAGE>
<TABLE>
<S> <C> <C> <C>
Norwest Bank Minnesota, N.A. Call Date: 03/31/96 ST-BK: 27-4095 FFIEC 031
Sixth Street and Marquette Avenue Page RC - 23
Minneapolis, MN 55479 Vendor ID: D CERT: 05208 33
Transit Number: 91000019
</TABLE>
SCHEDULE RC-R - REGULATORY CAPITAL
This schedule must be completed by all banks as follows: Banks that reported
total assets of $1 billion or more in Schedule RC, item 12, for June 30, 1995,
must complete items 2 through 9 and memoranda items 1 and 2. Banks with assets
of less than $1 billion must complete items 1 through 3 below or Schedule RC-R
in its entirety, depending on their response to item 1 below.
<TABLE>
<S> <C>
1. Test for determining the extent to which Schedule RC-R must be completed. To C480
be completed only by banks with total assets of less than $1 billion. RCFD YES No
Indicate in the appropriate box at the right whether the bank has total ---- --- --
capital greater than or equal to eight percent of adjusted total assets________6056 N/A N/A 1.
</TABLE>
For purposes of this test, adjusted total assets equals total assets less
cash, U.S. Treasuries, U.S. Government agency obligations, and 80 percent of
U.S. Government-sponsored agency obligations plus the allowance for loan and
lease losses and selected off-balance sheet items as reported on Schedule
RC-L (see instructions).
If the box marked YES has been checked, then the bank only has to complete
items 2 and 3 below. If the box marked No has been checked, the bank must
complete the remainder of this schedule.
A NO response to item 1 does not necessarily mean that the bank's actual
risk-based capital ratio is less than eight percent or that the bank is not
in compliance with the risk-based capital guidelines.
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
(Column A) (Column B)
Subordinated Debt (1) and
Items 2 and 3 are to be completed by all banks. Intermediated Term Other Limited-Life
Preferred Stock Capital Instruments
------------------------- -------------------
<S> <C> <C>
2. Subordinated debt (1) and other Limited-Life capital
instruments (original weighted average maturity of at
least five years) with a remaining maturity of: RCFD RCFD
---- ----
a. One year or less______________________________________3780. . 1,508 3786. . 0 2.a
b. Over one year through two years_______________________3781. . 8 3787. . 0 2.b
c. Over two years through three years____________________3782. . 8 3788. . 0 2.c
d. Over three years through four years___________________3783. . 8 3789. . 0 2.d
e. Over four years through five years____________________3784. . 8 3790. . 0 2.e
f. Over five years_______________________________________3785. . 160,155 3791. . 0 2.f
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
3. Amounts used in calculating regulatory capital ratios
(report amounts determined by the bank for its own
internal regulatory capital analyses): RCFD
----
a. Tier 1 capital________________________________________8274. . 1,114,626 3.a
b. Tier 2 capital________________________________________8275. . 301,688 3.b
c. Total rick-based capital______________________________3792. . 1,416,314 3.c
d. Excess allowance for loan and lease losses____________A222. . 45,590 3.d
e. Risk-weighted assets__________________________________A223. . 11,275,633 3.e
f. "Average total assets"________________________________A224. . 17,534,721 3.f
Items 4-9 and Memoranda items 1 and 2 are to be completed
by banks that answered NO to item 1 above and by banks
with total assets of $1 billion or more.
</TABLE>
<TABLE>
<CAPTION>
(Column A) (Column B)
Assets Recorded on the Credit Equivalent Amount
Balance Sheet of Off-Balance Sheet Items(2)
---------------------- -----------------------------
<S> <C> <C>
4. Assets and credit equivalent amounts of off-balance
sheet items assigned to the Zero percent risk category:
a. Assets recorded on the balance sheet:
(1) Securities issued by, other claims on, and
claims unconditionally guaranteed by, the U.S.
Government and its agencies and other DECD RCFD RCFD
central governments______________________________ ---- ----
3794. . 556,001 . . . . . . . 4.a.1
(2) All other__________________________________________3795. . 182,772 . . . . . . . 4.a.2
b. Credit equivalent amount of off-balance sheet items____ . . . . . 3796. . 0 4.b
_____________
(1) Exclude mandatory convertible debt reported in Schedule RC-M, item 7.
(2) Do not report in column B the risk-weighted amount assets reported in column A.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Norwest Bank Minnesota, N.A. Call Date: 03/31/96 ST-BK: 27-4095 FFIEC 031
Sixth Street and Marquette Avenue Page RC - 24
Minneapolis, MN 55479 Vendor ID: D CERT: 05208 34
Transit Number: 91000019
SCHEDULE RC-R - Continued
</TABLE>
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
(Column A) (Column B)
Assets Recorded on the Credit Equivalent Amount
Balance Sheet of Off-Balance Sheet Items (1)
---------------------- ------------------------------
<S> <C> <C> <C> <C> <C>
5. Assets and credit equivalent amounts of off-balance sheet items
assigned to the 20 percent risk category:
a. Assets recorded on the balance sheet:
(1) Claims conditionally guaranteed by the U.S. Government RCFD RCFD
and its agencies and other OECD central governments______________3798.. 769,044 ............ 5.a.1
(2) Claims collateralized by securities issued by the U.S.
Government and its agencies and other OECD central governments;
by securities issued by U.S. Government-sponsored agencies;
and by cash on deposit___________________________________________3799.. 0 ............ 5.a.2
(3) All other________________________________________________________3800.. 6,597,084 ............ 5.a.3
b. Credit equivalent amount of off-balance sheet items__________________ ............ 3801.. 570,283 5.b
6. Assets and credit equivalent amounts of off-balance sheet items
assigned to the 50 percent risk category:
a. Assets recorded on the balance sheet_________________________________3802.. 2,024,083 ............ 6.a
b. Credit equivalent amount of off-balance sheet items__________________ ............ 3803.. 125,737 6.b
7. Assets and credit equivalent amounts of off-balance sheet items assigned
to the 100 percent risk category:
a. Assets recorded on the balance sheet_________________________________3804.. 6,583,563 ............ 7.a
b. Credit equivalent amount of off-balance sheet items__________________ ............ 3805.. 2,088,083 7.b
8. On-balance sheet assets values excluded from the calculation of
the risk-based capital ratio(2)_________________________________________3806.. 21,955 ............ 8.
9. Total assets recorded on the balance sheet (sum of items 4.a, 5.a, 6.a,
7.a, and 8, column A) (must equal Schedule RC, item 12 plus items 4.b
and 4.c)________________________________________________________________3807.. 16,734,502 ............ 9.
Memoranda Dollar Amounts in Thousands
- -----------------------------------------------------------------------------------------------------------------------------------
1. Current credit exposure across all off-balance sheet derivative RCFD
contracts covered by the risk-based capital standards___________________8764.. 22,275 M.1.
