<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal period ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
---------- ----------
COMMISSION FILE NUMBER: No 1934 act file number assigned
(1933 act file no. 2-65481)
SADDLEBROOK RESORTS, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 59-1917822
------------------------ ---------------------------------
(State of incorporation) (IRS employer identification no.)
5700 Saddlebrook Way, Wesley Chapel, Florida 33543-4499
-------------------------------------------------------
(Address of principal executive offices)
813-973-1111
----------------------------------------------------
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None*
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None*
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 [ ]
----- -----
State the aggregate value of voting stock held by nonaffiliates of the
registrant: None*
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date: Not applicable*
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
Portions of the registrant's Form S-1 Registration Statement (no. 2-65481)
as declared effective December 28, 1979 are incorporated by reference into
Part IV.
* Registrant has no common stock subject to this annual report.
Exhibit index on Page 28
Page 1 of 34
<PAGE> 2
PART I
Item 1. Business
Saddlebrook Resorts, Inc., (the "Registrant") was incorporated in the State of
Florida on June 20, 1979 as a wholly-owned subsidiary of Pittway Real Estate,
Inc. ("PREI"). PREI was a wholly-owned subsidiary of Penton Publishing, Inc.
which, in turn, was a wholly-owned subsidiary of Pittway Corporation of
Northbrook, Illinois. The Registrant was formed to acquire an existing golf
course and tennis club and develop it into a condominium resort and residential
homes project.
Thomas L. Dempsey ("Dempsey") effectively purchased one hundred percent (100%)
of the authorized and issued stock of the Registrant from PREI in November
1988. Dempsey is the former Chairman of the Board of Penton Publishing, Inc.
and a former Director and Vice President of Pittway Corporation. Dempsey
subsequently gifted 13,000 shares of the Registrant's non-voting stock to
family trusts (see Item 12. Security Ownership of Certain Beneficial Owners and
Management of this Form 10-K, which is incorporated herein by reference).
Prior to November 1988, the Registrant operated and reported the results of its
operations in two industry segments: (1) the real estate segment was engaged in
the development, construction and sales of resort and residential condominium
units, homes and residential lots and (2) the resort segment was engaged in the
ownership and operation of the resort including its facilities for hotel,
convention, food and beverage, golf, tennis and other recreational activities.
In connection with and immediately prior to the sale of the stock of the
Registrant to Dempsey, the Registrant deeded the property which comprised its
real estate segment to PREI as a dividend from a subsidiary to its parent. The
property that was conveyed to PREI was not used as part of the resort or by its
rental guests or condominium owners.
In June 1998, each share of the Registrant's outstanding capital stock was
exchanged for one share of Saddlebrook Holdings, Inc. ("SHI") stock. After the
exchange, Dempsey and the family trusts own 100% of SHI which owns 100% of the
Registrant.
The operations of the Registrant are not considered to be dependent upon the
availability of raw materials, nor the effect of the duration of patents,
licenses, franchises or concessions held.
The Registrant's resort operations are seasonal with a higher volume of sales
during the winter and spring seasons.
The Registrant's competition includes major golf and tennis resorts nationwide,
which provide luxury accommodations and facilities for conventions and
recreational activities.
At December 31, 1999, there were approximately 820 persons employed by the
Registrant. Management's relationship with employees is excellent and there are
no collective bargaining agreements.
2
<PAGE> 3
Item 2. Properties
Saddlebrook Resort is located in south Pasco County, near Tampa, Florida. The
property originally consisted of approximately 330 acres which the Registrant
purchased in July 1979. In addition, approximately 170 and 11 adjoining acres
were purchased and added to the Saddlebrook project in 1984 and 1985,
respectively. The Registrant's property has been approved for 950 residential
and condominium units.
A portion of the Registrant's property that was being developed as residential
single family and cluster homes and improved residential lots known as Fairway
Village was deeded to PREI in November 1988 (see Item 1. Business of this Form
10-K, which is incorporated herein by reference).
Property improvements for the resort consist of condominium units which were
sold or are for sale to outside parties of which there were 550 rental units
participating in a rental pooling program at December 31, 1999 (see Exhibit 28
- - Interest Being Registered of this Form 10-K, which is incorporated herein by
reference).
Certain condominium units and their contents, tennis courts and tracts of real
property held for development which were owned by the Registrant are no longer
encumbered by the Registrant's debt (see Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations of this Form 10-K,
which is incorporated herein by reference). Accordingly, concurrent with the
1998 refinancing of its prior debt, the Registrant effectively distributed the
unencumbered property to SHI at its aggregate book value of approximately
$2,515,000.
In addition to condominium units, resort facilities owned by the Registrant and
its affiliates include a 117,000 square foot convention facility with
approximately 60,000 square feet of meeting space, two 18-hole golf courses, 45
tennis courts, a luxury health spa, a fitness center, three swimming pools,
three restaurants, shops and other facilities necessary for the operation of a
resort. In addition, a facility was completed in the first quarter 2000 which
increases group function space by 18,000 square feet.
Item 3. Legal Proceedings
On May 12, 1989, the Circuit Court of the Sixth Judicial Circuit in and for
Pasco County, Florida, in the lawsuit, James H. Porter and Martha Porter,
Trustees, et al v. Saddlebrook Resorts, Inc. and the County of Pasco, Florida,
Case No. 83-1860, entered a judgment against the Registrant in the amount of
$8,082,000 relating to damages to adjacent property for surface water effects.
In addition, an injunction was entered to remediate damages relating thereto.
On October 14, 1989, the Registrant and Pittway Corporation entered into an
agreement, and on July 16, 1993 an amended agreement, to split equally the
costs of the defense of the litigation, the ultimate judgment and the mandated
remedial work (see Item 1. Business of this Form 10-K, which is incorporated
herein by reference).
3
<PAGE> 4
Item 3. Legal Proceedings (continued)
On March 18, 1992, the Florida Second District Court of Appeal let stand a
circuit court opinion that reversed and vacated the jury verdict and judgment
against the Registrant and ordered a new trial due to the false testimony of
the plaintiff's expert hydrologist. On December 22, 1993, the Registrant filed
a motion for summary judgment in the trial court on grounds that the findings
in its favor by an administrative law judge in a related proceeding bar further
litigation of this matter. An order granting the summary judgment and
dismissing the action was entered on January 7, 1995. On August 16, 1996, the
Florida Second District Court of Appeal filed an opinion affirming, in part,
and reversing, in part, the summary judgment. On November 19, 1996, the
Registrant filed a motion with the trial court to determine the issues that
remain for retrial. On April 1, 1998, the trial court ruled that the plaintiff
will be prohibited from introducing evidence on some, but not all, of the
damages sought.
On March 10, 2000, the Registrant and the plaintiff reached a settlement
agreement which was approved by the court. Upon settlement, the case was
dismissed with prejudice without right to appeal. Final resolution has been
reflected in the financial statements in Item 8 of this Form 10-K, which is
incorporated herein by reference.
The Registrant is involved in other litigation in the ordinary course of
business. In the opinion of management, these matters are adequately covered by
insurance or indemnification from other third parties. The effect, if any, of
these claims is, in management's opinion, immaterial to the Registrant's
financial condition and results of operations.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
The Registrant's stock is privately held and there is no established market for
the stock (see Item 12. Security Ownership of Certain Beneficial Owners and
Management of this Form 10-K, which is incorporated herein by reference).
Condominium units that were developed and sold by the Registrant are deemed to
be securities due to the rental pool feature (see Exhibit 28 - Interest Being
Registered of this Form 10-K, which is incorporated herein by reference).
However, there is no market for such securities other than the normal real
estate market. Since the security is real estate, no dividends have been paid
or will be paid.
4
<PAGE> 5
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Operating revenues $47,306,000 $48,395,000 $41,753,000 $37,309,000 $35,625,000
Net income before
taxes 2,336,000 5,675,000 3,133,000 1,740,000 1,797,000
Total assets 37,773,000 40,956,000 32,707,000 29,519,000 29,157,000
Notes payable 24,628,000 25,530,000 18,687,000 19,567,000 18,764,000
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
The Registrant obtained financing from a third-party lender in June 1998, which
replaced its prior debt. The financing has a fixed annual interest rate of
7.7%, monthly principal and interest payments of approximately $244,000 and
matures on June 30, 2013. The Registrant may obtain additional financing from
the same lender of $5,000,000 provided certain financial covenants are met (see
Note 7 Note Payable of the Notes to Financial Statements in Item 8 of this Form
10-K, which is incorporated herein by reference).
Construction of the resort was substantially complete as of December 1982.
During the fiscal period ended December 31, 1999, the Registrant commenced
construction on a new facility which expands its group function space by 18,000
square feet. This structure, named the Grand Pavilion, was completed in the
spring of 2000 at a cost of approximately $1,620,000. During the fiscal period
ended December 31, 1998, the Registrant completed several capital projects for
an aggregate cost of approximately $2,187,000. However, no individual project
had a cost in excess of $1,000,000. During the fiscal periods ended December
31, 1997 and 1996, the Registrant constructed a new fitness and recreation
center and upgraded its previous fitness center area into a luxury spa at an
aggregate cost of $1,410,000. There were no other major capital additions or
improvements during the fiscal years ended December 31, 1999, 1998 and 1997.
Significant capital expenditures are not anticipated in the next year. Future
operating costs and planned expenditures for minor capital additions and
improvements will be funded by the resort operations of the Registrant or by
additional funds provided by the refinancing of the Registrant's debt discussed
above.
