SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended Commission file Number 0-1590
December 31, 1995
THE WESTWOOD GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 190 V.F.W. Parkway 04-1983910
(State or other jurisdiction Revere, MA 02151 (IRS Employer Identi-
of incorporation or organization) fication No.)
(Address of principal executive offices
including zip code)
617-284-2600
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Title of Class
Common Stock-$.01 par value
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 the Form 10-K or any amendment to
this form 10-K. [ ]
The aggregate market value of the voting stock held by nonaffiliates of the
registrant, computed by reference to the price at which the stock was sold,
or the average bid and asked prices of such stock,
as of a specified date within 60 days prior to the date of filing, was:
Total No. of Shares
Pricing of Common Stock Held by Aggregate
Voting Stock Nonaffiliates Market Value
$1.50(1) 305,875(2) 458,813
(1) The registrant's Common Stock was removed from quotation through the NASDAQ
system on July 29, 1988. There is no established trading market for either
the Company's Common Stock or Class B Common Stock.
(2) Excludes shares held by Executive Officers and Directors of the registrant,
without admitting that any such Executive Officer or Director is an
affiliate of the registrant.
The number of shares outstanding of each of the registrant's classes of common
stock, as of March 8, 1996, was as follows:
Common Stock, $.01 par value: 343,210
Class B Common Stock, $.01 par value: 912,015
DOCUMENTS INCORPORATED BY REFERENCE
None
<PAGE>
PART I
Item l. Business
(a) General
The Westwood Group, Inc. (the "Company," which term as used
herein includes its wholly-owned subsidiaries) was incorporated in Delaware
in 1984 as the successor to racing and restaurant operations which commenced
in 1935 and 1968, respectively. Through its Racing Division, the Company
operates Wonderland Greyhound Park, a parimutuel greyhound racing facility
located in Revere, Massachusetts, and Foxboro Park, a parimutuel harness
racing facility located in Foxboro, Massachusetts. Prior to 1994, the
Company operated, through its then 42.9% owned Restaurant Division, Back Bay
Restaurant Group, Inc. ("BBRG"), 32 full-service restaurants located in
Massachusetts, Connecticut, New Jersey and New York. In May 1994, the Company
exchanged approximately 887,000 shares of BBRG common stock for
$19,300,000 of the Company's 14.25% Subordinated Notes due in 1997.
As a result of this transaction, the Company's ownership of BBRG
decreased to approximately 18.5%, and the accounts of BBRG are no
longer consolidated with those of the Company.
(b) Business Segments
In 1995 and 1994, the Company's business was principally
conducted in the parimutuel racing industry. Prior to 1994, the
Company conducted its business principally through two divisions, the
Racing Division and the Restaurant Division. Financial information
relating to the business segments of the Company prior to 1994 appears
in Note 10 of the Notes to Consolidated Financial Statements.
In addition, the Company operates real property through its
wholly owned subsidiaries. These properties operate under mortgage
arrangement and performing lease agreements. All related expenses of
these properties are paid through cash flow from these operating
leases. Information relating to these mortgage and lease arrangements
appears in note 3 and 16 of the Notes to Consolidated Financial
Statements. All accounts of the subsidiaries have been consolidated
with those of the Company.
(c) Description of Business
Racing Subsidiaries
<PAGE>
The Company's wholly-owned subsidiary, Wonderland Greyhound Park,
Inc. ("Wonderland"), owns and operates a greyhound racetrack
("Wonderland Park") located on approximately 35 acres of land in the
City of Revere, Massachusetts. Revere adjoins the City of Boston.
Wonderland Park is approximately five miles north of
downtown Boston and is served directly by major transportation
routes and the Massachusetts Bay Transportation Authority (MBTA)
rail line. The racetrack is approximately two miles from Boston's
Logan International Airport.
The racetrack facilities include a one-quarter mile oval
sand track, a physical plant consisting of a climate controlled
grandstand and clubhouse and a two-story administrative center.
The Company maintains and operates two full service restaurants, a
sports bar and other concession facilities at the racetrack to serve
Wonderland's patrons. The racetrack facility can accommodate 10,000
patrons. The average attendance per performance in 1995 was 1,240
persons. The complex encompasses a total of approximately 35 acres,
including paved and lighted parking providing capacity for
approximately 2,300 cars.
Wonderland Park was originally opened in 1935 and has operated
continuously from the same location since that time. Wonderland Park
operates a year-round racing schedule of up to 510 matinee and evening
performances.
Wonderland Park continues to provide its patrons with a variety
of entertainment options by enhancing its full card simulcast wagering.
During 1995, Wonderland provided its patrons with simulcast wagering
from over 17 various tracks throughout the country. In addition,
Wonderland has broadcast its simulcast signal to over 20 locations
throughout the country. The Company is continuing to research new
markets to broadcast its signal and new ways to provide quality racing
entertainment to its on-track patron.
The Company's wholly-owned subsidiary, Foxboro Park, Inc.
("Foxboro"), operates a harness racetrack ("Foxboro Park") under an
agreement to lease, located on approximately 78 acres of land in the
town of Foxboro, Massachusetts. Foxboro Park is approximately 25 miles
southwest of Boston, and 32 miles southeast of Worcester,
Massachusetts, and is served by major transportation routes.
<PAGE>
The racetrack facilities include a five-eighths mile oval
track, a physical plant consisting of a climate controlled
grandstand and clubhouse, and administrative offices. The facility
also includes stalls to accommodate 600 horses. The Company maintains
and operates a full-service restaurant and various other concession
facilities at the racetrack to serve Foxboro Park's patrons. The
racetrack facility can accommodate 9,000 patrons, and includes paved
and lighted parking providing capacity for 3,500 cars.
Foxboro Park also provides its patrons with the opportunity to
wager on the premier thoroughbred racing, simulcast from various
tracks throughout the country.
Foxboro Park's harness racing meet commenced on schedule in
September l992 and continued for the remainder of the year. Foxboro
Park conducted 165 and 156 harness racing performances in 1995 and
1994, respectively, and continues to operate exclusively as a harness
racing facility, pursuant to a license to conduct 150 racing
performances.
Foxboro Park has continued to enhance its simulcast wagering by
providing our patrons with simulcast wagering from over 24 track from
throughout the country. In addition, through reciprocal arrangements
with many of these same tracks, Foxboro has broadcast its live
performances to a combination of over 30 tracks, casinos and off-track
betting facilities throughout the country. This approach has provided
our patrons with top quality racing, both live and simulcast, while
enhancing our total handle.
The Racing Division's annual revenues are mainly derived from the
commissions that it receives from wagers made by the public during its
racing performances and from admission and concession charges at such
performances. Wagers at Wonderland and Foxboro Park are placed under
the parimutuel wagering system, pursuant to which the winning bettors
in each race divide the total amount bet on the race (the "pool") in
proportion to the sums they wagered individually, after deducting
certain percentages fixed by state law which are reserved for the
Commonwealth of Massachusetts, the owners of the winning greyhounds,
the owners of the harness race winners, the racetrack, and certain
associations of breeders.
The parimutuel commission is regulated by the local and state
regulatory commission in the jurisdiction of the individual race track.
In addition, the net parimutuel commission varies based upon the type
<PAGE>
of wagering. Also, the Company generates commission revenue from other
tracks for all amounts wagered on our product at their facility. These
commissions vary based upon our contractual arrangements from
approximately 3% to 11%.
As such, the average net parimutuel commission at Wonderland Park
is approximately 18.9% of each $1.00 wagered on track. Out of this
amount approximately 5% is distributed to kennel operators as purses
paid, 5% is paid to the Commonwealth of Massachusetts in the form of
parimutuel tax and .5% is deposited into both the Capital Improvements
Trust Fund and Promotional Trust Fund. The average net simulcast fee
earned in 1995 on the Wonderland Park signal broadcast to other tracks
was 3.6%.
Subsequent to year end, the Commonwealth of Massachusetts
approved new simulcast legislation allowing the opportunity to increase
the amount of parimutuel wagering that may be retained by the track,
up to 26% of each $1.00 wagered. The Company is evaluating the best
method of increasing profitability and maximizing patron satisfaction
under these new regulations.
At Foxboro Park the average net parimutuel commission earned was
approximately 16.9% of each $1.00 wagered. Out of this amount
approximately 5.4% is distributed to the horse owners as purses paid,
.425% is paid to the Commonwealth of Massachusetts in the form of a
parimutuel tax, .64% is paid to the association representing the
breeders and 1% is deposited each into both the Capital Improvement
Trust Funds and Promotional Trust Funds. The average net simulcast fee
earned in 1995 on the Foxboro Park signal broad-cast to other tracks
was 4.8%.
The Commonwealth of Massachusetts is the trustee and Wonderland
and Foxboro are the beneficiaries of the Greyhound Capital Improvements
and Promotional Trust Funds, and the Harness
Horse and Running Horse Capital Improvements and Promotional Trust
Funds, respectively, which have been established in accordance with
Massachusetts law and are dedicated to reimbursement of capital
improvements and promotional expenses incurred by the Racing Division.
Traditionally, Wonderland Park has experienced the highest
parimutuel handle and number of attendees during the spring and summer
months. Such trend is expected to continue both at Wonderland Park and
at Foxboro Park.
<PAGE>
Former Restaurant Division
Prior to May 1994, the Company owned 42.9% of Back Bay
Restaurant Group, Inc. ("BBRG"), which at that time operated 32
full-service restaurants concentrated primarily in the Greater
Boston metropolitan area and also located elsewhere in Massachusetts,
Connecticut, New Jersey and New York. BBRG's restaurants have been
serving customers in New England since its first restaurant opened in
the Back Bay section of Boston in 1964.
(d) Competition and Marketing
The Company is trying to adapt and survive in a dramatically
changing environment. One in which the Company and the racing industry
nationally have experienced significant declines in on-site attendance
and dollars wagered. On the other hand, there has been considerable
growth in the simulcasting segment of our business. We are continually
seeking ways to expand those revenues. The gains we are able to make
in simulcasting, however, were offset by the negative impact
attributable to the steady growth of the Massachusetts lottery and the
relatively sudden and dramatic emergence of new forms of gaming,
principally the opening of the Indian casino at Ledyard, Connecticut
and the introduction of slot machines at the Lincoln, Rhode Island
greyhound track. Both of these competitors are in close proximity to
the Massachusetts border and therefore rely upon their ability to
attract Massachusetts patrons in large numbers. According to a recent
article in International Gaming and Wagering Business, on slot machines
alone patrons wagered $4.5 billion at the Indian casino in 1994 and
were expected to wager $6.5 billion in 1995. Its overwhelming success,
in part, has been at the expense of the Massachusetts racing industry.
In turn, racing continues to decline since it is unable to effectively
compete for the gaming and entertainment dollar with the state operated
lottery, the slot machines at the Rhode Island racetrack and the Indian
casino.
In 1994 in Massachusetts, total gaming revenues reached $3.2
billion as compared to $2.8 billion in 1993, an increase of 14.3%.
However, only the lottery, which realized 1994 revenues of $2.4
billion, experienced an increase in revenues while both parimutuel and
charitable gaming experienced declines.
After examining data compiled and published by the nationally
recognized consulting firm, Christiansen/Cummings Associates, Inc., it
<PAGE>
is readily apparent that what is happening here in Massachusetts is not
unique. Nationally, total gaming revenues reached $482.1 billion as
compared to $394.2 billion in 1993, an increase of 22.3%. The segments
of the industry that enjoyed the greatest gains were Indian
reservations and casinos which experienced increases of 41.8% and 23.7%
respectively. Greyhound and horse racing continued to struggle in
1994. Greyhound on-track wagering declined nearly 18% while on-track
harness horse racing decreased by nearly 11%.
More importantly, these declines are not a single year
phenomenon, but rather represent an alarming long-term trend. Between
1982 and 1994 total gross wagering on all forms of gambling grew at an
average annual rate of nearly 12%. All forms of parimutuel wagering,
however, only grew at an average annual rate of less than 2%.
As the racing industry has fallen victim to this onslaught of
competition, we have not stood idly by. We have restructured the
Company's balance sheet; retiring nearly $20 million in debt; reducing
accounts payable, accrued expenses and other long-term obligations by
approximately $11.5 million; and have generally renegotiated more
favorable terms on the remaining debt. We have also restructured the
organization. We have eliminated all but the most critical management
positions, significantly downsized the workforce, negotiated
substantial wage concessions and designed and implemented a variety of
new operating efficiencies. Despite our fiscal constraints, we have
managed to significantly upgrade our management team. Mr. Richard Egan
has joined the Company as Vice President & Chief Financial Officer and
Mr. Anthony Boschetto was hired as the Company's Controller. Together,
utilizing their considerable experience, they are reorganizing our
finance and accounting area. Meanwhile at the Company's subsidiary,
Foxboro Harness, Inc., we were able to recruit Mr. Gary Piontkowski,
the former Chairman of the Massachusetts State Racing Commission, to
join Foxboro as its Vice President and General Manager. He is
providing the leadership to a completely new management team at the
harness track. In recognition of the valuable role that Mr. A. Paul
Sarkis has fulfilled these past several years, he was named Executive
Vice President of the Company and was elected to its Board of
Directors. He has been coordinating our legislative efforts and
working with our investment banking firm on a number of financing
alternatives. All of these individuals are a very important part of
the rebuilding process. A process that we believe will enable us to
be well positioned for the challenges that lay ahead. In the meantime,
we continue to strive to do everything in our power, considering our
limited resources, to prevent further erosion of our patron base.
<PAGE>
Realistically, however, the long-term strategy that will ensure
that shareholder value is maximized is to position Westwood for growth,
not in the narrow confines of the pari-mutuel industry, but rather, in
the gaming and entertainment industry. To that end, we have worked
tirelessly these past three years attempting to convince the Governor
and the Legislature of the Commonwealth of Massachusetts of the need
to allow the State's four commercial racetracks to offer their patrons
the ability to wager on slot machines. It has been a long and involved
process which has become more complicated by the Wampanoag Indians'
efforts to open a casino in New Bedford, Massachusetts. We are
cautiously optimistic, in light of the significant economic benefits
that the racing industry has provided the Commonwealth of Massachusetts
over the past sixty years, that the Governor and the Legislature may
enact gaming legislation that would hopefully enable us to return
Westwood to being a healthy and vibrant company capable of contributing
tens of millions of dollars to the Commonwealth, providing much needed
employment to its citizens and a fair return for its shareholders.
(e) Government Regulation
Wonderland and Foxboro operate under annual licenses granted
after application to, and public hearings by, the Massachusetts State
Racing Commission (the "Racing Commission"). Wonderland received its
first license in 1935 and has had its license renewed annually since
that date. Foxboro commenced operations in l992. The Racing
Commission has certain regulatory powers with respect to the dates and
the number of performances granted to its licensees and various other
aspects of racetrack operations. In addition, the Racing Commission
licenses certain key officials employed by the Racing Subsidiaries.
Alcoholic beverage control regulations require each of the
restaurant facilities at Wonderland and Foxboro to apply to a state and
local authority for a license or permit to sell alcoholic beverages on
the premises. The licenses must be renewed annually and may be revoked
or suspended for cause at any time. Alcoholic beverage control
regulations relate to numerous aspects of the daily operations of the
restaurants, including minimum age of patrons and employees, hours of
operation, advertising, wholesale purchasing, inventory control and
handling, and storage and dispensing of alcoholic beverages. The
failure to receive or retain, or a delay in obtaining, a liquor license
could adversely affect the Company's ability to operate the restaurant
facilities. The Company has not encountered any material problems
relating to alcoholic beverage licenses to date.
<PAGE>
Various federal and state labor laws govern the Company's re-
lationship with its employees, including such matters as minimum wage
requirements, overtime and other working conditions.
Significant additional government-imposed increases in minimum
wages, paid leaves of absence, mandated health benefits or in-creased
tax payment requirements in respect of employees who receive gratuities
could, however, have a material adverse effect on the Company's results
of operations.
(f) Employees
At December 31, 1995, the Company employed approximately 840
persons.
Item 2. Description of Property
The Company is the owner of greyhound racing facilities at which
its greyhound racing performances are conducted, located on
approximately 35 acres of land; the complex consists of a one-quarter
mile track, a grandstand, a clubhouse, two restaurants and cocktail
lounge, a parking area for approximately 2,300 cars, kennel facilities
for a day's greyhound entrants, and other miscellaneous storage
buildings. The Company's racing facilities are mortgaged to secure the
indebtedness owed under a term loan to the MSCGAF Realty Trust. (See
Item 7, Liquidity and Capital Resources and Note 3 of Notes to
Consolidated Financial
Statements).
The Company invested approximately $9.4 million in 1992, in
connection with the commencement of harness racing at a facility which
is owned by an unrelated party. Included in the $9.4 million is
approximately $7.5 million in capital improvements. The Company is
conducting operations at such facility under a commitment to lease, and
has been granted a rent-free period extending through December 1995.
The racetrack facilities include a five-eighths mile oval track,
a physical plant consisting of a climate controlled grandstand and
clubhouse and administrative offices. The facility also includes
stalls to accommodate 600 horses. The Company maintains and operates
various concession facilities at the racetrack to serve Foxboro Park's
patrons. The racetrack facility can accommodate 9,000 patrons and
includes paved and lighted parking providing capacity for 3,500 cars.
<PAGE>
The Company owns a multi-story building in Boston, Massachu-
setts, which houses one of BBRG's restaurants and the corporate offices
of BBRG. The building is subject to a first mortgage of $4,100,000 and
a purchase money second mortgage of $400,000 (see Item 7, Liquidity and
Capital Resources, and Note 3 of Notes to Consolidated Financial
Statements).
The Company's executive offices are located at Wonderland
Greyhound Park in Revere, Massachusetts, which property is owned by the
Company.
Item 3. Legal Proceedings
The Company is subject to various claims and legal actions that
arise in the ordinary course of its business. In December 1993, the
labor contract between Wonderland Park and the Wonderland Dog Track
Employees Union, Local 410 (the "Union"), which governed the terms of
employment of the mutuel clerks at Wonderland Park, was due to expire.
The parties mutually agreed to extend the contract several times while
attempting to reach a new agreement. In February 1994, Wonderland Park
implemented the terms of its final offer to the Union, after months of
negotiations and an impasse having been reached. Such terms included
a reduction in the hourly compensation rate of approximately 35%, and
the elimination of certain weekend and holiday premiums. In October
1994, the national office of the Union reassigned the Union to Service
Employees International Union, Local 254 ("Local 254"). In October
1994, Local 254 agreed to a three year extension of the Union's current
contract amended by Wonderland Park's final offer. The Union is
challenging the implementation of the final offer at the State Labor
Relations Commission for the period from implementation in February
1994 through the reassignment of the Union in October 1994. If the
Union is successful in its challenge, Wonderland Park may be required
to retroactively compensate the Union member employees for the
difference between the old contract rates and the new contract rates
for that period of time, or approximately $750,000. The Company
believes it has meritorious defenses to the challenge.