---------------------------------With a remaining maturity of---------------------------------
(Column A) (Column B) (Column C)
Over one year
One year or less through five years Over five years
----------------------------- ---------------------------- -----------------------------
2. Notional principal amounts
of off-balance sheet
derivative contracts:(3) RCFD RCFD RCFD
a. Interest rate contracts_____3809.. 2,190,447 8766.. 1,451,188 8767.. 570,083 M.2a
b. Foreign exchange
contracts___________________3812.. 395,100 8769.. 36,627 8770.. N/A M.2b
c. Gold contracts______________8771.. N/A 8772.. N/A 8773.. N/A M.2c
d. Other precious metals
contracts___________________8774.. N/A 8775.. N/A 8776.. N/A M.2d
e. Other commodity contracts___8777.. N/A 8778.. N/A 8779.. N/A M.2e
f. Equity derivative contracts_A000.. N/A A001.. N/A A002.. N/A M.2f
</TABLE>
________________
(1) Do not report in column B the risk-weighted amount of assets reported in
column A.
(2) Include the difference between the fair value and the amortized cost of
available-for-sale securities in item 8 and report the amortized cost of
these securities in items 4 through 7 above. Item 8 also includes on-balance
sheet asset values (or portions thereof) of off-balance sheet interest rate,
foreign exchange rate, and commodity contracts and those contracts (e.g.
future contracts) not subject to risk-based capital. Exclude from item 8
margin accounts and accrued receivables as well as any portion of the
allowance for loan and lease losses in excess of the amounts that may be
included in Tier 2 capital.
(3) Exclude foreign exchange contracts with an original maturity of 14 days or
less and all futures contracts.
<PAGE>
EXHIBIT 99.1
LETTER OF TRANSMITTAL
To Tender for Exchange
11 1/2% Series A Senior Notes due 2003
of
COBBLESTONE GOLF GROUP, INC.
Pursuant to the Prospectus dated , 1996
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW
YORK CITY TIME, ON , 1996 (THE "EXPIRATION DATE"), UNLESS THE
EXCHANGE OFFER IS EXTENDED BY THE COMPANY IN ITS SOLE DISCRETION, IN WHICH
CASE THE TERM "EXPIRATION DATE" SHALL MEAN THE LATEST DATE AND TIME TO
WHICH THE EXCHANGE OFFER IS EXTENDED. TENDERS MAY BE WITHDRAWN AT ANY TIME
PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
The Exchange Agent is:
Norwest Bank Minnesota, National Association
By Registered or Certified Mail: In Person:
Northstar East Bldg.
Norwest Bank Minnesota, 608 2nd Ave S.
National Association 12th Floor
Corporate Trust Operations Corporate Trust Ser.
P.O. Box 1517 Minneapolis, MN
Minneapolis, MN 55480-1517
By Hand or Overnight Courier: By Facsimile (for Eligible
Institutions only):
Norwest Bank Minnesota, (612) 667-4927
National Association
Corporate Trust Operations Confirm Receipt of Notice of
Norwest Center Guaranteed Delivery by Telephone:
Sixth and Marquette (612) 667-9764
Minneapolis, MN 55479-0113
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS SET FORTH IN THIS
LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF
TRANSMITTAL IS COMPLETED.
<PAGE>
The undersigned acknowledges receipt of the Prospectus dated , 1996 (the
"Prospectus"), of Cobblestone Golf Group, Inc., a Delaware corporation (the
"Company"), and this Letter of Transmittal (the "Letter of Transmittal"),
which together with the Prospectus constitutes the Company's offer (the
"Exchange Offer") to exchange $1,000 principal amount of its 11 1/2% Series B
Senior Notes due 2003 (the "Exchange Notes") for each $1,000 principal amount
of its outstanding 11 1/2% Series A Senior Notes due 2003 (the "Private
Notes"). Recipients of the Prospectus should read the requirements described
in such Prospectus with respect to eligibility to participate in the Exchange
Offer. Capitalized terms used but not defined herein have the meaning given to
them in the Prospectus.
The undersigned hereby tenders the Private Notes described in the box
entitled "Description of Private Notes" below pursuant to the terms and
conditions described in the Prospectus and this Letter of Transmittal. The
undersigned is the registered owner of all the Private Notes and the
undersigned represents that it has received from each beneficial owner of
Private Notes ("Beneficial Owners") a duly completed and executed form of
"Instruction to Registered Holder from Beneficial Owner" accompanying this
Letter of Transmittal, instructing the undersigned to take the action
described in this Letter of Transmittal.
This Letter of Transmittal is to be used by a holder of Private Notes (i) if
certificates representing Private Notes are to be forwarded herewith, (ii) if
delivery of Private Notes is to be made by book-entry transfer to the Exchange
Agent's account at The Depository Trust Company ("DTC"), pursuant to the
procedures set forth in the section of the Prospectus entitled "The Exchange
Offer--Procedures for Tendering," or (iii) if a tender is made pursuant to the
guaranteed delivery procedures in the section of the Prospectus entitled "The
Exchange Offer--Guaranteed Delivery Procedures."
The undersigned hereby represents and warrants that the information received
from the beneficial owners is accurately reflected in the boxes entitled
"Beneficial Owner(s)--Purchaser Status" and "Beneficial Owner(s)--Residence."
Any beneficial owner whose Private Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact such registered holder of Private Notes promptly and
instruct such registered holder of Private Notes to tender on behalf of the
beneficial owner. If such beneficial owner wishes to tender on its own behalf,
such beneficial owner must, prior to completing and executing this Letter of
Transmittal and delivering its Private Notes, either make appropriate
arrangements to register ownership of the Private Notes in such beneficial
owner's name or obtain a properly completed bond power from the registered
holder of Private Notes. The transfer of record ownership may take
considerable time.
In order to properly complete this Letter of Transmittal, a holder of
Private Notes must (i) complete the box entitled "Description of Private
Notes," (ii) complete the boxes entitled "Beneficial Owner(s)--Purchaser
Status" and "Beneficial Owner(s)--Residence", (iii) if appropriate, check and
complete the boxes relating to book-entry transfer, guaranteed delivery,
Special Issuance Instructions and Special Delivery Instructions, (iv) sign the
Letter of Transmittal by completing the box entitled "Sign Here" and (v)
complete the Substitute Form W-9. Each holder of Private Notes should
carefully read the detailed instructions below prior to completing the Letter
of Transmittal.
Holders of Private Notes who desire to tender their Private Notes for
exchange and (i) whose Private Notes are not immediately available or (ii) who
cannot deliver their Private Notes, this Letter of Transmittal and all other
documents required hereby to the Exchange Agent on or prior to the Expiration
Date, must tender the Private Notes pursuant to the guaranteed delivery
procedures set forth in the section of the Prospectus entitled "The Exchange
Offer--Guaranteed Delivery Procedures." See Instruction 2.
Holders of Private Notes who wish to tender their Private Notes for exchange
must complete columns (1) through (3) in the box below entitled "Description
of Private Notes," complete the boxes entitled and sign the box below entitled
"Sign Here." If only those columns are completed, such holder of Private Notes
will have tendered for exchange all Private Notes listed in column (3) below.
If the holder of Private Notes wishes to tender for exchange less than all of
such Private Notes, column (4) must be completed in full. In such case, such
holder of Private Notes should refer to Instruction 5.
