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 August 31, 1999
[ ] 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 0-14019
Ridgewood Hotels, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 58-1656330
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2859 Paces Ferry Road, Suite 700
Atlanta, Georgia 30339
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (770) 434-3670
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
----------------------------
(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 _____
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__
Aggregate market value of voting stock held by non-affiliates on October
31, 1999 - $793,000; Common shares outstanding on October 31, 1999 -
1,513,480 shares
(1) Portions of the registrant's Annual Report to Shareholders for the
fiscal year ended August 31, 1999 (the "1999 Annual Report to
Shareholders") are incorporated by reference in Part II of this
Report.
(2) Portions of the registrant's definitive Proxy Statement relating to
the 2000 Annual Meeting (the "2000 Proxy Statement") to be filed
with the Commission on or about December 15, 1999, are incorporated
by reference in Part III of this Report.
PART I
Item 1. Business
Ridgewood Hotels, Inc. (the "Company") is primarily engaged in the
business of acquiring, developing, operating and selling real estate
property in the Southeast and "Sunbelt" areas. Additionally, the
Company, through its investment in certain entities, is engaged in
acquiring and managing hotel properties in the Southeast, as well as
managing other hotels throughout the country. The Company also owns and
operates a hotel in Longwood, Florida. All of the Company's other
properties are land properties held for sale, and no additional
development is currently anticipated for the land. The Company was
incorporated under the laws of the State of Delaware on October 29,
1985. In January 1997, the Company changed its name from Ridgewood
Properties, Inc. to Ridgewood Hotels, Inc. Prior to December 31, 1985,
the Company operated under the name CMEI, Inc.
The Company has invested in three hotel entities as follows:
RW Hotel Partners, L.P.
On August 16, 1995, RW Hotel Partners, L.P. was organized as a
limited partnership (the "Partnership") under the laws of the State of
Delaware. Concurrently, the Company formed Ridgewood Georgia, Inc., a
Georgia corporation ("Ridgewood Georgia") which became the sole general
partner in the Partnership with RW Hotel Investments Associates, LLC
("Investor") as the limited partner. Ridgewood Georgia has a 1% base
distribution percentage versus 99% for the Investor. However,
distribution percentages do vary depending on certain defined
preferences and priorities pursuant to the Partnership Agreement
("Agreement") which are discussed below. The Partnership was originally
formed to acquire a hotel property in Louisville, Kentucky, but
subsequently purchased five additional hotels. The Partnership
purchased the hotel in Louisville, Kentucky for approximately
$16,000,000. In December 1995 and January 1996, the Partnership
purchased four hotel properties in Georgia for approximately $15,000,000
and a hotel in South Carolina for $4,000,000, respectively. Three of
the Georgia hotels were sold at a loss in March 1998, and the hotel in
Louisville was transferred to a new entity in June 1998 in conjunction
with refinancing that hotel (see below). The hotel in Orangeburg, South
Carolina was sold for a loss in November 1998. The remaining hotel in
the Partnership is in Thomasville, Georgia. See Subsequent Events in
Notes to Consolidated Financial Statements in the 1999 Annual Report.
Income and loss are allocated to Ridgewood Georgia and the limited
partner based upon the formula for allocating Distributable Cash as
described below.
Distributable Cash is defined as the net income from the property
before depreciation plus any net sale proceeds and net financing
proceeds less capital costs. Distributions of Distributable Cash shall
be made as follows:
- First, to the Investor until there has been distributed to the
Investor an amount equal to a 15% cumulative internal rate of return on
the Investor's investment.
- Second, to Ridgewood Georgia until the aggregate amount received
by Ridgewood Georgia equals the aggregate cash contributions made by
Ridgewood Georgia to the Partnership.
- Third, 12% to Ridgewood Georgia and 88% to the Investor until
there has been distributed to the Investor an amount equal to a 25%
cumulative internal rate of return on Investor's investment.
- Fourth, 75% of the residual to the Investor and 25% to Ridgewood
Georgia.
Management of the Partnership intends to adopt a plan of
liquidation and will sell the remaining hotel. Based on management's
estimate, Ridgewood Georgia will not receive cash in excess of its
investment in the Partnership. See Subsequent Events in Notes to
Consolidated Financial Statements in the 1999 Annual Report.
A Management Agreement exists between the Partnership and the
Company as Manager ("Manager") for the purpose of managing the hotels.
The Manager shall be entitled to the following property management fees:
(1) 2.5% of the gross revenues from the hotel property.
(2) 1% of the gross revenues from the hotel property as an
incentive fee if distributable cash equals or exceeds 13.5% of total
aggregate acquisition costs.
Total management fees for the years ended August 31, 1999, 1998 and
1997 were approximately $68,000, $233,000 and $301,000, respectively.
On March 17, 1998, the Partnership sold three of its six hotels.
The Company signed a management agreement with the new owner of the
three hotels wherein it will receive a management fee equal to 3% of
revenues plus 15% of the net operating income plus 5% of any profit
realized upon the sale of the hotels. In connection with the management
agreement, the Company received management fees totaling approximately
$191,000 and $114,000 for the years ended August 31, 1999 and 1998,
respectively.
Houston Hotel, LLC
On December 9, 1997, Houston Hotel, LLC ("Houston Hotel") was
organized as a limited liability company under the laws of the State of
elaware. The purpose which Houston Hotel was organized is limited
solely to owning and managing the Hampton Inn Galleria in Houston,
Texas. The Company contributed approximately $316,000 into Houston
Hotel which represents a 10% interest, and the other 90% interest is
owned by Houston Hotel, Inc. (the "Manager"), a Nevada corporation.
Income or loss allocated to the Company and the Managing Member is
based upon the formula for distributing cash.
Distributable cash is defined as the cash from operations and
capital contributions determined by the Manager to be available for
distribution. Cash from operations is defined as the net cash realized
from the operations of Houston Hotel after payment of all cash
expenditures of Houston Hotel including, but not limited to, operating
expenses, fees, payments of principal and interest on indebtedness,
capital improvements and replacements, and such reserves and retentions
as the Manager reasonably determines to be necessary.
Distributions of distributable cash shall be made as follows:
- First, 100% to the Manager until it has been distributed an
amount equal to its accrued but unpaid 13% preferred return.
- Second, 100% to the Company until the Company has been
distributed an amount equal to its accrued but unpaid 13% preferred
return.
- Third, 80% to the Manager and 20% to the Company.
A Property Management Agreement exists between Houston Hotel, LLC
and the Company as Property Manager ("Property Manager") for the purpose
of managing the hotel. The Property Manager shall be entitled to the
following property management fees:
(1) 1.5% of the gross revenues from the hotel property.
(2) 1.5% of the gross revenues from the hotel property as an
incentive fee if 85% of the budgeted net operating income is
met.
In connection with the management agreement, the Company received
management fees totaling approximately $98,000 and $83,000 for the year
ended August 31, 1999 and 1998, respectively.
See Subsequent Events in Notes to Consolidated Financial Statements
in the 1999 Annual Report.
RW Louisville Hotel Associates, LLC
On May 13, 1998, RW Louisville Hotel Associates LLC ("RW Louisville
Hotel Associates") was organized as a limited liability company under
the laws of the State of Delaware. The purpose which RW Louisville
Hotel Associates was organized is limited solely to owning and managing
the Holiday Inn ("the Hotel") in Louisville, Kentucky. The Company's
investment in RW Hotel Partners, L.P. of $337,500 (see above) was
transferred to RW Louisville Hotel Associates at its historical basis.
Simultaneously, the Company invested $362,000 into Louisville Hotel,
LLC. The combined equity of $699,500 represents a 10% interest in the
Hotel. Louisville Hotel, LLC loaned $3,620,000 to the Hotel in return
for all cash flows generated from the Hotel.
Income or loss allocated to the Company is based upon the formula
for distributing cash.
Distributable cash is defined as the net cash realized from
operations but after payment of management fees, principal and interest,
capital improvements and other such retentions as the managing member
determines to be necessary. Distributions of distributable cash from
Louisville Hotel, LLC shall be made as follows:
- First, to the managing member until the managing member has been
distributed an amount equal to its accrued but unpaid 13% preferred
return.
- Second, to the Company until the Company has been distributed an
amount equal to its accrued but unpaid 13% preferred return.
- Third, 20% to the Company and 80% to the managing member.
Cash from a sale or refinancing would be distributed 10% to the
Company and 90% to the managing member.
A Management Agreement exists between the Owner and the Company as
Property Manager ("Property Manager") for the purpose of managing the
hotel. The Property Manager shall be entitled to the following property
management fees:
(1) Base Management Fee equal to 1.5% of gross revenues from the
hotel property.
(2) Incentive Management Fee equal to 1.5% of gross revenues from
the hotel in which the actual net operating income exceeds 85% of the
budgeted goal for the year.
(3) Super Incentive Management fee equal to: (a) .25% of gross
revenues from the hotel in which the net operating income exceeds 106%
of the budgeted goal for the year; (b) an additional .25% of gross
revenues in which the net operating income exceeds 112% of the budgeted
goal; and (c) an additional .50% of gross revenues in which the net
operating income exceeds 120% of the budgeted goal.
The Company paid an additional $200,000 to Louisville Hotel, LLC as
a fee to acquire the management contract for the hotel. This amount is
included in other assets. The Company is amortizing the fee $70,000 per
year for the first two years and $20,000 per year for the next three
years.
With respect to the sum of $100,000, in the event that the
management contract is terminated by Louisville Hotel, LLC with or
without cause and not pursuant to a third party sale prior to June 5,
2000, Louisville Hotel, LLC will pay to the Company the sum of $4,166.67
times the number of months prior to June 5, 2000 that the management
contract is terminated.
With respect to the second sum of $100,000, in the event that the
management contract is terminated by Louisville Hotel, LLC prior to June
5, 2003, Louisville Hotel, LLC will pay to the Company the sum of
$1,666.67 times the number of months prior to June 5, 2003 that the
management contract is terminated.
In connection with the management agreement, the Company received
management fees totaling approximately $285,000 and $57,000 for the
years ended August 31, 1999 and 1998, respectively.
See Subsequent Events in Notes to Consolidated Financial Statements
in the 1999 Annual Report.
The hotel management business has become very competitive. In
order to obtain management agreements, owners of hotels are frequently
requiring management companies to acquire an ownership in the hotel.
The hotel industry has become very attractive to many investors and, in
turn, it has become very competitive to purchase hotels. This has also
prompted the building of many new hotels in various markets. The
Company believes that it is in a position to remain competitive in this
industry. The Company has the ability to provide the management
expertise to manage the acquisitions, operations and ultimate
disposition of properties so acquired for both the Company and for
third-party owners. As the Company identifies hotel properties for
acquisition by others, it will enter into management agreements to
manage those properties.
The Company owns and operates one hotel and owns a number of land
parcels which are held for sale. The success of the Company's
operations continues to be dependent upon such unpredictable factors as
the general and local economic conditions to which the real estate
industry is particularly sensitive: zoning, labor, material and energy
availability, weather conditions and the availability of satisfactory
financing.
The annual average occupancy of the Company's only hotel was
approximately 56% for the fiscal year 1999.
The Company's principal office is located at 2859 Paces Ferry Road,
Suite 700, Atlanta, Georgia 30339 (telephone number: (770) 434-3670).
The Company employed approximately 90 persons (of which 17 were located
at its principal office) at August 31, 1999.
Item 2. Properties
The Company does not own any real property material to conducting
the administrative aspects of its business operations. Its principal
office in Atlanta, Georgia is leased until June 2002 and consists of
approximately 6,200 square feet. As a result of its operations, the
Company is the owner of various other properties, including developed
and undeveloped real estate.
The Company's operating properties are as follows:
Name of Hotel Location # of Rooms Ownership Interest
Ramada Inn Longwood, FL 192 Wholly-Owned (a)
Holiday Inn Thomasville, GA 147 (b)
Holiday Inn Louisville, KY 267 (c)
Hampton Inn Houston, TX 176 (d)
(a) The hotel serves as collateral for the Company's $2,677,000
term loan with a commercial lender.
(b) The Company has a 1% ownership interest in this hotel as the
general partner of RW Hotel Partners, L.P., which owns the hotels.
See Subsequent Events in Notes to Consolidated Financial Statements in
the 1999 Annual Report.
(c) The Company has a 10% ownership interest in this hotel as a member
of RW Louisville Hotel Associates, LLC and Louisville Hotel, LLC,
which owns the hotel. See Subsequent Events in Notes to Consolidated
Financial Statements in the 1999 Annual Report.
(d) The Company has a 10% ownership interest in this hotel as a member of
Houston Hotel, LLC, which owns the hotel. See Subsequent Events in
Notes to Consolidated Financial Statements in the 1999 Annual Report.
The Company also holds six land parcels for sale, two of which are
located in Florida, one in Georgia and one each in Texas, Ohio and Arizona.
For further information on such properties, see the accompanying
consolidated financial statements and Schedule III, Real Estate and
Accumulated Depreciation, contained elsewhere herein.
Item 3. Legal Proceedings
On May 2, 1995 a complaint was filed in the Court of Chancery of the
State of Delaware (New Castle County) entitled William N. Strassburger v.
Michael M. Early, Luther A. Henderson, John C. Stiska, N. Russell Walden,
and Triton Group, Ltd., defendants, and Ridgewood Hotels, Inc., nominal
defendant, C.A. No. 14267 (the "Complaint"). The plaintiff is an
individual shareholder of the Company who purports to file the Complaint
individually, representatively on behalf of all similarly situated
shareholders, and derivatively on behalf of the Company. The Complaint
challenges the actions of the Company and its directors in consummating the
Company's August 1994 repurchases of its common stock held by Triton Group,
Ltd. and Hesperus Partners Ltd. in five counts, denominated Waste of
Corporate Assets, Breach of Duty of Loyalty to Ridgewood, Breach of Duty of
Good Faith, Intentional Misconduct, and Breach of Duty of Loyalty and Good
Faith to Class. On July 5, 1995, the Company filed a timely answer
generally denying the material allegations of the complaint and asserting
several affirmative defenses. Discovery has been concluded, and on March
19, 1998, the Court dismissed all class claims, with only the derivative
claims remaining for trial. The case was tried to Vice Chancellor Jacobs
during the period February 1 through February 3, 1999. All post-trial
briefing and oral argument has been concluded, and the case has been
submitted for decision by the Court.
The Company serves as a general partner in a limited partnership. As
a general partner, the Company may be liable for certain deficiencies which
arise in meeting the terms of loan obligations incurred by the limited
partnership and for operating expenses and other liabilities incurred by
the partnership in the ordinary course of business.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during
the fourth quarter of the Company's fiscal year ended August 31, 1999.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters
Information regarding the market for the Company's common stock, the
Company's dividend policy and the approximate number of holders of the
common stock at October 31, 1999, is included under the caption "Market for
Registrant's Common Equity and Related Stockholder Matters" on page 1 of
the 1999 Annual Report to Shareholders and is incorporated herein by
reference. There were no sales of unregistered securities of the Company
in the fourth quarter of the Company's fiscal year ended August 31, 1999.
Item 6. Selected Financial Data
A summary of selected financial data for the Company for the fiscal
years 1995 through 1999 is included under the caption entitled "Selected
Financial Data" on page 3 of the 1999 Annual Report to Shareholders and is
incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Information regarding the Company's financial condition, changes in
financial condition and results of operations is included under the caption
entitled "Management's Discussion and Analysis of Financial Condition and
Results of Operations" on pages 4 through 10 of the 1999 Annual Report to
Shareholders and is incorporated herein by reference.
Item 8. Financial Statements
Consolidated financial statements and notes thereto for the Company,
which are included on pages 11 through 37 of the 1999 Annual Report to
Shareholders under the following captions listed below, are incorporated
herein by reference.
Consolidated Balance Sheets at August 31, 1999 and 1998.
Consolidated Statements of Operations for the years ended August 31,
1999, 1998 and 1997.
Consolidated Statements of Shareholders' Investment for the years
ended August 31, 1999, 1998 and 1997.
Consolidated Statements of Cash Flows for the years ended August
31, 1999, 1998 and 1997.
Notes to Consolidated Financial Statements.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the
Registrant
Information required by this item with respect to
directors and with respect to Item 405 of Regulation S-K is
incorporated by reference to the Company's 2000 Proxy
Statement.
Item 11. Executive Compensation
Information regarding compensation of officers and
directors of the Company is set forth under the caption
entitled "Executive Compensation" in the Company's 2000
Proxy Statement and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners
and Management
Information regarding ownership of certain of the
Company's securities is set forth under the caption
entitled "Beneficial Ownership of the Company's Securities"
in the Company's 2000 Proxy Statement and is incorporated
herein by reference.
Item 13. Certain Relationships and Related Transactions
Information regarding certain relationships and
related transactions with the Company is set forth under
the caption entitled "Certain Relationships and Related
Transactions" in the Company's 2000 Proxy Statement and is
incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K
(a)(1) The following financial statements, together
with the applicable report of independent public
accountants, are set forth on pages 11 through 37 of the
1999 Annual Report to Shareholders and are incorporated by
reference at Item 8 herein:
Report of Independent Accountants.
Consolidated Balance Sheets at August
31, 1999 and 1998.
Consolidated Statements of Operations
for the years ended August 31, 1999,
1998 and 1997.
Consolidated Statements of Shareholders'
Investment for the years ended
August 31, 1999, 1998 and 1997.
Consolidated Statements of Cash Flows for the
years ended August 31, 1999, 1998 and 1997.
Notes to Consolidated Financial Statements.
(a)(2) The following financial statement schedule,
together with the applicable report of independent public
accountants, are filed as a part of this Report:
Page Number(s)
in Form 10-K
Report of Independent Accountants
on Financial Statement Schedule S-1
III - Real Estate and Accumulated
Depreciation - August 31, 1999 S-2 thru
S-3
All other schedules are omitted because they are not
applicable or because the required information is given in
the financial statements or notes thereto.
(a)(3) The exhibits filed herewith or incorporated by
reference herein are set forth on the Exhibit Index on
pages E-1 through E-9 hereof. Included in those exhibits
are the following Executive Compensation Plans and
Arrangements:
10(a) Employment Agreement between N. R. Walden and CMEI, Inc.,
dated March 28, 1985 (filed as an Exhibit to Registrant's
Registration Statement on Form 10 filed November 19, 1985
(Securities Exchange Act File No. 0-14019) and
incorporated herein by reference).
10(c) Ridgewood Properties, Inc. Supplemental Retirement and
Death Benefit Plan dated January 1, 1987 (filed as an
Exhibit to Registrant's Form 10-K for the fiscal year
ended August 31, 1988 and incorporated herein by
reference).
10(d) Post-Employment Consulting Agreement between N. R. Walden
and Ridgewood Properties, Inc. dated September 4, 1991
(filed as an Exhibit to Registrant's Form 10-K for the
fiscal year ended August 31, 1991 and incorporated herein
by reference).
10(e) Post-Employment Consulting Agreement between Karen S.
Hughes and Ridgewood Properties, Inc. dated September 4,
1991 (filed as an Exhibit to Registrant's Form 10-K for
the fiscal year ended August 31, 1991 and incorporated
herein by reference).
10(f) Post-Employment Consulting Agreement between Byron T.
Cooper and Ridgewood Properties, Inc. dated September 4,
1991 (filed as an Exhibit to Registrant's Form 10-K for
the fiscal year ended August 31, 1991 and incorporated
herein by reference).
10(g) Post-Employment Consulting Agreement between M. M.
McCullough and Ridgewood Properties, Inc. dated
September 4, 1991 (filed as an Exhibit to Registrant's
Form 10-K for the fiscal year ended August 31, 1991 and
incorporated herein by reference).
10(h) Ridgewood Properties, Inc. Stock Option Plan dated March
30, 1993 and as amended September 14, 1993 (filed as an
Exhibit to Registrant's Form 10-Q for the quarter ended
February 28, 1994, and incorporated herein by reference).
10(i) Stock Option Agreement between Byron T. Cooper and
Ridgewood Properties, Inc. dated April 1, 1993 and as
approved on January 12, 1994 (filed as an Exhibit to
Registrant's Form 10-Q for the quarter ended February 28,
1994, and incorporated herein by reference).
10(j) Stock Option Agreement between Luther A. Henderson and
Ridgewood Properties, Inc. dated April 1, 1993 and as
approved on January 12, 1994 (filed as an Exhibit to
Registrant's Form 10-Q for the quarter ended February 28,
1994, and incorporated herein by reference).
10(k) Stock Option Agreement between Karen S. Hughes and
Ridgewood Properties, Inc. dated April 1, 1993 and as
approved on January 12, 1994 (filed as an Exhibit to
Registrant's Form 10-Q for the quarter ended February 28,
1994, and incorporated herein by reference).
10(l) Stock Option Agreement between M. M. McCullough and
Ridgewood Properties, Inc. dated April 1, 1993 and as
approved on January 12, 1994 (filed as an Exhibit to
Registrant's Form 10-Q for the quarter ended February 28,
1994, and incorporated herein by reference).
10(m) Stock Option Agreement between N. R. Walden and Ridgewood
Properties, Inc. dated April 1, 1993 and as approved on
January 12, 1994 (filed as an Exhibit to Registrant's
Form 10-Q for the quarter ended February 28, 1994, and
incorporated herein by reference).
10(n) Stock Option Agreement between Gregory T. Weigle and
Ridgewood Properties, Inc. dated April 1, 1993 and as
approved on January 12, 1994 (filed as an Exhibit to
Registrant's Form 10-Q for the quarter ended February 28,
1994, and incorporated herein by reference).