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
On October 24, 1995 at the annual meeting of stockholders, the
following items were brought to vote and approved:
- Number of Directors be fixed at five and
election of Directors;
- Amend the Company's Certificate of Incorporation
to reduce the authorized shares from 10,000,000 to
4,000,000;
- The ratification of Coopers & Lybrand L.L.P. as
independent auditors for the Corporation for the
year ending December 31, 1995.
<PAGE> PART II
Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters
(a) Market Price
There is no established trading market for the Company's
Common Stock or the Company's Class B Common Stock.
(b) Approximate Number of Record Holders of Common Stock
and Class B Common Stock
Number of
Record
Holders
as of
March 8,
Title of Class 1996
Common Stock--par value $.01 487
Class B Common Stock--par value $.01 11
(c) Dividend History
No dividends have been declared by the Company on its Common Stock
during 1995 or 1994. The Company has not paid a cash dividend on its
Class B Common Stock to date. The Company does not intend to pay cash
dividends on either class of Common Stock in the immediate future.
As of December 31, 1994, the Company was in default on its out-standing
14.25% subordinated debentures (the "Notes"). As such, it was
prohibited under the Indenture that governs the Notes from declaring
or paying any dividend or from making any distribution on any of its
capital stock. (See Item 7, Liquidity and Capital Resources and Note
3 of Notes to Consolidated Financial Statements).
PAGE
<PAGE>
Item 6. Selected Consolidated Financial Data.
The following table summarizes certain financial information derived
from the Consolidated Financial Statements of the Company. The
Selected Consolidated Financial Information for the fiscal years ended
December 31, 1995, 1994, 1993, 1992 and 1991 is derived from the
Consolidated Financial Statements, as audited by Coopers & Lybrand
L.L.P., independent accountants. This information should be read in
conjunction with and is qualified by reference to the Consolidated
Financial Statements of the Company and the notes thereto and
"Management's Discussion and Analysis of Financial Condition and
Results of Operations," included herein.
<PAGE>
Item 6. Selected Consolidated Financial Data, Continued
December 31,
1995 1994 1993 1992 1991
(Dollars in Thousands Except Per Share Amount)
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenue:
Operating revenue $ 33,108 $ 32,805 $ 31,801 $ 27,840 $24,889
Former restaurant
division - - 77,292 63,349 55,174
Total revenue 33,108 32,805 109,093 91,189 80,063
Expenses:
Operating expenses 32,667 34,620 33,903 32,782 25,723
Former restaurant
division - 68,680 54,775 46,793
Depreciation and
amortization 1,628 1,680 5,585 5,468 4,639
Total expenses 34,295 36,300 108,168 93,025 77,155
Income (loss) from
operations (1,187) (3,495) 925 (1,836) 2,908
Interest expense, net ( 709) (2,248) (5,884) (4,522) (6,469)
Other income (expense),
net ( 158) 6,820 (81) (6,082) 1,338
Minority interest - - (1,977) (1,385) -
Income (loss) before income
taxes & extraordinary
item (2,054) 1,077 (7,017) (13,825) (2,223)
(Provision) benefit for
income taxes - (145) (2,358) (1,847) 1,189
Income (loss) before
extraordinary item (2,054) 932 (9,375) (15,672) (1,034)
Extraordinary item, net - 11,160 - - 2,214
Net income (loss) $ (2,054) $ 12,092 $ (9,375) $(15,672) $ 1,180
Income (loss) per share:
Income (loss) before
extraordinary item $ (1.64) $ .74 $ (7.47) $ (12.49) $ (0.82)
Extraordinary item - 8.89 - - 1.76
Net income (loss)
per share $ (1.64) $ 9.63 $ (7.47) $ (12.49) $ 0.94
Cash dividends declared - - - - -
<PAGE>
CONSOLIDATED BALANCE SHEET DATA:
Working capital $ (20,480) $(15,264) $(47,550) $(40,161) $(27,556)
Total assets 25,608 27,823 62,722 64,846 73,626
Long-term debt (1) 5,774 9,550 544 4,265 26,497
Stockholders' equity
(deficit) (4,913) (2,952) (15,022) (5,235) 10,986
(1) Long-term debt for the years ended December 31, 1995, 1994, 1993 and 1992
excludes $1,751, $2,504, $25,382 and $31,534, respectively, of long term
debt reclassified as current obligations (see Note 3 of Notes to Consolidated
Financial Statements).
(2) The table above reflects the Company's accounting for its investment in
BBRG under the consolidation method for years prior to 1994 and under the equity
method for 1995 and 1994.
<PAGE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
RACING DIVISION
Wonderland Park
Wonderland Park conducts live racing seven nights and three
afternoons per week, and now offers simulcast wagering every afternoon
and evening. The table below illustrates certain key statistics for
Wonderland Park, the Company's greyhound racing operation, for the past
three years:
Year Ended December 31,
1995 1994 1993
Performances 509 511 519
Simulcast Days 359 357 164
Parimutuel handle (millions)
Live-on track $ 63 $ 72 $101
Live-simulcast $ 30 $ 3
Guest-simulcast $ 52 $ 43 $ 15
Total $145 $118 $116
Total attendance (thousands) 631 737 794
Average per capita wagering $182 $156 $146
In June 1993, Wonderland Park was granted permission by the
Massachusetts State Racing Commission (the "Racing Commission") to
begin simulcasting greyhound racing performances conducted at other
tracks. Such permission was granted pursuant to legislation that was
passed in the Commonwealth of Massachusetts in July 1992. The 1992
legislation also permits all racing facilities in Massachusetts to
offer common pool wagering on simulcasted races.
A common pool wagering program was implemented at Foxboro Park
in July of 1992 and at Wonderland Park in June of 1993. Wonderland
Park has been granted a license to conduct 520 racing performances
during 1995.
<PAGE>
Foxboro Park
In 1995 and 1994, Foxboro Park conducted seasonal live harness
racing generally three evenings and one to two matinees per week, while
simulcasting every afternoon and evening. Live racing and simulcasting
were conducted year-round in 1993. The table below presents certain
key statistics for Foxboro Park from the commencement of its operations
through December 31, 1995.
Year Ended December 31,
1995 1994 1993
Total Live Performances 165 158 200
Total Simulcast Days 357 352 351
Parimutuel handle (thousands)
Live-on track $ 7,034 $ 9,836 $ 13,690
Live-simulcast $ 20,596 $ 14,075 $ 8,929
Simulcast $ 48,242 $ 46,983 $ 45,845
Total $ 75,872 $ 70,894 $ 68,464
Total attendance 251,975 220,820 251,048
Average per capita wagering $ 219 $ 257 $ 237
Foxboro Park has been granted a license to conduct 165
harness racing performances during 1995.
Foxboro Park is currently operating under an agreement to lease
the premises. It is the intent of both Foxboro Park and the lessor
that a long-term lease be executed and, to that end, the lessor has
granted Foxboro Park a rent-free period extending through December
1995.
In 1995 and 1994, Foxboro Park conducted live racing during the
months of March through October and offered simulcast wagering all
year. The same schedule will be in effect for 1996. The shift from
year-round live racing and the reduction in live performances was
instituted to reduce operating costs during the months of the year when
attendance and handle are lowest. Conversely, more live performances
are conducted during the warmer months when attendance and handle are
highest. As a result of its change in racing schedule, operating
expenses decreased in 1995, and are expected to further decrease in
1996.
<PAGE>
The higher wagering, more sophisticated gamblers are expected to
continue to patronize Foxboro Park during the months when only
simulcasting is offered, as indicated by the $1.3 million increase in
simulcast handle in 1995 from 1994.
In addition, the Company has implemented an aggressive sales
campaign to export its simulcast signal to various tracks throughout
the country. As a result of this aggressive effort, the Company has
been successful in obtaining over 30 simulcast partners and increased
live simulcast wagering by over $6.5 million in 1995. The Company will
continue its simulcast efforts in 1996. In addition, the Company has
made significant changes in the scheduling of its live races to
accommodate simulcast times of many of its simulcast partners. This
effort has made our product more marketable. These factors also have
a significant impact on the Company's ability to improve the quality
of horses and racing at Foxboro.
Operating Revenue
Total operating revenue increased to $33.1 from $32.8 million in
1994, excluding BBRG, an increase of $0.3 million or 1.0%. Revenue
from parimutuel commissions increased slightly to $27.6 million in
l995, from $27.3 million in l994, an increase of $.3 million. The
increase in parimutuel commission is attributable to the increase in
live simulcasting. The total handle on our product exported to other
tracks increased by $33.5 million, $6.5 million at Foxboro and $27
million at Wonderland. This increase results in an increase in
commissions receivable from various tracks through-out the country of
approximately 3% of handle or $1.1 million. Our on-track handle
remained consistent from 1994 to 1995 at $170 million, $55 million at
Foxboro and $115 million at Wonderland. This stabilization of on-track
handle represents an increase in per capita wagering as on-track
attendance has decreased. The Company has made an aggressive effort to
provide a larger variety of wagering options to our patrons by
increasing the number of tracks available. This effort has enabled the
Company to maintain consistent handle results given a dwindling
attendance base. As such, a portion of the on-track wagering was
shifted to simulcast product of approximately $11 million. This change
in product mix has resulted in a lower net commission rate.
Consequently, on-track commission decreased by $.8 million, resulting
in a net increase of parimutuel commissions of $.3 million.
<PAGE>
Concessions revenue increased by approximately $150,000 in 1995
from 1994, as a result of the Company controlling the entire food
service operation in 1995. Other income consist of program revenue,
admission, parking and gift shop sales. The decrease in other revenue
of approximately $173,000 in 1995 is a result of the decrease in
attendance.
The Company is still experiencing a decline in total attendance,
caused by a variety of factors including the continued economic
recession, a general decline in the parimutuel racing industry and
strong competition for the wagered dollar, from the Massachusetts State
Lottery and from the introduction, in 1992, of casino gambling and
video poker machines in neighboring states. Average per capita
wagering increased in 1994 and again in 1995 due to the introduction
of simulcasting, which attracts a more sophisticated wagering audience.
Revenue for l995 includes approximately $470,000 deposited into
the Greyhound Promotional Trust Fund and approximately $470,000
deposited into the Greyhound Capital Improvements Trust Fund.
Additionally, revenue for this period includes approximately $136,000
deposited into the Harness and Running Horse Promotional Trust Funds
combined and $420,000 deposited into the Harness and Running Horse
Capital Improvement Trust Funds combined. These funds are dedicated
to reimbursement of promotional expenses and capital improvements,
respectively, incurred by Wonderland Park and Foxboro Park.
Total revenue increased to $32.8 million in 1994 from $31.9
million in 1993 (excluding BBRG). This increase of approximately $0.9
million is attributable entirely to the increase in food service and
other operating revenue. This increase is attributable to the
purchase of the concessions operation and program sales operation from
BBRG in May of 1994. Parimutuel revenues in 1994 of $27.3 million had
a slight decrease of approximately $100,000 from 1993. This decrease
is attributable primarily to the decrease in live on-track handle at
Foxboro, in part due to the decrease in number of performances and
attendance.
Operating Expenses
Operating expenses in 1995 of $34.3 million decreased from $36.3
million in 1994 by $2 million. This decrease is attributable to the
Company's continued reorganization efforts and cost containment
procedures. The Company realized savings in operating wages, taxes and
benefits of approximately $497,000 in 1995, of which $278,000 and
<PAGE>
$219,000 were attributable to Foxboro and Wonderland, respectively.
These savings represent efforts to manage the facilities by running
live racing at Foxboro during the peak season only and closing parts
of the Wonderland facility during non-peak performances.
The Company realized cost savings on purse expense in 1995 of
approximately $670,000. Wonderland purses paid increased by
approximately $310,000 to $6.1 million in 1995 from $5.8 million in
1994. Purses paid at Wonderland is determined by the statutory
requirements of the Commonwealth of Massachusetts and this increase is
attributable to the increase in total handle. In 1995, Foxboro only
paid purses in the amounts dictated by its statutory requirements with
the Commonwealth of Massachusetts and its contractual obligations with
the Horse Owners. During 1994, Foxboro paid purses in excess of
statutory requirements during the summer season. This period was
marketed as the "Summer Sizzle" and an effort was made to bring the
premier Harness Horses to Foxboro. In conjunction with this marketing
effort, a large sales effort was started to broadcast our signal to
various tracks throughout the country. As a result, Foxboro was able
to increase the number of tracks receiving the simulcast signal and
increase simulcast handle in 1995. As a result of paying purses in
excess of statutory requirements in 1994 a reduction of purses in 1995
of approximately $980,000, was realized.
In addition, the Company realized savings in general and
administrative costs in 1995 of $855,000. These savings are
attributable to a reduction in legal and consulting costs associated
with the restructuring of approximately $300,000. In addition, the
Company reduced its marketing budget by approximately $600,000 in 1995.
Operating expenses (excluding corporate restructuring expenses
and BBRG results in 1993 - See Liquidity and Capital Resources -
General), increased to $34.6 million in l994 from $33.8 million in
l993, an increase of $.8 million or 2.4%. This increase is
attributable primarily to Wonderland concessions operating expenses of
approximately $1,916,000 (purchased in May 1994). The increase is
offset by decreases in payroll due to the closing of portions of the
Wonderland facility during non-peak performances and due to new rates
put into effect for the mutuel clerks at Wonderland, decreases in
insurance premiums, savings as a result of improved operating
efficiencies and decreases in variable operating expenses which were
driven by the reduction in live performances at Foxboro in 1994. The
concessions operations at Wonderland, owned and operated by BBRG in
<PAGE>
1993 and the first four months of 1994 incurred operating expenses of
approximately $2,740,000 and $3,987,000 in 1994 and 1993, respectively.
This decrease of $1,247,000, or 31.3%, is attributable to decreases in
payroll due to the closing of portions of the Wonderland facility
during non-peak performances and reductions in variable operating
expenses as a result of decreased sales.
In December 1993, the labor contract between Wonderland and the
Wonderland Dog Track Employees Union, Local 410 (the "Union"), which
governed the terms of employment of the mutuel clerks at Wonderland
Park, was due to expire. The parties mutually agreed to extend the
contract several times while attempting to reach a new agreement. In
February 1994, Wonderland implemented the terms of its final offer to
the Union, after months of negotiations and an impasse having been
reached. Such terms included a reduction in the hourly compensation
rate of approximately 35%, and the elimination of certain week-end and
holiday premiums. In October 1994, the national office of the Union
reassigned the Union to Service Employees International Union, Local
254 ("Local 254"). In October 1994, Local 254 agreed to a three year
extension of the Union's current contract amended by Wonderland's final
offer. The annual savings to the Company as a result of the new
contract approximate $1.0 million. The Union is challenging the
implementation of the final offer at the State Labor Relations
Commission for the period from implementation in February 1994 through
the reassignment of the Union in October 1994. If the Union is
successful in its challenge, Wonderland may be required to
retroactively compensate the Union member employees for the difference
between the old contract rates and the new contract rates for that
period of time.
Administrative expenses include restructuring charges of $140,000
and $667,000 in 1993 and 1992, respectively, in connection with the
financial and operational reorganization the Company has undertaken.
(See Notes 2 and 16 of Notes to Consolidated Financial Statements).
Former Restaurant Division Operations, 1992 and 1993
During 1994, the Company and BBRG have jointly pursued a
series of transactions, the effect of which resulted in the control of
BBRG no longer resting with the Company (see Notes 4 and 17 of Notes
to Consolidated Financial Statements). The Company's investment in
BBRG for the year ended December 31, 1994 has been accounted for under
the equity method. Accordingly, the following discussions regarding
BBRG relate to the years ended December 31, 1993 and 1992.
<PAGE>
Restaurant Revenue
Net sales increased to $77,168,000 in 1993 from $64,799,000 in
1992, an increase of $12,369,000 or 19.1%. Net sales from restaurants
(excluding revenues from the Company's racetrack concessions) increased
to $74,172,000 in 1993 from $59,677,000 in 1992, an increase of
$15,544,000 or 26.5%. Total restaurant customer count for 1993
increased 21.9% to 4,575,000. Six new restaurants which were opened
during 1993 (Papa-Razzi in Wellesley, MA in March, Papa-Razzi in
Cranston, RI, in June, Papa-Razzi's Cucina in Peabody, MA in August,
Papa-Razzi in Short Hills, NJ in October, Barnside in Hanover, MA in
December and Papa-Razzi in Marlton, NJ in December) contributed
$5,860,000 towards the increase. The Company sold its Rayz restaurant
in Stuart, Florida in May 1993 which resulted in a decrease in net
sales of $1,186,000 in 1993 compared to 1992. Five new restaurants
which were opened during l992 (Papa-Razzi in Concord, MA in June, Papa-
Razzi in West Hartford, CT in August, Papa-Razzi in White Plains, NY
in November, Joe's American Bar & Grill in Peabody, MA in December and
Papa-Razzi in Burlington, MA in December) contributed $10,223,000 to
the increase in net sales. Net sales from the Company's concession
operations declined 71% or $2,126,000 during l993 to $2,996,000 from
$5,122,000 in 1992. This decrease was due primarily to lower
attendance at Wonderland during the period.
Restaurant Operating Expenses
Restaurant Division operating expenses (before depreciation and
amortization) increased to $68,826,000 in l993 from $56,504,000 million
in l992, an increase of 21.8%. This increase is primarily attributable
to increases in cost of sales, payroll costs, and other operating
expenses associated with increased revenues.
Restaurant Operating Margins
Restaurant Division operating profits (earnings from
restaurant operations before depreciation and amortization) were
$8.3 million in l993 and l992, respectively. Operating profit
margins (as a percentage of Restaurant Division revenue) were 10.8% and
12.8% in l993 and l992, respectively. The decrease in margins over the
two year period is attributable both to increases in occupancy costs,
in administrative costs and in general restaurant operating expenses
such as utilities, maintenance, repairs and paper goods, and to an
increase in payroll, in percentage terms, in the concession operations
at Wonderland. Such increases in operating costs as a percentage of
<PAGE>
sales, more than offset modest decreases in food costs as a percentage
of sales, due to a shift in the mix of restaurant sales towards the
higher margin Papa-Razzi Restaurants.
Interest Expense
Interest expenses decreased by approximately $1,500,000 to
$700,000 in 1995 from $2,200,000 in 1994. This decrease is
attributable to the restructuring of many of the Company's debt as
discussed in further detail below.
Interest expense decreased to approximately $2,248,000 in 1994,
from approximately $5,884,000 in 1993. The decrease is
primarily due to the elimination of interest and premium associated
with the Company's 14.25% Subordinated Notes. (See Liquidity and
Capital Resources - General).