<PAGE>
<TABLE>
DESCRIPTION OF PRIVATE NOTES
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
(1) (2) (3) (4)
PRINCIPAL
PRIVATE AMOUNT
NOTE AGGREGATE TENDERED
NAME(S) AND ADDRESS(ES) OF REGISTERED NUMBER(S) PRINCIPAL FOR EXCHANGE
HOLDER(S) OF PRIVATE NOTE(S), EXACTLY AS (ATTACH AMOUNT (MUST BE IN
NAME(S) SIGNED REPRESENTED INTEGRAL
APPEAR(S) ON PRIVATE NOTE CERTIFICATE(S) LIST IF BY MULTIPLES OF
(PLEASE FILL IN, IF BLANK) NECESSARY) CERTIFICATE(S)/1/ $1,000)/2/
- ------------------------------------------------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
</TABLE>
1. Unless indicated in the column "Principal Amount Tendered For Exchange,"
any tendering Holder of 11 1/2% Series A Senior Notes due 2003 will be
deemed to have tendered the entire aggregate principal amount represented
by the column labelled "Aggregate Principal Amount Represented by
Certificate(s)."
2. The minimum permitted tender is $1,000 in principal amount of 11 1/2%
Series A Senior Notes due 2003. All other tenders must be in integral
multiples of $1,000.
<PAGE>
[_]CHECK HERE IF TENDERED PRIVATE NOTES ARE ENCLOSED HEREWITH.
[_]CHECK HERE IF TENDERED PRIVATE NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND
COMPLETE THE FOLLOWING (FOR USE BY ELIGIBLE INSTITUTIONS (AS HEREINAFTER
DEFINED) ONLY):
Name of Tendering Institution: _____________________________________________
Account Number: ____________________________________________________________
Transaction Code Number: ___________________________________________________
[_]CHECK HERE IF TENDERED PRIVATE NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY ENCLOSED HEREWITH AND COMPLETE THE FOLLOWING
(FOR USE BY ELIGIBLE INSTITUTIONS ONLY):
Name of Registered Holder of Private Note(s): ______________________________
Date of Execution of Notice of Guaranteed Delivery: ________________________
Window Ticket Number (if available): _______________________________________
Name of Institution which Guaranteed Delivery: _____________________________
Account Number (if delivered by book-entry transfer): ______________________
[_]CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name: ______________________________________________________________________
Address: ___________________________________________________________________
___________________________________________________________________
<PAGE>
SPECIAL ISSUANCE INSTRUCTIONS
(See Instructions 1, 6, 7 and 8)
To be completed ONLY (i) if
the Exchange Notes issued in
exchange for Private Notes,
certificates for Private Notes
in a principal amount not
exchanged for Exchange Notes, or
Private Notes (if any) not
tendered for exchange, are to be
issued in the name of someone
other than the undersigned or
(ii) if Private Notes tendered
by book-entry transfer which are
not exchanged are to be returned
by credit to an account
maintained at DTC.
Issue to:
Name
-----------------------------
(Please Print)
Address
--------------------------
---------------------------------
---------------------------------
(Include Zip Code)
---------------------------------
(Tax Identification or Social
Security No.)
Credit Private Notes not
exchanged and delivered by book-
entry transfer to DTC account
set forth below:
---------------------------------
(Account Number)
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 1, 6, 7 and 8)
To be completed ONLY if the
Exchange Notes issued in
exchange for Private Notes,
certificates for Private Notes
in a principal amount not
exchanged for Exchange Notes, or
Private Notes (if any) not
tendered for exchange, are to be
mailed or delivered (i) to
someone other than the
undersigned or (ii) to the
undersigned at an address other
than the address shown below the
undersigned's signature.
Mail or delivered to:
Name
-----------------------------
(Please Print)
Address
--------------------------
---------------------------------
---------------------------------
(Include Zip Code)
---------------------------------
(Tax Identification or Social
Security No.)
<PAGE>
BENEFICIAL OWNER(S)--RESIDENCE
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
STATE OF DOMICILE/PRINCIPAL PLACE OF BUSINESS
OF PRINCIPAL AMOUNT OF PRIVATE NOTES
EACH BENEFICIAL OWNER OF PRIVATE NOTES HELD FOR ACCOUNT OF BENEFICIAL OWNER(S)
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BENEFICIAL OWNER(S)--PURCHASER STATUS
The beneficial owner of each of the Private Notes described herein is
(check the box that applies):
[_] A "Qualified Institutional Buyer" (as defined in Rule 144A under the
Securities Act)
[_] An "Institutional Accredited Investor" (as defined in Rule 501(a)(1),
(2), (3) or (7) under the Securities Act)
[_] A non "U.S. person" (as defined in Regulation S of the Securities Act)
that purchased the Private Notes outside the United States in
accordance with Rule 904 of the Securities Act
[_] Other (describe)
------------------------------------------------------
------------------------------------------------------------------------
<PAGE>
SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
LADIES AND GENTLEMEN:
Pursuant to the offer by Cobblestone Golf Group, Inc., a Delaware
corporation (the "Company"), upon the terms and subject to the conditions set
forth in the Prospectus dated , 1996 (the "Prospectus") and this Letter of
Transmittal (the "Letter of Transmittal"), which together with the Prospectus
constitutes the Company's offer (the "Exchange Offer") to exchange $1,000
principal amount of its 11 1/2% Series B Senior Notes due 2003 (the "Exchange
Notes") for each $1,000 principal amount of its outstanding 11 1/2% Series A
Senior Notes due 2003 (the "Private Notes"), the undersigned hereby tenders to
the Company for exchange the Private Notes indicated above.
By executing this Letter of Transmittal and subject to and effective upon
acceptance for exchange of the Private Notes tendered for exchange herewith,
the undersigned will have irrevocably sold, assigned, transferred and
exchanged, to the Company, all right, title and interest in, to and under all
of the Private Notes tendered for exchange hereby, and hereby will have
appointed the Exchange Agent as the true and lawful agent and attorney-in-fact
(with full knowledge that the Exchange Agent also acts as agent of the
Company) of such holder of Private Notes with respect to such Private Notes,
with full power of substitution to (i) deliver certificates representing such
Private Notes, or transfer ownership of such Private Notes on the account
books maintained by DTC (together, in any such case, with all accompanying
evidences of transfer and authenticity), to the Company, (ii) present and
deliver such Private Notes for transfer on the books of the Company and (iii)
receive all benefits and otherwise exercise all rights and incidents of
beneficial ownership with respect to such Private Notes, all in accordance
with the terms of the Exchange Offer. The power of attorney granted in this
paragraph shall be deemed to be irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that (i) the undersigned is
the owner; (ii) has a net long position within the meaning of Rule 14e-4 under
the Securities Exchange Act as amended ("Rule 14e-4") equal to or greater than
the principal amount of Private Notes tendered hereby; (iii) the tender of
such Private Notes complies with Rule 14e-4 (to the extent that Rule 14e-4 is
applicable to such exchange); (iv) the undersigned has full power and
authority to tender, exchange, assign and transfer the Private Notes and (v)
that when such Private Notes are accepted for exchange by the Company, the
Company will acquire good and marketable title thereto, free and clear of all
liens, restrictions, charges and encumbrances and not subject to any adverse
claims. The undersigned will, upon receipt, execute and deliver any additional
documents deemed by the Exchange Agent or the Company to be necessary or
desirable to complete the exchange, assignment and transfer of the Private
Notes tendered for exchange hereby.
