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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 October 31,1996 Commission file number: 0-17517
SEA PINES ASSOCIATES, INC.
(Exact name of registrant as specified in its charter)
South Carolina 57-0845789
-------------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
32 Greenwood Drive
Hilton Head Island, South Carolina 29928
- ---------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (803) 785-3333
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
None
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Common Stock (No Par)
(Title of Class)
Series A Cumulative Preferred Stock ($0.722 Dividend
Rate/$7.60 Liquidation Preference and Redemption Price)
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. ____
There is presently no established public trading market for shares of
the registrant's common stock, no par value, and there has been very limited
trading in such shares since their original issuance in 1987. Accordingly,
trading activity in the voting stock of the registrant does not currently
represent a reliable indicator of the aggregate market value of the voting stock
of the registrant held by non-affiliates of the registrant and the registrant is
unable to estimate such value.
The number of shares outstanding of the registrant's common stock as of January
15, 1997 was 1,842,525.
DOCUMENTS INCORPORATED BY REFERENCE
Registrant's Proxy Statement in connection with its 1996 Annual Meeting of
Shareholders on March 1, 1997 is incorporated by reference into Part III.
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PART I
The discussion in this Report includes forward-looking statements that
involve risks and uncertainties. The Company's actual results could differ
materially from those discussed herein. Factors that could cause or contribute
to such differences include, but are not limited to, those discussed in
Management's Discussion and Analysis of Financial Condition and Results of
Operations in Part II below, as well as those discussed in this Part I and
elsewhere in this Report.
ITEM 1. BUSINESS.
(A) GENERAL DEVELOPMENT OF BUSINESS. Sea Pines Associates, Inc.
was incorporated under South Carolina law on May 4, 1987. As used in this
report on Form 10-K, except where the context otherwise indicates, the "Company"
means Sea Pines Associates, Inc. and its subsidiaries. The Company was
principally organized to acquire, own and operate certain resort assets located
in Sea Pines, a 5,300 acre master planned resort community on Hilton Head
Island, South Carolina.
Subsidiaries of the Company are Sea Pines Company, Inc. ("SPC"), Sea
Pines Real Estate Company, Inc. ("SPREC"), Sea Pines/TidePointe, Inc., Sea Pines
Senior Living Center, Inc. ("SPSLC"), and Fifth Golf Course Club, Inc., all of
which are wholly-owned.
SPC is a full-service resort which owns and operates three golf
courses, tennis and various other recreational facilities, home and villa rental
management and food and beverage services. SPREC provides real estate brokerage
services for buyers and sellers of real estate on Hilton Head Island and its
neighboring communities. Sea Pines/TidePointe, Inc. was formed to invest in a
general partnership, TidePointe Partners, which is currently developing a
continuing care retirement community on Hilton Head Island. Sea Pines Senior
Living Center, Inc. was established to construct a health care facility within
the TidePointe retirement community.
During 1989, the Company formed The Sea Pines Country Club, Inc. (The
"Club") which, until May 1996, was controlled by the Company. The May 1990
Equity Offering Agreement by which the Club was organized provided for the
eventual turnover by the Company of the operations and assets of the Club to the
equity members. This transfer was made, effective May 1, 1996, such that the
Club obtained control of all of its physical assets and assumed complete and
total responsibility for its operation and all the other risks and rewards of
ownership. The Company retained the right to sell the remaining unsold
memberships. Results of Club operations through the turnover date are included
in the Company's consolidated financial statements.
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(B) FINANCIAL INFORMATION RELATING TO INDUSTRY SEGMENTS. See Note
15 to the consolidated financial statements for business segment information.
(C) NARRATIVE DESCRIPTION OF BUSINESS. The Company's business is
divided into three primary segments: resort operations, real estate brokerage,
and Country Club operations (prior to Club turnover on May 1, 1996).
Additionally, the Company is involved in the development of a health care
facility within a retirement community on Hilton Head Island.
1. RESORT OPERATIONS. Resort operations consist
primarily of the operation of three resort golf courses, a 28 court racquet
club, a home and villa rental management company, retail outlets, food service
operations, and other recreational facilities. For fiscal year 1996, resort
operations accounted for approximately $24,588,000 (70%) of the Company's total
revenues, with golf and tennis activities responsible for revenues of
approximately $12,631,000 (36%) and home and villa rental management activities
responsible for revenues of approximately $9,068,000 (26%). For fiscal year
1995, resort operations accounted for approximately $22,299,000 (68%) of the
Company's total revenues, with golf and tennis activities responsible for
revenues of approximately $11,414,000 (35%) and home and villa rental management
activities responsible for revenues of approximately $8,974,000 (27%). For
fiscal year 1994, resort operations accounted for approximately $22,746,000
(66%) of the Company's total revenues, with golf and tennis activities
responsible for revenues of approximately $11,658,000 (34%) and home and villa
rental management activities responsible for revenues of approximately
$8,823,000 (26%).
During fiscal years 1996, 1995 and 1994, approximately 70% of golf and
tennis revenues and 90% of home and villa rentals were derived from vacation and
conference use at Sea Pines. As a result, the success of the Company is
dependent upon Hilton Head (in general) and Sea Pines (in particular) continuing
to be considered as prime destination resort areas, with appropriate lodging and
conference facilities. The remaining golf and tennis volume, approximately 30%,
was generated from Hilton Head Island residents.
During fiscal years 1996, 1995 and 1994, residents and vacationers
utilizing accommodations at Sea Pines accounted for approximately 85-90% of the
use of the Company's golf and tennis facilities, with the remainder attributable
to use by persons residing outside Sea Pines. Fees charged to the general
public for use of the Company's facilities are typically higher than the fees
charged to persons residing within Sea Pines. The Company is also a party to
certain use and access agreements terminable at will with several developments
and hotels located outside of Sea Pines. These agreements generally provide the
management and guests of those particular developments and hotels with access to
the Company's facilities at rates slightly lower than those available to the
general public. In addition, the Company will occasionally offer special
discounts and package rates as part of its ongoing promotional activities. Use
of the Company's
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facilities resulting from such agreements and discounts does not represent a
material portion of overall resort usage and has no significant impact on the
Company's golf and tennis revenues.
Vacation use is seasonal with the highest period being from March
through November and the lowest period from December through February. In spite
of reduced levels of use during non-peak period, the Company continues to
experience substantial fixed costs.
The Company believes that its resort operations are relatively stable.
Economic conditions and other factors which adversely affect tourism on Hilton
Head in general may have a negative impact on the resort operations of the
Company. Because of its location on the Atlantic coast, Hilton Head is
susceptible to adverse weather conditions and resulting damage from hurricanes,
as well as the potential for damage from a major oil or hazardous waste spill.
Although the Island's location away from major oil drilling operations and
industrial sites greatly reduces the risk of the latter occurrence, there can be
no assurance that such damage will not occur in the future. The Company
maintains property and casualty insurance in amounts that it believes to be
adequate including coverage for business interruption. Furthermore, access to
the Company's facilities is dependent upon adequate means of transportation at a
reasonable cost. In the future, fuel shortages, increases in fuel costs and
other events which might inhibit or restrict airplane or automobile travel could
have a negative impact on the Company's operations, depending on the severity
and duration of the interruption.
The Company is generally subject to various local and regional land use
and environmental regulations, ordinances and restrictive covenants. The
Company believes that it is currently in compliance with all such applicable
regulations and covenants and does not expect that compliance in the future will
have any material effect on the operations or the profitability of the Company.
Resort operations are subject to significant competition from various
competing facilities on Hilton Head, as well as other destination resorts in
South Carolina, Georgia and Florida. Specifically, the Company believes its
golf courses are directly competitive with approximately 15 golf courses located
on Hilton Head outside of Sea Pines. However, in as much as golf course play is
in large part dictated by the number of guests utilizing accommodations within
Sea Pines, the overall success of the Company's operations will continue to be
dependent on Sea Pines maintaining its reputation as a premier golf and tennis
resort. The Company believes that its rates are competitive compared to other
facilities of comparable quality on the Island and expects that its facilities
will continue to compete favorably with neighboring and regional resorts due to
their location, quality and design, as well as the established reputation of Sea
Pines.
The Company's golf and tennis facilities are hosts to several national
tournaments, including the annual MCI Classic and the annual Family Circle
Magazine Cup. Although
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facility usage fees for these tournaments do not constitute a major source of
income, the extensive media coverage generated from these tournaments provides
the Company with substantial marketing benefits resulting in the enhanced
national reputation of Sea Pines and the Company's facilities. Other than this
benefit, however, the Company does not believe that tournaments have a
significant financial impact on its operations and, accordingly, does not
believe its operations are dependent upon one or more of such tournaments or
their sponsors.
The Company's golf and tennis operations consist primarily of the
marketing and maintenance of the Company's facilities. The Company receives
court fees, greens fees, cart rental fees, and income from merchandise sales.
The Company's tennis facility and the three resort golf courses are open to the
general public. Maintenance and overhead expenses associated with the Company's
golf and tennis operations remain generally stable despite the volume of
facility usage. As a result, the Company's current and future profits are
dependent for the most part on the revenues generated from the usage of its
facilities, which revenues are a function of both the volume of usage and the
fee levels the Company is in a position to charge in its market area.
Resort operations employed approximately 236 people as of October 31,
1996.