Interest expense in 1993, excluding BBRG, increased to $5.9
million, from $4.0 million in 1992. Interest expense for BBRG
decreased to $104,000 in 1993, from $524,000 in 1992, due to a decrease
in average borrowings, as well as lower interest rates. During March
1992, the Company's restaurant subsidiary completed an initial public
offering of its common stock and the proceeds therefrom were used to
substantially reduce the Company's out-standing indebtedness. The
related decrease in interest expense was offset by (1) an increase in
1993 associated with amortization of the premium relating to the
Foxboro Creditor Trust and Settlement Agreement and (2) an increase of
approximately $1,240,000 associated with the premium recorded pursuant
to Section 7.02 of the Indenture governing the Company's 14.25%
subordinated debentures (see Liquidity and Capital Resources).
Depreciation and Amortization
Depreciation and amortization remained flat at approximately $1.7
million in 1995, 1994 and 1993 (excluding BBRG).
Depreciation and amortization increased slightly to $5.6
million in l993, from $5.4 million in l992, an increase of $0.2
million or 3.7%. This increase reflects an increase in Racing
Division depreciation due to the addition of Foxboro Park in May
1992 as well as an increase in BBRG depreciation, driven by new
restaurant openings.
<PAGE>
Investment Gains (Losses)
As part of the exchange of 98.6% of the Company's 14.25% Sub-
ordinated Notes for 887,000 shares of BBRG common stock, the
Company realized an investment gain of approximately $4,252,000
(See Liquidity and Capital Resources - General). Other net gains
on investments in 1994, are attributable to the sale of certain
marketable securities.
During 1993, the Company recorded a reserve of approximately
$772,000 related to a note receivable, and accumulated interest, due
from a real estate limited partnership (See Note 15 of Notes to
Consolidated Financial Statements).
Gain on Sale of Real Property
In December 1994, the Company and Revere Realty Group ("Revere
Realty") collectively sold fifteen acres of excess land located in
Revere, MA to a third party for $3,705,000. The Company owned nine of
the fifteen acres and held a mortgage of approximately $1.6 million on
the remaining six acres, which were owned by Revere Realty. The
proceeds allocated to Revere Realty were used by Revere Realty to
satisfy its indebtedness to the Company. The Company realized a pre-
tax gain of approximately $1.1 million on the sale of the land and
recorded other income of approximately $.6 million related to the
repayment of the Revere Realty indebtedness, for interest due and the
recovery of amounts previously written off.
In May 1993, BBRG sold to the Florida Department of Trans-
portation the property occupied by the Company's restaurant in Stuart,
Florida for $4,700,000, resulting in a pretax gain of
approximately $1,202,000.
In June 1993, the Company sold a retail and office building
located in Boston, MA for $1,620,000, resulting in a loss on dis-
position of approximately $512,000.
Extraordinary Item - Gain on Retirement
and forgiveness of debt (net of tax)
In May 1994, the Company realized an extraordinary gain of
approximately $11.2 million, net of taxes and the write-off of bond
<PAGE>
issuance cost, premiums and interest, from the exchange of approxi-
mately 98.6% of the Company's 14.25% Subordinated Notes (See Liquidity
and Capital Resources - General).
Liquidity and Capital Resources
Historically, the Company's primary sources of capital to
finance its businesses have been its cash flow from operations and
credit facilities. The Company's capital needs are primarily for
maintenance and enhancement of the racing facilities at Wonderland Park
and Foxboro Park, and for debt service requirements, including those
relating to debt incurred in connection with capital expenditures at
Foxboro Park during l992.
General
In May 1994, holders of approximately $19,300,000 of the
Company's 14.25% Subordinated Notes (the "Notes") exchanged them for
approximately 887,000 shares of BBRG common stock. The shares were
exchanged in full settlement of principal, accumulated interest and
default premiums due in respect of such Notes. The transaction
resulted in an extraordinary gain of approximately $11,159,640 net of
applicable income taxes. The net extraordinary gain includes
forgiveness of interest and indebtedness reduced by related expenses
and the write-off of remaining bond issuance fees. Holders of
approximately $285,000 of the Notes elected not to participate in the
exchange. These Notes remain in default.
In December 1994, the Company entered into an amended loan
agreement restructuring a $4.5 million term loan agreement dated
November 1993. The new agreement was divided into two new notes. The
first note included a principal balance of $1.0 million which was paid
in full. The second note in the amount of $3.5 million, requires
monthly payments of interest only, until June 1995 at an annual rate
of 8.75% and, thereafter, monthly payments of principal and interest
of $42,298 until maturity in June 1996.
In May 1994, the Company settled certain litigation regarding the
Creditor Trust Agreement and entered into a Settlement Agreement of
approximately $2.2 million. Under the Settlement Agreement, the
balance was divided into two non-interest bearing notes. The first
note included a principal balance of $200,000 with four equal monthly
installments through September 15, 1994. The second note included a
principal balance of $2 million, and requires minimum quarterly
<PAGE>
payments of $105,000 in 1994, $145,000 in 1995, $150,000 in 1996 and
$230,000 through maturity in September 1997. The Company has pledged
100% of the distributions of the Foxboro Park Capital Improvement Trust
Funds as payment towards these amounts. A conditional bonus provision
may be required, contingent upon future events and conditions. The
Company was in default of the minimum payment requirements at year end
1995 and is currently negotiating to restructure the minimum payment
requirement. All receipts from the Capital Improvements Trust Funds
have been distributed as payments. The entire obligation has been
included as a current liability at year end.
In March 1995, the Company and the bank reached an agreement to
restructure the $2,000,000 Term Note which was in default at December
31, 1994. The agreement became effective in April 1995. The new terms
provide for the pledge of 401,000 shares of BBRG common stock, (the
"Collateral") and for the maintenance of a loan to collateral value
ratio of 75%. The new terms also provide for interest only payments
until August 31, 1995 and principal payments of $16,000 per month, plus
interest, thereafter until maturity on June 1, 1996. The interest rate
will be fixed at 10% for the remainder of the Term Note. In March
1995, the loan to collateral value ratio fell below 75%. The Company
has not received any notice of default from the bank. The Company is
in compliance with all other terms of the note and as made all required
payments.
In October 1994, the Company entered into a Loan Restructuring
Agreement with the Mortgagee of property located at 284 Newbury St.
The new agreement ("Loan Restructure Agreement") reduced the principal
amount from approximately $4.5 million to $4.1 million and released
outstanding interest of approximately $400,000. In consideration of
the above, the Company has assigned all of the rents it receives from
BBRG to the Mortgagee. The Loan Restructure Agreement requires
interest only payments through Maturity on September 1, 1998. Interest
charged at 5.50% through October 1995 and 8.29% thereafter. As part
of the Loan Restructure Agreement, the Company maintains a non-recourse
guarantee in the amount of $400,000, which is collateralized by 30,000
of the Company's shares of BBRG. The guarantee is reduced by $50,000
per year for three years beginning March 1996. In addition, the
Company has pledged 15,000 of its BBRG shares to the Mortgagee as
indemnification against past due real estate taxes owed to the City of
Boston. Such shares will be released to the Company on a pro-rata
basis as the past due real estate taxes are satisfied. The Company is
amortizing the interest forgiven over the term of the new note.
<PAGE>
In June 1993, the Company defaulted on its obligation under a
non-recourse promissory note (the "Promissory Note") which was
collateralized by a second mortgage on a building owned by the Company.
The Promissory Note, which matured in June 1993, required a combined
payment of principal and interest totalling $400,000. The Company
remains in default on such obligation.
In May 1994, the Company entered into an agreement with BBRG to
transfer the operations under the Concessions Agreement and the
Management Agreement to the Company in return for a six year term note
in the amount of $970,000. In April 1995 the Note was amended
requiring equal quarterly payments of principal and interest beginning
April 1, 1996 of approximately $36,000 with interest at 6%.
In April 1995, the Company reached an agreement to modify and
extend a 5% Promissory Note in the amount of $110,000. The terms of
the new agreement require sixty (60) monthly payments of principal and
interest of $2,003. The annual interest rate is 7.5% but is increased
to 12% in the event of a default.
In May 1995, the Company reached an agreement with a related
party to restructure a 6% Promissory Note (the "Note") in the amount
of $318,000. The new terms provide for the pledge of an additional
60,000 shares of BBRG common stock. The new terms also provide for
principal payments, plus interest at 3/4 of 1% per month, of $9,000 per
month until April 1996 and $12,000 per month from May 1996 until
maturity in November 1996.
In December 1994 as part of the agreement to sell land owned
collectively by the Company and the Revere Realty Group, Inc., the
Company was loaned $300,000 evidenced by a promissory Note and Second
Mortgage. In conjunction with the loan, a portion of the sales price
in the amount of $300,000 was contingent upon the buyer obtaining
certain permits for construction. The proceeds from this contingent
payment are to be used to extinguish the obligation on the related
loan. During August 1995, the buyer received the applicable permits
and the Company is seeking relief of this obligation.
Included in the current portion of long term debt is outstanding
indebtedness under a margin agreement of approximately $165,000 and
$332,000 at December 30, 1995 and 1994, respectively. the indebtedness
is collateralized by 88,000 shares of BBRG common stock.
<PAGE>
In conjunction with the sale of real property, described above,
included in the total proceeds, $300,000 was advanced by the purchaser
in the form of a Promissory Note. If the purchaser succeeds in
obtaining all necessary building permits within three
years of the purchase date, the Promissory Note will be forgiven. The
Company realized a pre-tax gain of approximately $1.1 million
on the sale of the land and approximately $600,000 on the related
repayment of the Revere Realty indebtedness.
In November 1992 the Company engaged the professional services
of a related party to assist management in the planning and execution
of a financial and operational reorganization of the Company (see Notes
2, 3 and 4 of Notes to Consolidated Financial Statements). Since such
engagement, the Company has retired or restructured approximately $32.5
million of debt, eliminated non-performing non-core assets, and
significantly reduced certain operating expenses. The Company
continues to pursue ways of improving operations, and of retiring or
restructuring its remaining indebtedness. Such methods may include the
sale of an equity interest in one or more of its subsidiaries or
alternative sources of financing.
The Company and its subsidiaries have several immediate needs for
cash. There can be no assurance that the Company's efforts to provide
additional liquidity will be successful. Management anticipates that
unless its efforts are successful, the Company may not have sufficient
cash to cover operating expenses and scheduled debt payments during
l996.
Racing Subsidiaries
In 1992, the Company, through its subsidiaries, invested
approximately $9,400,000 for capital improvements, equipment and start-
up costs in connection with the commencement of thoroughbred and
harness racing at Foxboro Park. The Company entered into certain
agreements for the financing of this investment, as detailed below.
Autotote Limited ("Autotote") advanced $1,325,000 to the Company
in 1992 and 1993, in consideration for the exclusive right to provide
totalisator services for any off-track betting and simulcast operations
that the Company may undertake in the future. The terms of the original
agreement required repayment in weekly installments of $4,944, with a
final installment due on May 31, 1997. The Company made none of the
weekly installments required under this agreement.
<PAGE>
In January 1994, a new agreement was entered into with Autotote
giving Autotote the exclusive right to supply keno terminals and
systems for Wonderland and Foxboro, in the event the Company is
authorized by law to select such equipment, in exchange for the
forgiveness of any current and future amounts owed by the Company in
respect of either of the above advances. Accordingly, the Company has
reclassified $1,325,000 from notes payable to deferred revenue and will
realize such deferred revenue over the remaining contract life of the
current service agreement with Autotote. As additional financing for
Foxboro Park, the Company entered into many other financing
arrangements described above.
In order to meet the requirements for renewal of racing licenses
in 1997, the Company's racing subsidiaries must demonstrate that they
are financially stable entities, capable of disposing of their
obligations on a timely basis. Although management is optimistic that
it will be able to demonstrate financial stability in their
applications for 1997 racing licenses, there can be no assurance that
the Racing Commission will continue to grant licenses to conduct
racing on the schedules presently maintained at Wonderland and Foxboro
Park.
In the event that the Company is not successful in obtaining 1997
racing licenses, the adverse impact on the Company's assets would be
material.
Former Restaurant Division, 1992 and 1993
On August 10, 1993, BBRG entered into a revolving credit and term
loan agreement with the First National Bank of Boston under which BBRG
may borrow up to $5,000,000 (the "Loan Agreement"). The Loan Agreement
acts as a revolving credit line through August 10, 1994, at which time
the outstanding principal balance is converted to a three-year term
loan. (BBRG has an agreement with the First National Bank of Boston
under which the Company has increased the amount it may borrow from
$5,000,000 to $9,000,000 under the Loan Agreement.)
Impact of Inflation and Changing Prices
Certain of the Company's operating expenses, such as wages and
benefits, equipment repair and replacement, and inventory and marketing
costs, increase with general inflation. In order for the Company to
cope with inflation, it must, to the extent permitted by competition
<PAGE>
and patron acceptance, pass increased cost on by periodically
increasing prices. The Company is unable to offset the effects of
inflation by increasing its percentage of handle in the racing
subsidiaries, because its percentage is fixed by statute.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
Page
REPORT OF INDEPENDENT ACCOUNTANTS 27
CONSOLIDATED BALANCE SHEETS 28
CONSOLIDATED STATEMENTS OF OPERATIONS 30
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DEFICIT) 31
CONSOLIDATED STATEMENTS OF CASH FLOWS 32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 34
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of The Westwood Group, Inc. and Subsidiaries:
We have audited the accompanying consolidated balance sheets of
The Westwood Group, Inc. (a Delaware Corporation) and Subsidiaries as
of December 31, 1995 and December 31, 1994, and the related
consolidated statements of operations, changes in stockholders' deficit
and cash flows for each of the three years in the period ended December
31, 1995. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance as to whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects the consolidated
financial position of The Westwood Group, Inc. and Subsidiaries as of
December 31, 1995 and 1994, and the consolidated results of its
operations and cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted
accounting principles.
The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going concern.
As discussed in Note 2 to the consolidated financial statements, the
Company has suffered significant losses from operations, encountered
substantial cash flow and liquidity problems, has a significant working
capital deficiency and stockholders' deficit and is in default on debt
obligations. These factors raise substantial doubt about its ability
to continue as a going concern. Management's plan in regard to these
matters is also described in Note 2. The consolidated financial
statements do not include any adjustments that might result from the
outcome of this uncertainty.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
March 8, 1996
<PAGE>
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
__________
ASSETS 1995 1994
Current assets:
Cash and cash equivalents $ 450,987 $ 812,424
Restricted cash 1,401,799 1,399,726
Accounts receivable 796,085 689,741
Prepaid expenses and other current
assets 270,685 244,739
Total current assets 2,919,556 3,146,630
Land 348,066 348,066
Buildings 19,397,281 19,237,102
Machinery and equipment 4,936,976 4,782,061
Leasehold improvements 10,694,678 10,596,672
35,377,001 34,963,901
Less: accumulated depreciation and
amortization 18,765,247 17,567,344
Net property, plant and equipment 16,611,754 17,396,557
Other assets:
Goodwill, less accumulated
amortization of $240,000
and $96,000 480,000 624,000
Intangible assets, less accumulated
amortization of $49,999 and
$33,333 - 16,666
Investment in unconsolidated
subsidiary 4,901,401 5,453,631
Accounts and notes receivable from
officers, employees and related
party 318,005 480,578
Other assets, less accumulated
amortization of $818,614 and
$549,258 376,909 705,212
Total other assets 6,076,315 7,280,087
Total assets $25,607,625 $27,823,274
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
____________
LIABILITIES AND STOCKHOLDERS' DEFICIT
1995 1994
Current liabilities:
Current portion of long-term debt $ 5,853,754 $ 2,213,307
Long-term obligations in default 1,751,235 2,504,168
Subordinated notes payable 285,000 285,000
Accounts payable and other accrued
expenses 14,944,406 12,818,644
Outstanding pari-mutuel tickets 564,880 589,296
Total current liabilities 23,399,275 18,410,415
Long-term debt, less current maturities 5,773,651 9,549,586
Other long-term liabilities 1,347,425 2,815,664
Commitments and contingencies
Stockholders' deficit:
Common stock, $.01 par value;
authorized 3,000,000 shares;
1,936,409 shares issued and
outstanding 19,364 19,364
Class B common stock, $.01 par
value; authorized 1,000,000
shares; 912,615 shares issued
and outstanding 9,126 9,126
Additional paid-in capital 13,355,355 13,355,355
Accumulated deficit (10,009,155) ( 7,954,721)
Note receivable from officer (316,073) (301,551)
Minimum pension liability adjustment ( 6,561) (115,182)
Cost of 1,593,199 common and 600
Class B common shares in treasury (7,964,782) (7,964,782)
Total stockholders' deficit (4,912,726) ( 2,952,391)
Total liabilities and
stockholders' deficit $25,607,625 $ 27,823,274
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
for the years ended December 31, 1995, 1994 and 1993
____________
1995 1994 1993
Operating revenue:
Parimutuel commissions $ 27,598,801 $ 27,289,706 27,425,944
Concessions 3,152,174 2,984,933 2,640,239
Other operating 2,357,186 2,530,248 1,859,309
Former restaurant division - - 77,168,236
Total operating revenue 33,108,161 32,804,887 109,093,728
Operating expenses:
Wages, taxes and benefits 10,518,322 10,995,734 10,474,463
Purses 8,863,655 9,536,257 9,412,226
Cost of food and beverage 1,088,348 1,033,544 469,847
Administrative 2,196,102 3,157,811 2,786,842
General operating 10,000,821 9,896,954 10,612,720
Restaurant division - - 68,826,307
Depreciation and amortization 1,627,925 1,679,671 5,585,709
Total operating expenses 34,295,173 36,299,971 108,168,114
Income (loss) from operations (1,187,012) ( 3,495,084) 925,614
Other income (expense):
Interest expense, net ( 708,975) (2,247,860) (5,884,054)
Equity income (loss) in
unconsolidated subsidiary ( 552,230) 115,377 -
Investment gains (losses) - 4,399,435 (771,712)
Net gain on sale of real
property - 1,087,883 689,889
Other income 393,783 1,217,722 -
Total other income (expense) ( 867,422) 4,572,557 (5,965,877)
Minority interest - - (1,976,802)
Income (loss) before provision
for income taxes and extraordinary
item (2,054,434) 1,077,473 (7,017,065)
Provision for income taxes - ( 145,000) (2,358,000)
Income (loss) before extraordinary
item (2,054,434) 932,473 (9,375,065)
Extraordinary item-gain on
retirement and forgiveness
of debt (net of tax) - 11,159,640 -
Net income (loss) $ (2,054,434) $ 12,092,113 $(9,375,065)
Income (loss) per share:
Loss before extraordinary
item $ ( 1.64) $ .74 $( 7.47)
Extraordinary item - 8.89 -
Net income (loss)
per share $ ( 1.64) $ 9.63 $( 7.47)
Weighted average common shares
outstanding 1,255,225 1,255,225 1,255,225
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
THE WESTWOOD GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' (DEFICIT)
for the years ended December 31, 1995, 1994 and 1993
__________
Class B Additional Retained Note Receivable
Common Common Paid-In Earnings From Related
Stock Stock Capital (Deficit) Party
Balance, December
31, 1992 $19,364 $9,126 $13,871,473 $(10,671,769) $(498,193)
Net loss - - - ( 9,375,065) -
Interest
receivable - - - - (36,017)
Minimum pension
liability
adjustment - - - - -
Balance, December
31, 1993 19,364 9,126 13,871,473 (20,046,834) (534,210)
Elimination of
previously
consolidated
subsidiary - - ( 516,118) - -
Net Income - - - 12,092,113 -
Interest
receivable - - - - (36,017)
Note receivable
payments - - - - 268,676
Minimum pension
liability
adj. - - - - -
Balance, December
31, 1994 19,364 9,126 13,355,355 ( 7,954,721) (301,551)
Net loss - - - ( 2,054,434) -
receivable - - - - (14,522)
liability
adj. - - - - -
Balance, December
31, 1995 $19,364 $9,126 $13,355,355 $(10,009,155)$(316,073)
(continued)
<PAGE>
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN (DEFICIT)
(continued)
for the years ended December 31, 1995, 1994 and 1993
Minimum
Pension Total
Liability Treasury Stockholders'
Adj. Stock Equity (Deficit)
Balance,
December 31, 1992 - $(7,964,782) $( 5,234,781)
Net Loss - - ( 9,375,065)
Interest receivable - - ( 36,017)
Minimum pension
liability adjustment $(376,090) - ( 376,090)
Balance,
December 31, 1993 (376,090) (7,964,782) ( 15,021,953)
Elimination of
previously con-
solidated sub-
sidiary - - ( 516,118)
Net income - - 12,092,113
Interest receivable - - ( 36,017)
Note receivable pay-
ments - - 268,676
Minimum pension
liability adj. 260,908 - 260,908
Balance,
December 31, 1994 (115,182) (7,964,782) ( 2,952,391)
Net loss - - ( 2,054,434)
Interest receivable - - ( 14,522)
Minimum pension
liability adj. 108,621 - 108,621
Balance,
December 31, 1995 ( 6,561) (7,964,782) ( 4,192,726)
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended December 31, 1995, 1994 and 1993
__________
1995 1994 1993
Cash flows from operating activities:
Net income (loss) $(2,054,434) $12,092,113 $(9,375,065)
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization 1,627,925 1,679,671 5,585,709
Gain on sale of real property - (1,087,883) (903,145)
Extraordinary gain on
extinguishment of debt - (11,159,640) -
Realized and unrealized investment
(gain) loss - ( 4,399,435) 771,712
Equity in (income) loss from BBRG 552,230 ( 115,377) -
Minority interest - - 1,976,802
Deferred revenue (353,333) ( 353,332) -
Minimum pension liability
adjustment 108,621 260,908 (376,090)
Other (158,424) - 65,471
Changes in operating assets and
liabilities:
Decrease (increase) in restricted
cash ( 2,073) 295,240 611,588
(Increase) decrease in accounts
receivable (106,344) 1,117,612 (459,055)
(Increase) in inventories - - ( 4,825)
(Increase) decrease in prepaid
expenses and other current assets ( 25,946) 48,692 (1,854,801)
Decrease in other assets 206,998 134,868 5,254
Increase in accounts payable and
other accrued liabilities 2,101,342 2,896,520 9,791,664
(Decrease) in other
long-term liabilities (1,114,906) (370,610) (291,458)
Total adjustments 2,836,090 (11,052,766) 14,918,826
Net cash provided by
operating activities 781,656 1,039,347 5,543,761
(Continued)
<PAGE>
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued
for the years ended December 31, 1995, 1994 and 1993
__________
1995 1994 1993
Cash flows from investing activities:
Proceeds from sales of marketable
equity securities available for sale - 147,474 152,235
Proceeds from sale of real property - 1,459,567 6,328,000
Additions to property, plant and
equipment (413,100) ( 260,720) (7,286,415)
Tradenames - - (29,000)
Proceeds from property insurance,
net - - 416,262
Proceeds from other liabilities - - 325,000
Net cash provided by (used in)
investing activities (413,100) 1,346,321 ( 93,918)
Cash flows from financing activities:
Proceeds of short-term debt 300,000 300,000 29,725
Principal payments of debt (1,029,993) (1,903,504) ( 4,154,607)
Payments related to exchange of debt - ( 324,131) -
Net cash provided by (used in)
financing activities (729,993) (1,927,635) ( 4,124,882)
Net (decrease)increase in cash and cash
equivalents (361,437) 458,033 1,324,961
Cash and cash equivalents at beginning
of year 812,424 2,725,391 1,400,430
Cash effect of deconsolidation - ( 2,371,000) -
Adjusted cash and cash equivalents
at beginning of year 812,424 354,391 1,400,430
Cash and cash equivalents at end
of year $ 450,987 $ 812,424 $ 2,725,391
Supplemental disclosure of cash flow
information:
Cash paid during the year for:
Interest $ 779,566 $ 1,009,479 $ 751,005
Income taxes $ 114,892 $ - $ 2,843,000
The accompanying notes are an integral part of these consolidated
financial statements.