By tendering, the undersigned hereby further represents to the Company that
(i) the Exchange Notes to be acquired by the undersigned in exchange for the
Private Notes tendered hereby and any beneficial owner(s) of such Private
Notes in connection with the Exchange Offer will be acquired by the
undersigned and such beneficial owner(s) in the ordinary course of business of
the undersigned, (ii) the undersigned have no arrangement or understanding
with any person to participate in the distribution of the Exchange Notes,
(iii) the undersigned and each beneficial owner acknowledge and agree that any
person who is a broker-dealer registered under the Exchange Act or is
participating in the Exchange Offer for the purpose of distributing the
Exchange Notes must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction of the Exchange Notes acquired by such person and cannot rely on
the position of the staff of the Commission set forth in certain no-action
letters, (iv) the undersigned and each beneficial owner understand that a
secondary resale transaction described in clause (iii) above and any resales
of Exchange Notes obtained by the undersigned in exchange for the Private
Notes acquired by the undersigned directly from the Company should be covered
by an effective registration statement containing the selling securityholder
information required by Item 507 or Item 508, as applicable, of Regulation S-K
of the Commission and (vi) neither the undersigned nor any beneficial owner is
an "affiliate," as defined under Rule 405 under the Securities Act, of the
Company. If the undersigned is a broker-dealer that will receive
<PAGE>
Exchange Notes for its own account in exchange for Private Notes that were
acquired as a result of market-making activities or other trading activities,
it acknowledges that it will deliver a prospectus meeting the requirements of
the Securities Act in connection with any resale of such Exchange Notes;
however, by so acknowledging and by delivering a prospectus, the undersigned
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
For purposes of the Exchange Offer, the Company will be deemed to have
accepted for exchange, and to have exchanged, validly tendered Private Notes,
if, as and when the Company gives oral or written notice thereof to the
Exchange Agent. Tenders of Private Notes for exchange may be withdrawn at any
time prior to 5:00 p.m., New York City time, on the Expiration Date. See "The
Exchange Offer--Withdrawal of Tenders" in the Prospectus. Any Private Notes
tendered by the undersigned and not accepted for exchange will be returned to
the undersigned at the address set forth above unless otherwise indicated in
the box above entitled "Special Delivery Instructions" as promptly as
practicable after the Expiration Date.
The undersigned acknowledges that the Company's acceptance of Private Notes
validly tendered for exchange pursuant to any one of the procedures described
in the section of the Prospectus entitled "The Exchange Offer" and in the
instructions hereto will constitute a binding agreement between the
undersigned and the Company upon the terms and subject to the conditions of
the Exchange Offer.
Unless otherwise indicated in the box entitled "Special Issuance
Instructions," please return any Private Notes not tendered for exchange in
the name(s) of the undersigned. Similarly, unless otherwise indicated in the
box entitled "Special Delivery Instructions," please mail any certificates for
Private Notes not tendered or exchanged (and accompanying documents, as
appropriate) to the undersigned at the address shown below the undersigned's
signature(s). In the event that both "Special Issuance Instructions" and
"Special Delivery Instructions" are completed, please issue the certificates
representing the Exchange Notes issued in exchange for the Private Notes
accepted for exchange in the name(s) of, and return any Private Notes not
tendered for exchange or not exchanged to, the person(s) so indicated. The
undersigned recognizes that the Company has no obligation pursuant to the
"Special Issuance Instructions" and "Special Delivery Instructions" to
transfer any Private Notes from the name of the holder of Private Note(s)
thereof if the Company does not accept for exchange any of the Private Notes
so tendered for exchange or if such transfer would not be in compliance with
any transfer restrictions applicable to such Private Note(s).
IN ORDER TO VALIDLY TENDER PRIVATE NOTES FOR EXCHANGE, HOLDERS OF PRIVATE
NOTES MUST COMPLETE, EXECUTE, AND DELIVER THIS LETTER OF TRANSMITTAL.
Except as stated in the Prospectus, all authority herein conferred or agreed
to be conferred shall survive the death, incapacity, or dissolution of the
undersigned, and any obligation of the undersigned hereunder shall be binding
upon the heirs, personal representatives, successors and assigns of the
undersigned. Except as otherwise stated in the Prospectus, this tender for
exchange of Private Notes is irrevocable.
<PAGE>
SIGN HERE
- --------------------------------------------------------------------------------
(Signature(s) of Owner(s))
Date: , 1996
Must be signed by the registered holder(s) of Private Notes exactly as
name(s) appear(s) on certificate(s) representing the Private Notes or on a
security position listing or by person(s) authorized to become registered
Private Note holder(s) by certificates and documents transmitted herewith. If
signature is by trustees, executors, administrators, guardians, attorneys-in-
fact, officers of corporations or others acting in a fiduciary or
representative capacity, please provide the following information. (See
Instruction 6).
Name(s):
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please Print)
Capacity (full title):
----------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Address:
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Include Zip Code)
Principal place of business (if different from address listed above):
-----------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Include Zip Code)
Area Code and Telephone No.: ( )
---------------------------------------------
Tax Identification or Social Security Nos.:
-------------------------------------
Please complete Substitute Form W-9
GUARANTEE OF SIGNATURE(S)
(Signature(s) must be guaranteed if required by Instruction 1)
Authorized Signature:
-----------------------------------------------------------
Dated:
--------------------------------------------------------------------------
Name and Title:
-----------------------------------------------------------------
(Please Print)
Name of Firm:
-------------------------------------------------------------------
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by an institution
which is (1) a member firm of a registered national securities exchange or of
the National Association of Securities Dealers, Inc., (2) a commercial bank or
trust company having an office or correspondent in the Unites States, or (3)
an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under
the Securities Exchange Act of 1934 which is a member of one of the following
recognized Signature Guarantee Programs (an "Eligible Institution"):
a. The Securities Transfer Agents Medallion Program (STAMP)
b The New York Stock Exchange Medallion Signature Program (MSP)
c. The Stock Exchange Medallion Program (SEMP)
Signatures on this Letter of Transmittal need not be guaranteed (i) if this
Letter of Transmittal is signed by the registered holder(s) of the Private
Notes tendered herewith and such registered holder(s) have not completed the
box entitled "Special Issuance Instructions" or the box entitled "Special
Delivery Instructions" on this Letter of Transmittal or (ii) if such Private
Notes are tendered for the account of an Eligible Institution. IN ALL OTHER
CASES, ALL SIGNATURES MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION.
2. DELIVERY OF THIS LETTER OF TRANSMITTAL AND PRIVATE NOTES; GUARANTEED
DELIVERY PROCEDURES. This Letter of Transmittal is to be completed by holders
of Private Notes (i) if certificates are to be forwarded herewith or (ii) if
tenders are to be made pursuant to the procedures for tender by book-entry
transfer or guaranteed delivery set forth in the section of the Prospectus
entitled "The Exchange Offer." Certificates for all physically tendered
Private Notes or any timely confirmation of a book-entry transfer (a "Book-
Entry Confirmation"), as well as a properly completed and duly executed copy
of this Letter of Transmittal or facsimile hereof, and any other documents
required by this Letter of Transmittal, must be received by the Exchange Agent
at its address set forth on the cover of this Letter of Transmittal prior to
5:00 p.m., New York City time, on the Expiration Date. Holders of Private
Notes who elect to tender Private Notes and (i) whose Private Notes are not
immediately available or (ii) who cannot deliver the Private Notes, this
Letter of Transmittal or other required documents to the Exchange Agent prior
to 5:00 p.m., New York City time, on the Expiration Date, must tender their
Private Notes according to the guaranteed delivery procedures set forth in the
Prospectus. Holders may have such tender effected if: (a) such tender is made
through an Eligible Institution; (b) prior to 5:00 p.m., New York City time,
on the Expiration Date, the Exchange Agent has received from such Eligible
Institution a properly completed and duly executed Notice of Guaranteed
Delivery, setting forth the name and address of the holder of such Private
Notes, the certificate numbers(s) of such Private Notes and the principal
amount of Private Notes tendered for exchange, stating that tender is being
made thereby and guaranteeing that, within five New York Stock Exchange
trading days after the Expiration Date, this Letter of Transmittal (or a
facsimile thereof), together with the certificate(s) representing such Private
Notes (or a Book-Entry Confirmation), in proper form for transfer, and any
other documents required by this Letter of Transmittal, will be deposited by
such Eligible Institution with the Exchange Agent; and (c) a properly executed
Letter of Transmittal (or a facsimile hereof), as well as the certificate(s)
for all tendered Private Notes in proper form for transfer or a Book-Entry
Confirmation, together with any other documents required by this Letter of
Transmittal, are received by the Exchange Agent within five New York Stock
Exchange trading days after the Expiration Date.