10(o) Stock Option Agreement between Karen S. Hughes and
Ridgewood Properties, Inc. dated January 31, 1994 (filed
as an Exhibit to Registrant's Form 10-Q for the quarter
ended February 28, 1994, and incorporated herein by
reference).
10(p) Stock Option Agreement between N. R. Walden and Ridgewood
Properties, Inc. dated January 31, 1994 (filed as an
Exhibit to Registrant's Form 10-Q for the quarter ended
February 28, 1994, and incorporated herein by reference).
10(q) Ridgewood Properties, Inc. 1993 Stock Option Plan, as
amended on October 26, 1994 (filed as an Exhibit to
Registrant's Registration Statement on Form S-8 filed
November 8, 1994 (No. 33-86084) and incorporated herein
by reference).
10(ff) Amendment No. 1 to Post-Employment Consulting Agreement
between Ridgewood Hotels, Inc. and N. Russell Walden
dated August 13, 1998 (filed as an Exhibit to
Registrant's Form 10-K for the fiscal year ended August
31, 1998 and incorporated herein by reference).
10(gg) Amendment No. 1 to Post-Employment Consulting Agreement
between Ridgewood Hotels, Inc. and Byron T. Cooper dated
August 18, 1998 (filed as an Exhibit to Registrant's Form
10-K for the fiscal year ended August 31, 1998 and
incorporated herein by reference).
10(hh) Amendment No. 1 to Post-Employment Consulting Agreement
between Ridgewood Hotels, Inc. and Karen S. Hughes dated
August 13, 1998 (filed as an Exhibit to Registrant's Form
10-K for the fiscal year ended August 31, 1998 and
incorporated herein by reference.
(b) No reports on Form 8-K were filed during the fourth
quarter of the Company's fiscal year ended August 31, 1999.
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.
RIDGEWOOD HOTELS, INC.
By: /s/ N. R. Walden
N. Russell Walden,
President, Chief
Executive Officer
Dated: November 22, 1999
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 and on
the date indicated:
/s/ N. R. Walden
N. Russell Walden, President,
Chief Executive Officer and
Director
/s/ Karen S. Hughes
Karen S. Hughes,
Vice President, Chief
Accounting and Financial
Officer and Secretary
/s/ Michael M. Earley
Michael M. Earley, Director
/s/ Luther A. Henderson
Luther A. Henderson, Director
Dated: November 22, 1999
Report of Independent Accountants on
Financial Statement Schedule
November 17, 1999
To the Board of Directors
of Ridgewood Hotels, Inc.
Our audits of the consolidated financial statements referred to in our
report dated November 17, 1999 appearing in the 1999 Annual Report to
Shareholders of Ridgewood Hotels, Inc. (which report and consolidated
financial statements are incorporated by reference in this Annual
Report on Form 10-K) also included an audit of the Financial Statement
Schedule listed in Item 14(a) of this Form 10-K. In our opinion, this
Financial Statement Schedule presents fairly, in all material respects,
the information set forth therein when read in conjunction with the
related consolidated financial statements.
PRICEWATERHOUSECOOPERS LLP
ATLANTA, GEORGIA
<TABLE>
RIDGEWOOD HOTELS, INC. AND SUBSIDIARIES SCHEDULE III
----------------------------------------- Page 1 of 2
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
-------------------------------------------------------
AUGUST 31, 1999
---------------
(000'S Omitted)
<CAPTION>
Cost Capitalized Gross Amount at Which
Initial Cost Subsequent to Carried at August 31, 1999
to Company Acquisition (A)(B)(D)
------------------ ------------------ ----------------------------------
Building Building Accumu-
and Carry- and lated Date of
Encum- Improve- Improve- ing Improve- Deprecia- Construc- Date
Description brances Land ments ments Costs Land ments Total tion (C) tion Acquired
- ----------- -------- ---- -------- -------- ------ ---- -------- ----- -------- -------- --------
LAND
- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Georgia -- 58 -- -- -- 44 -- 44 -- -- 12/75
Texas -- 5,338 -- 2 -- 3,582 2 3,584 -- -- 12/85
--
Florida -- 475 -- 10 -- 402 10 412 -- -- 3/85
Florida -- 41 -- -- -- 41 -- 41 -- -- 6/78
Arizona -- 978 -- 110 -- 978 110 1,088 -- -- 3/85
Ohio -- 1,006 -- 175 -- 104 74 178 -- -- 12/77
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Total Non-
operating
properties -- 7,896 -- 297 -- 5,151 196 5,347 --
--------- --------- --------- --------- --------- --------- --------- --------- ---------
HOTEL
- --------------
Florida 2,742 439 1,921 1,175 -- 439 2,514 2,953 1,781 1973 9/74
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total
operating
properties 2,742 439 1,921 1,175 -- 439 2,514 2,953 1,781
-------- -------- -------- -------- -------- -------- -------- -------- --------
GRAND TOTAL $ 2,742 $ 8,335 $ 1,921 $ 1,472 $ -- $ 5,590 $ 2,710 $ 8,300 $ 1,781
========= ========= ========= ========= ========= ========= ========= ========= =========
</TABLE>
SCHEDULE III
Page 2 of 2
(A) Except as discussed in Note 2 to the "Notes to Consolidated
Financial Statements," real estate owned is carried at the
lower of cost or fair value less costs to sell. At
August 31, 1999, the amount of the allowance for possible
losses was approximately $3,319,000, which related to land
held for sale.
(B) Reconciliation of real estate properties:
For the Year Ended
(000's omitted)
8/31/99 8/31/98 8/31/97
------- ------- -------
Balance, beginning of year $ 8,735 $ 9,553 $12,612
Additions during the period:
Acquisitions -- -- --
Capitalized costs 65 88 78
Deductions during the period:
Real estate sold or assets
retired (on which financing
was provided by the Company
in certain cases) 500 906 3,137
------- ------- -------
Balance, end of year $ 8,300 $ 8,735 $ 9,553
======= ======= =======
(C) Operating properties and any related improvements are being
depreciated by the "straight line" method over the estimated
useful lives of such assets, which are generally 30 years for
buildings and 5 years for furniture and fixtures.
Reconciliation of accumulated depreciation:
For the Year Ended
(000's omitted)
8/31/99 8/31/98 8/31/97
------- ------- -------
Balance, beginning of year $1,679 $1,567 $1,460
Additions during the period 130 139 128
Depreciation associated with
assets sold or retired (28) (27) (21)
------ ------ ------
Balance, end of year $1,781 $1,679 $1,567
====== ====== ======
(D) The aggregate cost for federal income tax purposes is approximately
$8,479,000 at August 31, 1999.
EXHIBIT INDEX
Report on Form 10-K for the fiscal year ended August 31, 1999
Page Number
Exhibit in Manually
Number Description Signed Original
3(a) Certificate of Incorporation of
Registrant.*
3(b) By-Laws of Registrant.*
3(c) Certificate of Amendment to the
Certificate of Incorporation (filed
as an Exhibit to Registrant's Form
10-K for the fiscal year ended August
31, 1987 and incorporated herein by
reference).
3(d) Certificate of Amendment to the
Certificate of Incorporation of the
Registrant (filed as an Exhibit to
Registrant's Form 10-K for the
fiscal year ended August 31, 1989 and
incorporated herein by reference).
3(e) Certificate of Amendment of the
Certificate of Incorporation of
Ridgewood Properties, Inc. dated May
23, 1991 (filed as an Exhibit
to Registrant's Form 10-K for the
fiscal year ended August 31, 1991 and
incorporated herein by reference).
3(f) Certificate of Amendment of the
Certificate of Incorporation of
Ridgewood Properties, Inc.
dated March 30, 1993 (filed as
Exhibit 3 to Registrant's Form 10-Q
for the fiscal quarter ended February
28, 1993 and incorporated herein by
reference).
3(g) Certificate of Amendment of the
Certificate of Incorporation of
Ridgewood Properties, Inc. dated
January 26, 1994 (filed as Exhibit 3
to Registrant's Form 10-Q for the
fiscal quarter ended February 28,
1994 and incorporated herein by
reference).
3(h) Certificate of Amendment to
Certificate of Incorporation by
Ridgewood Hotels, Inc. (filed as an
Exhibit to Registrant's Form 8-K on
February 5, 1997, and incorporated
herein by reference).
4(a) Stock Purchase Agreement between
Ridgewood Properties, Inc. and Triton
Group Ltd., dated as of August 15,
1994 (filed as an Exhibit to
Registrant's Form 8-K on August 15,
1994, and incorporated herein by
reference).
4(b) August 15, 1994 Press Release issued
by Ridgewood Properties, Inc. (filed
as an Exhibit to Registrant's Form
8-K on August 15, 1994, and
incorporated herein by reference).
4(c) Certificate of Designation,
Preferences and Rights of Series A
Convertible Preferred Stock of the
Registrant (filed as an Exhibit to
Registrant's Registration Statement
on Form S-8 filed on November 8, 1994
(No. 33-866084) and incorporated
herein by reference).
4(d) Notice of Exercise by N. Russell Walden dated January 31, 1997
(filed as an Exhibit to Registrant's Form 8-K on February 5, 1997, and
incorporated herein by reference).
4(e) Notice of Exercise by Karen S. Hughes
dated January 31, 1997 (filed as an
Exhibit to Registrant's Form 8-K on
February 5, 1997, and incorporated
herein by reference).
4(f) Share Security Agreement between N.
Russell Walden and Ridgewood
Properties, Inc. dated January 31,
1997 (filed as an Exhibit to
Registrant's Form 8-K on February 5,
1997, and incorporated herein by
reference).
4(g) Share Security Agreement between
Karen S. Hughes and Ridgewood
Properties, Inc. dated January 31,
1997 (filed as an Exhibit to
Registrant's Form 8-K on February 5,
1997, and incorporated herein by
reference).
10(a) Employment Agreement between N. R.
Walden and CMEI, Inc., dated March
28, 1985.*
10(b) Bill of Sale and Assumption of
Liabilities between CMEI, Inc. and
Ridgewood Properties, Inc. dated
December 9, 1985.*
10(c) Ridgewood Properties, Inc.
Supplemental Retirement and Death
Benefit Plan dated January 1, 1987
(filed as an Exhibit to Registrant's
Form 10-K for the fiscal year ended
August 31, 1988 and incorporated
herein by reference).
10(d) Post-Employment Consulting Agreement
between N. R. Walden and Ridgewood
Properties, Inc. dated September 4,
1991 (filed as an Exhibit to
Registrant's Form 10-K for the fiscal
year ended August 31, 1991 and
incorporated herein by reference).
10(e) Post-Employment Consulting Agreement
between Karen S. Hughes and Ridgewood
Properties, Inc. dated September 4,
1991 (filed as an Exhibit to
Registrant's Form 10-K for the fiscal
year ended August 31, 1991 and
incorporated herein by reference).
10(f) Post-Employment Consulting Agreement
between Byron T. Cooper and Ridgewood
Properties, Inc. dated September 4,
1991 (filed as an Exhibit to
Registrant's Form 10-K for the fiscal
year ended August 31, 1991 and
incorporated herein by reference).
10(g) Post-Employment Consulting Agreement
between M. M. McCullough and
Ridgewood Properties, Inc. dated
September 4, 1991 (filed as an
Exhibit to Registrant's Form 10-K for
the fiscal year ended August 31, 1991
and incorporated herein by
reference).
10(h) Ridgewood Properties, Inc. Stock
Option Plan dated March 30, 1993 and
as amended September 14, 1993 (filed
as an Exhibit to Registrant's Form
10-Q for the quarter ended February
28, 1994, and incorporated herein by
reference).
10(i) Stock Option Agreement between Byron
T. Cooper and Ridgewood Properties,
Inc. dated April 1, 1993 and as
approved on January 12, 1994 (filed
as an Exhibit to Registrant's Form
10-Q for the quarter ended February
28, 1994, and incorporated herein by
reference).
10(j) Stock Option Agreement between Luther
A. Henderson and Ridgewood
Properties, Inc. dated April 1, 1993
and as approved on January 12, 1994
(filed as an Exhibit to Registrant's
Form 10-Q for the quarter ended
February 28, 1994, and incorporated
herein by reference).
10(k) Stock Option Agreement between Karen
S. Hughes and Ridgewood Properties,
Inc. dated April 1, 1993 and as
approved on January 12, 1994 (filed
as an Exhibit to Registrant's Form
10-Q for the quarter ended February
28, 1994, and incorporated herein by
reference).
10(l) Stock Option Agreement between M. M.
McCullough and Ridgewood Properties,
Inc. dated April 1, 1993 and as
approved on January 12, 1994 (filed
as an Exhibit to Registrant's Form
10-Q for the quarter ended February
28, 1994, and incorporated herein by
reference).
10(m) Stock Option Agreement between N. R.
Walden and Ridgewood Properties, Inc.
dated April 1, 1993 and as approved
on January 12, 1994 (filed as an
Exhibit to Registrant's Form 10-Q for
the quarter ended February 28, 1994,
and incorporated herein by
reference).
10(n) Stock Option Agreement between
Gregory T. Weigle and Ridgewood
Properties, Inc. dated April 1, 1993
and as approved on January 12, 1994
(filed as an Exhibit to Registrant's
Form 10-Q for the quarter ended
February 28, 1994, and incorporated
herein by reference).
10(o) Stock Option Agreement between Karen
S. Hughes and Ridgewood Properties,
Inc. dated January 31, 1994 (filed as
an Exhibit to Registrant's Form 10-Q
for the quarter ended February 28,
1994, and incorporated herein by
reference).
10(p) Stock Option Agreement between N. R.
Walden and Ridgewood Properties, Inc.
dated January 31, 1994 (filed as an
Exhibit to Registrant's Form 10-Q for
the quarter ended February 28, 1994,
and incorporated herein by
reference).
10(q) Ridgewood Properties, Inc. 1993 Stock
Option Plan, as amended on October
26, 1994 (filed as an Exhibit to
Registrant's Registration Statement
on Form S-8 filed on November 8, 1994
(No. 33-86084) and incorporated
herein by reference).
10(r) Amended and Restated Basic Agreement
between RW Hotel Investment Partners,
L.P. and Ridgewood Hotels, Inc. dated
August 14, 1995 (filed as an Exhibit
to Registrant's Form 10-K for the
fiscal year ended August 31, 1995,
and incorporated herein by
reference).
10(s) Amended and Restated Limited
Partnership Agreement of RW Hotel
Partners, L.P. dated September 8,
1995 (filed as an Exhibit to
Registrant's Form 10-K for the fiscal
year ended August 31, 1995, and
incorporated herein by reference).
10(t) Management Agreement (Holiday Inn
Hurstbourne) between RW Hotel
Partners, L.P. and Ridgewood
Properties, Inc. dated August 16,
1995 (filed as an Exhibit to
Registrant's Form 10-K for the fiscal
year ended August 31, 1995, and
incorporated herein by reference).
10(u) Mortgage, Assignment of Leases and
Rents and Security Agreement Between
Bloomfield Acceptance Company, L.L.C.
and Ridgewood Orlando, Inc. dated
June 30, 1995 (filed as an Exhibit to
Registrant's Form 10-K for the fiscal
year ended August 31, 1995, and
incorporated herein by reference).
10(v) Security Agreement between Ridgewood
Orlando, Inc. and Bloomfield
Acceptance Company, L.L.C. dated June
30, 1995 (filed as an Exhibit to
Registrant's Form 10-K for the fiscal
year ended August 31, 1995, and
incorporated herein by reference).
10(w) Mortgage Note between Bloomfield
Acceptance Company and Ridgewood
Orlando, Inc. dated June 30, 1995
(filed as an Exhibit to Registrant's
Form 10-K for the fiscal year ended
August 31, 1995, and incorporated
herein by reference).
10(x) Agreement and Plan of Merger between
and among Ridgewood Properties, Inc.,
Ridgewood Acquisition Corp., Wesley
Hotel Group, Inc., Wayne McAteer and
Samuel King dated December 7, 1995
(filed as an Exhibit to Registrant's
Form 10-Q for the quarter ended
November 30, 1995, and incorporated
herein by reference).
10(y) Shareholders' Agreement by and between
Samuel King and Ridgewood Properties,
Inc. dated December 1995 (filed as an
Exhibit to Registrant's Form 10-K for
the fiscal year ended August 31, 1996,
and incorporated herein by reference).
10(z) Warrants to Purchase Shares of Common
Stock of Ridgewood Properties, Inc.
issued to Hugh Jones on December 16,
1996 (filed as an Exhibit to
Registrant's Form 10-Q for the quarter
ended November 30, 1996, and
incorporated herein by reference).
10(aa) Promissory Note between N. Russell
Walden and Ridgewood Properties, Inc.
dated January 31, 1997 (filed as an
Exhibit to Registrant's Form 8-K on
February 5, 1997 and incorporated
herein by reference).
10(bb) Promissory Note between Karen S.
Hughes and Ridgewood Properties, Inc.
dated January 31, 1997 (filed as an
Exhibit to Registrant's Form 8-K on
February 5, 1997 and incorporated
herein by reference).
10(cc) Operating Agreement between Houston
Hotel, LLC and Ridgewood Hotels, Inc.
effective December 9, 1997 (filed as
an Exhibit to Registrant's Form 10-Q
for the quarter ended May 31, 1998).
10(dd) Operating Agreement between RW
Hurstbourne Hotel, Inc. and RW
Louisville Hotel Investors, LLC
effective May 13, 1998 (filed as an
Exhibit to Registrant's Form 10-Q for
the quarter ended May 31, 1998).
10(ee) Operating Agreement between Ridgewood
Hotels, Inc. and Louisville Hotel,
L.P. effective June 5, 1998 (filed as
an Exhibit to Registrant's Form 10-Q
for the quarter ended May 31, 1998).
10(ff) Amendment No. 1 to Post-Employment
Consulting Agreement between Ridgewood
Hotels, Inc. and N. Russell Walden
dated August 13, 1998.
10(gg) Amendment No. 1 to Post-Employment
Consulting Agreement between Ridgewood
Hotels, Inc. and Byron T. Cooper dated
August 18, 1998.
10(hh) Amendment No. 1 to Post-Employment
Consulting Agreement between Ridgewood
Hotels, Inc. and Karen S. Hughes dated
August 13, 1998.
10(ii) First Amendment to Operating Agreement
of Louisville, LLC dated September 30,
1999.
10(jj) Secured Promissory Note in the amount
of $1,333,000 by Ridgewood Hotels,
Inc. to Louisville Hotel, L.P. dated
September 30, 1999.
10(kk) Secured Promissory Note (Arizona) in
the amount of $300,000 by Ridgewood
Hotels, Inc. to Louisville Hotel, L.P.
dated September 30, 1999.
10(ll) Secured Promissory Note (Florida) in
the amount of $300,000 by Ridgewood
Hotels, Inc. to Louisville Hotel, L.P.
dated September 30, 1999.
13 1999 Annual Report to Shareholders.
22 Subsidiaries of Registrant.
27 Financial Data Schedule.
_______________
* Previously filed as an Exhibit to Registrant's
Registration Statement on Form 10 filed on November 19,
1985 (Securities Exchange Act File No. 0-14019), and
incorporated herein by reference.
EXHIBIT 10(ii)
FIRST AMENDMENT
TO THE OPERATING AGREEMENT OF
LOUISVILLE HOTEL, LLC
This First Amendment ("Amendment") to the Operating Agreement of
Louisville Hotel, LLC (the "Agreement"), is entered into by and between
Ridgewood Hotels, Inc., a Delaware corporation ("Ridgewood"), and
Louisville Hotel, LP. a Delaware limited partnership ("Louisville"),
effective as of September 30, 1999. Capitalized terms used in this
Amendment are defined as set forth in the Agreement.
WHEREAS pursuant to the Operating Agreement of Louisville Hotel, LLC,
effective as of May 1998, Louisville was entitled to receive eighty
percent (80%) of all Net Income From Operations as set forth in Section
4.1.1(d) of the Agreement and ninety percent (90%) of all Net Income
From Sale or Exchange of the Optioned Property or the Hotel as set
forth in Section 4.2.1(d) of the Agreement and was entitled to receive
distributions of eighty percent (80%) of all Cash From Operations as
set forth in Section 5.1.4 of the Agreement and ninety percent (90%) of
all Cash From Sale or Refinancing as set forth in Section 5.2.4 of the
Agreement.
WHEREAS pursuant to that certain Membership Interest Purchase Agreement
dated September 30, 1999 by and between Louisville as Seller and
Ridgewood as Buyer (the "Purchase Agreement") Louisville is selling to
Ridgewood sixty percent (60%) of its eighty percent (80%) of Cash From
Operations to be received pursuant to Section 5.1.4 of the Agreement
and the allocation of Net Income From Operations as set forth in
Section 4.1.1(d) of the Agreement relating to such Distribution and
seventy percent (70%) of its ninety percent (90%) of Cash From Sale or
Refinancing as set forth in Section 5.2.4 of the Agreement and the
allocation of Net Income From Sale or Exchange relating to such
Distribution as set forth in Section 4.2.1(d) of the Agreement.
WHEREAS Louisville will retain its capital interest in the Company plus
its Preferred Return .
WHEREAS the parties wish to reflect the sale of this interest by
Louisville to Ridgewood and make other revisions to the Operating
Agreement.
NOW, THEREFORE, the parties hereby agree as follows:
1. Section 1.2 is deleted in its entirety and replaced with the
following:
1.2 Name and Place of Business. The name of the Company shall be
Louisville Hotel, LLC, and the its principal place of business shall be
2859 Paces Ferry Road, Suite 700, Atlanta, Georgia 30339. The Manager
may change such name, change such place of business or establish
additional places of business of the Company as the Manager may
determine to be necessary or desirable.