Management is not aware of any environmental matters other than the issue in
Item 3. Legal Proceedings of this Form 10-K, which is incorporated herein by
reference.
5
<PAGE> 6
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
The Registrant's operations are not considered to be dependent on any
individual or small group of customers, the loss of whom would have a material
adverse effect.
Management is aware of the issues associated with the programming code in
computer systems related to the new millennium (year 2000). The Registrant's
systems for property management and financial accounting had been in use for
many years which necessitated an upgrading to the current technological
standards for its industry. Consequently, the Registrant replaced its hardware
and software for both systems in 1998 at an aggregate cost of approximately
$395,000. Based on testing of the new computer systems and their performance
to-date, management anticipates that they are year 2000-compliant and the
effects of the new millennium on the Registrant's operations will be minimal.
There are no adverse purchase or other commitments outstanding as of December
31, 1999.
Results of Operations
Revenues for the fiscal years ended December 31, 1999, 1998 and 1997 were
comprised of the following areas of operation:
<TABLE>
<CAPTION>
Year ended December 31,
------------------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Hotel revenues 49% 48% 48%
Merchandise sales 37 37 36
Club fees 13 13 15
Other income 1 2 1
------ ------ ------
100% 100% 100%
====== ====== ======
</TABLE>
Total revenues decreased $1,089,000 or 2% for the fiscal year ended December
31, 1999 when compared with the previous year. This decrease resulted from
slightly fewer occupied unit nights and number of guests in the resort,
partially offset by a higher average daily room rate, for the current year when
compared to the prior year. Total revenues increased $6,642,000 or 16% for the
fiscal year ended December 31, 1998 when compared with its previous year. This
improvement was the result of an increase in occupied unit nights, average
daily rate and number of guests who stayed at the resort for that fiscal period
when compared to its prior period. Projections for occupied unit nights and
revenues for the year 2000 and subsequent fiscal periods are expected to remain
at the resort's current volume of business.
6
<PAGE> 7
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Net income decreased $3,339,000 or 59% for the fiscal year ended December 31,
1999 when compared with the previous year. This decrease is a result of lower
revenues, expected increases in general costs of operation and costs associated
with the litigation explained in Item 3. Legal Proceedings of this Form 10-K,
which is incorporated herein by reference. The net income for the fiscal year
ended December 31, 1998 increased $2,542,000 or 81% when compared with its
previous year. This improvement was a direct result of that year's increased
revenues which were offset by expected increases in general costs of operation,
when compared to the prior year.
The Registrant previously elected S Corporation status and is currently a
member of a Qualified Subchapter S Subsidiary Group. Accordingly, the
Registrant has had no income tax expense since the initial election as the tax
is assessed at the shareholder level (see Note 2 Significant Accounting
Policies of the Notes to Financial Statements in Item 8 of this Form 10-K,
which is incorporated herein by reference).
In management's estimation, the effects of inflation and changing prices on the
Registrant's results of operations were negligible in 1999, 1998 and 1997.
Saddlebrook Rental Pool Operation
The Saddlebrook Rental Pool Operation (the "Rental Pool") is described in Note
2 Significant Accounting Policies of the Notes to Financial Statements of
Saddlebrook Resorts, Inc. and in Note 1 Rental Pool Operations and Rental Pool
Agreement of the Notes to Financial Statements of Saddlebrook Rental Pool
Operation in Item 8 of this Form 10-K, which are incorporated herein by
reference.
The average occupancy for fiscal 1999, 1998 and 1997 was 52%, 57% and 54%,
respectively. The average distribution of Net Rental Income per participating
rental unit for fiscal 1999, 1998 and 1997 was $11,394, $12,106 and $11,093,
respectively.
Item 8. Financial Statements and Supplementary Data
The financial statements, including the Reports of Independent Certified Public
Accountants, for Saddlebrook Resorts, Inc. are included on pages 12 to 22 and
for Saddlebrook Rental Pool Operation on pages 23 to 27. An index to the
financial statements is on page 11.
Financial statement schedules have been omitted because they are not applicable
or the required information is shown in the financial statements or notes
thereto.
Item 9. Changes in and Disagreements on Accounting and Financial Disclosure
Not applicable.
7
<PAGE> 8
PART III
Item 10. Directors and Executive Officers of the Registrant
The Directors and Executive Officers of the Registrant are as follows:
<TABLE>
<CAPTION>
Name Position Background
<S> <C> <C>
Thomas L. Dempsey Chairman of the Board, Chairman of the Board, Penton
Age 73 President and Chief Publishing, Inc., Cleveland, OH,
29822 Fairway Dr. Executive Officer Vice President and Director,
Wesley Chapel, FL Pittway Corp., Northbrook, IL
Eleanor Dempsey Vice Chairman of the Wife of Thomas Dempsey
29822 Fairway Dr. Board
Wesley Chapel, FL
Richard Boehning Director, Executive Vice General Manager, Doral Hotel
Age 65 President and General and Country Club, Miami, FL
5017 Pinelake Rd. Manager
Wesley Chapel, FL
Gregory R. Riehle Director, Vice President Son-in-law of Thomas Dempsey,
Age 43 and Secretary Attorney, Shumaker, Loop &
30338 Laurelwood Ln. Kendrick, Tampa, FL
Wesley Chapel, FL
Maureen Dempsey Director, Vice President Daughter of Thomas Dempsey,
Age 41 and Assistant Secretary President, Saddlebrook
29812 Fairway Dr. International Tennis, Inc.
Wesley Chapel, FL
Diane L. Riehle Director, Vice President Daughter of Thomas Dempsey,
Age 39 and Assistant Secretary Regional Sales Manager,
30338 Laurelwood Ln. Saddlebrook Resorts, Inc.
Wesley Chapel, FL
Donald L. Allen Vice President and Controller, Kiawah Island,
Age 60 Treasurer Charleston, SC
1314 Foxwood Dr.
Lutz, FL
Robert A. Shaw Assistant Treasurer and Controller, Gulf Shores
Age 43 Corporate Controller Plantation, Gulf Shores, AL,
5404 Saddlebrook Way CPA, Price Waterhouse,
Wesley Chapel, FL Indianapolis, IN
</TABLE>
8
<PAGE> 9
Item 11. Executive Compensation
The directors and executive officers of the Registrant as of December 31, 1999
are listed in Item 10 of this Form 10-K, which is incorporated herein by
reference. The aggregate remuneration from the Registrant for all directors and
executive officers for the fiscal year ended December 31, 1999 was $1,377,000.
Of this amount, Thomas Dempsey received $219,000, Eleanor Dempsey received
$164,000, Richard Boehning received $300,000, Gregory Riehle received $140,000,
Maureen Dempsey received $199,000 and Diane Riehle received $200,000. No other
director or executive officer received compensation in excess of $100,000.
Directors and executive staff are allowed to use the Registrant's resort
facilities and are provided various discounts on related purchases in
accordance with hospitality industry standards. The Registrant has no other
compensation plans for directors and executive officers.
Item 12. Security Ownership of Certain Beneficial Owners and Management
<TABLE>
<CAPTION>
Title of Name of beneficial Amount and nature of Percent
class owner beneficial ownership of class
<S> <C> <C> <C>
Common Saddlebrook Holdings, Inc. 100.0% 100%
Common Thomas L. Dempsey 100.0% 0%
Common Maureen Dempsey Trust 6.5% 0%
Common Diane Lynn Riehle Trust 6.5% 0%
</TABLE>
In December 1994, the Registrant's Articles of Incorporation were amended to
increase the number of shares of authorized common stock from 25,000 to 100,000
shares. Each of the 500 shares of stock that was previously outstanding was
then exchanged for 100 shares of voting stock and 100 shares of nonvoting
stock. The par value of each share remains unchanged at $1. On October 1, 1995,
6,500 shares of nonvoting stock was gifted by Thomas L. Dempsey to each of two
family trusts.
In June 1998, each share of the Registrant's outstanding capital stock was
exchanged for one share of Saddlebrook Holdings, Inc. ("SHI") stock. After the
exchange, Thomas L. Dempsey and the family trusts own 100% of SHI which owns
100% of the Registrant.
Item 13. Certain Relationships and Related Transactions
As of December 31, 1999, present and past executive officers and/or directors
of the Registrant have personally accounted for real estate sales totaling
$2,748,000 since inception of the project. Other relationships and related
transactions are described in Note 8 Related Party Transactions of the Notes to
Financial Statements in Item 8 of this Form 10-K, which is incorporated herein
by reference.
9
<PAGE> 10
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Financial statements and schedules required to be filed are listed in
Item 8 of this Form 10-K, which is incorporated herein by reference.
Exhibits required to be attached by Item 601 of Regulation S-K are
listed in the Index to Exhibits attached to this Form 10-K, which is
incorporated herein by reference.
(b) The Registrant was not required to file a Form 8-K during the year
ended December 31, 1999.
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.
SADDLEBROOK RESORTS, INC.
(Registrant)
Date: March 30, 2000 /s/ Donald L. Allen
-----------------------
Donald L. Allen
Vice President and Treasurer
(Principal Financial and
Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on March 30, 2000.
/s/ Thomas L. Dempsey /s/ Richard Boehning
----------------------- ----------------------
Thomas L. Dempsey Richard Boehning
President and Chairman Director and Executive
of the Board Vice President
(Principal Executive Officer)
/s/ Gregory R. Riehle /s/ Robert A. Shaw
----------------------- ----------------------
Gregory R. Riehle Robert A. Shaw
Director and Vice President Assistant Treasurer
and Corporate Controller
10
<PAGE> 11
SADDLEBROOK RESORTS, INC.