THE METHOD OF DELIVERY OF PRIVATE NOTES, THIS LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF
THE HOLDER. EXCEPT AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE DEEMED
MADE ONLY WHEN ACTUALLY RECEIVED OR CONFIRMED BY THE EXCHANGE AGENT. INSTEAD
OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN OVERNIGHT OR HAND
DELIVERY SERVICE, PROPERLY INSURED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE.
NEITHER THIS LETTER OF TRANSMITTAL NOR ANY PRIVATE NOTES SHOULD BE SENT TO THE
COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL
BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH
HOLDERS.
<PAGE>
No alternative, conditional or contingent tenders will be accepted. All
tendering holders of Private Notes, by execution of this Letter of Transmittal
(or facsimile hereof, if applicable), waive any right to receive notice of the
acceptance of their Private Notes for exchange.
3. INADEQUATE SPACE. If the space provided in the box entitled "Description
of Private Notes" above is inadequate, the certificate numbers and principal
amounts of the Private Notes being tendered should be listed on a separate
signed schedule affixed hereto.
4. WITHDRAWALS. A tender of Private Notes may be withdrawn at any time prior
to 5:00 p.m., New York City time, on the Expiration Date by delivery of
written or facsimile notice of withdrawal to the Exchange Agent at the address
set forth on the cover of this Letter of Transmittal. To be effective, a
notice of withdrawal of Private Notes must (i) specify the name of the person
who tendered the Private Notes to be withdrawn (the "Depositor"), (ii)
identify the Private Notes to be withdrawn (including the certificate number
or numbers and aggregate principal amount of such Private Notes), and (iii) be
signed by the holder of Private Notes in the same manner as the original
signature on the Letter of Transmittal by which such Private Notes were
tendered (including any required signature guarantees). All questions as to
the validity, form and eligibility (including time of receipt) of such notices
will be determined by the Company in its sole discretion, whose determination
shall be final and binding on all parties. Any Private Notes so withdrawn will
thereafter be deemed not validly tendered for purposes of the Exchange Offer
and no Exchange Notes will be issued with respect thereto unless the Private
Notes so withdrawn are validly retendered. Properly withdrawn Private Notes
may be retendered by following one of the procedures described in the section
of the Prospectus entitled "The Exchange Offer--Procedures for Tendering" at
any time prior to 5:00 p.m., New York City time, on the Expiration Date.
5. PARTIAL TENDERS. Tenders of Private Notes will be accepted only in
integral multiples of $1,000 principal amount. If a tender for exchange is to
be made with respect to less than the entire principal amount of any Private
Notes, fill in the principal amount of Private Notes which are tendered for
exchange in column (4) of the box entitled "Description of Private Notes," as
more fully described in the footnotes thereto. In case of a partial tender for
exchange, a new certificate, in fully registered form, for the remainder of
the principal amount of the Private Notes, will be sent to the holders of
Private Notes unless otherwise indicated in the appropriate box on this Letter
of Transmittal as promptly as practicable after the expiration or termination
of the Exchange Offer.
6. SIGNATURES ON THIS LETTER OF TRANSMITTAL, ASSIGNMENT AND ENDORSEMENTS.
(a) The signature(s) of the holder of Private Notes on this Letter of
Transmittal must correspond with the name(s) as written on the face of the
Private Notes without alternation, enlargement or any change whatsoever.
(b) If tendered Private Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal.
(c) If any tendered Private Notes are registered in different names on
several certificates, it will be necessary to complete, sign and submit as
many separate copies of this Letter of Transmittal and any necessary or
required documents as there are different registrations or certificates.
(d) When this Letter of Transmittal is signed by the holder of the Private
Notes listed and transmitted hereby, no endorsements of Private Notes or bond
powers are required. If, however, Private Notes not tendered or not accepted,
are to be issued or returned in the name of a person other than the holder of
Private Notes, then the Private Notes transmitted hereby must be endorsed or
accompanied by a properly completed bond power, in a form satisfactory to the
Company, in either case signed exactly as the name(s) of the holder of Private
Notes appear(s) on the Private Notes. Signatures on such Private Notes or bond
powers must be guaranteed by an Eligible Institution (unless signed by an
Eligible Institution).
(e) If this Letter of Transmittal or Private Notes or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity,
such persons should so indicate when signing, and unless waived by the
Company, evidence satisfactory to the Company of their authority to so act
must be submitted with this Letter of Transmittal.
<PAGE>
(f) If this Letter of Transmittal is signed by a person other than the
registered holder of Private Notes listed, the Private Notes must be endorsed
or accompanied by a properly completed bond power, in either case signed by
such registered holder exactly as the name(s) of the registered holder of
Private Notes appear(s) on the certificates. Signatures on such Private Notes
or bond powers must be guaranteed by an Eligible Institution (unless signed by
an Eligible Institution).
7. TRANSFER TAXES. Except as set forth in this Instruction 7, the Company
will pay all transfer taxes, if any, applicable to the exchange of Private
Notes pursuant to the Exchange Offer. If, however, a transfer tax is imposed
for any reason other than the exchange of the Private Notes pursuant to the
Exchange Offer, then the amount of any such transfer taxes (whether imposed on
the registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemptions
therefrom is not submitted with this Letter of Transmittal, the amount of such
transfer taxes will be billed directly to such tendering holder.
8. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If the Exchange Notes are to
be issued, or if any Private Notes not tendered for exchange are to be issued
or sent to someone other than the holder of Private Notes or to an address
other than that shown above, the appropriate boxes on this Letter of
Transmittal should be completed. Holders of Private Notes tendering Private
Notes by book-entry transfer may request that Private Notes not accepted be
credited to such account maintained at DTC as such holder of Private Notes may
designate.
9. IRREGULARITIES. All questions as to the validity, form, eligibility
(including time of receipt), compliance with conditions, acceptance and
withdrawal of tendered Private Notes will be determined by the Company in its
sole discretion, which determination will be final and binding. The Company
reserves the absolute right to reject any and all Private Notes not properly
tendered or any Private Notes the Company's acceptance of which would, in the
opinion of counsel for the Company, be unlawful. The Company also reserves the
right to waive any defects, irregularities or conditions of tender as to
particular Private Notes. The Company's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in the Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Private Notes must be
cured within such time as the Company shall determine. Although the Company
intends to notify holders of defects or irregularities with respect to tenders
of Private Notes, neither the Company, the Exchange Agent nor any other person
shall incur any liability for failure to give such notification. Tenders of
Private Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Private Notes received by the
Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering holders, unless otherwise provided in this Letter of
Transmittal, as soon as practicable following the Expiration Date.