PAGE
<PAGE>
1. Summary of Significant Accounting Policies
Description of Business
The Company operates primarily through its parimutuel racing
subsidiaries. Wonderland Greyhound Park is a parimutuel greyhound
racing facility located in Revere, Massachusetts. Foxboro Park is a
parimutuel harness racing facility located in Foxboro, Massachusetts.
The Wonderland facility includes a one-quarter mile sand track, a
physical plant consisting of a climate controlled grandstand and
clubhouse and a two-story administrative center. The Company maintains
and operates two full service restaurants, a sports bar and other
concession facilities at the racetrack. The racetrack facility can
accommodate 10,000 patrons. The average attendance per performance in
1995 was 1,240 persons. The complex encompasses a total of
approximately 35 acres, including paved and lighted parking providing
capacity for approximately 2,300 cars.
The Foxboro facility includes a five-eighths mile oval track, a
physical plant consisting of a climate controlled grandstand and
clubhouse, and administrative offices. The facility also includes
stalls to accommodate 600 horses. The Company maintains and operates
a full-service restaurant and various other concession facilities at
the racetrack. The racetrack facility can accommodate 9,000 patrons,
and includes paved and lighted parking providing capacity for 3,500
cars.
<PAGE>
Wonderland and Foxboro provide its patrons with a variety of
entertainment options including live racing and full card simulcast
wagering.
Principles of Consolidation
The accompanying consolidated financial statements for the years
ended December 31, 1995 and 1994, include the accounts of the Company
and its wholly-owned subsidiaries. All material intercompany
transactions have been eliminated in consolidation. During 1993, the
Company also consolidated the accounts of its then 42.9% owned
restaurant subsidiary, Back Bay Restaurant Group, Inc. ("BBRG").
During 1994, the Company and BBRG jointly pursued a series of
transactions, the effect of which resulted in the control of BBRG no
longer resting with the Company. Accordingly, the Company's investment
in BBRG for the years ended December 31, 1995 and 1994 has been
accounted for under the equity method. (See Note 12 Investment in
Affiliate). The financial statements for the year ended December 31,
1993 reflect the Company's accounting treatment of its investment in
BBRG, as initially reported, under the consolidation method.
Cash and Cash Equivalents
Investors with maturities of three months or less at the time of their
purchase were classified as cash equivalents in 1993.
<PAGE>
Restricted Cash
The majority of restricted cash is related to the operations of
Wonderland Greyhound Park and Foxboro Park, and consists of amounts
held by The Commonwealth of Massachusetts (the "Commonwealth") in trust
funds (for capital improvements and advertising/promotion) (see Note
3), and unclaimed winnings from parimutuel wagering. Removal of
restrictions on the use of the trust funds is dependent upon approval
by the Commonwealth. Restricted cash also includes a cash balance of
$500,000 held as collateral on certain indebtedness (see Note 3).
Property, Plant and Equipment
Property, plant and equipment are stated at cost and are depreciated
using the straight-line method over the following
estimated useful lives:
Asset Classification Estimated Useful Life
Buildings and improvements 30 Years
Machinery and equipment 5-10 Years
Leasehold improvements are amortized over the lesser of the assets'
estimated useful lives or the actual or expected lease terms. Gains
or losses are recognized upon the disposal of property, plant and
equipment, and the related accumulated depreciation and amortization
are adjusted accordingly. Losses are also recognized on buildings and
improvements in the event of a permanent impairment to their value, as
determined by management. Maintenance, repairs and betterments that
do not enhance the value of or increase the life of the assets are
charged to operations as incurred.
<PAGE>
Depreciation expense of approximately $1,198,000, $1,282,000 and
$667,000 was recorded for the years ended December 31, 1995, 1994 and
1993 respectively.
Intangible Assets
Intangible assets, including goodwill, trade names and trademarks, are
amortized over periods not exceeding 40 years on a straight-line basis.
The carrying value of intangible assets is reviewed periodically by
management. If expected future operating cash flows derived from such
intangible assets is less than their carrying value, an impairment in
the carrying value is recognized. In performing this analysis,
management considers such factors as current results, trends and future
prospects, in addition to economic factors.
Receivable From Related Party
Amounts receivable from the Company's majority shareholder are
reflected in the balance sheet as an offset to equity.
Investments in Affiliates
The Company's investment in BBRG at December 31, 1995 is approximately
$4.9 million, or approximately 18.5% of BBRG common stock. The
investment in BBRG is accounted for under the equity method in 1995 and
1994, as a result of a series of transactions which separated the
companies and reduced the Company's ownership percentage from 42.9%.
In 1993, the accounts of BBRG were consolidated as described above.
<PAGE>
Debt
Long-term obligations which are in default have been classified
as current liabilities. (See Note 3.)
Income Taxes
The Company uses the liability method of accounting for deferred income
taxes. Under this method, deferred income taxes are provided based on
the estimated future tax effects of differences between financial
statement carrying amounts and the tax bases of existing assets and
liabilities. The Company's policy is to record evaluation allowance
against deferred tax assets unless it is more likely than not that such
assets will be realized in future periods. The tax effect of
differences in the timing of recognition of income and expense for tax
purposes are reflected in the deferred income tax accounts (which are
included in "Other Long-Term Liabilities").
Income (Loss) per Common Share
Income (loss) per share amounts are based on the weighted average
number of common and Class B common shares and common share equivalents
outstanding (if dilutive) during each year. Common
share equivalents consist of dilutive stock options and warrants
under the treasury stock method.
<PAGE>
Statement of Financial Accounting Standards No. 115
The Company adopted the provisions of Statement of Financial
Accounting Standards No. 115, Accounting for Certain Investments
in Debt and Equity Securities, as of December 31, 1993. The
adoption of this statement had no material affect on the
financial statements.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period(s). Actual results could
differ from those estimates.
Reclassifications
Certain amounts in the 1994 and 1993 consolidated financial
statements have been reclassified to conform with the 1995
presentation.
2. Results of Operations and Management's Plans
The Company's consolidated financial statements have been prepared on
the basis that it will be able to continue in existence. The Company
incurred a consolidated net loss from operations of approximately
$1,187,000 in 1995 and $3,495,000 in 1994. The net loss from
operations in 1995 include a non cash charge for depreciation and
<PAGE>
amortization of $1,628,000. The improvement in the year ending 1995
compared to the corresponding period in 1994 is primarily due to a
decrease in operating expenses of approximately $1.9 million
attributable to the reorganization plan discussed below. In addition,
the Company has encountered substantial cash flow and liquidity
problems. As a result, the Company is in default on certain senior
debt (See Note 3).
The Company is in the process of completing a plan of reorganization
to address its cash flow and liquidity problems as detailed below. The
above factors, however, raise substantial doubt about its ability to
continue as a going concern.
For the period beginning in November 1992 through February 1995, the
Company engaged the professional services of a corporate advisor (the
"Advisor") to assist management in the planning and execution of a
corporate reorganization. During their engagement, the Advisor
undertook the following activities in conjunction with and on behalf
of management:
- Managing the Company within its cash constraints,
including the creation of a cash flow forecasting
system;
- Developing an immediate short-term cost reduction
and cash generation program;
- Reorganizing operations and renegotiating
certain service contracts and agreements
in order to achieve operational efficiencies;
<PAGE>
- Negotiating with existing and potential
lenders and creditors in an effort to
restructure the Company's debt and to secure
new sources of capital (See Note 3);
- Restructuring certain assets including the
identification of assets to be held for
disposition.
- Assisting the Board of Directors as requested.
- Since such engagement, the Company has retired or
restructured approximately $32.5 million of debt,
eliminated non-performing non-core assets, and
significantly reduced certain operating expenses.
The Company continues to pursue ways of improving
operations, and of retiring or restructuring its
remaining indebtedness.
In June of 1995, the Company continued its reorganization with the
restructuring of its financial and operational management team, with
the addition of an Executive Vice-President, Chief Financial Officer
and Controller. Management has continued to monitor operational costs
containment and seek ways to improve operational profitability. Also,
management is continuing to negotiate existing obligations and
commitments to reduce the burden on current cash flow from operations.
In addition, management is looking for new opportunity to grow and
expand its current product, through increasing new markets via
simulcast wagering and adding new entertainment options at its two
locations.
<PAGE>
The Company's ability to continue as a going concern depends on future
events, including its continued success in its reorganization efforts.
3. Debt
At December 31, 1995 and 1994, debt consisted of the
following:
1995 1994
14-1/4% Subordinated Notes due 1997 $ 285,000 $ 285,000
8-3/4% Term loan requiring monthly
payments of interest only until
July 1995, then monthly payments
of principal and interest of
$42,298 until maturity in June
1996, collateralized by a
mortgage and security interest
in all real estate and personal
property located at Wonderland
Park, by all of the stock of
Wonderland Park, by $500,000
cash, and guaranteed by three
subsidiaries of the Company,
including Wonderland Park. 3,397,479 3,500,000
Promissory note, non-interest
bearing, requiring monthly
payments, with a quarterly
minimum guaranteed amount,
of all distributions from
Foxboro Capital Improvements
Trust Funds applicable to the
period beginning January
1, 1994, until paid in full,
collateralized by all of the
assets and stock of Foxboro
Park. 1,351,235 1,667,947
<PAGE>
1995 1994
Line of credit, interest at 10%
requiring monthly payments of
interest only through August 1995,
then monthly payments of interest plus
$16,000 principal until maturity at
June 1, 1996, final payment of
$1,342,000 due July 1996, collateralized
by approximately 401,000 shares of BBRG
common stock held by the Company. 1,936,000 2,000,000
Mortgage note, principal amount of
$4,100,000 with interest at 5.5%
through October, 1995 and 8.29%
thereafter, due September 1, 1998,
requiring payments of interest only.
Collateralized by certain real property
with assignment of all rents at the
property and a pledge of the stock of
a subsidiary. 4,519,651 4,680,911
<PAGE>
1995 1994
10% Note payable due July
1993, collateralized by
certain property. 400,000 400,000
6% Term Note, payable in equal
quarterly payments of principal
and interest of approximately $36,000
beginning April 1, 1996, collateralized
by certain tangible personal property
and licenses.
970,000 970,000
7.5% Promissory Note, payable in 60
monthly payments of principal and
interest of $2,003, commencing
April, 1995.
85,818 104,168
6% Promissory Notes, payable in monthly
payments of principal plus interest at
$9,000 per month until
April, 1996 and $12,000 per month
until maturity in November, 1996.
Collateralized by 60,333 shares of
BBRG common stock held by the Company. 255,000 300,000
<PAGE>
Promissory Note, due December 15, 1997,
non interest bearing,
payment contingent upon
certain events, collateralized by a
second mortgage on certain property. 300,000 300,000
Margin agreement due on demand
collateralized by 88,000 shares
of BBRG stock held by the Company. 163,457 331,986
Miscellaneous notes, payable in
connection with construction
services performed at Foxboro
Park, maturing on or before
December 31, 1994. - 12,049
13,663,640 14,552,061
Less: Current maturities 5,853,754 2,213,307
Long-term obligations in default
which have been classified as
a current liability. 1,751,235 2,504,168
Subordinated notes in default,
which have been classified
as a current liability. 285,000 285,000
Long-term debt, net of current
maturities, long-term obligations
and subordinated notes in default. $ 5,773,651 $ 9,549,586
<PAGE>
The aggregate principal payments required to be made on long term debt,
assuming the Company and its subsidiaries were not in default on any
of their borrowings (see hereunder for debt defaults), for the years
subsequent to December 31, 1995 are as follows:
1996 7,887,888
1997 106,054
1998 4,212,879
1999 120,148
2000 and thereafter 617,092
$12,944,061
In May 1994, holders of approximately $19,300,000 of the Company's
14.25% Subordinated Notes (the "Notes") exchanged them for
approximately 887,000 shares of BBRG common stock. The shares were
exchanged in full settlement of principal, accumulated interest and
default premiums due in respect of such Notes. The transaction
resulted in an extraordinary gain of approximately $11,159,640 net of
applicable income taxes of approximately $1.3 million. The net
extraordinary gain includes forgiveness of interest and indebtedness
reduced by related expenses and the write-off of remaining bond
issuance fees. Holders of approximately $285,000 of the Notes elected
not to participate in the exchange. These Notes remain in default.
In December 1994, the Company entered into an amended loan agreement
restructuring a $4.5 million term loan agreement dated November 1993.
The new agreement was divided into two new notes. The first note
included a principal balance of $1.0 million which was paid in full.
<PAGE>
The second note in the amount of $3.5 million, requires monthly
payments of interest only, until June 1995 at an annual rate of 8.75%
and, thereafter, monthly payments of principal and interest of $42,298
until maturity in June 1996.
In May 1994, the Company settled certain litigation regarding the
Creditor Trust Agreement and entered into a Settlement Agreement of
approximately $2.2 million. Under the Settlement Agreement, the
balance was divided into two non-interest bearing notes. The first
note included a principal balance of $200,000 and four equal monthly
installments through September 15, 1994 which has been paid. The
second note included a principal balance of $2 million, and requires
minimum quarterly payments of $105,000 in 1994, $145,000 in 1995,
$150,000 in 1996 and $230,000 through maturity in September 1997. The
Company has pledged 100% of the distributions of the Foxboro Park
Capital Improvement Trust Funds as payment towards these amounts. A
conditional bonus provision, which may be required contingent upon
future events and conditions, has been accrued. Additionally, the
agreement includes an acceleration clause contingent upon future events
and conditions. The Company was in default of the minimum payment
requirements at year end 1995 and is currently negotiating to
restructure the minimum payment requirement. All receipts from the
Capital Improvements Trust Funds have been distributed as payments.
The entire obligation has been included as a current liability at year
end.
In March 1995, the Company and the bank reached an agreement to
restructure the $2,000,000 Term Note which was in default at December
31, 1994. The agreement became effective in April 1995. The new terms
provide for the pledge of 401,000 shares of BBRG common stock, (the
<PAGE>
"Collateral") and for the maintenance of a loan to collateral value
ratio of 75%. The new terms also provide for interest only payments
until August 31, 1995 and principal payments of $16,000 per month, plus
interest, thereafter until maturity on June 1, 1996. The interest rate
will be fixed at 10% for the remainder of the Term Note. In March
1995, the loan to collateral value ratio fell below 75%. The Company
has not received any notice of default from the bank. The Company is
in compliance with all other terms of the note and has made all
required payments.