INDEX TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
<S> <C>
Financial Statements
SADDLEBROOK RESORTS, INC.
Report of Independent Certified Public Accountants 12
Balance Sheets at December 31, 1999 and 1998 13
Statements of Income for each of the three years in the period
ended December 31, 1999 14
Statements of Changes in Shareholders' Equity for each of the
three years in the period ended December 31, 1999 15
Statements of Cash Flows for each of the three years in the
period ended December 31, 1999 16
Notes to Financial Statements 17-22
SADDLEBROOK RENTAL POOL OPERATION
Report of Independent Certified Public Accountants 23
Balance Sheets at December 31, 1999 and 1998 24
Statements of Operations for each of the three years in the period
ended December 31, 1999 25
Statements of Changes in Participants' Fund Balance for each of
the three years in the period ended December 31, 1999 26
Notes to Financial Statements 27
</TABLE>
11
<PAGE> 12
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholder of
Saddlebrook Resorts, Inc.
In our opinion, the accompanying balance sheets and the related statements of
income, changes in shareholders' equity and of cash flows present fairly, in
all material respects, the financial position of Saddlebrook Resorts, Inc. at
December 31, 1999 and 1998, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1999, in
conformity with accounting principles generally accepted in the United States.
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 of these statements in accordance with
auditing standards generally accepted in the United States, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
PricewaterhouseCoopers LLP
Tampa, Florida
March 10, 2000
12
<PAGE> 13
SADDLEBROOK RESORTS, INC.
BALANCE SHEETS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,551,280 $ 8,604,005
Escrowed cash 372,104 91,326
Short-term escrowed investments 195,251 1,180,327
Trade accounts receivable, net of allowances for
doubtful accounts of $164,000 and $271,000 2,874,562 5,185,155
Due from related parties 531,179 643,681
Resort inventory and supplies 1,832,538 1,582,488
Prepaid expenses and other assets 550,830 670,643
----------- -----------
Total current assets 11,907,744 17,957,625
Long-term escrowed investments 398,553 498,485
Property, buildings and equipment, net 24,930,026 21,937,929
Deferred charges, net of accumulated amortization of
$60,000 and $19,000 537,046 561,904
----------- -----------
$37,773,369 $40,955,943
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of notes payable $ 1,097,965 $ 996,764
Escrowed deposits 965,908 1,770,138
Accounts payable 1,515,163 1,598,704
Accrued rental distribution 1,431,301 1,613,142
Accrued payroll and related expenses 770,608 818,240
Accrued taxes 77,633 63,067
Guest deposits 1,909,517 1,988,483
Accrued expenses and other liabilities 2,073,696 1,338,098
Due to related parties 441,318 811,398
----------- -----------
Total current liabilities 10,283,109 10,998,034
Notes payable due after one year 23,529,604 24,532,820
----------- -----------
Total liabilities 33,812,713 35,530,854
----------- -----------
Commitments and contingencies (Note 10)
Shareholders' equity:
Common stock 100,000 100,000
Additional paid-in capital 1,013,127 1,013,127
Accumulated earnings 2,847,529 4,311,962
----------- -----------
Total shareholders' equity 3,960,656 5,425,089
----------- -----------
$37,773,369 $40,955,943
=========== ===========
</TABLE>
The accompanying Notes to Financial Statements are
an integral part of these financial statements.
13
<PAGE> 14
SADDLEBROOK RESORTS, INC.
STATEMENTS OF INCOME
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended
December 31,
1999 1998 1997
<S> <C> <C> <C>
Resort revenues (Note 8) $47,306,209 $48,394,775 $41,752,786
----------- ----------- -----------
Cost and expenses:
Operating costs of resort (Note 8) 32,292,105 31,515,915 28,128,453
Sales and marketing 3,781,059 3,548,950 3,529,378
General and administrative 5,256,616 4,297,181 3,785,816
Depreciation and amortization 1,755,644 1,573,902 1,489,063
Interest 1,885,218 1,784,187 1,687,092
----------- ----------- -----------
Total costs and expenses 44,970,642 42,720,135 38,619,802
----------- ----------- -----------
Net income $ 2,335,567 $ 5,674,640 $ 3,132,984
=========== =========== ===========
</TABLE>
The accompanying Notes to Financial Statements are
an integral part of these financial statements.
14
<PAGE> 15
SADDLEBROOK RESORTS, INC.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Total
Common Additional Accumulated shareholders'
stock paid-in capital earnings equity
<S> <C> <C> <C> <C>
Balance at December 31, 1996 $ 100,000 $1,013,127 $ 2,378,825 $ 3,491,952
Net income 3,132,984 3,132,984
Distributions to shareholders (1,652,594) (1,652,594)
---------- ---------- ----------- -----------
Balance at December 31, 1997 100,000 1,013,127 3,859,215 4,972,342
Net income 5,674,640 5,674,640
Distributions to shareholders (2,707,361) (2,707,361)
Distribution of fixed assets to
shareholder (2,514,532) (2,514,532)
---------- ---------- ----------- -----------
Balance at December 31, 1998 100,000 1,013,127 4,311,962 5,425,089
Net income 2,335,567 2,335,567
Distributions to shareholder (3,800,000) (3,800,000)
---------- ---------- ----------- -----------
Balance at December 31, 1999 $ 100,000 $1,013,127 $ 2,847,529 $ 3,960,656
========== ========== =========== ===========
</TABLE>
The accompanying Notes to Financial Statements are
an integral part of these financial statements.
15
<PAGE> 16
SADDLEBROOK RESORTS, INC.
STATEMENTS OF CASH FLOWS
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended
December 31,
1999 1998 1997
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 2,335,567 $ 5,674,640 $ 3,132,984
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,755,644 1,573,902 1,489,063
Loss (gain) on disposal of property, buildings
and equipment 1,188 (124,217) 4,629
Provision for doubtful accounts 12,844 125,300 77,100
Change in assets and liabilities:
(Increase) decrease in:
Escrowed cash (280,778) 1,194 124,167
Escrowed investments 1,085,008 (389,547) (890,038)
Trade accounts receivable 2,297,749 (1,269,015) (662,351)
Resort inventory and supplies (250,050) (14,516) (108,877)
Prepaid expenses and other assets 119,813 (146,968) (148,466)
Increase (decrease) in:
Escrowed deposits (804,230) 388,353 765,871
Accounts payable (83,541) 1,057,423 (56,699)
Accrued rental distribution (181,841) 163,347 6,283
Guest deposits (78,966) (173,137) 1,070,902
Accrued expenses and other liabilities 702,532 (430,015) 488,483
----------- ----------- ----------
Net cash provided by operating activities 6,630,939 6,436,744 5,293,051
----------- ----------- ----------
Cash flows from investing activities:
Proceeds from sales of equipment 1,625 210,000 555,400
Capital expenditures (4,587,029) (2,187,248) (3,040,501)
----------- ----------- ----------
Net cash used in investing activities (4,585,404) (1,977,248) (2,485,101)
----------- ----------- ----------
Cash flows from financing activities:
Proceeds from notes payable - 26,000,000 -
Payments on notes payable (1,025,244) (19,157,336) (880,000)
Distribution to shareholders (3,800,000) (2,707,361) (1,652,594)
Financing costs (15,438) (540,637) (36,641)
Due to/from related parties (257,578) (304,753) 197,684
----------- ----------- ----------
Net cash (used in) provided by financing activities (5,098,260) 3,289,913 (2,371,551)
----------- ----------- ----------
Net (decrease) increase in cash and cash equivalents (3,052,725) 7,749,409 436,399
Cash and cash equivalents, beginning of year 8,604,005 854,596 418,197
----------- ----------- ----------
Cash and cash equivalents, end of year $ 5,551,280 $ 8,604,005 $ 854,596
=========== =========== ==========
SUPPLEMENTAL DISCLOSURE:
Cash paid for interest $ 1,942,398 $ 1,918,953 $1,608,123
NON-CASH FINANCING AND INVESTING ACTIVITIES:
Distribution of fixed assets to shareholder $ - $ 2,514,532 $ -
Capital lease obligation $ 123,229 $ - $ -
</TABLE>
The accompanying Notes to Financial Statements are
an integral part of these financial statements.
16
<PAGE> 17
SADDLEBROOK RESORTS, INC.
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
1. THE COMPANY:
Saddlebrook Resorts, Inc. (the "Company") was incorporated in the
State of Florida in June 1979 at which time it purchased a golf course
and tennis complex, as well as certain undeveloped land, located in
Pasco County, Florida, which was developed as a resort-condominium and
residential homes project. Property improvements for the resort
consist of condominiums which were sold or are for sale to outside
parties. The majority of the condominium units sold are provided as
hotel accommodations by their owners under a Rental Pool and Agency
Appointment Agreement. As of December 31, 1999, the resort facilities
include two 18 hole golf courses, eight tennis courts, three swimming
pools, three restaurants, a 117,000 square foot convention facility
with approximately 60,000 square feet of meeting space, a luxury
health spa, a fitness center, shops and other facilities necessary for
the operation of a luxury resort. In addition, a facility was
completed in the first quarter of 2000 which increases the group
function space by 18,000 square feet.
On June 29, 1998, the Company's shareholders exchanged each share of
the outstanding common stock for one share of common stock of
Saddlebrook Holdings, Inc. ("SHI"). After the exchange, the Company's
prior shareholders own 100% of SHI which owns 100% of the Company.
2. SIGNIFICANT ACCOUNTING POLICIES:
A summary of the Company's significant accounting policies follows:
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities 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.