2. Section 4.1 is deleted in its entirety and replaced with the
following:
4.1 Allocation of Net Income and Net Loss. For each fiscal year,
the Net Income and Net Loss of the Company shall be allocated as
follows:
4.1.1 Net Income Allocations. After giving effect to the special
allocations set forth in the Sections 4.3 and 4.4, Net Income for any
fiscal year shall be allocated as follows:
(a) First, to the Members, in proportion to and to the extent of
the negative balances, if any, in the Members' respective Capital
Accounts (as of the last day of such fiscal year);
(b) Second, to each Member, pro rata in accordance with their then
respective Percentage Interests, until the cumulative Net Income
allocated to each Member pursuant to this clause (b) is equal to the
cumulative Net Loss allocated to such Member pursuant to Section
4.1.2(g) and Section 4.2 (such Net Income to be allocated first with
respect to Net Loss allocated pursuant to Section 4.2 and thereafter in
reverse chronological order of the allocation of the Net Loss which has
not been previously offset by an allocation under this Section
4.1.1(b));
(c) Third, to Ridgewood in an amount equal to the cumulative
interest that has been paid on the Acquisition Loans up to and
including the end of the fiscal year less the cumulative Net Income
allocated to Ridgewood pursuant to this Section 4.1.1(c) for all prior
fiscal years;
(d) Fourth, to Louisville to the extent of the cumulative
distributions of Preferred Return pursuant to Section 5.1.3 and 5.2.4
for all fiscal years less the cumulative Net Income allocated to
Louisville Hotel, L.P., for all prior fiscal years pursuant to this
Section 4.1.1(d) and Section 4.1.1(g);
(e) Fifth, to Ridgewood, to the extent of the cumulative
distributions of Preferred Return pursuant to Section 5.1.4 and 5.2.6
for all fiscal years less the cumulative Net Income allocated to
Ridgewood, for all prior fiscal years pursuant to this Section 4.1.1(e)
and Section 4.1.1(f);
(f) Sixth, to Ridgewood, an amount equal to the original principal
amount of the Acquisition Loans less the cumulative Net Income
allocated to Ridgewood pursuant to this Section 4.1.1(f) for all prior
fiscal years;
(g) Seventh, to Louisville until it has been allocated an amount
equal to its Preferred Return for all fiscal years less the sum of
allocations pursuant to this Section 4.1.1(g) for all prior fiscal
years plus allocations pursuant to Section 4.1.1(d) for the current and
all prior fiscal years;
(h) Eighth, to Ridgewood, until it has been allocated an amount
equal to its Preferred Return for all fiscal years less the sum of
allocations pursuant to this Section 4.1.1(h) for all prior fiscal
years plus allocations pursuant to Section 4.1.1(e) for the current and
all prior fiscal years;
(i) Ninth, to Louisville, to the extent of the cumulative
distributions to Louisville pursuant to Section 5.1.5 and 5.2.8 for all
fiscal years less the cumulative Net Income allocated to Louisville,
for all prior periods pursuant to this Section 4.1.1(i);
(j) Thereafter, to Ridgewood
For purposes of determining the amount of Net Income to be allocated
pursuant to Section 4.1.1 for any fiscal year, the Capital Account of
each Member shall be increased by such Member's share of "partnership
minimum gain" as of the last day of such fiscal year, determined
pursuant to Section 1.704-2(g)(1) of the Treasury Regulations, and by
such Member's share of "partner nonrecourse debt minimum gain" as of
the last day of such fiscal year, determined pursuant to Section
1.704-2(i)(5) of the Treasury Regulations.
4.1.2 Net Loss Allocations. After giving effect to the special
allocations set forth in Section 4.3 and 4.4, Net Loss for any fiscal
year shall be allocated as follows:
(a) First, to the Members in proportion to and to the extent of Net
Income allocated to the Members under Section 4.1.1(j) until the
aggregate Net Loss allocated pursuant to this Section 4.1.2(a) for such
fiscal year and all previous fiscal years equals the aggregate Net
Income allocated to the Members pursuant to Section 4.1.1(j) for all
previous fiscal years;
(b) Second, to the Members in proportion to and to the extent of
Net Income allocated to the Members under Section 4.1.1(i) until the
aggregate Net Loss allocated pursuant to this Section 4.1.2(b) for such
fiscal year and all previous fiscal years equals the aggregate Net
Income allocated to the Members pursuant to Section 4.1.1(i) for all
previous fiscal years;
(c) Third, to the Members in proportion to and to the extent of Net
Income allocated to the Members under Section 4.1.1(h) until the
aggregate Net Loss allocated pursuant to this Section 4.1.2(c) for such
fiscal year and all previous fiscal years equals the aggregate Net
Income allocated to the Members pursuant to Section 4.1.1(h) for all
previous fiscal years;
(d) Fourth, to the Members in proportion to and to the extent of
Net Income allocated to the Members under Section 4.1.1(g) until the
aggregate Net Loss allocated pursuant to this Section 4.1.2(d) for such
fiscal year and all previous fiscal years equals the aggregate Net
Income allocated to the Members pursuant to Section 4.1.1(g) for all
previous fiscal years;
(e) Fifth, to the Members in proportion to and to the extent of Net
Income allocated to the Members under Section 4.1.1(f) until the
aggregate Net Loss allocated pursuant to this Section 4.1.2(e) for such
fiscal year and all previous fiscal years equals the aggregate Net
Income allocated to the Members pursuant to Section 4.1.1(f) for all
previous fiscal years;
(f) Sixth, to the Members in proportion to and to the extent of Net
Income allocated to the Members under Section 4.1.1(e) until the
aggregate Net Loss allocated pursuant to this Section 4.1.2(f) for such
fiscal year and all previous fiscal years equals the aggregate Net
Income allocated to the Members pursuant to Section 4.1.1(e) for all
previous fiscal years;
(g) Seventh, to the Members in proportion to and to the extent of
Net Income allocated to the Members under Section 4.1.1(d) until the
aggregate Net Loss allocated pursuant to this Section 4.1.2(g) for such
fiscal year and all previous fiscal years equals the aggregate Net
Income allocated to the Members pursuant to Section 4.1.1(d) for all
previous fiscal years;
(h) Eighth, to the Members in proportion to and to the extent of
Net Income allocated to the Members under Section 4.1.1(c) until the
aggregate Net Loss allocated pursuant to this Section 4.1.2(h) for such
fiscal year and all previous fiscal years equals the aggregate Net
Income allocated to the Members pursuant to Section 4.1.1(c) for all
previous fiscal years;
(i) Ninth, to the Members in proportion to and to the extent of Net
Income allocated to the Members under Section 4.1.1(b) until the
aggregate Net Loss allocated pursuant to this Section 4.1.2(i) for such
fiscal year and all previous fiscal years equals the aggregate Net
Income allocated to the Members pursuant to Section 4.1.1(b) for all
previous fiscal years; and,
(j) Thereafter, to the Members in proportion their respective
Percentage Interests.
3. Section 4.2 is deleted in its entirety and replaced with the
following:
4.2 Net Loss Limitation. Notwithstanding any provision of this
Agreement to the contrary, except as otherwise specifically provided in
this Section 4.2, in no event shall Net Loss be allocated to a Member
if such allocation would result in such Member's having an Adjusted
Capital Account Deficit at the end of any fiscal year. All Net Loss in
excess of the limitation set forth in this Section 4.2 shall be
allocated to any remaining Member without an Adjusted Capital Account
Deficit, and if all Members have an Adjusted Capital Account Deficit,
to the Members under Section 4.1.2(j).
4. Section 4.3(a) is deleted in its entirety and replaced with the
following:
Qualified Income Offset. Except as provided in Section 4.3(b), in the
event any Member unexpectedly receives any adjustments, allocations, or
distributions described in Treasury Regulation Sections
1.704-1(b)(2)(ii)(d)(4), 1.604-1(b)(2)(ii)(d)(5), or
1.704-1(b)(2)(ii)(d)(6), items of Company income and gain shall be
specially allocated to such Member in an amount and manner sufficient
to eliminate, to the extent required by the Treasury Regulations, the
Adjusted Capital Account Deficit created by such adjustment, allocation
or distribution as quickly as possible; provided, that an allocation
pursuant to this Section 4.3(a) shall be made only if and only to the
extent that such Member would have an Adjusted Capital Account Deficit
after all other allocations provided for in this Article 4 have been
tentatively made as if this Section 4.3(a) were not in this Agreement.
5. Section 4.3(b) is deleted in its entirety.
6. Section 4.3(e) is deleted in its entirety and replaced with the
following:
Nonrecourse Deductions. Nonrecourse Deductions for any fiscal year or
other period shall be allocated to the Members in proportion to their
respective Percentage Interests. "Excess nonrecourse liabilities" of
the Company within the meaning of Regulations Section 1.752-3(a)(3)
shall be allocated among the Members in proportion to their respective
Percentage Interests.
7. Section 4.8.1 is deleted in its entirety and replaced with the
following:
In the event of the assignment of an Interest, the Net Income and Net
Loss shall be allocated as between the Owner and the assignee based on
their respective ownership in accordance with Code Section 706, and the
Regulations thereunder, using any convention permitted by law and
selected by the Company and approved by the Owner and the assignee
provided, however, unless otherwise agreed such allocations shall be
made pursuant to an interim closing of the Company's books as of the
Amendment Date.
8. Section 5.1 is deleted in its entirety and replaced with the
following:
5.1 Cash From Operations. Except as otherwise provided in Section
12, Distributable Cash From Operations with respect to each fiscal year
shall be distributed to the Members in the following order of priority:
5.1.1 First, to pay any Member Loans made pursuant to Section 3.5 in
proportion to the outstanding interest and principal balances of such
loans;
5.1.2 Second, to Ridgewood, in an amount equal to the cumulative
interest paid on the Acquisition Loans less all prior distributions
pursuant to this Section 5.1.2 and Section 5.2.2 for all prior fiscal
years;
5.1.3 Third, to Louisville until it has received aggregate
distributions pursuant to this Section 5.1.3 and Section 5.2.4 for the
current and all prior fiscal years in amount equal to its Preferred
Return;
5.1.4 Fourth, to Ridgewood until it has received aggregate
distributions pursuant to this Section 5.1.4 and Section 5.2.5 for the
current and all prior fiscal years in amount equal to its Preferred
Return;
5.1.5 Thereafter, to the Members in proportion to their respective
Percentage Interests.
9. Section 5.2 is deleted in its entirety and replaced with the
following:
5.2 Cash From Sale or Refinancing. Cash From Sale or Refinancing
shall be distributed to the Members in the following order of priority:
5.2.1 First, to pay any Member Loans made pursuant to Section 3.5 in
proportion to the outstanding interest and principal balances of such
loans;
5.2.2 Second, to Ridgewood, in an amount equal to the cumulative
interest paid on the Acquisition Loans less all prior distributions
pursuant to this Section 5.2.2 and Section 5.1.2 for the current and
all prior fiscal years;
5.2.3 Third, to Ridgewood in an amount equal to the aggregate
original principal amount of the Acquisition Loans less all prior
distributions pursuant to this Section 5.2.3 for all prior fiscal
years;
5.2.4 Fourth, to Louisville until it has received aggregate
distributions pursuant to this Section 5.2.4 and Section 5.1.3 for the
current and all prior fiscal years in amount equal to its Preferred
Return;
5.2.5 Fifth, to the Louisville until its Net Capital Contribution is
reduced to zero;
5.2.6 Sixth, to Ridgewood until it has received aggregate
distributions pursuant to this Section 5.2.5 and Section 5.1.4 for the
current and all prior fiscal years in amount equal to its Preferred
Return;
5.2.7 Seventh, to Ridgewood until its Net Capital Contribution is
reduced to zero; and
5.2.8 Thereafter, to the Members in proportion to their respective
Percentage Interests; provided, however, (X) if the distribution occurs
prior to the first anniversary of the Amendment Date then such amounts
shall be distributed 10% to Louisville and 90% to Ridgewood; or (Y) if
the distribution occurs following the first anniversary of the
Amendment Date but before the second anniversary of the Amendment Date
then such amounts shall be distributed 15% to Louisville and 85% to
Ridgewood
10. The following is added as a new Section 5.3:
5.3 Special Provisions. Notwithstanding the provisions in Section
5.1.5 and Section 5.2.8 the amount distributed to Louisville, and the
corresponding allocation in Section 4.1.1(i) shall be reduced by the
amount of the asset management fee paid pursuant to Section 6.1.2 and
such amount shall be paid to Ridgewood
11. Section 6.1.1 is deleted in its entirety and replaced with the
following:
6.1.1 Ridgewood shall receive the fees set forth in the Property
Management Agreement pursuant to the terms in the Property Management
Agreement. Ridgewood hereby agrees that if for any reason there is any
default under any of the Loan Documents as described in the Purchase
Agreement (the "Loan Documents") then 50% of its fees under the
Property Management Agreement will be automatically subordinated to all
obligations of Ridgewood to Louisville under the Loan Documents and
this Agreement and Ridgewood agrees to execute any and all reasonable
documents as necessary to confirm this subordination.
12. The following is added as a new Section 6.1.2:
6.1.2 Louisville will receive an asset management fee equal to one
half of one percent (1/2 of 1%) of the Gross Revenues of the Hotel and
any other revenues generated by the Company, which shall be paid
monthly. If Gross Revenues are not sufficient to pay this asset
management fee, it shall accrue and be paid in the next period when
such Gross Revenues are available. Ridgewood will be entitled to its
full property management fee set forth in the Property Management
Agreement prior to the payment of this asset management fee.
13. Section 7.2 is deleted in its entirety and replaced it with the
following:
7.2 The Company shall have one Manager which shall be Ridgewood
The Manager shall hold office until such Manager withdraws or resigns.
Any other references to the Manager in the Agreement shall refer to
Ridgewood
14. The following is added as a new Section 7.9:
7.9 Special Rule: The Manager agrees not to exercise the Option
without providing at least 30 days prior written notice to Louisville.
Further, the Manager shall not enter into or modify any agreement
between the Company and Ridgewood or its Affiliates without the prior
consent of Louisville.
15. Section 8.3 is deleted in its entirety and replaced with the
following:
8.3 Member Vote; Consent of Manager. Matters upon which the
Members may vote shall require a Majority Vote of the Members and the
consent of the Manager (which may be withheld for any or no reason) to
pass and become effective; provided, however, any amendment to this
Agreement shall require the unanimous consent of the Members.
16. Section 13.1 entitled "Purchase or Sale Offer" is deleted in
its entirety.
17. Section 14 is deleted in its entirety and replaced with the
following:
14.1 Right to Purchase Louisville Membership Interest. In addition
to all other rights as set forth in this Amendment, Ridgewood shall
have the absolute right (the "Purchase Right"), at any time by
providing written notice to Louisville, to purchase Louisville's
membership interest and all rights of interest of Louisville under the
Operating Agreement for an amount equal to the sum of the following
(the "Purchase Right Price"): (1) Louisville's total Capital
Contributions, (2) any accrued but unpaid Preferred Return on such
Capital Contribution, and (3) the value of Louisville's remaining
interest which is the amount which would have been distributed to
Louisville had the Company sold the Property for its fair market value
and distributed the net proceeds to Louisville pursuant to Section 5.2
as of the date of the Closing (the "Equity Appreciation Value"). The
parties agree and acknowledge that the total amount of the Equity
Appreciation Value will be determined through Ridgewood and Louisville
requesting and equally sharing the cost of an appraisal of such amount
from HVS International (the "Appraisal"). The Appraisal shall be
jointly requested by the parties within ten (10) days after
Louisville's receipt of the exercise notice from Ridgewood and the
determination of the Equity Appreciation Value as set forth in the
Appraisal shall be final and binding upon both parties. Notwithstanding
anything to the contrary set forth above, Ridgewood shall not have the
right to exercise the Purchase Right and to acquire the interests of
Louisville hereunder except in connection with the concurrent payment
in full to Louisville of all remaining amounts due under the Promissory
Notes as described in the Purchase Agreement. In the event the
Purchase Right is exercised hereunder, the closing shall occur as
provided in Section 13.2 of the Operating Agreement.
14.2 Obligation to Purchase Louisville Membership Interest. As
provided in Section 14.1 above, in connection with the execution of the
Purchase Agreement, Ridgewood executed certain Promissory Notes in
favor of Louisville in the total cumulative amount of One Million Nine
Hundred Thirty Three Thousand Dollars ($1,933,000.00), bearing interest
at thirteen percent (13%) per annum. The Promissory Notes indicate
that they are fully due and payable on the first to occur of (i)
September 30, 2002 and (ii) the closing of the acquisition of the
Louisville membership interest by Ridgewood as provided in Section 14.1
above. In the event that on or before September 30, 2002 Ridgewood has
not exercised the Purchase Right above and fully paid the Purchase
Right Price pursuant to the provisions of Section 14.1, then Ridgewood
shall be obligated to purchase Louisville's interest and to pay the
full amount of the Purchase Right Price described in Section 14.1 above
on September 30, 2002. In the event of a default by Ridgewood
hereunder, the provisions of Section 14.3 below shall apply.
14.3 Default Under Section 14.2 or Under Loan Documents. Any
default by Ridgewood under the Operating Agreement not cured within any
cure period provided herein shall also constitute a default under the
Promissory Notes. In the event that (i) Ridgewood fails to acquire the
Louisville membership interest and pay the Purchase Right Price as
required pursuant to Sections 14.1 and 14.2 above, or (ii) Ridgewood
defaults under any of the Promissory Notes or the other Loan Documents
as defined in the Purchase Agreement and fails to cure such default
within any cure period set forth therein, or (iii) Ridgewood otherwise
defaults under any of its obligations under the Operating Agreement
where such default is not cured within the earlier of (a) twenty (20)
days after written notice from Louisville or (b) on or before September
30, 2002, then Louisville shall have the right to pursue all rights and
remedies based upon such default as provided in the Loan Documents or
available pursuant to applicable law.
18. Section 19.5 is deleted and replaced with the following:
19.5 Managers Address. The name and address of the Manager is as
follows:
Ridgewood Hotels, Inc. 2859 Paces Ferry Road, Suite 700 Atlanta,
Georgia 30339. Attn: Ms. Karen Hughes
19. Section 19.12 is deleted and replaced with the following:
19.12 Legal Counsel. Louisville acknowledges and agrees that counsel
representing the Company, the Manager and their Affiliates does not
represent and shall not be deemed under the applicable Codes of
Professional Responsibility to have represented or to be representing
Louisville or any of its Affiliates in any respect. In addition,
Louisville consents to the Manager hiring counsel for the Company which
is also counsel to the Manager.
20. The following definitions are either deleted and replaced (to
the extent already defined) or insert, as the case may be, as follows:
"Acquisition Loans" shall mean the aggregate obligations of Ridgewood
pursuant to the promissory notes described in the Membership Interest
Purchase Agreement between Louisville and Ridgewood dated as of the
Amendment Date. The aggregate original principal amount of such
obligations being $1,933,000.00.
"Amendment Date" shall mean September 30, 1999.
Capital Account", paragraph (ii)(d) shall read as follows:
(d) the fair market value, as agreed to by the Manager and the
Members pursuant to a Majority Vote, of any Property (reduced by any
liabilities assumed by the Member in connection with the Distribution
or to which the distributed Property is subject) distributed to such
Member; provided that, upon liquidation and winding up of the Company,
unsold Property will be valued for Distribution at its fair market
value and the Capital Account of each Member before such Distribution
shall be adjusted to reflect the allocation of gain or loss that would
have been realized had the Company then sold the Property for its fair
market value and distributed the proceeds pursuant to Section 5.2.
Such fair market value shall not be less than the amount of any
nonrecourse indebtedness that is secured by the Property.
"Manager" shall mean Ridgewood The term Manager shall also refer to
any successor or additional Manager who is admitted to the Company as
the Manager.
"Net Capital Contribution" of any Member shall be the excess, if any,
of (a) the aggregate Capital Contributions of such Member less (b) the
aggregate distributions to such Member pursuant to Section 5.2.6 or
5.2.7, as the case may be, of this Agreement; provided, however, with
respect to Ridgewood, solely for purposes of this definition, its
Capital Contributions shall be deemed to include additional
contributions of $844,778.
"Net Income and Net Loss From Operations" - deleted in its entirety.
"Net Income and Net Loss From Sale or Exchange" - deleted in its
entirety.
"Percentage Interests" shall be twenty percent (20%) for Louisville and
eighty percent (80%) for Ridgewood.
"Stated Value" - deleted in its entirety.
21. As amended hereby, the Agreement shall continue in full force
and effect.
22. The terms and provisions of this Amendment shall be binding
upon and shall inure to the benefit of the successors and assigns of
the respective Members.
20. This Amendment may be executed in several counterparts, and all
so executed shall constitute one Agreement, binding on all of the
parties hereto, notwithstanding that all of the parties are not
signatory to the original or the same counterpart.
IN WITNESS WHEREOF, this Amendment is effective as of the date first
set forth above.
