UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
_____ OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
_____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(NO FEE REQUIRED)
For the transition period from ___ to ___
Commission File Number 0-5556
CONSOLIDATED-TOMOKA LAND CO.
(Exact name of registrant as specified in its charter)
FLORIDA
59-0483700
(State or other jurisdiction of (I.R.S. Employer
149 South Ridgewood Avenue incorporation or organization)
Daytona Beach, Florida Identification No.)
(Address of principal executive offices) 32114
(Zip Code)
Registrant's telephone Number, including area code
(904) 255-7558
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF
THE SECURITIES EXCHANGE ACT OF 1934:
Name of each exchange on
Title of each class which registered
COMMON STOCK, $1 PAR VALUE AMERICAN STOCK EXCHANGE
SECURITIES REGISTERED UNDER SECTION 12(g) OF THE ACT:
NONE
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
YES X NO ___
----
1
<PAGE>
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. X
___
The aggregate market value of the voting stock held by non-affiliates of
the Registrant at March 10, 1998 was approximately $26,750,743.
The number of shares of the Registrant's Common Stock outstanding on
March 10, 1998 was 6,371,833.
Portions of the 1997 Annual Report to Stockholders of Registrant are
incorporated by reference in Part I, II, and IV of this report. Portions
of the Proxy Statement of Registrant dated March 31, 1998 are
incorporated by reference in Part III of this report.
2
<PAGE>
PART I
Item 1. Business
_______ ________
The Company is primarily engaged in the citrus industry and,
through its wholly owned subsidiaries, Indigo Group Inc.,
Indigo Development Inc., Indigo International Inc.and Indigo
Group Ltd., the real estate industry. Real estate operations
include commercial real estate, real estate development,
golf operations, property leasing, leasing properties for
oil and mineral exploration and the sale of forest products. The
Company also operated in the resort industry until July 14, 1994 when the
resort complex at Indigo Lakes was sold. From time to time, the
Company sells unimproved real estate considered surplus to its
operating needs. This latter function is not considered part of
the Company's ordinary operations and is included in general
corporate and other operations, along with earnings from
temporary investments, in the information below which separates
the business segments.
Revenues of each segment are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
______________________________________
<S> <C> <C> <C>
1997 1996 1995
---- ---- ----
(In Thousands)
$ $ $
Citrus Operations 9,445 13,863 8,819
Real Estate Operations 5,412 7,642 7,743
General Corporate and
Other Operations 9,094 6,508 7,122
------ ------ ------
Combined 23,951 28,013 23,684
====== ====== ======
</TABLE>
Operating Income before tax for each segment is as follows:
3
<PAGE>
Item 1. Business (continued)
- ------ --------
<TABLE>
<CAPTION>
Year Ended December 31,
_____________________________________
<S> <C> <C> <C>
1997 1996 1995
----- ------ -------
(In Thousands)
$ $ $
Citrus Operations 1,092 4,012 629
Real Estate Operations 2,004 3,472 2,889
General Corporate and
Other Operations 3,162 3,121 3,638
------ ------ ------
Combined 6,258 10,605 7,156
====== ====== ======
</TABLE>
Identifiable assets of each segment are as follows:
<TABLE>
<CAPTION>
At December 31,
------------------------------------------
1997 1996 1995
--------- ------- --------
<S> <C> <C> <C>
(In Thousands)
$ $ $
Citrus Operations 17,017 17,043 17,866
Real Estate Operations 27,433 32,169 35,349
General Corporate and
Other Operations 13,784 10,461 6,478
------ ------ ------
Combined 58,234 59,673 59,693
====== ====== ======
</TABLE>
Identifiable assets by segment are those assets that are used
in each segment. General corporate assets and those used in the
Company's other operations consist primarily of cash and cash
equivalents, investment securities, notes receivable, and property,
plant, and equipment.
4
<PAGE>
Item 1. Business (continued)
------- --------
CITRUS
------
Citrus groves. The Company, under the name Lake Placid Groves,
owns and operates approximately 3,900 acres of orange and grapefruit
groves located primarily in two large parcels in Highlands County,
Florida. The average age of grove trees is 15 years, well within
the average 45-year productive life. At December 31, 1997 all grove
acres were classified as fruit bearing. The groves require
expenditures chargeable to production expenses, such as fertilizer,
irrigation, and cultivation.
In late 1988, the Company began a grove development project on
1,600 acres east of U. S. Highway 27, fronting on State Road 70,
south of Lake Placid. This project, which included the installation
of deep wells and low pressure micro-jet irrigation systems, was
completed in mid-1992. Initial development work was started on
approximately 400 acres of grove in 1989 with 400 additional acres
developed in each of the three following years. The land, which is
about one mile from the Company's fresh fruit packing plant, is high
and dry and well suited for growing citrus. The 1992-93 crop year
was the first year any significant fruit was harvested from these
groves.
Citrus operations. The Company harvests and sells both fresh and
to-be-processed citrus from its groves. In connection
with the groves, the Company owns and operates an efficient fresh
fruit citrus packing plant, placed in service during the fall of
1969, in which the portion of the crop which is sold as fresh
fruit is packed. Fresh fruit sales are made by the Company to
wholesale produce distributors and retail grocery chains primarily
in the Eastern and Midwestern regions of the United States
and Canada. In an effort to achieve optimum utilization of the
packing facility, the Company also handles the fruit of other
growers in the area.
The Company has an agreement in place with Turner Foods, Inc.
whereby the Company processes the portion of Turner's crop
being sold on the fresh market through the Company's
packing house. Turner also pays the Company for delivery
of the fruit to the packing plant.
The obligations under the agreements can be terminated by
either party on August 31 of each year upon thirty days written
notice. The amounts received by the Company for providing such
services to outside growers for the years ended 1997, 1996 and
1995, amounted to $226,490,$562,954, and $449,605, respectively.
5
<PAGE>
Item 1. Business - continued
------- --------
That portion of the Company's citrus crop which is not sold
as fresh fruit is processed by Citrus World Incorporated, an
agricultural cooperative under a participating marketing
pool agreement. The agreement is a two year arrangement which
the Company may terminate on October 1 of any year by
giving written notice sixty days prior to such date with the
arrangement continuing for two additional years from the
notice of cancellation. Citrus World, one of the larger
processors of citrus products in the United States, pools its
own fruit with the fruit received from the Company and other
citrus growers, processes the pooled fruit, and sells the products
produced therefrom. Each participant in the pool, including Citrus
World, shares ratably in the proceeds from the sales of these products,
net of Citrus World's actual processing and marketing costs, plus a per-unit
handling fee. Citrus World makes periodic payments to all
participants on their pro rata share of net sales proceeds
and makes final payment after all the products in the pool have
been sold. During the years 1997, 1996, and 1995, the Company's
sales under the above pooling agreement amounted to $3,107,919,
$5,203,787, and $2,912,415, respectively.
The percentages of the Company's citrus which are sold as fresh
fruit and which are diverted to the processing plant can vary
considerably from year to year, depending upon fruit size, exterior
appearance, and the relative profitability of the markets. During
the crop year ended August 31, 1997 approximately 47% of the
Company's citrus crop was sold as fresh fruit and the balance
was diverted to the cannery, as compared with 35% in the crop year
ended August 31, 1996 and 38% the crop year ended August 31, 1995.
The citrus industry, which is seasonal in nature as are other
agricultural pursuits, is subject to wide fluctuations in income
because of changes in demand, weather conditions, and other economic
factors. Also affecting income are the continuing large amounts
of frozen concentrate orange juice from Brazil which maintains
high supply levels and tend to lower selling prices. The Company's
sales of fresh citrus fruit can be affected adversely by marketing
orders issued by the United States Department of Agriculture under
the Agricultural Marketing Agreement Act, which can result in
periodic proration, controlled by grade and size, of interstate
shipment of Florida oranges and grapefruit. Also, tariffs
established by the International Tariff Commission and approved
by Congress can impact the cost of importing citrus products and
thus affect the supply and selling prices of processed citrus.
Although North American Free Trade Agreement, which was passed in
1994, has not had a significant impact to date, it could have an
effect on future fruit prices.
6
<PAGE>
Item 1. Business (continued
------ --------
RESORT OPERATIONS
-----------------
During 1994, the Company sold its resort operation known as the
Indigo Lakes Holiday Inn Crowne Plaza Resort located on U. S.
Highway 92 in Daytona Beach, Florida. The Resort had been under
a management contract with Sandcastle Resorts since August 17,
1990. A group associated with Sandcastle Resorts formed a
partnership named Indigo Lakes Resort, Ltd. and purchased the
145-unit inn, 8 separate buildings housing 64 condominium-style
units, tennis courts and pro shop, a conference center, several
small meeting rooms, two swimming pools, and other properties
related to those facilities. The 18-hole championship golf course,
fully equipped golf pro shop, restaurant and cocktail lounge, and
a 500-seat banquet and meeting room facility, were sold to The
Fairways Group, L.P.
On January 4, 1992, the Company had assumed a leasehold interest
in a 21,000-square-foot restaurant located adjacent to the Indigo
Lakes Holiday Inn Crowne Plaza Resort. The Resort's food and
beverage division operated the restaurant and lounge
for a portion of the period from time of lease until April of 1993,
after which it stood empty until the lease was terminated in 1994.
REAL ESTATE OPERATIONS
----------------------
Commercial Development. In August of 1989, the Company reached
an agreement in principle with the Ladies Professional Golf
Association ("LPGA") and the City of Daytona Beach, which calls
for the planning and development of the site for the national
headquarters of the LPGA along with two championship golf
courses. The mixed-use development will also include a clubhouse,
resort facilities, and residential communities along with other
commercial uses. This development is on approximately 3,600
acres of land owned by the Company's real estate development
subsidiary, Indigo Development Inc. ("IDI"), in Daytona Beach,
plus 730 acres owned by the City of Daytona Beach immediately
west of Interstate 95. The LPGA has successfully relocated its
headquarters to Daytona Beach and occupies their newly constructed
facilities within the development. The official opening of the LPGA
International golf course occurred in July 1994. In December 1994,
the first sale within the development was completed with the closing of
60 acres of residential land located in the northern section
of the property. During 1995, the first residential units
within the community were completed. In early 1996,
the Interstate 95 interchange at LPGA Boulevard, which
is the north and main entrance to the project, was opened
for use. Construction of the second golf course, designed
7
<PAGE>
Item 1. Business (continued)
------- ---------
by architect Arthur Hills, is well underway on lands donated by the
Company to the City of Daytona Beach. On September 1, 1997,
responsibility for the operations of the LPGA International golf
courses was transferred from the City of Daytona Beach to a wholly
owned subsidiary of the Company. The agreement with the City of
Daytona Beach provides for the second golf course and a clubhouse
to be constructed by the Company in return for a long-term lease
from the City on both golf courses. The design phase of the
clubhouse has begun. Depending upon weather conditions and other
variables, both the second golf course and the clubhouse are
scheduled to open in the fourth quarter of 1998.
Indigo Commercial Realty, a commercial real estate brokerage
company formed in 1991, is the Company's agent in the marketing
and management of commercial properties. In addition to the LPGA
development, approximately 67 acres of fully developed sites,
owned by Indigo Group Inc. and Indigo Group Ltd. ("IG LTD") were
available for sale at December 31, 1997. All development and
improvement costs have been completed at these sites. All of
these commercial sites are located in the Daytona Beach area.
Residential. Until December 1993, the Company, through IG LTD,
operated in residential development, building and sales. At the
end of 1993 IG LTD closed down the development and building
functions. IG LTD continues to sell its remaining lot inventory
in the following communities:
Riverwood Plantation, a 180-acre community in Port Orange, Florida
with 67 lots remaining at December 31, 1997.
Indigo Lakes, a 200-acre development located in Daytona Beach
with 5 lots remaining at December 31, 1997. This community
also includes a 304 unit apartment complex constructed in 1989
by a joint venture between IG LTD and the Trammel Crow Company.
The apartment complex was sold to the mortgage holder in 1994.
Tomoka Heights, a 180-acre development adjacent to Lake Henry in
Highlands County, Florida. There are approximately 125 developable
lots remaining to be sold. The sales and construction operations
were assumed by third parties as of January 1994.
8
<PAGE>
Item 1. Business (continued)
------- --------
IG LTD also has an inventory of 34 fully developed non-contiguous
lots in Palm Coast at December 31, 1997, which the Company continues
to sell.
INCOME PROPERTIES
-----------------
Volusia County. On December 31, 1987 the Company acquired a two-
building office complex in downtown Daytona Beach. The larger
building, known as Consolidated Center, was sold at the end of 1997.
The Company continues to use a portion of the building as its
headquarters, as terms of the sale include a commitment to lease
6,000 square feet for a period of at least three years. The smaller
building at 17,000 square feet is subject to an existing lease/purchase
agreement and is considered a direct financing lease by the Company.
During 1996, the Company sold the 24,000-square-foot office
building in Daytona Beach which had been leased to the LPGA as
the principal tenant.
During 1978 and early 1979, the Company constructed a commercial
building at the intersection of Interstate 95 and State Road 40.
Previously this facility was operated as a gift and fruit shop.
This building was sold in December 1993.
Highlands County. The Company leased a 50,000-square-foot
building, located in Sebring, Florida, to Scotty's Home Builder's
Supply, Inc until sold in early 1993. Two other buildings formerly
vacant were leased up with occupancy in early 1992:
A 12,000-square-foot facility was leased for a ten-year term
with an option to purchase, and sold in 1993. A second
10,500-square-foot building, formerly the Company's administrative
office, was leased for a three-year term. This was
sold in December of 1992.
Sunshine Newspaper, Inc. leased from the Company a
7,000-square-foot building located near Lake Placid, in which
it operated a printing plant until the building was sold to
them in 1993.
9
<PAGE>
Item 1. Business (continued)
------- --------
Other Income Properties. The Company owns or has owned,
other commercial rental properties throughout Florida.
Forest Center is a 72,000 square foot neighborhood shopping
center located east of Ocala, Florida. This facility was 93%
leased at December 31, 1997 and has a Winn Dixie grocery store,
Eckerd drug store and Family Dollar department store as its
anchor tenants. During 1993, Winn Dixie expanded its leased space
by 10,500 square feet at the Forest Center location. The 24,000 square
foot office building at Palm Coast was sold during 1997.
The Mariner Village Shopping Center, a 70,000 square
foot neighborhood center anchored by a Winn Dixie grocery store
and Eckerd Drug store located in Spring Hill, Florida, was sold
during 1996. Mariner Towne Square, an adjacent 18,000 square foot
facility, was sold during 1995.
Forest product sales. Income from sales of forest products varies
considerably from year to year depending on economic conditions and
rainfall, which sometimes limits access to portions of the woodlands.
In addition, drought conditions sharply increase the potential of forest
fires.
The timber lands encompass approximately 13,000 acres west of Daytona
Beach. The sale of an 11,200 acre parcel to St. Johns River Water
Management District in 1997 reduces the Company's potential for future
income from sales of forest products, although income should be
fairly stable for the next few years. Expenses associated with the
forestry operation are primarily real estate taxes, with additional
expenses including the costs of installing roads and drainage
systems, reforestation, and wild fire suppression.
Subsurface Interests. The Company owns full or fractional subsurface
oil, gas, and mineral interests in approximately 539,000 "surface"
acres of land owned by others in various parts of Florida, equivalent
to approximately 300,000 acres in terms of full interest. The
Company leases its interests to mineral exploration firms whenever
possible.
At December 31, 1997 mineral leases were in effect covering a total
of 24,731 surface acres. Although the leases are for three- to five-year
10
<PAGE>
Item 1. Business (continued)
------- --------
terms, they are terminable annually by the lessees; and the lessees
have no obligation to conduct drilling operations. Leases on 2,080
acres have reached maturity but are held by the oil companies without
annual rental payments because of producing oil wells, on which the
Company receives royalties.
The purchasers of 82,543 surface acres in which the Company has a
one-half reserved mineral interest are entitled to releases of
the Company's rights if such releases are required for residential
or business development. Consideration for such releases on 73,117
of those acres would be at the rate of $2.50 per surface acre.
On other acres in Lee and Hendry Counties (where producing oil
wells exist), the Company's current policy is to grant no releases
of its reserved mineral rights. In rare instances, a release of
surface entry rights might be granted upon request of a surface
owner who requires such a release for special financing or development
purposes. In counties other than Lee and Hendry, releases are
granted for a percentage of the surface value of a parcel of land.
At December 31, 1997 there were four producing oil wells on the
Company's interests. During 1997 one additional well was brought
into production on a Hendry county drill site on which the Company
shares mineral ownership with another corporation. Royalty
payments from that well should begin in the first or second quarter of
1998. Volume in 1997 was 125,356 barrels and volume in 1996
was 131,231 barrels. Production for prior recent years
was: 1995 - 117,831 barrels, 1994 - 141,488 barrels
and 1993 - 111,739 barrels.
11
<PAGE>
Item 1. Business (continued)
------ --------
GENERAL, CORPORATE AND OTHER OPERATIONS
_______________________________________
Real estate held and land transactions. More than 90% of the
Company's lands have been owned by the Company or its affiliates
for more than fifty years. To date the Company has not been in the
business of acquiring and holding real estate for sale. Instead,
portions of the Company's lands are put to their best economic use.
Unsolicited sales are made of parcels which do not appear to offer
opportunities for use in the foreseeable future.
Land development beyond that discussed at "Business - Real Estate
Operations" will necessarily depend upon the long-range economic and
population growth of Florida and may be significantly affected by
fluctuations in economic conditions, prices of Florida real estate, and
the amount of resources available to the Company for development.
Employees. The Company has approximately 145 employees, including
approximately 70 seasonal employees in citrus operations. During
the citrus harvesting season, these seasonal employees are hired
to pack and handle the citrus crop. No employees are represented
by unions. The Company considers its employee relations to be
satisfactory.
12
<PAGE>
Item 2. Properties
______ __________
Information concerning the Company's properties is included on
pages 2-4 of the Company's 1997 Annual Report to Shareholders
(the "Annual Report") under the captions "Land Holdings",
"Citrus", and "Real Estate Operations" and is incorporated
herein by reference. Except for parts of the Annual Report
expressly incorporated herein by reference, the annual report is
not to be deemed filed with the Securities and Exchange
Commission.
Item 3. Legal Proceedings
______ _________________
There are no material pending legal proceedings to which
the Company or its subsidiaries are a party.
Item 4. Submission of Matters to a Vote of Security Holders
_______ ___________________________________________________
No matters were submitted to a vote of security holders
during the fourth quarter of the year ended December 31, 1997.
13
<PAGE>
PART II
Item 5. Market for the Registrant's Common Stock and Related
Shareholder Matters
------ ----------------------------------------------------
(a) Common Stock
Information concerning the Company's common stock and dividends
is included on page 28 of the Annual Report under the caption
"Common Stock Prices and Dividends" and such discussion
is incorporated herein by reference.
(b) Recent Sales of Unregistered Securities
None
Item 6. Selected Financial Data
------- -----------------------
Five-year financial statement data is included on page 4
of the Annual Report under the caption "Five-Year Financial Highlights"
and such information is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition
------- ------------------------------------------------------------
and Results of Operations.
--------------------------
Management's Discussion and Analysis of Financial Condition
and Results of Operations is included on pages 25 through 27 of the
Annual Report, under the captions "Management's Discussion and
Analysis," and "Financial Position" and such discussion is incorporated
herein by reference.
Item 7A Quantitative and Qualitative Discloures about Market Risk
------- ---------------------------------------------------------
Not Applicable
Item 8. Financial Statements and Supplementary Data
Financial Statements
--------------------------------------------------------
Financial statements incorporated by reference in this report
are listed at Part IV, Item 14 (a), "Financial Statements."
Item 9. Changes in and Disagreements with Accountants Accounting
and Financial Disclosures
------ -----------------------------------------------------
There were no disagreements with accountants on accounting and
financial disclosures.
14
<PAGE>
PART III
The information required by Items 10, 11, 12, and 13 is
incorporated herein by reference to the registrant's 1997 annual
meeting proxy statement pursuant to Instruction G to Form 10-K.
On March 31, 1998, the registrant anticipates filing with the
Commission, pursuant to Regulation 14A under the Securities Exchange
Act of 1934, its definitive proxy statement to be used in connection
with its 1998 annual meeting of shareholders at which directors will
be elected for the ensuing year.
Executive Officers of the Registrant
------------------------------------
The executive officers of the registrant, their ages at January 31,
1997, their business experience during the past five years, and the year
first elected as an executive officer of the Company are as follows:
Bob D. Allen, 63, president and chief executive officer, March 1990
to present.
Bruce W. Teeters, 52, senior vice president-finance and treasurer,
January 1988 to present.
Both of the above are elected annually as provided in the By-Laws.
15
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
------- ---------------------------------------------------------------
(a.) 1. Financial Statements
--------------------
The Company's 1997, 1996, and 1995 consolidated financial
statements, together with the report of Arthur Andersen LLP,
dated February 5, 1998, appearing on pages 5 to 23 of the
accompanying 1997 Annual Report to Shareholders are incorporated
by reference in this Form 10-K Annual Report. The following is
a list of such financial statements with references to the pages
of the 1997 Annual Report to Shareholders on which they may be found:
Annual Report
Page No.
--------------
Report of Independent Certified Public Accounts 5
Consolidated Statements of Income three years ended
December 31, 1997 6
Consolidated Balance Sheets as of December 31,
1997 and 1996 7
Consolidated Statements of Shareholders' Equity
for the three years ended December 31, 1997 8
Consolidated Statements of Cash Flows for the three
years ended December 31, 1997 9-10
Notes to Consolidated Financial Statements 11-23
With the exception of (i) the aforementioned financial
statements and (ii) the information incorporated under
Items 2, 5, 6, and 7, the 1997 Annual Report to Shareholders
is not to be deemed filed as part of this report.
2. Financial Statement Schedules
-----------------------------
Included in Part IV of this Annual Report on
Form 10-K:
Report of Independent Certified Public Accountants
on Financial Statement Schedules on Page 19 of this
Annual Report on Form 10-K.
Schedule III - Real Estate and Accumulated
Depreciation on page 20 of this
Annual Report on Form 10-K
Schedule IV - Mortgage Loans on Real Estate
on page 21 of this Annual Report on
Form 10-K
<PAGE> 16
14. Exhibits, Financial Statements Schedules and
Reports on Form 8-K (continued)
--------------------------------------------
Other Schedules are omitted because of the absence of
conditions under which they are required or because the
required information is given in the financial statements
or notes thereof.
3. Exhibits
See Index to Exhibits on page 23 of this
Annual Report on Form 10-K.
(b) Reports on Form 8-K
-------------------
No reports were filed on Form 8-K during the fourth
quarter of the year ended December 31, 1997.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
CONSOLIDATED-TOMOKA LAND CO.
(Registrant)
3/20/98 By /s/ Bob D. Allen
Bob D. Allen, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1934, this report is
signed below by the following persons on behalf of the Registrant in the
capacities and on the dates indicated.
3/20/98 Chairman of the Board and Director /s/ David D. Peterson
David D. Peterson
3/20/98 President, Chief Executive
Officer (Principal Executive
Officer), and Director /s/ Bob D. Allen
Bob D. Allen
3/20/98 Senior Vice President-Finance
Treasurer (Principal Financial
and Accounting Officer), Director /s/ Bruce W. Teeters
Bruce W. Teeters
3/20/98 Director /s/ John C. Adams, Jr.
John C. Adams, Jr.
3/20/98 Director /s/ Robert F. Lloyd
Robert F. Lloyd
18
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULES
TO CONSOLIDATED-TOMOKA LAND CO.:
We have audited in accordance with generally accepted auditing
standards, consolidated financial statemens included in
Consolidated-Tomoka Land co.'s 1997 annual Report to Shareholders
incorporated by reference in this Form 10-K, and have issued our
report thereon dated February 5, 1998. Our audits were made
for the purpose of forming an opinion on these statements
taken as a whole. The schedules listed in item 14(a) 2 are
the responsibility of the Company's management and are presented
for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic consolidated
financial statements. These schedules have been subjected to
the auditing procedures applied in the audits of the basic
consolidated financial statements and, in our opinion, fairly
state in all material respects the financial data required to be
set forth therein in relation to the basic consolidated financial
statements taken as a whole.