Cash equivalents
All highly liquid debt instruments purchased with an original maturity
of three months or less are considered to be cash equivalents.
Resort inventory and supplies
Inventory includes operating materials and supplies and is accounted
for at the lower of first-in, first-out cost or market.
Investments
Investments, which are held to maturity, are recorded at amortized
cost, which approximates fair market value.
Property, buildings and equipment
Property, buildings and equipment are stated at cost. Depreciation is
provided over the estimated useful lives of the assets on a
straight-line basis. Expenditures for renewals and improvements that
significantly add to or extend the useful life of an asset are
capitalized.
17
<PAGE> 18
SADDLEBROOK RESORTS, INC.
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
Expenditures for repairs and maintenance are charged to expense as
incurred. With the retirement or other disposition of property,
buildings and equipment, the cost of the assets and related
accumulated depreciation amounts are removed from the accounts, and
any resulting gains or losses are reflected in operations.
Management periodically reviews the potential impairment of property,
buildings and equipment in order to determine the proper carrying
value of property, buildings and equipment as of each balance sheet
date presented. Based on this review, there were no adjustments made
to the carrying value of operating properties during the three years
ended December 31, 1999.
Deferred charges
In connection with the Company's refinancing of its debt during 1998,
financing costs in the amount of $597,000 were incurred and
capitalized. These financing costs are being amortized using a method
that approximates the effective interest method over fifteen years,
the life of the related debt outstanding.
Amortization expense for deferred charges amounted to $41,000, $87,000
and $127,000 for the years ended December 31, 1999, 1998 and 1997,
respectively.
Operating costs of resort
Included in operating costs of resort are service fee revenues
associated with various operating departments, primarily banquets.
Such amounts were $2,397,000, $2,577,000 and $1,993,000 for the years
ended December 31, 1999, 1998 and 1997, respectively.
Rental pool operations
Resort revenues include rental revenues for condominium units owned by
third parties participating in the rental pool. If these rental units
were owned by the Company, normal costs associated with ownership such
as depreciation, real estate taxes, maintenance, and other costs would
have been incurred. Instead, resort operating expenses for the years
ended December 31, 1999, 1998 and 1997 include rental pool
distributions to condominium unit owners approximating $6,278,000,
$6,646,000 and $6,090,000, respectively.
Income taxes
Effective February 1, 1990, the Company elected S Corporation status
for federal and state income tax purposes. Taxable income and losses
are ultimately passed through to the shareholders, and accordingly, no
provision for income taxes has been made in the accompanying financial
statements. As of December 31, 1999, the Company has approximately
$470,000 in tax net operating loss carryforwards, which expire in 2002
available only to offset future C Corporation taxable income.
3. COMMON STOCK:
At December 31, 1999 and 1998, the Company had 50,000 shares of voting
common stock and 50,000 shares of nonvoting common stock authorized,
issued and outstanding. The par value of the voting and nonvoting
common stock was $1.00 at December 31, 1999 and 1998.
18
<PAGE> 19
SADDLEBROOK RESORTS, INC.
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
4. ESCROWED CASH:
Escrowed cash, restricted as to use, at December 31 is comprised of
the following:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Rental pool unit owner deposits for maintenance reserve fund
held in a bank account which bears an interest rate of 3.6% $353,829 $74,676
Security deposits held on long-term rentals 18,275 16,650
-------- -------
$372,104 $91,326
======== =======
</TABLE>
5. ESCROWED INVESTMENTS:
Escrowed investments at December 31 are comprised of the following:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
U.S. Treasury Securities $ 593,804 $ 1,678,812
Less current portion (195,251) (1,180,327)
--------- -----------
$ 398,553 $ 498,485
========= ===========
</TABLE>
Escrowed investments relate to rental pool unit owner deposits for the
maintenance reserve fund which bear interest at rates ranging from
4.6% to 6.5%. Long-term portions of these investments mature in 2001
through 2003.
6. PROPERTY, BUILDINGS AND EQUIPMENT, NET:
Property, buildings and equipment, net at December 31 consist of the
following:
<TABLE>
<CAPTION>
Estimated
Useful
Lives 1999 1998
<S> <C> <C> <C>
Land and land improvements $ 4,412,745 $ 3,820,478
Buildings and recreational facilities 10-40 21,407,692 19,133,063
Machinery and equipment 2-15 11,173,064 9,147,470
Construction in progress 1,128,285 1,371,265
------------ ------------
38,121,786 33,472,276
Accumulated depreciation (13,191,760) (11,534,347)
------------ ------------
$ 24,930,026 $ 21,937,929
============ ============
</TABLE>
Substantially all property, buildings and equipment are mortgaged,
pledged or otherwise subject to lien under loan agreements (Note 7).
On June 29, 1998, the Company distributed to its shareholders at its
aggregate book value of approximately $2,515,000, its unencumbered
condominium units, tennis courts and certain tracts of real property.
19
<PAGE> 20
SADDLEBROOK RESORTS, INC.
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
Depreciation expense amounted to $1,715,000, $1,487,000 and $1,362,000
for the years ended December 31, 1999, 1998 and 1997, respectively.
The Company leases certain equipment under an agreement which is
classified as a capital lease. The equipment and obligations related
to the lease are recorded at the present value of the minimum lease
payments. During 1999, the Company recorded approximately $11,000 of
interest expense related to the lease. Depreciation is computed on a
straight-line basis over the estimated useful life of the asset. Total
depreciation expense was approximately $24,000 during 1999 on the
asset under lease.
The Company leases certain equipment under operating leases. Some of
the leases contain annual renewal options after the initial lease
term. Lease expense amounted to $319,000, $228,000 and $203,000 for
the years ended December 31, 1999, 1998 and 1997, respectively. Future
minimum lease payments for noncancelable operating leases with initial
lease terms in excess of one year approximate:
<TABLE>
<S> <C>
2000 $ 163,800
2001 52,119
2002 4,200
2003 and thereafter --
----------
$ 220,119
==========
</TABLE>
7. NOTES PAYABLE:
Notes payable at December 31 consists of the following:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Note payable to lender, 15 year term, 7.70% fixed interest
rate, monthly ratable principal and interest payments,
secured by all current and subsequently acquired real
and personal property $ 24,532,820 $25,529,584
Capital lease obligation 94,749 -
Less current portion (1,097,965) (996,764)
------------ -----------
$ 23,529,604 $24,532,820
============ ===========
</TABLE>
On June 29, 1998, the Company financed a $26 million note payable. The
proceeds from the note payable were used principally to retire the
prior debt. Under the terms of the agreement, the Company is required
to meet debt service coverage ratios as defined. The Company was in
compliance at December 31, 1999. The Company has the ability to obtain
an additional $5 million from the same lender under the terms of the
agreement.
Principal maturities of the note payable are due as follows: 2000 -
$1,097,965; 2001 - $1,186,270; 2002 - $1,281,699; 2003 - $1,377,062;
2004 and thereafter - $19,684,573.
20
<PAGE> 21
SADDLEBROOK RESORTS, INC.
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
8. RESORT REVENUES AND OPERATING COSTS OF RESORT:
Resort revenues and operating costs of resort for the years ended
December 31 are comprised of the following:
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Resort Revenues
Room revenue subject to rental pool agreement $15,555,374 $16,310,670 $14,981,287
Food and beverage 14,764,053 15,682,829 13,182,191
Resort facilities and other 16,986,782 16,401,276 13,589,308
----------- ----------- -----------
$47,306,209 $48,394,775 $41,752,786
=========== =========== ===========
Operating Costs of Resort
Room expense subject to rental pool agreement $ 6,278,003 $ 6,646,176 $ 6,090,010
Food and beverage 10,239,266 9,810,205 8,306,784
Resort facilities and other 15,774,836 15,059,534 13,731,659
----------- ----------- -----------
$32,292,105 $31,515,915 $28,128,453
=========== =========== ===========
</TABLE>
9. RELATED PARTY TRANSACTIONS
At December 31, 1999, a net payable amounting to approximately
$326,000 was due to SHI, the Company's parent (Note 1), primarily
relating to dividends declared to the Company's shareholders during
1994 in the amount of $350,000 which were unpaid as of December 31,
1999 and net intercompany charges and cash transfers. At December 31,
1998, a net receivable amounting to approximately $57,000 was due from
SHI, primarily relating to amounts paid by the Company for condominium
improvements made to their units, net of dividends declared to the
Company's shareholders during 1994 in the amount of $350,000 which
were unpaid as of December 31, 1998.
Saddlebrook International Tennis, Inc. ("SIT") is a tennis training
facility and preparatory school operating at the resort. SIT is solely
owned by the Company's parent. The Company charges SIT various amounts
for services provided to SIT guests, which amounted to approximately
$2,142,000, $1,947,000 and $1,730,000 for the years ended December 31,
1999, 1998 and 1997, respectively. In addition, the Company is
reimbursed for allocated expenses and other costs paid on behalf of
SIT. At December 31, 1999, the amounts due to/from SIT were included
in the net payable to SHI. At December 31, 1998, a net payable
amounting to approximately $274,000 resulted from net intercompany
charges and cash transfers.
Saddlebrook Investments, Inc. is a broker/dealer for sales of
Saddlebrook Resort condominium units. Saddlebrook Realty, Inc. is a
broker/dealer for the sale of other general real estate. These
companies are solely owned by the majority shareholder of the
Company's parent. At December 31, 1999 and 1998, a net payable of
approximately $98,000 and $186,000, respectively, resulted from net
intercompany charges and cash transfers.