RIDGEWOOD HOTELS, INC., a Delaware corporation
By:
Its:
LOUISVILLE HOTEL, LP, a Delaware limited partnership
By: Louisville Hotel Inc., a Delaware corporation
By:___________________________________________
Its:________________________________________
SECURED PROMISSORY NOTE
$1,333,000.00 September 30, 1999 Scottsdale, Arizona
FOR VALUE RECEIVED, RIDGEWOOD HOTELS, INC., A Delaware corporation
("Maker"), hereby promises to pay to LOUISVILLE HOTEL, L.P., a Delaware
limited partnership ("Holder"), or order, at 6900 East 2nd Street,
Scottsdale, Arizona, the principal amount of One Million Three Hundred
Thirty Three Thousand Dollars ($1,333,000.00), with interest on such
amount until paid, at the rate set forth below and payable as follows:
1. INTEREST RATE
The amount of outstanding principal shall bear interest at the rate of
13% per annum. Interest shall commence on the princi-pal balance from
and after October 1, 1999 and shall be calculated on the basis of a
365-day year.
2. TERM
All unpaid principal, together with any and all accrued and unpaid
interest, shall be due upon the earlier of (i) three (3) years after
the date hereof which is September 30, 2002 or (ii) the acquisition of
Holder's membership interest in Louisville Hotel, LLC (the "LLC")
pursuant to the Operating Agreement of Louisville Hotel, LLC effective
as of May 1998, as amended by that First Amendment to the Operating
Agreement of Louisville Hotel, LLC dated as of September 30, 1999 (such
Operating Agreement of Louisville Hotel, LLC as at any time amended,
modified, revised or replaced, the "Operating Agreement") (the
"Maturity Date").
3. PAYMENT
Interest only shall be payable in monthly installments due on the first
(1st) day of each month beginning on November 1, 1999, and continuing
to the Maturity Date, on which date the amount equal to the outstanding
princi-pal balance, together with accrued and unpaid interest, shall be
due and payable.
Any payment hereunder shall be applied first to the payment of costs
and charges of collection, if any, then to accrued in-terest, and the
balance, if any, shall be then applied to reduc-tion of principal.
Principal and interest are payable in lawful money of the United States
of America.
4. LATE PAYMENT
Maker agrees that if for any reason it fails to make any on the
monthly payments required herein, including the amount due at the
Maturity Date, within five (5) days after the due date, Holder shall be
entitled to damages for the detriment caused thereby, the extent of
which damages are extremely difficult and impractical to ascertain.
Maker there-fore agrees that a sum equal to five percent (5%) of such
delin-quent payment is a reasonable estimate of such damages and Maker
agrees to pay such sum upon demand by Holder. Accept-ance of such late
charge by the Holder shall in no event consti-tute a waiver of Maker's
default with respect to such overdue amount nor pre-vent the Holder
from exercising any of the other rights and remedies granted hereunder.
5. SECURITY AGREEMENT
This Note is secured by (i) a Membership Interest Security Agreement,
executed contemporaneously herewith by Maker in favor of Holder, which
grants security interests in Maker's ownership interests in Louisville
Hotel LLC, a Delaware limited liability company (the "Security
Agreement") (ii) the Arizona Deed of Trust (as defined on Exhibit A)
and (iii) the Florida Deed of Trust (as defined on Exhibit A).
6. DEFAULT/ACCELERATION
If any one or more of the following events shall occur (hereinafter
called an "Event of Default"), namely: (i) default shall be made in
the payment of any installment here-under, when due; or (ii) default
shall be made in the punc-tual payment of any other obligation of the
Maker to the Holder under the Membership Interest Purchase Agreement
dated concurrently herewith by and between Maker and Holder (the
"Purchase Agreement") or otherwise when due; or (iii) there is any
default or event of default under any of the loan documents as
described on Exhibit "A" attached hereto and incorporated herein by
this reference (as at any time amended, modified, renewed or replaced,
the "Loan Documents") which is not cured within any applicable cure
period; or (iv) Maker shall become insolvent, or shall be unable to pay
its debts as they mature; or shall admit in writing its inability to
pay its debts as they mature; or shall make an assignment for the
benefit of its creditors; or shall file or commence or have filed or
commenced against it any proceeding for any relief under any bankruptcy
or insolvency law or any law or laws relat-ing to the relief of
debtors, readjustment of indebtedness, reorganizations, compositions or
extensions, or a receiver or trustee shall be appointed for the
undersigned; or (v) an event of default shall exist under the Security
Agreement which is not cured within any applicable cure period; or (vi)
Maker shall fail to comply with any other provision of this Note; or
(vi) any representation or warranty made herein or in the Security
Agreement shall be false in any material respect; or (vii) there is any
default or event of default under the Operating Agreement by Maker
which is not cured within any applicable cure period, and with respect
to each of the foregoing, in the case of any monetary obligation, the
same shall not be paid within five (5) days of written notice of such
failure by Holder to Maker, except that after two (2) such notices
shall have been given by Holder under any Loan Document, no such
further notices will be given by Holder and Maker shall be in default
with respect to any monetary obligation if the same is not paid within
five (5) days of when due, and in the case of any non-monetary
obligation which is curable, the same shall not be cured within twenty
(20) days of written notice of such failure by Holder to Maker
(provided that if a cure period is provided in any other Loan Document
or the Operating Agreement, such cure periods shall control with
respect to defaults under such agreements, and the cure period provided
herein shall not apply with respect thereto), THEN, upon the occurrence
of any such Event of Default, or upon the expiration of the term of
this Note, Holder at its election, and without presentment, demand,
notice of any kind, all of which are ex-pressly waived by Maker, may
declare the entire outstanding balance of principal and interest
thereon immediately due and payable, together with all costs of
collec-tion, including attorneys' fees, or may exercise upon or enforce
its rights to its collateral, as may be set forth in the Security
Agreement or otherwise.
7. NO WAIVER BY HOLDER
The acceptance by Holder of any payment under this Note after the date
such payment is due, or the failure to declare an Event of Default as
herein provided, shall not constitute a waiver of any of the terms of
this Note or the right to require the prompt payment when due of future
or succeeding pay-ments or to declare an Event of Default for any
failure to so pay or for any other default. The acceptance by Holder
of a payment of a portion of any installment at any time that such
installment is due in full shall not cure or excuse the default caused
by the failure to pay such installment in full and shall not constitute
a waiver of the right to require full payment when due of all future or
succeed-ing installments.
8. ATTORNEYS' FEES AND COSTS
In the event Holder takes any action to enforce any provision of this
Note, either through legal proceedings or otherwise, Maker promises to
immediately reimburse Holder for reasonable attorneys' fees and all
other costs and expenses so incurred. Maker shall also reimburse
Holder for all reasonable attorneys' fees and costs reason-ably
incurred in the representation of Holder in any bankruptcy, insolvency,
reorganization or other debtor-relief proceeding of or relating to
Maker or any security for the obligations hereunder, or for any action
to enforce any judgment rendered hereon or relating to enforcement
hereof.
9. WAIVERS
The Maker, endorsers, guarantors and sureties of this Note hereby waive
diligence, demand, presentment, notice of non-payment, protest and
notice of protest; expressly agree that this Note, or any payment
hereunder, may be renewed, modified or extended from time to time and
at any time; and consent to the acceptance or release of security for
this Note or the release of any party or guaran-tor, all without in any
way affecting their liability and waive the right to plead any and all
statutes of limitations as a de-fense to any demand on this Note, or on
any guaranty thereof, or to any agree-ment to pay the same to the full
extent permissible by law.
10. MAXIMUM INTEREST
In no event whatsoever shall the amount paid, or agreed to be paid, to
Holder for the use, forbearance or deten-tion of money to be loaned
hereunder or otherwise, for the per-formance or payment of any covenant
or obligation contained herein, exceed the maxi-mum amount permissible
under applicable law. If from any circum-stance whatsoever fulfillment
of any provision hereof exceeds the limit of validity prescribed by
law, then, ipso facto, the obli-gation to be fulfilled shall be reduced
to the limit of such validity, and if from any such circumstance Holder
shall ever receive as interest under this Note or other-wise an amount
that would exceed the highest lawful rate, such amount that would be
excessive interest shall be applied to the reduction of the prin-cipal
amount owing hereunder and not to the payment of interest, or if such
excessive interest exceeds the unpaid balance of prin-cipal, such
excess shall be refunded to Maker.
11. PREPAYMENT
Maker may prepay this Note in full or in part at any time without
prepayment charge. No partial prepayment shall release Maker from
thereafter tendering all regular scheduled monthly payments required
herein until the Note is paid in full.
12. NOTICES
Any notice which a party is required or may desire to give the other
shall be in writing and may be sent by personal delivery or by mail
(either (i) by United States registered or certified mail, return
receipt requested, postage prepaid, or (ii) by Federal Express or
similar generally recognized overnight carrier regularly providing
proof of delivery), addressed as follows (subject to the right of a
party to designate a different address for itself by notice similarly
given):
To Maker:
2859 Paces Ferry Road, Suite 700 Atlanta, Georgia 30339 Attention:
Mr. N. Russell Walden Ms. Karen Hughes Telecopier: (770) 433-8935
Telephone: (770) 434-3670
To Holder:
Louisville Hotel, L.P. 6900 East 2nd Street Scottsdale, Arizona 85251
Attention: Mr. Timothy Wright Telecopier: (602) 874-0678 Telephone:
(602) 874-0706
Any notice so given by mail shall be deemed to have been given as of
delivery (whether accepted or refused) established by U.S. Post Office
return receipt or the overnight carrier's proof of delivery, as the
case may be. Any such notice not so give shall be deemed given upon
receipt of the same by the party to whom the same is to be given.
13. ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS
Maker is a corporation formed and incorporated under the laws of the
State of Delaware. The principal place of business and chief executive
office of Maker is located at the address for notice to such party as
set forth herein. The registered agent of Maker and its address is:
Ms. Karen Hughes 2859 Paces Ferry Road, Suite 700 Atlanta, Georgia
30339 Telecopier: (770) 433-8935 Telephone: (770) 434-3670
Maker shall, from time to time, promptly execute and deliver all
further instruments and documents and take all further action that may
be reasonably necessary or desirable or that Holder may request, in
order to effectuate the provisions of this Note.
14. MISCELLANEOUS
The terms of this Note shall inure to the benefit of and bind the
parties hereto and their successors and assigns. As used herein the
term "Maker" shall include the undersigned Maker and any other person
or entity who may subsequently become liable for the payment hereof.
All obligations hereunder are joint and several and references to
"Maker" shall refer to each and every one of them. The term of this
Note shall inure to the benefit of and bind Maker and Holder and their
successors and assigns. The term "Holder" shall include the named
Holder as well as any other person or entity to whom this Note or any
interest in this Note is conveyed, transferred or assigned. Each
person signing this Note on behalf of Maker represents and warrants
that he has full authority to do so and that this Note binds Maker.
15. TIME OF ESSENCE
It is agreed that time is of the essence as to every term, condition
and provision of this Note.
16. SEVERABILITY
Every provision hereof is intended to be several and if any provision
is determined by a court of competent jurisdiction to be illegal,
invalid or unenforceable, such illegality, invalidity or
unenforceability shall not affect the other provisions hereof, which
shall remain binding and enforceable.
17. MODIFICATION
This Note may not be changed or modified orally, nor may any right or
provision hereof be waived orally, but in each instance only by an
instrument in writing signed by the party against which enforcement of
such change, modification or waiver is sought.
18. REMEDIES CUMULATIVE
Each and every right, remedy and power hereby granted to Holder or
allowed it by law or other agreement shall be cumulative and not
exclusive and may be exercised by Holder from time to time.
19. NONRECOURSE
Notwithstanding any other provision of this Note or the Loan Documents,
except as provided hereinbelow, Maker shall not be personally liable
for the payment of the principal sum or any interest due or any other
amount under this Note, and Holder agrees that in no event shall any
monetary deficiency judgment for such amount be sought or secured
against Maker for the payment of sums due hereunder. Notwithstanding
the foregoing, however, nothing in this Note or other Loan Documents
shall be deemed to limit the rights and remedies of Holder with respect
to, or limit the liability of Maker for, any and all losses, costs,
claims, demands, judgments, penalties, fines, liabilities, damages or
expenses arising (directly or indirectly), by reason of the occurrence
or existence of or relating to any of the following: (a) fraud or
misrepresentation by Maker, (b) misappropriation or misapplication of
any property securing the obligations under this Note, including, but
not limited to rents, issues, profits or other revenues, and/or other
revenues and/or monies, including security deposits, insurance proceeds
and condemnation awards, including any failure to apply the same to
amounts under the Note or (c) intentional waste with regard to any
security for the obligations hereunder.
20. GOVERNING LAW
This Note shall be governed by and construed under the laws of the
State of Arizona.
MAKER:
RIDGEWOOD HOTELS, INC., a Delaware corporation
By: Its:
EXHIBIT "A"
LIST OF LOAN DOCUMENTS
[All Dated September 30, 1999]
21. Secured Promissory Note in the principal amount of $1,333,000.00
executed by Ridgewood Hotels, Inc. ("Ridgewood") as Maker in favor of
Louisville Hotel L.P. ("Louisville") as Holder.
22. Membership Interest Security Agreement executed by Ridgewood as
Debtor in favor of Louisville as Creditor.
23. Secured Promissory Note [Arizona] in the principal amount of
$300,000.00 executed by Ridgewood as Maker in favor of Louisville as
Holder.
24. Deed of Trust executed by Ridgewood as Trustor in favor of
Louisville as Beneficiary encumbering certain real property located in
Glendale, Arizona (the "Arizona Deed of Trust").
25. Secured Promissory Note [Florida] in the principal amount of
$300,000.00 executed by Ridgewood as Maker in favor of Louisville as
Holder.
26. Mortgage, Assignment of Rents and Security Agreement executed by
Ridgewood as Mortgagor in favor of Louisville as Mortgagee encumbering
certain real property located in Orlando, Florida (the "Florida Deed of
Trust").
SECURED PROMISSORY NOTE [Arizona]
$300,000.00 September 30, 1999 Scottsdale, Arizona
FOR VALUE RECEIVED, RIDGEWOOD HOTELS, INC., A Delaware corporation
("Maker"), hereby promises to pay to LOUISVILLE HOTEL, L.P., a Delaware
limited partnership ("Holder"), or order, at 6900 East 2nd Street,
Scottsdale, Arizona, the principal amount of Three Hundred Thousand
Dollars ($300,000.00), with interest on such amount until paid, at the
rate set forth below and payable as follows:
1. INTEREST RATE
The amount of outstanding principal shall bear interest at the rate of
13% per annum. Interest shall commence on the princi-pal balance from
and after October 1, 1999 and shall be calculated on the basis of a
365-day year.
2. TERM
All unpaid principal, together with any and all accrued and unpaid
interest, shall be due upon the earlier of (i) three (3) years after
the date hereof which is September 30, 2002 or (ii) the acquisition of
Holder's membership interest in Louisville Hotel, LLC (the "LLC")
pursuant to the Operating Agreement of Louisville Hotel, LLC effective
as of May 1998, as amended by that First Amendment to the Operating
Agreement of Louisville Hotel, LLC dated as of September 30, 1999 (such
Operating Agreement of Louisville Hotel, LLC as at any time amended,
modified, revised or replaced, the "Operating Agreement") (the
"Maturity Date").
3. PAYMENT
Interest only shall be payable in monthly installments due on the first
(1st) day of each month beginning on November 1, 1999, and continuing
to the Maturity Date, on which date the amount equal to the outstanding
princi-pal balance, together with accrued and unpaid interest, shall be
due and payable.
Any payment hereunder shall be applied first to the payment of costs
and charges of collection, if any, then to accrued in-terest, and the
balance, if any, shall be then applied to reduc-tion of principal.
Principal and interest are payable in lawful money of the United States
of America.
4. LATE PAYMENT
Maker agrees that if for any reason it fails to make any on the
monthly payments required herein, including the amount due at the
Maturity Date, within five (5) days after the due date, Holder shall be
entitled to damages for the detriment caused thereby, the extent of
which damages are extremely difficult and impractical to ascertain.
Maker there-fore agrees that a sum equal to five percent (5%) of such
delin-quent payment is a reasonable estimate of such damages and Maker
agrees to pay such sum upon demand by Holder. Accept-ance of such late
charge by the Holder shall in no event consti-tute a waiver of Maker's
default with respect to such overdue amount nor pre-vent the Holder
from exercising any of the other rights and remedies granted hereunder.
5. SECURITY AGREEMENT
This Note is secured by (i) a Membership Interest Security Agreement,
executed contemporaneously herewith by Maker in favor of Holder, which
grants security interests in Maker's ownership interests in Louisville
Hotel LLC, a Delaware limited liability company (the "Security
Agreement") (ii) the Arizona Deed of Trust (as defined on Exhibit A)
and (iii) the Florida Deed of Trust (as defined on Exhibit A).
6. DEFAULT/ACCELERATION
If any one or more of the following events shall occur (hereinafter
called an "Event of Default"), namely: (i) default shall be made in
the payment of any installment here-under, when due; or (ii) default
shall be made in the punc-tual payment of any other obligation of the
Maker to the Holder under the Membership Interest Purchase Agreement
dated concurrently herewith by and between Maker and Holder (the
"Purchase Agreement") or otherwise when due; or (iii) there is any
default or event of default under any of the loan documents as
described on Exhibit "A" attached hereto and incorporated herein by
this reference (as at any time amended, modified, renewed or replaced,
the "Loan Documents") which is not cured within any applicable cure
period; or (iv) Maker shall become insolvent, or shall be unable to pay
its debts as they mature; or shall admit in writing its inability to
pay its debts as they mature; or shall make an assignment for the
benefit of its creditors; or shall file or commence or have filed or
commenced against it any proceeding for any relief under any bankruptcy
or insolvency law or any law or laws relat-ing to the relief of
debtors, readjustment of indebtedness, reorganizations, compositions or
extensions, or a receiver or trustee shall be appointed for the
undersigned; or (v) an event of default shall exist under the Security
Agreement which is not cured within any applicable cure period; or (vi)
Maker shall fail to comply with any other provision of this Note; or
(vi) any representation or warranty made herein or in the Security
Agreement shall be false in any material respect; or (vii) there is any
default or event of default under the Operating Agreement by Maker
which is not cured within any applicable cure period, and with respect
to each of the foregoing, in the case of any monetary obligation, the
same shall not be paid within five (5) days of written notice of such
failure by Holder to Maker, except that after two (2) such notices
shall have been given by Holder under any Loan Document, no such
further notices will be given by Holder and Maker shall be in default
with respect to any monetary obligation if the same is not paid within
five (5) days of when due, and in the case of any non-monetary
obligation which is curable, the same shall not be cured within twenty
(20) days of written notice of such failure by Holder to Maker
(provided that if a cure period is provided in any other Loan Document
or the Operating Agreement, such cure periods shall control with
respect to defaults under such agreements, and the cure period provided
herein shall not apply with respect thereto), THEN, upon the occurrence
of any such Event of Default, or upon the expiration of the term of
this Note, Holder at its election, and without presentment, demand,
notice of any kind, all of which are ex-pressly waived by Maker, may
declare the entire outstanding balance of principal and interest
thereon immediately due and payable, together with all costs of
collec-tion, including attorneys' fees, or may exercise upon or enforce
its rights to its collateral, as may be set forth in the Security
Agreement or otherwise.
7. NO WAIVER BY HOLDER
The acceptance by Holder of any payment under this Note after the date
such payment is due, or the failure to declare an Event of Default as
herein provided, shall not constitute a waiver of any of the terms of
this Note or the right to require the prompt payment when due of future
or succeeding pay-ments or to declare an Event of Default for any
failure to so pay or for any other default. The acceptance by Holder
of a payment of a portion of any installment at any time that such
installment is due in full shall not cure or excuse the default caused
by the failure to pay such installment in full and shall not constitute
a waiver of the right to require full payment when due of all future or
succeed-ing installments.
8. ATTORNEYS' FEES AND COSTS
In the event Holder takes any action to enforce any provision of this
Note, either through legal proceedings or otherwise, Maker promises to
immediately reimburse Holder for reasonable attorneys' fees and all
other costs and expenses so incurred. Maker shall also reimburse
Holder for all reasonable attorneys' fees and costs reason-ably
incurred in the representation of Holder in any bankruptcy, insolvency,
reorganization or other debtor-relief proceeding of or relating to
Maker or any security for the obligations hereunder, or for any action
to enforce any judgment rendered hereon or relating to enforcement
hereof.
9. WAIVERS
The Maker, endorsers, guarantors and sureties of this Note hereby waive
diligence, demand, presentment, notice of non-payment, protest and
notice of protest; expressly agree that this Note, or any payment
hereunder, may be renewed, modified or extended from time to time and
at any time; and consent to the acceptance or release of security for
this Note or the release of any party or guaran-tor, all without in any
way affecting their liability and waive the right to plead any and all
statutes of limitations as a de-fense to any demand on this Note, or on
any guaranty thereof, or to any agree-ment to pay the same to the full
extent permissible by law.
10. MAXIMUM INTEREST
In no event whatsoever shall the amount paid, or agreed to be paid, to
Holder for the use, forbearance or deten-tion of money to be loaned
hereunder or otherwise, for the per-formance or payment of any covenant
or obligation contained herein, exceed the maxi-mum amount permissible
under applicable law. If from any circum-stance whatsoever fulfillment
of any provision hereof exceeds the limit of validity prescribed by
law, then, ipso facto, the obli-gation to be fulfilled shall be reduced
to the limit of such validity, and if from any such circumstance Holder
shall ever receive as interest under this Note or other-wise an amount
that would exceed the highest lawful rate, such amount that would be
excessive interest shall be applied to the reduction of the prin-cipal
amount owing hereunder and not to the payment of interest, or if such
excessive interest exceeds the unpaid balance of prin-cipal, such
excess shall be refunded to Maker.