In October 1994, the Company entered into a Loan Restructuring
Agreement with the Mortgagee of property located at 284 Newbury St.
The new agreement ("Loan Restructure Agreement") reduced the principal
amount from approximately $4.3 million to $4.1 million and released
outstanding interest of approximately $360,000. In consideration of
the above, the Company has assigned all of the rents it receives from
BBRG to the Mortgagee. The Loan Restructure Agreement requires
interest only payments through Maturity on September 1, 1998. Interest
was charged at 5.50% through October 1995 and 8.29% thereafter. As
part of the Loan Restructure Agreement, the Company maintains a non-
recourse guarantee in the amount of $400,000, which is collateralized
by 30,000 of the Company's shares of BBRG. The guarantee is reduced
by $50,000 per year for three years beginning March 1996. In addition,
the Company has pledged 15,000 of its BBRG shares to the Mortgagee as
indemnification against past due real estate taxes owed to the City of
Boston. Such shares will be released to the Company on a pro-rata
basis as the past due real estate taxes are satisfied. No reduction
of principal or accrued interest has been recorded and no gain has been
recognized as a result of modifying the terms of the agreement. The
<PAGE>
Company has calculated an effective interest rate of 6.66% based on
required future payments and will recognize the effect of the
restructuring prospectively over the life of the note.
In June 1993, the Company defaulted on its obligation under a non-
recourse promissory note (the "Promissory Note") which was
collateralized by a second mortgage on a building owned by the Company.
The Promissory Note, which matured in June 1993, required a combined
payment of principal and interest totalling $400,000. The Company
remains in default on such obligation.
In May 1994, the Company entered into an agreement with BBRG to
transfer the operations under the Concessions Agreement and the
Management Agreement to the Company in return for a six year term note
in the amount of $970,000. In April 1995 the Note was amended
requiring equal quarterly payments of principal and interest beginning
April 1, 1996 of approximately $36,000 with interest at 6%.
In April 1995, the Company reached an agreement to modify and extend
a 5% Promissory Note in the amount of $110,000. The terms of the new
agreement require sixty (60) monthly payments of principal and interest
of $2,003. The annual interest rate is 7.5% but is increased to 12%
in the event of a default.
In May 1995, the Company reached an agreement with a related party to
restructure a 6% Promissory Note (the "Note") in the amount of
$318,000. The new terms provide for the pledge of an additional 60,333
shares of BBRG common stock. The new terms also provide for principal
payments, plus interest at 3/4 of 1% per month, of $9,000 per month
until April 1996 and $12,000 per month from May 1996 until maturity in
November 1996.
<PAGE>
In December 1994 as part of the agreement to sell land owned
collectively by the Company and the Revere Realty Group, Inc., the
Company was loaned $300,000 evidenced by a promissory Note and Second
Mortgage. In conjunction with the loan, a portion of the sales price
in the amount of $300,000 was contingent upon the buyer obtaining
certain permits for construction. The proceeds from this contingent
payment are to be used to extinguish the obligation on the related
loan. During August 1995, the buyer received the applicable permits
and the Company is seeking relief of this obligation.
Included in the current portion of long term debt is outstanding
indebtedness under a margin agreement of approximately $165,000 and
$332,000 at December 30, 1995 and 1994, respectively. The indebtedness
is collateralized by 88,000 shares of BBRG common stock.
4. Labor Contracts
In December 1993, the labor contract between Wonderland Park and
the Wonderland Dog Track Employees Union, Local 410 (the "Union"),
which governed the terms of employment of the mutuel clerks at
Wonderland Park, was due to expire. The parties mutually agreed to
extend the contract several times while attempting to reach a new
agreement. In February 1994, Wonderland Park implemented the terms of
its final offer to the Union, after months of negotiations and an
impasse having been reached. Such terms included a reduction in the
hourly compensation rate of approximately 35%, and the elimination of
certain week-end and holiday premiums. In October 1994, the national
office of the Union reassigned the Union to Service Employees
International Union, Local 254 ("Local 254"). In October 1994, Local
<PAGE>
254 agreed to a three year extension of the Union's current contract amended
by Wonderland Park's final offer. The annual savings to the Company as a
result of the new contract approximate $1.0 million. The Union is
challenging the implementation of the final offer at the State Labor
Relations Commission for the period from implementation in February 1994
through the reassignment of the Union in October 1994. If the Union is
successful in its challenge, Wonderland Park may be required to retroactively
compensate the Union member employees for the difference between the old
contract rates and the new contract rates for that period of time, or
approximately $750,000. The Company believes it has meritorious defenses to
the challenge.
5. Deferred Revenue
Included in other long-term liabilities at December 31, 1995 and
1994 was $619,000 and $972,000, respectively representing funds
advanced from Autotote Limited ("Autotote"). The original advance of
$1,000,000 was made to the Company in 1992 in consideration for the
exclusive right to provide totalisator services for any off-track
betting and simulcast operations that the Company may undertake in the
future. The terms of the original agreement required repayment in
weekly installments of $4,944, with a final installment due on May 31,
1997. The Company made none of the weekly installments required under
this agreement.
In 1993, Autotote made an additional advance to the Company of
$325,000, as an inducement to the Company to consider entering into
negotiations leading to further investment or other joint activity by
Autotote in or with the Company. The Company and Autotote agreed that,
if negotiations did not lead to such further investment or joint
activity by April 30, 1993, then the repayment period of the original
<PAGE>
advance of $1.0 million would be accelerated in order that it would be
completely repaid at the end of the twenty four month period commencing
April 30, 1993. In January 1994, the Company granted Autotote the
exclusive right to supply keno terminals and systems for Wonderland and
Foxboro, in the event the Company is authorized by law to select such
equipment, in exchange for the forgiveness of any current and future
amounts owed by the Company in respect of either of the above advances.
Accordingly, the Company reclassified $1,325,000 from notes payable to
deferred revenue and will realize such deferred revenue over the
remaining contract life of the current service agreement with Autotote.
6. Commitments and Contingencies
Pledges of BBRG Stock
As of December 31, 1995, the Company has pledged, or has committed to
pledge, certain amounts of its shares of BBRG common stock as follows:
Approximately 336,000 shares were pledged in 1992 in connection with
the Company's $2.0 million borrowing under its Term Note. An
additional 65,000 shares have been committed in connection with the
restructuring of the Term Note in 1995 (see Note 3); 40,000 shares were
pledged in October 1994 and an additional 30,000 in November 1995, to
collateralize two performance bonds for Wonderland Park and Foxboro
Park, respectively, which bonds are required annually by the Mass State
Racing Commission for all race tracks; approximately 33,333 shares were
pledged in January 1994 and an additional 27,000 in 1995, in connection
with the Company's $300,000 borrowing under its Promissory Note.
<PAGE>
45,000 shares have been pledged in connection with 284
Newbury's Loan Restructure Agreement.
88,000 shares have been pledged in connection with the
Company's indebtedness under a margin agreement.
The Company currently owns approximately 673,000 shares of BBRG,
representing approximately 18.5% of BBRG total shares.
Racing Licenses
In order to meet the requirements for renewal of racing licenses,
the Company's racing subsidiaries must demonstrate, on an annual
basis, that they are financially viable entities, capable of disposing
of their obligations on a timely basis. Racing licenses have been
granted for the 1996 calendar year.
Leases
Rent expense for facility leases for the years ended December 31,
1995, 1994 and 1993 was approximately $1,200,000, $1,200,000, and
$4,478,000 respectively (including $674,000 in l993 attributed to
percentage rent in excess of base amounts). Future minimum payments
relating to all operating leases at December 31, 1995 are as follows:
<PAGE>
Years Amount
1996 1,113,345
1997 1,159,342
1998 1,189,408
1999 1,210,702
2000 1,235,000
Thereafter 21,125,000
Total $27,032,797
Totalisator equipment rent (which is based on the handle per per-
formance) of approximately $1,016,000, $974,000 and $692,000, in 1995,
l994, and l993 is not included in the above table since minimum
payments cannot be determined.
Included in the above commitments are future minimum payments of
approximately $26,975,000 for the Foxboro Park facility. Payments were
scheduled to begin in January 1996 and continue through the year 2018.
The Company is conducting operations at such facility under an
agreement to lease and has been granted a rent-free period extending
from 1992 through December 1995. The Company is recording rent on a
straight line basis.
Litigation
The Company is involved in routine litigation from time to time.
There is no litigation currently pending for which the Company
would be required, under Statement of Financial Accounting Standards
5, to adjust its consolidated results of operations
(see Note 4).
<PAGE>
7. Common Stock, Stock Option and Grant Plans
In October 1995, the Board of Directors approved and ratified the
granting of non-qualified stock options granted in October, 1992.
These options were granted to the Directors of the Company to purchase
shares of common stock at an option price equal to the fair market
value of the Company's common stock at the date the options were
granted ($3.00 per share). In connection with the above options, the
Company issued options to purchase 241,334 shares of the Company's
common stock to Directors during the period 1992 through 1995.
The Company also has a Stock Grant Plan which is intended to
reward key employees of the Company. The maximum number of the
Company's nonregistered common shares which may be awarded under
the plan shall not exceed an aggregate of 35,000 shares. At
December 31, 1995, 17,950 shares had been awarded under the plan
and are fully vested. These grants were awarded prior to 1985 at
values ranging from $8.00 to $13.00 per share.
<PAGE>
8. Income Taxes
A summary of the provision for income taxes (including tax
provisions applied to extraordinary items) in the accompanying
consolidated statements of operations is as follows:
1995 1994 1993
Federal -
Current $ - $ 345,000 $2,092,000
Deferred - - (325,000)
- 345,000 1,767,000
State -
Current - 1,070,000 692,000
Deferred - - (101,000)
- 1,070,000 591,000
Provision for income taxes
after extraordinary item - 1,415,000 2,358,000
Provision for extraordinary
item - 1,270,000 -
Provision for income taxes
before extraordinary item $ 0 $ 145,000 $2,358,000
The Company's effective tax rates differ from amounts computed by
applying the statutory federal income tax rate to income (loss) before
income taxes, as follows:
1995 1994 1993 1992
Statutory federal income
tax rate (34.0%) 34.0% (34.0%) (34.0)%
State income tax, net of
federal income tax
benefit - 2.3 5.6 2.4
(Utilization) deferral of
temporary items subject
to valuation allowance 35.7 (43.4) - -
Alternative minimum tax - 11.2 - -
Parent company losses to
which there is no tax
benefit - - 58.9 43.4
Excess tax gain over book on
sale of BBRG stock - 221.8 - -
Utilization of carryforward
losses ( 2.2 ) (212.4) - -
Other, including tax credits .5 - 3.1 1.6
Income tax rate expense/
(benefit) 0.0% 13.5% 33.6% 13.4%
<PAGE>
The tax effects of the significant temporary differences which comprise
the deferred tax assets and liabilities are as follows:
1995 1994 1993
(in thousands)
ASSETS
Net operating loss carryforwards $3,492 $2,858 $10,245
Capital loss carryforwards - - 229
Fixed assets 1,284 1,599 1,952
Deferred compensation 312 386 356
Reserve for capital assets - - 759
Miscellaneous operating reserves 748 438 323
Rent expense 1,732 1,248 492
Alternative minimum tax credit 580 602 -
Capitalized expense 170 234 -
Deferred assets of BBRG - - 777
Gross deferred assets 8,318 7,365 15,133
Valuation allowance (6,280) (4,991) (14,356)
Net deferred assets 2,038 2,374 777
LIABILITIES
Miscellaneous liabilities $ 64 $ 178 -
Investment in BBRG 1,974 2,196 -
Deferred liabilities of BBRG - - $ 1,661
Net deferred tax liabilities $ 0 $ 0 $ 884
<PAGE>
The Company has fully reserved for all net deferred tax assets
exclusive of those applicable to BBRG, as future realization of these
assets is not determinable.
In the first quarter of 1993, the Company adopted Statement of
Financial Accounting Standards No. 109. Accounting for Income
Taxes ("FAS 109") which requires a change from an income statement to
a balance sheet approach to accounting for income taxes. Under FAS
109, deferred tax assets and liabilities are recognized based on
temporary differences between the financial statements and tax basis
of assets and liabilities using current statutory tax rates.
9. Pension Plans and Retirement Benefits
The Company contributed $71,551 and $89,425 in 1995 and 1994, re-
spectively to three multi-employer pension plans for employees covered
by collective bargaining agreements. These plans are not
administered by the Company and contributions are determined in
accordance with the provisions of negotiated labor contracts. The
Company maintains a defined benefit retirement plan for certain other
union employees. The plan provides a benefit of a flat dollar amount,
determined by the collective bargaining agreement with the union.
Company contributions to this plan totalled $101,528 and $135,372 in
1995 and 1994, respectively. Benefits under the plan maintained by the
Company are provided by a group annuity contract purchased from an
insurance carrier. Expense for this plan includes amortization of the
cost of providing plan benefits for past service over a period of
approximately 14 years. The Company's funding policy is to contribute
amounts annually to the Plan, subject to the Internal Revenue Service
and ERISA minimum required and maximum allowable funding limitations.
The following table sets forth the plan's funded status at December 31,
1995 and 1994:
<PAGE>
1995 1994
Accumulated and projected
benefit obligation-
Vested $1,747,894 $1,730,678
Nonvested 5,718 34,989
Total 1,753,612 1,765,667
Plan assets at fair value 1,313,459 1,178,215
Unfunded projected benefit
obligation 440,153 587,452
Unrecognized net transition
obligation (255,451) (298,027)
Unrecognized net losses ( 10,217) (122,433)
Adjustment for minimum liability 265,668 420,460
Adjusted accrued pension cost $ 440,153 $ 587,452
Net periodic pension cost included the following components:
1995 1994 1993
Service cost-benefits
earned during the period $ 28,130 $ 40,782 $ 41,116
Interest cost on projected
benefit obligation 136,328 122,349 123,152
Actual return on plan assets (211,832) 23,931 (118,049)
Net gain (loss) during the year,
deferred for later recognition 112,549 (114,799) 32,029
Amortization of unrecognized net
obligation 42,576 42,576 42,576
Amortization of unrecognized
net loss 12,654 15,493
Net periodic pension cost $ 107,751 $ 127,493 $136,317
<PAGE>
Assumptions used in accounting at December 31 were:
1995 1994 1993
Discount rates 8.00% 8.00% 6.00%
Expected long-term rate of
return on assets 8.50% 8.50% 7.50%
Included in accounts payable and other accrued expenses is approxi-
mately $440,000 which reflects the unfunded accumulated benefit
obligation, as detailed in the table above. This includes an accrued
pension cost of approximately $175,000 and an additional minimum
liability of approximately $265,000. Approximately $255,000 of the
$440,000 is offset by an intangible asset which reflects unrecognized
prior service cost accumulated (including any unrecognized net
transition obligation). The remaining balance of the $440,000, or
approximately $175,000, has been recognized in the Company's statements
of operations since adoption of SFAS #87.
The Company also has employment contracts with certain retired
employees which provide for the payment of retirement benefits,
the cost of which has been accrued during their active employment.
Deferred tax benefits have been recorded for these costs which are
deductible for tax purposes when paid.
Expense for all retirement plans of the Company for the years ended
December 31, 1995, 1994, and 1993, was approximately $409,000,
$404,000, and $387,000, respectively.
<PAGE>
10. Business, Operations and Segment Information
Prior to 1994, the Company operated in two industries, restaurant
operations and parimutuel racing. In 1994, the Company's investment
in the restaurant subsidiary decreased to 18.5% (see Note 12). As a
result, the restaurant subsidiary is not consolidated with the Company
after 12/31/93. Business, operations and segment information is
therefore only shown for 1993. Revenues from restaurant operations
include revenues derived from the sale of food and beverages at
Wonderland Park. Racing division operating income includes rental
income derived from charges to the restaurant division for the
concession operations at Wonderland Park. Operating profit represents
total revenue by segment less operating expenses. Income from
operations does not include other income (expenses) or income taxes.
Assets allocated to each segment are based upon specific identification
of such assets provided by Company records. Assets not so identified
represent primarily working capital items and other corporate
investments.
PAGE
<PAGE>
The following segment information is presented for the year
ended December 31, 1993:
1993
Operating revenue:
Restaurant division $ 77,168,236
Racing division 31,925,492
Total 109,093,728
Operating income (loss):
Restaurant division 4,465,929
Racing division (3,540,315)
Total 925,614
Identifiable assets:
Restaurant division 38,364,000
Racing division 18,685,948
Total identifiable
assets 57,049,948
Corporate assets 5,671,742
Total assets 62,721,690
Depreciation and
amortization:
Restaurant division 3,939,744
Racing division 1,264,124
Corporate assets 381,841
Total 5,585,709
<PAGE>
Additions to property, plant
and equipment, including
construction:
Restaurant division 7,026,000
Racing division 256,688
Corporate assets 3,727
Total $ 7,286,415
11. Gain on Sale of Real Property
In December 1994, the Company and Revere Realty collectively sold
fifteen acres of excess land located in Revere, MA to a third party
for $3,705,000. The Company owned nine of the fifteen acres and
held a mortgage of approximately $1.6 million on the remaining six
acres, which were owned by Revere Realty. The selling price was
allocated between the fifteen acres based on terms negotiated between
the Company and Revere Realty.
The Company used $1.0 million of the proceeds it received to satisfy
a portion of its indebtedness to the MSCGAF Realty Trust and
approximately $62,000 to satisfy interest due. The Company also used
approximately $1.6 million to satisfy outstanding real estate taxes due
to the City of Revere. Approximately $250,000 of the remaining
proceeds have been held in escrow to pay for the upgrading of the
remaining parking areas at Wonderland.
<PAGE>
Of the total proceeds, $300,000 was advanced by the purchaser in the
form of a Promissory Note. In conjunction with the note, a portion of
the sales price in the amount of $300,000 was contingent upon the buyer
obtaining certain permits for construction. The proceeds from this
contingent payment are to be used to extinguish the obligation on the
related loan. During August 1995, the buyer received the applicable
permits and the Company is seeking relief of this obligation. The
Company realized a pre-tax gain of approximately $1.1 million on the
sale of the land and recorded other income of approximately $.6 million
related to the repayment of the Revere Realty indebtedness, for
interest due and the recovery of amounts previously written off.
On May 4, 1993, BBRG sold to the Florida Department of Transportation
the property occupied by the Company's restaurant in Stuart, Florida
for $4,700,000. The pre-tax gain from the sale of the restaurant was
approximately $1,202,000.
In June 1993, Westwood 755 sold a multi-story retail and office
building located in Boston, MA for $1,620,000. As a result of the
sale, Westwood 755 recognized a loss on disposition of approximately
$512,000.