The Company performs certain accounting and property management
activities on behalf of the Saddlebrook Resort Condominium Association
(the "Association") and is reimbursed for expenses paid on behalf of
the Association. Expenses paid on behalf of and services provided to
the Association amounted to approximately $1,012,000, $976,000 and
$971,000 for the years ended December 31, 1999, 1998 and 1997,
respectively. At December 31, 1999 and 1998, a net receivable of
approximately $101,000 and $100,000 respectively, was due from the
Association.
21
<PAGE> 22
SADDLEBROOK RESORTS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The Company and the original owner of the resort have an agreement to
split equally the costs of defense in the litigation and any ultimate
judgment or remedial work relating to litigation with the adjacent
property owners of the resort. A receivable for reimbursable costs of
defense and remedial work at December 31, 1999 and 1998 was
approximately $388,000 and $120,000, respectively. See Note 10 for
discussion of litigation.
Due from related parties also consists of other miscellaneous
receivables and employee advances owed the Company of approximately
$25,000 and $15,000 at December 31, 1999 and 1998, respectively.
10. COMMITMENTS AND CONTINGENCIES:
Litigation
On May 12, 1989, a judgment was entered against the Company in the
amount of $8,082,000 relating to damages to adjacent property owners
for surface water effects as a result of past development. In
addition, an injunction was entered to remediate the damages relating
thereto.
On March 18, 1992, the Florida Second District Court of Appeal let
stand a circuit court decision reversing and vacating the jury verdict
and judgment against the Company and ordered a new trial due to the
false testimony of the plaintiffs' expert hydrologist. On December 7,
1994, the trial court heard oral arguments on the merits of the
Company's motion for summary judgment based on collateral estoppel and
ruled in the Company's favor. On January 7, 1995, the court entered an
order granting summary judgment in favor of the Company and dismissing
the action. The plaintiffs then appealed this order to the Florida
Second District Court of Appeal on April 21, 1995. On August 16, 1996,
the appellate court issued its opinion affirming and reversing, in
part, the trial court's grant of summary judgment to the Company. On
November 19, 1996, the Company filed a motion to determine the issues
that remain for retrial. Oral arguments for that motion took place on
May 15, 1997. On April 1, 1998, the trial court entered an order on
the issues remaining to be tried. The plaintiff sought rehearing of
that order on April 13, 1998. The rehearing was denied on July 30,
1998. On March 10, 2000, the Company and the plaintiff reached a
settlement agreement, which was approved by the court. Upon
settlement, the case was dismissed with prejudice without right to
appeal. Final resolution has been reflected in the accompanying
financial statements.
The Company is involved in other litigation in the ordinary course of
business. In the opinion of management, these matters are adequately
covered by insurance or indemnification from other third parties
and/or the effect, if any, of these claims is not material to the
reported financial condition or results of operations of the Company
as of December 31, 1999.
Insurance pool
The Company has pooled its risks with other resorts by forming an
insurance purchasing group in which they retain an equity interest and
to which they pay insurance premiums. The Company's ownership is less
than 9% and all amounts contributed as capital ($122,950 as of
December 31, 1999) are reflected as prepaid expenses and other assets
in the accompanying Balance Sheets. The Company's investment
approximates the proportionate net book value of the insurance company
as of December 31, 1999. The Company may withdraw from the risk pool
at any renewal date (annually).
22
<PAGE> 23
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of Saddlebrook
Resorts, Inc., as Operators under the Saddlebrook
Rental Pool and Agency Appointment Agreement
In our opinion, the accompanying balance sheets and the related statements of
operations and of changes in participants' fund balance present fairly, in all
material respects, the financial position of the Saddlebrook Rental Pool
Operation (funds created for participants who have entered into a rental pool
agreement as explained in Note 1) at December 31, 1999 and 1998, and the
results of its operations and the changes in participants' fund balance for
each of the three years in the period ended December 31, 1999, in conformity
with accounting principles generally accepted in the United States. These
financial statements are the responsibility of the rental pool's operators; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
PricewaterhouseCoopers LLP
Tampa, Florida
March 10, 2000
23
<PAGE> 24
SADDLEBROOK RENTAL POOL OPERATION
BALANCE SHEETS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DISTRIBUTION FUND
DECEMBER 31,
1999 1998
<S> <C> <C>
ASSETS
Receivable from Saddlebrook Resorts, Inc. $1,354,525 $1,549,733
========== ==========
LIABILITIES AND PARTICIPANTS' FUND BALANCE
Due to participants for rental pool distribution $1,108,663 $1,256,492
Due to maintenance escrow fund 245,862 293,241
Participants' fund balance -- --
---------- ----------
$1,354,525 $1,549,733
========== ==========
MAINTENANCE ESCROW FUND
ASSETS DECEMBER 31,
1999 1998
Cash in bank $ 353,829 $ 74,676
Investments 593,804 1,678,812
Receivables:
Distribution fund 245,862 293,241
Interest 8,180 16,904
Prepaid maintenance 636,669 325,648
Linen inventory 222,188 145,109
---------- ----------
$2,060,532 $2,534,390
========== ==========
LIABILITIES AND PARTICIPANTS' FUND BALANCE
Accounts payable $ 340,730 $ 94,288
Participants' fund balance 1,719,802 2,440,102
---------- ----------
$2,060,532 $2,534,390
========== ==========
</TABLE>
The accompanying Notes to Financial Statements are
an integral part of these financial statements.
24
<PAGE> 25
SADDLEBROOK RENTAL POOL OPERATION
STATEMENTS OF OPERATIONS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DISTRIBUTION FUND
YEAR ENDED
DECEMBER 31,
1999 1998 1997
<S> <C> <C> <C>
Rental pool revenues $ 15,555,374 $ 16,310,670 $ 14,981,287
------------ ------------ ------------
Deductions:
Marketing fee 1,166,653 1,223,299 1,123,597
Management fee 1,944,422 2,038,834 1,872,661
Travel agent commissions 746,589 698,483 682,404
Credit card expense 197,293 160,148 151,701
Bad debt expense 33,000 53,000 10,000
------------ ------------ ------------
4,087,957 4,173,764 3,840,363
------------ ------------ ------------
Net rental income 11,467,417 12,136,906 11,140,924
Operator share of net rental income (5,160,338) (5,461,608) (5,013,416)
Other revenues (expenses):
Complimentary room revenues 103,488 92,121 105,871
Minor repairs and replacements (132,564) (121,243) (143,369)
------------ ------------ ------------
Amounts available for distribution to
participants and maintenance
escrow fund $ 6,278,003 $ 6,646,176 $ 6,090,010
============ ============ ============
</TABLE>
The accompanying Notes to Financial Statements are
an integral part of these financial statements.
25
<PAGE> 26
SADDLEBROOK RENTAL POOL OPERATION
STATEMENTS OF CHANGES IN PARTICIPANTS' FUND BALANCE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DISTRIBUTION FUND
YEAR ENDED
DECEMBER 31,
1999 1998 1997
<S> <C> <C> <C>
Balance, beginning of period $ -- $ -- $ --
Additions:
Amounts available for distribution 6,278,003 6,646,176 6,090,010
Reductions:
Amounts withheld for maintenance
escrow fund (1,117,665) (1,184,568) (1,076,594)
Amounts accrued or paid to participants (5,160,338) (5,461,608) (5,013,416)
----------- ----------- -----------
Balance, end of period $ -- $ -- $ --
=========== =========== ===========
MAINTENANCE ESCROW FUND
YEAR ENDED
DECEMBER 31,
1999 1998 1997
Balance, beginning of period $ 2,440,102 $ 1,852,584 $ 1,146,309
Additions:
Amount withheld from distribution fund 1,117,665 1,184,568 1,076,594
Unit owner payments 288,909 554,024 238,174
Interest earned 77,792 79,361 49,901
Reductions:
Unit renovations (1,690,746) (716,219) (144,458)
Refunds of excess amounts in escrow accounts (209,874) (145,966) (200,025)
Maintenance charges (217,416) (249,025) (221,687)
Linen amortization (86,630) (119,225) (92,224)
----------- ----------- -----------
Balance, end of period $ 1,719,802 $ 2,440,102 $ 1,852,584
=========== =========== ===========
</TABLE>
The accompanying Notes to Financial Statements are
an integral part of these financial statements.
26
<PAGE> 27
SADDLEBROOK RENTAL POOL OPERATION
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
1. RENTAL POOL OPERATIONS AND RENTAL POOL AGREEMENT:
Condominium units are provided as rental (hotel) accommodations by
their owners under the Rental Pool and Agency Appointment Agreement
(the "Agreement") with Saddlebrook Resorts, Inc. (collectively, the
"Rental Pool"). Saddlebrook Resorts, Inc. ("Saddlebrook") acts as
operator of the Rental Pool, which provides for the distribution of a
percentage of net rental income, as defined, to the owners.
The Saddlebrook Rental Pool Operation consists of two funds, the
Rental Pool Income Distribution Fund ("Distribution Fund") and the
Maintenance and Furniture Replacement Escrow Fund ("Maintenance Escrow
Fund"). The operations of the Distribution Fund reflect the earnings
of the Rental Pool. The Distribution Fund balance sheets reflect
amounts due from Saddlebrook for the rental pool distribution payable
to participants and amounts due to the Maintenance Escrow Fund. The
amounts due from Saddlebrook are required to be distributed no later
than forty-five days following the end of each calendar quarter. The
Maintenance Escrow Fund reflects the accounting for escrowed assets
used to maintain unit interiors and replace furniture as it becomes
necessary.