10. WAIVER OF CONDITIONS. The Company reserves the absolute right to waive,
amend or modify certain of the specified conditions as described under "The
Exchange Offer--Conditions" in the Prospectus in the case of any Private Notes
tendered (except as otherwise provided in the Prospectus).
11. MUTILATED, LOST, STOLEN OR DESTROYED PRIVATE NOTES. Any tendering Holder
whose Private Notes have been mutilated, lost, stolen or destroyed should
contact the Exchange Agent at the address listed below for further
instructions:
Norwest Bank Minnesota,
National Association
Corporate Trust Operations
Norwest Center
Sixth and Marquette
Minneapolis, MN 55479-0113
(612) 667-9764
12. REQUESTS FOR INFORMATION OR ADDITIONAL COPIES. Requests for information
or for additional copies of the Prospectus and this Letter of Transmittal may
be directed to the Exchange Agent at the address or telephone number set forth
on the cover of this Letter of Transmittal.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE THEREOF, IF
APPLICABLE) TOGETHER WITH CERTIFICATES, OR CONFIRMATION OF BOOK-ENTRY OR THE
NOTICE OF GUARANTEED DELIVERY, AND ALL OTHER REQUIRED DOCUMENTS MUST BE
RECEIVED BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE
EXPIRATION DATE.
<PAGE>
IMPORTANT TAX INFORMATION
Under current federal income tax law, a holder of Private Notes whose
tendered Private Notes are accepted for exchange may be subject to backup
withholding unless the holder provides the Company (as payor), through the
Exchange Agent, with either (i) such holder's correct taxpayer identification
number ("TIN") on Substitute Form W-9 attached hereto, certifying that the TIN
provided on Substitute Form W-9 is correct (or that such holder of Private
Notes is awaiting a TIN) and that (A) the holder of Private Notes has not been
notified by the Internal Revenue Service that he or she is subject to backup
withholding as a result of a failure to report all interest or dividends or
(B) the Internal Revenue Service has notified the holder of Private Notes that
he or she is no longer subject to backup withholding; or (ii) an adequate
basis for exemption from backup withholding. If such holder of Private Notes
is an individual, the TIN is such holder's social security number. If the
Exchange Agent is not provided with the correct taxpayer identification
number, the holder of Private Notes may be subject to certain penalties
imposed by the Internal Revenue Service.
Certain holders of Private Notes (including, among others, all corporations
and certain foreign individuals) are not subject to these backup withholding
and reporting requirements. Exempt holders of Private Notes should indicate
their exempt status on Substitute Form W-9. A foreign individual may qualify
as an exempt recipient by submitting to the Exchange Agent a properly
completed Internal Revenue Service Form W-8 (which the Exchange Agent will
provide upon request) signed under penalty of perjury, attesting to the
holder's exempt status. See the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 (the "Guidelines") for
additional instructions.
If backup withholding applies, the Company is required to withhold 31% of
any payment made to the holder of Private Notes or other payee. Backup
withholding is not an additional federal income tax. Rather, the federal
income tax liability of persons subject to backup withholding will be reduced
by the amount of tax withheld. If withholding results in an overpayment of
taxes, a refund may be obtained from the Internal Revenue Service.
The holder of Private Notes is required to give the Exchange Agent the TIN
(e.g., social security number or employer identification number) of the record
owner of the Private Notes. If the Private Notes are held in more than one
name or are not held in the name of the actual owner, consult the enclosed
Guidelines for additional guidance regarding which number to report.
<PAGE>
INSTRUCTION TO REGISTERED HOLDER
FROM BENEFICIAL OWNER
OF
11 1/2% SERIES A SENIOR NOTES DUE 2003 OF COBBLESTONE GOLF GROUP, INC.
The undersigned hereby acknowledges receipt of the Prospectus dated ,
1996 (the "Prospectus") of Cobblestone Golf Group, Inc., a Delaware
corporation (the "Company"), and the accompanying Letter of Transmittal (the
"Letter of Transmittal"), that together constitute the Company's offer (the
"Exchange Offer"). Capitalized terms used but not defined herein have the
meanings ascribed to them in the Prospectus.
This will instruct you, the registered holder, as to the action to be taken
by you relating to the Exchange Offer with respect to the 11 1/2% Series A
Senior Notes due 2003 (the "Private Notes") held by you for the account of the
undersigned.
The aggregate face amount of the Private Notes held by you for the account
of the undersigned is (fill in amount):
$ of the Private Notes.
With respect to the Exchange Offer, the undersigned hereby instructs you
(check appropriate box):
[_] To TENDER the following Private Notes held by you for the account of the
undersigned (insert principal amount of Private Notes to be tendered, if any):
$ of the Private Notes.
[_] NOT to TENDER any Private Notes held by you for the account of the
undersigned.
If the undersigned instructs you to tender the Private Notes held by you for
the account of the undersigned, it is understood that you are authorized (a)
to make, on behalf of the undersigned (and the undersigned, by its signature
below, hereby makes to you), the representations and warranties contained in
the Letter of Transmittal that are to be made with respect to the undersigned
as a beneficial owner of the Private Notes, including but not limited to the
representations that (i) the undersigned's principal residence is in the state
of (fill in state) , (ii) the undersigned is acquiring the Exchange Notes
in the ordinary course of business of the undersigned, (iii) the undersigned
has no arrangement or understanding with any person to participate in the
distribution of Exchange Notes, (iv) the undersigned acknowledges that any
person who is a broker-dealer registered under the Exchange Act or is
participating in the Exchange Offer for the purpose of distributing the
Exchange Notes must comply with the registration and prospectus delivery
requirements of the Securities Act of 1933, as amended, in connection with a
secondary resale transaction of the Exchange Notes acquired by such person and
cannot rely on the position of the Staff of the Securities and Exchange
Commission set forth in certain no-action letters (See the section of the
Prospectus entitled "The Exchange Offer--Resale of the Exchange Notes"), (v)
the undersigned understands that a secondary resale transaction described in
clause (iv) above and any resales of Exchange Notes obtained by the
undersigned in exchange for the Private Notes acquired by the undersigned
directly from the Company should be covered by an effective registration
statement containing the selling securityholder information required by Item
507 or Item 508, if applicable, of Regulation S-K of the Commission, (vi) the
undersigned is not an "affiliate," as defined in Rule 405 under the Securities
Act, of the Company, and (vii) if the undersigned is a broker-dealer that will
receive Exchange Notes for its own account in exchange for Private Notes that
were acquired as a result of market-making activities or other trading
activities, it acknowledges that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such
Exchange Notes; however, by so acknowledging and by delivering a prospectus,
the undersigned will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act; (b) to agree, on behalf of the undersigned,
as set forth in the Letter of Transmittal; and (c) to take such other action
as necessary under the Prospectus or the Letter of Transmittal to effect the
valid tender of Private Notes.