2. REAL ESTATE BROKERAGE. SPREC is engaged primarily in
the brokerage of residential real estate on Hilton Head Island and its
neighboring communities. The Company competes with other real estate brokerage
firms in the Hilton Head Island area.
SPREC maintains ten offices; seven located within Sea Pines and three
located outside of Sea Pines in the Hilton Head Island area.
For fiscal year 1996, real estate brokerage operations accounted for
approximately $8,504,000 (24%) of the Company's total revenue. For fiscal year
1995, real estate brokerage operations accounted for approximately $7,070,000
(21%) of the Company's total revenue. For fiscal year 1994, real estate
brokerage operations accounted for approximately $8,050,000 (23%) of the
Company's total revenue.
While brokerage activities are not tied directly to vacation and
conference activities, general downturns with respect to visitors to Hilton Head
Island can result in slower residential real estate sales. Furthermore, rising
interest rates and other economic conditions which adversely affect real estate
sales in general are anticipated to continue to have a significant impact on
real estate brokerage revenues in the future.
SPREC employed 24 people and had 85 sales agents as of October 31,
1996.
3. COUNTRY CLUB OPERATIONS. The Equity Offering Agreement by
which The Sea Pines Country Club was organized in 1990 provided for the eventual
turnover by the
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Company of the operations and assets of the Club to the equity members. This
transfer was made, effective May 1, 1996, such that the Club obtained control of
all of its physical assets and assumed complete and total responsibility for its
operation and all the other risks and rewards of ownership. The Company
retained the right to sell the remaining unsold memberships.
As a result of the turnover, the Company recognized the deferred income
related to past membership sales and removed the Club assets from its balance
sheet. Accordingly, a non-cash gain of $7,747,000 is included in the 1996
statement of operations.
Concurrent with the turnover, the Company entered into a one year
administrative services contract with the Club to provide certain administrative
and landscape services. The Company earned $72,000 under this contract through
October 31, 1996.
Results of Club operations through the turnover date are included in
the Company's consolidated financial statements.
For the period November 1, 1995 to April 30, 1996 Country Club
operations accounted for approximately $1,866,000 (5.3%) of the Company's total
revenue. For the fiscal year 1995, Country Club operations accounted for
approximately $3,675,000 (11%) of the Company's total revenue. For fiscal year
1994, Country Club operations accounted for approximately $3,607,000 (10%) of
the Company's total revenue.
For the period November 1, 1995 to April 30, 1996 pre-tax loss from
Country Club operations was $155,000. For fiscal 1995 and 1994 pre-tax losses
from Country Club operations were $229,000 and $195,000, respectively.
The Company employed 73 people in Club operations as of the turnover
date. These individuals became Club employees at that date.
4. TIDEPOINTE RETIREMENT COMMUNITY. The Company, through its wholly
owned subsidiary, Sea Pines/TidePointe, Inc., owns a 17.5% general partnership
interest in TidePointe Partners. TidePointe Partners is a general partnership
which is developing and constructing a continuing care retirement community on
Hilton Head Island, South Carolina. The Company contributed $850,000 of certain
pre-development costs in 1994 for its partnership interest. As of October 31,
1996, the Company has also loaned the Partnership $1,694,000, including accrued
interest. Phase I construction is substantially complete and 43 units of the
total 206 units in Phase I had closed as of October 31, 1996.
Sea Pines Senior Living Center, Inc., a wholly owned subsidiary of the
Company, secured the Certificate of Need required for the construction and
operation of the health care facility located within the TidePointe community.
This Certificate of Need cannot currently be transferred because of certain
South Carolina Department of Health and
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Environmental Control (DHEC) regulations. Accordingly, the Company is
developing and constructing the health care facility. After completion and DHEC
approval, it is anticipated that TidePointe Partners will exercise an option to
purchase this facility. As of October 31, 1996, approximately $7,073,000 has
been capitalized relating to the construction and development of the health care
facility. TidePointe Partners has loaned $7,073,000 to the Company for the
construction and it is anticipated that TidePointe Partners will continue to
lend to the Company the full amount needed to complete construction and operate
the facility. No assurance can be given that TidePointe Partners will exercise
the option to purchase the facility or continue to lend the funds to complete
development. The Company has entered into a management contract with an entity,
of which the Company owns a minority interest, to operate the facility until its
transfer.
The Company expects to receive distributions from the Partnership in
the future from the sale of fee simple homes and condominiums, operation of the
health care facility, and proceeds from the ultimate sale of the project.
However, this is dependent on the project's success and cash flow.
(D) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND
EXPORT SALES. All of the Company's operations are confined to Beaufort County,
South Carolina. See Item 1(a).
ITEM 2. PROPERTIES.
(A) GOLF FACILITIES. SPC directly owns three 18-hole resort golf
courses known as the Harbour Town Golf Links, the Ocean Course and the Sea Marsh
Course, all of which are located within Sea Pines. Each of the Company's golf
courses is fully utilized during peak occupancy period on Hilton Head Island,
which is March through November.
The Harbour Town Golf Links property consists of approximately 136
acres, including a driving range. Harbour Town is the site of the MCI Classic,
a regular stop on the PGA Tour. Adjacent to the Harbour Town Golf Links is the
Heritage Clubhouse which contains a pro shop, restaurant space which is leased
to a restaurant operator, and other small meeting and dining facilities.
The Sea Marsh Golf Course contains approximately 92 acres and the Ocean
Course contains approximately 97 acres. There is a driving range located
adjacent to, and shared by, the Ocean and Sea Marsh golf courses. The Ocean
Course reopened in September of 1995 after undergoing an extensive renovation
project costing approximately $2,900,000.
(B) TENNIS FACILITIES. SPC owns and operates a tennis complex in
the Harbour Town area of Sea Pines known as the Sea Pines Racquet Club. There
are 28 tennis courts, including a stadium court, and a tennis pro shop. The
Family Circle Magazine
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Cup is held at the Sea Pines Racquet Club annually.
(C) EQUESTRIAN FACILITIES. SPC owns a tract of land known as
Lawton Stables which contains approximately 21.8 acres. The stables are leased
to a stable operator who provides boarding, lessons, and trail rides.
(D) PLANTATION CLUB. SPC owns a tract of land with improvements
thereon known as the Plantation Club site containing approximately 9.4 acres. It
includes the golf pro shop associated with the Ocean and Sea Marsh golf courses
and a parking lot utilized by patrons on such courses. In addition, the
Plantation Club contains conference facilities, a food and beverage facility
leased to a restaurant operator, a health and fitness center, a swimming pool,
and a bike rental store.
The Company is considering construction of improved conference
facilities and possibly an inn on the Plantation Club site but has no immediate
plans regarding the timing and scope of such development.
(E) OTHER RECREATIONAL FACILITIES. In the vicinity of the Harbour
Town Golf Links, SPC owns and operates recreational areas containing a
playground, a swimming pool, and a snack bar leased to a restaurant operator.
SPC also owns and operates a Beach Club in the vicinity of the
Plantation Club, containing a retail shop, parking area, an outdoor food and
beverage facility leased to a restaurant operator and a real estate office.
In the South Beach area of Sea Pines, SPC owns and operates a 3.9 acre
recreational area containing a swimming pool and parking area.
(F) UNDEVELOPED TRACTS/DEVELOPMENT RIGHTS. SPC owns a number of
undeveloped tracts of land within Sea Pines briefly described as follows:
1. Sea Pines Academy Tract - approximately 3 acres;
2. Sea Pines Center Residual - approximately 1.4 acres;
3. Harbour Town Main Parking Tract - approximately 3.21
acres;
4. Artists Area Tract - approximately 1.5 acres;
5. Cordillo Parkway Tract - 6 acres; and
6. Fifth Golf Course Tract - approximately 8 acres.
Development plans for these tracts are undetermined at the present time.
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In addition to the foregoing tracts, SPC owns the right to construct
approximately 66 multi-family dwelling units within Sea Pines along with the
right to construct 100 hotel rooms at the Plantation Club site and 60 hotel
rooms in the Harbour Town area.
(G) FOREST PRESERVE/FIFTH GOLF COURSE CLUB, INC. SPC owns a 495
acre tract of land known as the Sea Pines Forest Preserve. Various recreational
activities are permitted to be conducted on 181 of these acres and the Fifth
Golf Course Club, Inc. is investigating various possibilities. Among such
possibilities is the development of a golf course. However, construction of such
a golf course would require the approval of 75% of Sea Pines property owners
voting on such issue. The balance of the Forest Preserve is generally limited
to use as a wildlife preserve, although certain sanitation uses are permitted.
In August, 1993, the Company made a commitment to donate approximately 404 acres
of the wildlife preserve to a not-for-profit organization on Hilton Head Island,
South Carolina. As of October 31, 1996 approximately 90 of the 404 acres had
been donated and title transferred. The remaining 314 acres is leased to the
same not-for-profit organization.
(H) WELCOME CENTER. SPC owns a 6 acre tract of land which is the
site of the Sea Pines Welcome Center. This is a 23,000 square foot facility
which contains the Company's Executive and Administrative offices, the lodging
front office facilities, and the main office facility for Sea Pines Real Estate
Company.
(I) LIBERTY OAK CAFE. SPC owns a 1.6 acre tract of land and
improvements known as the Liberty Oak Cafe. This is an outdoor food and beverage
facility which is leased to a third party operator.