Rental pool participants and Saddlebrook share rental revenues
according to the provisions of the Agreement. Net Rental Income shared
consists of rentals received less a marketing surcharge of 7.5%, a
12.5% management fee, travel agent commissions, credit card expense
and provision for bad debts, if warranted. Saddlebrook receives 45% of
Net Rental Income as operator of the Rental Pool. The remaining 55% of
Net Rental Income after adjustments for complimentary room revenues
(ten percent of the normal unit rental price paid by Saddlebrook for
promotional use of the unit) and certain minor repair and replacement
charges is available for distribution to the participants and
maintenance escrow fund based upon each participants' respective
participation factor (computed using the value of a furnished unit and
the number of days it was available to the pool). Quarterly, 45% of
Net Rental Income is distributed to participants, and 10%, as adjusted
for complimentary room revenues and minor interior maintenance and
replacement charges, is deposited in an escrow account until a maximum
of 20% of the set value of the individual owner's furniture package
has been accumulated. Excess escrow balances are refunded to
participants.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of accounting
The accounting records of the funds are maintained on the accrual
basis of accounting.
Investments
Investments consist of U.S. Treasury Securities which bear interest at
rates ranging from 4.6% to 6.5% (4.4% to 7.1% for 1998). At December
31, 1999 and 1998, investments of $195,251 and 1,180,327,
respectively, mature in one year or less.
Income taxes
No federal or state taxes have been reflected in the accompanying
financial statements as the tax effect of fund activities accrues to
the rental pool participants and operator.
27
<PAGE> 28
INDEX TO EXHIBITS
Sequential
Number and Description of Exhibit Page Number
3.1 Articles of Incorporation of Saddlebrook Resorts, Inc.,
a Florida corporation (incorporated by reference to
Exhibit A*).
3.2 Corporate By-laws of Saddlebrook Resorts, Inc.
(incorporated by reference to Exhibit B*).
4. Declaration of Condominium, together with the following:
(1) Articles of Incorporation of the Saddlebrook
Association of Condominium Owners, Inc. a Florida
non-profit corporation; (2) By-laws of the Saddlebrook
Association of Condominium Owners, Inc., and (3) Rules
and Regulations of the Saddlebrook Association of
Condominium Owners, Inc. (incorporated by reference to
Exhibit C*).
10.1 Management Contract between Saddlebrook Resorts, Inc.
and the Saddlebrook Association of Condominium Owners,
Inc. (incorporated by reference to Exhibit C*).
10.2 Saddlebrook Rental Pool and Agency Appointment
Agreement. 29
10.3 Saddlebrook Rental Management Agency Employment
(incorporated by reference to Exhibit E*).
10.4 Form of Purchase Agreement (incorporated by reference to
Exhibit H*).
10.5 Form of Deed (incorporated by reference to Exhibit I*).
10.6 Form of Bill of Sale (incorporated by reference to
Exhibit J*).
27. Financial Data Schedule (SEC use only). 33
28. Interest Being Registered. Pages 21 and 22 of the
Post-Effective Amendment No. 9 to Registration Statement
on Form S-1 No. 2-65481 filed by the Registrant on March
25, 1986. 34
* Identification of exhibit incorporated by reference from the
Registration Statement No. 2-65481 previously filed by Registrant,
effective December 28, 1979.
28
<PAGE> 1
EXHIBIT 10.2
Page 1 of 4
Saddlebrook
The Golf and Tennis Resort
P.O. Box 7046
Wesley Chapel, Florida 34249 - (813) 973-1111
DEDICATION OF CONDOMINIUM APARTMENT TO
RENTAL POOL AND AGENCY APPOINTMENT AGREEMENT
THIS AGREEMENT, made this day of , 198 , by and between
SADDLEBROOK RESORTS, INC., Wesley Chapel, Florida, hereinafter call "Agent," and
whose address is
hereinafter called "Owner":
WHEREAS, the undersigned is the owner of a condominium apartment which is a
part of SADDLEBROOK RESORTS, the identification of which is hereinafter set
forth; and
WHEREAS, in connection with the sales of the condominium apartments in
SADDLEBROOK RESORTS, a majority of the apartment purchasers have indicated a
desire to dedicate their apartments to a rental pool during such periods as the
Owners thereof shall not occupy the same whereby income from such operation may
be shared equitably after payments to the Agent of a percentage of the income
to cover the expenses of the operation and services of Agent; and
WHEREAS, day-to-day management is required, and the Agent is prepared to
assume such responsibilities according to the terms and conditions hereinafter
set forth.
NOW, THEREFORE, in consideration of the covenants and agreements hereinafter
set forth, and the mutual benefits to the respective parties, and the joining
by the one or more Owners of condominium apartment units in SADDLEBROOK
RESORTS, it is hereby agreed as follows:
(1) DEDICATION OF APARTMENT TO RENTAL POOL. The Owner dedicates to the
rental pool his condominium apartment No. , Bldg. , which apartment is a
type apartment unit, in accordance with the terms hereof.
(2) EXCLUSIVE AGENCY EMPLOYMENT: Owner hereby employs Agent to manage the
rental of his unit number for a period commencing on , 198 , and
ending on the 31st day of December, 198 , with the understanding that the
Agency will be automatically renewed on an annual basis unless either party has
given written notification of termination prior to October 15th of any given
year. If such notice is given, this agreement will terminate on December 31st
of the year in which such notice is received.
(3) RESERVATION OF OWNER'S OCCUPANCY. Owner agrees and hereby dedicates his
apartment to the rental pool for rental occupancy for the total period of this
Agreement except for the period of time hereinafter set forth which the Owner
specifically reserves for his personal use, subject to the limitations set
forth in paragraph (4) of this Agreement.
(a) Owner reserves his apartment for
(see attached exhibit)
(b) Except when reserved by Owner for his personal use, Owner's apartment
shall be subject to rental to such tenants as may be provided by Agent for
terms of one or more days by oral or written lease or rental arrangement.
(c) Subject to the limitations set forth in paragraph 4 of this Agreement,
Owner may at any time, by written notice to Agent during the term of this
Agreement, withhold his unit from such renting, for his personal use, for not
more than the said limitations on Owner occupancy for the succeeding calendar
year. Owner must notify Agent as to the dates to be set aside for his personal
use prior to October 15th of each year. Owner understands that his failure to
provide timely notification to Agent could result in the inavailability of his
unit on desired dates. If Owner provides no notification to Agent it will be
assumed that the Owner desires to reserve the same days for his personal use as
were reserved in the previous year. Agent agrees to provide Owner with a
reminder notice regarding renewal options and reservation days by mail on or
before September 1st of each calendar year.
(d) Notwithstanding any other provision set forth in this Agreement, in
the event an Owner desires his own apartment other than at periods reserved by
the Owner pursuant to Paragraphs 2 (a) and (c) hereof, and if said apartment is
not occupied, or in the sole opinion of the Agent likely to be occupied, for
all or any part of the period for which Owner desires such occupancy, the Owner
may take the apartment out of the pool for such period and utilize the said
apartment himself. In such event, the Owner shall give Agent a minimum of
twenty-four (24) hours' written notice of such temporary removal of the
apartment from the pool. In the event the apartment is occupied, or in the sole
opinion, of the Agent is likely to be occupied, for all or any part of the
period the Owner desires such additional occupancy, then the Owner shall have
no right to remove said unit from the rental pool.
(e) In the event that the Owner desires to occupy his own apartment, other
than at a time reserved for Owner occupancy, during any period when it is
dedicated to the rental pool and does not wish to remove said apartment from
the rental pool, he may do so as a rental tenant and, as such, shall have
preference to occupy his condominium apartment unit if the same has not been
previously reserved by a tenant. Owner shall pay the prevailing rental charges
as established by the Agent for said apartment.
(4) LIMITATIONS ON OWNER OCCUPANCY. The parties acknowledge that in order
to have a successful rental pool operation, there must be a limitation on Owner
occupancy of the units so dedicated to the rental pool. It is mutually agreed
that participating Owners in this rental pool are guaranteed the use of their
units for forty-five (45) days per calendar, with not more than twenty-one (21)
of such days to fall in the period beginning December 15th and ending April
15th. Nothing herein contained shall be construed as prohibiting a
participating Owner from occupying his dedicated unit in excess of the above
limitations if his unit is available in the sole judgement of the Agent. The
above provision concerning occupancy is a contractual agreement between Agent
and Owner. The Tax Reform Act of 1976 contains special provisions concerning
the deductibility of expenses for vacation homes related to the Owner's personal
occupancy. You should consult your tax advisor regarding this matter.
(5) TERMINATION OF AGREEMENT. The parties to this Agreement, both the Owner
and the Agent, may terminate this Agreement by giving not less than six (6)
months' notice to the other party of his intentions to so terminate the
Agreement.