12. Investment in Affiliate
During 1994, the Company and BBRG have jointly pursued a series of
transactions, the effect of which resulted in the control of BBRG no
longer resting with the Company (see Notes 3 and 16). Accordingly, the
Company's investment in BBRG for the year ended December 31, 1995 and
1994 has been accounted for under the equity method.
<PAGE>
The following unaudited financial information summarizes the financial
position and results of operations of BBRG, as of and for the years
ended December 31, 1995 and December 25, 1994.
Financial Information December 31, December 25,
(In thousands) 1995 1994
Balance sheet data
Current assets $ 5,236 $ 4,387
Noncurrent assets 40,864 31,510
Current liabilities 13,363 6,315
Noncurrent liabilities 8,010 4,213
Net equity 24,727 25,369
Year Ended
December 31, December 25,
1995 1994
Earnings data
Net sales $93,496 $85,831
Gross profit 67,516 11,479
Income from
continuing operations (2,810) 501
Net income (2,810) 501
Company's equity in
net earnings of BBRG $ (552) $ 115
13. Investment Gains (Losses)
Investment gains and losses are summarized as follows:
<PAGE>
1995 1994 1993
Gain on exchange/sale
of investment in
subsidiary - $4,251,961 -
Realized net gains
on sales
of investments - 147,474 -
Unrealized net
losses on in-
vestments held - - $(772,000)
$ - $4,399,435 $(772,000)
In 1994, the Company realized an investment gain of approximately
$4,252,000 related to the exchange of 887,000 shares of BBRG common
stock for 98.6% of the Company's Notes. Other net gains on investments
in 1994, are attributable to the sale of certain marketable securities.
During 1993, the Company recorded a reserve of approximately $772,000
related to a note receivable, and accumulated interest, due from a real
estate limited partnership (See Note 14).
<PAGE>
14. Investment in Partnership
During 1989, the Company purchased a 32% limited partnership interest
in a partnership which owns land and an office and retail building.
The purchase price was $3,500,000 in cash. The Company also loaned the
partnership an aggregate amount of $635,000, including a $560,000 note
which bears interest at 14.25% per annum and was due on March 24, 1991.
The Company's limited partnership interest was subsequently increased
in l989 to 60%. The purchase price for this additional interest was
$1,500,000.
The Company historically accounted for this investment under the equity
method since it did not control the operations of the partnership.
During 1992, the Company determined that the carrying value of its
investment in the partnership had been permanently impaired.
Accordingly, the Company recorded a write-down of its investment in the
partnership from $4,369,000 to zero (excluding the $635,000 loan to the
partnership detailed below) (see Note 13). In February 1993, the
Company accepted a new note from the partnership in the principal
amount of $635,000, in full discharge of the principal balance of
$560,000 outstanding on the existing note and of $75,000 outstanding
under a loan from the Company. The new note bears interest at a
minimum rate of 16%, matures in May 2008, and is senior to all debt
other than the first mortgage. In December 1993, the Company
determined that the carrying value of the new note had been permanently
impaired. As a result, the Company reserved the new note during 1993,
recording a loss of $772,000, including interest accumulated to date
(See Note 13).
<PAGE>
15. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses as of December 31, 1995 and 1994
consisted of the following:
1995 1994
Accounts payable, trade $ 2,349,256 $ 2,675,723
Accrued interest 1,592,000 1,691,341
Accrued lease obligations
and occupancy costs 5,700,347 3,704,800
Other accrued expenses 5,302,803 4,746,780
$14,944,406 $12,818,644
16. Transactions with Officers, Employees and Related Parties
In May 1994, the Company purchased all restaurant and concession
operations at both facilities, Wonderland and Foxboro, from BBRG for
a sales price of $770,000, including goodwill of $720,000. Included
in the term note of $970,000 was additional amounts owed to BBRG for
costs incurred under the Cross Indemnification agreement amounting to
$200,000.
BBRG Operating, Inc., a subsidiary of BBRG, entered into a lease for
7,888 square feet of restaurant space in Boston, Massachusetts with 284
Newbury Street Trust, a trust for the benefit of 284 Newbury, Inc., a
subsidiary of the Company. The primary lease term expires on September
30, 2001, but may be extended by the tenant for an additional ten year
term. The lease provides for annual rent equal to the higher of
$200,000 and 7 1/2% of sales, with the annual rent in no event to
exceed $240,000. The tenant is also responsible for utilities,
maintenance and taxes.
<PAGE>
BBRG also leases approximately 9,000 square feet of office space in
Boston, Massachusetts from 284 Newbury Street Trust. The lease expires
on September 30, 2002 and provides for annual rent of $140,000. BBRG
is also responsible for utilities, maintenance and taxes. The landlord
was responsible for $225,000 of the cost of the build out of the
premises, with this amount being deducted from monthly rent payments
on a pro rata basis over a two-year period.
For the period of November 1993 through February 1995, the Company
engaged the professional services of a former Director of the
Corporation to assist in the financial and operational reorganization
of the Company. Fees paid in 1995 and 1994 for these services amounted
to approximately $36,000 and $456,000, respectively.
The Company received payments of $80,000 in January 1995, $188,675 in
1994, and $225,000 in 1993 as repayments on a note receivable from
Charles Sarkis, the Company's Chairman and majority stockholder. At
December 31, 1995 and 1994, the aggregate amounts of loans outstanding
to officers/stockholders (excluding the note receivable from Revere
Realty) was $490,227. The loans are payable on demand and bear
interest at the prime rate of one of the Company's lending banks plus
1.5% per annum. Notes receivable and related interest, in the amount
of $316,073 and $301,551 have been classified as an offset to
stockholders' equity at December 31, 1995 and 1994, respectively.
Interest receivable, exclusive of the amount recorded in equity, at
December 31, 1995 and 1994 was $110,066 and $91,882, respectively.
<PAGE>
In 1991, the Company sold certain real estate for $585,120, its
original cost, to an employee of the Company who is currently an
officer of BBRG. The employee assumed a mortgage loan of $486,710 that
was guaranteed by a subsidiary of the Company, and issued a promissory
note of $98,410 to the Company. In l992, the Company wrote off $38,410
of the promissory note. The promissory note is due August 2001 and
bears interest at 8% per annum. In March 1994, the Company received
a foreclosure notice from the bank that holds the mortgage. The
outstanding amount of principal and interest under the mortgage was
approximately $500,000. In June 1994, the Company agreed to pay the
lender $20,000 in return for the release of its guarantee. Payments
were made over a period of four months and the Company was released
from its guarantee in 1994.
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
None.
<PAGE> PART III
Item 10. Directors and Executive Officers of the Registrant
Director
Name Age Since Position
Charles F. Sarkis 56 1978 Chairman of the Board
Richard P. Dalton 48 1978 President, Chief
Executive Officer,
Director
A. Paul Sarkis 29 1995 Executive Vice President,
Director
Richard G. Egan, Jr. 33 1995 Vice President of Finance,
Treasurer, Secretary and
Chief Financial Officer
Anthony V. Boschetto 32 1995 Controller, Asst.
Secretary
Francis J. Feeney 37 1995 Asst. Secretary
Jon M. Baker 53 1987 Director
Paul J. DiMare 53 1987 Director
<PAGE>
Charles F. Sarkis has served as Chairman of the Board since 1978. He
was Chief Executive Officer of the Company from 1978 to 1992 and
President from 1984 to 1992. He has been Chairman of the Board,
President and Chief Executive Officer of Back Bay Restaurant Group,
Inc. (restaurant holding company), formerly a wholly-owned subsidiary
of the Company, for more than six years. He also has been Chief
Executive Officer of Sarkis Management Corporation (restaurant
management).
Richard P. Dalton has served as President and Chief Executive Officer
of the Company since 1992. He served as Executive Vice President of
the Company from 1988 to 1992 and Chief Operating Officer from 1989
until 1992. He was Vice President from 1984 until 1987; Chief
Financial Officer from 1988 to 1989; Treasurer from 1974 to 1989;
Assistant Secretary since 1984; and General Manager from 1981 to 1983.
Mr. Dalton is also a director of Back Bay Restaurant Group, Inc.
A. Paul Sarkis was elected Executive Vice President and Director on
October 24, 1995. Mr. Sarkis was Corporate Director of Development
from 1993 to 1995 and Financial Analyst from 1990 to 1993.
Richard G. Egan, Jr. was elected Vice President of Finance, Treasurer,
Secretary and Chief Financial Officer on October 24, 1995. Prior to
that time, Mr. Egan was Accounting and Financial Officer at Copley Real
Estate Advisors and was previously a manager at Price Waterhouse.
Anthony V. Boschetto was elected Controller and Asst. Secretary on
October 24, 1995. Prior to that time, Mr. Boschetto was Treasurer and
Controller for Boston Bagel Inc. and was previously an associate of
Laventhol & Horwath for many years.
<PAGE>
Francis J. Feeney was elected Asst. Secretary on October 24, 1995. Mr.
Feeney is an associate of the law firm, Hutchins, Wheeler & Dittmar.
Jon M. Baker has been Chairman of the Board and sole proprietor of the
Baker Companies (implementation and administration of executive
benefits programs) since January 1990. Prior to that time, he was a
principal in the firm of Baker & Lander Insurance Agency, Inc.
(implementation and administration of executive benefit programs) for
more than five years.
Paul J. DiMare has been President of DiMare Homestead, Inc.
(agricultural processing and packaging) and DiMare Management Corp.
(agricultural management and marketing) for over six years. He also
is a director of First National Bank of Homestead, Florida.
Mr. A. Paul Sarkis, currently an Executive Vice President of the
Company and director of the Company, is the son of Charles F. Sarkis,
the Chairman of the Board of Directors. All of the directors and
executive officers are citizens of the United States. There are no
arrangements or understandings between any of the directors or
executive officers of the Company and any other person pursuant to
which such director or executive officer was or will be selected as a
director or officer of the Company. Each of the executive officers of
the Company holds office at the pleasure of the Board of Directors.
The Board of Directors has two standing committees, the Audit
Committee and the Compensation Committee. The Board has no nominating
committee. The Audit Committee is comprised of Messrs. Baker and
DiMare and the Compensation Committee is comprised of Messrs. Baker &
DiMare. Both of these committee members are non-employee Directors.
<PAGE>
Item 11. Executive Compensation
Summary Compensation Table - The following table shows the cash
and other remuneration paid or accrued, in respect of services rendered
to the Company and its wholly-owned subsidiaries for the three years
ended December 31, 1995, to each of the Company's executive officers
whose aggregate remuneration exceeded $100,000. During 1993 through
1995 there were no compensation awards of; Restricted Stock Awards,
Options/SARS, LTIP Payouts and any other compensation.
Certain executive officers of the Company also received cash
compensation from BBRG in respect of their responsibilities as
executive officers of BBRG. Such compensation is excluded from the
following table.
Name and Other
Principal Annual
Position Year Salary Bonus Compensation
Charles F. Sarkis
Chairman of the 1995 $200,000 - -
Board 1994 $200,000 - -
1993 $275,000 - -
Richard P. Dalton
President and
Chief Executive 1995 $180,000 - -
Officer 1994 $180,000 - -
1993 $180,000 - -
<PAGE>
In connection with the Offering, BBRG entered into a
three-year employment agreement dated as of January 16, 1992 with Mr.
Sarkis with respect to his employment as President and Chief Executive
Officer of BBRG. The term of agreement will continue from year to year
after its initial term unless either party terminates the agreement.
Under this agreement, Mr. Sarkis agreed to devote the preponderance of
his business time to the performance of his duties as BBRG's President
and Chief Executive Officer. BBRG acknowledged that Mr. Sarkis may
hold various management positions with the Company and agreed that Mr.
Sarkis may devote an amount of his business time to the Company as he
deems appropriate to perform his duties competently. Mr. Sarkis' base
compensation under the agreement is $200,000 per year and may be
adjusted from time to time by BBRG's board of directors.
In October 1992, Mr. Sarkis resigned as President and
Chief Executive Officer of the Company in order to devote more
attention to BBRG. Mr. Sarkis remains as the Chairman of the Board of
the Company. In 1993, the Compensation Committee of the Board of
Directors of the Company reduced the annual base salary of Mr. Sarkis
from $500,000 to $200,000 to reflect his reduced responsibilities to
the Company.
Compensation Committee Interlocks and Insider Participation -
During the years ended December 31, 1994 and 1993, Mr. Dalton served
as an executive officer of the Company and as a member of the
Compensation and Benefits Committee of the Board of Directors of BBRG,
and Mr. Sarkis served as an executive officer of BBRG and as Chairman
of the Board of the Company.
<PAGE>
Remuneration of Directors - The Company pays to each nonemployee
Director $2,000 per Board meeting attended with an additional fee of
$1,000 for each Committee meeting attended. It has been the Company's
practice to grant options to acquire 12,500 shares of Common Stock to
each Director at an option exercise price equal to the fair market
value per share of the Company's Common Stock at the date the options
are granted.
Compensation Plan - The Company has adopted a compensation plan
for the fiscal years 1995, 1996 and 1997. The compensation plan is
designed to provide an environment and opportunity for key executives
to be rewarded for individual achievement as well as for attaining
overall corporate goals. The compensation plan includes provisions for
a base salary, annual incentive and long term incentives. Base salary
is determined annually and is based upon the level and amount of
responsibility in the context of comparable companies. Additional
annual incentives are to be distributed to key executives from a bonus
pool. A performance bonus equal to 10% of income before tax will be
allocated to the key executives at the discretion of the Compensation
Committee and Board of Directors. Additionally, a discretionary bonus
up to 5% of income before income taxes will be available to reward an
employee's individual performance. Finally, long term incentives will
consist of stock options granted to key executives at the discretion
of the Compensation Committee and Board of Directors.
In addition, a special transaction bonus is available in the
event the Chairman initiates and/or negotiates an extraordinary
transaction to enhance shareholder value, including a merger, sale,
acquisition or joint venture. The transaction bonus is equal to 2% of
the value of any such transaction.
<PAGE>
As of December 31, 1995, no bonus had been paid or accrued based
upon the operating results of the Company.
Stock Grant Plans - The Company has in effect two Stock Grant
Plans with respect to its Common Stock which are designed to reward key
employees of the Company for significant prior services rendered to the
Company which have been of value over and above the cash and other
forms of compensation previously paid to such employees. The Stock
Grant Plans are administered by the Compensation Committee of the
Company. The awarding of stock grants pursuant to the Stock Grant
Plans is performed by the Board of Directors who take into
consideration, among other things, the grantee's level of
responsibility, quality of performance and future potential at the time
of the award. The aggregate maximum number of shares of Common Stock
which may be awarded under the Plans may not exceed 35,000 and 40,000,
respectively of which 17,950 and none, respectively had been awarded
as of December 31, 1995. No stock grants were awarded during the year
ended December 31, 1995.
Stock grants made under the Stock Grant Plans are subject to
several restrictions. If the grantee's employment is terminated for
any reason other than death, disability or retirement, the grantee
forfeits to the Company a portion of the shares awarded in accordance
with the following schedule:
<PAGE>
Years Elapsed
from Date of Percentage
Grant at of Shares
Termination Forfeited
of Employment by Employee
Less than 1 100%
1 80
2 60
3 40
4 20
5 or more 0
In addition, the Company has the right of first refusal at a
purchase price no greater than the book value of the shares in the
event the grantee seeks to sell or transfer awarded shares that are no
longer subject to forfeiture. The Stock Grant Plans also provide that,
in the event of termination of the grantee's employment for any reason,
the Company has the right to repurchase shares of Common Stock no
longer subject to forfeiture at their book value measured as of the
Company's last calendar quarter balance sheet. In addition to stock
grants awarded pursuant to the Stock Grant Plans, the Company may also
award to the grantee an amount in cash sufficient to pay the tax
liability of the grantee arising from the stock grant and cash award.
The 1984 Incentive Stock Option Plan - The Company had in effect
the 1984 Incentive Stock Option Plan which permitted the grant of
incentive stock options (within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended) to purchase up to 75,000
shares of the Company's Common Stock to key employees (including full-
<PAGE>
time management and administrative personnel) of the Company and its
subsidiaries. Such plan terminated in March, 1994 and there are no
options outstanding under such plan.
Stock Option Agreements - During 1995, The Company awarded to
Directors and Former Directors of the Company, non-qualified stock
options to purchase 241,334 shares of the Corporation's common stock
at an exercise price of $3 per share. Pursuant to the Director Non-
qualified Stock Option Agreement and the Former Director Non-qualified
Stock Option Agreement, the options terminate 10 years from date of
grant.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year
End Option Values - The following table shows the total number of
unexercised options held at December 31, 1995. There are no
unexercised in-the-money options at the fiscal year end. No options
were exercised in the fiscal year ended December 31, 1995.
Number of Securities
Underlying Unexercised
Options at Fiscal Year-End (#)
Name Exercisable Unexercisable
Charles F. Sarkis 75,000 -
Item 12. Security Ownership of Certain Beneficial Owners and
Management
(a) Security Ownership of Certain Beneficial Owners of Common
Stock
<PAGE>
The following table sets forth certain information, as of March
7, 1995, with respect to the beneficial ownership of the Company's
Common Stock by each Director, by all Directors and officers of the
Company as a group and by persons known by the Company to own
beneficially more than 5% of the outstanding Common Stock. Unless
otherwise noted, such stockholders have full voting and investment
power with respect to the shares listed as beneficially owned by them.
Amount and Nature
Name and Address of Beneficial Percent
of Beneficial Owner Ownership (1) of Class
Directors and Officers:
Jon M. Baker 39,309(2) 2.6%
The Baker Companies
62 Walnut Street
Wellesley, MA 02181
Richard P. Dalton* 40,100(3) 2.65%
The Westwood Group, Inc.
190 VFW Parkway
Revere, MA 02151
<PAGE>
Paul J. DiMare 143,900(4) 9.5%
P.O. Box 900460
Homestead, FL 33090
A. Paul Sarkis 41,109(5) 2.71%
Back Bay Restaurant Group, Inc
284 Newbury Street
Boston, MA 02115
Charles F. Sarkis* 883,416(6) 58.33%
Back Bay Restaurant Group, Inc.
284 Newbury Street
Boston, MA 02115
All Directors and Officers as a
group (eight persons) 1,147,834 75.79%
Holders of more than 5%, not included above
None
* Messrs. Sarkis and DiMare each beneficially owns over five percent
of the outstanding Common Stock.
(1) As used in this table, "beneficial ownership" means the
sole or shared power to vote, or to direct the voting of,
a security, or the sole or shared investment power with
respect to a security (i.e., the power to dispose of or to
direct the disposition of, a security). In addition, for
purposes of this table a person is deemed to have
"beneficial ownership" of any security that such person
<PAGE>
has the right to acquire within 60 days, including by
conversion of such stockholder's shares of Class B Common
Stock into shares of Common Stock or by exercise of
options. For purposes of this table, any shares of Common
Stock not outstanding which are subject to such a right
of, or such options or conversion privileges held by, a
person or group are deemed to be outstanding for the
purposes of computing the percentage of outstanding shares
owned by such person or group, but are not deemed to be
outstanding for the purposes of computing such percentage
owned by any other person or group.