<PAGE>
The purchaser status of the undersigned is (check the box that applies):
[_] A "Qualified Institutional Buyer" (as defined in Rule 144A under the
Securities Act)
[_] An "Institutional Accredited Investor" (as defined in Rule 501(a)(1),
(2), (3) or (7) under the Securities Act)
[_] A non "U.S. person" (as defined in Regulation S of the Securities Act)
that purchased the Private Notes outside the United States in accordance
with Rule 904 of the Securities Act
[_] Other (describe)
----------------------------------------------------------
- -------------------------------------------------------------------------------
SIGN HERE
Name of Beneficial Owner(s):
----------------------------------------------------
- -------------------------------------------------------------------------------
Signature(s):
-------------------------------------------------------------------
- -------------------------------------------------------------------------------
Name(s) (please print):
---------------------------------------------------------
- -------------------------------------------------------------------------------
Address:
------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Principal place of business (if different from address listed above):
-----------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Telephone Number(s):
------------------------------------------------------------
- -------------------------------------------------------------------------------
Taxpayer Identification or Social Security Number(s):
---------------------------
- -------------------------------------------------------------------------------
Date:
---------------------------------------------------------------------------
<PAGE>
PAYER'S NAME:
PART 1--PLEASE PROVIDE YOUR
TIN IN THE BOX AT RIGHT AND
CERTIFY BY SIGNING AND
DATING BELOW
------------------------
SUBSTITUTE Social Security Number
FORM W-9
DEPARTMENT OF THE TREASURY OR
INTERNAL
REVENUE
SERVICE
------------------------
Employer Identification
Number
PAYER'S REQUEST FOR PART 3 --
TAXPAYER Awaiting
IDENTIFICATION NUMBER (TIN) TIN [_]
--------------------------------------------------------
PART 2--Certification Under Penalties
of Perjury, I certify that:
(1) The number shown on this form is
my current taxpayer
identification number (or I am
waiting for a number to be issued
to me) and
(2) I am not subject to backup
withholding either because I have
not been notified by the Internal
Revenue Service (the "IRS") that
I am subject to backup
withholding as a result of a
failure to report all interest or
dividends, or the IRS has
notified me that I am no longer
subject to backup withholding.
--------------------------------------------------------
Certificate instructions--You must cross out item
(2) in Part 2 above if you have been notified by the
IRS that you are subject to backup withholding be-
cause of underreporting interest or dividends on
your tax return. However, if after being notified by
the IRS that you are subject to backup withholding
you receive another notification from the IRS stat-
ing that you are no longer subject to backup with-
holding, do not cross out item (2).
SIGNATURE _______________________ DATE ____________
NAME ________________________________________________
ADDRESS _____________________________________________
CITY __________________ STATE_____ ZIP CODE________
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENT MADE TO YOU PURSUANT TO THE EXCHANGE OFFER.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
<PAGE>
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU
CHECK THE BOX IN PART 3 OF SUBSTITUTE FORM W-9
PAYOR'S NAME: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office
or (b) I intend to mail or deliver such an application in the near future.
I understand that if I do not provide a taxpayer identification number
with sixty (60) days, 31% of all reportable payments made to me thereafter
will be withheld until I provide such a number.
---------------------------------------------------------- ------------
Signature Date
<PAGE>
Exhibit 99.2
NOTICE OF GUARANTEED DELIVERY
WITH RESPECT TO
11 1/2% SERIES A SENIOR NOTES DUE 2003
THIS FORM, OR ONE SUBSTANTIALLY EQUIVALENT HERETO, MUST BE USED BY ANY
HOLDER OF 11 1/2% SERIES A SENIOR NOTES DUE 2003 (THE "PRIVATE NOTES") OF
COBBLESTONE GOLF GROUP, INC., A DELAWARE CORPORATION (THE "COMPANY"), WHO
WISHES TO TENDER PRIVATE NOTES PURSUANT TO THE COMPANY'S EXCHANGE OFFER,
AS DEFINED IN THE PROSPECTUS DATED , 1996 (THE "PROSPECTUS")
AND (i) WHOSE PRIVATE NOTES ARE NOT IMMEDIATELY AVAILABLE OR (ii) WHO
CANNOT DELIVER SUCH PRIVATE NOTES OR ANY OTHER DOCUMENTS REQUIRED BY THE
LETTER OF TRANSMITTAL ON OR BEFORE THE EXPIRATION DATE (AS DEFINED IN THE
PROSPECTUS) OR (iii) WHO CANNOT COMPLY WITH THE BOOK-ENTRY TRANSFER
PROCEDURE ON A TIMELY BASIS. SUCH FORM MAY BE DELIVERED BY FACSIMILE
TRANSMISSION, MAIL OR HAND DELIVERY TO THE EXCHANGE AGENT. SEE "THE
EXCHANGE OFFER--GUARANTEED DELIVERY PROCEDURES" IN THE PROSPECTUS.
COBBLESTONE GOLF GROUP, INC.
NOTICE OF GUARANTEED DELIVERY
To: Norwest Bank Minnesota, National Association, the Exchange Agent
By Registered or Certified Mail: In Person:
Norwest Bank Minnesota, Northstar East Bldg.
National Association 608 2nd Ave S.
Corporate Trust Operations 12th Floor
P.O. Box 1517 Corporate Trust Ser.
Minneapolis, MN 55480-1517 Minneapolis, MN
By Hand or Overnight Courier: By Facsimile (for Eligible Institutions
only):
Norwest Bank Minnesota, (612) 667-4927
National Association
Corporate Trust Operations Confirm Receipt of Notice of
Norwest Center Guaranteed Delivery by Telephone:
Sixth and Marquette
Minneapolis, MN 55479-0113 (612) 667-9764
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION VIA A FACSIMILE NUMBER OTHER THAN AS SET FORTH
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to the Company upon the terms and subject to
the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Private Notes specified below pursuant to the guaranteed delivery procedures
set forth under the caption "The Exchange Offer--Guaranteed Delivery
Procedures" in the Prospectus. By so tendering, the undersigned does hereby
make, at and as of the date hereof, the representations and warranties of a
tendering Holder of Private Notes set forth in the Letter or Transmittal. The
undersigned hereby tenders the Private Notes listed below:
<TABLE>
<S> <C>
CERTIFICATE NUMBERS PRINCIPAL AMOUNT TENDERED
(IF AVAILABLE)
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
All authority herein conferred or agreed to be conferred shall survive the
death, incapacity, or dissolution of the undersigned and every obligation of
the undersigned hereunder shall be binding upon the heirs, personal
representatives, successors and assigns of the undersigned.
If Private Notes will be tendered SIGN HERE
by book-entry transfer:
-------------------------------------
Signature(s)
Name of Tendering Institution:
-------------------------------------
- -------------------------------------
The Depository Trust Company -------------------------------------
Name(s) (Please Print)
Account No.:
------------------------- -------------------------------------
-------------------------------------
Address
-------------------------------------
Zip Code
-------------------------------------
Area Code and Telephone No.
Date:
--------------------------------
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a participant in a Recognized Signature Guarantee Medallion
Program, guarantees deposit with the Exchange Agent of the Letter of
Transmittal (or facsimile thereof), together with the Private Notes tendered
hereby in proper form for transfer, or confirmation of the book-entry transfer
of such Private Notes into the Exchange Agent's account at the Depository
Trust Company, pursuant to the procedure for book-entry transfer set forth in
the Prospectus, and any other required documents, all by 5:00 p.m., New York
City time, on the fifth New York Stock Exchange trading day following the
Expiration Date (as defined in the Prospectus).