(J) HEALTH CARE FACILITY. The Company is currently constructing a
health care facility within the TidePointe community. This facility is expected
to be completed and fully operational in February 1997 at a total approximate
cost of $8,000,000. The facility will include a 44 bed skilled nursing unit and
a 35 unit assisted living center. See Item 1 (c)(4) above.
(K) LEASES. SPC currently leases approximately 31,000 square
feet of space used for the golf maintenance facilities, and Sea Pines Real
Estate Company, Inc. leases approximately 10,000 square feet of office space in
6 locations throughout the Island. SPSLC has a long term lease on approximately
1 acre of land located within the TidePointe continuing care retirement
community. This is the site of the Health Care facility.
(L) OTHER REAL ESTATE. SPC owns a small office building in the
Harbour Town area known as the Saddlebag Building, the majority of which is
currently leased to The Family Circle Magazine Cup, and three small commercial
buildings in Harbour Town, two of which currently serve as additional sales
offices for Sea Pines Real Estate Company.
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ITEM 3. LEGAL PROCEEDINGS.
The Company is a defendant in a lawsuit filed in November 1995 in
Beaufort Country, South Carolina by Grey Point Associates, Inc. and its
principals relating to a contractual relationship. The suit alleges breach of
contract and seeks unspecified damages. The Company has answered the suit and
filed a counter-claim for unspecified damages. Discovery has not yet commenced.
The Company intends to defend its position vigorously and pursue its
counter-claim against the plaintiff however neither the Company or its legal
counsel can form an opinion as to the outcome of this matter at this time.
The Company is not currently involved in any other litigation which it
believes will have a material and adverse affect on its financial condition or
results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.
(A) MARKET INFORMATION. The Company's capital stock was originally
issued in 1987 in units consisting of 750 shares of voting common stock and 500
shares of Series A preferred stock. Virtually all transactions of the Company's
common stock and preferred stock have been in units as originally issued.
Beginning in September of 1993, transactions in units of the Company's capital
stock trade on a bid and ask basis through the over-the-counter market at
Robinson-Humphrey Company in Atlanta, Georgia. Prior to September 1993, there
was no established public trading market for the Company's common or preferred
stock. Quotes for the units of stock were available only through Prudential
Securities, Inc. and there was no available composite index of trading and
pricing of the units.
Set forth below are the high and low closing sales price for units of
the Company's stock for each quarter since trading began:
<TABLE>
<CAPTION>
Fiscal Year Ended
October 31, 1996 High Low
----------------- ---- ---
<S> <C> <C>
Fourth Quarter $5,400.00 $5,400.00
Third Quarter $5,400.00 $5,400.00
Second Quarter $5,400.00 $5,400.00
First Quarter $5,400.00 $5,400.00
Fiscal Year Ended
October 31, 1995 High Low
----------------- ---- ---
Fourth Quarter $5,400.00 $5,400.00
Third Quarter $5,400.00 $5,400.00
Second Quarter $5,400.00 $5,400.00
First Quarter $5,400.00 $5,400.00
</TABLE>
None of the Company's Common Shares are subject to outstanding
options or warrants to purchase, or securities convertible into common equity of
the Company. The Company's Common Shares are not restricted securities and
other than those
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Shares held by officers, directors and affiliates of the Company, the Common
Shares are not subject to the volume and other limitations pursuant to Rule 144
under the Securities Act. The Company is under no obligation to register its
Common Shares under the Securities Act of 1933 for sale by holders of such
shares and the Company has no present intention to publicly offer any of its
Common Shares.
(B) HOLDERS. As of October 31, 1996 there were approximately 670
holders of record of shares of Common Stock. Most of the holders hold units
consisting of shares of both Common Stock and shares of Preferred Stock
(generally in units of 750 shares of Common Stock and 500 shares of Preferred
Stock).
(C) DIVIDENDS. The Articles of Incorporation of the Company
provide for dividends on the preferred stock of $.722 per share per annum. The
Company has paid all accrued dividends on the preferred stock through the fiscal
year ended October 31, 1996.
At its December 1996 Board of Directors meeting, the Company declared a
cash dividend to holders of Series A Cumulative Preferred Stock of $.722 per
share. This dividend is payable in equal quarterly installments of
approximately $.181 per share on January 15, 1997, April 15, 1997, July 15,
1997, and October 15, 1997 to shareholders of record on January 2, 1997, April
1, 1997, July 1, 1997 and October 1, 1997 respectively.
Historically, the Company has not paid dividends on its common stock
and has no present intention of paying such dividends in the foreseeable future.
ITEM 6. SELECTED FINANCIAL DATA.
The selected financial data is included on Exhibit 99 which is attached
and filed as part of this report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The Company's operations are conducted primarily through two wholly
owned subsidiaries. Sea Pines Company, Inc. operates all of the resort assets,
including three resort golf courses, a 28 court racquet club, a home and villa
rental management business, retail sales outlets, food service operations and
other resort recreational facilities. Sea Pines Real Estate Company, Inc. is an
independent real estate brokerage firm with ten offices serving Hilton Head
Island and its neighboring communities.
On May 1, 1996 the Company turned over the operations and assets of The
Sea Pines Country Club to the equity members as contemplated by the May 1990
Equity Offering Agreement. Effective with this transfer, the Club obtained
control of all of its
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physical assets and assumed complete and total responsibility for its operation
and all the other risks and rewards of ownership. As a result of recognizing
the deferred income related to past membership sales and removing the Club
assets from the Company's financial statements, the turnover generated in 1996,
a non-cash gain of $7,747,000 (approximately $4,786,000 after income tax effect)
which is included as other income in the Company's 1996 statement of operations.
Results of Club operations through the turnover date are included in the
Company's consolidated financial statements.
In the third quarter of fiscal year 1996, the Company reached an
agreement with the plaintiff in a previously-filed lawsuit relating to the
Company's purchase of property known as the Carolina Center. The Company agreed
to sell the property, including improvements, to the plaintiff for $1.5 million
and to pay the plaintiff $225,000. Furthermore, the Company agreed to finance
the sale with a 15 year note bearing interest at 7.5% per annum. As a result of
the agreement, the Company recorded a pre-tax impairment loss of $810,000
(approximately $500,000 after income tax effect). On October 31, 1996, the
Company consummated the sale of the property as agreed. No additional gain or
loss was required to be recorded.
The Company, through its wholly owned subsidiary, Sea Pines/TidePointe,
Inc., owns a 17.5% general partnership interest in TidePointe Partners.
TidePointe Partners is a general partnership which is developing and
constructing a continuing care retirement community on Hilton Head Island, South
Carolina. Phase I construction including the clubhouse, spa and villa buildings
1 and 2 is substantially complete and sales contracts on 43 units of the total
206 units in Phase I had closed as of October 31, 1996.
Sea Pines Senior Living Center, Inc., a wholly owned subsidiary of the
Company, is currently constructing the health care facility located within the
TidePointe community. Upon completion and DHEC approval scheduled for February
1997, it is anticipated that TidePointe Partners will exercise its option to
purchase this facility.
Liquidity and Capital Resources
The Company continued its aggressive capital investment and capital
improvement program during fiscal 1996, investing approximately $2,407,000 in
resort capital expenditures. Capital investments in 1996 included renovation of
the Company's golf maintenance facilities and the renovation of the Carolina
Center prior to the sale of the property. During the nine year period from
November 1, 1987 through October 31, 1996, the Company has invested over $30
million in capital purchases, property acquisitions and property improvements
thereby significantly enhancing the resort assets originally acquired in 1987.
In addition, the Company invested $3,878,000 in fiscal 1996 in the
construction and development of the TidePointe health care facility. TidePointe
Partners has loaned the
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Company the necessary funds for these development costs and has committed to
continue to lend to the Company the full amount needed to complete construction.
TidePointe Partners has an option to acquire the facility upon completion for
the amount loaned to the Company for construction costs.
The Company has a $12 million revolving credit facility with its
principal corporate lender to fund capital investments in business lines
consistent with current operations. As of October 31, 1996, the Company had
drawn $7,600,000 on this credit facility. The Company must obtain the lender's
approval on a project-by-project basis before using any of the remaining
availability of this revolving credit facility. The Company believes that it
will obtain such approval in order to meet its short-term cash requirements.
Long term debt, including the revolving credit facility and advances
from TidePointe Partners, totaled $26,575,000 at October 31, 1996, a $4,765,000
increase over 1995.
In addition to the revolving credit facility, the Company maintains a
$2.5 million seasonal line of credit with its principal corporate lender. This
line is used to meet cash requirements during the Company's off-season winter
months. As of October 31, 1996, the outstanding balance on the seasonal line of
credit was $775,000.
As of October 31, 1996 the Company was not in compliance with certain
covenants under its loan agreement with its principal corporate lender. The
lender has waived the noncompliance.
Cash and short term investments decreased by $1,015,000 during fiscal
1996 and totalled approximately $1,428,000 at October 31, 1996, of which
$1,196,000 is restricted. This decrease results both from the turnover of
certain short term investments to the Club and from a reduction in restricted
escrow deposits from advance lodging reservations and real estate sales. Working
capital decreased during the current year by $122,000 resulting in a working
capital deficit of $1,504,000 at October 31, 1996.
The Company expects that available cash, cash provided by operations,
and existing short term and long term lines of credit will be sufficient to meet
its cash requirements through October 31, 1997.