Arthur Anderen LLP
Tampa, Florida
February 5, 1998
19
<PAGE>
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTIONS>
COSTS CAPITALIZED
INITIAL COST TO COMPANY SUBSEQUENT TO ACQUISITION
------------------------- ------------------------------
DESCRIPTION ENCUMBRANCES LAND BUILDINGS &
- ----------- ----------- ---- IMPROVEMENTS IMPROVEMENTS CARRYING
COSTS
------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
SHOPPING CENTER
AT:OCALA 2,499,770 406,414 3,040,377 53,768
CITRUS FACILITY &
TREES
AT:
LAKE PLACID 9,179,173 1,485,974 1,335,426 9,931,958
MISCELLANEOUS NONE 735,433 26,956 677,071
--------------------------------------------------------------------------
11,678,943 2,627,821 4,402,759 10,662,797 --
==========================================================================
GROSS AMOUNT AT WHICH
CARRIED AT CLOSE OF PERIOD
DATE OF
--------------------------------- ACCUMULATED COMPLETION OF DATE
LAND BUILDINGS TOTAL DEPRECIATION CONSTRUCTION
ACQUIRED
-------------------------------- ------------ -------------- ---------
<S> <C> <C> <C> <C> <C> <C>
OCALA 406,414 3,094,145 3,500,559 1,033,023 N/A 1987
LAKE PLACID 1,485,974 11,267,384 12,753,358 2,936,820 VARIOUS N/A
MISCELLANEOUS 1,412,504 26,956 1,439,460 143,560 N/A VARIOUS
--------------------------------------------------
3,304,892 14,388,485 17,693,377 4,113,403
==================================================
1997 1996 1995
----------- ---------- ----------
<S> <C> <C> <C>
COST:
BALANCE AT BEGINNING OF YEAR 25,544,117 31,683,184 32,320,163
IMPROVEMENTS 657,688 182,985 8 51,394
COST OF REAL ESTATE SOLD (8,508,428) (6,322,052) (1,488,373)
----------- ----------- -----------
BALANCE AT END OF YEAR 17,693,377 25,544,117 31,683,184
===============================================
ACCUMULATED DEPRECIATION:
BALANCE AT BEGINNING OF YEAR 6,566,029 7,631,177 7,015,261
DEPRECIATION AND AMORTIZATION 731,962 833,994 879,776
DEPRECIATION ON REAL ESTATE
SOLD (3,184,588) (1,899,142) (263,860)
------------------------------------------------------
BALANCE AT END OF YEAR 4,113,403 6,566,029 7,631,177
======================================================
</TABLE>
20
<PAGE>
SCHEDULE IV
CONSOLIDATED-TOMOKA LAND CO.
MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1997
<TABLE>
<CAPTIONS>
PRINCIPAL
FINAL PERIODIC AMOUNT OF
DESCRIPTION INTEREST MATURITY PAYMENT PRIOR FACE
CARRYING LOANS
RATE DATE TERMS LIENS AMT. AMOUNT (A)
DELINQUENT
- ----------- -------- -------- -------- ----- ----- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
MORTGAGE N/R
SECURED BY
REAL ESTATE:
Highlands Co 8.50% 01/03 Level, plus balloon of $394,334 -- $ 560,000 $ 495,063 --
Volusia Co 9.25% 12/98 Level, plus balloon of $1,116,073 -- 1,969,541 1,094,925 --
Volusia Co 9.25% 12/00 Level, plus balloon of $611,200 -- 764,000 363,000 --
Volusia Co 9.25% 12/98 Level, plus balloon of $313,438 -- 356,250 313,437 --
Volusia Co 8.50% 12/01 Level, plus balloon of $974,083 -- 1,220,000 1,174,249 --
Volusia Co 8.50% 01/03 Level, plus balloon of $502,381 -- 713,440 628,986 --
Hernando Co 9.00% 05/00 Level, plus balloon of $888,516 -- 975,000 934,529 --
Other 6.25%-9.25% Various Level, plus balloon of $86,835 -- 156,149 141,828 --
-----------------------------------------
-- $ 6,714,380 $ 5,146,017 --
=========================================
(A) FOR FEDERAL INCOME TAX PURPOSES, THE AGGREGATE BASIS OF THE
LISTED MORTGAGES WAS $5,146,017
(B) A RECONCILIATION OF THE CARRYING AMOUNT OF MORTGAGES FOR THE
THREE YEARS ENDED DECEMBER 31, 1997, 1996,
AND 1995 IS AS FOLLOWS:
1997 1996 1995
------- ------- --------
<S> <C> <C> <C>
BALANCE AT BEGINNING OF YEAR $10,944,356 $7,097,776 $8,993,825
NEW MORTGAGE LOANS 12,900 4,911,607 2,247,350
COLLECTIONS OF PRINCIPAL ( 5,811,239) (1,065,027) ( 4,143,399)
------------------------------------
BALANCE AT END OF YEAR $ 5,146,017 $10,944,356 $7,097,776
====================================
</TABLE>
21
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
EXHIBITS
TO
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
Commission File No. 0-5556
CONSOLIDATED-TOMOKA LAND CO.
(Exact name of registrant as specified in the charter)
22
<PAGE>
EXHIBIT INDEX
Page No.
(2.1) Agreement of Merger and Plan of Merger and Reorganization
dated April 28, 1993 between Consolidated-Tomoka Land Co.
and CTLC, Inc. filed with the registrant's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1993 and
incorporated by this reference. *
(2.2) Certificate of Merger dated April 28, 1993 filed with the
registrant's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1993 and incorporated by this reference. *
(3.1) Articles of Incorporation of CTLC, Inc. dated February 26,
1993 and Amended Articles of Incorporation dated March 30,
1993 filed with the registrant's Quarterly Report on Form
10-Q for the quarter ended March 31, 1993 and incorporated
by this reference. *
(3.2) By-laws of CTLC, Inc. filed with the registrant's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1993 and
incorporated by this reference. *
10 Material Contracts:
(10.1) Amendment Agreement No. 1 to the 1996 Citrus World
Marketing Agreement dated August 11, 1997 between
Citrus world, Inc. and Consolidated-Tomoka Land Co. 24
(10.2) Packing House Agreement executed October 20,1997 between
Turner Food Corporation and Consolidated-Tomoka Land Co. 27
(10.3) The Consolidated-Tomoka Land Co. Unfunded Deferred
Compensation Plan filed with the registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1981
and incorporated by this reference. *
(10.4) The Consolidated-Tomoka Land Co. Unfunded Deferred
Compensation Plan executed on October 25, 1982 filed with
the registrant's annual report on Form 10-K for the year
ended December 31, 1982 and incorporated by this reference. *
(10.5) The Consolidated-Tomoka Land Co. Stock Option Plan
effective April 26, 1990 filed with the registrant's
Quarterly Report on Form 10-Q for the quarter ended
June 30, 1990 and incorporated by this reference. *
(10.6) Lease Agreement dated August 28, 1997 between the City
of Daytona Beach, and Indigo International Inc., a wholly
owned subsidiary of Consolidated-Tomoka Land Co. 33
(10.7) Development Agreement dated August 18, 1997 between the
City of Daytona Beach and Indigo International Inc., a
wholly owned subsidiary of Consolidated-Tomoka Land Co. 67
(11) Statement of Computation of Per Share Earnings is include
on Page 21 of the 1997 Annual Report to Shareholders and
incorporated by this Reference *
(13) 1997 Annual Report to Shareholders 72
(21) Subsidiaries of the Registrant 117
(23) Consent of Arthur Andersen LLP 118
* - Incorporated by Reference
23
<PAGE>
EXHIBIT 10.1
AMENDMENT AGREEMENT NO. 1
to the
1996 CITRUS WORLD MARKETING AGREEMENT
THIS AMENDMENT AGREEMENT made this 11th day of August 1997 by
and between CITRUS WORLD, INC., a Florida cooperative organization
having its principal office in Lake Wales, Florida (hereinafter
referred to as "Citrus World") and CONSOLIDATED-TOMOKA LAND CO. of
Lake Placid, Florida (hereinafter referred to as "Member")
WITNESSETH
WHEREAS Member is a stockholder-member of Citrus World and
heretofore, effective September 1, 1996, Member and Citrus World entered
into a uniform marketing agreement respecting certain
of Member's citrus fruit which agreement is hereafter referred
to as the "1996 Marketing Agreement"; and
WHEREAS both parties now desire to amend the said 1996
Marketing Agreement in certain respects as set forth below;
NOW, THEREFORE, in consideration of the premises and
other valuable consideration, the parties mutually agree to
the following:
A. Paragraph 5 of the 1996 Marketing Agreement is
hereby amended to read as follows:
"5. Certificate of Compliance. Each year within 30
days following the close of Member's fiscal year, Member
will deliver to Citrus World a certificate of compliance
in the form of Exhibit "A" attached hereto and made a part
hereof signed by Member, and accompanied by an opinion of
Member's independent auditor to be based on Member's records attesting
to the fact (a) that all fruit delivered by Member to Citrus World during
the preceding Florida Citrus Season was in fact Fruit Owned or controlled
by Member as herein defined; and (b) that the total quantity of all such
Fruit Owned or Controlled by Member was in fact delivered to Citrus World
by Member."
B. Paragraph 10 (Diversion of Fruit) of the 1996
Marketing Agreement is hereby amended by adding the following
as new subparagraph (f):
24
<PAGE>
"(f) Member's obligation to deliver Limited Fruit hereunder,
if any, shall also be subject to the exceptions listed in subparagraphs
(a), (b), (c), (d) and (e) above, provided that in
the event any such instance occurs which affects the quantity of
Limited Fruit that Member is obligated to deliver hereunder, such
quantity may at Member's option be reduced: (1) if Member is a
cooperative, by the number of boxes actually lost by member;
or (2) if Member is not a cooperative, then by the number of
boxes which is in the same proportion as the sold or otherwise
lost grove acres bears to the total number of grove acres
originally owned by Member."
C. Except as herein amended the 1996 Marketing Agreement
shall continue in full force and effect.
IN WITNESS WHEREOF the parties have caused this Amendment
Agreement to be executed by their duly authorized representatives as of
the day and year first above written.
MEMBER: Attest or witness:
By: Hugh J. Veley Betty Caudill
____________________________ _______________________
CITRUS WORLD, INC.
By: F. M. Hunt N. T. Mitchell
____________________________ _______________________
25
<PAGE>
CITRUS WORLD
1997-98 UNIFORM MARKETING AGREEMENT
EXHIBIT "A"
CERTIFICATE OF COMPLIANCE
To the best of our knowledge and belief, the undersigned
member of Citrus World hereby certifies (a) that all fruit
delivered to Citrus World by the undersigned during the
1997-1998 Florida Citrus Season consisted of Fruit Owned
or Controlled by the undersigned as such terms are defined in
Paragraph 1 of the Citrus World Uniform Marketing Agreement; and (b) that
the total quantity of such fruit has been delivered
to Citrus World in accordance with Paragraph 2 of said Agreement.
By:____________________________
Date:__________________________
26
<PAGE>
EXHIBIT 10.2
PACKING HOUSE AGREEMENT
THIS AGREEMENT, made and entered into the 20th day of October,
1997, by and between TURNER FOODS CORPORATION, a Florida
corporation, 25450 Airport Road, Punta Gorda, Florida 33950
(herein referred to as "TFC") and CONSOLIDATED-TOMOKA LAND CO.,
Post Office Box 1005, Lake Placid, Florida 33852 (hereinafter
referred to as "CONSOLIDATED").
WITNESSETH
WHEREAS, CONSOLIDATED is the owner and operator of a fresh citrus
fruit packing house located near Lake Placid, Florida
(hereinafter referred to as the "packing house"), and
WHEREAS, TFC is the owner of citrus groves located in Highlands,
Collier, Hendry, Charlotte, DeSoto, and Martin Counties, Florida,
known as the 'HICKORY, HIGHLAND, GATOR SLOUGH, CHARLOTTE, DESOTO
and SUNRISE CITRUS GROVES", and
WHEREAS, the parties desire that a portion of the citrus fruit raised
on said TFC CITRUS GROVES which is suitable for packing as fresh
fruit shall be run through CONSOLIDATED's packing house, pursuant to
the terms and conditions hereinafter set forth:
1.0 Committed Fruit: TFC agrees to deliver and CONSOLIDATED agrees
to receive at its packing house the following estimated quantities
providing that previous commitments can be met:
Variety Estimated Quantity
Robinson Tangerine 12,000
Hamlin Orange As mutually agreed upon
Pineapple Orange As mutually agreed upon
Orlando Tangelo 7,000
Temple 50,000
Murcott Tangerine As mutually agreed upon
Valencia as mutually agreed upon
The above volumes are subject to market conditions, TFC and CONSOLIDATED
have the right to add varieties or volumes, or to delete varieties or
volumes, if acceptable to both parties.
2.0 Pools: All fruit from TFC run through CONSOLIDATED's packing
house will be pooled with other fruit of like grade and quality
from CONSOLIDATED or from other growers.
27
<PAGE>
2.1 Pool Periods: All fruit harvested will be accounted for in
a seasonal pool period by variety. The seasonal pool period is
further defined as August through June or upon completion of
final harvest of fruit covered by this Agreement.
2.2 Pack-out: CONSOLIDATED shall account for all fruit, received by
its packing house from HICKORY, HIGHLAND, GATOR SLOUGH, CHARLOTTE,
DESOTO and SUNRISE CITRUS GROVES separately and on a daily basis
by standard box (hereinafter defined) and shall transmit DAILY to
TFC (c/o Jim Snively; FAX No. 941-657-6837) a report of all pack-out
data for such fruit. "Pack-Out Data" shall be deemed to mean listing
by variety and by grade of (i) all fruit that meets fresh fruit standards
and (ii) all fruit that is eliminated.
3.0 Packing and Selling Costs: Packing and selling costs are based
on a packed 1-3/5 bu. carton.
3.1 Packing Costs: Packing and costs based on a packed 1-3/5 bu. box:
Packed In 4/5 Bu 2/5 Bu #4 #5 Bulk
Bins
Carton Carton Bagmasters Bagmasters Wood
Oranges $5.50 $7.10 $7.00 $6.90 $1.50
Temples $5.50 $7.10 $7.00 $6.90 $1.50
Tangelos $5.50 $7.10 $7.00 $6.90 $1.50
Tangerines $7.10 N/A N/A 3# bags $1.50
$8.40
3.2 Selling Costs: $0.30 per packed or bulk standard box.
3.3 Handling Costs: $0.20 per packed or bulk standard box.
3.4 Elimination Haul: Hauling: Per weight box (90 lbs. for
Oranges, Temples and Tangelos; 95 lbs. for Tangerines; 85 lbs. for
Grapefruit).
28
<PAGE>
Elimination Haul Rates:
Temple
Tangelo
Destination Orange Tangerine
Silver Springs, Winter Garden $0.50/box $0.60/box
SunPac, Winter Haven $0.42/box $0.52/box
Coke, Auburndale $0.45/box $0.55/box
Tropicana, Bradenton $0.45/box $0.55/box
Tropicana, Fort Pierce $0.45/box $0.55/box
Cargill, Frostproof $0.35/box $0.45/box
LaBelle $0.35/box $0.45/box
Orange Co., Bartow $0.42/box $0.52/box
3.5 Elimination Charges: $0.25 for Orange, Temples, Tangelos:
$0.40 for Tangerines.
3.6 Industry Assessments: As set by the industry groups (to
be determined after the October 10, 1997 crop estimate and attached
as an addendum to this agreement) and is to be deducted from
Fruit Proceeds of TFC and paid by CONSOLIDATED.
4.0 Haul Charges from Grove to Packing House: CONSOLIDATED agrees
to haul all fruit from HICKORY CITRUS GROVE for $0.16 per box,
from HIGHLANDS and GATOR SLOUGH CITRUS GROVES for $0.40 per box, and from
DESOTO CITRUS GROVE for $0.20 per box, to be deducted from Fruit Proceeds
of the participation plan.
5.0 Pick and Roadside Charges: Pick and roadside charges will
be negotiated with an independent contractor approved by TFC. TFC will
pay for all pick and roadside charges direct to harvester. CONSOLIDATED
agrees to advance TFC $1.25 per box weekly for fruit delivered to packing
house.
6.0 Elimination Fruit: Packing house eliminations will be sold
directly to a processing plant of TFC's choice under a separate contract
agreement. Proceeds from sale of elimination fruit will go directly to
TFC. TFC will furnish TFC Trip Ticket books, one for each grove, for
a CONSOLIDATED representative to write for each load of eliminations
delivered for TFC's account. CONSOLIDATED will mail, daily, copies
of TFC Trip Tickets to the Punta Gorda address above. All TFC Trip
ticket books used or unused should be returned to the grove location
by the end of the current season.
29
<PAGE>
7.0 Terms of Payment: Within 30 days following the close of
each month during each Florida Citrus season, CONSOLIDATED will pay
to TFC 75% of the anticipated pool returns, less the harvesting advance
and other charges listed in paragraphs 3.0, 4.0, and 5.0, due TFC arising
from all fruit picked and sold during each month.
The remaining balance due from such pool returns will be paid
by CONSOLIDATED to TFC within 75 days after the final close of each pool.
Each TFC Grove should be accounted for separately, with separate
statements. Each statement should tie to TFC Trip Ticket numbers,
which can be sorted by ticket prefix numbers (grove identification
number). All payment checks and statements should be sent to
Turner Foods Corporation, 25450 Airport Road, Punta Gorda, FL 33950.
8.0 Estimated Returns: CONSOLIDATED will provide estimated returns
and payment dates as requested throughout the season. TFC understands
the estimates may vary considerably from actual final returns
depending upon many variables. CONSOLIDATED will report the average FOB
selling price for each carton size on a weekly basis (to be faxed to Jim
Snively at 941-465-6837).
9.0 Standard Box: For the purposes of this Agreement, "standard box"
means Florida standard weight boxes as follows: Oranges - 90 pounds;
Grapefruit - 85 pounds; Tangerines - 95 pounds.
10.0 Delivery Schedule: Delivery schedules shall enable TFC to harvest
in a timely fashion so as to enhance marketability and to avoid loss from
premature harvest or excess loss due to over-maturity. Delivery
schedules shall be coordinated with CONSOLIDATED and TFC site
representatives.
11.0 Right of Entry: TFC reserves the right for its agents or designees
to enter CONSOLIDATED's packing house as it may elect for the purpose of
inspecting the work. CONSOLIDATED reserves the right for its agents or
designees to enter TFC's groves for inspection and harvest of the fruit
under contract.
30
<PAGE>
12.0 Records and Accounts: CONSOLIDATED shall keep and maintain such
records and accounts in connection with the performance of the Contract,
as shall permit CONSOLIDATED to furnish TFC an accurate written
allocation of the total amount paid for performance of the Contract to
the various elements of the Contract. CONSOLIDATED shall retain
such records and accounts for a period not less than five (5) years
and shall make records available to TFC for inspection and copying, where
records are kept, during reasonable business hours and upon seven (7)
days' written request.
13.0 Term of Contract: This contract shall commence upon full
execution of this Contract and shall remain in force through the 1997-
1998 season.
14.0 Complete Agreement and Non-Waiver: This Contract is intended
to be final and complete, and exclusive statements of the terms of the
Agreement between the parties. The parties agree that parol or extrinsic
evidence may not be used to vary or contradict the express terms of this
Contract. Except as specifically provided herein, this contract shall
not be amended or modified, and no waiver of any provision hereof shall
be effective, unless set forth in a written instrument authorized and
executed with the same formality as this contract.
15.0 Binding Effect: This Agreement shall be binding upon and inure
to the benefit of the parties successors and assigns.
IN WITNESS WHEREOF, the parties have executed this Agreement this 20th
day of October, 1997.
TURNER FOODS CORPORATION
/s/ Linda Doyle By: /s/ James A. Snively
------------------------ --------------------
Witness James A. Snively
Manager, Marketing &
& Sales
/s/ Sylvia Leon
________________________
Witness
CONSOLIDATED-TOMOKA LAND CO.
/s/ Linda Doyle By: /s/ Hugh J. Veley
-------------------------- ---------------------
Witness Vice President-Citrus
/s/ Sylvia Leon
_______________________
Witness
31
<PAGE>
ADDENDUM
Assessments
Assessments
STD. BOX
Dept. of Agriculture .1452
Citrus Admin Committee .007
Florida Citrus Packers .006
Florida Citrus Mutual .0106
Dept. of Citrus:
Oranges 29
Temples 27
Grapefruit 30
Tangerines 27
Tangelo 27
Total Assessments:
Oranges .4482*
Grapefruit .4582*
Temples, Tangelo, Tangerines .4282*
* These Assessments do not include Florida Citrus Mutual 1997-98
season.
/s/ Hugh J. Veley
Vice Pres. Citrus
-----------------
32
<PAGE>
EXHIBIT 10.6
LEASE AGREEMENT
THIS LEASE AGREEMENT ("Lease"), entered into this 28th day of
August, 1997, between the CITY OF DAYTONA BEACH, a municipality
of the State of Florida, hereinafter referred to as "City", and
INDIGO INTERNATIONAL INC., a Florida corporation, hereinafter
referred to as "Indigo".
WHEREAS, the City entered into a Master Agreement
(Exhibit "A") with the Ladies Professional Golf Association
("LPGA") and other parties to develop golf facilities at LPGA
International within the LPGA Development of Regional
Impact ("DRI"), and
WHEREAS, City owns and maintains an existing eighteen (18) hole
golf course with related improvements and desires to cause to be
developed a second eighteen (18) hole golf course with related
improvements, all at LPGA International, and
WHEREAS, the City has determined that it is in the best interest
of the public to lease the golfing facilities referenced herein
to enhance the enjoyment thereof, to expedite construction and
development of the second LPGA golf course and other
facilities as more particularly described in a Development Agreement
of even date between the City and Indigo ("Development Agreement")
and to have the property subject to this Lease managed by private
enterprise, and
WHEREAS, the parties agree, in furtherance of their mutual
objectives, it is to their advantage to enter into a long-term
lease for the operation of both eighteen (18) hole
LPGA golf courses which are to be owned by the City.
NOW, THEREFORE, for Ten Dollars ($10.00) and other good and valuable
consideration, the receipt and sufficiency of which
are hereby acknowledged, the City and Indigo agree as follows:
1. LEASED PREMISES:
a. First Course. One part of the real property to be
leased hereby consists of that certain real property located
in the City in an area commonly known as the "LPGA
International" and is more particularly described in Exhibit
"B" attached hereto and made a part hereof, including all
improvements now or hereafter located thereon, including,
without limitation, the existing eighteen (18) hole Rees Jones
designed LPGA golf course, three (3) practice holes, practice
range, putting greens, maintenance buildings, the existing
tournament/interim clubhouse structure and all other structures
and fixtures appurtenant to the Rees Jones LPGA golf course
operation including parking lot, and rights to ingress and
egress within the property described in Exhibit "B".
33
<PAGE>
b. Second Course and Golf Operations Facility.
i. Another part of the real property to be
leased consists of real property located in the City within
LPGA International which shall be the site of the second
LPGA golf course designed by Arthur Hills to be developed
pursuant to the Development Agreement which real property is
described in Exhibit "C" attached hereto and made a part hereof.
Upon completion of construction of the second LPGA golf course,
the real property shall be more particularly described by a
surveyor in a sketch of legal description. Once the final
legal description of the second LPGA golf course is approved by
the City and Indigo, that legal description shall be substituted
as Exhibit "C" to this Lease by an amendment to this Lease.
ii. The remaining part of the real property to be
leased consists of real property located in the City within
LPGA International which shall be the Golf Operations Facility
Parcel as hereinafter defined on which the Golf Operations Facility
as hereinafter defined is to be developed pursuant to the
Development Agreement. The Golf Operations Facility Parcel
is generally described in Paragraph 2(a) hereof and in
Exhibit "C-1" attached hereto and made a part hereof. Upon
completion of construction of the Golf Operations Facility
as hereinafter defined and the Club Facility as
hereinafter defined, the Golf Operations Facility Parcel shall
be more particularly described by a surveyor in a sketch of
legal description. The Golf Operations Facility Parcel
shall include all portions of the Golf Operations Facility
and the City and Indigo agree that the size of the Golf
Operations Facility Parcel shall be kept to a minimum.
Once the final legal description of the Golf Operations Facility Parcel
is approved by the City and Indigo, that legal
description shall be substituted as Exhibit "C-1" to this
Lease by an amendment to this Lease.
c. Personal Property. As part of this Lease and the
consideration therefor, the City includes all of the personal
property listed on Exhibit "D" attached hereto and made a
part hereof including any personal property covered by
equipment leases from third parties or other agreements by which
property owned by third parties is located on the property
described in Exhibit "B" and which Indigo has agreed to assume
and which may be assignable to Indigo ("Personal Property").
Upon any termination of this Lease, substantially equivalent
personal property in use, type, age and value must
remain on the property described in Exhibits "B", "C" and "C-1"
for use by the City in its operation as the owner of the real
property described in Exhibits "B", "C" and "C-1".