11. PREPAYMENT
Maker may prepay this Note in full or in part at any time without
prepayment charge. No partial prepayment shall release Maker from
thereafter tendering all regular scheduled monthly payments required
herein until the Note is paid in full.
12. NOTICES
Any notice which a party is required or may desire to give the other
shall be in writing and may be sent by personal delivery or by mail
(either (i) by United States registered or certified mail, return
receipt requested, postage prepaid, or (ii) by Federal Express or
similar generally recognized overnight carrier regularly providing
proof of delivery), addressed as follows (subject to the right of a
party to designate a different address for itself by notice similarly
given):
To Maker:
2859 Paces Ferry Road, Suite 700 Atlanta, Georgia 30339 Attention:
Mr. N. Russell Walden Ms. Karen Hughes Telecopier: (770) 433-8935
Telephone: (770) 434-3670
To Holder:
Louisville Hotel, L.P. 6900 East 2nd Street Scottsdale, Arizona 85251
Attention: Mr. Timothy Wright Telecopier: (602) 874-0678 Telephone:
(602) 874-0706
Any notice so given by mail shall be deemed to have been given as of
delivery (whether accepted or refused) established by U.S. Post Office
return receipt or the overnight carrier's proof of delivery, as the
case may be. Any such notice not so give shall be deemed given upon
receipt of the same by the party to whom the same is to be given.
13. ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS
Maker is a corporation formed and incorporated under the laws of the
State of Delaware. The principal place of business and chief executive
office of Maker is located at the address for notice to such party as
set forth herein. The registered agent of Maker and its address is:
Ms. Karen Hughes 2859 Paces Ferry Road, Suite 700 Atlanta, Georgia
30339 Telecopier: (770) 433-8935 Telephone: (770) 434-3670
Maker shall, from time to time, promptly execute and deliver all
further instruments and documents and take all further action that may
be reasonably necessary or desirable or that Holder may request, in
order to effectuate the provisions of this Note.
14. MISCELLANEOUS
The terms of this Note shall inure to the benefit of and bind the
parties hereto and their successors and assigns. As used herein the
term "Maker" shall include the undersigned Maker and any other person
or entity who may subsequently become liable for the payment hereof.
All obligations hereunder are joint and several and references to
"Maker" shall refer to each and every one of them. The term of this
Note shall inure to the benefit of and bind Maker and Holder and their
successors and assigns. The term "Holder" shall include the named
Holder as well as any other person or entity to whom this Note or any
interest in this Note is conveyed, transferred or assigned. Each
person signing this Note on behalf of Maker represents and warrants
that he has full authority to do so and that this Note binds Maker.
15. TIME OF ESSENCE
It is agreed that time is of the essence as to every term, condition
and provision of this Note.
16. SEVERABILITY
Every provision hereof is intended to be several and if any provision
is determined by a court of competent jurisdiction to be illegal,
invalid or unenforceable, such illegality, invalidity or
unenforceability shall not affect the other provisions hereof, which
shall remain binding and enforceable.
17. MODIFICATION
This Note may not be changed or modified orally, nor may any right or
provision hereof be waived orally, but in each instance only by an
instrument in writing signed by the party against which enforcement of
such change, modification or waiver is sought.
18. REMEDIES CUMULATIVE
Each and every right, remedy and power hereby granted to Holder or
allowed it by law or other agreement shall be cumulative and not
exclusive and may be exercised by Holder from time to time.
19. NONRECOURSE
Notwithstanding any other provision of this Note or the Loan Documents,
except as provided hereinbelow, Maker shall not be personally liable
for the payment of the principal sum or any interest due or any other
amount under this Note, and Holder agrees that in no event shall any
monetary deficiency judgment for such amount be sought or secured
against Maker for the payment of sums due hereunder. Notwithstanding
the foregoing, however, nothing in this Note or other Loan Documents
shall be deemed to limit the rights and remedies of Holder with respect
to, or limit the liability of Maker for, any and all losses, costs,
claims, demands, judgments, penalties, fines, liabilities, damages or
expenses arising (directly or indirectly), by reason of the occurrence
or existence of or relating to any of the following: (a) fraud or
misrepresentation by Maker, (b) misappropriation or misapplication of
any property securing the obligations under this Note, including, but
not limited to rents, issues, profits or other revenues, and/or other
revenues and/or monies, including security deposits, insurance proceeds
and condemnation awards, including any failure to apply the same to
amounts under the Note or (c) intentional waste with regard to any
security for the obligations hereunder.
20. GOVERNING LAW
This Note shall be governed by and construed under the laws of the
State of Arizona.
MAKER:
RIDGEWOOD HOTELS, INC., a Delaware corporation
By: Its:
EXHIBIT "A"
LIST OF LOAN DOCUMENTS
[All Dated September 30, 1999]
21. Secured Promissory Note in the principal amount of $1,333,000.00
executed by Ridgewood Hotels, Inc. ("Ridgewood") as Maker in favor of
Louisville Hotel L.P. ("Louisville") as Holder.
22. Membership Interest Security Agreement executed by Ridgewood as
Debtor in favor of Louisville as Creditor.
23. Secured Promissory Note [Arizona] in the principal amount of
$300,000.00 executed by Ridgewood as Maker in favor of Louisville as
Holder.
24. Deed of Trust executed by Ridgewood as Trustor in favor of
Louisville as Beneficiary encumbering certain real property located in
Glendale, Arizona (the "Arizona Deed of Trust").
25. Secured Promissory Note [Florida] in the principal amount of
$300,000.00 executed by Ridgewood as Maker in favor of Louisville as
Holder.
26. Mortgage, Assignment of Rents and Security Agreement executed by
Ridgewood as Mortgagor in favor of Louisville as Mortgagee encumbering
certain real property located in Orlando, Florida (the "Florida Deed of
Trust").
SECURED PROMISSORY NOTE [Florida]
$300,000.00 September 30, 1999 Scottsdale, Arizona
FOR VALUE RECEIVED, RIDGEWOOD HOTELS, INC., A Delaware corporation
("Maker"), hereby promises to pay to LOUISVILLE HOTEL, L.P., a Delaware
limited partnership ("Holder"), or order, at 6900 East 2nd Street,
Scottsdale, Arizona, the principal amount of Three Hundred Thousand
Dollars ($300,000.00), with interest on such amount until paid, at the
rate set forth below and payable as follows:
1. INTEREST RATE
The amount of outstanding principal shall bear interest at the rate of
13% per annum. Interest shall commence on the princi-pal balance from
and after October 1, 1999 and shall be calculated on the basis of a
365-day year.
2. TERM
All unpaid principal, together with any and all accrued and unpaid
interest, shall be due upon the earlier of (i) three (3) years after
the date hereof which is September 30, 2002 or (ii) the acquisition of
Holder's membership interest in Louisville Hotel, LLC (the "LLC")
pursuant to the Operating Agreement of Louisville Hotel, LLC effective
as of May 1998, as amended by that First Amendment to the Operating
Agreement of Louisville Hotel, LLC dated as of September 30, 1999 (such
Operating Agreement of Louisville Hotel, LLC as at any time amended,
modified, revised or replaced, the "Operating Agreement") (the
"Maturity Date").
3. PAYMENT
Interest only shall be payable in monthly installments due on the first
(1st) day of each month beginning on November 1, 1999, and continuing
to the Maturity Date, on which date the amount equal to the outstanding
princi-pal balance, together with accrued and unpaid interest, shall be
due and payable.
Any payment hereunder shall be applied first to the payment of costs
and charges of collection, if any, then to accrued in-terest, and the
balance, if any, shall be then applied to reduc-tion of principal.
Principal and interest are payable in lawful money of the United States
of America.
4. LATE PAYMENT
Maker agrees that if for any reason it fails to make any on the
monthly payments required herein, including the amount due at the
Maturity Date, within five (5) days after the due date, Holder shall be
entitled to damages for the detriment caused thereby, the extent of
which damages are extremely difficult and impractical to ascertain.
Maker there-fore agrees that a sum equal to five percent (5%) of such
delin-quent payment is a reasonable estimate of such damages and Maker
agrees to pay such sum upon demand by Holder. Accept-ance of such late
charge by the Holder shall in no event consti-tute a waiver of Maker's
default with respect to such overdue amount nor pre-vent the Holder
from exercising any of the other rights and remedies granted hereunder.
5. SECURITY AGREEMENT
This Note is secured by (i) a Membership Interest Security Agreement,
executed contemporaneously herewith by Maker in favor of Holder, which
grants security interests in Maker's ownership interests in Louisville
Hotel LLC, a Delaware limited liability company (the "Security
Agreement") (ii) the Arizona Deed of Trust (as defined on Exhibit A)
and (iii) the Florida Deed of Trust (as defined on Exhibit A).
6. DEFAULT/ACCELERATION
If any one or more of the following events shall occur (hereinafter
called an "Event of Default"), namely: (i) default shall be made in
the payment of any installment here-under, when due; or (ii) default
shall be made in the punc-tual payment of any other obligation of the
Maker to the Holder under the Membership Interest Purchase Agreement
dated concurrently herewith by and between Maker and Holder (the
"Purchase Agreement") or otherwise when due; or (iii) there is any
default or event of default under any of the loan documents as
described on Exhibit "A" attached hereto and incorporated herein by
this reference (as at any time amended, modified, renewed or replaced,
the "Loan Documents") which is not cured within any applicable cure
period; or (iv) Maker shall become insolvent, or shall be unable to pay
its debts as they mature; or shall admit in writing its inability to
pay its debts as they mature; or shall make an assignment for the
benefit of its creditors; or shall file or commence or have filed or
commenced against it any proceeding for any relief under any bankruptcy
or insolvency law or any law or laws relat-ing to the relief of
debtors, readjustment of indebtedness, reorganizations, compositions or
extensions, or a receiver or trustee shall be appointed for the
undersigned; or (v) an event of default shall exist under the Security
Agreement which is not cured within any applicable cure period; or (vi)
Maker shall fail to comply with any other provision of this Note; or
(vi) any representation or warranty made herein or in the Security
Agreement shall be false in any material respect; or (vii) there is any
default or event of default under the Operating Agreement by Maker
which is not cured within any applicable cure period, and with respect
to each of the foregoing, in the case of any monetary obligation, the
same shall not be paid within five (5) days of written notice of such
failure by Holder to Maker, except that after two (2) such notices
shall have been given by Holder under any Loan Document, no such
further notices will be given by Holder and Maker shall be in default
with respect to any monetary obligation if the same is not paid within
five (5) days of when due, and in the case of any non-monetary
obligation which is curable, the same shall not be cured within twenty
(20) days of written notice of such failure by Holder to Maker
(provided that if a cure period is provided in any other Loan Document
or the Operating Agreement, such cure periods shall control with
respect to defaults under such agreements, and the cure period provided
herein shall not apply with respect thereto), THEN, upon the occurrence
of any such Event of Default, or upon the expiration of the term of
this Note, Holder at its election, and without presentment, demand,
notice of any kind, all of which are ex-pressly waived by Maker, may
declare the entire outstanding balance of principal and interest
thereon immediately due and payable, together with all costs of
collec-tion, including attorneys' fees, or may exercise upon or enforce
its rights to its collateral, as may be set forth in the Security
Agreement or otherwise.
7. NO WAIVER BY HOLDER
The acceptance by Holder of any payment under this Note after the date
such payment is due, or the failure to declare an Event of Default as
herein provided, shall not constitute a waiver of any of the terms of
this Note or the right to require the prompt payment when due of future
or succeeding pay-ments or to declare an Event of Default for any
failure to so pay or for any other default. The acceptance by Holder
of a payment of a portion of any installment at any time that such
installment is due in full shall not cure or excuse the default caused
by the failure to pay such installment in full and shall not constitute
a waiver of the right to require full payment when due of all future or
succeed-ing installments.
8. ATTORNEYS' FEES AND COSTS
In the event Holder takes any action to enforce any provision of this
Note, either through legal proceedings or otherwise, Maker promises to
immediately reimburse Holder for reasonable attorneys' fees and all
other costs and expenses so incurred. Maker shall also reimburse
Holder for all reasonable attorneys' fees and costs reason-ably
incurred in the representation of Holder in any bankruptcy, insolvency,
reorganization or other debtor-relief proceeding of or relating to
Maker or any security for the obligations hereunder, or for any action
to enforce any judgment rendered hereon or relating to enforcement
hereof.
9. WAIVERS
The Maker, endorsers, guarantors and sureties of this Note hereby waive
diligence, demand, presentment, notice of non-payment, protest and
notice of protest; expressly agree that this Note, or any payment
hereunder, may be renewed, modified or extended from time to time and
at any time; and consent to the acceptance or release of security for
this Note or the release of any party or guaran-tor, all without in any
way affecting their liability and waive the right to plead any and all
statutes of limitations as a de-fense to any demand on this Note, or on
any guaranty thereof, or to any agree-ment to pay the same to the full
extent permissible by law.
10. MAXIMUM INTEREST
In no event whatsoever shall the amount paid, or agreed to be paid, to
Holder for the use, forbearance or deten-tion of money to be loaned
hereunder or otherwise, for the per-formance or payment of any covenant
or obligation contained herein, exceed the maxi-mum amount permissible
under applicable law. If from any circum-stance whatsoever fulfillment
of any provision hereof exceeds the limit of validity prescribed by
law, then, ipso facto, the obli-gation to be fulfilled shall be reduced
to the limit of such validity, and if from any such circumstance Holder
shall ever receive as interest under this Note or other-wise an amount
that would exceed the highest lawful rate, such amount that would be
excessive interest shall be applied to the reduction of the prin-cipal
amount owing hereunder and not to the payment of interest, or if such
excessive interest exceeds the unpaid balance of prin-cipal, such
excess shall be refunded to Maker.
11. PREPAYMENT
Maker may prepay this Note in full or in part at any time without
prepayment charge. No partial prepayment shall release Maker from
thereafter tendering all regular scheduled monthly payments required
herein until the Note is paid in full.
12. NOTICES
Any notice which a party is required or may desire to give the other
shall be in writing and may be sent by personal delivery or by mail
(either (i) by United States registered or certified mail, return
receipt requested, postage prepaid, or (ii) by Federal Express or
similar generally recognized overnight carrier regularly providing
proof of delivery), addressed as follows (subject to the right of a
party to designate a different address for itself by notice similarly
given):
To Maker:
2859 Paces Ferry Road, Suite 700 Atlanta, Georgia 30339 Attention:
Mr. N. Russell Walden Ms. Karen Hughes Telecopier: (770) 433-8935
Telephone: (770) 434-3670
To Holder:
Louisville Hotel, L.P. 6900 East 2nd Street Scottsdale, Arizona 85251
Attention: Mr. Timothy Wright Telecopier: (602) 874-0678 Telephone:
(602) 874-0706
Any notice so given by mail shall be deemed to have been given as of
delivery (whether accepted or refused) established by U.S. Post Office
return receipt or the overnight carrier's proof of delivery, as the
case may be. Any such notice not so give shall be deemed given upon
receipt of the same by the party to whom the same is to be given.
13. ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS
Maker is a corporation formed and incorporated under the laws of the
State of Delaware. The principal place of business and chief executive
office of Maker is located at the address for notice to such party as
set forth herein. The registered agent of Maker and its address is:
Ms. Karen Hughes 2859 Paces Ferry Road, Suite 700 Atlanta, Georgia
30339 Telecopier: (770) 433-8935 Telephone: (770) 434-3670
Maker shall, from time to time, promptly execute and deliver all
further instruments and documents and take all further action that may
be reasonably necessary or desirable or that Holder may request, in
order to effectuate the provisions of this Note.
14. MISCELLANEOUS
The terms of this Note shall inure to the benefit of and bind the
parties hereto and their successors and assigns. As used herein the
term "Maker" shall include the undersigned Maker and any other person
or entity who may subsequently become liable for the payment hereof.
All obligations hereunder are joint and several and references to
"Maker" shall refer to each and every one of them. The term of this
Note shall inure to the benefit of and bind Maker and Holder and their
successors and assigns. The term "Holder" shall include the named
Holder as well as any other person or entity to whom this Note or any
interest in this Note is conveyed, transferred or assigned. Each
person signing this Note on behalf of Maker represents and warrants
that he has full authority to do so and that this Note binds Maker.
15. TIME OF ESSENCE
It is agreed that time is of the essence as to every term, condition
and provision of this Note.
16. SEVERABILITY
Every provision hereof is intended to be several and if any provision
is determined by a court of competent jurisdiction to be illegal,
invalid or unenforceable, such illegality, invalidity or
unenforceability shall not affect the other provisions hereof, which
shall remain binding and enforceable.
17. MODIFICATION
This Note may not be changed or modified orally, nor may any right or
provision hereof be waived orally, but in each instance only by an
instrument in writing signed by the party against which enforcement of
such change, modification or waiver is sought.
18. REMEDIES CUMULATIVE
Each and every right, remedy and power hereby granted to Holder or
allowed it by law or other agreement shall be cumulative and not
exclusive and may be exercised by Holder from time to time.
19. NONRECOURSE
Notwithstanding any other provision of this Note or the Loan Documents,
except as provided hereinbelow, Maker shall not be personally liable
for the payment of the principal sum or any interest due or any other
amount under this Note, and Holder agrees that in no event shall any
monetary deficiency judgment for such amount be sought or secured
against Maker for the payment of sums due hereunder. Notwithstanding
the foregoing, however, nothing in this Note or other Loan Documents
shall be deemed to limit the rights and remedies of Holder with respect
to, or limit the liability of Maker for, any and all losses, costs,
claims, demands, judgments, penalties, fines, liabilities, damages or
expenses arising (directly or indirectly), by reason of the occurrence
or existence of or relating to any of the following: (a) fraud or
misrepresentation by Maker, (b) misappropriation or misapplication of
any property securing the obligations under this Note, including, but
not limited to rents, issues, profits or other revenues, and/or other
revenues and/or monies, including security deposits, insurance proceeds
and condemnation awards, including any failure to apply the same to
amounts under the Note or (c) intentional waste with regard to any
security for the obligations hereunder.
20. GOVERNING LAW
This Note shall be governed by and construed under the laws of the
State of Arizona.
MAKER:
RIDGEWOOD HOTELS, INC., a Delaware corporation
By: Its:
EXHIBIT "A"
LIST OF LOAN DOCUMENTS
[All Dated September 30, 1999]
21. Secured Promissory Note in the principal amount of $1,333,000.00
executed by Ridgewood Hotels, Inc. ("Ridgewood") as Maker in favor of
Louisville Hotel L.P. ("Louisville") as Holder.
22. Membership Interest Security Agreement executed by Ridgewood as
Debtor in favor of Louisville as Creditor.
23. Secured Promissory Note [Arizona] in the principal amount of
$300,000.00 executed by Ridgewood as Maker in favor of Louisville as
Holder.
24. Deed of Trust executed by Ridgewood as Trustor in favor of
Louisville as Beneficiary encumbering certain real property located in
Glendale, Arizona (the "Arizona Deed of Trust").
25. Secured Promissory Note [Florida] in the principal amount of
$300,000.00 executed by Ridgewood as Maker in favor of Louisville as
Holder.
26. Mortgage, Assignment of Rents and Security Agreement executed by
Ridgewood as Mortgagor in favor of Louisville as Mortgagee encumbering
certain real property located in Orlando, Florida (the "Florida Deed of
Trust").
EXHIBIT 13
RIDGEWOOD
HOTELS, INC.
ANNUAL REPORT
1999
FINANCIAL STATEMENTS
Ridgewood Hotels, Inc. (the "Company") is primarily engaged in
the business of acquiring, developing, operating and managing hotel
properties in the Southeast and "Sunbelt" areas. Additionally, the
Company owns several land parcels which are held for sale.
Board of Directors Officers
Michael M. Earley N. Russell Walden
President - Triton Group President
Management
Luther A. Henderson Byron T. Cooper
President - Pirvest, Inc. Vice President, Construction and
Planning
N. Russell Walden
President - Ridgewood Karen S. Hughes
Hotels, Inc. Vice President, Chief Financial
Officer and Secretary
Corporate Offices
2859 Paces Ferry Road, Suite 700
Atlanta, Georgia 30339
Telephone: (770) 434-3670
Market For Registrant's Common Equity and Related Stockholder Matters
The common stock, $0.01 par value per share (the "Common Stock"),
of the Company is listed in the National Association of Securities
Dealers (NASDAQ) over-the-counter bulletin board service. However,
there effectively has been an absence of an established public trading
market for the Common Stock.
Shares outstanding and per share amounts for all periods
presented have been retroactively adjusted for a three-for-one stock
split effected in the form of a stock dividend on October 31, 1994.
On October 31, 1999, there were 1,513,480 shares of Common Stock
outstanding held by approximately 206 shareholders of record. The
Company paid its first and only cash dividend on the Common Stock
during fiscal year 1990. The dividend paid was approximately $0.06
per share of Common Stock, which totaled approximately $397,000. The
Company may pay future dividends if and when earnings and cash are
available. The declaration of dividends on the Common Stock is within
the discretion of the Board of Directors of the Company and is,
therefore, subject to many considerations, including operating
results, business and capital requirements and other factors.
<TABLE>
Selected Financial Data
<CAPTION>
-----------------------------------------------------------------
($000's omitted, except
per share data) 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data as of August 31
Total Assets $ 5,910 $ 7,280 $ 8,266 $ 8,724 $ 9,673
Term Loan(s) Payable 2,682 2,744 2,804 2,858 2,796
Shareholders' Investment 1,556 2,944 4,038 4,441 5,612
Income Statement Data
Year Ended August 31
Net Revenues 4,547 5,830 8,209 4,314 8,675
Net Loss (1,283) (622) (463) (1,178) (1,656)
Basic and Diluted Loss Per
Common Share (1) $ (1.09) $ (0.64) $ (0.58) $ (1.29) $ (1.90)
(1) Retroactively adjusted for a three-for-one stock split effected in
the form of a stock dividend on October 31, 1994.