Results of Operations for 1996 as Compared with 1995
The Company reported total consolidated revenues of $34,958,000 for the
fiscal year ended October 31, 1996, a 5.8% increase over the prior year.
Consolidated net income during the fiscal year was $5,399,000, including the net
after tax gain on the Country Club turnover of $4,786,000 and the net after tax
impairment loss on the Carolina Center sale of $500,000. Excluding these items,
consolidated net income for the year was $1,113,000, an increase of $1,405,000
from the consolidated net loss of $292,000 reported for the fiscal year ended
October 31, 1995. The increases in consolidated
14
<PAGE> 15
revenues and net income are attributable to several operating factors, the most
significant being increases in real estate brokerage revenues and golf
operations revenues due to the reopening of the Ocean Golf Course, which was
closed for renovation during fiscal 1995.
Interest expense on long term debt increased by $154,000 in 1996, or
11.9%, as compared with 1995. This increase was the result of additional
borrowing in 1996 relating to capital investments during the year.
Results of Operations for 1995 as Compared with 1994
The Company reported total consolidated revenues of $33,044,000 and a
consolidated net loss of $292,000 for the fiscal year ended October 31, 1995.
Total consolidated revenue decreased by $1,359,000, or 4%, reflecting the
decline in real estate brokerage commissions of $980,000, or 12%, in 1995 as
compared with 1994 and the anticipated loss in golf revenues due to the
temporary closure of the Ocean Course for renovation. The Company believes that
the declining commissions were attributable primarily to a market-wide decline
in the local real estate market, and not to a loss of market share position. The
decreases in revenue and net income were partially offset by an increase in
operating income from lodging operations of $309,000, or 33%, in 1995 as
compared with 1994.
Interest expense on long term debt increased by $396,000 in 1995, or
44%, as compared with 1994. This increase was the result of higher interest
rates during 1995 and additional borrowing needed for the Ocean Course
renovation project and other capital expenditures during the year.
Business Outlook and Recent Developments
In February 1997 the Company expects to complete construction of the
health care facility located within the TidePointe continuing care retirement
community. The completed cost is estimated to total approximately $8,000,000.
As of October 31, 1996, costs totalled $7,073,000. TidePointe Partners has
loaned the Company $7,073,000 for such construction and has committed to loan
the Company the remaining funds required to construct, equip and begin operating
the facility. TidePointe Partners also has an option to purchase the facility
for a price equal to the then outstanding principal balance plus accrued
interest on the advances. This option is exercisable only after completion of
construction, licensing, commencement of operations and approval of the South
Carolina Department of Health and Environmental Control. The Company
anticipates that this option will be exercised by TidePointe Partners and a
transfer will occur in 1997, although no assurance can be given that the option
will be exercised. The Company has entered into a management contract with an
entity, of which the Company owns a minority interest, to operate the facility
until its transfer.
15
<PAGE> 16
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The audited Consolidated Financial Statements of the Company are
attached hereto beginning at page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.
ITEM 11. EXECUTIVE COMPENSATION.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information called for by Part III (Items 10, 11 and 12) has been
omitted as the Company intends to file with the Securities and Exchange
Commission not later than 120 days after the close of its fiscal year ended
October 31, 1996 a definitive Proxy Statement pursuant to Regulation 14A. Such
information is set forth in such Proxy Statement (i) with respect to Item 10,
under the caption "Election of Directors," (ii) with respect to Item 11, under
the caption "Executive Compensation" and (iii) with respect to Item 12, under
the caption "Principal Shareholders".
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K.
(a)(1)-(2) Financial Statements and Schedule:
The financial statements and schedules listed in the accompanying Index
to Consolidated Financial Statements at page F-1 herein are filed as part of
this report.
All other schedules for which provision is made in the applicable
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
16
<PAGE> 17
(3) Exhibits:
The exhibits listed on the accompanying Exhibit Index are filed as part
of this report.
(b) Reports on Form 8-K:
None.
17
<PAGE> 18
Sea Pines Associates, Inc.
Consolidated Financial Statements
October 31, 1996
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors.............................. F-2
Consolidated Financial Statements
Consolidated Balance Sheets................................. F-3
Consolidated Statements of Operations....................... F-5
Consolidated Statements of Shareholders' Equity............. F-6
Consolidated Statements of Cash Flows....................... F-7
Notes to Consolidated Financial Statements.................. F-9
Report of Independent Auditors.............................. F-29
</TABLE>
F-1
<PAGE> 19
Report of Independent Auditors
Board of Directors and Shareholders of
Sea Pines Associates, Inc.
We have audited the accompanying consolidated balance sheets of Sea Pines
Associates, Inc. (the "Company") as of October 31, 1996 and 1995, and the
related consolidated statements of operations, shareholders' equity, and cash
flows for each of the three years in the period ended October 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Sea Pines
Associates, Inc. at October 31, 1996 and 1995, and the results of its
operations and its cash flows for each of the three years in the period ended
October 31, 1996 in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Atlanta, Georgia
January 10, 1997
F-2
<PAGE> 20
Sea Pines Associates, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
OCTOBER 31
1996 1995
-------------------------
(In Thousands of Dollars)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents, including cash held in
escrow of $1,196 and $1,638 at
October 31, 1996 and 1995, respectively $ 1,428 $ 1,968
Short-term investments - 475
Accounts receivable, less allowance for doubtful
accounts of $27 and $30 at October 31, 1996 and
1995, respectively 1,029 1,856
Current portion of notes receivable 344 -
Inventories 733 749
Prepaid expenses 293 201
----------------------
Total current assets 3,827 5,249
Notes receivable -- other 1,617 -
Note receivable and accrued interest from
TidePointe Partners 1,694 1,538
Investment in TidePointe Partners 809 831
Deferred loan fees, net 49 78
Deferred income taxes - 2,662
Other assets, net 91 132
Intangibles, net of accumulated amortization of
$1,179 and $1,048 at October 31, 1996 and
1995, respectively 131 262
Real estate assets
Construction in progress 8,113 4,665
Operating properties, net 22,879 29,123
Properties held for future development 7,047 7,166
----------------------
38,039 40,954
----------------------
Total assets $46,257 $51,706
======================
</TABLE>
F-3
<PAGE> 21
<TABLE>
<CAPTION>
OCTOBER 31
1996 1995
--------------------------
(In Thousands of Dollars)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 2,037 $ 2,301
Advance deposits 1,223 1,446
Line of credit with bank 775 1,300
Income taxes payable 142 13
Current portion of deferred revenue 371 858
Current maturities of long-term debt 783 713
---------------------
Total current liabilities 5,331 6,631
Long-term debt 18,719 17,902
Due to TidePointe Partners 7,073 3,195
Deferred revenue on equity club 13,276
Other deferred revenue 214 61
Deferred income taxes 412
Other liabilities 645
---------------------
Total liabilities 31,749 41,710
Commitments and contingencies
Shareholders' equity:
Series A cumulative preferred stock, no par
value, 2,000,000 shares authorized; 1,228,350
shares issued and outstanding (liquidation
preference $9,335,460) 7,218 8,105
Series B junior cumulative preferred stock, no
par value, 3,000 shares authorized, none issued
or outstanding - -
Common stock, 23,000,000 shares authorized
respectively; no par value, 1,842,525 shares
issued and outstanding 2,166 2,166
Retained earnings (accumulated deficit) 5,124 (275)
---------------------
Total shareholders' equity 14,508 9,996
---------------------
Total liabilities and shareholders' equity $46,257 $51,706
=====================
</TABLE>
See accompanying notes.
F-4
<PAGE> 22
Sea Pines Associates, Inc.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
1996 1995 1994
--------------------------------------------------------
(In Thousands of Dollars, Except Per Share Amounts)
<S> <C> <C> <C>
Revenues $34,958 $33,044 $34,403
Cost and expenses:
Cost of revenues 24,758 24,772 25,154
Sales and marketing expenses 1,219 1,368 1,180
General and administrative expenses 4,166 4,194 4,109
Depreciation and amortization 1,716 1,891 1,853
Impairment loss on Carolina Center 810 - -
-----------------------------------------------
32,669 32,225 32,296
-----------------------------------------------
Operating income 2,289 819 2,107
Other income (expense):
Equity in loss of TidePointe Partners (22) - (38)
Gain on equity club turnover 7,747 - -
Interest income 176 61 25
Interest expense, net of amounts capitalized (1,451) (1,297) (901)
-----------------------------------------------
6,450 (1,236) (914)
-----------------------------------------------
Income (loss) before income taxes 8,739 (417) 1,193
Provision (benefit) for income taxes 3,340 (125) 289
-----------------------------------------------
Net income (loss) 5,399 (292) 904
Preferred stock dividend requirements 887 887 887
-----------------------------------------------
Net income (loss) attributable to common stock $ 4,512 $(1,179) $ 17
===============================================
Per share of common stock
Net income (loss) $ 2.45 $ (0.64) $ 0.01
===============================================
</TABLE>
See accompanying notes.
F-5
<PAGE> 23
Sea Pines Associates, Inc.