<PAGE> 2
EXHIBIT 10.2 Page 2 of 4
(6) OWNER'S RESPONSIBILITY. Owner recognizes and agrees that his right to
participate in the rental pool depends upon his maintaining the interior of his
condominium apartment in a first-class occupancy condition, and Owner agrees,
so long as he is a party to this Agreement, that he will so maintain the
interior of his apartment. Agent, in its sole discretion shall have the right
to take such steps as necessary to bring the interior of the apartment to such
condition, including but not limited to redecoration of walls and ceilings and
replacement or repairs of draperies, carpeting, furniture and equipment. Costs
for such expenditures shall be charged against the Escrow Account more fully
described hereafter in paragraph 19, and if said account is insufficient, the
balance of such costs may be deducted from any amounts owning to Owner from his
share of the rental pool, provided, however, that in the event the proposed
expenditure would both exceed the amount in the Escrow Account and is over One
Hundred ($100.00) Dollars, Agent agrees to get Owner's permission prior to
making such expenditures, provided further that should Owner refuse to
authorize such expenditures, Agent may forthwith terminate this Agreement. In
the event Agent shall exercise its right to bring a rental unit into
first-class occupancy condition as provided in this paragraph 6, subject to the
Owner's right of approval, if applicable, and such expenditures exceed both the
amounts in the Escrow Account and owing to Owner from his share in the rental
pool, Owner agrees to promptly fully recompense Agent for the balance of said
expenditures. In the event Owner fails to so recompense Agent, Agent may
forthwith terminate this Agreement as to such apartment unit, and upon due
notification to SADDLEBROOK RESORT CONDOMINIUM ASSOCIATION, INC., the said
Association will recompense Agent and exercise such remedies against Owner
and/or his apartment unit as are set forth in the Articles of Incorporation and
By-Laws of such Association pertaining to assessments. Owner further agrees
that the Agent shall have the right to reasonable inspection of the interior
of the Owner's apartment in order to satisfy itself that the unit is being so
maintained, and Agent shall at all times have a passkey to Owner's apartment.
No apartment Owner shall alter any lock or install any new lock on any doors
leading into his apartment without the consent of the Agent, and if such
consent be given, the Agent shall be provided with a key.
(7) DEFINITION AND ALLOCATION OF NET RENTAL INCOME. The parties agree that
net rental income for purposes of this Agreement is defined as follows:
Apartment and room rentals received, less marketing surcharge of a maximum of
7 1/2% of rentals received in each calendar year, a twelve and one-half percent
(12 1/2%) management fee to Agent, travel agents' commissions, reserve for bad
debt and credit card expenses. The proceeds of the marketing surcharge will be
made available for promoting and advertising the Saddlebrook resort operations.
The remaining amount of net rental income, as defined, shall be distributed as
follows:
(a) Rental Pool Income; 45% to the rental pool, to be allocated among
the Owners in accordance with the formula for calculating shares of interest as
hereinafter set forth.
(b) Occupancy Fee; 10% of Net Rental Income to the Owner of a rented
apartment unit; prior to determination of the 10% occupancy fee a deduction
will be made for all minor repair and replacement charges of $25 or less.
Items in this category shall include but not be limited to common repair and
replacement charges applicable to all units such as replacing light bulbs, air
conditioner filter, and smoke detector batteries. A participant's occupancy
fee is subject to the provisions of paragraphs 6 and 19.
(c) 45% to Agent for its services as manager of the rental pool and the
hotel operation.
(8) CALCULATION OF SHARES IN RENTAL POOL. The Owner's share in the monies
allocated to the rental pool shall be determined as follows:
(a) Unit Factor:
A point allocation, attributable to the purchase price (furnished)
of each dedicated apartment unit, will be calculated quarterly so as to
determine the Owner's unit factor. The computation of this factor will be
based upon the purchase price (furnished) of each apartment unit as of January
1 of each year for each type of apartment. the unit factor will be the sum
total of the purchase price (furnished), as herein defined of all apartment
units dedicated during the quarter, divided into the purchase price (furnished)
as herein defined of the particular dedicated apartment unit. The resulting
fraction shall be expressed as a decimal.
(b) Availability Factor:
The summation of the number of days that all apartments are
dedicated to the rental pool in the quarter shall be the denominator. The
number of days that the particular dedicated apartment is in the rental pool in
the quarter shall be the numerator. The resulting fraction, expressed as a
decimal, shall be the availability factor for an apartment unit for that
calendar quarter.
(c) Participation Factor:
The unit factor shall be multiplied by the availability factor, and
the resulting figure shall be the Owner's rental pool participation factor for
such quarter.
(d) Rental Pool Income:
The total of the participation factors for each apartment unit in
the rental pool for the calendar quarter shall be divided into the total rental
pool income (45% of net rental income), as herein defined, available to the
rental pool participants, and the resulting figure times each Owner's
participation factor shall equal his income from the rental pool for the
calendar quarter.
(9) COMPLIMENTARY ROOMS. Owner acknowledges that in connection with rental
promotion activities, Agent will find it necessary and desirable to furnish
complimentary rooms from time to time. Owner agrees that Agent may so furnish
complimentary rooms when Agent, in its sole discretion, deems it necessary or
desirable to do so and that in such event, Agent shall pay an amount
representative of ten percent (10%) of the normal unit rental for each
apartment unit or units which are used as complimentary rooms, and said ten
percent (10%) amount shall be paid pursuant to the terms of this Agreement to
the Owner of the respective apartment unit or units whose apartments have been
so utilized for complimentary occupancy.
(10) AGENT OBLIGATION FOR RENTAL EXPENSES. Owner shall have no expenses for
rental operation as a deduction from net rentals except as provided in
paragraph 7, so long as SADDLEBROOK RESORTS, INC. is the Agent under the
Agreement, except the utilities and property taxes for his apartment, his
obligations for the common element expenses under the Declaration of
Condominium and the maintenance of his regular membership in SADDLEBROOK GOLF
AND TENNIS CLUB in good standing.
(11) PAYMENT OF RENTAL SHARES. Payment of rental pool shares shall be made
on a quarterly basis within forty-five (45) days of the close of each calendar
quarter. The Agent shall distribute to the participating Owners their
respective rental and occupancy fees as heretofore provided, based on their
respective participating factors for that calendar quarter accompanying such
distribution with adequate accounting data in support thereof, such payments to
be subject to all provisions of this Agreement.
(12) OWNER'S OBLIGATIONS. In addition to and not in limitation of the
obligations at law of Owner as a lessor, Owner covenants as follows:
(a) Punctually and fully to perform Owner's obligation as a
condominium owner in SADDLEBROOK RESORTS, including payment of the periodic
charges and assessments attributable to condominium ownership.
<PAGE> 3
EXHIBIT 10.2 Page 3 of 4
(b) To keep Owner's apartment furnished to the extent and in the manner
reasonably required by Agent as necessary for rental purposes hereunder. In
order to maintain the quality of the Owner's apartment comparable with other
rental units in SADDLEBROOK RESORTS, Agent is authorized to establish required
minimum quantity and style of furnishings and equipment for purposes of
efficient rental pool operations.
(c) Subject to Owner's rights of privacy during periods of Owner occupancy
of Owner's apartment, to permit Agent and tenants access to Owner's apartment
consistent with rental occupancy hereunder.
(d) Not to leave upon the premises valuable personal effects or matters of
a nature unsuitable for rental occupancy.
(e) To maintain during the term of the Agreement a regular membership in
SADDLEBROOK GOLF AND TENNIS CLUB for each non-connecting unit in the rental
pool and to authorize SADDLEBROOK to issue a guest card to tenants of Owner's
apartment authorizing the tenant during his tenancy to use the facilities of
SADDLEBROOK upon payment by the tenant of such costs and charges which the Club
may make for any and all services and facilities and upon tenant's complying
with all rules and regulations of the Club. The Owner shall not be liable for
any charges or expenses of tenant in connection with his use of the Club
facilities and services, and if any credit is extended by SADDLEBROOK GOLF AND
TENNIS CLUB to tenant, the Club shall be responsible for the collection of the
indebtedness.
(f) To authorize the Agent to utilize seasonal rates, to grant discounts in
room rates to individuals and/or groups and to utilize package plans. All
package plan discounts will be allocated on a pro-rata basis to all cost
centers affected.
(13) EXTENSION OF RENTAL POOL. It is recognized that Agent plans to expand
the present condominium development of the property it owns or acquires in
Pasco County, Florida, if there is good public acceptance of same. In such
event, it is recognized that it may be economically desirable to extend the
rental pool hereunder on a common basis with other condominium projects and
with common agency management. Agent therefore is specifically permitted to
undertake the duties as Agent under similar rental pool arrangements to this
one for other condominium apartments which are a part of SADDLEBROOK RESORTS
and, to the extent that such rental pool is on a common basis with the terms
hereof, to apply common administration to the rental pool so created on a
basis of equitable participation by condominium apartment units subjected to
the terms hereof or of similar agreements to this one.
(14) ACCOUNTING AND RECORDS. Agent shall cause appropriate books and
records to be maintained for the rental pool, which books and records shall be
subject to examination by or on behalf of participating Owners at any and
all reasonable times. In addition to quarterly distribution of accounting data
in connection with distribution of rental shares as per paragraph 11 hereof,
Agent will cause an annual summary to be distributed to each Owner in such form
as is useful for Owner's income, expense, tax, and depreciation records.
(15) TERMINATION. Agent may terminate its designation hereunder upon giving
of six (6) months' written notice. Such termination will not of itself
terminate the rental pool, and the Owners participating therein may designate a
replacement manager for the performance of Agent's duties hereunder effective
with such termination. Terms of successor agent's appointment shall be as
agreed between Owners and such successor and, to the extent that such successor
agent does not thereby assume the Agent's duties hereunder, the same shall be
the obligation and expense of the participating Owners. Upon expiration of the
term hereof, or as the same may be renewed or upon termination hereof by Agent
under the provisions of this paragraph, Agent will offer for sale to the
management of the rental pool Owner's participating in the rental pool at the
then amortized cost thereof, the innkeeper's supplies then in use by Agent in
the management of the rental pool hereunder, and if the same be purchased by
participants for continuing rental pool, the expense of such acquisition shall
require the Agent to acquire charge against the Owners electing to participate
therein, provided, however, that nothing herein shall require the Agent to
acquire innkeeper's supplies should Agent engage the services of an independent
operating firm as hereinafter provided. Participating Owners may individually
withdraw from the rental pool upon six (6) months' written notice to Agent as
heretofore provided. Such withdrawal by an individual Owner shall not terminate
the rental pool as between Agent and other participating Owners. In the
event of transfer by Owner of his condominium apartment in the SADDLEBROOK
project to a new owner, any such sale shall be subject to the current rental
reservations for a period of six months after closing, however, the successor
owner shall not otherwise be a participating member of the rental pool except
by joining as a party thereto by execution and delivery of a similar agreement
to this Agreement.