</TABLE>
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources -
During fiscal year 1999, the Company received net proceeds of
approximately $423,000 from the sale of undeveloped land in Texas, Ohio
and Georgia. The proceeds were used to provide additional working capital
to the Company.
In June 1995, the Company received a loan from a commercial lender to
refinance the Ramada Inn in Longwood, Florida. The loan proceeds were
$2,800,000. The loan is for a term of 20 years with an amortization
period of 25 years, and an interest rate of 10.35%. Principal and
interest payments were approximately $26,000 per month beginning August 1,
1995. A portion of the proceeds from the loan was used to repay a term
loan, and the remaining proceeds of approximately $1,500,000 were used for
working capital. In addition, the Company is required to make a repair
escrow payment comprised of 4% of estimated revenues, as well as real
estate tax and insurance escrow payments. The total amount for these
items amount to a payment of approximately $22,000 per month and are
adjusted annually. The escrow funds are used as tax, insurance and repair
needs arise. As of August 31, 1999, there was approximately $249,000 of
escrowed funds related to this loan agreement.
In June 1999, the Company entered into a contract for the sale of its
hotel and land in Longwood, Florida for approximately $6,100,000. In
November 1999, the contract was amended to include only the sale of the
hotel for $5,000,000. The Company would recognize net profit on the sale
of approximately $3,500,000. There are numerous contingencies which allow
the seller to cancel the contract. Closing would occur approximately 75
days from the amendment date.
The Company has invested in three hotel entities as follows:
RW Hotel Partners, L.P.
On August 16, 1995, RW Hotel Partners, L.P. was organized as a
limited partnership (the "Partnership") under the laws of the State of
Delaware. Concurrently, the Company formed Ridgewood Georgia, Inc., a
Georgia corporation ("Ridgewood Georgia") which became the sole general
partner in the Partnership with RW Hotel Investments Associates, LLC
("Investor") as the limited partner. Ridgewood Georgia has a 1% base
distribution percentage versus 99% for the Investor. However,
distribution percentages do vary depending on certain defined preferences
and priorities pursuant to the Partnership Agreement ("Agreement") which
are discussed below. The partnership was originally formed to acquire a
hotel property in Louisville, Kentucky, but subsequently purchased five
additional hotels. The Partnership purchased the hotel in Louisville,
Kentucky for approximately $16,000,000. In December 1995 and January
1996, the Partnership purchased four hotel properties in Georgia for
approximately $15,000,000 and a hotel in South Carolina for $4,000,000,
respectively. Three of the Georgia hotels were sold at a loss in March
1998, and the hotel in Louisville was transferred to a new entity in June
1998 in conjunction with refinancing that hotel (see below). The hotel in
Orangeburg, South Carolina was sold for a loss in November 1998. The
remaining hotel in the Partnership is in Thomasville, Georgia. See
Subsequent Events in Notes to Consolidated Financial Statements.
Income and loss are allocated to Ridgewood Georgia and the limited
partner based upon the formula for allocating Distributable Cash as
described below.
Distributable Cash is defined as the net income from the property
before depreciation plus any net sale proceeds and net financing proceeds
less capital costs. Distributions of Distributable Cash shall be made as
follows:
- First, to the Investor until there has been distributed to the
Investor an amount equal to a 15% cumulative internal rate of return on
the Investor's investment.
- Second, to Ridgewood Georgia until the aggregate amount received by
Ridgewood Georgia equals the aggregate cash contributions made by
Ridgewood Georgia to the Partnership.
- Third, 12% to Ridgewood Georgia and 88% to the Investor until there
has been distributed to the Investor an amount equal to a 25% cumulative
internal rate of return on Investor's investment.
- Fourth, 75% of the residual to the Investor and 25% to Ridgewood
Georgia.
Management of the Partnership intends to adopt a plan of liquidation
and will sell the remaining two hotels. Based on management's estimate,
Ridgewood Georgia will not receive cash in excess of its investment in the
Partnership. See Subsequent Events in Notes to Consolidated Financial
Statements.
A Management Agreement exists between the Partnership and the Company
as Manager ("Manager") for the purpose of managing the hotels. The
Manager shall be entitled to the following property management fees:
(1) 2.5% of the gross revenues from the hotel property.
(2) 1% of the gross revenues from the hotel property as an incentive
fee if distributable cash equals or exceeds 13.5% of total aggregate
acquisition costs.
Total management fees for the years ended August 31, 1999, 1998 and
1997 were approximately $68,000, $233,000 and $301,000, respectively.
On March 17, 1998, the Partnership sold three of its six hotels. The
Company signed a management agreement with the new owner of the three
hotels wherein it will receive a management fee equal to 3% of revenues
plus 15% of the net operating income plus 5% of any profit realized upon
the sale of the hotels. In connection with the management agreement, the
Company received management fees totaling approximately $191,000 and
$114,000 for the years ended August 31, 1999 and 1998, respectively.
Houston Hotel, LLC
On December 9, 1997, Houston Hotel, LLC ("Houston Hotel") was
organized as a limited liability company under the laws of the State of
Delaware. The purpose which Houston Hotel was organized is limited solely
to owning and managing the Hampton Inn Galleria in Houston, Texas. The
Company contributed approximately $316,000 into Houston Hotel which
represents a 10% interest, and the other 90% interest is owned by Houston
Hotel, Inc. (the "Manager"), a Nevada corporation.
Income or loss allocated to the Company and the Managing Member is
based upon the formula for distributing cash.
Distributable cash is defined as the cash from operations and capital
contributions determined by the Manager to be available for distribution.
Cash from operations is defined as the net cash realized from the
operations of Houston Hotel after payment of all cash expenditures of
Houston Hotel including, but not limited to, operating expenses, fees,
payments of principal and interest on indebtedness, capital improvements
and replacements, and such reserves and retentions as the Manager
reasonably determines to be necessary.
Distributions of distributable cash shall be made as follows:
- First, 100% to the Manager until it has been distributed an amount
equal to its accrued but unpaid 13% preferred return.
- Second, 100% to the Company until the Company has been distributed
an amount equal to its accrued but unpaid 13% preferred return.
- Third, 80% to the Manager and 20% to the Company.
A Property Management Agreement exists between Houston Hotel, LLC and
the Company as Property Manager ("Property Manager") for the purpose of
managing the hotel. The Property Manager shall be entitled to the
following property management fees:
(1) 1.5% of the gross revenues from the hotel property.
(2) 1.5% of the gross revenues from the hotel property as an
incentive fee if 85% of the budgeted net operating income is
met.
In connection with the management agreement, the Company received
management fees totaling approximately $98,000 and $83,000 for the years
ended August 31, 1999 and 1998, respectively.
See Subsequent Events in the Notes to Consolidated Financial
Statements.
RW Louisville Hotel Associates, LLC
On May 13, 1998, RW Louisville Hotel Associates LLC ("RW Louisville
Hotel Associates") was organized as a limited liability company under the
laws of the State of Delaware. The purpose which RW Louisville Hotel
Associates was organized is limited solely to owning and managing the
Holiday Inn ("the Hotel") in Louisville, Kentucky. The Company's
investment in RW Hotel Partners, L.P. of $337,500 (see above) was
transferred to RW Louisville Hotel Associates at its historical basis.
Simultaneously, the Company invested $362,000 into Louisville Hotel, LLC.
The combined equity of $699,500 represents a 10% interest in the Hotel.
Louisville Hotel, LLC loaned $3,620,000 to the Hotel in return for all
cash flows generated from the Hotel.
Income or loss allocated to the Company is based upon the formula for
distributing cash.
Distributable cash is defined as the net cash realized from
operations but after payment of management fees, principal and interest,
capital improvements and other such retentions as the managing member
determines to be necessary. Distributions of distributable cash from
Louisville Hotel, LLC shall be made as follows:
- First, to the managing member until the managing member has been
distributed an amount equal to its accrued but unpaid 13% preferred
return.
- Second, to the Company until the Company has been distributed an
amount equal to its accrued but unpaid 13% preferred return.
- Third, 20% to the Company and 80% to the managing member.
Cash from a sale or refinancing would be distributed 10% to the
Company and 90% to the managing member.
A Management Agreement exists between the Owner and the Company as
Property Manager ("Property Manager") for the purpose of managing the
hotel. The Property Manager shall be entitled to the following property
management fees:
(1) Base Management Fee equal to 1.5% of gross revenues from the
hotel property.
(2) Incentive Management Fee equal to 1.5% of gross revenues from
the hotel in which the actual net operating income exceeds 85% of the
budgeted goal for the year.
(3) Super Incentive Management fee equal to: (a) .25% of gross
revenues from the hotel in which the net operating income exceeds 106% of
the budgeted goal for the year; (b) an additional .25% of gross revenues
in which the net operating income exceeds 112% of the budgeted goal; and
(c) an additional .50% of gross revenues in which the net operating income
exceeds 120% of the budgeted goal.
The Company paid an additional $200,000 to Louisville Hotel, LLC as a
fee to acquire the management contract for the hotel. This amount is
included in other assets. The Company is amortizing the fee $70,000 per
year for the first two years and $20,000 per year for the next three
years.
With respect to the sum of $100,000, in the event that the management
contract is terminated by Louisville Hotel, LLC with or without cause and
not pursuant to a third party sale prior to June 5, 2000, Louisville
Hotel, LLC will pay to the Company the sum of $4,166.67 times the number
of months prior to June 5, 2000 that the management contract is
terminated.
With respect to the second sum of $100,000, in the event that the
management contract is terminated by Louisville Hotel, LLC prior to June
5, 2003, Louisville Hotel, LLC will pay to the Company the sum of
$1,666.67 times the number of months prior to June 5, 2003 that the
management contract is terminated.
In connection with the management agreement, the Company received
management fees totaling approximately $285,000 and $57,000 for the years
ended August 31, 1999 and 1998, respectively.
See Subsequent Events in Notes to Consolidated Financial Statements.
Since the Company is not currently generating sufficient operating
cash to cover overhead and debt service, the Company must continue to sell
its real estate assets, seek alternative financing or otherwise
recapitalize the Company. There is currently approximately $200,000 of
available cash. This available cash will be used to fund operating losses
until new sources of income can be generated. The Company also intends to
aggressively pursue the acquisition of hotel management contracts through
entities similar to those described above which would provide additional
cash flow. However, given increased competition in the hotel acquisition
market, management contracts may be difficult to obtain.
The Company owns one hotel, has 10% ownership interest in two other
hotels and has a 1% ownership interest in another (see Subsequent Events
in Notes to Consolidated Financial Statements). The Company also
currently has fourteen other hotels which it manages but has no ownership
interest. Under the terms of franchise agreements, the Company is
required to comply with standards established by franchisors, including
property renovations and upgrades. The success of the Company's
operations continues to be dependent upon such unpredictable factors as
the general and local economic conditions to which the real estate and
hotel industry is particularly sensitive: labor, environmental issues,
weather conditions, consumer spending or general business conditions and
the availability of satisfactory financing.
Results of Operations -
Sales of real estate properties for the fiscal year ended August 31,
1999 decreased compared to 1998 due primarily to greater sales in Ohio and
Florida during 1998. Sales of real estate properties for the fiscal year
ended August 31, 1998 decreased compared to 1997 due primarily to the sale
of the Company's undeveloped land in Maitland, Florida in 1997. The
Company had gains from real estate sales of approximately $80,000,
$744,000 and $1,354,000 during fiscal years 1999, 1998 and 1997,
respectively. Gains or losses on real estate sales are dependent upon the
timing, sales price and the Company's basis in specific assets sold and
will vary considerably from period to period.
Revenues from wholly-owned hotel operations for fiscal year 1999
decreased $331,000, or 11%, compared to 1998. Revenues from wholly-owned
hotel operations for fiscal year 1998 decreased $14,000, or .5%, compared
to 1997. The decreases were due to lower occupancy at the Company's hotel
in Longwood, Florida in 1999 and 1998.
Revenues from hotel management increased $137,000, or 13%, and
$26,000, or 2%, compared to 1999 and 1998 compared to 1997, respectively.
The increases were due to a larger number of hotels under management in
both years.
Due to the Company's investment in unconsolidated entities during
fiscal years 1999, 1998 and 1997, the Company recognized equity in the
income (loss) of the entities of approximately $156,000, $(98,000), and
$65,000, respectively. A provision of $199,000 for possible losses on
investments in unconsolidated entities in fiscal year 1997 was recorded as
there is no indication that the Company will be able to recover the equity
income in the partnership. In turn, the equity in net loss of the
unconsolidated entities reported for 1997 was $134,000.
The other revenue of $117,000 received during fiscal year 1998 was
primarily from profits received on land joint ventures in Atlanta, Georgia
and a worker's compensation insurance refund. The Company received
approximately $398,000 as a consulting fee during fiscal year 1997. This
consulting fee was earned by the Company for its involvement in the
negotiations and purchase of a large hotel by another hotel company.
Expenses of wholly-owned real estate increased $38,000, or 2%, for
the fiscal year ended August 31, 1999 compared to 1998 due to increased
expenses at the Company's hotel in Longwood, Florida. Expenses of
wholly-owned real estate decreased $69,000, or 3%, for the fiscal year
ended August 31, 1998 compared to 1997 due primarily to fewer land parcels
(and their associated expenses) held by the Company.
Depreciation and amortization expense increased by $199,000, or 77%,
during fiscal year 1999 compared to 1998. The increase was due to greater
amortization of the Company's hotel management agreements and the
write-off of the remaining investment in the hotel management company.
General, administrative and other expenses decreased $116,000, or 5%,
for fiscal year 1999 compared to 1998. General, administrative and other
expenses increased $101,000, or 5%, for fiscal year 1998 compared to 1997.
Expenses in fiscal year 1998 were unusually high due to severance paid to
the executive in charge of hotel operations.
During fiscal years 1999, 1998 and 1997, while the Company was
aggressively pursuing the business of acquiring, developing, operating and
selling hotel properties throughout the country, the Company incurred
business development costs of $148,000, $361,000 and $1,067,000,
respectively. Approximately $878,000 of the business development expense
in fiscal year 1997 related to costs on the unsuccessful purchase of a
hotel in Atlanta, Georgia.
Effect of Inflation -
Inflation tends to increase the Company's cash flow from income
producing properties since rental rates generally increase by a greater
amount than associated expenses. Inflation also generally tends to
increase the value of the Company's land portfolio.
Offsetting these beneficial effects of inflation are the increased
cost and decreased supply of investment capital for real estate that
generally accompany inflation.
Year 2000 -
The Company has established policies and procedures to coordinate
changes to computer systems and applications necessary to achieve a year
2000 date conversion with no effect on customers or disruption to business
operations. These actions are necessary to ensure that the systems and
applications will recognize and process the year 2000 and beyond. Major
areas of potential business impact have been identified and conversion
efforts have been completed or are underway. The Company's primary
operating and financial systems are already Year 2000 compliant. The
Company also is communicating with suppliers, vendors, financial
institutions and others with which it does business to coordinate Year
2000 conversion. The total cost of compliance and its effect on the
Company's future results of operations is being determined as part of the
conversion planning, but is not expected to be material.
<TABLE>
RIDGEWOOD HOTELS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AUGUST 31, 1999 AND 1998
($000'S omitted, except per share data)
<CAPTION>
August 31, August 31,
ASSETS: 1999 1998
------ --------- ---------
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents $ 471 $ 1,255
Receivables 241 240
Other Current Assets 394 438
---------- ----------
Total Current Assets 1,106 1,933
Real Estate Investments:
Real Estate Properties
Operating Properties, net 1,172 1,248
Land Held for Sale, net 2,028 2,361
Investment in Unconsolidated
Hotel Entities 1,016 832
---------- ----------
Total real estate investments 4,216 4,441
Other Assets 588 906
---------- ----------
$ 5,910 $ 7,280
========== ==========
<FN>
(continued)
The accompanying notes are an integral part of these consolidated
financial statements.
</FN>
</TABLE>
<TABLE>
RIDGEWOOD HOTELS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AUGUST 31, 1999 AND 1998
($000's omitted, except per share data)
LIABILITIES AND SHAREHOLDERS' INVESTMENT
<CAPTION>
August 31, August 31,
1999 1998
---------- ----------
LIABILITIES:
-----------
<S> <C> <C>
Current Liabilities:
Current Maturities of Long-Term Debt $ 40 $ 53
Accounts Payable 246 260
Accrued Salaries, Bonuses and
Other Compensation 84 107
Accrued Property Tax Expense 111 116
Accrued Interest and Other Liabilities 338 289
---------- ----------
Total Current Liabilities 819 825
Accrued Pension Liability 893 820
Long-Term Debt 2,642 2,691
---------- ----------
Total Liabilities 4,354 4,336
---------- ----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' INVESTMENT:
Series A Convertible Cumulative Preferred
Stock, $1 par value, 1,000,000 shares
authorized, 450,000 shares issued and
outstanding in 1999 and 1998 450 450
Common stock, $0.01 par value, 5,000,000
shares authorized, 1,513,480 shares issued
and outstanding in 1999 and 1998 15 15
Paid-in Surplus 15,681 15,861
Note receivable from officer for
purchase of common stock -- (75)
Accumulated deficit since
December 30, 1985 (14,590) (13,307)
---------- ----------
Total Shareholders' Investment 1,556 2,944
---------- ----------
$ 5,910 $ 7,280
========== ==========
<FN>
The accompanying notes are an integral part of these consolidated
financial statements.
</FN>
</TABLE>
<TABLE>
RIDGEWOOD HOTELS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED AUGUST 31, 1999, 1998 AND 1997
($000's Omitted, except per share data)
<CAPTION>
1999 1998 1997
--------- ------- ---------
<S> <C> <C> <C>
REVENUES:
Revenues from wholly-owned hotel operations........ $ 2,703 $ 3,034 $ 3,048
Revenues from hotel management .................... 1,213 1,076 1,050
Sales of real estate properties ................... 458 1,655 3,808
Equity in net income (loss) of
unconsolidated entities ......................... 156 (98) (134)
Interest income ................................... 15 46 40
Other.............................................. 2 117 397
---------- - -------- ----------
$ 4,547 $ 5,830 $ 8,209
---------- ---------- ----------
COSTS AND EXPENSES:
Expenses of wholly-owned real estate properties ... $ 2,365 $ 2,327 $ 2,396
Costs of real estate sold ......................... 379 911 2,454
Depreciation and amortization ..................... 459 260 258
Interest expense .................................. 342 340 345
General, administrative and other.................. 2,137 2,253 2,152
Business development .............................. 148 361 1,067
---------- ---------- ----------
$ 5,830 $ 6,452 $ 8,672
---------- ---------- ----------
NET LOSS $ (1,283) $ (622) $ (463)
OTHER COMPREHENSIVE INCOME (LOSS) -- -- --
---------- ---------- ----------
COMPREHENSIVE LOSS (1,283) (622) (463)
---------- ---------- ----------
BASIC AND DILUTED LOSS PER COMMON SHARE $ (1.09) $ (0.64) $ (0.58)
========== ========== ==========
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
<TABLE>
RIDGEWOOD HOTELS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
FOR THE YEARS ENDED AUGUST 31, 1999, 1998 AND 1997
($000's Omitted, except per share data)
Note
<CAPTION> Receivable
Preferred Common From
Stock Stock Officer for Total
---------------------- ------------------------ Paid-in Purchase of Accumulated Shareholders'
Shares Amount Shares Amount Surplus Common Stock Deficit Investment
---------- ---------- ------------ ---------- ---------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, August 31, 1996 450,000 $ 450 1,088,480 $ 11 $ 16,202 $ -- $ (12,222) $ 4,441
Dividends on
Preferred Stock -- -- -- -- (315) -- -- (315)
Issuance of Common Stock -- -- 450,000 4 446 (75) -- 375
Net Loss -- -- -- -- -- -- (463) (463)
----------- ----------- ------------- ----------- ----------- ------------- ----------- -----------
Balance, August 31, 1997 450,000 $ 450 1,538,480 $ 15 $ 16,333 $ (75) $ (12,685) $ 4,038
Repurchase of Common Stock -- -- (25,000) -- (112) -- -- (112)
Dividends on
Preferred Stock -- -- -- -- (360) -- -- (360)
Net Loss -- -- -- -- -- -- (622) (622)
----------- ----------- ------------- ----------- ----------- ------------- ----------- -----------
Balance, August 31, 1998 450,000 $ 450 1,513,480 $ 15 $ 15,861 $ (75) $ (13,307) $ 2,944
Repayment of Note
Receivable -- -- -- -- -- 75 -- 75
Dividends on
Preferred Stock -- -- -- -- (180) (180)
Net Loss -- -- -- -- -- -- (1,283) (1,283)
----------- ---------- ------------ ----------- ----------- ------------ ----------- -----------
Balance, August 31, 1999 450,000 $ 450 1,513,480 $ 15 $ 15,681 -- $ (14,590) $ 1,556
=========== =========== ============ =========== =========== ============= =========== ===========
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
<TABLE>
Ridgewood Hotels, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
For the Years Ended August 31, 1999, 1998 and 1997
($000's Omitted)
<CAPTION>
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss ................................................... $ (1,283) $ (622) $ (463)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization .......................... 459 260 258
Increase in allowance for possible losses
on investment in unconsolidated entities ............. -- -- 199
Gain from sale of real estate properties ............... (79) (744) (1,354)
Distributions from unconsolidated entities greater (less)
than equity in net (loss) income ..................... -- 184 (14)
(Increase) decrease in other assets .................... 32 185 (571)
Increase (decrease) in accounts payable
and accrued liabilities .............................. 80 168 (1)
---------- ---------- ----------
Total adjustments ...................................... 492 53 (1,483)
---------- ---------- ----------
Net cash used in operating activities .................. (791) (569) (1,946)
---------- ---------- ----------
Cash flows from investing activities:
Principal payments received on mortgage loans ............ -- -- 3
Investment in unconsolidated entities .................... (184) (678) --
Proceeds from sale of real estate ........................ 423 1,526 3,313
Additions to real estate properties ...................... (65) (88) (78)
---------- ---------- ----------
Net cash provided by investing activities .............. 174 760 3,238
---------- ---------- ----------
Cash flows from financing activities:
Dividends on preferred stock ............................. (180) (360) (315)
Issuance of common stock upon exercise of stock options .. -- -- 375
Repurchase of common stock ............................... -- (112) --
Repayments of debt ....................................... (62) (60) (54)
Payment received on note receivable from stock issuance... 75 -- --
---------- ---------- ----------
Net cash (used in) provided by financing activities .... (167) (532) 6
---------- ---------- ----------
Net (decrease) increase in cash and cash equivalents ......... (784) (341) 1,298
Cash and cash equivalents at beginning of year ............... 1,255 1,596 298
---------- ---------- ----------
Cash and cash equivalents at end of year ..................... $ 471 $ 1,255 $ 1,596
========== ========== ==========
<FN>
(continued)
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
<TABLE>
Ridgewood Hotels, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
For the Years Ended August 31, 1999, 1998 and 1997
- -------------------------------------------------------------------------------------------------
<CAPTION>
Supplemental disclosures of cash flow information and non-cash activity:
1999 1998 1997
------------ ------------ ----------
<S> <C> <C> <C>
Interest paid ....................................... $ 342,000 $ 340,000 $ 345,000
Repurchase of 25,000 shares of common stock subject
to a Put Agreement, at $4.50 per share ............ $ -- $ 112,500 $ --
Decrease in allowance for possible losses due
to sale of parcel of land ......................... $ 128,000 $ 97,000 $ 1,156,000
During the second quarter of fiscal year 1997, the
Company's President and Chief Financial Officer
exercised their stock options for 450,000 shares of
the Company's common stock. In conjunction with the
exercise, a promissory note and cash were received
by the Company and common stock issued as follows:
Cash received from Company's President .......... $ -- $ -- $ 375,000
Promissory Note received from Chief Financial
Officer upon exercise of stock options ...... $ -- $ -- $ 75,000
Issuance of 450,000 shares of common stock,
$0.01 par value, in 1997 .................... $ -- $ -- $ 450,000
- -------------------------------------------------------------------------------------------------
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
Ridgewood Hotels, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
August 31, 1999, 1998 and 1997
1. Description of Business and Significant Accounting Policies
Description of the Business and Future Prospects
Ridgewood Hotels, Inc. (the "Company") is primarily engaged in the
business of acquiring, developing, operating and managing hotel properties
in the Southeast and "Sunbelt" areas. Additionally, the Company owns
several land parcels which are held for sale.