34
<PAGE>
During the term of this Lease, the Personal Property owned by
the City shall be deemed titled in Indigo for purposes of
maintenance, repair, replacement and liability to remove
all such liabilities from the City and to place all
responsibilities therefor on Indigo. Any transfer of title
necessary to title any such Personal Property in Indigo is
without additional consideration as it is part of the Leased
Premises and is being done at the City's request to protect it
from liability. Further, because of the useful life of the
Personal Property, the Personal Property will be replaced by
Indigo at its sole cost and expense over the term of the
Lease and it is the intention of the parties that Indigo be
permitted to trade in, salvage or otherwise dispose of,
non-functional items of Personal Property or items of Personal
Property that have exceeded their useful life provided that
they are replaced with suitable items of replacement personal
property. Indigo acknowledges that any replacement personal
property paid for or acquired by Indigo is part of the
Personal Property and remains part of the Leased Premises upon
any termination of this Lease. Indigo shall provide the City
with a schedule of the Personal Property annually on September
1 of each lease year showing any replacement personal property
and any item of Personal Property removed from service during
the preceding lease year. Such schedule shall be in the same
general format as Exhibit "D".
d. Leased Premises. The term "Leased Premises" as used
herein shall mean the Personal Property, the real property
described in Exhibit "B", the real property described in
Exhibit "C" and the real property described in Exhibit "C-1".
e. Modifications to Leased Premises. The City
and Indigo agree that the legal descriptions in Exhibits "B", "C"
and "C-1" are subject to modifications upon development and
construction of the second LPGA golf course, the Golf Operations
Facility as hereinafter defined, the Club Facility as hereinafter
defined, the resort hotel and further residential and other
development in LPGA International by Indigo Development Inc.
or its affiliates and their respective successors and assigns
of the lands surrounding the Leased Premises. The City and
Indigo agree to execute such releases, modifications or
amendments to this Lease and any memorandum thereof as
may be necessary to modify or finalize the legal descriptions
of the Leased Premises provided that such releases, amendments
or modifications to the Leased Premises shall not impair
The operation of the Rees Jones LPGA golf course, the Arthur Hills LPGA
golf course or the Golf Operations Facility.
35
<PAGE>
f. Donation of Land and Depreciation of
Improvements by Indigo.
i. Under the Master Agreement, Consolidated-Tomoka
Land Co. (or its affiliates and subsidiaries, one of which
is Indigo), is to donate to the City unimproved land for the
two LPGA golf courses and the clubhouse. The City has agreed to
accept the unimproved land for the Golf Operations Facility
as hereinafter defined in lieu of the land for the clubhouse.
It is anticipated that donation of the second LPGA golf course
will be made reasonably close in time to the Commencement Date
of this Lease and donation of the Golf Operations Facility
Parcel as hereinafter defined will be made once the Golf
Operations Facility as hereinafter defined has been designed
and permitted. Nothing contained in this Lease is intended to
change the donation of the unimproved land for the two
LPGA golf courses and the Golf Operations Facility Parcel
as hereinafter defined to the City. Notwithstanding the date
the deeds to the second LPGA golf course and the Golf
Operations Facility Parcel may be delivered to the City,
the City agrees that the land deeded was unimproved. The
City acknowledges that the donee of the unimproved
land for the two LPGA golf courses and the Golf Operations
Facility Parcel intends to take the fair market value of the
unimproved real property as a charitable contribution
for income tax purposes. The City acknowledges that these
donations are of value to the City and its residents as
these donations provide lands for recreational purposes at
no cost to the City and provide economic benefits to
the City. The City agrees to cooperate with the donee in
establishing such charitable contribution and to provide
such reasonable documentation thereof as the donee may request
that is satisfactory for IRS purposes provided that the same
does not create any liability to the City. The donee shall
indemnify and hold the City harmless with respect to the
donee's claimed charitable contribution.
ii. Under the Lease and the Development
Agreement, Indigo is obligated to construct certain
improvements including but not limited to the second LPGA
golf course, the Second Course Snack Bar as hereinafter defined
and the Golf Operations Facility as hereinafter defined.
To the extent that these improvements are part of the Leased
Premises or deemed to be part of the Leased Premises, such
improvements are agreed to be leasehold improvements made by
Indigo and not part of the donation of the unimproved real
property for the second LPGA golf course and for the Golf
Operations Facility. As such, Indigo shall have the right,
to the fullest extent authorized by law or regulation, to
take the depreciation on any leasehold improvements made by
36
<PAGE>
Indigo described in this Lease for income tax purposes and
that during the term of this Lease the City does not have
the right to the depreciation on any of the same for income
tax purposes.
2. GOLF OPERATIONS FACILITY AND CLUB FACILITY:
a. Golf Operations Facility. Under the Development
Agreement, Indigo has agreed to construct the Golf
Operations Facility. The Golf Operations Facility as used
in this Lease shall mean a pro shop for the sale of golf
merchandise and clothing of a minimum of 2,000 square feet;
golf professional and staff office, storage and other
golf related space of a minimum of 1,000 square feet;
locker facilities for at least 150 golfers; enclosed cart
storage facility for at least 150 golf carts; and expansion
of the existing LPGA golf course parking lot by at least 75
parking spaces. Additionally under the Development Agreement,
Indigo has agreed to construct a snack bar, restrooms and
starter area for the Arthur Hills LPGA golf course containing
at least 750 square feet ("Second Course Snack Bar") on a part
of the real property described in Exhibit "C". For purposes
of this Lease, the Second Course Snack Bar is not part of
the Golf Operations Facility and shall be constructed on a part
of the real property described in Exhibit "C". The Golf
Operations Facility shall be constructed on real property
contiguous to a portion of the real property described in
Exhibit "B" which is northerly of Champions Drive, easterly
of the existing Rees Jones LPGA golf course parking lot and
southerly of the lake adjacent to the existing 18th hole of
the Rees Jones LPGA golf course and is part of the Leased
Premises and is described in Exhibit ("C-1"). Upon completion
of construction of the Club Facility as hereinafter defined
and the Golf Operations Facility, the real property on which
the Golf Operations Facility is located ("Golf Operations
Facility Parcel") shall be described as set forth in Paragraph
1b above and the Lease amended accordingly. The Golf
Operations Facility and the Club Facility as hereinafter defined
may share a party wall. If the Golf Operations Facility and the
Club Facility share a party wall, the terms of any such party
wall agreement must be reasonably acceptable to the City.
b. Substitute for Existing Snack Bar. If, during the
term of this Lease, Indigo decides to cease the snack bar
operation in the existing tournament/interim clubhouse, such
snack bar operations may be included in the Golf Operations
Facility provided that such substitute snack bar must increase
the size of the Golf Operations Facility by at least 1,000 square
feet and be comparable to the existing snack bar in the
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tournament/interim clubhouse. Alternatively, Indigo may
build a substitute snack bar of at least 1,000 square feet
in size which must be comparable to the existing snack bar on
the real property described in Exhibit "B" provided that the substitute
snack bar must be in reasonable proximity to the
existing first, ninth, tenth and eighteenth holes of the Rees
Jones LPGA golf course. This right does not alter or modify
Indigo's obligation to build the Second Course Snack Bar.
c. Club Facility. The term "Club Facility" shall
have the same definition herein as in the Development Agreement.
The Club Facility is not part of the Leased Premises, is not
part of the Golf Operations Facility and is not part of the
Golf Operations Facility Parcel. The Club Facility does not
become the property of the City under this Lease or any
other agreement existing as of the date of this Lease.
3. USE:
a. Public Course. The Leased Premises shall be
used primarily for the operation of a public golf course
facility, subject to such limitations and restrictions as are
set forth elsewhere herein. Such use shall include the
operation of the two (2) eighteen (18) hole golf courses,
three (3) practice holes, practice range, the existing
tournament/interim clubhouse, putting greens, golf instruction,
parking facilities and equipment rental, as well as snack
bar operations and the Golf Operations Facility. The Golf
Operations Facility shall be used in connection with and as
an integrated part of the golf course operations.
b. Prohibited Activities. Indigo agrees not to use
the Leased Premises for, or carry on or permit any dangerous
activity or any actionable nuisance. Indigo agrees to comply
with all existing permits, laws and ordinances, municipal,
state, federal and/or other governmental authority and any
and all reasonable requirements or orders of any local municipal,
state, federal or other governmental board or authority, present
or future, relating to the condition, use, and occupancy of the
Leased Premises. Anything herein to the contrary notwithstanding,
Indigo may contest any such law, ordinance, requirement, order
or regulation which it, in its reasonable judgment, deems
unreasonable or inapplicable and may defer compliance therewith,
or may defer compliance therewith without a contest, so long as
said contest and/or noncompliance does not jeopardize the
continuing operation of business as contemplated under this
Lease. The enforcement or enactment of a City ordinance of other
than protection of people and property from imminent peril which
has a unique, permanent, material and substantial adverse impact
which is different from present conditions on Indigo's ability
to conduct its principal business on the Leased Premises or
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the ability of patrons, staff or purveyors to access the
Leased Premises shall be grounds for terminating this
Lease after notice and a reasonable opportunity to cure
(including but not limited to consideration of amending or
repealing the ordinance), whereupon City will remit to
Indigo ONE HUNDRED PERCENT (100%) of all expenses incurred
by Indigo, but not previously recovered, to that date, including
the value of improvements made by Indigo and City will purchase,
at fair market value, all equipment fixtures, supplies and
inventory owned by Indigo and located on or used for the
operations of Indigo at the Leased Premises which is not part
of the Personal Property.
4. TERM: POSSESSION:
a. Initial Term. The initial term of this Lease shall
be for a period of twenty-five (25) years, commencing upon
September 1, 1997 ("Commencement Date"). Prior to the
Commencement Date, Indigo, at its option and its sole risk, shall
have the right to commence construction of the Arthur Hills LPGA
golf course. Exhibit "E" attached hereto and made a part hereof
shall govern the transfer of operational control of the Rees
Jones LPGA golf course and other existing golf facilities from
the City to Indigo on the Commencement Date.
b. Option to Extend. Provided Indigo is not then in
default under the terms of this Lease beyond any applicable
grace period, Indigo is granted seven (7) options of five (5)
years each to extend the term of this Lease on all of the same
terms and conditions thereof, including rent. Indigo shall give
written notice to the City of its election to exercise the option
to renew anytime not later than six (6) months prior to the
expiration of the initial term, or the term of this Lease as
extended. The parties agree that nothing herein shall preclude
the consideration for extending the term of the Lease beyond
the extended terms if the respective parties should so elect and
can agree. Whenever used in this Lease, the phrase "the term of
this Lease," and any similar phrase, shall include both the
initial term of this Lease and each renewal term, if such
renewal term comes into existence.
c. Surrender of Leased Premises by Indigo. Indigo agrees
to peacefully surrender possession of the Leased Premises upon
the termination of this Lease. Any holding over by Indigo
after termination of this Lease shall not constitute a renewal
hereof or give Indigo any rights hereunder in or to the
Leased Premises. Any permits related to the Leased Premises
upon termination of this Lease shall be assigned by Indigo to
the City to the extent the same are assignable.
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d. Ownership of Buildings, Improvements and Fixtures. All
buildings, improvements and permanent fixtures of whatsoever
nature at any time constructed, placed, or maintained on any part
of the Leased Premises shall be and remain the property of City
upon termination of this Lease and the same are deemed to be
leasehold improvements made by Indigo which Indigo may take
depreciation on for income tax purposes as provided elsewhere
herein.
e. Ownership of Machinery or Equipment. As provided
elsewhere herein, the Personal Property is part of the Leased
Premises and is owned by the City. The City may purchase all
machinery, equipment, inventory, trade fixtures and personal
property which is not part of the Personal Property at book or
then current market value, whichever is lower, not later than
thirty (30) days following the termination of this Lease.
f. Additional Improvements. Any improvements to the
Leased Premises, other than the improvements discussed and
described in this Lease or in the Development Agreement shall
be subject to the prior approval of City, which approval shall
not be unreasonably withheld or delayed. It is understood that
trees, bushes, and similar materials are an integral part of
the aesthetic beauty of the Leased Premises. No tree will be
removed from the Leased Premises for purposes other than normal
maintenance which includes removal of dead or dying trees,
tree trimming, or removal of tree trunks that hinder play
or maintenance on the golf course. Notwithstanding the
foregoing, Indigo shall have the right to construct, modify
and/or relocate existing drainage ponds, lines, pipes, ditches
or other facilities located on and/or adjacent to the Leased
Premises as may be deemed necessary to accommodate the design,
development, operation and maintenance of the Rees Jones LPGA
golf course and the Arthur Hills LPGA golf course, the Golf
Operations Facility, the Club Facility and adjacent resort
facilities upon development thereof; provided that such
construction, modification and/or relocation of the
drainage facilities otherwise complies with applicable
governmental regulations, and further provided that upon the
completion of such construction, modification and/or relocation,
the drainage facilities reasonably accommodate the surface
water drainage requirements of the Leased Premises. The City
agrees to join in the execution of any easements, releases or
other instruments to evidence such drainage facility modification
or relocation.
5. RENTAL PAYMENTS BY LESSEE:
a. Annual Rent. As consideration for the use of the
Leased Premises, Indigo shall pay to the City as and for rent
an annual rent payment ("Annual Rent") pursuant to the
following schedule:
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i. Commencing on September 1, 1997 through
and including August 31, 2002, the Annual Rent shall be Fifty
Thousand and no/100 Dollars ($50,000.00) per lease year plus
any applicable sales, use or other similar tax thereon.
ii. Commencing on September 1, 2002 through
and including August 31, 2007, the Annual Rent shall be One
Hundred Thousand and no/100 Dollars ($100,000.00) per lease year
plus any applicable sales, use or other similar tax thereon.
iii. Commencing on September 1, 2007 through and
including August 31, 2012 the Annual Rent shall be Two Hundred
Fifty Thousand and no/100 Dollars ($250,000.00) per lease year
plus any applicable sales, use or other similar tax thereon.
iv. Commencing on September 1, 2012 through
and including August 31, 2022, the Annual Rent shall be Five
Hundred Thousand and no/100 Dollars ($500,000.00) per lease year
plus any applicable sales, use or other similar tax thereon unless
the Annual Percentage Rent set forth in Section 5 b ii is greater
than the Annual Rent in which event the rent shall be the
Annual Percentage Rent.
v. During each of the seven (7), five (5) year
option periods of this Lease, should Indigo exercise its option
to extend the Lease, the Annual Rent shall be Five Hundred
Thousand and no/100 Dollars ($500,000.00) per lease year plus
any applicable sales, use or other similar tax thereon unless
the Annual Percentage Rent set forth in Section 5 b iii is
greater than the Annual Rent in which event the rent shall be
the Annual Percentage Rent.
vi. One-twelfth (1/12/th) of the Annual Rent for
each year shall be paid in advance to the City monthly, by the
first day of each month, with the first monthly rent payment due
on the Commencement Date. If the Annual Percentage Rent under
Section 5b ii or iii is greater than the Annual Rent under Section
5a iv or v above, any Annual Rent paid for that lease year shall
be credited against the Annual Percentage Rent due for that
lease year. As used herein the phrase "lease year" shall mean
the one (1) year period beginning on September 1 and ending on
August 31 of the next calendar year.
b. Annual Percentage Rent. Commencing on the first day
of September next occurring after a certificate of occupancy is
issued for a resort hotel facility adjacent to the Golf
Operations Facility Parcel and Club Facility and located on the
Resort Parcel as same is identified on the LPGA Development
Plan, annual percentage rent ("Annual Percentage Rent") plus
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any applicable sales, use or other similar tax thereon, shall,
in addition to the Annual Rent payable to the City under Section
5a above except as expressly otherwise provided in this Lease, be
paid to the City by Indigo pursuant to the following schedule:
i. Commencing on September 1, 1998 through and
including August 31, 2012, in addition to the Annual Rent,
Annual Percentage Rent shall be paid in an amount equal to
seven percent (7%) of the annual gross revenues from the
Leased Premises in excess of Five Million Dollars ($5,000,000)
per lease year.
ii. Commencing on September 1, 2012 through
and including August 31, 2022, Annual Percentage Rent shall be paid
in an amount equal to seven percent (7%) of the annual gross
revenues from the Leased Premises per lease year if, and only if,
the Annual Percentage Rent is greater than the Annual Rent under
Section 5a iv above.
iii. During each of the seven (7), five (5) year
option periods of this Lease should Indigo exercise its option
to extend the Lease, Annual Percentage Rent shall be paid in an
amount equal to seven percent (7%) of the annual gross revenues
from the Leased Premises per lease year if, and only if, the
Annual Percentage Rent is greater than the Annual Rent under
Section 5a v above.
iv. Any Annual Percentage Rent due under Section
5b ii or iii for any lease year shall be reduced by the Annual
Rent paid under Section 5a iv or v for that lease year.
v. No Annual Percentage Rent shall be due under
this Lease unless and until the condition precedent regarding
the resort hotel set forth above is satisfied. Annual Percentage
Rent shall be paid as set forth in subparagraph 5c below.
c. Payment of Annual Percentage Rent. On or before
sixty (60) days following the end of each lease year that the
Annual Percentage Rent provision is in effect, Indigo shall deliver
to the City a statement signed by a responsible accounting
representative of Indigo and audited by an independent
certified public accountant selected by Indigo, setting forth
in reasonable detail on a lease year basis, the gross revenues
realized from the lease operation for the preceding lease year.
At this time, any Annual Percentage Rent then due will be paid to
the City.
d. Gross Revenues Defined. As used herein, "gross revenues"
shall include all revenues received by Indigo or its agents which
are related to its golf operations at the Leased Premises whether
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the transaction generating the revenues occurs on the Leased
Premises or elsewhere in connection with the sale of golf
course tee times, memberships, instruction, practice and range fees,
golf equipment and apparel on the Leased Premises and the
rental of golf carts (either automatic or the manual pull type)
or other golf equipment and food and beverage sales on the
Leased Premises. Further, "gross revenues" shall include all
revenues in the form of commissions, rents, and other
consideration received by Indigo from concessionaires, subtenants
and independent contractors for instruction and other activities
on the Leased Premises not identified in the preceding sentence.
"Gross revenues" shall exclude any membership or other fees paid
for, or allocated for, the use of the Club Facility, the sale of
used equipment, trade fixtures or other capital assets, loan
proceeds, capital contributions, condemnation proceeds, insurance
proceeds, credits, allowances (but not allowances for bad debts)
and refunds, returns of merchandise from customers, interest on
late payment credit accounts, and the amount of any sales, use
or excise taxes, taxes on rents and other similar taxes. Gross
revenues shall not be deemed cumulative from one lease year to
any succeeding lease year; rather, they shall be computed separately
for each lease year on an accrual basis in accordance with
generally accepted accounting principles. If, at any time, there is
a bona fide dispute between the City and Indigo regarding
what constitutes the gross revenues on which Annual Percentage Rate
is to be based, the failure to pay the Annual Percentage Rent on
the amount of gross revenues in dispute shall not be a default
hereunder provided that the undisputed Annual Percentage Rent
is timely paid and that any additional Annual Percentage Rent due
is paid upon resolution of any such dispute.
e. Records. Indigo shall, with respect to business done
on the Leased Premises, keep true and accurate accounts,
records, books and dates (hereinafter called "records"), in
form satisfactory to the City, and show total gross revenues
attributable from the Leased Premises. Accurate receipt printing
cash registers or equivalent point of sale apparatus shall be
installed and kept by Indigo on the Leased Premises which shall
record each and every charge or sale made and service performed on
or from the Leased Premises, such receipts to provide for and show
the original holding and computing and totaling of the daily sales
made and services performed and the daily gross receipts of
the business done on the Leased Premises by Indigo.
f. Inspection of Records: Audit. The City shall be
entitled, at any time throughout the term of this Lease, to
question the accuracy of any statement furnished by Indigo
hereunder. For such purpose Indigo shall keep safe and intact for
at least two (2) years after the end of each lease year all
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of Indigo's records, sales slips, and other materials Indigo
is required to maintain hereunder with respect to gross
revenues. Indigo shall, upon reasonable request of not less than
five (5) business days, make the same available for examination
at any reasonable time for two (2) years after the end of the
lease year to which such records relate. Indigo hereby agrees
that the City, its employees, agents and representatives,
during normal working hours, shall have the right to inspect
and examine all such records, sales slips and other such
records, sales slips and other materials by which the City may
be enabled to ascertain the amount of Indigo's gross revenues
hereunder, provided no interruption of business activity
occurs. Indigo agrees to furnish the City, upon written request,
true and complete copies of its retail sales and use tax returns
at the time such is filed with the State of Florida relative to
its operations at the Leased Premises. The City may, once in
any lease year, and once within two (2) years after expiration of
any lease year, cause an audit of Indigo's business conducted of
the Leased Premises to be made by a certified public accountant
of the City's selection and, at the City's expense and during
normal business hours. If the inaccuracy determined for any
lease year exceeds five percent (5%) in favor of Indigo, then
Indigo shall pay the reasonable costs of conducting the audit
in addition to any unpaid Annual Percentage Rent.
g. Payment. All amounts required to be paid to the
City under the terms of the Lease shall be made in lawful money
of the United States, at such place or places as may from time
to time be designated by City by written notice given to Indigo.
h. Use Interruption. Indigo will periodically prohibit
or restrict play for fee in order to permit the LPGA to exercise
its rights under the Master Agreement, to conduct charitable
events, to protect the golf courses from inclement weather, to
conduct routine and extraordinary maintenance and repairs, to
rebuild the Leased Premises or parts thereof, or to otherwise
benefit the Leased Premises, but such prohibition or restriction
shall not relieve Indigo of its obligation to pay rent
hereunder.
6. OPERATION OF THE LEASED PREMISES AND GOLF OPERATIONS FACILITY:
a. Services: Operation Plans. Indigo shall prepare or
caused to be prepared an operational and marketing plan for each
lease year dealing with Indigo's plans for handling and
organization of such matters as starting times, group reservations,
membership privileges, tournaments, encouragement of new
golfers, maintenance of pace of play during peak periods and fee
and price schedules. Indigo agrees to diligently pursue
said operational and marketing plans. The City understands that
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the operational and marketing plans may require adjustment
over the course of the calendar year. It is the intent of the
City and Indigo to communicate regularly to keep each other
informed regarding the Leased Premises and its use.
b. Fees and Charges: Days and Hours.
i. Days and Hours . Indigo shall operate the
Leased Premises and furnish the services and facilities
offered thereon in first-class manner. The Leased Premises
and attendant facilities and services shall be open at least
those hours normally utilized by golfers for play, within the
greater Daytona Beach metropolitan area, which hours are, in
general, deemed to be daylight hours in permissible weather.
Indigo reserves the right to curtail or cease daily operation
during periods of inclement weather.
ii. Fees and Charges.
(1) Indigo shall establish and keep current
a comprehensive schedule of fees for golf play, fees for use
of the practice academy, fees for memberships, fees for
instruction, charges for practice range balls, charges for
cart rentals and food and beverage prices which shall be available
in writing at all times at the places such fees are normally paid.
Any changes in fees or charges made by Indigo shall be furnished
to City prior to the effective date of such changes. Changes
in rates, charges and fees are determined solely by Indigo.
It is understood that fees and charges will be competitive in
the Daytona Beach area and/or similar to the fee structures of
first class golf operations in other areas. A cash register
(or similar) receipt, showing at least the date issued and
amount paid, shall be issued to every person playing golf or
paying any fee or charge included in gross revenues. Golfers
shall be instructed to keep green fee receipts in their
possession during play. It is understood that due to the
importance of the pace of play, as well as the generation of
revenues, that golf cart usage may be mandatory on the two
golf courses and practice holes. Golf cart policies and pricing
are directly and solely determined and controlled by Indigo.
This specifically includes Indigo's right to prohibit entirely
the use of privately owned golf carts and power hand-carts.
(2) Nothing contained in this provision or any other
provision of this Lease shall prohibit or be deemed to prohibit
Indigo from engaging in the normal and customary golf course
operational practice of establishing membership fees and programs
of various types to use the two LPGA golf courses, practice holes
and other golf related facilities and of establishing a system
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of priority tee time reservations including but not limited
to distinctions that are based upon residency, club
membership, LPGA association, and resort guests (after the
resort hotel is constructed and open for business), while
consistently and contemporaneously making available sufficient
daily greens fee play as is customary at golf courses open to
the public.
(3) Indigo will make available to all residents of
the City a reduced greens fee rate. The reduced rate will be
a minimum of TEN PERCENT (10%) at any time off of the
established retail rate and a minimum of TWENTY PERCENT (20%) at
off-season times off of the established retail rates.