(2) Includes 5,475 and 7,500 shares held of record by Baker
Insurance Agency, Inc. Profit Sharing Plan and Money
Purchase Plan, respectively, over which Mr. Baker has
voting and investment power, and presently exercisable
options to purchase 26,334 shares.
(3) Includes presently exercisable options and grants to purchase
27,750 shares.
(4) Includes 92,500 shares held of record by DiMare Homestead
Inc. over which Mr. DiMare has voting and investment power,
and presently exercisable options and grants to purchase
40,600 shares.
(5) Includes presently exercisable options to purchase 25,000
shares.
<PAGE>
(6) Consists of 804,616 shares issuable upon conversion of
shares of Class B Common Stock beneficially owned by Mr.
Sarkis, as well as presently exercisable options and
grants to purchase 78,800 shares. Does not include 6,750
shares of common stock or 2,900 shares of Class B Common
Stock held by Mr. Sarkis' wife; Mr. Sarkis disclaims
beneficial ownership of such shares. See Note (2) to
table below showing beneficial ownership of Class B Common
Stock.
(7) Includes presently exercisable options and grants to purchase
198,484 shares and 820,725 shares issuable upon conversion of
all shares of Class B Common Stock, held by all Directors and
officers as a group.
(b) Security Ownership of Certain Beneficial Owners of
Class B Common Stock
The following table sets forth certain information, as of March
7, 1995 with respect to the beneficial ownership of the Company's Class
B Common Stock by each Director, by all Directors and officers of the
Company as a group and by persons known by the Company to own
beneficially more than 5% of the outstanding Class B Common Stock.
Such stockholders have full voting power and investment power with
respect to the shares listed as beneficially owned by them. Each
stockholder of Class B Common Stock is entitled to ten votes for each
share of Class B Common Stock registered in his name on the Company's
records.
<PAGE>
Shares of Class B
Name and Address Common Stock Percent
of Beneficial Owner Beneficially Owned (1) of Class
Charles F. Sarkis 804,616(2) 88.2%
Back Bay Restaurant
Group, Inc.
284 Newbury St.
Boston, MA 02116
A. Paul Sarkis 16,109 1.8%
Back Bay Restaurant
Group, Inc.
284 Newbury St.
Boston, MA 02116
All Directors and 820,725(2) 90%
Officers as a
Group (seven persons)
(1) As used in this table, "beneficial ownership" means the
sole or shared power to vote, or to direct the voting of,
a security, or the sole or shared investment power with
respect to a security (i.e., the power to dispose of, or
to direct the disposition of, a security). In addition,
for purposes of this table a person is deemed to have
"beneficial ownership" of any security that such person
has the right to acquire within 60 days. For purposes of
<PAGE>
this table, any shares of Class B Common Stock not
outstanding which are subject to such a right of a person
or group are deemed to be out-standing for the purposes of
computing the percentage of outstanding shares owned by
such person or group, but are not deemed to be outstanding
for the purposes of computing such percentage owned by any
other person or group.
(2) Includes shares held by Sarkis Management Corporation which
is wholly-owned by Mr. Sarkis. Does not include
93,754 shares held by Mr. Sarkis' six adult children; Mr.
Sarkis disclaims beneficial ownership of such shares.
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's officers and directors, and persons who own more
than ten percent of a registered class of the Company's equity
securities, to file reports of ownership and changes in ownership with
the SEC. Officers, directors and greater than ten percent stockholders
are required by regulation of the SEC to furnish the Company with
copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received
by it, or written representations from certain reporting persons that
no Forms 5 were required for those persons, the Company believes that,
during the fiscal year ended December 31, 1995, all filing requirements
applicable to its officers, directors and greater than ten percent
beneficial owners were complied with.
<PAGE>
Item 13. Certain Relationships and Related Transactions
The following is a summary of certain agreements between the
Company and BBRG, formerly a wholly-owned subsidiary of the Company in
which the Company now holds approximately an 18.5% equity interest,
that were entered into or formalized in connection with the initial
public Offering:
Concessions Agreement -- Wonderland and BBRG entered into a
concessions agreement (the "Concessions Agreement") which formalized
an arrangement in effect since 1980 pursuant to which BBRG continued
to operate two full-service restaurants, a sports bar and two food
courts at Wonderland Park. BBRG also received revenues from parking,
program sales, and rentals of box seats. BBRG employees did not
conduct the parking or program sales operations. The Agreement was
terminated in May 1994, in connection with the purchase by the Company
of the concessions operations at Wonderland (see Note 17 of Notes to
Consolidated Financial Statements).
Under the Concessions Agreement, Wonderland received (i) a fee
calculated on the basis of the number of daily attendees at the
racetrack and (ii) 10% of Clubhouse Dining Room revenues, 25% of sports
bar, pub and food court revenues and 10% of tobacco revenues.
Wonderland was responsible for and provided maintenance, security,
trash removal services, heat, electricity, water, air conditioning and
telephone services for Wonderland Park, including the restaurants and
concession facilities at no charge to BBRG. BBRG was responsible for
the recruitment, training and compensation of all food service
<PAGE>
personnel and for the procurement of and payment for all food,
beverages, liquor, disposables and cleaning supplies. BBRG also was
required to maintain insurance in specified amounts and agreed to
indemnify Wonderland against all claims for personal injuries arising
out of BBRG's performance under the Concessions Agreement.
Amended and Restated Cross Indemnification Agreement -- The
Company and BBRG entered into an Amended and Restated Cross
Indemnification Agreement (the "Cross Indemnification Agreement")
pursuant to which BBRG agreed generally to indemnify the Company
against substantially all liabilities relating to the business of BBRG
as has been conducted, including claims arising from the Company's
guarantee of the lease obligations of certain of BBRG's subsidiaries,
but excluding tax liabilities, which were addressed in the Tax Sharing
Agreement (as defined below). The Company agreed to indemnify BBRG
against substantially all liabilities relating to the business of the
Company and its subsidiaries (other than the business of BBRG)
excluding tax liabilities, which were addressed in the Tax Sharing
Agreement. The Company also agreed to indemnify and hold BBRG harmless
against losses that it incurred in connection with certain potential
liquor liability claims. In addition, the Company agreed to indemnify
BBRG against any losses, damages, costs, expenses, penalties and
liabilities arising from the operation of certain restaurants in
Florida which have been closed. The agreement was terminated in March
1995.
<PAGE>
Tax Sharing Agreement -- Prior to the closing of the Offering,
BBRG and its subsidiaries were included as members of the Company's
affiliated group of corporations which files a consolidated United
States federal income tax return (the "Consolidated Group"). Upon the
consummation of the Offering, the Company and these subsidiaries were
no longer qualified as members of the Consolidated Group for federal
income tax purposes. The Company and BBRG have entered into an Amended
and Restated Tax Sharing and Indemnification Agreement (the "Tax
Sharing Agreement").
Under the Tax Sharing Agreement, the Company will indemnify BBRG
with respect to all federal and state income tax liabilities or
obligations in respect of all tax periods prior to the closing of the
Offering, but only to the extent such tax liabilities or obligations
exceed the sum of (i) $350,000 for all periods ending on or before
December 29, 1991, and (ii) all federal and state income tax
liabilities accrued in the ordinary course of business for the year in
which the Offering occurred. The Company will indemnify BBRG with
respect to any tax liabilities incurred in connection with the
reorganization that occurred in preparation for the Offering. The
Company will be under no obligation to indemnify BBRG for any other tax
liability.
BBRG will indemnify the Company for all taxes, liabilities or
obligations allocated or attributed to BBRG and paid by the Company for
all periods other than those taxes arising in connection with the
reorganization. BBRG's obligation to indemnify the Company for any
such income taxes is limited to the sum of (i) $350,000 for all periods
ending on or before December 29, 1991 and (ii) all federal and state
<PAGE>
income taxes accrued in the ordinary course of business for the year
in which the Offering occurs. The Tax Sharing Agreement also will
provide that BBRG will assign to the Company all refunds of taxes for
which the Company indemnifies BBRG. The Tax Sharing Agreement also
will provide that the Company generally will direct any audit, legal
or administrative proceedings concerning any tax matters for which the
Company has indemnified BBRG or with respect to any refund to which the
Company is entitled.
Each member of the Consolidated Group has joint and several
liability with respect to the federal income tax liability of the
Consolidated Group. Thus, if the Company fails to meet its
indemnification obligations under the Tax Sharing Agreement, BBRG could
be liable for federal income taxes incurred by any member of the
Consolidated Group for all years through the end of the year during
which the deconsolidation occurred. In addition, the Company entered
into the following leases and other real estate arrangements with BBRG:
In addition, the Company entered into the following leases and
other real estate arrangements with BBRG.
(a) The Westwood Newbury Restaurant, Inc., a subsidiary of
BBRG, entered into a lease, which was amended on July 1, 1993, for
7,888 square feet of restaurant space in Boston, MA with 284 Newbury
Street Trust, a trust for the benefit of 284 Newbury Inc., a subsidiary
of the Company. The lease, which expires on September 30, 2011,
provides that the annual rent is the higher of $200,000 and 7.5% of
revenues earned by the restaurant up to a maximum annual rent of
$240,000, and that BBRG is responsible for utilities, maintenance and
taxes. The lease does not provide for the payment of minimum rent.
The lease reflects, in all material respects, the arrangement that
existed between these parties prior to the Offering.
<PAGE>
(b) In December 1991, Boraschi, which is now a wholly-owned
subsidiary of BBRG entered into a lease which formalized a prior
leasing arrangement for 14,427 square feet of restaurant space in
Boston, MA with Mr. Sarkis who beneficially owns this property. The
lease, which expires on September 30, 2006, provides that the annual
rent is $300,000 and that Boraschi is responsible for utilities,
maintenance, insurance and taxes. The lease reflects, in all material
respects, the arrangement between Boraschi and Mr. Sarkis that existed
prior to the Boraschi Merger.
(c) BBRG entered into a lease for approximately 9,000 square
feet of executive office space in Boston, Massachusetts with 284
Newbury Street Trust, a trust for the benefit of 284 Newbury Inc., a
subsidiary of the Company. The lease, which commenced on July 1, 1993
with the amendment of the lease, and expires on September 30, 2002,
provides that annual rent is $140,000. This amount of annual rent
approximates the rent paid by BBRG in prior periods. Under the amended
lease, BBRG is allowed to deduct from monthly rent the costs associated
with preparing the space for occupancy, amounting to $225,000, over a
24 month period beginning October 1, 1993.
(d) The Company has guaranteed the obligations of certain of
BBRG's subsidiaries under five leases for restaurant space with
unaffiliated third parties. The aggregate annual base rent guaranteed
by the Company under these leases was approximately $625,000 at
December 31, 1992. Pursuant to the Cross Indemnification Agreement (as
defined below), BBRG will indemnify the Company for any amounts that
are paid under such guarantees.
<PAGE>
Revere Realty
On December 31, 1990, Revere Realty Group, Inc., a company owned
by Mr. Dalton purchased certain real property from the Company for
$1,856,000 consisting of $278,400 in cash and a note receivable of
$1,577,600. The note accrues interest at the rate of 10% per annum and
is due in quarterly installments of approximately $46,000 commencing
March 31, 1991 with the entire unpaid balance of principal and interest
to be paid in full on December 31, 1995. The note is secured by an
mortgage on the property sold, an assignment of the proceeds of an
expected lease on the property and Mr. Dalton's guaranty. The Company
recorded a pretax gain of approximately $1.3 million in connection with
this transaction.
In December 1994, the Company and Revere Realty collectively sold
fifteen acres of excess land located in Revere, MA to a third party for
$3,705,000. The Company owned nine of the fifteen acres and held a
mortgage of approximately $1.6 million on the remaining six acres,
which were owned by Revere Realty. The selling price was allocated
between the fifteen acres based on terms negotiated between the Company
and Revere Realty. The proceeds allocated to Revere Realty were used
by Revere Realty to satisfy its indebtedness to the Company. The
Company used a portion of the proceeds it received to satisfy a portion
of its indebtedness to the MSCGAF Realty Trust and to satisfy
outstanding real estate taxes assessed by the City of Revere.
<PAGE>
Other Related Transactions
In November 1992 the Company engaged the professional services
of a related party to assist management in the planning and execution
of a financial and operational reorganization of the Company, exclusive
of its Restaurant Division. One of the principals of the related party
was a member of the Board of Directors of the Company.
Fees paid in 1995 and 1994 for these services amounted to $36,000
and $456,000, respectively.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K
(a)(1) Financial Statements
Included under Item 8 in Part II of this report:
Report of Independent Accountants
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Stockholders' Equity (Deficit)
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules
All financial statement schedules are omitted because they are
not applicable or the required information is shown in the
consolidated financial statements or notes thereto.
(3) Exhibits
3.1 Certificate of Incorporation of the Company (1).
3.2 Amendment, dated May 15, 1987, to the Certificate of
Incorporation of the Company (8).
3.3 Bylaws of the Company (1).
4.1 Indenture, dated as of August 15, 1987, between the
Company and State Street Bank and Trust Company,
as trustee, relating to the Company's Subordinated
Notes (2).
<PAGE>
4.2 Supplemental Indenture, dated as of March 16, 1988,
between the Company and State Street Bank and
Trust Company, as trustee (8).
4.3 Warrant Agreement, dated as of August 15, 1987,
between the Company and Drexel Burnham Lambert,
Inc. (2).
10.2 Stock Grant Plan (2).
10.3 Nonqualified Stock Option Plan (2).
10.7 Collective Bargaining Agreement between Wonderland
Greyhound Park, Inc. and Local 103 - Electrical
Workers, dated November 12, 1986 (2).
10.16 1984 Incentive Stock Option Plan (9).
10.18 Retirement arrangement with James F. Kelly (9).
10.19 Contract of Limited Partnership of Boylston 745
Limited Partnership, dated March 24, 1989 (10).
10.22 Loan Agreement, dated August 17, 1989, relating to the
purchase of a building in Boston, Massachusetts,
together with a mortgage note and mortgage and
security agreement (10).
10.32 Agreement, dated December 27, 1990, relating to the
sale of real property in Revere, Massachusetts,
together with related commercial real estate
promissory note, personal guaranty and mortgage
deed and security agreement (12).
10.39 Cross Indemnification Agreement dated as of February
7, 1992 between Back Bay Restaurant Group, Inc. and
The Westwood Group, Inc. (13).
10.40 Amended and Restated Tax Sharing and Indemnification
Agreement dated as of March 12, 1992 between The
Westwood Group, Inc. and Back Bay Restaurant Group,
Inc. (13)
<PAGE>
10.41 Lease dated January 10, 1992 between The Westwood
Newbury Restaurant, Inc., a subsidiary of Back Bay
Restaurant Group, Inc. and 284 Newbury Street
Trust. (13)
10.43 Lease dated January 10, 1992 between Back Bay
Restaurant Group, Inc. and 284 Newbury Street
Trust. (13)
10.44 Concession Agreement dated as of March 6, 1992 between
Wonderland Greyhound Park, Inc., The Westwood Group,
Inc. and Back Bay Restaurant Group, Inc. (13)
10.45 Letter Agreement dated January 16, 1992 between Back
Bay Restaurant Group, Inc. and The Westwood Group,
Inc. (13)
10.49 Loan Agreement dated May 15, 1992, in connection with a
loan from the MSCGAF Realty Trust, together with a
promissory note and a mortgage and security
agreement. (15)
10.50 Term Loan Agreement, dated August 24, 1992, in
connection with a loan from First Trade Union
Savings Bank, FSB, together with a term promissory
note, a pledge and security agreement and with a
Modification Agreement, dated August 27, 1992. (15)
10.51 Term Note, dated September 9, 1992, in connection with
the refinancing of a purchase money mortgage on a
building in Boston, Massachusetts, together with a
mortgage financing statement and security agreement. (15)
<PAGE>
10.52 Creditor Trust and Settlement Agreement dated September
29, 1992, in connection with a settlement with
certain trade creditors, together with a promissory
note and a creditors trust security agreement. (15)
10.53 Totalisator Service Agreement, dated August 30, 1991,
in connection with an exclusive service contract,
together with an amendment and extension agreement
dated April 2, 1992. (15)
10.54 Notice of Sales Agreement, dated February 8, 1993, in
connection with a sales agreement entered into
jointly by the Company and a related party to sell,
collectively, certain parcels of land owned severally
by the Company and such related party, together with
a joinder and a sales agreement. (15)
10.55 Forbearance Agreement, dated April 5, 1993, in
connection with the mortgagee of a building owned by
the Company in Boston, Massachusetts, together with a
subordinated unconditional guarantee. (15)
10.56 Management Agreement, dated May 27, 1992, between the
Company and its 42.9% owned subsidiary, BBRG, in
connection with services to be provided by BBRG to
the Company. (15)
10.58 Contract dated November 20, 1992, in connection with
services to be provided to the Company by an entity
of which a Director of the Company is a principal,
together with an amendment by letter agreement, dated
February 2, 1993. (15)
10.59 First Amendment of Lease dated July 1, 1993 between
Back Bay Restaurant Group, Inc. and 284 Newbury
Street Trust (16).
<PAGE>
10.60 First Amendment of Lease dated July 1, 1993 between The
Westwood Newbury Restaurant, Inc. and 284 Newbury
Street Trust (16).
10.61 Letter Agreement dated January 6, 1994 in connection
with an exclusive service contract (16).
10.62 Collective Bargaining Agreement between the Company
and United Food and Commercial Workers' Union, Local
1445 AFL-CIO, CLC, dated June 1, 1993 (16).
10.63 Collective Bargaining Agreement between the Company and
Local 25-Teamsters, effective January 1, 1993 (16).
10.64 Purchase and Sale Agreement dated December 14, 1993
between Back Bay Restaurant Group, Inc. and The
Westwood Group, Inc. (16).
10.65 Termination Agreement dated December 14, 1993 between
Back Bay Restaurant Group, Inc. and The Westwood
Group, Inc. together with a termination of employee
and administrative services agreement, a termination
of amended and restated tax sharing and
indemnification agreement, an amended and restated
cross-indemnification agreement and a mutual release
(16).
10.66 Letter of Intent dated March 8, 1994 from The Westwood
Group, Inc., Back Bay Restaurant Group, Inc., John
Hancock Mutual Life Insurance Company and Fidelity
Management & Research Company, on behalf of funds
managed by it, defining the terms under which an
exchange for the Company's 14.25% Subordinated
debentures would take place (16).
<PAGE>
10.67 Loan Restructuring Agreement, dated as of July 1, 1993,
between certain subsidiaries of the Company and the
MSCGAF Realty Trust, in connection with the
restructuring of $4,500,000 Term Loan, together with
Exhibits A through F of such agreement (16).
10.68 Settlement and Debt Forgiveness Agreement between The
Westwood Group, Inc. and each Noteholder of the
Company's 14.25% Subordinated Notes due August 15,
1997 (17).