The Company's common stock is listed in the National Association of
Securities Dealers (NASDAQ) over-the-counter bulletin board service.
During the fourth quarter of fiscal year 1994, the Company purchased and
retired all of the shares of common stock owned by the Company's
then-majority stockholder, Triton Group, Ltd. On April 15, 1997, Security
Systems Holdings, Inc. merged with Triton Group Ltd., and the
newly-combined entity was named Alarmguard Holdings, Inc. ("Alarmguard").
The cash used to purchase the common stock ("Alarmguard Shares") was from
the proceeds received by the Company from the sale of its mobile home
parks in June 1994.
The Company has incurred losses from operations and experienced
negative cash flow from operations for each of the past five years. In
order to satisfy operating needs and other cash requirements, the Company
has generated cash from the sale of its real estate assets and, to a
lesser extent, debt financing.
The Company believes that, barring unforeseen events, it has
sufficient working capital ($287,000 at August 31, 1999) to cover its
operating needs and debt service requirements through August 31, 2000.
However, existing working capital as reduced by expected operating needs
and debt service requirements is not sufficient to pay dividends on the
Company's preferred stock. The Company has instituted several measures to
generate additional cash. At August 31, 1999, the Company has binding
contracts from potential purchasers covering certain of its real estate
assets. Additionally, the Company continues to seek new contracts to
manage hotel properties owned by third parties. However, there can be no
assurance that the binding contracts will close or that the Company will
be able to generate new hotel management contracts.
In the event that unforeseen events arise during the year ending
August 31, 2000, the Company will be required to sell additional real
estate assets, seek alternative financing or otherwise recapitalize the
Company. There can be no assurance that the Company will be able to
generate cash from real estate sales or through additional debt or equity
financing since such activities will be dependent upon future market
conditions and other factors which presently cannot be foreseen.
The consolidated financial statements have been prepared assuming
that the Company will continue as a going concern.
Basis of Presentation and Consolidation -
The consolidated financial statements of the Company include the
accounts of all of its wholly-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated in
consolidation.
The investments in the unconsolidated entities are being accounted
for using the equity method of accounting (See Note 8).
Per Share Data -
In fiscal 1998, the Company adopted Statement of Financial Accounting
Standards No. 128, Earnings Per Share ("FAS 128"). Basic earnings per
share is based on the weighted average effect of all common shares issued
and outstanding, and is calculated by dividing net income available to
common stockholders by the weighted average shares outstanding during the
period. Diluted earnings per share is calculated by dividing net income
available to common stockholders, adjusted for the effect, if any, from
assumed conversion of all potentially dilutive common shares outstanding,
by the weighted average number of common shares used in the basic earning
per share calculation plus the number of common shares that would be
issued assuming conversion of all potentially dilutive common shares
outstanding. All historical earnings per share amounts have been restated
to conform to provisions of this statement.
Valuation of Real Estate Properties -
In 1997, the Company adopted Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and
Long-Lived Assets to be Disposed of" ("FAS 121"). This statement requires
that long-lived assets and certain identified intangibles to be held and
used by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The statement requires the use of undiscounted estimated
cash flows expected from the asset's operations and eventual disposition.
If the sum of the expected future cash flows is less than the carrying
value of the asset, an impairment loss is recognized based on the fair
value of the asset.
Under FAS 121, properties are classified as either operating
properties or properties held for sale. If determined to be impaired,
operating properties are written down to their fair value, and the
associated loss cannot be recovered if the fair value of the property
increases. Properties held for sale are written down to their fair value
less cost to sell, but the associated loss can be recovered in the event
the fair value of the property increases.
Stock-Based Compensation -
During 1997, the Company adopted Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("FAS 123").
This statement provides entities a choice between fair value and intrinsic
value based methods of accounting for stock based compensation plans. The
Company has elected to continue using the intrinsic value method.
Depreciation and Amortization Policies -
The Company depreciates operating properties and any related
improvements by using the straight-line method over the estimated useful
lives of such assets, which are generally 30 years for building and land
improvements and 5 years for furniture, fixtures and equipment.
Depreciation expense for the years ended August 31, 1999, 1998 and 1997
was approximately $180,000, $172,000 and $166,000, respectively.
The Company amortizes certain intangible assets over the useful life
of those assets. Amortization expense for the years ended August 31,
1999, 1998 and 1997 was approximately $279,000, $88,000 and $92,000,
respectively.
Capitalization Policies -
Repairs and maintenance costs are expensed in the period incurred.
Major improvements to existing properties which increase the usefulness or
useful life of the property are capitalized.
Sale of Real Estate -
All revenue related to the sale of real estate is recognized at the
time of closing. The Company allocates costs of real estate sold using
the specific identification or relative sales value methods based on the
nature of the development. Profit recognition is based upon the Company
receiving adequate cash down payments and other criteria specified by
existing accounting literature.
Cash and Cash Equivalents -
For the purpose of the Consolidated Statements of Cash Flows, cash
includes cash equivalents. Cash equivalents include all highly liquid
investments with maturities of three months or less.
Fair Value of Financial Instruments -
The recorded values of cash, accounts receivable, accounts payable
and accrued liabilities reflected in the financial statements are
representative of their fair value due to the short-term nature of the
instruments.
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
the disclosure of contingent assets and liabilities at the date of the
financial statements. Actual results could differ from those estimates.
Significant estimates included in the Company's financial statements
include allowances for impairment of real estate assets and for deferred
tax assets.
Reclassifications -
Certain prior year amounts have been reclassified to conform with the
current year presentation.
New Accounting Pronouncements -
In fiscal 1999, the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" ("FAS 130"). This
statement requires enterprises to classify items of other comprehensive
income by their nature in the financial statements and to display the
accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in-capital in the equity statement of the
financial statements. Adoption of this pronouncement had no material
effect on the consolidated statement of operations for the year ended
August 31, 1999.
In fiscal 1999, the Company adopted Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information" ("FAS 131"). This standard requires that enterprises
report financial and descriptive information about its reportable
operating segments. The Company currently has only one segment, real
estate ownership and management, which is the basis for the consolidated
information in the financial statements.
2. Real Estate Investments
The Company's real estate properties by type at August 31, 1999, and
1998 were as follows ($000's omitted):
<TABLE>
<CAPTION>
Furniture,
August 31, 1998 Land & Fixtures &
Type of Project Buildings Equipment Total
<S> <C> <C> <C>
Wholly-owned hotel $ 2,535 $ 392 $ 2,927
Less -- accumulated
depreciation (1,679)
-------
Net operating property 1,248
Land $ 5,808 -- 5,808
Less -- allowance for
possible losses (3,447)
-------
Net land 2,361
Investment in unconsolidated
hotel entities 832
-------
Total net real estate
investments $ 4,441
=======
Furniture
August 31, 1999 Land & Fixtures &
Type of Project Buildings Equipment Total
Wholly-owned hotel $ 2,535 $ 418 $ 2,953
Less -- accumulated
depreciation (1,781)
-------
Net operating property 1,172
Land $ 5,347 -- 5,347
Less -- allowance for
possible losses (3,319)
-------
Net land 2,028
Investment in unconsolidated
hotel entities 1,016
-------
Total net real estate
investments $ 4,216
=======
</TABLE>
Changes in the allowance for possible losses on real estate
investments for the years ended August 31, 1999, 1998 and 1997
were as follows ($000's omitted):
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Allowance, beginning of year $3,447 $3,544 $4,700
Reversal of reserves associated
with sales of real estate
assets (128) (97) (1,156)
Allowance, end of year $3,319 $3,447 $3,544
====== ====== ======
</TABLE>
3. Commitments and Contingencies
In August 1991, each executive officer was offered a two year
Post-Employment Consulting Agreement (the "Consulting Agreement(s)")
whereby the officer agrees that if he or she is terminated by the Company
for other than good cause, the officer will be available for consulting at
a rate equal to their annual compensation immediately prior to
termination. All officers have chosen to enter into Consulting
Agreements. In August 1998, an amendment was signed by the two executive
officers reducing the consulting period by one month for each month that
the executive continues to be employed by the Company through August 31,
1999, such that if the executive remains employed by the Company through
August 31, 1999, the consulting period shall be twelve months in duration.
In addition, two other employees were offered and have chosen to enter
into one year Consulting Agreements. The executives and two other
employees, upon termination, agree to sign an unconditional release of all
claims and liability in exchange for a one year consulting fee
arrangement.
On May 2, 1995 a complaint was filed in the Court of Chancery of the
State of Delaware (New Castle County) entitled William N. Strassburger v.
Michael M. Early, Luther A. Henderson, John C. Stiska, N. Russell Walden,
and Triton Group, Ltd., defendants, and Ridgewood Hotels, Inc., nominal
defendant, C.A. No. 14267 (the "Complaint"). The plaintiff is an
individual shareholder of the Company who purports to file the Complaint
individually, representatively on behalf of all similarly situated
shareholders, and derivatively on behalf of the Company. The Complaint
challenges the actions of the Company and its directors in consummating
the Company's August 1994 repurchase of its common stock held by Triton
Group, Ltd. and Hesperus Partners Ltd. in five counts, denominated Waste
of Corporate Assets, Breach of Duty of Loyalty to Ridgewood, Breach of
Duty of Good Faith, Intentional Misconduct, and Breach of Duty of Loyalty
and Good Faith to Class. On July 5, 1995, the Company filed a timely
answer generally denying the material allegations of the complaint and
asserting several affirmative defenses. Discovery has been concluded, and
on March 19, 1998, the Court dismissed all class claims, with only the
derivative claims remaining for trial. The case was tried to Vice
Chancellor Jacobs during the period February 1 through February 3, 1999.
All post-trial briefing and oral argument has been concluded, and the case
has been submitted for decision by the Court.
The Company serves as a general partner in a limited partnership.
As a general partner, the Company may be liable for certain deficiencies
which arise in meeting the terms of loan obligations incurred by the
limited partnership and for operating expenses and other liabilities
incurred by the partnership in the ordinary course of business.
4. Notes Payable
In June 1995, the Company entered into a loan with a commercial
lender to refinance the Ramada Inn in Longwood, Florida. The loan
proceeds are $2,800,000, and the hotel serves as collateral for the loan.
The loan is for a term of 20 years with an amortization period of 25
years, at a fixed interest rate of 10.35%. Principal and interest
payments are approximately $26,000 per month beginning August 1, 1995.
In addition, the Company is required to make a repair escrow payment
comprised of 4% of estimated revenues, as well as real estate tax and
insurance escrow payments. The total amount for these items will be a
payment of approximately $22,000 per month and can be adjusted annually.
The escrow funds will be used as tax, insurance and repair needs arise.
As of August 31, 1999, there was approximately $249,000 of escrowed funds
related to this loan agreement that are included with Other Assets on the
balance sheet. Also, commitment fees and loan costs of approximately
$159,000 were deferred and are being amortized over 20 years.
The approximate average amount of borrowings on the term loan during
fiscal year 1998 was $2,694,000, at an average interest rate of 10.35%.
The maximum amount of borrowings outstanding under this loan was
$2,711,000. The balance of the loan at August 31, 1999 was approximately
$2,676,000. The carrying value of the note approximates its fair value at
August 31, 1999.
In December 1995 and in conjunction with the acquisition of a hotel
management company, the Company assumed three promissory notes dated
September 22, 1994 and payable to three different Georgia corporations.
The total combined outstanding principal was approximately $106,000. All
three notes are for a term of five years at a rate of 6.83%. Combined
principal and interest payments are approximately $2,667 per month through
October 1, 1999. The combined balance of these loans at August 31, 1999
was approximately $5,300.
The approximate average amount of borrowings on the three promissory
notes during fiscal year 1999 was $19,000, at an average interest rate of
6.83%. The maximum amount of combined borrowings outstanding under these
loans was approximately $33,000.
Maturities of long-term debt during the Company's next five fiscal
years are as follows: 2000 - $40,000; 2001 - $42,000; 2002 - $47,000;
2003 - $52,000; 2004 - $58,000; thereafter - $2,443,000.
5. Income Taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 ("FAS 109"), "Accounting for Income
Taxes", which requires the recognition of deferred tax liabilities and
assets for the expected future tax consequences of temporary differences
between the carrying amounts and the tax bases of assets and liabilities.
The income tax provision (benefit) is as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Current:
Federal $ -- $ --
State -- --
---- ----
Total current -- --
Deferred:
Federal -- --
State -- --
---- ----
Total deferred $ -- $ --
</TABLE> ==== ====
A reconciliation of the provision for income taxes (benefit) to the
federal statutory rate is as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Tax at statutory rate $ (404) $(194)
State taxes, net of
federal benefit (43) --
Permanent items 36 17
Valuation reserve 1,101 186
Other (690) (9)
------ -----
$ -- $ --
====== =====
</TABLE>
Deferred tax assets (liabilities) are composed of the following at
August 31, 1999 and August 31, 1998, respectively:
<TABLE>
<CAPTION>
000's Omitted
1999 1998
---- ----
<S> <C> <C>
Allowance for possible losses $ 1,246 $ 1,169
Excess of tax over book basis, land held
for sale or future development -- 16
Depreciation and amortization 86 71
Excess of tax over book basis, income
from partnership -- 40
Other 378 331
Tax loss carryforwards 5,966 4,724
------- --------
Gross deferred tax assets 7,676 6,351
------- --------
Excess of book over tax basis, income
from partnership (213) --
Loan amortization (37) (26)
------- --------
Gross deferred tax liabilities (250) (26)
------- --------
Deferred tax assets valuation allowance (7,426) (6,325)
------- --------
$ 0 $ 0
======= ========
</TABLE>
For financial reporting purposes, a valuation allowance has been
recognized at August 31, 1999 and 1998 to reduce the net deferred income
tax assets to zero. The net change in the valuation allowance for
deferred tax asset was an increase of $1,101,000. This change resulted
primarily from an increase in the Company's deferred tax assets relating
to state net operating loss carryforwards. The Company has unused net
operating loss carryforwards in certain states in which it operates which
are available to offset future state taxable income in those states. In
prior years, no benefit for the unused state loss carryforwards was
recognized in the financial statements. In the current year, the unused
state loss carryforwards were booked as a deferred tax asset with the
benefit offset by a corresponding valuation allowance.
On August 31, 1999, the Company had federal net operating loss
carryforwards for income tax purposes of approximately $15,394,000, which
will begin to expire in 2005. Under the Internal Revenue Code, if certain
substantial changes in the Company's ownership occur, there are annual
limitations on the amount of loss carryforwards.
6. Shareholders' Investment
Authorized Shares of Common and Preferred Stock -
On January 4, 1995, the Company approved an increase in the
authorized number of shares of the Company's common stock from 3,000,000
shares to 5,000,000 shares and increased the number of authorized shares
of the Company's preferred stock from 500,000 shares to 1,000,000 shares.
In addition, the Company increased the number of shares reserved under the
Ridgewood Hotels, Inc. 1993 Stock Option Plan from 900,000 to 1,200,000
shares. There are currently 1,513,480 shares of common stock outstanding,
of which approximately 51% is owned by the Company's President, N. Russell
Walden.
There are currently 1,000,000 authorized shares of the Company's
Series A Convertible Preferred Stock. The Company has issued 450,000
shares of Series A Convertible Preferred Stock to Alarmguard. The
preferred stock is redeemable by the Company at $8.00 per share and
accrues dividends at a rate of $0.40 per share annually for the first two
years and at a rate of $0.80 per share annually thereafter. Dividends are
payable quarterly commencing on November 1, 1994. Each share of the
preferred stock is convertible into three shares of the Company's common
stock effective August 16, 1996 and is subject to certain anti-dilution
adjustments. As of August 31, 1999, no shares have been converted. In
the event of any liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary, the holders of the shares of preferred
stock shall be entitled to receive $8.00 per share of preferred stock plus
all dividends not previously declared and unpaid thereon. As of August
31, 1999, there are $180,000 of dividends in arrears.
Loss Per Share -
The following table sets forth the computation of basic and diluted
loss per share:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net loss $(1,283,000) $(622,000) $ (463,000)
Less preferred dividends paid (180,000) (360,000) (315,000)
Less undeclared preferred dividends (180,000) -- --
------------ ---------- -----------
Net loss applicable to common
shareholders $(1,643,000) $ (982,000) $ (778,000)
Weighted average shares
outstanding - basic and
diluted 1,513,000 1,526,000 1,350,000
============ =========== ===========
Net loss per share - basic and
diluted $ (1.09) $ (0.64) $ (0.58)
============ ========== ===========
</TABLE>
The effect of the Company's stock options and convertible securities was
excluded from the computations for each of the three years ended August
31, 1999, 1998 and 1997 as it is antidilutive. Accordingly, for the
periods presented, diluted net loss per share is the same as basic net
loss per share.
Issuance and Repurchase of Common Shares -
In December 1995, the Company purchased a hotel management company in
part by issuing 125,000 shares of the Company's common stock: 100,000
shares and 25,000 shares to the President and Senior Vice President of
Wesley Hotel Group ("Wesley"), respectively. See also Note 10. The
25,000 shares issued to the Senior Vice President of Wesley were subject
to a Put Agreement ("Agreement"). The Agreement states that within ninety
days after the two year anniversary of the effective date of the Agreement
(which was effective in December 1995), the Company shall be obligated to
purchase all or part of the 25,000 shares from the Senior Vice President
of Wesley at a purchase price of $4.50 per share. In March 1998, the Put
Agreement was exercised, whereby the shares were repurchased by the
Company and subsequently cancelled.
1993 Stock Option Plan -
On March 30, 1993, the Company granted options to purchase
378,000 shares of common stock at a price of approximately $1.83 per share
to its key employees and one director under the Ridgewood Hotels, Inc.
1993 Stock Option Plan (the "Plan"). The options vested over a four year
period in 25% increments. All options expire ten years from the date of
grant, unless earlier by reason of death, disability, termination of
employment, or for other reasons outlined in the Plan. As of August 31,
1999, all of the options are exercisable.
On January 28, 1994, the Company granted options to purchase 375,000
and 75,000 shares of common stock at a price of $1.00 per share to its
President and Chief Financial Officer, respectively, under the Plan. On
January 31, 1997, all of the options were exercised. In conjunction with
the exercise, a promissory note for $75,000 was received from the Chief
Financial Officer in exchange for the Company's common stock. The $75,000
promissory note due from the Chief Financial Officer was payable in full
on January 31, 1998 and accrues interest at a rate per annum of 8.25%.