(4) The management, improvement, maintenance
and operation of the Leased Premises and all of the facilities
and services related thereto shall be under the control of
persons familiar with the golf course business and shall be under
the immediate supervision and direction of a manager representing,
and subject to, the direction and control of Indigo. Indigo
shall insure that an adequate number of personnel work at the
Leased Premises to assure a first-class golf course and golf
shop operation comparable to first-class resort facilities in
the Central Florida area.
c. Promotion of Name. Indigo agrees to do whatever
is reasonably necessary to diligently promote, and offer to the
public (subject to the rights of members) all the privileges of
the two LPGA golf courses and other facilities on the
Leased Premises. No names other than LPGA International or
other names agreed to from time to time by the City and Indigo,
the names to be selected for the golf courses, and the resort
identifiers shall be used to identify, advertise and/or promote
the two LPGA golf courses. The City and Indigo agree that any
names selected for the two LPGA golf courses or any name
selected other than LPGA International shall be subject to
the approval of the LPGA which approval shall not be
unreasonably withheld or delayed. Any advertising and
promotional material used in connection with the Leased Premises
is subject to the terms of the Master Agreement.
d. Public Courses: Non-Discrimination. Subject to
other provisions hereof, fair and equal use of the Leased
Premises subject to other provisions hereof and the hiring,
treatment and advancement of employees at the Leased Premises
shall not, in any manner, be denied or abridged on the basis of
race, sex, color, religion, ancestry, national origin or in any
other arbitrary or discriminatory manner.
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e. Clubs, Tournaments and Special Events.
i. Clubs. Indigo agrees to encourage formation
of responsible golfers' organizations by users of the golf
facilities.
ii. Tournaments and Special Events. Indigo agrees
to accommodate and encourage tournaments, both public and
restricted, and to consider suggestions for events calculated to
accommodate the public, promote golf play at the two LPGA
golf courses, and otherwise mutually benefit the parties hereto.
It is understood that Indigo reserves the right to conduct
tournaments on the Leased Premises which shall be restricted
to qualifying players. The scheduling of all tournaments and
all applicable rules shall be determined by Indigo. Indigo shall
use its best efforts to schedule any golf events or other
special events requested by the City on the Leased Premises
provided that the City makes such requests at least sixty (60)
days prior to any such event. Indigo shall fulfill the
City's obligations to the LPGA under the Master Agreement to
provide the golf facilities for tournament and other activities
under the terms and conditions provided therein. In connection
with Indigo fulfilling the City's obligations to the LPGA to
provide the golf facilities for tournament and other activities,
the LPGA shall be required to provide or to cause to be
provided liability insurance which may include such liability
insurance as is provided by the tournament sponsor. Any
such liability insurance provided hereunder shall be in
such reasonable amounts insuring such risks and with such companies
as reasonably determined by Indigo consistent with liability
insurance generally provided by the LPGA or tournament sponsors
for similar tournaments or other activities. Such liability
insurance shall name the City and Indigo as additional
insureds whether the liability insurance is provided by the LPGA
or the tournament sponsor.
iii. Prices charged for golf tournaments or special
events shall be determined by Indigo.
f. Food and Beverage Service and Other Service.
i. Pursuant to the Development Agreement, Indigo
will develop the Golf Operations Facility as part of the
Leased Premises. It is an operational necessity that Indigo
provide directly or indirectly the essential services for
the operation of the Leased Premises, including food and
beverage (including alcoholic beverage) service through snack
bar facilities, golf pro shop for customary merchandise sales,
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locker rooms for players and cart rental and that such services
be provided at a high quality by the Leased Premises.
Indigo is obligated to consistently provide the highest
standard of performance by the Leased Premises.
ii. It is the intent of the parties that the food
and beverage service be provided through snack bar facilities
on the Leased Premises as provided elsewhere herein. Such snack
bar facilities shall be open for use by the public at all
times necessary to serve the golfing public when the two LPGA
golf courses are open and will be operated in accordance with
existing restaurant and liquor laws, if applicable.
iii. All food and beverages sold or dispensed by
Indigo shall be good quality and be well prepared and served
properly. The standard of service provided shall be of equal
quality or better of such services provided similar facilities
at other resort golf courses in the Central Florida area. Indigo
has the exclusive noncompetitive right to dispense all food and
beverages on the Leased Premises.
iv. Prices charged for food and beverages shall
be determined by Indigo.
g. Liens. The City shall keep the Leased Premises and
any improvements thereon free from any and all liens and
mortgages (except Permitted Leasehold Mortgages as defined
hereinafter) arising out of any work performed, materials
furnished, or obligations incurred by the City, its employees,
agents and contractors. Indigo shall not suffer or permit any
mechanic's liens or other liens to be filed against the
Leased Premises, nor against Indigo's leasehold interest in the
land, nor any buildings or improvements on the Leased Premises
by reason of any work, labor, services or materials supplied
or claimed to have been supplied by Indigo. If any such mechanic's
liens or materialmen's liens shall be filed against the
Leased Premises or any buildings or improvements thereon, Indigo
shall cause the same to be removed or, in the alternative, if
Indigo desires to contest the same, Indigo may do so; but in
such case, Indigo hereby agrees to indemnify and save City
harmless from all liability for damages, including attorneys'
fees, occasioned thereby and shall, in the event of a judgement
on said mechanic's lien, cause the same to be discharged and
removed prior to the execution of said judgment.
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h. Taxes.
i. During the term of this Lease, Indigo hereby
agrees to pay, prior to delinquency, any fair and lawful taxes
or assessments levied or assessed against the Leased Premises and
in connection with the Leased Premises and Indigo's operation
thereof, including taxes on all structures, improvements, and
fixtures, now or hereafter, existing on the Leased Premises
and on any personal property situated in, on, or about the
Leased Premises, or in, on, or about any structures or
improvements thereon; provided however, that Indigo may pay
any such taxes and/or assessments under protest, and without
liability, cost or expense to City, in good faith contest the
validity or amount thereof. In the event Indigo shall be
unsuccessful in any such contest, such taxes and any interest
and/or penalties resulting therefrom shall be forthwith
discharged by Indigo prior to execution. If, at any time
during the term of this Lease, any lawful taxes or assessments
are assessed against the Leased Premises or are increased on
the Leased Premises, the City agrees to provide reasonable
assistance to, and support of, Indigo in any dispute over any
such taxes or assessments.
ii. If, at any time during the lease term, under
the laws of the State of Florida or any political subdivision
thereof, a tax or excise on rents or any other tax however
described, is levied or assessed against Indigo on its rent
or any portion thereof payable hereunder, Indigo covenants to
pay and discharge such tax or excise on rents on or before the
last day upon which same, or any installment thereof if the
same may be paid in installments, may be paid prior to delinquency.
It is agreed that a special City tax enacted hereafter that
is directed specifically at golf operations shall be credited
against rent payments under this Lease.
i. Utilities.
i. City shall be responsible for bringing any
potable water, sanitary sewer and reuse water utilities to the
Leased Premises.
ii. Indigo shall pay, or cause to be paid, all
charges except for irrigation as may be set forth elsewhere in
this Lease for telephone, cable television, heat, gas,
electricity, sanitary and storm sewer and potable water and all
other utilities used on the Leased Premises throughout the term
of this Lease.
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iii. The City has had a plan in effect to irrigate
the two LPGA golf courses on the Leased Premises with reuse
water. Indigo agrees to accept and use such water for
irrigation. The City is responsible for obtaining and making
available to the Leased Premises all irrigation water necessary
for use on the Leased Premises which will be supplied by City
from whatever sources it may select. The City will guarantee
the delivery of sufficient water suitable for irrigation per
lease year to maintain both golf courses at all times in
championship condition as hereinafter defined. The City shall
be responsible for any easements required in bringing said water
to the Leased Premises. The delivery schedule of water is
determined by Indigo.
j. Trash. The prompt, efficient collection and disposal
of trash, clippings, and refuse is essential to the proper
maintenance of golf courses, and Indigo shall be responsible for
such collection and disposal from the Leased Premises at its
own expense and in accordance with applicable laws and
ordinances. Indigo shall not pile or store (except
temporarily awaiting prompt collection in service areas out of
public view and approved by City) clippings, trimmings, cans,
cartons, barrels, used equipment, scrap or other similar debris
on or about the Leased Premises or suffer the same to occur.
7. MAINTENANCE AND REPAIRS:
a. Net Return. It is the intention of the parties
hereto that the income for the term of this Lease shall constitute
a net return to the City, excluding any expenses, charges or
other deductions whatsoever other than such services as are
specifically required to be supplied hereunder by the City.
Indigo agrees at its expense to keep and maintain the Leased
Premises and the improvements thereon, including but not limited
thereto, all electrical and plumbing fixtures and wiring, plate glass,
all wall and floor coverings, all painting and decorating, golf course
roadways and parking lots, including the irrigation system, fixtures,
trade fixtures, equipment, including HVAC, utilities and
landscaping, in good operable, usable and sanitary order and repair,
reasonable wear and tear and casualty loss excepted. The City
may advise Indigo in writing of any reasonable deficiency noted in
the maintenance of the Leased Premises, which deficiency shall
be cured within an appropriate period of time.
b. Maintenance of Golf Courses. The golf facilities, and
in particular the playing grounds of the two LPGA 18 hole courses
and practice holes, must be maintained at the highest level
commensurate with the quality of the professional tournament and
other special activities the golf facilities are to provide.
The standard shall be known as "Championship Condition" and
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shall equal the standard presently existing for regular play
at PGA National, TPC's Sawgrass, Lake Nona, Grand Cypress
and other highly rated golf experiences. Notwithstanding
the foregoing, Indigo shall be permitted to continue and
expand, subject to the consent of the LPGA which consent shall
not be unreasonably withheld or delayed, the existing
maintenance program of the Rees Jones LPGA golf course and practice
holes whereby certain sodded or grassed areas are being replaced
with natural vegetation, whereby the frequency of mowing
areas outside of the normal playing areas of the Rees Jones
golf course and practice holes has been significantly reduced
and whereby the mowing of some remote areas is very infrequent; provided
however such maintenance program shall not diminish the championship
condition of the Rees Jones LPGA golf course and practice holes.
c. Alterations. All remodeling, rebuilding or alterations
deemed necessary by Indigo shall be made by Indigo with the
prior consent of the City, which consent shall not be unreasonably
withheld if such remodeling and rebuilding meets or exceeds original
quality.
d. Master Agreement Obligations. Indigo hereby assumes the
obligations of the City under the Master Agreement concerning
the operation and maintenance of the Leased Premises. In
particular, but without limitation, the wetland areas and
stormwater and reuse water drainage and storage facilities are
connected to and operate interdependently with surrounding
properties of Consolidated-Tomoka Land Co. and its related entities
or affiliates and successors. Regulatory permits also govern
the operation and maintenance of the wetlands areas and stormwater
and reuse water transmission, storage and disposal. Indigo shall
be responsible for regulatory compliance and obligations of the
City for the Leased Premises under the Master Agreement.
e. Compliance with Laws. Indigo covenants and agrees
to comply with all environmental laws, including without
limitation those environmental laws that relate to the handling
of hazardous materials on or about the Leased Premises. The
indemnity provisions of paragraph 9 shall apply without limitation
to this subparagraph.
8. INSURANCE:
a. Liability. Indigo shall, throughout the lease term,
at its own cost and expense, procure and maintain in full force
and effect comprehensive general liability, automobile liability,
and property damage insurance insuring Indigo for loss, damage
or liability for personal injury, death or damage to property
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resulting from any cause whatsoever, including without limitation
the acts and/or omissions of the insured parties incident to
the use of, or resulting from an occurrence on or about, the
Leased Premises, with minimum limits of liability of FIVE HUNDRED
THOUSAND DOLLARS ($500,000) for personal injury to or death of
one person, and ONE MILLION DOLLARS ($1,000,000) for personal
injury to or death of two or more persons in each occurrence or
event, and in a minimum of FIVE HUNDRED THOUSAND DOLLARS
($500,000) for damage to property resulting from each occurrence
or event, or in lieu thereof a combined single limit of not less
than ONE MILLION DOLLARS ($1,000,000). Indigo shall procure
such liability and builder's risk insurance during any
construction under the Development Agreement or otherwise while
this Lease is in effect. Additionally, the LPGA shall be named as
an additional insured provided that naming the LPGA as an
additional insured is permitted by Indigo's insurance carrier at
a nominal charge. The City shall be named an additional insured.
Limits of liability may be raised by the City to reasonably adjust
for changed economic conditions provided the same are consistent
with the liability limits of similar golf facilities in Central
Florida.
b. Property Insurance.
i. Throughout the term of this Lease, Indigo agrees,
at Indigo's cost and expense, to keep all buildings upon the
Leased Premises, including improvements, insured against loss covered
by all risk insurance in an amount equal to the full replacement
value thereof. The "replacement value" shall be determined as
the said insurance is initially taken out and shall be updated on
an annual basis, and Indigo shall promptly notify the City, in
writing, of such determination. Said insurance policy or policies
shall be issued in the names of the City and Indigo, as their
respective interests appear.
ii. In the event of damage or destruction to any
structure(s) and/or improvement(s) on the Leased Premises during
the term hereof, notwithstanding the cause or causes thereof,
Indigo shall forthwith repair, restore, or rebuild the structure(s)
and/or improvement(s) to the same condition as immediately before
such injury, damage or destruction, whether or not said damage
or destruction was insured against, and whether or not the amount
of insurance proceeds, if any payable by reason of such damage
or destruction, is sufficient to cover the cost of repairing,
restoring, or rebuilding. The City agrees to disburse any
insurance proceeds received by it in installments to Indigo's
contractor in payment of costs of reconstruction upon presentation
of Indigo's architect's or engineer's certificates showing the
amount then reasonably due therefore. Any insurance proceeds
received directly by Indigo shall be applied toward Indigo's costs
of reconstruction and at Indigo's discretion.
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iii. Indigo agrees that all of the insurance required
under this provision shall be in the form and with companies
authorized to do business in the State of Florida; shall provide
that it shall not be subject to cancellation or change except after
at least FORTY-FIVE (45) days prior written notice to City; and
the policies or duly executed certificates for them, together
with satisfactory evidence of the payment of the premiums thereon
shall be deposited with the City upon the commencement of the
term hereof, and upon renewal of such policies, not less than
THIRTY (30) days prior to the expiration of the term of such
coverage. Should Indigo fail, after making every reasonable
effort, to effect, maintain, or renew any kind of insurance herein
required of Indigo in the required amount, or to pay the
premium thereof or deposit with City the certificates thereof,
as hereinabove provided, then in any said events, it becomes
the City's obligation so to do and such insurance and any
sums expended by the City for such insurance shall be repaid by
Indigo to the City forthwith. The City hereby agrees that
any policies herein required may be provided through blanket
policies. As circumstances change during the term hereof, the
City may, from time to time, require reasonable revisions and
changes in the foregoing insurance requirements and Indigo agrees
to comply therewith with such reasonable requirements.
9. INDEMNIFICATION:
Indigo shall protect, indemnify and save harmless City,
its officers, agents, and employees, from and against any and
all claims, demands and causes of action of any nature whatsoever
for injury to or death of persons, or loss or damage to
property, occurring on the Leased Premises or in any manner
growing out of or connected with the lease of the Leased Premises
or Indigo's construction, development, or operation of the
facilities contemplated by this Lease. This section shall not
operate to require Indigo to defend or indemnify the City with
regard to suits arising out of this Lease or of the authority of
City to enter into this Lease or to defend or indemnify City
for injury to or death of persons or loss or damage to property
caused solely by the City, its officers, agents or employees.
10. PROVISIONS PERTAINING TO ENTIRE AGREEMENT:
a. Notices. All notices to be given hereunder shall be
in writing and shall be deemed given when personally delivered or
when deposited in the United States Mail, postage prepaid,
certified return receipt requested, or registered, addressed
as follows:
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TO CITY: The City of Daytona Beach
Attention: City Manager
Post Office Box 2451
Daytona Beach, Florida 32115-2451
and
The City of Daytona Beach
Attention: City Clerk
Post Office Box 2451
Daytona Beach, Florida 32115-2451
TO LESSEE: Indigo International Inc.
Attention: William H. McMunn
Post Office Box 10809
Daytona Beach, Florida 32120-0809
and
Indigo International Inc.
Attention: Robert F. Apgar
Post Office Box 10809
Daytona Beach, Florida 32120-0809
Either party may change the address or the name or title of
the person to receive such notice by providing written notice of
such change in the manner provided herein for such notice. Indigo
and the City agree that under the LPGA Master Agreement, the LPGA
has certain rights and privileges which may be affected by a breach
or default under this Lease. The City and Indigo shall use best
efforts to provide the LPGA with a copy of any notice provided
under this Lease which is regarding any matter related to the
Master Agreement.
b. Waiver of Subrogration. The City hereby releases
Indigo and Indigo hereby releases the City, and their
respective directors, officers, agents, employees and servants,
from any and all claims or demands for damages, loss, expense
or injury to the Leased Premises, or other property of either the
City or Indigo in, about, or upon the Leased Premises, as the case
may be, which be caused by or result from perils, events or
occurrences which are the subject of insurance carried by the
respective parties and in force at the time of any such loss;
provided, however, that such waiver shall be effective only to
the extent permitted by the insurance covering such loss and to
the extent such insurance is not prejudiced thereby or the expense
of such insurance is not thereby increased.
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c. Default.
i. The following acts or events shall be considered acts
of default by Indigo ("Event of Default"):
(1) Indigo, after written notice, shall continue
to default in the payment of rent or any other sum or sums due under
this Lease for a period of FIFTEEN (15) days; or
(2) Indigo's continued default in
performance of any other covenant of this Lease for a period of
more than thirty (30) days after delivery of written notice of
such default to Indigo by the City (if such default cannot
reasonably be cured within said thirty (30) day period, Indigo shall
have such additional time to cure said default as Indigo may
reasonably require, providing Indigo uses due diligence in attempting
to cure said default); or
(3) Indigo's default under the Development
Agreement.
ii. Upon the occurrence of any Event of Default (but
subject to the provisions of Section 10c iii, iv and v), the City,
at the City's option:
(1) may, upon such notice or without notice,
as may be reasonable under the circumstances, pay the amount or
perform the obligation. All amounts paid by the City and all costs
and expenses incurred by the City in connection with the performance
of any of those obligations (together with interest at the daily prime
rate as announced by Barnett Banks of Florida or its successor from
the date of the City's paying the amount or incurring each cost or
expense until the date of full repayment by Indigo) will be payable by
Indigo to the City upon written demand therefor, accompanied by
written evidence or documentation supporting such cost or expense.
In the event Indigo fails to pay such reimbursement expenses within
thirty (30) days following written demand therefor, such reimbursement
expenses may be collected by lien against the leasehold estate created
hereby and foreclosure thereof; or
(2) may seek to enforce its rights
hereunder by injunction or specific performance or any other remedy
available at law or in equity.
iii. If the Event of Default is the failure of Indigo
to pay any rent due hereunder on or before the fifteenth day after
notice of such delinquency, Indigo shall also pay the City a late
charge equal to five percent (5%) of the amount of rent not paid
when due and all of City's reasonable expenses that arise from such
failure.
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iv. The following shall apply if the failure of Indigo
to pay rent continues for one month after City gives notice to
Indigo of such failure:
(1) Indigo shall pay the City liquidated damages
equal to one-third of the monthly portion of the Annual Rent in
addition to the unpaid rent; and
(2) Indigo shall pay the City all of the City's
reasonable expenses that arise from Indigo's failure to make the
payment when due.
v. The following shall apply if the failure of
Indigo to pay rent continues for two months or more after the City
gives notice to Indigo of such failure:
(1) In addition to the unpaid rent, Indigo shall
pay the City liquidated damages equal to one-third of the monthly
portion of the Annual Rent for each month during the period
beginning on the due date of the monthly portion of the Annual
Rent payment and ending on the date of payment of unpaid portion
of the Annual Rent and liquidated damages; and
(2) Indigo shall pay the City all of the City's
reasonable expenses that arise from Indigo's failure to make the
payment when due; and
(3) The City may also give Indigo notice that
the continued failure to pay constitutes a "Substantial Event
of Default." The notice shall state that, unless the Substantial
Event of Default is cured within thirty (30) days, the City intends
to pursue its remedies pursuant to subsection 10c vi, below.
vi. Notwithstanding anything to contrary herein, any
uncured Event of Default which substantially impairs the value to
the City of this Lease or the Leased Premises (i.e., the failure to
pay delinquent taxes which are not being contested in good faith as
provided in Section 5h, above, and which renders the Leased
Premises in danger of being forfeited, the failure to maintain the
two LPGA golf courses in championship condition, or any uncured
Event of Default described in Section 10c v (3), above, is
hereinafter referred to as a "Substantial Event of Default." Upon
the occurrence of a Substantial Event of Default, the City, at
the City's option, may either pursue any of the remedies set forth
in ii, iii or iv above, or may give Indigo notice that the failure
to cure the Event of Default constitutes a "Substantial Event
of Default." The notice shall state that, unless the Substantial
Event of Default is cured within thirty (30) days, the City
shall declare this Lease terminated and will proceed to retake
possession of the Leased Premises and all attachments and fixtures
thereto.
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vii. The following acts or events shall be considered
acts of default by the City ("Event of Default"):
(1) The City's continued default in performance
of any covenant or provision of this Lease for a period of more
than thirty (30) days after delivery of written notice of such
default to the City by Indigo (if such default cannot reasonably
be cured within said thirty (30) day period, the City shall have
such additional time to cure said default as the City may
reasonably require providing the City uses due diligence in
attempting to cure such default).
(2) If any such default is not timely cured by
the City, Indigo shall have all rights and remedies available at
law or in equity for such default.
d. Eminent Domain.
i. If the Leased Premises shall be taken or condemned
for any public or quasi-public use or purpose, by right of eminent
domain or by purchase in lieu thereof, or if a portion of the
Leased Premises shall be so taken or condemned that the
portion remaining is not sufficient and suitable, in Indigo's
reasonable judgment, for the operation of two 18 hole golf courses
and the Golf Operations Facility, then this Lease and the term
hereby granted shall cease and terminate as of the date on which
the condemning authority takes possession.
ii. If a portion of the Leased Premises is taken,
and the remaining portion can, in Indigo's reasonable judgment
(subject, however, to the rights of any Permitted Leasehold
Mortgagee), be adapted and used for the conduct of Indigo's
operations, then this Lease shall continue in full force and effect.
iii. The entire award for the Leased Premises so
taken shall be apportioned between the City and Indigo as follows:
if this Lease terminates due to a taking or condemnation, Indigo
shall be entitled to the value of Indigo's interest in the
improvements and the value of Indigo's leasehold estate so taken or
condemned, and the City shall be entitled to the balance of the
award; if this Lease does not terminate due to such taking or
condemnation, Indigo shall be entitled to the entire award to the
extent required for restoration of the Leased Premises, and out of
the portion of the award not applied to restoration, Indigo shall
have the right to the amount by which the value of Indigo's
interest in the improvements and the value of Indigo's leasehold
estate was diminished by the taking of condemnation, and the City
shall be entitled to the balance of the award. If this Lease does
not terminate due to a taking or condemnation, then: Indigo shall,
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with due diligence, restore the remaining portion of the demised
land and the improvements to a complete, independent and self-
contained architectural unit; the entire proceeds of the award
shall be deposited with a bank approved by the City and Indigo and
the amount so deposited will thereafter be disbursed to Indigo
upon restoration and reconstruction of the improvements until
the restoration has been completed and Indigo has been reimbursed
for all the costs and expenses thereof.
iv. If the temporary use (but not title) of the Leased
Premises is taken, this Lease shall remain in full force and effect,
and there shall be no abatement of rent. Indigo shall receive
the entire award for such temporary taking to the extent it applies
to the period prior to the end of the term; and the City shall
receive the balance of the award.
v. If the City and Indigo cannot agree with respect
of any matters to be determined under this Section, a determination
shall be requested of the Court having jurisdiction over the taking,
and if said Court will not accept such matters for determination,
either party may have the matters determined by a Court having
jurisdiction over the parties.
vi. Notwithstanding any provision to the contrary,
Indigo shall be entitled to any award or payment for moving and/or
relocation or business interruption. If the City is the condemning
authority, in addition, the City agrees to reimburse Indigo for all
capital expenditures incurred but not previously recovered to that
date.
e. Enforceability. The terms, covenants, and conditions
contained herein shall be binding upon and enforceable by the parties
hereto and their respective heirs, executors, administrators,
successors and assigns subject to the restrictions herein imposed
on assignment by Indigo.
f. Independent Contractor. For all the purposes hereunder,
Indigo is and shall be deemed to be a tenant and an independent
contractor.
g. Attorneys' Fees and Costs. If legal action shall be
brought by either of the parties hereto for the unlawful detainer of
the Leased Premises, for the recovery of any rent due under the
provisions of this Lease, or because of the breach of any term,
covenant or condition hereof, the party prevailing in such action
shall be entitled to recover from the party not prevailing, costs of
suit and a reasonable attorney fee which shall be fixed by the
Court.