(16) INSURANCE. Owner recognizes that the maintenance of fire and extended
coverage insurance upon the common property of the condominium project is an
ordinary and assessable cost of the condominium, exclusive of the agency
arrangements hereunder. Additionally, Owner recognizes the maintenance of fire
and extended coverage insurance upon Owner's property located at Owner's
apartment unit in the condominium project is the Owner's own responsibility.
Recognizing that the conduct of the rental pool hereunder is for the common
benefit of the participants, Owner covenants that he will maintain such
additional insurance as he deems necessary with the subrogation waiver clause
provisions, and Owner hereby waives subrogation as to damage or destruction
of his property to the extent that the same may occur during or arise in
connection with rental occupancy thereof or the conduct of the rental pool
hereunder. Agent will procure, as a rental pool expense chargeable to Agent's
share of the rental income, liability insurance protecting the rental pool, the
participants therein and the Agent as to liability for property damage, bodily
injury or death occurring or claimed to occur by reason of or connected with the
rental pool operations hereunder or the conditions of the rented property or
common property therewith. Agent is further authorized, but only as Agent may
determine economically feasible, in the name of itself and the rental pool, to
procure burglary and theft insurance, use and occupancy insurance and fidelity
bond coverages.
(17) MAINTENANCE OF OWNER'S APARTMENT UNIT. The Agent is not responsible
for repair, restoration, redecorating or other expenses arising by reason of
ordinary wear, tear, obsolescence and depreciation. Owner recognizes such
expenditures as within Owner's responsibility and, to the extent connected with
rental pool participation, adequately compensated by the occupancy fee provided
for in paragraph 7(b) hereof.
(18) AGENT'S DELEGATION OF DUTIES TO AN INDEPENDENT OPERATOR. The parties
agree that Agent has the right to delegate many of Agent's duties to an
independent operating corporation at Agent's discretion. Such delegation may
include, but is not limited to, arranging for all advertising and promotion,
employing a general manager and other necessary personnel, maintaining the
books and records of the rental pool, staffing and operating a rental
reservation system and any and all other operations and employment of personnel
which are consistent with the operation and maintenance of a recreational
resort facility. Owner shall have no liability for any charges made to Agent
for the services of such independent operator, and any and all cost for such
services shall be paid by Agent out of its portion of the gross rentals.
(19) ESCROW ACCOUNT. Agent will establish an Escrow Account in which shall
be deposited quarterly Owner's ten percent (10%) occupancy (which equals 10% of
the net rental income) for use of its individual apartment in the rental pool,
such ten percent (10%) occupancy fee being heretofore more fully described in
paragraph 7(b). The Escrow Account is established for the purpose of enabling
Agent to have funds on hand from which Agent, at its sole discretion, may
maintain in the interior of each apartment, including maintenance,
redecoration, repair and/or replacement of walls, ceilings, floors, carpeting,
furniture, fixtures and equipment, such redecoration, repairs and replacement
being necessitated by normal wear and use. The parties acknowledge that
establishment of such account and the repair, replacement and redecoration is
necessary to keep all participating apartments in the rental pool up to
standards established for SADDLEBROOK. Subject to limitations set forth in
paragraph 6, Agent, in its sole discretion, shall have the
- 33 -
<PAGE> 4
EXHIBIT 10.2 Page 4 of 4
right to expend from said Escrow Account such funds as are therein set aside
for such redecoration, repairs and replacement. Agent agrees that each
apartment in the rental pool shall be maintained in a condition with the
standards established for SADDLEBROOK as a resort hotel, and Owner agrees that
he will provide such additional funds as are necessary for this maintenance and
upkeep upon request of management. Thereafter, Agent shall deposit the Owner's
occupancy fee into the Escrow Account until such time as the Owner shall have on
deposit in said Escrow Account twenty percent (20%) of the then existing value
of the standard furniture package for condominium apartment unit comparable to
Owner's unit. Additional funds will be deposited from Owner's occupancy fees
from time to time in order to maintain Owner's interest in the Escrow Account
at the level as heretofore described. The Escrow Account shall be an
interest-bearing account to the extent practicable, and interest shall be
credited to the respected apartment Owner's share of the funds in said account.
Agent shall annually report to the apartment Owner on all expenditures made from
said Escrow Account on his apartment and as to the balance remaining in
said Escrow Account together with any interest accrued thereon. If an Owner's
Escrow Account, including interest, shall exceed the twenty percent (20%)
maximum, the excess will be refunded on an annual basis. In the event the
Owner should sell his unit, the Escrow balance shall be returned to him within
forty-five (45) days from the transfer of ownership and the new owner shall be
required to deposit $500.00 into the Reserve Account if he elects to
participate in the SADDLEBROOK rental pool.
(20) NOTICES, ASSIGNMENT AND ENFORCEMENT. Notices required or appropriate
hereunder may be given in writing, addressed to the recipient at the address
set forth above as to Agent, or set forth below as to Owner and deposited in
the United States mails, postage prepaid, and in such case shall be deemed
received on the fifth business day following such dispatch. Either party, by
written notice, may provide a different address for the receipt of notice
hereunder. Because of the necessity of dependable performance by the parties
hereto of their respective undertakings, neither party may assign its rights or
obligations hereunder to any other person or party except with written consent
of the other party hereto, other than as provided in paragraph 18 hereof. This
Agreement is binding upon and for the benefit of the respective parties, their
heirs, representatives, successors and to the extent permitted hereby, their
respective assigns. In the event an action is brought to enforce the terms
hereof, the prevailing party shall be entitled to recover the expenses of such
action, including reasonable attorney's fees therefor.
(21) CONDITIONS OF OCCUPANCY. Agent may enter Owner's apartment, and Agent
may remove such personal effects as Agent determines appropriate to be moved,
storing the same for reinstallation at the end of the rental period, provided,
however, that nothing herein shall obligate Agent to so remove such personal
effects or create any liability against Agent for the failure to remove such
personal effects. Agent will cause the apartment to be cleaned and prepared
for rental occupancy and so maintained during rental occupancy. At the
termination of rental occupancy, Agent will remove linens and supplies utilized
for such occupancy and will replace linens and any personal effects of Owner,
leaving the premises for re-occupancy by Owner.
(22) MISCELLANEOUS MATTERS.
(a) This Agreement contains all the terms and conditions agreed to
between the parties, and any amendments or modifications shall be in writing
and executed with the same formality at this Agreement.
(b) Whenever used, the singular number shall include the plural, the
plural the singular, and the use of any gender shall include all genders.
(c) The parties agree that this Agreement shall be interpreted under the
laws of the State of Florida and that the invalidity of one or more parts of
the Agreement shall not affect the remaining parts of the Agreement.
<TABLE>
<S> <C>
Signed sealed and delivered in the presence of SADDLEBROOK RESORTS, INC.
By
- --------------------------------- ----------------------------------
Witness Agent
- ---------------------------------
As to Agent Witness
X
- --------------------------------- ----------------------------------
Witness Owner
X
- --------------------------------- ----------------------------------
Witness Owner
----------------------------------
Address
----------------------------------
Social Security Number of Owner
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 5,923,384
<SECURITIES> 195,251
<RECEIVABLES> 3,038,562
<ALLOWANCES> 164,000
<INVENTORY> 1,832,538
<CURRENT-ASSETS> 11,907,744
<PP&E> 38,121,786
<DEPRECIATION> 13,191,760
<TOTAL-ASSETS> 37,773,369
<CURRENT-LIABILITIES> 10,283,109
<BONDS> 0
0
0
<COMMON> 100,000
<OTHER-SE> 1,013,127
<TOTAL-LIABILITY-AND-EQUITY> 37,773,369
<SALES> 47,306,209
<TOTAL-REVENUES> 47,306,209
<CGS> 0
<TOTAL-COSTS> 43,085,424
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,885,218
<INCOME-PRETAX> 2,335,567
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,335,567
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,335,567
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE> 1
EXHIBIT 28
Page 1 of 1
4. INTERESTS BEING REGISTERED
The registrant is advised by Hill, Hill & Dickenson, P.A., registrant's
legal counsel, that the mere sale of a condominium unit formed under the laws
of the state of Florida is not, of itself, the offer or sale of a security
or investment contract, as those terms are used in the regulation of securities
in Florida. However, in view of the fact that the purchasers are offered the
optional opportunity to participate in a rental pool, the combination is treated
as an offering of an investment contract under the Federal and various state
securities laws and interpretations thereof. If a purchaser of a condominium
unit at Saddlebrook elects to participate in the rental pool, he thereby has an
opportunity to receive rental income as from an investment. The registrant
emphasizes that there is not contractual or guaranteed rate of return of rental
income to purchasers who elect to participate in the rental pool or the
non-pooling rental arrangement. The condominium unit owners electing to
participate in the rental pool does not thereby receive any incidence of control
or voting rights in the operation of the rental pool. Condominium unit owners
electing to participate in the rental pool furthermore receive no interest,
directly or indirectly, in the affairs of registrant nor any parent or affiliate
thereof.