The note was extended and was payable in full on January 31, 1999, along
with any accrued interest. The note was paid in full in April 1999.
Warrants -
On December 16, 1996, 75,000 warrants were issued to Hugh Jones, a
hotel acquisitions consultant for the Company. Each warrant represents
the right to purchase from the Company one share of common stock at the
exercise price of $3.50 per share. The warrants may be exercised at any
time within five years from the date of issuance.
7. Supplemental Retirement and Death Benefit Plan
The Company implemented a non-qualified Supplemental Retirement and
Death Benefit Plan with an effective date of January 1, 1987. The Plan
supplements other retirement plans and also provides pre-retirement death
benefits to participants' beneficiaries.
The net periodic pension cost includes the following components:
<TABLE>
<CAPTION>
August 31, 1999 August 31, 1998
--------------- ---------------
<S> <C> <C>
Service cost for the period $39,256 $34,628
Interest cost on projected
benefit obligation 52,014 46,170
Net amortization of transition
liability 11,026 11,026
Recognized net actuarial gain (28,848) (39,938)
------- -------
Net periodic pension cost $73,448 $51,886
======= =======
</TABLE>
The following sets forth the funded status of the plan and the amounts
shown in the accompanying balance sheet as of August 31, 1999 and 1998.
<TABLE>
<CAPTION>
August 31, 1999 August 31, 1998
--------------- ---------------
<S> <C> <C>
Unfunded excess of projected benefit
obligation over plan assets $(893,274) $(819,826)
========= =========
Projected benefit obligation (778,536) (654,260)
Unrecognized net obligation at
transition 33,074 44,100
Unrecognized net gain (147,812) (209,666)
--------- ---------
Net accrued pension liability $(893,274) $(819,826)
========= =========
</TABLE>
The weighted average discount rate used to measure the projected benefit
obligation was 7.0% in 1999 and 7.5% in 1998. There was no compensation
increase and no expected return on plan assets assumed for 1998 and 1997.
Concurrent with the implementation of the Supplemental Retirement and
Death Benefit Plan, the Company purchased key-person life insurance
contracts on the lives of the Plan participants. The policies are owned
by and payable to the Company and are "increasing whole life" insurance.
The Company pays level annual premiums, may borrow against cash values
earned, and pays interest annually on any loans which may be cumulatively
outstanding. The Company has recorded a total pension liability of
approximately $893,000 as of August 31, 1999. At August 31, 1999 the net
cash surrender value available to settle the outstanding pension liability
was approximately $45,000.
8. Investment in Unconsolidated Entities
RW Hotel Partners, L.P.
On August 16, 1995, RW Hotel Partners, L.P. was organized as a
limited partnership (the "Partnership") under the laws of the State of
Delaware. Concurrently, the Company formed Ridgewood Georgia, Inc., a
Georgia corporation ("Ridgewood Georgia") which became the sole general
partner in the Partnership with RW Hotel Investments Associates, L.L.C.
("Investor") as the limited partner. Ridgewood Georgia has a 1% base
distribution percentage versus 99% for the Investor. However,
distribution percentages do vary depending on certain defined preferences
and priorities pursuant to the Partnership Agreement ("Agreement") which
are discussed below. The partnership was originally formed to acquire a
hotel property in Louisville, Kentucky, but subsequently purchased five
additional hotels. The Partnership purchased the hotel in Louisville,
Kentucky for approximately $16,000,000. In December 1995 and January
1996, the Partnership purchased four hotel properties in Georgia for
approximately $15,000,000 and a hotel in South Carolina for $4,000,000,
respectively. Three of the Georgia hotels were sold at a loss in March
1998, and the hotel in Louisville was transferred to a new entity in June
1998 in conjunction with refinancing that hotel (see below). The hotel in
Orangeburg, South Carolina was sold at a loss in November 1998. The only
remaining hotel in the Partnership is in Thomasville, Georgia (see
Subsequent Events).
Income and loss are allocated to Ridgewood Georgia and the limited
partner based upon the formula for allocating Distributable Cash as
described below.
Distributable Cash is defined as the net income from the property
before depreciation plus any net sale proceeds and net financing proceeds
less capital costs. Distributions of Distributable Cash shall be made as
follows:
- First, to the Investor until there has been distributed to the
Investor an amount equal to a 15% cumulative internal rate of return on
the Investor's investment.
- Second, to Ridgewood Georgia until the aggregate amount received by
Ridgewood Georgia equals the aggregate cash contributions made by
Ridgewood Georgia to the Partnership.
- Third, 12% to Ridgewood Georgia and 88% to the Investor until there
has been distributed to the Investor an amount equal to a 25% cumulative
internal rate of return on Investor's investment.
- Fourth, 75% of the residual to the Investor and 25% to Ridgewood
Georgia.
Management of the Partnership intends to adopt a plan of liquidation
and will sell the remaining hotel. Based on management's estimate,
Ridgewood Georgia will not receive cash in excess of its investment in the
Partnership (see Subsequent Events).
A Management Agreement exists between the Partnership and the Company
as Manager ("Manager") for the purpose of managing the hotels. The
Manager shall be entitled to the following property management fees:
(1) 2.5% of the gross revenues from the hotel property.
(2) 1% of the gross revenues from the hotel property as an incentive
fee if distributable cash equals or exceeds 13.5% of total aggregate
acquisition costs.
Total management fees for the years ended August 31, 1999, 1998 and
1997 were approximately $68,000, $233,000 and $301,000 respectively.
On March 17, 1998, the Partnership sold three of its six hotels. The
Company signed a management agreement with the new owner of the three
hotels wherein it will receive a management fee equal to 3% of revenues
plus 15% of the net operating income plus 5% of any profit realized upon
the sale of the hotels. In connection with the management agreement, the
Company received management fees totaling approximately $191,000 and
$114,000 for the years ended August 31, 1999 and 1998, respectively.
For the fiscal year ended August 31, 1997, the Company recorded
equity in income (loss) of the Partnership totaling $(134,000) net of
provision for possible losses. The Company has recorded during 1997 a
provision for possible losses of approximately $199,000 as there is no
indication that the Company will be able to recover the equity income in
the Partnership given the provisions of the partnership agreement
regarding the distribution of cash to the partners upon liquidation.
Houston Hotel, LLC
On December 9, 1997, Houston Hotel, LLC ("Houston Hotel") was
organized as a limited liability company under the laws of the State of
Delaware. The purpose which Houston Hotel was organized is limited solely
to owning and managing the Hampton Inn Galleria in Houston, Texas. The
Company contributed approximately $316,000 into Houston Hotel which
represents a 10% interest, and the other 90% interest is owned by Houston
Hotel, Inc. (the "Manager"), a Nevada corporation.
Income or loss allocated to the Company and the Managing Member is
based upon the formula for distributing cash.
Distributable cash is defined as the cash from operations and capital
contributions determined by the Manager to be available for distribution.
Cash from operations is defined as the net cash realized from the
operations of Houston Hotel after payment of all cash expenditures of
Houston Hotel including, but not limited to, operating expenses, fees,
payments of principal and interest on indebtedness, capital improvements
and replacements, and such reserves and retentions as the Manager
reasonably determines to be necessary.
Distributions of distributable cash shall be made as follows:
- First, 100% to the Manager until it has been distributed an amount
equal to its accrued but unpaid 13% preferred return.
- Second, 100% to the Company until the Company has been distributed
an amount equal to its accrued but unpaid 13% preferred return.
- Third, 80% to the Manager and 20% to the Company.
A Property Management Agreement exists between Houston Hotel, LLC and
the Company as Property Manager ("Property Manager") for the purpose of
managing the hotel. The Property Manager shall be entitled to the
following property management fees:
(1) 1.5% of the gross revenues from the hotel property.
(2) 1.5% of the gross revenues from the hotel property as an
incentive fee if 85% of the budgeted net operating income is
met.
In connection with the management agreement, the Company received
management fees totaling approximately $98,000 and $83,000 for the fiscal
years ended August 31, 1999 and 1998, respectively.
See Subsequent Events.
RW Louisville Hotel Associates, LLC
On May 13, 1998, RW Louisville Hotel Associates LLC ("RW Louisville
Hotel Associates") was organized as a limited liability company under the
laws of the State of Delaware. The purpose which RW Louisville Hotel
Associates was organized is limited solely to owning and managing the
Holiday Inn ("the Hotel") in Louisville, Kentucky. The Company's
investment in RW Hotel Partners, L.P. of $337,500 (see above) was
transferred to RW Louisville Hotel Associates at its historical basis.
Simultaneously, the Company invested $362,000 into Louisville Hotel, LLC.
The combined equity of $699,500 represents a 10% interest in the Hotel.
Louisville Hotel, LLC loaned $3,620,000 to the Hotel in return for all
cash flows generated from the Hotel.
Income or loss allocated to the Company is based upon the formula for
distributing cash.
Distributable cash is defined as the net cash realized from
operations but after payment of management fees, principal and interest,
capital improvements and other such retentions as the managing member
determines to be necessary. Distributions of distributable cash from
Louisville Hotel, LLC shall be made as follows:
- First, to the managing member until the managing member has been
distributed an amount equal to its accrued but unpaid 13% preferred
return.
- Second, to the Company until the Company has been distributed an
amount equal to its accrued but unpaid 13% preferred return.
- Third, 20% to the Company and 80% to the managing member.
Cash from a sale or refinancing would be distributed 10% to the
Company and 90% to the managing member.
A Management Agreement exists between the Owner and the Company as
Property Manager ("Property Manager") for the purpose of managing the
hotel. The Property Manager shall be entitled to the following property
management fees:
(1) Base Management Fee equal to 1.5% of gross revenues from the
hotel property.
(2) Incentive Management Fee equal to 1.5% of gross revenues from
the hotel in which the actual net operating income exceeds 85% of the
budgeted goal for the year.
(3) Super Incentive Management fee equal to: (a) .25% of gross
revenues from the hotel in which the net operating income exceeds 106% of
the budgeted goal for the year; (b) an additional .25% of gross revenues
in which the net operating income exceeds 112% of the budgeted goal; and
(c) an additional .50% of gross revenues in which the net operating income
exceeds 120% of the budgeted goal.
The Company paid an additional $200,000 to Louisville Hotel, LLC as a
fee to acquire the management contract for the hotel. This amount is
included in other assets. The Company is amortizing the fee $70,000 per
year for the first two years and $20,000 per year for the next three
years.
With respect to the sum of $100,000, in the event that the management
contract is terminated by Louisville Hotel, LLC with or without cause and
not pursuant to a third party sale prior to June 5, 2000, Louisville
Hotel, LLC will pay to the Company the sum of $4,166.67 times the number
of months prior to June 5, 2000 that the management contract is
terminated.
With respect to the second sum of $100,000, in the event that the
management contract is terminated by Louisville Hotel, LLC prior to June
5, 2003, Louisville Hotel, LLC will pay to the Company the sum of
$1,666.67 times the number of months prior to June 5, 2003 that the
management contract is terminated.
In connection with the management agreement, the Company received
management fees totaling approximately $285,000 and $57,000 for the years
ended August 31, 1999 and 1998, respectively.
See Subsequent Events.
A summary of the investment in unconsolidated entities is as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Beginning balance of investment
in unconsolidated entities $ 832 $ 338
Capital contributions 184 678
Equity in loss -- (98)
Distributions -- (86)
------ ------
Ending balance of investment
in unconsolidated entities $1,016 $ 832
====== ======
</TABLE>
The unaudited combined balance sheet and statement of operations of
the unconsolidated entities are as follows:
<TABLE>
COMBINED UNCONSOLIDATED ENTITIES
CONDENSED BALANCE SHEET
UNAUDITED
(000's omitted)
<CAPTION>
8/31/99 8/31/98
---------- ----------
<S> <C> <C>
CURRENT ASSETS $ 2,018 $ 2,730
PROPERTY AND EQUIPMENT, net 37,499 36,410
INTANGIBLE ASSETS, net 629 565
---------- ----------
TOTAL ASSETS $ 40,146 $ 39,705
========== ==========
CURRENT LIABILITIES $ 1,854 $ 1,850
LONG-TERM DEBT 31,622 28,382
---------- ----------
TOTAL LIABILITIES 33,476 30,232
CAPITAL, net 6,670 9,473
---------- ----------
TOTAL LIABILITIES AND
CAPITAL $ 40,146 $ 39,705
========== ==========
</TABLE>
<TABLE>
COMBINED UNCONSOLIDATED ENTITIES
CONDENSED STATEMENT OF OPERATIONS
UNAUDITED
($000's Omitted)
<CAPTION>
8/31/99 8/31/98 8/31/97
--------- --------- ---------
<S> <C> <C> <C>
HOTEL OPERATIONS:
Revenues $ 11,681 $ 17,057 $ 17,058
Operating Expenses 10,146 12,781 13,696
---------- ---------- ----------
Income From Hotel Operations 1,535 4,276 3,362
---------- ---------- ----------
Interest Expense 2,632 2,059 1,682
Depreciation/Amortization 1,562 1,943 1,926
Loss due to change to liquidation
basis of accounting for RW Hotel
Partners, L.P. -- 2,828 --
---------- ---------- ----------
NET INCOME (LOSS) $ (2,659) $ (2,554) $ (246)
========== ========== ==========
</TABLE>
9. Employee Savings Plan
The Ridgewood Hotels Employee Savings Plan ("Savings Plan") is a
savings and salary deferral plan which is qualified under Sections 401(a)
and 401(k) of the Internal Revenue Code of 1986. The Savings Plan
includes all employees of the Company who have completed one year of
service and have attained age twenty-one.
Each participant in the Savings Plan may elect to reduce his or her
compensation by any percentage, not to exceed 15% of compensation when
combined with any Matching Basic or Discretionary Employer Contributions
(below) made on behalf of the participant, and have such amount
contributed to his or her account under the Savings Plan. Elective
employer contributions are made prior to the withholding of income taxes
on such amounts. A participant may also elect to contribute to the Plan
an amount of cash or property equal to or up to 10% of his or her
compensation ("Voluntary Contributions"). Voluntary Contributions are
made on an after-tax basis.
The Savings Plan provides for an employer matching contribution in an
amount equal to 50% of the elective employer contributions, provided that
in no event shall such employer matching contributions exceed 3% of the
participant's compensation. In addition, the Board of Directors of the
Company is authorized to make discretionary contributions to the Savings
Plan out of the Company's current or accumulated profits ("Discretionary
Contributions"). Discretionary Contributions are allocated among those
participants who complete at least 1,000 hours of service during the plan
year and are employed by the Company on the last day of the plan year.
Employees are subject to a seven year graduated vesting schedule with
respect to Basic Employer Contributions, Matching Employer Contributions
and Discretionary Contributions.
Distributions from the Savings Plan will generally be available upon
or shortly following a participant's termination of employment with the
Company, with additional withdrawal rights with respect to Voluntary
Contributions.
For the fiscal years ending August 31, 1999, 1998 and 1997, expense
for the Employee Savings Plan was approximately $18,000, $18,000 and
$21,000, respectively.
10. Acquisition of Hotel Management Company
In December 1995, the Company acquired the Wesley Hotel Group, a
hotel management company located in Atlanta, Georgia. At the time of
acquisition, Wesley managed five hotels. The acquisition has been
accounted for using the purchase method of accounting. In conjunction
with the acquisition, the Company issued 125,000 shares of common stock
with a determined market value of $1.50 per share (see Note 6) and assumed
three promissory notes with a combined outstanding principal of
approximately $106,000, bringing the total investment in Wesley to
$293,000. The investment recorded by the Company for the acquisition is
being amortized over the useful life of the assets acquired. As of August
31, 1999 the useful life of the assets acquired was determined to be -0-,
so the entire investment has been fully amortized.
11. Subsequent Events
On September 30, 1999, the Company purchased additional equity in
Louisville Hotel, LLC. The Company increased its ownership from 10% to
80%. The consideration issued to acquire the increased ownership was
$2,500,000, composed of the following:
Transfer of 10% ownership interest in
Houston Hotel, LLC $443,000
Cash payment 124,000
Promissory note to Louisville Hotel, L.P.
secured by the Company's ownership
interest in Louisville Hotel, LLC(2) 1,333,000
Promissory note to Louisville Hotel, L.P.
secured by the Company's Phoenix,
Arizona land(2) 300,000
Promissory note to Louisville Hotel, L.P.
secured by one parcel of the Company's
Longwood, Florida land (2) 300,000
----------
Total additional equity in Louisville Hotel,
LLC $2,500,000
==========
(1) The cash to make this payment was obtained from Louisville
Hotel, LLC in connection with a modification of the management
contract of the hotel. This amount represents the unamortized
portion of the original $200,000 participation fee paid to
Louisville Hotel, LLC to acquire the management contract of the
hotel.
(2) The three promissory notes are cross defaulted. The three
promissory notes bear interest at 13% and mature on September
30, 2002.
With 80% ownership, the Company is now the Managing Member of
Louisville Hotel, LLC. Louisville Hotel, L.P. now has 20% ownership in
Louisville Hotel, LLC and is the Non-Managing Member.
Income or loss allocated to the Company is based upon the formula for
distributing cash.
Distributable cash is defined as the net cash realized from
operations but after payment of management fees, principal and interest,
capital improvements and other such retentions as the managing member
determines to be necessary. Distributions of distributable cash from
Louisville Hotel, LLC shall be made as follows:
- First, to the Company in an amount equal to the cumulative interest
paid on the acquisition loans of $1,333,000, $300,000 and $300,000. The
Company would then use these funds to pay Louisville Hotel, L.P.
- Second, a 13% preferred return to Louisville Hotel, L.P. on their
original $3,061,000 investment.
- Third, a 13% preferred return to the Company on its capital
contribution of $1,207,000.
- Fourth, 80% to the Company and 20% to Louisville Hotel, L.P.
Cash from a sale or refinancing would be distributed 10% to Louisville
Hotel, L.P. and 90% to the Company. If a sale or refinancing occurs after
September 30, 2000 but before September 30, 2001, then the distribution
would change to 15% and 85%, respectively.
On November 18, 1999, RW Hotel Partners, L.P. sold the partnership's
remaining hotel in Thomasville, Georgia at a loss. The partnership will
be dissolved, and the Company will neither receive cash nor be required to
pay out cash related to the partnership.
Report of Independent Accountants
November 17, 1999
To the Board of Directors and
Shareholders of Ridgewood Hotels, Inc.
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of cash flows and of
shareholders' investment present fairly, in all material respects, the
financial position of Ridgewood Hotels, Inc. and its subsidiaries (the
"Company") at August 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period
ended August 31, 1999, in conformity with generally accepted accounting
principles. 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 generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion
expressed above.
PRICEWATERHOUSECOOPERS LLP
Atlanta, Georgia
Market Information
The Company's common stock is listed in the National Association of
Securities Dealers (NASDAQ) over-the-counter bulletin board service.
Transfer Agent
Harris Trust and Savings Bank, Dallas, Texas is the Company's stock
transfer agent. Harris maintains the Company's shareholder records. To
change name, address or ownership of stock, to report lost certificates,
or to consolidate accounts, contact:
Harris Trust and Savings Bank
1601 Elm Street
Thanksgiving Tower, Suite 2320
Dallas, Texas 75201
(214) 665-6033
General Counsel
Rogers & Hardin
2700 International Tower
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Independent Accountants
PricewaterhouseCoopers LLP
50 Hurt Plaza
Suite 1700
Atlanta, Georgia 30303
Shareholder and General Inquiries
The Company is required to file an Annual Report on Form 10-K for its
fiscal year ended August 31, 1999 with the Securities and Exchange
Commission. Copies of this annual report may be obtained without charge
upon written request to:
Ridgewood Hotels, Inc.
Shareholder Relations
2859 Paces Ferry Road
Suite 700
Atlanta, Georgia 30339
(770) 434-3670
EXHIBIT 22
RIDGEWOOD HOTELS, INC. AND SUBSIDIARIES
SUBSIDIARIES OF THE REGISTRANT
Percentage
State or of Voting
Jurisdiction Securities
of Incorporation Owned
---------------- ----------
Florida Communities, Inc. Florida 100%
Ridgewood Orlando, Inc. Florida 100%
Ridgewood Georgia, Inc. Georgia 100%
Wesley Hotel Group, Inc. Georgia 100%
Florida Beta Hotel Corp. Florida 100%
California Zeta Hotel Corp. California 100%
Capitol Alpha Hotel Corp. Washington, D.C. 100%
California Eta Hotel Corp. California 100%
The foregoing subsidiaries are included in the consolidated
financial statements of the Company.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial information extracted from
the Consolidated Balance Sheets, Statements of Consolidated Loss and
Consolidated Statement of Cash Flow and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1999
<PERIOD-END> AUG-31-1999
<CASH> 471,000
<SECURITIES> 0
<RECEIVABLES> 241,000
<ALLOWANCES> 3,319,000
<INVENTORY> 18,000
<CURRENT-ASSETS> 0
<PP&E> 3,174,000
<DEPRECIATION> 1,914,000
<TOTAL-ASSETS> 5,910,000
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
450,000
<COMMON> 15,000
<OTHER-SE> 1,091,000
<TOTAL-LIABILITY-AND-EQUITY> 5,910,000
<SALES> 458,000
<TOTAL-REVENUES> 4,547,000
<CGS> 379,000
<TOTAL-COSTS> 3,203,000
<OTHER-EXPENSES> 2,285,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 342,000
<INCOME-PRETAX> (1,283,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,283,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,283,000)
<EPS-BASIC> (1.09)
<EPS-DILUTED> (1.09)
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