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h. Third Party Beneficiary. The LPGA is a direct third
party beneficiary of this Lease as a party to the Master Agreement.
In exercising any enforcement rights, the LPGA shall not have any
right to any remedy at law including damages but the LPGA shall have
any and all equitable remedies including injunctive relief and
specific performance. This provision was inserted in this Lease at the
request of the LPGA and has been approved by and consented to by the
LPGA.
11. ESTOPPEL LETTERS:
The City and Indigo hereby covenant and agree that each of
them shall, without charge and at any time from time to time
within ten (10) days after request by the other, deliver a written
instrument to the other or to any person specified by the other,
which written instrument shall state the following information:
a. That this Lease is unmodified and in full force and
effect (to the extent the same is true), or if there has been any
modification, that the same is in full force and effect as so
modified (to the extent the same is true), and identifying each
such modification; and
b. Whether there are any existing defaults with respect
to the terms of this Lease known by the party executing said
instrument with respect to the other party, and if any such defaults
are known, specifying the same; and
c. The dates to which rental and all other charges hereunder
have been paid. If such instrument is directed to a potential
mortgagee of either party's interest, the City and Indigo
additionally agree that it shall contain an undertaking by the party
executing the same to notify such mortgagee of any default by the
mortgagor under this Lease and to give such mortgagee a reasonable
opportunity (which, in all events shall not be less than thirty (30)
days to cure the same); provided, however, nothing herein contained
shall be construed to require the City to subordinate the fee simple
title to the Leased Premises to the lien of any mortgage.
12. COVENANT OF QUIET ENJOYMENT:
So long as Indigo keeps and performs all of the covenants
and conditions on its part to be kept and performed under this Lease,
the City covenants and agrees that Indigo shall have quiet and
undisturbed possession and enjoyment of the Leased Premises for the
term of this Lease including any extensions thereof.
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13. ASSIGNMENT:
The City has entered into this Lease with Indigo in reliance
on established qualifications and business experience of Indigo's
management team. Consequently, Indigo may assign this Lease to its
parent corporation, any sister corporation or any affiliate of it
or any entity controlled by its parent corporation, any sister
corporation or any affiliate of it without the consent of the
City. Additionally, Indigo may assign the Lease under the same
terms and conditions contained herein to an assignee other than
as described above and be released from all obligations under
this Lease provided that the City consents to such assignment
which consent shall not be unreasonably withheld by the City.
The City may disapprove any assignment and the same shall not
be deemed to be unreasonable if: (a) assignee is not of the
highest repute, (b) the assignee does not have substantial
experience in first-class golf course management, (c) the
assignee does not have the present qualifications to operate
the Leased Premises in a first-class manner, (d) the assignee
does not have the financial resources necessary to successfully
operate and maintain the Leased Premises and pay the rents
provided herein, and (e) as measured by a totality of qualities
the assignee is not an equivalent or better entity to fulfill
the obligations of the Lease and goals of the Master Agreement
and the assignee does not have the ability to generate equal
or greater gross revenues than Indigo. The City and Indigo agree
that any assignment of this Lease shall also require the consent
of the LPGA which consent shall not be unreasonably withheld
or delayed. Indigo may sublease part or all of the Leased
Premises without the consent of the City. No assignment of part
of the Leased Premises shall be permitted.
14. PERMITTED LEASEHOLD MORTGAGE:
a. Right to Mortgage. Provided Indigo is not then in default
under the terms of this Lease beyond any applicable grace period,
Indigo and every successor and assign of Indigo is hereby given
the right by the City, in addition to any other rights herein
granted and without any requirement to obtain the City's consent,
to mortgage or grant a security interest in Indigo's interest in
this Lease and the Leased Premises subject to the terms of this
Lease and any sublease(s), under a leasehold mortgage to a Lending
Institution as hereinafter defined, or to any entity, person
or persons owning a controlling interest in Indigo, and/or to
any entity owned or controlled by the controlling owners of Indigo,
or under a purchase money leasehold mortgage in connection with any
sale of such interest, and to assign this Lease and any sublease(s)
as collateral security for such leasehold mortgage, upon the
condition that all rights acquired under such leasehold mortgage
shall be subject to each and all of the covenants, conditions
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and restrictions set forth in this Lease and to all rights and
interests of the City herein, none of which covenants, conditions,
restrictions, rights or interest is or shall be waived by the City
by reason of the right given to mortgage or grant a security interest
in Indigo's interest in this Lease and the Leased Premises, except
as expressly provide herein. Indigo agrees that it shall notify
the City in writing of any such mortgage or grant of a security
interest and identify the mortgagee.
b. Mortgage Definitions. Any mortgage made pursuant to
this Section is herein referred to as a "Permitted Leasehold
Mortgage," and the holder of or secured party under a Permitted
Leasehold Mortgage is herein referred to as a "Permitted Leasehold
Mortgagee." A "Permitted Leasehold Mortgage" shall include
whatever security instruments are used in the locale of the
Leased Premises, such as, without limitation, mortgages, deeds
of trust, mortgage deeds, security deeds and conditional deeds,
as well as financing statements, security agreements and other
documentation which the lender may require. The words "Lending
Institution," as used in this Lease, shall mean any commercial,
national or savings bank, savings and loan association, trust
company or insurance company, and any other entity approved by
the City as a Lending Institution. The City shall not unreasonably
withhold its approval of a nationally respected lender-mortgagee
(such as an eleemosynary institution or foundation, publicly held
corporation, real estate investment trust, pension fund or the like).
c. Notices to Permitted Leasehold Mortgagee. If a Permitted
Leasehold Mortgagee shall send the City a copy of its leasehold
mortgage, together with written notice specifying the name and address
of the Permitted Leasehold Mortgagee, all in accordance with the
requirements for Notices as provided in Section 10a hereinabove,
then so long as such Permitted Leasehold Mortgage shall remain
unsatisfied of record or until written notice of satisfaction is
given by the holder to the City, the following provisions shall apply
(in respect of such Permitted Leasehold Mortgage and of any other
Permitted Leasehold Mortgages):
i. There shall be no cancellation, termination,
surrender, acceptance of surrender, amendment or modification of
this Lease by joint action of the City and Indigo, nor shall the
City recognize any such action by Indigo alone, without in each case
obtaining the prior consent in writing of the Permitted Leasehold
Mortgagee (In no event shall the City be obligated to obtain the
prior consent of the Permitted Leasehold Mortgagee in order to
initiate any of the remedies of landlord upon the occurrence of
any Event of Default, as specified in Section 10c, above.) nor
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shall any merger result from the acquisition by, or devolution
upon, any one entity of the fee and the leasehold estates in the
Leased Premises.
ii. The City shall, upon serving Indigo with any
notice, whether of default or any other matter, simultaneously
serve a copy of such notice upon the Permitted Leasehold Mortgagee,
and no such notice to Indigo shall be deemed given unless a copy is
so served upon the Permitted Leasehold Mortgagee in the manner
provided in this Lease for the giving of notice.
iii. In the event of any default by Indigo under
this Lease, the Permitted Leasehold Mortgagee shall have the same
period, after service of notice upon it of such default, to remedy
or cause to be remedied or commence to remedy and complete the
remedy of the default complained of as Indigo has hereunder for
such default, and the City shall accept such performance by or at
the instigation of such Permitted Leasehold Mortgagee as if the
same had been done by Indigo. Each notice of default given by
the City shall state the amounts of whatever rent and other
payments herein provided for are then claimed to be in default
or the other causes of the default.
iv. If the City shall elect to terminate this Lease
by reason of any default of Indigo, the Permitted Leasehold
Mortgagee shall not only have the right to nullify any notice of
termination by curing such default prior to the effective date
of termination but shall also have the separate right to postpone
and extend the specified date for the termination of this Lease
as fixed by the City in its notice of termination to a date that
is six (6) months following the date of the Permitted Leasehold
Mortgagee's "Abatement Notice" (as hereinafter defined), provided
that, prior to the effective date of termination, such Permitted
Leasehold Mortgagee shall give written notice to the City
("Abatement Notice") that the Permitted Leasehold Mortgagee shall
agree with the City to accomplish the following within the times
hereinafter provided and shall, in fact, accomplish the following
in a timely manner: (A) cure or causes to be cured within thirty
(30) days following the date of the Abatement Notice any then
existing monetary defaults of which the Permitted Leasehold
Mortgagee has knowledge; (B) pay or cause to be paid during such
abatement period any rent and other monetary obligations of
Indigo hereunder of which the Permitted Leasehold Mortgagee has
knowledge, as the same fall due; (C) promptly cure or cause to
be cured any other defaults that such Permitted Leasehold Mortgagee
can cure and of which the Permitted Leasehold Mortgagee has
knowledge within thirty (30) days after delivery of the Abatement
Notice or delivery of notice of default by City to the Permitted
Leasehold Mortgagee (whichever is later) and if such default
cannot reasonably be cured within said thirty (30) day period,
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the Permitted Leasehold Mortgagee shall have such additional time
to cure said default as the Permitted Leasehold Mortgagee may
reasonably require, providing the Permitted Leasehold Mortgagee
uses due diligence in attempting to cure said default; and
(D) forthwith take steps to acquire or sell Indigo's interest in
this Lease by foreclosure of the Permitted Leasehold Mortgage
or otherwise and thereafter prosecute the same to completion
with reasonable diligence. If, at the end of said six (6)
month period, the Permitted Leasehold Mortgagee shall be
actively engaged in steps to acquire or sell Indigo's interest
herein and is in compliance with the other conditions set forth
in (A) through (C), the time for said Permitted Leasehold Mortgagee
to comply with the applicable provisions of this subparagraph iv
shall be extended for such period as shall be reasonably necessary
to complete such steps with reasonable diligence upon the
same conditions, not to exceed an additional three (3) months.
If Indigo's interest is acquired or sold as aforesaid by
foreclosure of the Permitted Leasehold Mortgage or otherwise
during said six (6) month period, as the same may be extended
as aforesaid, the intended termination of this Lease by the City
under the aforesaid notice will be automatically nullified, and
this Lease will continue as if said notice of termination had
never been given, provided that the Permitted Leasehold
Mortgagee complied with the covenants itemized in (A), (B) and (c)
in this Subsection iv above, or shall require the purchaser of
the Indigo's interest to comply with the covenants itemized in
(A), (B) and (C) in this Subsection iv above, in the event that
such defaults were not capable of being cured prior to the
foreclosure sale or deed in lieu thereof.
v. In the event of termination of this Lease by reason
of any uncured default by Indigo, the City will promptly notify the
Permitted Leasehold Mortgagee of such termination and the amount
of any sums then due to the City under this Lease, and the Permitted
Leasehold Mortgagee shall have the right to have the City enter into
a new lease of the Leased Premises with the Permitted Leasehold
Mortgagee or a nominee or other person controlled by such Permitted
Leasehold Mortgagee (hereinafter referred to in this subparagraph
as its "nominee") in accordance with the following provisions:
(1) The Permitted Leasehold Mortgagee or its
nominee or any other entity approved by City, shall be entitled to
such new lease if the Permitted Leasehold Mortgagee shall make
written request upon the City for such new lease on or before the
date which is thirty (30) days after the date on which the
Permitted Leasehold Mortgagee shall have received the notice from
the City of such termination and if such written request is
accompanied by the Permitted Leasehold Mortgagee's agreement to
pay to the City upon the execution and delivery of the new lease
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the sums which would then be due to the City under this Lease had
this Lease remained in effect and to cause to be cured any other
defaults outstanding under the Lease that such Permitted Leasehold
Mortgagee can cure and of which the Permitted Leasehold Mortgagee
has knowledge.
(2) Said new lease shall be for what would have
been the remainder of the term hereunder if this Lease had not
terminated, effective as of date of such termination, at the rent
and upon the terms, provisions, covenants and agreements as
herein contained, including all rights and options herein contained;
(3) To the extent within the control of the
City, such new lease shall be prior to any mortgage or other lien,
charge or encumbrance on the fee of the Leased Premises (except
taxes and assessments) and, if so requested by the Permitted Leasehold
Mortgagee, shall be accompanied by a conveyance quitclaiming any
right, title or interest of the City in and to the improvements on
the Leased Premises and the furnishings during the term of the Lease.
Such new lease shall, however, be subject to the same conditions
of title as this Lease is subject to on the date of the execution
hereof;
(4) In said new lease, the Permitted Leasehold
Mortgagee or its nominee shall agree to perform and observe all
covenants herein contained on the lessee's part to be performed,
except that all of the obligations and liabilities of the Permitted
Leasehold Mortgagee or its nominee as lessee under the new lease
shall cease and terminate upon any assignment of the new lease or
the sooner expiration or termination thereof and shall be subject to
any limitation on liability contained therein.
vi. The Permitted Leasehold Mortgagee shall be
given notice of any arbitration or other proceeding or dispute by
or between the parties hereto, and shall have the right to intervene
therein and be made a party to any such arbitration or other
proceeding. In any event, the Permitted Leasehold Mortgagee shall
receive notice of, and a copy of, any award or decision made in
said arbitration or other proceeding.
vii. The name of the Permitted Leasehold Mortgagee
shall be added to the loss payable endorsement of any and all fire
and other casualty insurance policies to be carried by the City or
Indigo in respect of the Leased Premises and all such policies
shall state that the insurance proceeds are to be paid to the
Permitted Leasehold Mortgagee to be held for the benefit of the
parties hereto and applied in the manner specified in this Lease.
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viii. Any award or payment in condemnation or eminent
domain in respect of the Leased Premises shall be paid to the
Permitted Leasehold Mortgagee for the benefit of the parties
hereto and applied in the manner specified in this Lease.
ix. No fire or casualty loss claims shall be settled
and no agreement will be made in respect of any award or payment
in condemnation or eminent domain without in each case the prior
written consent of the Permitted Leasehold Mortgagee, which consent
shall not be unreasonably withheld.
x. Except where the Permitted Leasehold Mortgagee has
become the lessee, no liability for the payment of rent or the
performance of any of Indigo's covenants and agreements hereunder
shall attach to or be imposed upon the Permitted Leasehold Mortgagee
(other than any obligations assumed by the Permitted Leasehold
Mortgagee), all such liability (other than any obligations assumed
by the Permitted Leasehold Mortgagee) being hereby expressly waived by
the City.
d. The City shall, upon request, execute, acknowledge and
deliver to each Permitted Leasehold Mortgagee an agreement prepared
at the sole cost and expense of Indigo, in form satisfactory to the
Permitted Leasehold Mortgagee and the City, among the City, Indigo
and the Permitted Leasehold Mortgagee, agreeing to all the provisions
of this Section.
15. JURISDICTION:
Any dispute, controversy, interpretation or any other
matter regarding this Lease between the City and Indigo which cannot
be resolved by the City and Indigo shall be determined by the Circuit
Courts of Volusia County, Florida.
16. RECORDATION:
A memorandum of this Lease will be recorded in the local
public records. Additionally, the parties shall execute and record
any corrective or supplemental memoranda of this Lease upon the
determination of the final legal description for the second LPGA
golf course and the Golf Operations Facility Parcel and upon any
modification to the Leased Premises.
17. RADON DISCLOSURE STATEMENT:
Pursuant to Section 404.056, Florida Statutes, notification
is hereby given to Indigo as follows:
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"RADON GAS: Radon is a naturally occurring radioactive gas that,
when it has accumulated in a building in sufficient quantities,
may present health risks to persons who are exposed to it over
time. Levels of radon that exceed federal and state guidelines
have been found in buildings in Florida. Additional information
regarding radon and radon testing may be obtained from your
county public health unit."
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement the day and year first above written.
Witnesses:
CITY OF DAYTONA BEACH
/s/Joyce L. Butler
By: /s/ Baron H. Asher, Mayor
/s/Deborah L. Griffith Mayor
Attest: /s/ Gwen Azema-Edwards,
City Clerk
Witnesses:
/s/Jill S. Lust
/s/ Joan Howerton INDIGO INTERNATIONAL INC.
By: William H. McMunn
President
Approved:
/s/ Frank B. Gummey, III
City Attorney
STATE OF FLORIDA
COUNTY OF VOLUSIA
The foregoing instrument was acknowledged before me this 27th
day of August, 1997 by BARON H. ASHER and GWEN AZAMA-EDWARDS as the
Mayor and City Clerk of the City of Daytona Beach, at Municipal
Corporation, on behalf of the corporation. They are personally
known to me and did not take an oath.
/s/ Joyce L. Butler
Notary Public
My Commission Expires: 3/24/00
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DEVELOPMENT AGREEMENT
This Development Agreement ("Agreement") made and entered into
this 28th day of August, 1997 by and between THE CITY OF DAYTONA
BEACH, a Florida Municipal Corporation (the "City"), and INDIGO
INTERNATIONAL INC., a Florida corporation ("Indigo");
WHEREAS, the City entered into a Master Agreement with the
Ladies Professional Golf Association ("LPGA"), Consolidated-Tomoka
Land Co. ("CTLC"), Indigo Development Inc. ("IDI") and The Charles
Wayne Group Ltd., dated May 24, 1990;
WHEREAS, Indigo is a wholly owned subsidiary of CTLC;
WHEREAS, the City, the LPGA, CTLC and IDI have actively pursued a
developer to develop the second LPGA golf course, the clubhouse and
resort hotel;
WHEREAS, the City, the LPGA, CTLC and IDI have agreed on a phased
development plan whereby the second LPGA golf course, the Golf
Operations Facility as hereinafter defined and the Club Facility as
hereinafter defined will be constructed and developed before a resort
hotel is developed and other than as contemplated by the Master
Agreement; and
WHEREAS, Indigo has agreed to construct the second LPGA golf
course, the Golf Operations Facility and the Club Facility as
described herein contingent upon the City leasing both LPGA golf
courses and other LPGA golf facilities to Indigo.
NOW, THEREFORE, for Ten Dollars ($10.00) and other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the City and Indigo covenant and agree as
follows:
1. RECITATIONS. The above recitations are true and correct and
are incorporated by reference herein.
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2. GENERAL AGREEMENT
The City and Indigo will cooperate in creating golf facilities at
LPGA International to stimulate residential, commercial, industrial
and tourist development within the City and more particularly the LPGA
DRI. The City and Indigo are actively cooperating to provide two (2)
eighteen (18) hole championship golf courses, related practice
facilities, pro shop facilities, clubhouse and certain related
clubhouse facilities, and to provide integrated management of all the
aforementioned facilities and which has required or will require
substantial investment by both parties, in fulfillment of the goals
and objectives of the Master Agreement which contains the obligations
and rights of the City.
3. LPGA INTERNATIONAL
The City owns, has developed and operated an eighteen (18) hole
championship golf course, three (3) practice golf holes including
related practice facilities, a tournament/interim clubhouse facility,
and parking as well as maintenance facilities which maintenance
facilities are capable of serving two (2) eighteen (18) hole golf
courses. As a part of the current, overall phased plan of
development, the City will lease the two LPGA golf courses, 3 practice
golf holes including related practice facilities, the
tournament/interim clubhouse facility, parking, the Golf Operations
Facility as hereinafter defined and the existing maintenance
facilities at LPGA International to Indigo for twenty-five (25) years
with seven (7), five-year options to renew pursuant to the terms of
the lease. The lease shall commence on September 1, 1997 which will
be before development of the second LPGA golf course, the Golf
Operations Facility as hereinafter defined and the Club Facility as
hereinafter defined commences.
4. SECOND LPGA GOLF COURSE
The City, under the Master Agreement, has the obligation to
develop a second LPGA golf course. Pursuant to that obligation, the
City has contracted with a golf course architect, Arthur Hills, and
with Miller-Sellen Engineers to design, permit and provide
construction management services for the second LPGA golf course. The
City has made expenditures to the architect, engineers and others in
pursuant of development of the second LPGA golf course. Under the
Master Agreement, CTLC and its related entities are obligated to deed
to the City, without charge, the land necessary for the construction
of the second LPGA golf course. Indigo agrees to construct the second
LPGA golf course pursuant to the City's obligation under the Master
Agreement and in accordance with the concept already developed by the
City and its design professionals and in accordance with all
applicable existing permits. The City shall assign any contracts and
permits held by the City for second LPGA golf course to Indigo.
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Indigo agrees to pay all costs of the construction of the second LPGA
golf course incurred after the date of this Agreement without any
obligation to reimburse the City for any expenditures made by the City
prior to the date of this Agreement. Indigo agrees to
operate and maintain the second LPGA golf course and the Golf
Operations Facility as hereinafter defined upon completion pursuant to
the lease with the City. The City as part of the leased premises
agrees to lease the second LPGA golf course and the Golf
Operations Facility as hereinafter defined to Indigo under the terms
of paragraph 3. Indigo agrees to complete construction of the same,
including green-in of the second LPGA golf course, by December 31,
1998 unless acts or events beyond the control of Indigo cause delays
in completion thereof and green-in of the second LPGA golf
course. Indigo agrees to have in place adequate insurance to protect
the property.
5. GOLF OPERATIONS FACILITY AND CLUB FACILITY.
Pursuant to the Master Agreement, the City is obligated to
construct a clubhouse to operate, in conjunction with and support of,
the golf facilities provided in paragraphs 2, 3 and 4 above. Indigo
agrees to cause CTLC and its related entities to convey to
the City as provided in the lease the site for the Golf Operations
Facility as hereinafter defined (except Item (f) below which will be
constructed on the second LPGA golf course) and the Club Facility as
hereinafter defined, contiguous to the golf facilities, and to
construct with due diligence and operate facilities meeting the
following specifications which vary from those described in the Master
Agreement:
a. Pro-shop for the sale and rental of golf merchandise and
clothing of a minimum of 2000 square feet.
b. Office, storage and other golf related space of a
minimum of 1000 square feet.
c. Locker facilities for at least 150 golfers.
d. Enclosed cart storage facility for at least 150 golf
carts.
e. Expansion of the existing LPGA golf course parking lot
by at least 75 parking spaces.
f. Snack bar, restrooms and starter area for the second
LPGA golf course containing at least 750 square feet.
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For the purposes of this Agreement, the term "Golf Operations Facility"
shall mean items (a) through (f) listed above. As provided
in the lease, the Golf Operations Facility (excluding item (f) above)
shall be deeded to the City and is part of the leased premises. Other
amenities and facilities will be constructed by Indigo adjacent to the
Golf Operations Facility which for purposes of this Agreement are
defined to be the "Club Facility". The Club Facility shall include a
bar and grill, dining room, kitchen, tennis courts and a swimming
pool. The Club Facility is not a part of, and is not deemed to be a
part of the Golf Operations Facility for purposes of this Agreement
or the lease and shall be owned and operated by Indigo, its successors
and assigns. Indigo agrees to obtain the approval of the City and
other parties to the Master Agreement of the design of the Golf
Operations Facility and the Club Facility to insure that they
provide the necessary quality required under the Master Agreement and
are compatible with other development. Prior to the deeding the Golf
Operations Facility to the City under the lease, Indigo agrees that it
shall bind itself and its successors and assigns at all times to
operate the Golf Operations Facility as available to and in support of
the two LPGA golf courses and the other golf facilities in paragraphs
3 and 4 above, and that it shall specifically identify the City as a
third-party beneficiary of any such agreement. To construct the Golf
Operations Facility, the Club Facility and any other facilities
contemplated herein, certain permits and approvals will be required
from the City. The City agrees that it will not require any property
developed pursuant to this Agreement which is owned or to be owned by
the City under the Master Agreement or the lease to be platted. The
City agrees to expedite any such permitting and approvals needed from
the City for construction of the Golf Operations Facility, the Club
Facility and any other facilities contemplated by this Agreement as it
is in the best interest of the City and Indigo to have the Golf
Operations Facility, the Club Facility and second LPGA golf
course available for use at the earliest time.
6. RESORT HOTEL
Under prior agreements with the City that are no longer in
effect, others were obligated to construct certain resort hotel
facilities in addition to the facilities to be constructed pursuant to
this Agreement. Indigo does not have any obligation of any
type or nature under this Agreement or otherwise to build or develop a
resort hotel. Under the current, phased development plan, meeting and
multi-use rooms, banquet facilities and conference facilities will be
developed as part of a resort hotel and not as part of the Golf
Operations Facility or the Club Facility. The obligation to develop
and build a resort hotel shall remain as set forth in the Master
Agreement.