10.69 Exchange Form Restructuring of the 14.25% Subordinated
Notes due 1997 of The Westwood Group, Inc. (17).
10.70 Loan Restructure Agreement, dated October 31, 1994,
between certain subsidiaries of the Company and
Winter Hill Federal Savings Bank, in connection with
the restructuring of a $4.3 million loan, together
with an amendment to mortgage note (18).
10.71 Amendment, dated December 16, 1994, to Loan
Restructuring Agreement between certain subsidiaries
of the Company and the MSCGAF Realty Trust, in
connection with the restructuring of $4,500,000 Term
Loan (18).
10.72 Agreement, dated December 16, 1994, between certain
subsidiaries of the Company and National Development
Associates of New England Limited Partnership in
connection with the sale of real property in Revere,
Massachusetts, together with related promissory note
and mortgage (18).
<PAGE>
10.73 Settlement of Litigation Agreement, dated October 12,
1994, between Foxboro Park, Inc. and the trustee of
the Creditor Trust and Settlement Agreement, in
connection with the restructuring of the Creditor
Trust and Settlement Agreement with related
promissory notes, dated July 7, 1994 (18).
10.74 Collective Bargaining Agreement between Wonderland
Greyhound Park, Inc. and Local 22 - Laborers'
International Union, dated July 1, 1993 (18).
10.75 Collective Bargaining Agreement Extension between RFSC,
Inc. and Local 26 - Hotel and Restaurant Workers,
effective January 1, 1994 (18).
10.76 Settlement Agreement between Wonderland
Greyhound Park, Inc. and Local 254 - Service
Employees International Union, dated September 19,
1994, in connection with a successor collective
bargaining agreement (18).
10.77 Agreement for Termination of Amended and Restated Cross-
Indemnification Agreement between the Company and BBRG,
dated March 18,1994 (18).
10.78 Amendment to Term Note between certain subsidiaries of
the Company and BBRG, dated March 17, 1995 (18).
10.79 Margin Account Client Agreement between Westwood
Financial Group, Inc. and Tucker Anthony Inc.,
dated May 19, 1994, together with a side agreement
detailing additional terms (18).
<PAGE>
10.80 Amendment, dated October 24, 1995, to the Certificate of
of Incorporation of the Company (filed herewith).
11 Statement re: Computation of Earnings Per Share (filed
herewith).
22 Subsidiaries of the Company (filed herewith).
27 Financial Data Schedules (filed herewith).
<PAGE>
(1) Filed with the Company's Annual Report on Form 10-K for
1984 and incorporated herein by reference.
(2) Filed with the Company's Registration Statement on Form
S-2 No. 33-15344 filed on June 25, 1987 and
incorporated herein by reference.
(3) Filed with the Company's Annual Report on Form 10-K for
1980 and incorporated herein by reference.
(4) Filed with the Company's Annual Report on Form 10-K for
1983 and incorporated herein by reference.
(5) Filed with the Company's Annual Report on Form 10-K for
1985 and incorporated herein by reference.
(6) Filed with the Company's Annual Report on Form 10-K for
1986 and incorporated herein by reference.
(7) Filed with the Company's Current Report on Form 8-K
dated November 21, 1986.
(8) Filed with the Company's Annual Report on Form 10-K for
1987 and incorporated herein by reference.
(9) Filed with the Company's Annual Report on Form 10-K for
1988 and incorporated herein by reference.
(10) Filed with the Company's Annual Report on Form 10-K for
1989 and incorporated herein by reference.
(11) Filed with the Company's Quarterly Reports on Forms-Q
for 1990 and incorporated herein by reference.
(12) Filed with the Company's Annual Report on Form 10-K for
1990 and incorporated herein by reference.
<PAGE>
(13) Filed as an exhibit to Back Bay restaurant Group,
Inc.'s Form S-1 Registration Statement No. 33-45184
and incorporated herein by reference.
(14) Filed with the Company's Annual Report on Form 10-K for
1991 and incorporated herein by reference.
(15) Filed with the Company's Annual Report on Form 10-K for
1992 and incorporated hereby by reference.
(16) Filed with the Company's Annual Report on Form 10-K
for 1993 and incorporated hereby by reference.
(17) Filed with the Company's Quarterly Reports on Forms 10-
Q for 1994 and incorporated herein by reference.
(18) Filed with the Company's Annual Report on Form 10-K for
1994 and incorporated herein by reference.
(b) Reports on Form 8-K.
The following reports on Form 8-K were filed during the quarter
ended December 31, 1994:
None
<PAGE>
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) of
the Securities Exchange Act of l934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
THE WESTWOOD GROUP, INC.
By /s/ Charles F. Sarkis
Charles F. Sarkis
Chairman of the Board
Date: March 28, 1996
<PAGE>
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 dates
indicated.
Date: March 28, 1996 By /s/ Charles F. Sarkis
Charles F. Sarkis
Chairman of the Board
Date: March 28, 1996 By /s/ Richard P. Dalton
Richard P. Dalton
President, Chief Executive
Officer and Director
Date: March 28, 1996 By /s/ A. Paul Sarkis
A. Paul Sarkis
Executive Vice President
Director
Date: March 28, 1996 By /s/ Richard G. Egan, Jr.
Richard G. Egan, Jr.
Vice President of Finance,
Treasurer, Secretary, and
Chief Financial Officer
Date: March 28, 1996 By /s/ Anthony V. Boschetto
Anthony V. Boschetto
Controller, Asst. Secretary
<PAGE>
Date: March 28, 1996 By /s/ Francis J. Feeney
Francis J. Feeney
Asst. Secretary
Date: March 28, 1996 By /s/ Jon M. Baker
Jon M. Baker
Director
Date: March 28, 1996 By /s/ Paul J. DiMare
Paul J. DiMare
Director
The Company's Annual Report for 1995 on Form 10-K as filed with
the Securities and Exchange Commission is available without charge upon
written request to Richard P. Dalton, President and Chief Executive
Officer, The Westwood Group, Inc., 190 V.F.W. Parkway, Revere,
Massachusetts 02151.
<PAGE>
EXHIBIT 11
THE WESTWOOD GROUP, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
FOR THE THREE YEARS ENDED DECEMBER 31, 1994
1995 1994 1993
NET (INCOME) LOSS BEFORE
EXTRAORDINARY ITEM $(2,054,434) $ 932,473 $(9,375,065)
EXTRAORDINARY ITEM - 11,159,640 -
NET INCOME (LOSS) $(2,054,434) $12,092,113 $(9,375,065)
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING
DURING THE PERIOD 1,255,225 1,255,225 1,255,225
LOSS PER SHARE
BEFORE EXTRAORDINARY
ITEM $ (1.64) $ .74 $ (7.47)
<PAGE>
EXTRAORDINARY ITEM - $ 8.89 -
INCOME (LOSS) PER
SHARE AFTER
EXTRAORDINARY ITEM $ (1.64) $ 9.63 $ ( 7.47)
<PAGE>
EXHIBIT 22
SUBSIDIARIES OF THE WESTWOOD GROUP, INC.
Wonderland Greyhound Park, Inc. (Massachusetts corporation)
Westwood Communications, Inc. (Massachusetts corporation)
Westwood Development, Inc. (Massachusetts corporation)
284 Newbury, Inc. (Massachusetts corporation)
Westwood 745 Boylston Street Partnership, Inc. (Massachusetts
corporation)
Westwood 755 Boylston Street Realty Group, Inc. (Massachusetts
corporation)
Westwood Financial Group, Inc. (Massachusetts corporation)
Foxboro Park, Inc. (Massachusetts corporation)
Foxboro Harness, Inc. (Massachusetts corporation)
Foxboro Thoroughbred, Inc. (Massachusetts corporation)
Westwood Racing Holding Corp. (Massachusetts corporation)
Westwood Cartel, Inc. (Massachusetts corporation)
Westwood Tornado, Inc. (Massachusetts corporation)
Westwood Residential, Inc. (Massachusetts corporation)
Westwood Service Group, Inc. (Massachusetts corporation)
Westwood Realty, Inc. (Massachusetts corporation)
<PAGE>
EXHIBIT 10.8
<PAGE>
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
THE WESTWOOD GROUP, INC.
Pursuant to Section 242 of the General
Corporation Law of the State of Delaware
THE WESTWOOD GROUP, INC., a Delaware corporation (the "Corporation"),
does hereby certify as follows:
FIRST: Article FOURTH of the Corporation's Certificate of Incorporation
is hereby amended to read in its entirety as follows:
"FOURTH: Capital Stock.
A. Classes and Number of Shares.
The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 4,000,000 shares, consisting of
3,000,000 shares of Common Stock, par value $.01 per share (hereinafter the
"Common Stock") and 1,000,000 shares of Class B Common Stock, par value $.01
per share (hereinafter the "Class B Common Stock").
B. Relative Rights and Preferences of the Capital Stock.
1. The powers, preferences and rights of the Common Stock and Class B
Common Stock, and the qualifications, limitations or restrictions thereof, shall
be in all respects identical, except as otherwise required by law or expressly
provided in this Certificate of Incorporation.
<PAGE>
2. (a) At each annual or special meeting of stockholders, each holder
of Common Stock shall be entitled to one (1) vote in person or by proxy for each
share of Common Stock standing in his name on the stock transfer records of the
Corporation and each holder of Class B Common stock shall be entitled to ten
(10) votes in person or by proxy for each share of Class B Common Stock
standing in his name on the stock transfer records of the Corporation.
Except as set forth herein, all actions submitted to a vote of stockholders
shall be voted on by the holders of Common Stock and Class B Common Stock
voting together as a single class; provided that at any Annual Meeting of
Stockholders, the holders of Common Stock, voting separately as a class,
shall be entitled to elect as Directors of the Corporation that number of
persons which, when added to the number of persons previously elected by
the holders of Common Stock voting separately as a class who are to serve
after such meeting, would constitute one-quarter (rounded up to the nearest
whole number) of the number of directors to serve on the Board after such
meeting; provided further that at no such meeting shall the holders of
Common Stock be entitled to so vote separately as a class to elect more than
one-half of the members of the Board of Directors to be elected at such
meeting, except notwithstanding such limitation, such holders shall be
entitled to elect at least one person at such meeting. In addition to
any vote required by Article EIGHTH, Directors elected by the holders of
Common Stock, voting separately as a class, may be removed only by a vote
of the holders of 75% or more of the outstanding shares of
Common Stock, voting separately as a class.
(b) The holders of Common Stock and Class B Common Stock shall be
entitled to vote separately as a class with respect to (i) any amendments to
this Certificate of Incorporation that alter or change the powers,
preferences or special rights of their respective class of stock so as
to affect them adversely, including proposals to change the number of
authorized shares of their respective class of stock, (ii) amendments to
this Certificate of Incorporation authorizing additional shares of Common
Stock or Class B Common Stock, and (iii) such other matters as may require
class votes under the General Corporation Law of the State of Delaware.
3. (a) Dividends may be declared and paid to the holders of
Common Stock and Class B Common Stock in cash, property or other securities
of the Corporation out of any net profits or net assets of the Corporation
legally available therefor.
<PAGE>
(b) If and when dividends on the Common Stock and Class B Common
Stock are declared payable from time to time by the Board of Directors, the
holders of Class B Common Stock shall be entitled to share equally, on a per
share basis, in such dividends, except that if dividends shall be declared
that are payable at the same rate on both classes of stock and the dividends
payable in shares of Common Stock shall be payable to holds of that class of
stock and the dividends payable in shares of Class B Common Stock shall be
payable to holders of that class of stock.
(c) If the Corporation shall in any manner subdivide or combine
the outstanding shares of Common Stock or Class B Common Stock, the
outstanding shares of the other such class of stock shall be proportionally
subdivided or combined in the same manner and on the same basis as the
outstanding shares of Common Stock or Class B Common Stock, as the case
maybe, have been subdivided or combined.
4. (a) The holders of each outstanding share of any Class B Common
Stock shall have the right at any time, or from time to time, at such
holder's option, to convert such share into one fully paid and non-assessable
share of Common Stock, on and subject to the terms and conditions hereinafter
set forth.
(b) In order to exercise his conversion privilege, the holder of
any shares of Class B Common Stock to be converted shall present and surrender
the certificate representing such shares during usual business hours at any
office or agency of the Corporation maintained for the transfer of Class B
Common Stock and shall deliver a written notice of the election of the holder
to convert the shares represented by such certificate or any portion thereof
specified in such notice. Such notice shall also state the name or names
(with address) in which the certificate or certificates for shares of Common
Stock which shall be issuable on such conversion shall be issued. If so
required by the Corporation, any certificate for shares surrendered for
conversion shall be accompanied by instruments of transfer, in form
satisfactory to the Corporation, duly executed by the holder of such shares
or his duly authorized representative. Each conversion of shares of Class B
Common Stock shall be deemed to have been effected on the date (the
"Conversion Date") on which the certificate or certificates representing
such shares shall have been surrendered and
<PAGE>
such notice and any required instruments of transfer shall have been received as
aforesaid, and the person or persons in whose name or names any certificate or
certificates for shares of Common Stock shall be issuable on such conversion
shall be deemed to have become, immediately prior to the close of business on
the Conversion Date, the holder or holders of record of the shares of Common
Stock represented thereby.
(c) As promptly as practicable after the presentation and
surrender for conversion, as herein provided, of any certificate for shares
of Class B Common Stock, the Corporation shall issue and deliver at such
office or agency, to or upon the written order of the holder thereof,
certificates for the number of shares of Common Stock issuable upon such
conversion. In case any certificate for shares of Class B Common Stock
shall be surrendered for conversion of a part only of the shares represented
thereby, the Corporation shall deliver at such office or agency, to or upon
the written order of the holder thereof, a certificate or certificates for
the number of shares of Class B Common Stock represented by such surrendered
certificate, which are not being converted. The issuance of certificates for
shares of Common Stock issuable upon the conversion ofshares of Class B Common
Stock shall be made without charge to the converting holder for any tax imposed
on the Corporation in respect of the issue thereof. The Corporation shall not,
however, be required to pay any tax which may be payable with respect to any
transfer involved in the issue anddelivery of any certificate in a name other
than that of the holder of the shares being converted, and the Corporation
shall not be required to issue or deliver any such certificate unless and
until the person requesting the issue thereof shall have paid to the
Corporation the amount of such tax or has established to the satisfaction
of the Corporation that such tax has been paid.
(d) Upon any conversion of shares of Class B Common Stock
into shares of Common Stock pursuant hereto, no adjustment with respect to
dividends shall be made; only those dividends shall be payable on the shares
so converted as may be declared and may be payable to holders of
record of shares of Class B Common Stock on a date prior to the Conversion
Date with respect to the shares so converted; and only those dividends shall
be payable on shares of Common Stock issued upon such conversion as may be
declared and may be payable to holders of record of shares of Common Stock on
or after such Conversion Date.
<PAGE>
(e) In case of any consolidation or merger of the
Corporation as a result of which the holders of Common Stock shall be
entitled to receive stock, other securities or other property with respect
to or in exchange for Common Stock or in case of any sale or conveyance of
all or substantially all of the property or business of the Corporation as
an entirety, a holder of shares of Class B Common Stock shall have the right
thereafter, so long as the conversion right hereunder shall exist, to convert
each such share into the kind and amount of shares of stock and other
securities and properties receivable upon such consolidation, merger,
sale or conveyance by a holder of one share of Common Stock and shall
have no other conversion rights with regard to such share. The provisions
of this subparagraph (e) shall similarly apply to successive consolidations,
mergers, sales or conveyances.
(f) All shares of Class B Common Stock which shall have
been surrendered for conversions as herein provided shall no longer be
deemed to be outstanding, and all rights with respect to such shares,
including the rights, if any, to receive notices and to vote, shall
thereupon cease and terminate, except only the right of the holders
thereof, subject to the provisions of subparagraph (c) of this subdivision (4),
to receive shares of Common Stock in exchange therefor.
(g) Such number of shares of Common Stock as may from time
to time be required for such purpose shall be reserved for issuance upon
conversion of outstanding shares of Class B Common Stock.
(h) At any time when (i) the number of shares of Class B
Common Stock falls below 5% of the aggregate number of outstanding shares of
Common Stock and Class B Common Stock, or (ii) the Board of Directors and the
holders of a majority of the outstanding shares of Class B Common Stock
approve the conversion of all of the Class B Common Stock into Common Stock,
then the outstanding shares of Class B Common Stock shall automatically be
converted into shares of Common Stock. In the event of any automatic
conversion of the Class B Common Stock pursuant to this subdivision (h),
certificates formerly representing outstanding shares of Class B Common
Stock will thereafter be deemed to represent a like number of shares of
Common Stock.
<PAGE>
5. Upon any liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, the net assets of the Corporation shall be
distributed pro rata to the holders of the Common Stock and Class B Common
Stock in accordance with their respective rights and interests.
C. Issuance of the Common Stock and Class B Common Stock.
The Board of Directors of the Corporation may from time to time authorize by
resolution the issuance of any or all shares of the Common Stock or Class B
Common Stock herein authorized in accordance with the terms and conditions
set forth in this Certificate of Incorporation for such purposes, in such
amounts, to such persons, corporations or entities, and for such
consideration, all as the Board of Directors in its discretion may
determine and without any vote or other action by the stockholders,
except as otherwise required by law. At any time shares of the Class B
Common Stock are outstanding, the Board of Directors may issue shares of
Common Stock in the form of a distribution or distributions pursuant to a
stock dividend or split-up of the shares of the Common Stock only to the
then holders of the outstanding shares of the Common Stock and in conjunction
with and in the same ratio as a stock dividend or split-up of the shares of
the Class B Common Stock to the then holders of the outstanding shares of
the Class B Common Stock."
SECOND: The foregoing amendments were duly adopted in accordance with
the provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, The Westwood Group, Inc. has caused this Certificate
of Amendment to be executed in its corporate name this 2nd day of November,
1995.
<PAGE>
THE WESTWOOD GROUP, INC.
By: /s/ Richard P. Dalton
President
ATTEST:
By: /s/ Richard G. Egan, Jr.
Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 450,987
<SECURITIES> 0
<RECEIVABLES> 796,085
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,672,484
<PP&E> 35,377,001
<DEPRECIATION> 18,765,247
<TOTAL-ASSETS> 25,607,625
<CURRENT-LIABILITIES> 23,399,275
<BONDS> 0
<COMMON> 28,490
0
0
<OTHER-SE> (4,941,216)
<TOTAL-LIABILITY-AND-EQUITY> 25,607,625
<SALES> 33,108,161
<TOTAL-REVENUES> 33,108,161
<CGS> 0
<TOTAL-COSTS> 34,295,173
<OTHER-EXPENSES> 158,447
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 708,975
<INCOME-PRETAX> (2,054,434)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,054,434)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,054,434)
<EPS-PRIMARY> (1.64)
<EPS-DILUTED> (1.64)
</TABLE>