SIGN HERE
-------------------------------------
Name of Firm
-------------------------------------
Authorized Signature
-------------------------------------
Name (Please print)
-------------------------------------
-------------------------------------
Address
-------------------------------------
Zip Code
-------------------------------------
Area Code and Telephone No.
Date:
--------------------------------
DO NOT SEND CERTIFICATES FOR PRIVATE NOTES WITH THIS FORM. ACTUAL SURRENDER OF
CERTIFICATES FOR PRIVATE NOTES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED
BY, A COPY OF THE PREVIOUSLY EXECUTED LETTER OF TRANSMITTAL.
<PAGE>
INSTRUCTIONS
1. DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY. A properly completed and
duly executed copy of this Notice of Guaranteed Delivery and any other
documents required by this Notice of Guaranteed Delivery must be received by
the Exchange Agent at one of its addresses set forth on the cover hereof prior
to the Expiration Date. The method of delivery of this Notice of Guaranteed
Delivery and all other required documents to the Exchange Agent is at the
election and risk of the Holder but, except as otherwise provided below, the
delivery will be deemed made only when actually received by the Exchange
Agent. Instead of delivery by mail, it is recommended that holders use an
overnight or hand delivery service, properly insured. If such delivery is by
mail, it is recommended that the Holder use properly insured, registered mail
with return receipt requested. For a full description of the guaranteed
delivery procedures, see the Prospectus under the caption "The Exchange
Offer--Guaranteed Delivery Procedures." In all cases, sufficient time should
be allowed to assure timely delivery. No Notice of Guaranteed Delivery should
be sent to the Company.
2. SIGNATURE ON THIS NOTICE OF GUARANTEED DELIVERY; GUARANTEE OF SIGNATURES.
If this Notice of Guaranteed Delivery is signed by the registered Holder(s) of
the Private Notes referred to herein, then the signature must correspond with
the name(s) as written on the face of the Private Notes without alteration,
enlargement or any change whatsoever.
If this Notice of Guaranteed Delivery is signed by a person other than the
registered Holder(s) of any Private Notes listed, this Notice of Guaranteed
Delivery must be accompanied by a properly completed bond power signed as the
name of the registered Holder(s) appear(s) on the face of the Private Notes
without alteration, enlargement or any change whatsoever.
If this Notice of Guaranteed Delivery is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing, and, unless waived by the Company, evidence
satisfactory to the Company of their authority so to act must be submitted
with this Notice of Guaranteed Delivery.
3. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to the
Exchange Offer or the procedure for consenting and tendering as well as
requests for assistance or for additional copies of the Prospectus, the Letter
of Transmittal and this Notice of Guaranteed Delivery, may be directed to the
Exchange Agent at the address set forth on the cover hereof or to your broker,
dealer, commercial bank or trust company.
<PAGE>
Exhibit 99.3
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens:
i.e. 000-00-0000. Employer identification numbers have nine digits separated
by only one hyphen: i.e. 00-0000000. The table below will help determine the
number to give the payer.
- -----------------------------------------------
GIVE THE
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY
NUMBER OF--
- -----------------------------------------------
1. An individual's account The individual
2. Two or more individuals The actual owner
(joint account) of the account
or, if combined
funds, any one of
the individuals(1)
3. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
4. a. The usual revocable The grantor-
savings trust account trustee(1)
(grantor is also
trustee)
b. So-called trust The actual
account that is owner(1)
not a legal or valid
trust under State law
5. Sole proprietorship The owner(3)
account
==================================================
- --------------------------------------------------
GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF --
- --------------------------------------------------
6. A valid trust, estate, The legal entity
or pension trust (Do not furnish
the identifying
number of the
personal
representative or
trustee unless
the legal entity
itself is not
designated in the
account title.)(4)
7. Corporate The corporation
8. Religious, charitable, The organization
or educational
organization account
9. Partnership The partnership
10. Association, club, or The organization
other tax-exempt
organization
11. A broker or registered The broker or
nominee nominee
12. Account with the The public entity
Department of Agriculture
in the name of a public
entity (such as a State or
local government, school
district, or prison) that
receives agricultural
program payments
=====================================================
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Show individual name, but may also enter the business or "doing business
as" name. Use either individual's social security number or employer
identification number.
(4) List first and circle the name of the legal trust, estate, or pension
trust.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER OF SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you do not know your
number, obtain Form SS-5, Application for a Social Security Number Card, or
Form SS-4, Application for Employer Identification Number, at the local office
of the Social Security Administration or the Internal Revenue Service and
apply for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include
the following:
. A corporation.
. A financial institution.
. An organization exempt from tax under Section 501(a), or an individual
retirement plan, or a custodial account under Section 403(b)(7).
. The United States or any agency or instrumentality thereof.
. A state, the District of Columbia, a possession of the United States, or
any political subdivision or instrumentality thereof.
. A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
. An international organization or any agency or instrumentality thereof.
. A dealer in securities or commodities required to register in the U.S. or
a possession of the U.S.
. A real estate investment trust.
. A common trust fund operated by a bank under Section 584(a).
. A trust exempt from tax under Section 664 or described in Section 4947.
. An entity registered at all times during the tax year under the
Investment Company Act of 1940.
. A foreign central bank of issue.
. A middleman known in the investment community as a nominee or listed in
the most recent publication of the American Society of Corporate
Secretaries, Inc. Nominee List.
. A futures commission merchant registered with the Commodity Futures
Trading Commission.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
. Payments to nonresident aliens subject to withholding under Section 1441.
. Payments to partnerships not engaged in a trade or business in the U.S.
and which have at least one nonresident partner.
. Payments of patronage dividends where the amount received is not paid in
money.
. Payments made by certain foreign organizations.
Payments of interest not generally subject to backup withholding include the
following:
. Payments of interest on obligations issued by individuals. Note: You may
be subject to backup withholding if this interest is $600 or more and is
paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payer.
. Payments of tax-exempt interest (including exempt-interest dividends
under Section 852).
. Payments described in Section 6049(b)(5) to non-resident aliens.
. Payments on tax-free covenant bonds under Section 1451.
. Payments made by certain foreign organizations.
. Mortgage interest paid by you.
Exempt payees described above should file Substitute Form W-9 to avoid
possible erroneous backup withholding. FILE SUBSTITUTE FORM W-9 WITH THE
PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE
OF THE FORM, AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST,
DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM. If you are a
nonresident alien not subject to backup withholding, submit a completed Form
W-8, Certificate of Foreign Status.
Certain payments other than interest, dividends, and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see Sections 6041, 6041(A)(a), 6042, 6044, 6045,
6049, 6050A and 6050N, and the regulations thereunder.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. The IRS uses the numbers for
identification purposes. Payers must be given the numbers whether or not
recipients are required to file tax returns. Payers must generally withhold
31% of certain taxable payments to a payee who does not furnish a taxpayer
identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you
fail to furnish your taxpayer identification number to a payer, you are sub-
ject to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING .--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Willfully falsifying certi-
fications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
(4) MISUSE OF TINS.--If the requester discloses or uses the TINs in violation
of Federal law, the requester may be subject to civil and criminal penalties.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE