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7. INTERIM MANAGEMENT - LPGA
There currently exists an Interim Management Agreement for golf
services at the LPGA International between the City and Buena Vista
Hospitality Group Inc.("BVHG"). That agreement shall be terminated by
the City effective upon commencement of the lease. Indigo may choose
to manage the two LPGA golf courses, the other golf facilities and the
Golf Operations Facility itself or to secure professional management
such as with BVHG.
8. CONDITIONS PRECEDENT
The City's obligations herein are conditioned on it being assured
that the real property for the second LPGA golf course and the Golf
Operations Facility will be conveyed to it by CTLC or its related
entities at a time mutually acceptable to the City, Indigo and CTLC.
There are no conditions precedent to the performance of Indigo"s
obligations under this Agreement.
9. DEFAULT
If either the City or Indigo defaults under, or breaches this
Agreement, the non-defaulting party shall have all rights and remedies
available at law or in equity for such breach or default. Prior to
exercising any right or remedy for any such breach or default, the
non-defaulting party shall give the defaulting party prior written
notice of such default and thirty (30) days within which to cure such
default or breach. A default by Indigo under this Agreement shall be
an event of default under the lease.
WHEREFORE, the parties attach their hands and seals this 27th day
of August, 1997.
Witnesses: THE CITY OF DAYTONA BEACH
/s/ Deborah L. Griffith By: /s/ Baron H. Asher, Mayor
/s/ Joyce L. Butler
Attest: /s/ Gwen Azema-Edwards,
City Clerk
Witnesses: INDIGO INTERNATIONAL INC., a
Florida Corporation
/s/ Jill S. Lust
/s/ Joan Howerton By:/s/ William H. McMunn
President
Approved:
/s/ Frank B. Gummey, III
City Attorney
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CONSOLIDATED-TOMOKA LAND CO.
ANNUAL REPORT
1997
72
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CONSOLIDATED-TOMOKA LAND CO.
MISSION - To efficiently produce and market fresh citrus fruit for
distribution by supermarkets primarily located in the eastern half
of the United States and Canada.
MISSION - To originate optimum development plans and establish development
rights for the company's land holdings generating increased land
values recognized in sales to site specific developers.
<TABLE>
<CAPTION>
BOARD OF DIRECTORS OFFICERS
<S> <C>
John C. Adams, Jr.(2) David D. Peterson
Chairman of the Board of Hilb, Chairman of the Board
Rogal and Hamilton Company of
Daytona Beach, Inc. (an insurance Bob D. Allen
agency); Executive Vice President President and Chief
of Hilb, Rogal and Hamilton Executive Officer
Bruce W. Teeters
Bob D. Allen(1) Senior Vice President-Finance
President and Chief Executive and Treasurer
Officer of the Company
Robert F. Apgar
Jack H. Chambers(3) Vice President-General Counsel
Of Counsel to law firm of
Foley & Lardner Joseph Benedict III
Vice President-Government
James P. Gorter Relations
Chairman of the Board of
Baker Fentress & Company; limited Patricia Lagoni
partner of Goldman, Sachs & Co. Vice President-Administration
and Corporate Secretary
William O. E. Henry(3)
Practicing attorney and partner Hugh J. Veley
in law firm of Holland & Knight LLP Vice President-Citrus
counsel for the Company
Emily J. Sottile
Robert F. Lloyd (2) Assistant Secretary and
32120-0809
Chairman of the Board and Assistant Treasurer
Chief Executive Officer of
Lloyd Buick-Cadillac Inc. Linda Crisp
Assistant Secretary
John H. Pace, Jr.(3)
Chairman of Cardinal Investment Gary Moothart
Company (investor in securities Controller
and real estate)
INDIGO DEVELOPMENT INC.
David D. Peterson(1) William H. McMunn
Chairman of the Board of the Company; President
Retired President and Chief Executive
Officer of Baker Fentress & Company (1) Member of the Executive Committee
(2) Member of the Compensation and
Bruce W. Teeters Stock Option Committee
Senior Vice President-Finance (3) Member of the Audit Committee
and Treasurer of the Company
COUNSEL
Holland & Knight LLP
Post Office Box 1526
Orlando, Florida 32802-1526
REGISTRAR AND STOCK TRANSFER AGENT
Registrar and Transfer Company
10 Commerce Drive
Cranford, New Jersey 07016-3752
AUDITORS
Arthur Andersen LLP
101 East Kennedy Boulevard
Tampa, Florida 33602
MAILING ADDRESS
Consolidated-Tomoka Land Co.
Post Office Box 10809
Daytona Beach, Florida 32120-0809
</TABLE>
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TO OUR SHAREHOLDERS
During 1997, Company operations added significant strength to
its financial condition. For the year, cash provided by
operations exceeded $12 million allowing cash and cash
equivalents to increase $7.6 million. At year-end, outstanding
Company debt had been reduced to just under $13.5 million, a
$4.4 million reduction from the prior year figure.
Net income for 1997 totaled $4,011,367 or $.64 per share
compared to $6,602,558 or $1.05 earned in the prior year.
Lower earnings were experienced in both of the Company's
major business segments: citrus production and land development.
Exercise of stock options by management also impacted earnings
as appreciation in Company stock prices over option grant
prices were reflected in general and administrative expenses
as compensation.
The citrus industry is currently influenced by the negative
effects of a worldwide imbalance in supply and demand.
Citrus operations of the Company for calendar 1997 were profitable
but disappointing as contribution to earnings by citrus
operations declined $2.9 million. Both lower prices and
lower production caused the reduced results. The lower production
was due to prior year sales of groves.
On December 29, 1997, the Company completed the sale of
approximately 11,000 acres of land on the western border of
its Daytona Beach Area land holdings for approximately $10
million. The land sold was not designated for development in
the near-term; and since it was acquired for conservation
purposes, a new competitor for future land sales was not created.
Also during 1997, an additional 63 acres of land were sold for
approximately $2 million. Land sales would have been considerably
greater except for the delay of several closings to the first
half of 1998 at the buyer's option.
With the sale of two office buildings in 1997, including the
Company's headquarters building in Daytona Beach, income
property holdings have essentially been liquidated. The only
remaining property for sale is a jointly owned shopping center near
Ocala.
At the LPGA International project, the Company's major real
estate activity, a significant event occurred on September 1,
1997, when responsibility for the operations of the LPGA
International golf courses was transferred from the City of Daytona
Beach to a wholly owned subsidiary of the Company. The
agreement with the City provides for the second golf course and
a clubhouse to be constructed by the Company in return for a long-
term lease from the City on both golf courses. The first course
designed by Rees Jones was previously constructed at the expense
of the City. The second course, designed by Arthur Hills, is
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under construction and is scheduled to open in November of
this year. The clubhouse, currently under design, should be
in operation by late 1998 as well. It is anticipated that
moving forward on these major projects will boost home sales
and lead to the development of a destination resort hotel.
The Titleholders Championship golf tournament, sponsored by
Mercury, will be played at LPGA International April 30 through
May 3 with weekend rounds covered by CBS Television.
For the fifth straight year, dividends increased with the
dividends paid during 1997 amounting to $.65 per share. The
1997 amount represented a 225% increase over the $.20 per share
paid in 1992. Continuing this trend, the $.35 dividend paid
in February 1998 was an increase of 17% over the comparable
1996 dividend.
Although future earnings will continue to be subject to the
volatility and timing of commercial real estate transactions and
the macro-economic factors affecting citrus product prices,
prospects for the future remain strong. In addition to the
major development projects underway at LPGA International, plans
are being developed to pre-permit several new industrial sites
to expedite commercial land sales. Citrus production should
increase as younger groves planted in the late 1980's and
early 1990's mature. The Company's improved financial
condition will allow it to pursue its goals and objectives from
a position of strength.
Bob D. Allen
President
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SHAREHOLDERS' REPORT
LAND HOLDINGS
Land holdings of Consolidated-Tomoka Land Co. (the "Company")
and its affiliates, all of which are located in Florida, include:
approximately 15,700 acres in the Daytona Beach area of
Volusia County; approximately 4,080 acres in Highlands County,
near Lake Placid; a shopping center in Marion County;
commercial/retail sites in Volusia County; and full or
fractional subsurface oil, gas, and mineral interests in
approximately 539,000 "surface acres" in 20 Florida counties.
The conversion and subsequent utilization of these assets provides
the base of the Company's operations.
In December of 1997, the Company sold to the St. Johns River
Water Management District, in partnership with the Florida
Department of Forestry, approximately 11,000 acres of undeveloped
land lying between U. S. Highway 92 and State Road 40. This was
the westernmost portion of the Volusia County holdings, all
lying west of LPGA Boulevard and Interstate 95. Also in 1997,
the Company sold the Consolidated Center, a seven-story office
building in downtown Daytona Beach, and an office building in
Palm Coast.
The remaining holdings of approximately 15,700 acres in
Volusia County include approximately 14,200 acres within the
city limits of Daytona Beach, approximately 1,080 acres within
the unincorporated area of Volusia County, and small acreages in
the cities of Ormond Beach and Port Orange. Of the 14,200 acres
inside the city limits of Daytona Beach, approximately 3,600 acres
have received development approval by governmental agencies.
The 3,600 acres plus approximately 730 acres owned by the City
of Daytona Beach, 15 acres owned by Indigo Community Development
District, and 165 acres sold to others for development are the
site of a long-term, mixed-use development known as "LPGA
International," which includes the national headquarters of
the Ladies Professional Golf Association along with a "Signature"
golf course and a residential community, a maintenance facility,
an interim clubhouse, and main entrance roads to serve the
LPGA community. Construction of the entrance signage and
landscaping was completed in 1995, and construction of a second
golf course is scheduled for completion this year. Construction
of several homes around the first golf course, on 70 acres of
land sold to a residential developer, began in 1995 with the
first residences completed in early 1996. The LPGA completed
construction of its headquarters in April 1996. The lands
not currently being developed, including those on which
development approvals have been received, are involved in an
active forestry operation. Except for a 15-acre parcel at
the Interstate 95 and Taylor Road interchange in the Port
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Orange area south of Daytona Beach, the tract straddles Interstate
95 for 6 1/2 miles between International Speedway Boulevard (U. S.
Highway 92) and State Road 40, with approximately 12,500 acres
west and 3,100 east of the interstate.
Subsidiaries of the Company are holders of the developed
Volusia County properties and are involved in the development
of additional lands zoned for residential, commercial, or
industrial purposes.
In Highlands County, located in south central Florida along
U.S. Highway 27, the Company utilizes approximately 3,900 acres
in its citrus operation. The citrus groves and most of the
other Highlands County lands are near Lake Placid, Florida, which
is about 75 miles east of Sarasota and 150 miles northwest of
Miami. The remaining lands, approximately 180 acres, are mostly
in a subsidiary's inventory of residential or industrial lands.
The Company's oil, gas, and mineral interests, which are equivalent
to full rights of 300,000 acres, were acquired by retaining
subsurface rights when acreage was sold many years ago.
CITRUS
Under the name "Lake Placid Groves," the Citrus Division of
Consolidated-Tomoka Land Co. grows and packs fresh whole
citrus fruit, primarily oranges, tangelos, temples, tangerines,
and Ruby Red grapefruit. The brand names "Lake Placid" and
"Winding Waters" are used in marketing directly to wholesalers
and retailers in the eastern half of the United States and Canada.
Because fresh fruit usually commands higher prices, the
operation emphasizes sales of fresh fruit packed in the Company's
fresh fruit packing plant; however, the division also ships part
of the harvest (not suitable for packing because of size,
appearance, content deficiencies, or demand) to a cooperative,
partially owned by the Company, in Lake Wales, Florida, where it
is processed into juice and juice concentrate.
All groves are situated in prime citrus-growing areas on
the southern ridge of Highlands County, Florida; and a portion
of the land is adjacent to the southeastern shoreline of Lake
Placid, whose water temperatures provide some protection against
freezing weather. The trees are in excellent condition.
The Company crop for the 1995-96 and 1996-97 seasons showed
production of 1,385,000 and 1,047,000 boxes, respectively; and
the 1997-98 harvest is expected to be 1,200,000 boxes. Production
in the latter two seasons was negatively impacted by groves sold as
part of lake frontage sales. Production from the 1,600-acre
grove planted during the years 1989 through 1992 continues to
increase as these trees reach maturity. The average age of
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grove trees is approximately 15 years, well within the
average 45-year productive life. The groves are well maintained
and irrigated by a modern low-volume system. A portion of the
citrus groves are mortgaged as collateral for a term loan.
The fresh fruit packing plant near Lake Placid, Florida, packs
and sells both Company fruit and that of other growers.
This process involves washing, grading, waxing, and packing
into cartons or bags for direct shipment to customers who buy
in truckload quantities. For each of the last ten seasons,
the plant has been among the top ten largest Florida packers
of fresh oranges. The facility is within a seven-mile radius of
all its grove sources, providing a significant transportation
cost advantage.
The cooperative to which a portion of the crop is sent is owned
by the Company and twelve other organizations. It markets
and processes under several brand names, including Florida's
Natural, Donald Duck, and Blue Bird. The division shares in
the net proceeds from the processed products (juice, juice
concentrate, and by-products) according to the amount and content
of fruit delivered to the plant.
REAL ESTATE OPERATIONS
One of the Company's major achievements in recent years was the
relocation of the Ladies Professional Golf Association ("LPGA") to
Daytona Beach in 1989 with planned construction of its national
headquarters on Company lands. The LPGA signed a four-party
agreement with the Company, Indigo Group Ltd., a wholly owned
subsidiary ("IG LTD"), and the City of Daytona Beach which
includes development of a new mixed-use community on approximately
3,800 acres of Company land. Development plans were approved by
the governmental agencies in 1993. The City of Daytona Beach
completed construction of a Rees Jones designed "signature"
golf course in 1994. That course has been ranked by Golf Magazine
as one of the ten best municipal golf courses in the country.
Construction of a second golf course, designed by architect
Arthur Hills, is well underway on lands donated by the Company
to the City. On September 1, responsibility for the operations
of the LPGA International golf courses was transferred from the
City of Daytona Beach to a wholly owned subsidiary of Consolidated-
Tomoka. The agreement with the City of Daytona Beach provides
for the second golf course and a clubhouse to be constructed by
the Company in return for a long-term lease from the City on
both golf courses. The design phase of the clubhouse has begun.
Depending upon weather conditions and other variables, both
the second golf course and the clubhouse are scheduled to open in
the fourth quarter of 1998. The LPGA has recently announced
that the Titleholders Championship Tournament, held at LPGA
International and nationally televised, will be sponsored
78
<PAGE>
by Mercury, a division of Ford Motor Company, and known as
the Mercury Titleholders Championship, for the next three years.
Budget Rent A Car will be a secondary sponsor of the tournament,
to be held April 30 through May 3, 1998.
Significant to the City of Daytona Beach and to development of
the Company's lands is the opening of an interchange at
Interstate 95 and LPGA Boulevard in early 1996, providing a
new gateway to the LPGA International development and other
Company land. This interchange has been dramatically landscaped
with funds provided by a Florida Department of Transportation
beautification grant and the Company.
From October 1990 until December 1993, IG LTD centered its
operations on residential community development, construction,
and sales. In December of 1993, IG LTD discontinued its home
building and sales activities in two communities under lot
marketing and sales arrangements. Residential lots owned by
IG LTD at December 31, 1997 are:
o 67 lots in Riverwood Plantation, a community of 180 acres
in Port Orange, Florida.
o 5 lots at the 200-acre Indigo Lakes development in Daytona
Beach.
o 41 lots at the 180-acre Tomoka Heights development in
Highlands County, Florida. IG LTD is developing this community,
located adjacent to Lake Henry. It is approved for a total
of 587 single-family and duplex units now selling in the
$89,000 to $135,000 price range. The development features
controlled access and has appeal for active retired couples.
After the sale of the Consolidated Center and the Palm Coast
office building in 1997, rental properties are limited to a three-
story office building in downtown Daytona Beach, adjacent to the
Consolidated Center, and an interest in a shopping center east
of Ocala. The office building, containing 17,000 square feet,
is under a lease/purchase agreement, and is considered a financing
lease. Terms of the sale of the Consolidated Center included
a commitment by the Company to lease the space now occupied as
corporate offices in the building for a period of at least three
years.
IG LTD owns a 50% interest in The Forest Center Shopping Center
east of Ocala. The property is encumbered by a mortgage. The
Mariner Towne Square Shopping Center in Spring Hill was sold
in 1995, with the adjacent Mariner Village Shopping Center sold
in 1996.
Other leasing activities of the Company include ground leases
for billboards, leases of communication tower sites, and a
hunting lease covering approximately 8,300 acres.
79
<PAGE>
Another source of income is from subsurface interests which
are leased for mineral exploration, as described under "Land
Holdings." At December 31, 1997, oil and gas leases were in
effect covering a total of 24,731 surface acres in Lee and
Hendry Counties, Florida. In addition, a geophysical permit
and option to lease 10,200 acres in Lee County was executed in
1996. The permit calls for 3-D seismic exploration; and both
the permit and the option expire in March of 1998. At December
31, 1997, there were four producing oil wells on the Company's
interests. Volume produced in 1997 from these wells was
125,356 barrels, compared with 131,231 barrels in 1996. A
fifth producing well on Company interests was drilled in 1997,
and royalty payments from it are expected to commence soon.
Oil lease income and oil royalty income have in the past been
much more significant sources of income for the Company than
in recent years. The Company's current policy is to grant no
releases of its reserved mineral rights in oil-producing counties
unless required to do so through contractual obligations; however,
releases of surface entry rights might be sold upon request of a
surface owner who requires such a release for financing or
development purposes; and rights in non-oil-producing counties
will be sold as opportunities to do so arise. As Florida develops,
such requests will no doubt increase. Sales and releases of surface
entry rights in 1997 produced revenues of $19,250.
Income from sales of forest products varies considerably from
year to year depending on economic conditions and weather.
The primary market today is in pulpwood with sawtimber, plylogs,
and some cypress being marketed as conditions and the market allow.
Geographic location of the timber tract is excellent. In addition
to access by major highways (Interstate 95, State Road 40, and
International Speedway Boulevard), the internal road system for
forestry purposes is good. Sale of the approximately 11,000-acre
parcel to St. Johns River Water Management District in 1997
reduces the Company's potential for future income from sales of
forest products, although income should be fairly stable for
the next few years.
80
<PAGE>
Five-Year Financial Highlights
(In thousands except per share amounts)
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
$ $ $ $ $
<S> <C> <C> <C> <C> <C>
Summary of Operations:
Revenues:
Citrus 9,445 13,863 8,819 8,175 10,719
Real Estate 5,412 7,642 7,743 16,528 15,780
Profit on Sales of
Undeveloped Real Estate 7,725 385 4,718 1,400 314
Interest and Other Income 1,369 6,123 2,404 2,623 653
------------------------------------------
TOTAL 23,951 28,013 23,684 28,726 27,466
------------------------------------------
Operating Costs and Expenses 11,761 14,021 13,044 14,980 22,029
General and Administrative
Expenses 5,932 3,386 3,484 3,478 3,549
Provision for Income Taxes 2,247 4,003 2,736 3,778 672
Income from Continuing Operation 4,011 6,603 4,420 6,490 1,216
Loss from Discontinued Operations
(net of tax) - - - (135) (759)
Cumulative Effect of Change in
Accounting for Income Taxes - - - - 329
Net Income 4,011 6,603 4,420 6,355 786
Basic Earnings per Share:
Income from Continuing
Operations 0.64 1.05 0.71 1.04 0.20
Net Income 0.64 1.05 0.71 1.01 0.13
Diluted Earning Per Share:
Income from Continuing
Operations 0.64 1.04 0.70 1.04 0.20
Net Income 0.64 1.04 0.70 1.01 0.13
Dividends Paid Per Share 0.65 0.55 0.45 0.35 0.30
Summary of Financial Position:
Total Assets 58,234 59,673 59,693 61,535 65,815
Shareholders' Equity 37,854 35,791 32,633 31,030 26,867
</TABLE>
81
<PAGE>
REPORT TO INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders of Consolidated-Tomoka Land Co.
We have audited the accompanying consolidated balance sheets of
Consolidated-Tomoka Land Co. and subsidiaries as of December 31, 1997
and 1996, and the related consolidated statements of income,
shareholders' equity and cash flows for each of the three years
in the period ended December 31, 1997. 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 consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of Consolidated-Tomoka Land Co. and subsidiaries as
of December 31, 1997 and 1996, and the results of their operations
and their cash flows for each of the three years in the period
ended December 31, 1997, in conformity with generally accepted
accounting principles.
Arthur Andersen LLP
Tampa, Florida
February 5, 1998
82
<PAGE>
Consolidated Statements of Income
<TABLE>
<CAPTION>
Calendar Year
------------------------------------------
1997 1996 1995
------------ ---------- ---------
<S> <C> <C> <C>
Income
Citrus Operations:
Sales of Fruit and Other Income $ 9,444,783 $ 13,862,864 $ 8,819,259
Production and Selling Expenses (8,352,566) ( 9,851,352) (8,190,430)
---------- ---------- ----------
1,092,217 4,011,512 628,829
---------- ---------- ----------
Real Estate Operations:
Sales and Other Income 5,411,787 7,641,898 7,742,915
Costs and Other Expenses ( 3,408,109) ( 4,169,717) ( 4,854,321)
---------- ---------- ----------
2,003,678 3,472,181 2,888,594
---------- ---------- ----------
Profit On Sales of Undeveloped
Real Estate Interests 7,725,007 384,756 4,718,248
---------- ---------- ----------
Interest and Other Income 1,369,086 6,123,025 2,404,063
---------- ---------- ----------
12,189,988 13,991,474 10,639,734
General and Administrative Expenses ( 5,932,023) ( 3,386,296) ( 3,483,706)
---------- ---------- ----------
6,257,965 10,605,178 7,156,028
Income Taxes ( 2,246,598) ( 4,002,620) ( 2,736,021)
---------- ---------- ----------
Net Income 4,011,367 6,602,558 4,420,007
========== ========== ==========
Per Share Information:
Basic Earnings Per Share (Note 11) $ 0.64 $ 1.05 $ 0.71
========== ========= ========
Diluted Earnings Per Share (Note 11) $ 0.64 $ 1.04 $ 0.70
========== ========= ========
The accompanying notes are an integral part of these consolidated statements.
83
<PAGE>
Consolidated Balance Sheets
</TABLE>
<TABLE>
<CAPTION>
December 31,
----------------------------
1997 1996
----------- -----------
<S> <C> <C>
Assets
Cash and Cash Equivalents $ 9,387,433 $ 1,760,835
Investment Securities (Note 2) 1,026,679 1,396,415
Notes Receivable (Note 4) 10,018,350 14,770,281
Accounts Receivable 1,824,973 2,217,584
Inventories 921,454 686,597
Cost of Fruit on Trees 2,786,501 2,179,989
Real Estate Held for Development and Sale (Note 5) 13,819,068 14,499,495
Deferred Income Taxes (Note 3) 335,530 --
Net Investment in Direct Financing Lease (Note 6) 625,256 710,990
Other Assets 597,761 354,473
---------- ----------
41,343,005 38,576,659
---------- ----------
Property, Plant and Equipment
Land, Timber and Subsurface Interests 2,898,472 3,648,383
Citrus Properties:
Trees 8,523,852 8,523,852
Buildings and Equipment 9,291,626 9,164,146
Income Properties 3,527,515 10,671,197
Other Buildings and Equipment 1,956,469 743,768
---------- ----------
Total Property, Plant and Equipment 26,197,934 32,751,346
Less Accumulated Depreciation and Amortization ( 9,306,797) (11,655,483)
---------- ----------
Net Property, Plant and Equipment 16,891,137 21,095,863
---------- ----------
Total Assets $58,234,142 $59,672,522
========== ==========
Liabilities
Accounts Payable $ 919,241 $ 680,935
Notes Payable (Notes 7 and 14) 13,497,523 17,947,771
Accrued Liabilities 3,853,403 3,651,507
Deferred Income Taxes (Note 3) -- 406,930
Income Taxes Payable (Note 3) 2,109,528 1,193,994
---------- ----------
Total Liabilities 20,379,695 23,881,137
---------- ----------
84
<PAGE>
SHAREHOLDERS' EQUITY (Notes 10 and 11)
Preferred Stock - 50,000 Shares Authorized,
$100 Par Value; None Issued - -
Common Stock - 10,000,000 Shares Authorized;
$1 Par Value; 6,371,833 and 6,261,272 Issued and
Outstanding at December 31, 1997 and 1996, Respectively
6,371,833 6,261,272
Additional Paid-In Capital 3,793,066 1,782,105
Retained Earnings 27,689,548 27,748,008
---------- ----------
Total Shareholders' Equity 37,854,447 35,791,385
---------- ----------
Total Liabilities and Shareholders' Equity $58,234,142 $59,672,522
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated statements
85
<PAGE>
Consolidated Statements of Shareholders' Equity
<TABLE>
<CAPTION>
Additional
Common Paid-In Retained
Stock Capital Earnings Total
---------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Balance, December 31, 1994 $6,261,272 $1,782,105 $22,986,715 $31,030,092
Net Income - - 4,420,007 4,420,007
Cash Dividends ($.45 per share) - - ( 2,817,572) ( 2,817,572)
--------- --------- ---------- ----------
Balance, December 31, 1995 6,261,272 1,782,105 24,589,150 32,632,527
Net Income - - 6,602,558 6,602,558
Cash Dividends ($.55 per share) - - ( 3,443,700) ( 3,443,700)
--------- --------- ---------- -----------
Balance, December 31, 1996 6,261,272 1,782,105 27,748,008 35,791,385
Net Income - - 4,011,367 4,011,367
Cash Dividends ($.65 per share) - - ( 4,069,827) ( 4,069,827)
Issuance of 110,561 Shares
Pursuant to Exercise of Stock
Options (Note 10) 110,561 1,717,437 - 1,827,998
Tax Benefit of Stock Options
Exercised (Note 10) - 293,524 - 293,524
--------- --------- ---------- ----------
Balance, December 31, 1997 $6,371,833 $3,793,066 $27,689,548 $37,854,447
========= ========= ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
86
<PAGE>
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Calendar Year
-----------------------------------------
1997 1996 1995
----------- ---------- ------------
<S> <C> <C> <C>
Cash Flow from Operating Activities
Cash Received from:
Citrus Sales of Fruit and Other Income $ 9,971,002 $ 13,627,237 $ 8,635,807
Real Estate Sales and Other Income 5,601,771 7,575,069 9,671,554
Sales of Undeveloped Real Estate Interests 7,725,007 428,026 4,674,978
Interest and Other Income 5,483,312 647,512 599,960
---------- ---------- ----------
Total Cash Received from
Operating Activities 28,781,092 22,277,844 23,582,299
---------- ---------- ----------
Cash Expended for
Citrus Production and Selling Expenses 8,592,119 8,828,098 8,135,094
Real Estate Development Costs and Other Expenses 1,750,282 3,419,452 5,223,375
General and Administrative Expenses 3,062,124 2,067,615 1,293,073
Interest 1,507,246 1,402,767 2,007,655
Income Taxes (Note 3) 1,780,000 4,594,853 2,119,899
---------- ---------- ----------
Total Cash Expended for
Operating Activities 16,691,771 20,312,785 18,779,096
---------- ---------- ----------
Net Cash Provided by
Operating Activities 12,089,321 1,965,059 4,803,203
---------- ---------- ----------
Cash Flow from Investing Activities
Acquisition of Property, Plant and Equipment ( 2,089,861) ( 444,718) ( 1,201,509)
Net Decrease (Increase) in Investment
Securities (Note 2) 369,736 ( 756,072) 79,063
Direct Financing Lease (Note 6) 85,734 81,540 87,692
Proceeds from Sale of Property, Plant and
Equipment 5,686,737 6,164,880 3,193,387
---------- ---------- ---------
Net Cash Provided by Investing Activities 4,052,346 5,045,630 2,158,633
---------- ---------- ----------
87
Cash Flow from Financing Activities
Cash Proceeds from Notes Payable (Note 7) 7,760,000 6,800,000 6,950,000
Payments on Notes Payable (Note 7) (12,210,248) ( 9,773,527) (11,001,985)
Cash Proceeds from Exercise of Stock
Options (Note 10) 5,006 -- --
Dividends Paid ( 4,069,827) ( 3,443,700) ( 2,817,572)
---------- ---------- ----------
Net Cash Used in Financing Activities ( 8,515,069) ( 6,417,227) ( 6,869,557)
---------- ---------- ----------
Net Increase in Cash and Cash Equivalents 7,626,598 593,462 92,279
Cash and Cash Equivalents, Beginning of Year 1,760,835 1,167,373 1,075,094
---------- ---------- ----------
Cash and Cash Equivalents, End of Year $ 9,387,433 $ 1,760,835 $ 1,167,373
========== ========== ==========
</TABLE>
88
<PAGE>
Consolidated Statements of Cash Flows
continued
<TABLE>
<CAPTION>
Calendar Year
--------------------------------------
1997 1996 1995
----------- ---------- ---------
<S> <C> <C> <C>
Reconciliation of Net Income to Net Cash Provided
by Operating Activities:
Net Income $ 4,011,367 $6,602,558 $4,420,007
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities
Depreciation and Amortization 917,760 1,111,036 1,094,523
Gain on Sale of Facilities ( 309,910) (5,396,148) (1,674,662)
Compensation Expense on Exercise of
Stock Options (Note 10) 1,822,992 -- --
Decrease (Increase) in Assets:
Notes Receivable 4,751,931 ( 112,667) (1,714,646)
Accounts Receivable 392,611 ( 74,279) ( 266,085)
Inventories ( 234,857) 115,918 ( 142,054)
Cost of Fruit on Trees ( 606,512) 478,137 ( 222,725)
Real Estate Held for Development and Sale 680,427 ( 698,018) 2,825,028
Deferred Income Taxes (Note 3) ( 335,530) 337,464 ( 26,038)
Other Assets ( 243,288) 144,799 ( 123,786)
Increase (Decrease) in Liabilities:
Accounts Payable 238,306 ( 532,757) 464,415
Accrued Liabilities 201,896 918,713 ( 472,934)
Deferred Income Taxes ( 406,930) -- --
Income Taxes Payable (Note 3) 1,209,058 ( 929,697) 642,160
---------- --------- ---------
Net Cash Provided by Operating Activities $12,089,321 $1,965,059 $4,803,203
========== ========= =========
</TABLE>
Supplement Disclosure of Noncash Operating Activities:
In connection with the sale of real estate, the Company received,
as consideration, mortgage notes receivable of $12,900,
$1,143,607, and $1,255,350 for the years 1997, 1996 and 1995,
respectively.
In connection with the sale of property, plant and equipment,
the Company received as consideration, mortgage notes receivable
of $3,720,000 for the year 1996.
The accompanying notes are an integral part of these consolidated
statements.
89
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of
Consolidated-Tomoka Land Co. and its wholly owned
Subsidiaries: Indigo Group Inc., Indigo Group Ltd.,
Indigo International Inc., and Indigo Development
Inc. (collectively, the Company). All significant
intercompany accounts and transactions have been
been eliminated in consolidation.
Nature of Operations
The Company is primarily engaged in the citrus industry
and, through its wholly owned subsidiaries, the real estate
industry. The Company harvests and sells both fresh and
to-be-processed citrus from its bearing groves, all of
which are located in Highlands County, Florida. Fresh
fruit sales are made by the Company to wholesale produce
distributors and retail grocery chains primarily in the
Eastern and Midwestern regions of the United States and
Canada. The to-be-processed fruit is sent to Citrus World,
Inc. (Citrus World), an agricultural cooperative owned
by the Company and twelve other growers. The cooperative
processes the fruit and markets it under several names on a
regional and national basis. Real estate operations, which
are primarily commercial in
nature, also include residential, golf operations, income
properties and forestry operations. These operations are
predominantly located in Volusia and Highlands
Counties in Florida. From time to time the Company sells
unimproved real estate considered surplus to its operating
needs. The latter function is not considered part of the
Company's ordinary operations.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual
results could differ from those estimates.
90
<PAGE>
NOTE 1 SUMMARY OF SIGNIFICATN ACCOUTNING POLICIES (CONTINUED)
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased
with a maturity of three months or less to be cash
equivalents. Due to the short maturity period of the cash
equivalents, the carrying amount of these instruments
approximates their fair values.
Inventories
Inventories which are stated at the lower of cost (first-in,
first-out method) or market, consist primarily of citrus
supplies.
Cost of Fruit on Trees
Direct and allocated indirect costs incurred in connection
with the production of crops are capitalized into cost of
fruit on trees. As the crop is harvested and sold, the
related costs are charged to production expense, pro-rata
based on the boxes harvested and sold to the estimated
total boxes expected to be harvested and sold.
The cost of fruit on trees is carried at the lower of cost or
market.
Real Estate Held for Development and Sale
The carrying value of land and land development costs
includes the initial acquisition costs of the land,
improvements thereto and other costs incidental to the
acquisition or development of land. These costs are
allocated to properties on a relative sales value basis
and are charged to costs of sales as specific properties are
sold. Land and land development costs include approximately
$359,407 and $261,068 of interest and $72,030 and $96,861 of
property taxes capitalized during 1997 and 1996,
respectively.
Property, Plant and Equipment
Property, plant and equipment are stated at cost, less
accumulated depreciation and amortization. Such properties
are depreciated on a straight-line basis over their estimated
useful lives. Renewals and betterments are capitalized to
property accounts. The cost of maintenance and repairs is
expensed as incurred. The cost of property retired or
otherwise disposed of, and the related accumulated
depreciation or amortization, are removed from the accounts,
and any resulting gain or loss is taken into income.
The amount of depreciation and amortization taken for the
years 1997, 1996, and 1995, is summarized as follows:
91
<PAGE>
NOTE 1 SUMMARY OF SIGNIFICATN ACCOUTNING POLICIES (CONTINUED)
<TABLE>
<CAPTION>
Calendar Year
-------------
1997 1996 1995
-------- -------- ---------
<S> <C> <C> <C>
Citrus Properties $ 469,488 $ 501,954 $ 411,624
Other Properties 448,272 609,082 682,899
-------- --------- ---------
$ 917,760 $1,111,036 $1,094,523
======== ========= =========
The range of estimated useful lives for property, plant and equipment
is as follows:
Citrus Trees 20-40 Years
Citrus Buildings and Roads 10-30 Years
Citrus Irrigation Equipment 5-20 Years
Citrus Other Equipment 3-30 Years
Income Properties 3-30 Years
Other Buildings 10-30 Years
Other Equipment 3-30 Years
</TABLE>
92
<PAGE>
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Sale of Citrus
The Company sells a portion of its citrus crop as fresh fruit
through the Company owned packing plant and recognizes
revenues, and related cost of sales, at the time of shipment.
The Company sells the remainder of the citrus crop
under a participating marketing pool agreement to Citrus
World of which the Company owns a 4 percent equity interest.
Citrus World is a citrus grower and the owner of a citrus
processing plant in Lake Wales, Florida. Citrus World pools
its own fruit with the fruit purchased from the Company and
other citrus growers, processes the pooled fruit and sells
the products produced. Each participant in the pool,
including Citrus World, shares ratably in the proceeds
from the sale of products, net of Citrus World's actual
processing and marketing costs, plus a per-unit handling fee.
Citrus World makes periodic payments to all participants
based on their pro rata share of net sales proceeds and makes
final payment after all the products in the pool have been
sold.
The Company records estimated revenues at the time of
delivery of the fruit to Citrus World and finalizes revenues
after all the products in the pool have been sold. During
the years 1997, 1996, 1995, the Company's estimated pro
rata share of said net sales proceeds under the above pooling
agreement amounted to $3,107,919, $5,203,787, and
$2,912,415, respectively.
Sale of Real Estate
The profit on sales of real estate is accounted for in
accordance with the provisions of the Statement of Financial
Accounting Standards No. 66, "Accounting for Sales of Real
Estate (SFAS 66)." The Company recognizes revenue from the
sale of real estate at the time the sale is consummated
unless the property is sold on a deferred payment plan and
the initial payment does not meet criteria established under
SFAS 66. No income was deferred for the three years in the
period ended December 31, 1997.
Rental income from income properties is recognized ratably
over the periods of the related property leases.
93
<PAGE>
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Unfunded Deferred Compensation Plans
The Company maintains two unfunded deferred compensation
plans. One plan is established for the Board of Directors
of the Company, with the second plan established for the
officers and key employees of the Company. Under the plans
any member of the Board of Directors, officer or key employee
may elect to defer all or a portion of his compensation. The
amount of deferred compensation shall increase annually by an
amount which is equal to interest on the deferred
compensation at the rate of return earned by the Company on
its short-term investments. Compensation credited to a
participant shall be deferred until such participant ceases
to be a member of the board of directors, officer or key
employee, at which time the amounts accumulated
shall be distributed in the manner elected. The plans are
nonqualified plans as defined by the Internal Revenue
Service. The amount of deferred compensation
reflected in accrued liabilities on the balance sheet at
December 31, 1997 and 1996 was $2,677,007 and $2,152,260,
respectively.
Pensions
The Company has a funded, non-contributory defined benefit
pension plan covering all eligible full-time employees. The
Company's method of funding and accounting for pension costs
is to fund and accrue all normal costs plus an amount
necessary to amortize past service cost over a period of 30
years.
Concentration of Credit Risk
Financial instruments which potentially subject the Company
to concentrations of credit risk consist principally of cash
and cash equivalents, investment securities, accounts
receivables and notes receivable. Concentration of
credit risk with respect to accounts receivables is limited
due to the Company's large number of customers and their
dispersion across geographic areas and industries.
Fair Value of Financial Instruments
The carrying amounts of the Company's financial assets and
liabilities, including cash and cash equivalents, accounts
receivable and accounts payable at December 31, 1997 and
1996, approximate fair value because of the short maturity
of these instruments. The carrying amount of the Company's
notes receivable and notes payable approximates fair value at
December 31, 1997 and 1996, since the notes are at floating
rates or fixed rates which approximate current market rates
for notes with similar risks and maturities.
94
<PAGE>
NOTE 2 INVESTMENT SECURITIES
The Company Accounts for Investment Securities under
Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity
Securities (SFAS 115)". This standard requires
classification of the investment portfolio into three
categories: held to maturity, trading and available for
sale. The Company classifies as held to maturity those
securities for which the Company has the intent and
ability to hold through their stated maturity date.
Investment securities which are classified as held to
maturity are carried at cost, adjusted for amortization of
premiums and accretion of discounts. Gains and losses are
determined using the specific identification method.
Investment securities as of December 31, 1997 and 1996, all
of which are classified as held to maturity, are as follows:
1997 1996
---- ----
<TABLE>
<CAPTION>
<S> <C> <C>
Debt Securities Issued by States
and Political Subdivisions of States $ 951,268 $1,289,572
Mortgage-Backed Securities 75,411 106,843
--------- ---------
$1,026,679 $1,396,415
========= =========
The contractual maturities of these securities are as follows:
Maturity Date Amount
---------------- -----------
Within 1 year $ 385,734
1-5 Years 100,894
6-10 Years 247,381
After 10 Years 292,670
---------
$1,026,679
=========
</TABLE>
Subsequent to year-end, $8,000,000 of cash equivalents were
invested in tax free financial instruments.
95
<PAGE>
NOTE 3 INCOME TAXES
The Company accounts for income taxes under SFAS No. 109,
"Accounting for Income Taxes."
The provision for income taxes is summarized as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
Current Deferred Current Deferred Current Deferred
------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Federal $2,650,630 $( 748,189) $3,198,460 $ 221,699 $2,374,049 $( 22,232)
State 338,428 5,729 466,696 115,765 388,010 ( 3,806)
--------- -------- --------- --------- --------- ---------
Total $2,989,058 $( 742,460) $3,665,156 $ 337,464 $2,762,059 $( 26,038)
========= ======== ========= ========= ========= =========
</TABLE>
Deferred income taxes have been provided to reflect temporary
differences that represent the cumulative difference between
taxable or deductible amounts recorded in the financial statements
and in the tax returns. The sources of these differences and the
related provision (credit) and deferred income tax assets
(liabilities) are summarized as follows:
<TABLE>
<CAPTION>
Provision (Credit) Deferred Taxes
------------------ ---------------
1997 1996 1995 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Depreciation $ 181,876 $ 79,047 $ 100,222 $(1,325,919) $(1,144,043)
Sales of Real
Estate ( 1,278,181) 392,438 ( 200,852) 102,230 (1,175,951)
Deferred
Compensation ( 197,463) (181,590) ( 155,461) 1,007,358 809,895
Basis
Difference in
Joint Venture 81,454 (219,858) 52,285 1,246,664 1,328,118
Revolving Fund
Certificates ( 58,112) ( 24,985) ( 48,182) 338,245 280,133
Charitable
Contributions
Carryforward ( 1,961,789) 391,210 479,321 3,115,724 1,153,935
Other 115,093 (258,551) 6,389 259,739 374,832
Less-Valuation
Allowance 2,374,662 159,753 ( 259,760) (4,408,511) (2,033,849)
--------- --------- --------- --------- ---------
$( 742,460) $ 337,464 $( 26,038) $ 335,530 $( 406,930)
========= ======== ========= ========== =========
</TABLE>
96
<PAGE>
NOTE 3 INCOME TAXES (CONTINUED)
Following is a reconciliation of the income tax computed
at the federal statutory rate of 34 percent.
<TABLE>
<CAPTION>
Calendar Year
-------------
1997 1996 1995
---- ---- -----
<S> <C> <C> <C>
Income Tax Computed at
Federal Statutory Rate $2,127,708 $3,605,761 $2,433,050
Increase (Decrease) Resulting
from:
State Income Tax, Net of
Federal Income Tax Benefit 227,144 384,968 260,175
Other Reconciling Items ( 108,254) 11,891 42,796
--------- --------- ---------
Provision for Income Taxes $2,246,598 $4,002,620 $2,736,021
========= ========= =========
</TABLE>
NOTE 4 NOTES RECEIVABLE
Notes Receivable consisted of the following:
<TABLE>
<CAPTION>
December 31,
-------------------------
1997 1996
----------- ----------
<S> <C> <C>
Mortgage Notes Receivable
Various notes with interest rates ranging
from 6.25% to 9.25% with payments due from 1998
through 2003. Collateralized by real
estate mortgages held by the Company $ 5,146,017 $10,944,356
Other Notes Receivable
Interest at 5.425%, total principal and
accrued interest paid June 1997 -- 3,678,794
Interest at 6.2%, total principal and
accrued interest due September 2000 4,740,497 --
97
NOTE 4 NOTES RECEIVABLE (CONTINUED)
Interest at prime rate, receivable in
monthly installments of principal and
interest to amortize the original note
over a period of 15 years, due January
2006 131,836 147,131
---------- ----------
Total Notes Receivable $10,018,350 $14,770,281
========== ==========
Prime rate was 8.5% and 8.25% at December 31,
1997 and 1996, respectively.
The required annual principal receipts are as follows:
Year ending December 31, Amount
-----------
1998 $ 1,608,155
1999 157,040
2000 6,134,319
2001 1,114,343
2002 78,428
2003 and thereafter 926,065
----------
$10,018,350
==========
</TABLE>
NOTE 5 REAL ESTATE HELD FOR DEVELOPMENT AND SALE
Real estate held for development and sale as of December
31, 1997 and 1996, is summarized as follows:
<TABLE>
<CAPTION>
December 31,
----------------------------------
1997 1996
---- ----
<S> <C> <C>
Undeveloped Land $ 1,504,926 $ 1,581,212
Land and Land Development 12,217,117 12,674,028
Completed Houses 97,025 244,255
---------- ----------
$13,819,068 $14,499,495
========== ==========
98
<PAGE>
NOTE 6 NET INVESTMENT IN DIRECT FINANCING LEASE
On December 31, 1987, the Company acquired certain
real estate and equipment subject to a direct financing
lease. The aggregate amounts due under the lease are
identical in amount to the payments required to be made
by the Company in order to amortize the debt applicable
to the properties. The required annual payments on the
lease at December 31, 1997, are summarized as follows:
</TABLE>
<TABLE>
<CAPTION>
Amount
Aggregate Representing Net
Year Ended December 31, Payment Interest Investment
----------------------- ---------- ------------ ----------
<S> <C> <C> <C>
1998 $123,422 $ 40,289 $ 83,133
1999 124,407 34,376 90,031
2000 125,478 27,973 97,505
2001 126,635 21,038 105,597
2002 127,889 13,527 114,362
2003 and Thereafter 140,083 5,455 134,628
------- ------- -------
$767,914 $142,658 $625,256
======= ======= =======
</TABLE>
The interest rate stated in the lease agreement is 80.65% of prime.
NOTE 7 NOTES PAYABLE
Notes Payable consisted of the following:
<TABLE>
<CAPTION>
December 31,
---------------------
1997 1996
---- ----
<S> <C> <C>
Mortgage Notes Payable
Mortgage notes payable are collateralized
by real estate mortgages held by the
lender. As of December 31, 1997 and 1996,
mortgage notes payable consisted of the
following:
99
<PAGE>
NOTE 7 NOTES PAYABLE (CONTINUED)
Payments of $266,783, including interest
at 8.8% payable quarterly through
April 2002; principal balance due
July 2002 $ 9,179,173 $ 9,424,876
Interest payable quarterly at 10%,
principal and outstanding interest
due October 2005 1,200,000 1,200,000
Industrial Revenue Bonds
Industrial revenue bonds payable are
collateralized by real estate.
As of December 31, 1997 and
1996, industrial revenue bonds
consisted of the following:
Interest at 80.56% of prime rate,
payable in monthly installments of
principal and interest to amortize
the original debt over a period
of 18 years, due January 2004 618,580 2,851,755
Interest at 84.2% of prime rate,
payable in monthly installments
of $4,700 plus interest, remaining
principal and interest due
January 2002, paid in 1997 -- 1,936,000
Note Payable to Related Party
Principal and interest payable in
monthly installments of $23,268,
interest at 9.68%, unpaid
principal and interest due
December 1998. Collateralized by
developed real estate in a joint
venture. The venture partner
is jointly liable on the note. 2,499,770 2,535,140
---------- ----------
$13,497,523 $17,947,771
========== ==========
</TABLE>
A line of credit totaling $7,000,000, payable on demand, with
interest at prime rate and no borrowing outstanding was in place
at December 31, 1997, and 1996.
The required annual principal payments on notes payable are as
follows:
100
<PAGE>
NOTE 7 NOTES PAYABLE (CONTINUED)
<TABLE>
<CAPTION>
Year Ending December 31, Amount
------------------------ ----------
<S> <C>
1998 $ 2,844,275
1999 382,458
2000 416,528
2001 453,634
2002 8,065,999
2003 and Thereafter 1,334,629
----------
$13,497,523
==========
</TABLE>
Interest expense was $1,507,246, $1,402,767, $2,007,655 for 1997, 1996, and
1995, respectively.
NOTE 8 PENSION PLAN
The company maintains a defined benefit plan for all
employees who have attained the age of 21 and completed
one year of service. The pension benefits are based
primarily on years of service and the average compensation
for the highest five years during the final 10 years of
employment. The benefit formula generally provides for a
life annuity benefit.
The Company's net periodic pension cost included the
following components:
<TABLE>
<CAPTION>
December 31,
1997 1996 1995
---- ---- ----
<S> <C> <C>
Service Cost $198,123 $175,363 $170,673
Interest Cost on Projected Benefit
Obligation 289,424 257,745 249,027
Actual Return on Plan Assets (759,642) (577,221) (266,582)
Net Amortization 348,622 260,594 ( 14,734)
------- ------- -------
Net Periodic Pension Cost $ 76,527 $116,481 $138,384
======= ======= =======
</TABLE>
101
<PAGE>
NOTE 8 PENSION PLAN (continued)
The funded status of the Company's pension plan was as
follows:
<TABLE>
<CAPTION>
December 31,
--------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Actuarial Present Value of Benefit
Obligations:
Vested $(3,621,174) $(2,914,318) $(2,519,049)
Nonvested ( 6,245) ( 4,628) ( 3,975)
--------- --------- ---------
Accumulated Benefit Obligation (3,627,419) (2,918,946) (2,523,024)
Effect of Projected Future Salary
Increases ( 957,295) ( 621,808) ( 834,347)
--------- --------- ---------
Projected Benefit Obligation (4,584,714) (3,540,754) (3,357,371)
Plan Assets at Fair Value, Primarily
Stocks, Corporate Bonds, Treasury
Securities and Money Market Funds 4,862,398 4,136,008 3,698,295
--------- --------- ---------
Plan Assets In Excess of
Projected Benefit Obligation 277,684 595,254 340,924
Unrecognized Prior Service Cost 5,695 6,361 7,027
Unrecognized Net Gain ( 341,137) ( 731,602) ( 346,057)
Unrecognized Transition Asset ( 131,672) ( 147,072) ( 162,472)
--------- --------- ---------
Accrued Pension Liability $( 189,430) $( 277,059) $( 160,578)
========= ========= =========
The actuarial assumptions made to determine the projected benefit
obligation and the fair value of plan assets are as follows:
December 31,
------------
1997 1996 1995
----- ---- ----
Weighted Average Discount Rate 7.0% 8.0% 8.0%
Weighted Average Asset Rate of Return 9.0% 8.0% 8.0%
Compensation Scale 5.0% 5.0% 5.0%
</TABLE>
102
<PAGE>
NOTE 9 POSTRETIREMENT BENEFIT PLANS OTHER THAN PENSIONS
The Company sponsors two defined benefit postretirement
plans of certain health care and life insurance benefits
for eligible retired employees. All full-time employees
become eligible to receive these benefits if they retire
after reaching age 55 with 20 or more years of service.
The postretirement health care plan is contributory,
with retiree contributions adjusted annually; the life
insurance plan is non-contributory up to $5,000 of coverage.
The accounting for the health care plan reflects caps on
the amount of annual benefit to be paid to retirees as
stipulated by the plan. The Company pays for the plan as
costs are incurred.
The Company recognizes postretirement expenses in accordance
with adopted SFAS No.106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," which requires
that expected costs of postretirment benefits be charged to
expense during the years the employees render service. The
Company elected to amortize the unfunded obligation measured
at adoption of SFAS 106 over a period of 20 years. The
effect of this expense recognized in 1997, 1996, and 1995
was $102,639, $89,670, and $103,415 respectively. The
accrued post retirement benefit cost reflected in the
balance sheet at December 31, 1997 and 1996 was $235,906
and $182,785, respectively.
NOTE 10 STOCK OPTION PLAN
The Company maintains a stock option plan (the Plan)
pursuant to which 530,000 shares of the Company's common
stock may be issued. Under the Plan the option exercise
price equals the stock's market price on the date of grant.
The Options vest over five years and all expire after
ten years. The Plan provides for the grant of (1) incentive
stock options which satisfy the requirements of Internal
Revenue Code (IRC) Section 422, and (2) nonqualified options
which are not entitled to favorable tax treatment under IRC
Section 422. No optionee may exercise incentive
stock options in any calendar year for shares of common
stock having a total market value of more than $100,000 on
the date of grant (subject to certain carryover provisions).
In connection with the grant of nonqualified options, a
stock appreciation right for each share covered
by the option may also be granted. The stock appreciation
right will entitle the optionee to receive a supplemental
payment which may be paid in whole or in part in cash or in
103
<PAGE>
NOTE 10 STOCK OPTION PLAN (CONTINUED)
shares of common stock equal to all or a portion of the
spread between the exercise price and the fair market
value of the underlying share at the time of exercise.
The Company accounts for the Plan under APB Opinion No. 25.
Had compensation cost for the Plan been determined
consistent with FASB Statement No. 123, the Company's
net income and earnings per share would not have been
materially different than previously reported.
A summary of the status of the Company's stock option plan
for the three years ended December 31, 1997 and changes
during the years then ended is as follows:
<TABLE>
<CAPTIONS>
1997 1996 1995
-------------- -------------- -------------
Shares Wtd Avg Shares Wtd Avg Shares Wtd Avg
Ex Price Ex Price Ex Price
------- ------- ------ ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year 327,300 $12.87 279,300 $12.14 267,300 $12.90
Granted 48,000 $16.87 48,000 $17.15 48,000 $12.12
Exercised (226,500) $12.09
Expired -- -- ( 36,000) $17.75
------ ------ -------
Outstanding at end of year 148,800 $15.36 327,300 $12.87 279,300 $12.14
------- ------- -------
Exercisable at end of year 71,680 $14.52 226,500 $12.09 171,300 $11.69
Weighted average fair value
of options granted during
the year $5.13 $4.98 $3.52
</TABLE>
Of the 226,500 options exercised in 1997, 115,939 options were
surrendered in payment of the cash exercise price of the
remaining options. The option exercise and accrual of stock
appreciation rights resulted in compensation expense of $1,822,992
and $1,409,109, respectively, included in general and administrative
expenses primarily during the fourth quarter. Additionally, the
exercise resulted in $1,216,240 of income tax benefit, of which
$293,524 was recorded as an addition to additional paid-in capital.
Of the 148,800 options outstanding at December 31, 1997, 62,400
have exercise prices between $12.37 and $14.87 with a weighted
average exercise price of $13.09 and a weighted average contractual
104
<PAGE>
NOTE 10 STOCK OPTION PLAN (CONTINUED)
life of 6.3 years. Of these 62,400 options, 46,720 are exercisable
with a weighted average exercise price of $13.17. The remaining
86,400 shares have exercise prices between $16.87 and $17.15, with
a weighted average exercise price of $16.99 and a weighted
average contractual life of 8.6 years. Of these 86,400 shares
24,960 are exercisable and their weighted average
exercise price is $17.04.
NOTE 11 EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards ("SFAS")
No. 128, "Earnings Per Share," effective for reporting
periods ending after December 15, 1997. SFAS No. 128
requires companies to present basic earnings per share
("EPS") and diluted EPS, instead of primary and fully
diluted EPS previously required. The new standard also
requires additional information and disclosures
and makes certain modifications to the EPS calculations
previously reported under Accounting Principles Board
No. 15.
The Company has adopted SFAS No. 128 effective December 15,
1997 and, as a result, the Company's reported quarterly EPS
for 1997 have been restated. This accounting change had
no material effect on previously reported EPS data for
1996 and 1995. The following disclosures comply with the
requirements of SFAS No. 128.
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Income Available to Common Shareholders $4,011,367 $6,602,558 $4,420,007
========= ========= =========
Weighted Average Shares Outstanding 6,288,452 6,261,272 6,261,272
Common shares Applicable to Stock Options
Using the Treasury Stock Method 22,789 90,159 46,917
--------- --------- ---------
Total shares applicable to Diluted Earnings
Per Share 6,311,241 6,351,431 6,308,189
========= ========= =========
Basic Earnings Per Share $ .64 $ 1.05 $ .71
========= ========= =========
Diluted Earnings Per Share $ .64 $ 1.04 $ .70
========= ========= =========
</TABLE>
105
<PAGE>
NOTE 11 EARNINGS PER SHARE (CONTINUED)
Basic earnings per common share were computed by dividing
net income by the weighted average number of shares of
common stock outstanding during the year. Diluted
earnings per common share were determined based on
assumption of the conversion of stock options at the
beginning of each period using the treasury stock method at
average cost for the periods.
NOTE 12 LEASE OBLIGATIONS
The Company leases certain equipment, land and improvements
under operating leases.
Minimum future rental payments under non-cancelable
operating leases having remaining terms in excess of one
year as of December 31, 1997, are summarized as follows:
<TABLE>
<CAPTION>
Year Ending December 31, Amounts
--------
<S> <C>
1998 $ 272,852
1999 261,907
2000 192,560
2001 154,701
2002 98,597
2003 and thereafter 6,716,667
---------
$7,697,284
=========
</TABLE>
Rental expense under all operating leases amounted to $351,785,
$315,528,and $398,345 for the years ended December 31, 1997, 1996
and 1995, respectively.
106
<PAGE>
NOTE 13 BUSINESS SEGMENT DATA
Information about the Company's operations in different
industries for each of the three years ended December 31
is as follows (amounts in thousands):
<TABLE>
<CAPTIONS)
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Revenues:
Citrus $ 9,445 $13,863 $ 8,819
Real Estate 5,412 7,642 7,743
General, Corporate and Other 9,094 6,508 7,122
------ ------ ------
$23,951 $28,013 $23,684
====== ====== ======
Income:
Citrus $ 1,092 $ 4,012 $ 629
Real Estate 2,004 3,472 2,889
General, Corporate and Other 3,162 3,121 3,638
------ ------ ------
$ 6,258 $10,605 $ 7,156
====== ====== ======
Identifiable Assets:
Citrus $17,017 $17,043 $17,866
Real Estate 27,433 32,169 35,349
General, Corporate and Other 13,784 10,461 6,478
------ ------ ------
$58,234 $59,673 $59,693
====== ====== ======
Depreciation and Amortization:
Citrus $ 470 $ 502 $ 412
Real Estate 430 585 648
General, Corporate and Other 18 24 35
----- ----- -----
$ 918 $ 1,111 $ 1,095
====== ====== ======
Capital Expenditures:
Citrus $ 149 $ 241 $ 580
Real Estate 1,587 200 593
General, Corporate and Other 354 4 29
------ ------ ------
$ 2,090 $ 445 $ 1,202
====== ====== ======
</TABLE>
Income represents income before income taxes. Identifiable assets
by industry are those assets that are used in the Company's operations
in each industry. General corporate assets and assets used in the
Company's other operations consist primarily of cash and cash
equivalents, investment securities, mortgage notes receivable and
property, plant and equipment.
107
<PAGE>
NOTE 14 RELATED PARTIES
Baker, Fentress & Company, a publicly owned, closed-end
investment company, owned approximately 79 percent of the
Company's outstanding common stock at December 31, 1997 and
1996.
The Company sells, under a participating marketing pool
agreement, a significant portion of its citrus fruit to
Citrus World, an agricultural cooperative of which
the Company owns a 4 percent equity interest. The Company
accounts for this equity interest at cost. Non-voting
stock, in the aggregate amount of $898,871 issued by
Citrus World is owned by the Company. This non-voting stock
represents per unit retain contributions and are considered
to have no value for financial statement purposes until
redeemed. See Note 1 "Summary of Significant Accounting
Policies."
A note payable in the amount of $2,499,770 and $2,535,140 at
December 31, 1997 and 1996, respectively, was payable to an
affiliate partner in a joint venture with Indigo Group Ltd.
108
<PAGE>
<PAGE>
QUARTERLY FINANCIAL DATA (Unaudited)
(In thousands except per share amounts)
THREE MONTHS ENDED
<TABLE>
<CAPTIONS>
March 31, June 30, September 30, December 31,
--------------- --------------- -------------- -------------
1997 1996 1997 1996 1997 1996 1997 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues
Citrus $4,422 $5,169 $1,814 $4,618 $ 78 $ 50 $ 3,131 $ 4,026
Real Estate 849 2,792 1,475 989 1,243 733 1,845 3,128
Undeveloped Real Estate 2 2 16 1 2 1 7,705 381
Interest and Other Income 299 172 532 650 274 182 264 5,119
----- ----- ----- ----- ----- ----- ------ ------
5,572 8,135 3,837 6,258 1,597 966 12,945 12,654
----- ----- ----- ----- ----- ----- ------ ------
Cost and Expenses:
Citrus 3,547 3,474 1,559 2,827 535 537 2,712 3,013
Real Estate 794 1,202 749 849 806 713 1,059 1,406
General and
Administrative 883 850 765 828 1,021 761 3,263 947
----- ----- ----- ----- ----- ----- ----- -----
5,224 5,526 3,073 4,504 2,362 2,011 7,034 5,366
----- ----- ----- ----- ----- ----- ----- -----
Income (Loss) From
Continuing Operations
Before Income Taxes 348 2,609 764 1,754 ( 765) (1,045) 5,911 7,288
Income Taxes
(Credit) ( 121) ( 960) ( 248) ( 638) 252 415 ( 2,130) (2,820)
----- ------ ----- ----- ----- ----- ----- ------
Net Income (Loss) $ 227 $1,649 $ 516 $1,116 $(513) $( 630) $ 3,781 $4,468
===== ===== ==== ===== ==== ===== ===== =====
Per Share Amounts (Note 11)
Net Income (Loss)
Basic Earnings
Per Share $ 0.04 $ 0.26 $0.08 $ 0.18 $(0.08) $(0.10) $ 0.60 $ 0.71
==== ===== ==== ===== ==== ==== ===== =====
</TABLE>
109
<PAGE>
Management's Discussion and Analysis
Results of Operations
1997 Compared to 1996
Citrus Operations
Profits from citrus operations totaling $1,092,217 for calendar
year 1997 represent a 73% downturn from the $4,011,512 profit
posted during 1996. A 26% reduction in fruit harvested and
sold resulted in a 32% decline in revenues realized and was
the primary reason for the fall in profitability. A total
of 1,042,000 boxes of fruit were sold during 1997 compared
to 1,401,000 sold one year earlier. Also contributing to the
revenue and profit reductions was an 8% decrease in average
fruit pricing for the year, with pricing of both fresh and
processed fruit contributing to the decline. Production and
selling expenses fell 15% during the period on the lower fruit
volume; although, this was offset to some extent by reduced
handling credits received due to a 58% decline in fruit handled
for outside growers. Lower fruit production reduced profit margins
as fixed and semi-variable costs were allocated to fewer boxes.
Real Estate Operations
Reduced commercial land sales volume resulted in a 42% fall in
profits from real estate operation to $2,003,678 for the year
Ended December 31, 1997. This profit compares to the $3,472,181
recorded during 1996's same period. A total of 63 acres of
commercial land sales were closed during 1997, producing gross
profits approximating $1,745,000, while gross profits of $3,125,000
were realized on the sale of 92 acres during 1996.
The sale of the 70,000-square-foot Mariner Village shopping
center in June 1996, the 24,000 square-foot office building in
Daytona Beach in December 1996, the 24,000-square-foot Palm
Coast office building in May 1997 and the December 1997 sale of
the 47,000-square-foot Daytona Beach office building resulted
in income properties revenues and expenses falling 39% and 35%,
respectively. Bottom line results from income properties for
the twelve months of 1997 were break-even, compared to a $127,000
profit posted in 1996.
Forestry operating income rose 25% to $748,000 during 1997
as revenues rose 20% from increased harvesting. A 10% increase
in subsurface revenue to $184,000 was produced on higher mineral
lease income offset to some extent by lower oil royalty income.
110
<PAGE>
General, Corporate and Other
The sale of 11,156 acres of the Company's western most Volusia
County lands along with releases on surface entry rights on 48
acres produced profits from undeveloped real estate interests
of $7,725,007 for 1997. This compares to the sale of 25 acres
of land and the release of surface entry rights on 11,767 acres
which produced income for 1996 of $384,756.
Interest and other income declined 78% for 1997 to $1,369,086
when compared to 1996's profit of $6,123,025. Results for
1997 include a profit of $250,000 realized on the sale of the
24,000 square-foot Palm Coast office building along with increases
from interest on mortgage notes receivable and investment income
of $260,000 and $70,000, respectively when compared to the
prior year. Interest and other income posted during 1996
includes $4,550,000 recognized on the sale of 479 acres
including citrus groves in Highlands County, and $450,000 and
$340,000 realized on the sale of the 70,000-square-foot
Mariner Village shopping center and 24,000-square-foot Daytona
Beach office building, respectively.
The exercise of stock options along with an increase in expense
from stock appreciation rights, due to the rise in the Company's
stock price at time of exercise, primarily resulted in a 75%
increase in general and administrative expenses for the twelve
months of 1997.
111
<PAGE>
Management's Discussion and Analysis
Results of Operations
1996 Compared to 1995
Citrus Operations
Results from citrus operations for the year ended December 31, 1996
improved dramatically when compared to calendar year 1995. Profits
increased 538% to $4,011,512 for the twelve months of 1996 from
$628,829 one year earlier. Revenues of $13,862,864 were posted for
the year reflecting a 57% climb from the $8,819,259 recorded in the
prior year. The revenue gain is attributable to a 37% increase in
fruit harvested and sold, coupled with a 9% improvement in average
fruit pricing. Fruit sales for 1996 totaled 1,401,000 boxes, with
sales for 1995 amounting to 1,021,000 boxes. Pricing for both fresh
and processed fruit contributed to the average price increase in 1996.
Production and selling expenses were down on a per box basis for the
twelve months of 1996 due to the efficiencies achieved on the higher
fruit volume, but rose 20% in total on the higher fruit volume.
Real Estate Operations
Real estate operations income rose 20% for the calendar year of 1996
to $3,472,181. This compares to 1995's income of $2,888,594.
Commercial land sales activity accounted for the improved results.
Although the sale of commercial acres decreased slightly to 92 acres
sold in 1996 compared to the sale of 97 acres in 1995, higher profit
margins were earned on these 1996 sales. Sales pricing and profit
margins can vary from property to property based on its location and
intended use.
Income properties posted a 20% profit gain in 1996 on higher
occupancies and leasing rates. Both revenues and expenses decreased,
7% and 8% respectively, during the twelve- month period due to the May
1995 sale of the 18,000-square-foot Mariner Towne Square shopping
center and the June 1996 sale of the 70,000 square foot Mariner
Village shopping center both located in Spring Hill, Florida.
Forestry profits fell 17% for 1996's twelve months, a direct result of
a 17% decline in revenues on decreased harvesting. Higher oil
royalties on increased production combined with additional mineral
leases resulted in a 68% rise in subsurface income.
General, Corporate and Other
Profits on the sale of undeveloped real estate interests totaled
$384,756 for 1996 on the sale of 25 acres of land and the release of
surface entry rights on 11,767 acres. This represents a 92% downturn
from 1995 results when profits of $4,718,248 were recorded on the sale
of 1,218 acres.
112
<PAGE>
Interest and other income realized in 1996 amounted to $6,123,025, a
155% gain over 1995's interest and other income of $2,404,063.
Interest and other income for 1996 includes $4,550,000 recognized on
the sale of 479 acres including citrus groves in Highlands County,
$450,000 posted on the sale of the Mariner Village shopping center and
$340,000 recorded on the sale of the 24,000-square-foot office
building in Daytona Beach, Florida. The sale of 142 acres of citrus
groves and lakefront property in Highlands County accounted for
profits of $1,740,000 included in 1995's interest and other income.
General and administrative expenses fell 3% for the calendar year on
decreased interest expense from lower outstanding borrowings, with
this decline partially offset by increased costs related to the
accounting for stock options.
113
<PAGE>
Financial Position
Earnings for the twelve months of 1997 totaling $4,011,367, equivalent
to $.64 per share, represent a 39% decline from 1996's record earnings
of $6,602,558, equivalent to $1.05 per share. Earnings from both of
the Company's major lines of business, citrus and real estate,
contributed to the decline. Profits from citrus operations fell 73%
on lower fruit volume along with a reduction in pricing, while
results from real estate operations were down due to weaker closings
on commercial acreage. Dividends declared and paid during 1997 rose
18% over 1996 to $.65 per share, from 1996's level of $.55 per share.
The Company's financial position was strong at December 31, 1997 with
cash, cash equivalents and investment securities totaling
$10,414,112, and debt being reduced $4,450,248 to $13,497,523. Net
cash and cash equivalents increased $7,626,598 during the year with
$12,089,321 provided from operating activities and $4,052,346 provided
from investing activities, offset by $8,515,069 used in financing
activities including the payment of dividends and debt reduction.
Investing activities includes $2,089,861 expended for the acquisition
of property, plant and equipment and $5,686,737 received as proceeds
from the sale of property, plant and equipment, primarily the sale of
the 24,000-square-foot office building in Palm Coast and the 47,000-
square-foot Daytona Beach office building. The expenditures on
property, plant and equipment were centered around the development of
the second golf course at the LPGA International mixed-use development
along with forestry tree planting. Capital requirements for 1998 are
projected to approximate $10.6 million, of which $8.6 will be spent on
the second golf course, the clubhouse and amenities and golf
maintenance equipment. These expenditures will be funded from cash
and investments on hand, operating activities, and if necessary,
existing financing sources.
Fruit production from citrus operations declined 24% for the 1996-1997
crop season with 1,047,000 boxes harvested and sold. To a large
extent the drop-off in production is due to the sale of groves in 1996
in conjunction with the disposition of lakefront property. This fruit
will be replaced in future years as the groves planted during 1989-
1992 mature and increase their yield. The groves remain in excellent
condition and fruit volume for the 1997-1998 season, which began in
September 1997, is anticipated to approximate 1,200,000 boxes. The
1997-1998 crop estimate for Florida oranges totals 254 million boxes
and represents a 12% increase over the final 1996-1997 record crop
totaling 226 million boxes. Due to this abundant crop, pricing for
both fresh and processed fruit has been relatively weak. News of an
approximate 25% reduction in fruit to be produced by Brazil for the
coming season has led to some strengthening of prices in recent weeks.
114
<PAGE>
On September 1, 1997, the Company took over operations of the LPGA
International golf facilities from the City of Daytona Beach through a
long-term lease arrangement. This entails not only the operation of
the current facilities, but also assuming the responsibility of
constructing the second golf course and clubhouse facilities. The
second golf course, designed by Arthur Hills, is currently under
construction, with the clubhouse currently in the design phase. The
golf course should be ready for play during the fourth quarter of 1998
with the clubhouse ready shortly thereafter. The total cost of these
new facilities will approximate $10 million. It is anticipated that
the addition of these amenities will strengthen residential sales
activity and attract a destination resort hotel. Additionally, the
recent introduction of a lower priced product, with prices starting
just over $100,000, should broaden the market and spur residential
sales activity. Commercial sales activity in and around the
development remain relatively strong. Several closings originally
anticipated to close during the fourth quarter of 1997 have been
deferred for closing in the first half of 1998.
During 1997 the Company sold approximately 11,000 acres of its most
western lands in Volusia County. These lands were not in the
Company's short term plans for development and were sold to a state
agency, rather than a competitor, to be used for conservation. The
Company also continues to sell its income properties and at this time
only one such property remains unsold. These strategies have helped
to substantially reduce Company debt while producing funds to be
invested in its core assets, the citrus groves and in particular the
LPGA International mixed-use development. With stable citrus pricing
and increasing fruit volume from citrus operations, along with the
conversion of commercial contract backlog to closings, continued
profitability is forecasted in the near term.
115
<PAGE>
COMMON STOCK PRICES AND DIVIDENDS
Effective September 1, 1992, the Company's common stock began
trading on the American Stock Exchange (AMEX) under the symbol CTO.
The Company has paid dividends annually on a continuous basis since
1976, the year in which its initial dividends were paid. The
following table summarizes aggregate annual dividends paid (on a semi-
annual basis) over the five years ended December 31, 1997.
1993 $.30
1994 $.35
1995 $.45
1996 $.55
1997 $.65
Indicated below are high and low sales prices for the quarters of the
last two fiscal years. All quotations represent actual transactions.
<TABLE>
<CAPTION>
1997 1996
------------- --------------
$ $ $ $
<S> <C> <C> <C> <C>
First Quarter 17-5/8 16-1/2 17-7/8 16-3/4
Second Quarter 17-1/4 15-1/2 20-7/8 17-1/2
Third Quarter 24-1/4 16-3/8 19-5/8 16-3/4
Fourth Quarter 25 17-5/8 17-3/8 16-1/4
</TABLE>
Approximate number of shareholders of record as of
December 31, 1997(without regard to shares held in nominee or
street name): 250
116
<PAGE>
EXHIBIT 21
Subsidiaries of the Registrant
<TABLE>
<CAPTION>
Percentage of
Organized voting securities
under owned by
laws of immediate parent
<S> <S> <S>
Consolidated-Tomoka Land Co. Florida --
Placid Utilities Florida 100.0
Indigo Group Inc. Florida 100.0
Indigo Group Ltd. Florida 99.0*
(A Limited Partnership)
Indigo Development Inc. Florida 100.0
Indigo Lakes Realty, Inc. Florida 100.0
Palms Del Mar Inc. Florida 100.0
Indigo International Inc. Florida 100.0
</TABLE>
*Consolidated-Tomoka Land Co. is the limited partner of Indigo Group Ltd., and
owns 99.0% of the total partnership equity. Indigo Group Inc. is the managing
general partner of the partnership and owns an additional 1.0% of the
partnership equity.
All subsidiaries are included in the Consolidated Financial Statements of the
Comany and its subsidiaries appearing elsewhere herein.
117
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTS
TO: CONSOLIDATED-TOMOKA LAND CO.
As independent certified public accountants, we hereby consent
to the incorporation of our reports included and incorporated by
reference in this Form 10-K, into the Company's previously filed
Registration Statements on Form S-8 (File 33-62679 (prior
registration number 33-50954)).
Arthur Andersen LLP
Tampa, Florida
March 20,1998
118
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CONSOLIDATED-TOMOKA LAND CO.'S DECEMBER 31, 1997 10-K AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 9,387,433
<SECURITIES> 1,026,679
<RECEIVABLES> 11,843,323
<ALLOWANCES> 0
<INVENTORY> 17,527,023
<CURRENT-ASSETS> 0
<PP&E> 26,197,934
<DEPRECIATION> 9,306,797
<TOTAL-ASSETS> 58,234,142
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 6,371,833
<OTHER-SE> 31,482,614
<TOTAL-LIABILITY-AND-EQUITY> 58,234,142
<SALES> 22,581,577
<TOTAL-REVENUES> 23,950,663
<CGS> 8,347,587
<TOTAL-COSTS> 11,760,675
<OTHER-EXPENSES> 5,018,736
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 913,287
<INCOME-PRETAX> 6,257,965
<INCOME-TAX> 2,246,367
<INCOME-CONTINUING> 4,011,367
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,011,367
<EPS-PRIMARY> .64
<EPS-DILUTED> .64
</TABLE>