Consolidated Statements of Shareholders' Equity
<TABLE>
<CAPTION>
SERIES A
PREFERRED STOCK COMMON STOCK RETAINED EARNINGS
---------------------------------- (ACCUMULATED
SHARES AMOUNT SHARES AMOUNT DEFICIT) TOTAL
------------------------------------------------------------
(In Thousands of Dollars)
<S> <C> <C> <C> <C> <C> <C>
Balance at October 31, 1993 1,228 $8,478 1,843 $2,166 $ 514 $11,158
Net income - - - - 904 904
Declaration of preferred
stock dividend of $0.722
per share - (373) - - (514) (887)
------------------------------------------------------------
Balance at October 31, 1994 1,228 8,105 1,843 2,166 904 11,175
Net loss - - - - (292) (292)
Declaration of preferred
stock dividend of $0.722
per share - - - - (887) (887)
------------------------------------------------------------
Balance at October 31, 1995 1,228 8,105 1,843 2,166 (275) 9,996
Net income - - - - 5,399 5,399
Declaration of preferred
stock dividend of $0.722
per share - (887) - - - (887)
------------------------------------------------------------
Balance at October 31, 1996 1,228 $7,218 1,843 $2,166 $5,124 $14,508
============================================================
</TABLE>
See accompanying notes.
F-6
<PAGE> 24
Sea Pines Associates, Inc.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
1996 1995 1994
-----------------------------
(In Thousands of Dollars)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 5,399 $ (292) $ 904
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 1,745 1,920 1,883
Gain on equity club turnover (7,747) - -
Gain on sale of assets - - (2)
Increase (decrease) in allowance for doubtful
accounts (3) 9 (65)
Deferred income taxes 3,074 (138) (394)
Loss on real estate assets 585 123 -
Equity in loss of TidePointe Partners 22 - 38
Changes in current assets and liabilities:
Decrease in accounts and notes receivable 369 112 325
(Increase) decrease in inventories 16 (40) 77
Decrease (increase) in prepaid expenses (92) 21 264
Decrease (increase) in other assets 41 (36) -
(Decrease) increase in accounts payable and
accrued expenses (264) (164) 268
Increase (decrease) in deferred revenue 107 (47) (46)
Increase (decrease) in advance deposits (223) 161 (89)
Increase (decrease) in income taxes payable 129 (154) (77)
Increase (decrease) in current portion of
deferred revenue (487) 71 (599)
Decrease (increase) in other liabilities (645) 191 85
-----------------------------
Net cash provided by operating activities 2,026 1,737 2,572
INVESTING ACTIVITIES
Decrease (increase) in short-term investments 475 (40) (89)
Proceeds from sale of equity memberships - 259 598
Proceeds from sale of assets 47 - 17
Capital expenditures and property acquisitions (2,407) (3,922) (2,084)
Increase in note receivable and accrued
interest from TidePointe Partners (156) (1,538) -
Increase in investment in TidePointe Partners - - (70)
-----------------------------
Net cash used in investing activities (2,041) (5,241) (1,628)
</TABLE>
F-7
<PAGE> 25
Sea Pines Associates, Inc.
Consolidated Statements of Cash Flows (continued)
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
1996 1995 1994
-----------------------------
(In Thousands of Dollars)
<S> <C> <C> <C>
FINANCING ACTIVITIES
Additions (reductions) to line of credit with bank (525) 700 600
Additions to long-term debt 1,600 4,500 250
Principal repayments of debt (713) (650) (597)
Principal payments under capital lease obligations - (38) (150)
Dividends paid (887) (887) (887)
-----------------------------
Net cash provided by (used in) financing activities (525) 3,625 (784)
-----------------------------
Net increase (decrease) in cash and cash
equivalents (540) 121 160
Cash and cash equivalents at beginning of year 1,968 1,847 1,687
Cash and cash equivalents at end of year $ 1,428 $1,968 $1,847
=============================
</TABLE>
See accompanying notes.
F-8
<PAGE> 26
Sea Pines Associates, Inc.
Notes to Consolidated Financial Statements
October 31, 1996, 1995 and 1994
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Sea Pines Associates, Inc. ("SPA" or the "Company") was incorporated in South
Carolina on May 4, 1987. The Company was principally organized to acquire, own
and operate certain resort assets in Sea Pines Plantation on Hilton Head
Island, South Carolina.
The wholly-owned subsidiaries of the Company are Sea Pines Company, Inc.
("SPCI"), Sea Pines Real Estate Company ("SPREC"), Sea Pines/TidePointe, Inc.,
Sea Pines Senior Living Center, Inc. ("SPSLC") and Fifth Golf Course Club, Inc.
During 1989, the Company formed a corporation, The Sea Pines Country Club,
Inc. (the "Club") which the Company controlled prior to its turnover to the
equity members on May 1, 1996 (see Note 10 for further discussion).
SPCI is a full-service resort which provides guests with the use of three golf
courses, tennis, various other recreational facilities, villa management and
food-and-beverage services. The Club is a private membership country club that
operates food-and-beverage services, a golf course and other recreational
facilities. SPREC provides real estate brokerage services for buyers and
sellers of real estate in the Hilton Head Island, South Carolina area (see Note
15 for business segment information). Sea Pines/TidePointe, Inc. was formed to
invest in a general partnership, TidePointe Partners, which is developing a
continuing care retirement community (see Note 8). Sea Pines Senior Living
Center, Inc. was established to construct a health care facility within the
TidePointe community (see Note 8). Fifth Golf Course Club, Inc. owns certain
acreage which could be used to develop another golf course.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its wholly-owned or controlled subsidiaries. All intercompany accounts and
transactions have been eliminated.
The Company accounts for its general partner interest in the TidePointe
Partners partnership (see Note 8) using the equity method of accounting
pursuant to AICPA Statement of Position 78-9. Under the equity method, the
Company's investment equals its capital contributions, plus its share of net
income or loss of the partnership, less any capital distributions received.
F-9
<PAGE> 27
Sea Pines Associates, Inc.
Notes to Consolidated Financial Statements (continued)
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
STATEMENTS OF CASH FLOWS
For purposes of the statements of cash flows, the Company considers all
short-term investments with maturities of 90 days or less at the time of
purchase to be cash equivalents.
REVENUE RECOGNITION
Revenues and expenses from resort services and commercial and country club
operations are recognized as goods are sold and services are provided. Real
estate brokerage revenues are recognized upon closing of the sale.
Proceeds from the sale of Country Club memberships and a portion of the
proceeds from resales were deferred until May 1, 1996 when the Club was turned
over to its equity members (see Note 10). Subsequent to May 1, 1996 sales of
the new memberships and commissions on sales of reissued memberships are
recognized as income pursuant to the terms of an agreement with the Club, which
rotates sales of new and reissued memberships according to a pre-set schedule.
Such sales are subject to certain restrictions related to sales of new
memberships and resales of memberships, as defined.
Revenues from long-term service contracts are recognized during the periods in
which the services are provided.
COST OF REVENUES
Cost of revenues includes payments to home and villa owners, real estate sales
commissions, cost of inventories sold, credit-card commissions and costs
incurred to operate and maintain operating properties.
F-10
<PAGE> 28
Sea Pines Associates, Inc.
Notes to Consolidated Financial Statements (continued)
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
CONCENTRATION OF CREDIT RISK
The Company maintains substantially all of its cash with one financial
institution. Account balances greater than $100,000 are not federally insured
and are subject to an accounting loss if the financial institution fails.
Management believes such risk is minimal based on the current financial
condition of the financial institution.
CASH HELD IN ESCROW
Cash includes cash held in escrow pending real estate closings, advance
deposits for home and villa rentals, and rental receipts to be paid to home and
villa owners.
SHORT-TERM INVESTMENTS
At October 31, 1995 short-term investments consist of U.S. Treasury Bills with
maturities greater than 90 days at the time of purchase and are restricted in
accordance with the Equity Offering Agreement (see Note 10). Such investments
are stated at amortized cost, and management has the intent and the ability to
hold such securities to maturity.
INVENTORIES
Inventories are valued at the lower of cost (first-in, first-out method) or
market.
REAL ESTATE ASSETS
Real estate assets are recorded at cost less any impairment losses. The costs
of additions and improvements which substantially extend the useful lives of
assets are capitalized. Capitalized costs include costs of construction,
property taxes, interest and miscellaneous expenses incurred during the
construction period. Capitalized construction period interest totalled
approximately $630,000, $238,000, and $32,000, in 1996, 1995, and 1994,
respectively (see Note 8). Repairs and maintenance costs are expensed as
incurred.
F-11
<PAGE> 29
Sea Pines Associates, Inc.
Notes to Consolidated Financial Statements (continued)
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
REAL ESTATE ASSETS (CONTINUED)
The Company provides depreciation for financial reporting purposes when the
asset is placed in operation using straight-line and certain accelerated
methods over the estimated useful lives of the assets, which range from five to
39 years.
OTHER ASSETS
Intangible assets are amortized using the straight line method over ten years.
Deferred loan fees are amortized over 3-5 years, the lives of the corresponding
debt.
IMPAIRMENT OF LONG-LIVED ASSETS
An impairment loss is recognized whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. The
Company considers historical performances and future estimated results in its
evaluation of potential impairment and then compares the carrying amount of the
asset to the estimated future cash flows expected to result from the use of the
asset. If the carrying amount of the asset exceeds the estimated expected
future cash flows, the Company measures the amount of the impairment by
comparing the amount of the asset to its fair value.
INCOME TAXES
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"), which
requires recognition of deferred tax liabilities and assets based on temporary
differences between the financial statement and tax bases of assets and
liabilities using current statutory tax rates. SFAS 109 also requires a
valuation allowance be established against net deferred tax assets if, based
upon the available evidence, it is more likely than not that some or all of the
deferred tax assets will not be realized.
F-12
<PAGE> 30
Sea Pines Associates, Inc.
Notes to Consolidated Financial Statements (continued)
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
INCOME (LOSS) PER SHARE
Income (loss) per share of common stock is calculated by dividing net income or
loss after preferred stock dividend requirements by the weighted average
outstanding shares of common stock.
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 amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain amounts in the 1995 and 1994 financial statements have been
reclassified to conform to the current year presentation.
2. STATEMENTS OF CASH FLOWS
Supplemental disclosure of cash flows information follows (in thousands of
dollars):
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
1996 1995 1994
-----------------------
<S> <C> <C> <C>
Cash paid during the year for:
Interest $1,577 $1,386 $892
Income taxes 98 207 760
</TABLE>
Prior to the Country Club turnover, the Company billed quarterly dues related
to the Country Club in advance and deferred the related revenues to the periods
in which the dues were earned. Accordingly, the Company had $789,000 in
receivables and other deferred revenue at October 31, 1995.
F-13
<PAGE> 31
Sea Pines Associates, Inc.
Notes to Consolidated Financial Statements (continued)
3. INVENTORIES
Inventories consist of the following (in thousands of dollars):
<TABLE>
<CAPTION>
OCTOBER 31
1996 1995
--------------
<S> <C> <C>
Merchandise $654 $651
Supplies, parts and accessories 35 35
Food and beverages 11 33
Other 33 30
--------------
$733 $749
==============
</TABLE>
4. REAL ESTATE ASSETS
Operating properties consist of the following (in thousands of dollars):
<TABLE>
<CAPTION>
OCTOBER 31
1996 1995
-----------------
<S> <C> <C>
Land and improvements $19,712 $22,624
Buildings 6,432 9,271
Machinery and equipment 5,034 6,324
Property held under capital leases 251 251
-----------------
31,429 38,470
Less accumulated depreciation (8,550) (9,347)
-----------------
$22,879 $29,123
=================
</TABLE>
Construction in progress consists of the following (in thousands of dollars):
<TABLE>
<CAPTION>
OCTOBER 31
1996 1995
----------------
<S> <C> <C>
Healthcare facility $7,073 $3,195
Other 1,040 1,470
----------------
$8,113 $4,665
================
</TABLE>
F-14
<PAGE> 32
Sea Pines Associates, Inc.
Notes to Consolidated Financial Statements (continued)
4. REAL ESTATE ASSETS (CONTINUED)
Properties held for future development of $7,047,000 and $7,166,000 at October
31, 1996 and 1995, respectively, consist primarily of land and certain future
development rights.
5. LONG-TERM DEBT AND LINE OF CREDIT AGREEMENTS
Long-term debt consists of notes payable to one bank secured by first mortgages
on substantially all assets of SPCI (net book value of approximately
$39,184,000 at October 31, 1996) as follows (in thousands of dollars):
<TABLE>
<CAPTION>
OCTOBER 31
1996 1995
-----------------
<S> <C> <C>
Note payable to bank, bearing interest at various London
Interbank Offered Rates (LIBOR) plus 1.5% (averaging 7% at
October 31, 1996), with monthly principal payments ranging
from $63 to $69, plus interest, through May 1998 with a
balloon payment for the balance in June 1998,
collateralized by substantially all assets of SPCI. $11,902 $12,615
Note payable to bank, bearing interest at LIBOR plus 1.5%
(7% at October 31, 1996), interest payable on a monthly
basis and adjustable as defined, all principal is due
October 14, 1998, collateralized by substantially all
assets of SPCI; $12,000 maximum borrowing; as of October
31, 1996, $4,400 is available if pre-approved by the bank
for capital projects. 7,600 6,000
-----------------
19,502 18,615
Less current portion of long-term debt (783) (713)
-----------------
Total long-term debt $18,719 $17,902
=================
</TABLE>
F-15
<PAGE> 33
Sea Pines Associates, Inc.
Notes to Consolidated Financial Statements (continued)
5. LONG-TERM DEBT AND LINE OF CREDIT AGREEMENTS (CONTINUED)
Scheduled maturities of long-term debt as of October 31, 1996, are as follows
(in thousands of dollars):
<TABLE>
<S> <C>
Year ending October 31
1997 $ 783
1998 18,719
-------
$19,502
=======
</TABLE>
The loan agreements contain provisions and covenants which impose certain
restrictions on the use of the Company's assets. The more significant of these
restrictions include limitations as to new indebtedness and leases, the sale or
disposal of certain assets, capital contributions and investments, and new
lines of business.
In addition, the Company maintains a $2,500,000 seasonal line of credit with
the same bank. As of October 31, 1996 and 1995, $775,000 and $1,300,000 were
outstanding under this line of credit, respectively. Interest is payable
monthly at LIBOR plus 1.5% (7.0% and 7.45% at October 31, 1996 and 1995) and
the line of credit expires October 15, 1998. Borrowings under the line are
also secured by substantially all of the assets of SPCI.
On February 2, 1996 the Company entered into an interest rate collar agreement
which effectively set minimum and maximum interest rates on a $10 million
notional principal amount ranging from a floor of 5.99% to a maximum or cap of
7.75% for a sixteen month period ending June 10, 1998.
F-16
<PAGE> 34
Sea Pines Associates, Inc.
Notes to Consolidated Financial Statements (continued)
6. INCOME TAXES
The provision (benefit) for income taxes consists of the following (in
thousands of dollars):
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
1996 1995 1994
-----------------------
<S> <C> <C> <C>
Current taxes:
Federal $ 167 $ - $ 592
State 99 13 91
-----------------------
266 13 683
Deferred income taxes (benefit):
Federal 2,658 (124) (341)
State 416 (14) (53)
-----------------------
3,074 (138) (394)
-----------------------
$3,340 $(125) $ 289
=======================
</TABLE>
The reconciliation between actual income tax expense (benefit) and the amount
calculated by applying the federal statutory rates to income (loss) before
income taxes follows (in thousands of dollars):
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
1996 1995 1994
-----------------------
<S> <C> <C> <C>
Tax at statutory federal income tax rates $2,971 $(142) $ 406
State income taxes, net of federal income
tax benefit 361 - 25
Tax benefit of charitable contribution - - (166)
Other 8 17 24
-----------------------
$3,340 $(125) $ 289
=======================
</TABLE>
F-17
<PAGE> 35
Sea Pines Associates, Inc.
Notes to Consolidated Financial Statements (continued)
6. INCOME TAXES (CONTINUED)
The tax effects of the types of temporary differences and carryovers which give
rise to deferred income tax assets (liabilities) at October 31, 1996, 1995 and
1994 are as follows (in thousands of dollars):
<TABLE>
<CAPTION>
OCTOBER 31
1996 1995 1994
-----------------------------
<S> <C> <C> <C>
Deferred revenue related to country club
membership sales $ 52 $2,807 $2,720
Charitable contribution carryover 392 410 410
Accrued liabilities 99 121 119
Other assets 10 59 21
-----------------------------
Gross deferred income tax assets 553 3,397 3,270
Valuation allowance (392) (405) (405)
-----------------------------
Deferred income tax assets 161 2,992 2,865
-----------------------------
Depreciation (142) (179) (148)
Intangible assets (49) (98) (147)
Equity loss from TidePointe Partners (284) - -
Other liabilities (98) (53) (46)
-----------------------------
Gross deferred income tax liabilities (573) (330) (341)
-----------------------------
Net deferred income tax (liabilities) assets $(412) $2,662 $2,524
=============================
</TABLE>
These net amounts are included in the consolidated balance sheets as noncurrent
assets or liabilities.
7. SHAREHOLDERS' EQUITY
The Company's capital stock generally trades in units, each consisting of 500
preferred shares and 750 voting common shares. The preferred and common shares
were issued on December 22, 1987.
F-18
<PAGE> 36
Sea Pines Associates, Inc.
Notes to Consolidated Financial Statements (continued)
7. SHAREHOLDERS' EQUITY (CONTINUED)
PREFERRED STOCK
Of the 5,000,000 authorized shares of preferred stock, 2,000,000 shares are
designated as Series A cumulative preferred stock and 3,000 shares are
designated as Series B junior cumulative preferred stock. The Board of
Directors has the authority to approve the issuance amount, rights and powers
of an additional 2,997,000 shares of non-Series A preferred stock except that
such rights and powers shall not be superior to those of the Series A
cumulative preferred shares.
The Series A cumulative preferred shares provide for a cumulative dividend of
$0.722 per share per annum, payable as declared by the Board of Directors.
These shares have a liquidation value of $7.60 per share plus accumulated but
unpaid dividends. If four or more years of dividends are in arrears, the
Series A cumulative preferred shareholders shall be entitled to elect a
majority of the Board of Directors of the Company. All or any part of such
shares may be redeemed at the option of the Company at liquidation value.
No shares of the Series B junior cumulative preferred stock have been issued
(see Stock Purchase Rights Plan).
COMMON STOCK
Of the 23,000,000 authorized shares of common stock, 2,000,000 shares are
designated as special common stock and 1,000,000 are designated as nonvoting
common stock. All other shares are voting. The 1,842,525 shares of common
stock outstanding are all voting common stock.
Each share of common stock (regardless of class) shall participate on an equal
and pro rata basis in all dividends and other distributions, including
liquidation, subject to the rights of the preferred shareholders.
F-19
<PAGE> 37
Sea Pines Associates, Inc.
Notes to Consolidated Financial Statements (continued)
7. SHAREHOLDERS' EQUITY (CONTINUED)
COMMON STOCK (CONTINUED)
Holders of shares of voting common stock shall be entitled to one vote per
share. Holders of special common shares (if issued) shall have such voting
rights as specified by the Board of Directors, except that such rights shall
not be superior to the voting common stock.
STOCK PURCHASE RIGHTS PLAN
On August 23, 1993 the Company's Board of Directors approved a Stock Purchase
Rights Plan ("Plan") and declared a dividend distribution of one right
("Right") for each share of the Company's outstanding common stock. Each Right
entitles a shareholder to purchase one one-thousandth of a share of Series B
junior cumulative preferred stock at a price of $50 per Right, subject to
adjustment.
The Rights become exercisable after any person or group of affiliated or
associated persons (an "Acquirer") acquires 20% percent or more of the
Company's outstanding common stock or commences a tender offer that would
result in the Acquirer owning 20% or more of the Company's outstanding common
stock or an Acquirer has been designated an Adverse Person, as such term is
defined in the Plan. In the event the Rights become exercisable, a Right will
entitle the holder to receive shares of the Company's common stock having a
value equal to twice the exercise price of the Right. In the event that the
Company is acquired in a merger or other business combination or sale of 50% or
more of its assets or earning power, a Right will entitle the holder to receive
shares of the surviving company's common stock having a market value equal to
twice the exercise price of the Right. The Board of Directors has the
flexibility to lower the 20% threshold to not less than 10% under certain
circumstances.
In general, the Rights may be redeemed by the Company at $.01 per Right at
anytime before certain events occur. One Right is attached to and trades with
each share of common stock. The Rights will not trade separately unless they
become exercisable. All Rights expire on August 23, 2003.
F-20
<PAGE> 38
Sea Pines Associates, Inc.
Notes to Consolidated Financial Statements (continued)
8. TIDEPOINTE PARTNERS
On January 14, 1994, a subsidiary of the Company entered into a general
partnership, TidePointe Partners (the Partnership), with a major physicians
professional liability insurance company, for the purpose of constructing,
developing and operating a continuing care retirement community on Hilton Head
Island, South Carolina, to be known as TidePointe. The Company contributed
$850,000 of certain predevelopment costs for a 17.5% interest in the
partnership, and the other company made an initial cash contribution of
$6,000,000 (of which $5,000,000 was borrowed) for an 82.5% interest in the
partnership.
The Partnership has also guaranteed the other partner's repayment of the
$5,000,000 note payable related to it's capital contribution which matures on
January 18, 1999. As a general partner, the Company's subsidiary (Sea
Pines/TidePointe, Inc.) has also inherently assumed other risks of the
partnership and its obligations.
As of October 31, 1996, the Company has loaned the Partnership $1,505,000 which
accrues interest at prime plus two percent. Such loan with accrued interest of
$189,000 and $33,000 at October 31, 1996 and 1995, respectively, is unsecured
and matures on December 31, 1996. The Company expects to extend the maturity
date of this loan. The Company has no further commitments or obligations to
fund the Partnership.
The following is a summary of TidePointe Partners' statement of financial
condition at:
<TABLE>
<CAPTION>
OCTOBER 31
1996 1995
--------------------
<S> <C> <C>
Development costs $35,904 $20,217
Receivable from SPSLC 7,073 3,195
Total assets 43,531 23,412
Debt 29,679 11,641
Total liabilities 36,927 16,675
Partners' equity 6,604 6,737
</TABLE>
F-21
<PAGE> 39
Sea Pines Associates, Inc.
Notes to Consolidated Financial Statements (continued)
8. TIDEPOINTE PARTNERS (CONTINUED)
As a part of the partnership agreement, the Company agreed to construct a
healthcare facility within TidePointe. SPSLC, the Company's subsidiary,
secured the certificate of need required for the healthcare facility which
cannot be transferred until the facility is licensed because of certain South
Carolina Department of Health and Environmental Control (DHEC) regulations.
Accordingly, SPSLC is developing and constructing the healthcare facility which
is scheduled to be completed by February 1997. As of October 31, 1996 and
1995, $7,073,000 and $3,195,000, respectively, of development costs are
included in construction in progress. As of October 31, 1996 approximately
$900,000 remains to be expended for the completion of the healthcare facility.
The healthcare facility is also pledged as security on certain loan obligations
of TidePointe Partners.
SPSLC has entered into a ground lease with TidePointe Partners for the land
upon which the healthcare facility is being constructed. The ground lease has
a term of 52 years at $252,000 per annum.
TidePointe Partners has committed to loan to SPSLC all funds necessary to
construct, equip and operate the healthcare facility. Such advances accrue
interest at prime plus 2% (10.25% and 10.75% at October 31, 1996 and 1995) and
are secured by the healthcare facility, equipment and SPSLC common stock. The
advances are repayable on an interim basis only from available cash, as
defined, or at January 14, 2001. At October 31, 1996 and 1995, such advances
aggregated $7,073,000 and $3,195,000, respectively. Interest incurred on these
advances totaled $695,000 and $146,000 at October 31, 1996 and 1995,
respectively, and has been capitalized.
TidePointe Partners has an option to purchase all of the common stock of SPSLC
for a purchase price equal to the then outstanding principal balance and
accrued interest on the advances exercisable only after completion of the
healthcare facility, licensing of SPSLC as the operator and commencement of
operations, and only with the approval of DHEC. The option expires on January
14, 2001.
The Company has entered into a 5-year management contract with an entity, of
which the Company owns a minority interest, to operate the facility for a fixed
percentage of the facility's gross revenues. The contract can be terminated
upon 180-days notice.
F-22
<PAGE> 40
Sea Pines Associates, Inc.
Notes to Consolidated Financial Statements (continued)
9. COMMITMENTS AND CONTINGENCIES
Rent expense aggregated $689,000, $681,000 and $616,000 for the years ended
October 31, 1996, 1995 and 1994, respectively. Operating leases relate
primarily to office space and equipment. Minimum annual rental commitments
remaining at October 31, 1996, under noncancelable operating leases with
original terms of at least one year are as follows (in thousands of dollars):
<TABLE>
<S> <C>
Year ending October 31
1997 $ 424
1998 279
1999 217
2000 84
2001 84
Thereafter 944
------
$2,032
======
</TABLE>
The Company has entered into real estate purchase agreements totaling $630,000
for two condominiums units. A deposit of $63,000 was made in connection with
these contracts, and the balance of $567,000 is due at closing which is
scheduled for 1998. The Company expects to find other purchasers prior to its
closing on the units.
The Company is a defendant in a lawsuit relating to a contractual relationship.
The suit alleges breach of contract and seeks unspecified damages. The Company
has answered the suit and filed a counterclaim for unspecified damages.
Discovery has not yet commenced. The Company intends to defend its position
vigorously and pursue its counterclaim against the plaintiff, however neither
the Company nor its legal counsel can form an opinion as to the outcome of this
matter at this time. Additionally, the Company is involved in certain other
matters of litigation related to normal operating activities. Management
believes that the ultimate resolution of these other matters will not have a
materially adverse effect on the consolidated financial position or results of
operations of the Company.
In 1993, the Company made a commitment to donate approximately 404 acres of the
wildlife preserve to a not-for-profit organization on Hilton Head Island, South
Carolina. As of October 31, 1996 approximately 90 of the 404 acres has been
donated and title transferred. The remaining 314 acres has been leased to the
same not-for-profit organization for a nominal amount.
F-23
<PAGE> 41
Sea Pines Associates, Inc.
Notes to Consolidated Financial Statements (continued)
10. THE SEA PINES COUNTRY CLUB, INC.
The Equity Offering Agreement, by which the Sea Pines Country Club was
organized in 1990, provided for the eventual turnover by the Company of the
operations and assets of the Club to the equity members. This transfer was
made, effective May 1, 1996, such that the Club obtained control of all of its
physical assets and assumed complete and total responsibility for its operation
and all the other risks and rewards of ownership. The Company retained the
right to sell the remaining unsold memberships.
Revenue from the sale of memberships and a portion of the proceeds from resales
had been deferred until the turnover. As of October 31, 1995 the Company had
sold 1,148 new memberships and received approximately $13,276,000, which was
recorded as deferred revenue, and $645,000 related to resales which was
included in other liabilities at that date.
As a result of recognizing the deferred income related to past membership sales
and removing the Club assets from the Company's financial statements, the
turnover generated a non-cash gain in 1996 of $7,747,000 which is included as
other income in the 1996 statement of operations.
Concurrent with the turnover, the Company entered into a one year
administrative services contract with the Club to provide certain
administrative and landscaping services. The Company earned $72,000 under this
contract through October 31, 1996. Additionally, the Club has reimbursed the
Company $887,000 related to payroll and benefits during the period May 1, 1996
through October 31, 1996.
Results of operations and the assets and liabilities of the Club are included
in the Company's consolidated financial statements through April 30, 1996.
Subsequent to April 30, 1996 and through October 31, 1996, the Company
recognized approximately $494,000 in revenues from the sale of memberships.
F-24
<PAGE> 42
Sea Pines Associates, Inc.
Notes to Consolidated Financial Statements (continued)
11. SALE OF CAROLINA CENTER
In 1996, the Company reached an agreement with the plaintiff in a
previously-filed lawsuit relating to the Company's purchase of property known
as the Carolina Center. The Company agreed to sell the property, including
improvements, to the plaintiff for $1.5 million and to pay the plaintiff
$225,000. Furthermore, the Company agreed to finance the sale with a 15-year
note bearing interest at 7.5% per annum. As a result of the agreement, the
Company recorded a pre-tax impairment loss of $810,000 ($500,000 after income
tax effect). On October 31, 1996, the Company consummated the sale of the
property, as agreed, and no additional gain or loss was recorded.
12. EMPLOYEE SAVINGS PLAN
Effective January 1, 1989, the Company adopted a 401(k) defined contribution
plan for all eligible employees with a minimum of six months of service and who
meet certain age requirements, as defined. The Company matches 50% of the
first 4% (3% in 1994) of the participants' compensation. Effective January 1,
1997 the Company's match has been increased to 50% of the first 5% of the
participants' compensation. The Company's contributions to the plan were
$80,000, $82,000 and $70,000 for the years ended October 31, 1996, 1995 and
1994, respectively.
13. FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents, trade receivables, notes
receivable other current assets, accounts payable, line of credit with bank,
long-term debt and accruals meeting the definition of financial instruments
approximate their fair values, as of October 31, 1996. As of October 31, 1996
the estimated fair value of the interest rate collar is $24,000 which is not
recognized in the financial statements. Fair values of long term debt have
been determined through a combination of management estimates and information
obtained from third parties using market data such as bid/ask spreads,
available on the last day of the business year.
F-25
<PAGE> 43
Sea Pines Associates, Inc.
Notes to Consolidated Financial Statements (continued)
14. COMMUNITY SERVICES ASSOCIATES, INC.
Community Services Associates, Inc. ("CSA"), a homeowner association for Sea
Pines property owners, reimbursed the Company $594,000, $2,681,000, and
$2,334,000 related to payroll and benefits and for certain administrative
services provided to CSA during the years ended October 31, 1996, 1995, and
1994, respectively. In addition, the Company paid approximately $136,000,
$95,000, and $87,000 to CSA for security service, landscaping and other related
services during the years ended October 31, 1996, 1995, and 1994, respectively.
F-26
<PAGE> 44
Sea Pines Associates, Inc.
Notes to Consolidated Financial Statements (continued)
15. BUSINESS SEGMENT INFORMATION
The Company operates primarily in three business segments - resort operations,
real estate brokerage services and country club operations (see Note 10).
Identifiable assets by segment include assets directly employed by those
operations. Corporate assets consist primarily of deferred income tax assets
(in 1995 and 1994) and other assets. Intersegment transactions are
insignificant. A summary of Company operations by segment follows (in
thousands of dollars):
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
1996 1995 1994
-------------------------
<S> <C> <C> <C>
Revenues:
Resort $24,588 $22,299 $22,746
Real estate brokerage 8,504 7,070 8,050
Country club 1,866 3,675 3,607
-------------------------
34,958 33,044 34,403
-------------------------
Cost of revenues:
Resort 15,320 14,652 14,675
Real estate brokerage 7,626 6,630 7,099
Country club 1,812 3,490 3,380
-------------------------
24,758 24,772 25,154
-------------------------
Depreciation and amortization expense:
Resort 1,335 1,305 1,262
Real estate brokerage 172 172 169
Country club 209 414 422
-------------------------
1,716 1,891 1,853
-------------------------
Corporate expenses:
Sales and marketing 1,219 1,368 1,180
General and administrative 4,166 4,194 4,109
Impairment loss on Carolina Center 810
-------------------------
6,195 5,562 5,289
-------------------------
Operating income $ 2,289 $ 819 $ 2,107
=========================
</TABLE>
F-27
<PAGE> 45
Sea Pines Associates, Inc.
Notes to Consolidated Financial Statements (continued)
15. BUSINESS SEGMENT INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
1996 1995 1994
-------------------------
<S> <C> <C> <C>
Identifiable assets:
Resort $37,167 $36,267 $32,197
Real estate brokerage 1,535 1,611 1,728
Country club 7,104 7,242
Healthcare 7,073 3,195 300
Corporate 482 3,529 3,694
-------------------------
$46,257 $51,706 $45,161
=========================
<CAPTION>
YEAR ENDED OCTOBER 31
1996 1995 1994
-------------------------
<S> <C> <C> <C>
Capital expenditures:
Resort $ 2,267 $ 3,695 $ 1,905
Real estate brokerage 120 23 30
Country club 20 204 149
Healthcare 3,878 2,895 300
-------------------------
$ 6,285 $ 6,817 $ 2,384
=========================
</TABLE>
F-28
<PAGE> 46
Report of Independent Auditors
Board of Directors and Shareholders of
Sea Pines Associates, Inc.
We have audited the consolidated financial statements of Sea Pines Associates,
Inc. as of October 31, 1996 and 1995, and for each of the three years in the
period ended October 31, 1996, and have issued our report thereon dated January
10, 1997, included elsewhere in this Annual Report on Form 10-K. Our audits
also included the financial statement schedule listed in Item 14(a)(1) and (2).
This schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion on the financial statement schedule
based on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ Ernst & Young LLP
Atlanta, Georgia
January 10, 1997
F-29
<PAGE> 47
SCHEDULE II
SEA PINES ASSOCIATES, INC.
VALUATION AND QUALIFYING ACCOUNTS
(Amounts in thousands)
<TABLE>
<CAPTION>
Additions Net
Balance at charged to deductions Balance
beginning costs and and at end
of year expenses expenses of year
---------- ---------- --------- -------
<S> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
- --------------------------------
For the year ended
October 31, 1994 $ 86 $19 $(84) $ 21
==== === ==== ====
For the year ended $ 21 $ 7 $ 2 $ 30
October 31, 1995 ==== === ==== ====
For the year ended
October 31, 1996 $ 30 $ 0 $ (3) $ 27
==== === ==== ====
DEFERRED TAX ASSET VALUATION ALLOWANCE:
- ---------------------------------------
For the year ended
October 31, 1994 $309 $96 -- $405
==== === ==== ====
For the year ended $405 -- -- $405
October 31, 1995 ==== === ==== ====
For the year ended $405 -- $(13) $392
October 31, 1996 ==== === ==== ====
</TABLE>
F-30
<PAGE> 48
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant, Sea Pines Associates, Inc., has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SEA PINES ASSOCIATES, INC.
Dated: January 29, 1997 By: Charles W. Flynn
-----------------
Charles W. Flynn
Chairman
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, Sea Pines Associates, Inc., and in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
Charles W. Flynn Chairman and Director January 29, 1997
- --------------------------
Charles W. Flynn
Michael E. Lawrence Chief Executive Officer January 29, 1997
- -------------------------- and Director
Michael E. Lawrence
Thomas C. Morton Treasurer (Principal January 29, 1997
- -------------------------- Financial and
Thomas C. Morton Accounting Officer)
and Director
Norman P. Harberger Vice Chairman and January 29, 1997
- -------------------------- Director
Norman P. Harberger
Angus Cotton Secretary and January 29, 1997
- -------------------------- Director
Angus Cotton
</TABLE>
<PAGE> 49
<TABLE>
<S> <C> <C>
Thomas G. Daniels Director January 29, 1997
- -----------------------------
Thomas G. Daniels
Ralph L. Dupps, Jr. Director January 29, 1997
- -----------------------------
Ralph L. Dupps, Jr.
P. R. Easterlin, Jr. Director January 29, 1997
- -----------------------------
P. R. Easterlin, Jr.
Director
- -----------------------------
James L. Gray
John G. McGarty Director January 29, 1997
- -----------------------------
John G. McGarty
Arthur P. Sundry Director January 29, 1997
- -----------------------------
Arthur P. Sundry
Joseph F. Vercellotti Director January 29, 1997
- -----------------------------
Joseph F. Vercellotti
Francis S. Webster, Jr. Director January 29, 1997
- -----------------------------
Francis S. Webster, Jr.
Frank E. Zimmerman, Jr. Director January 29, 1997
- -----------------------------
Frank E. Zimmerman, Jr.
By: Angus Cotton
-------------------------
Angus Cotton
Attorney-in-Fact for each
of the persons indicated)
</TABLE>
<PAGE> 50
EXHIBIT INDEX
Pursuant to Item 601 of Regulation S-K
<TABLE>
<CAPTION>
Sequential
Exhibit No. Page No.
- ----------- ----------
<S> <C>
3(a) Articles of Incorporation of Registrant
(Incorporated by reference to Exhibit 3
to Registration Statement on Form 10
filed March 1, 1989)
3(b) Articles of Amendment to Articles of
Incorporation of Registrant (Incorporated
by reference to Exhibit 3(b) to the
Registrants' Form 10-K for the fiscal
year ended December 31, 1989 filed on
January 29, 1990)
3(c) Articles of Amendment to Articles of
Incorporation of Registrant (Incorporated
by reference to Exhibit 3(c) to Form 10-K
filed January 26, 1994)
3(d) Bylaws of Registrant (Incorporated by
reference to Exhibit 3 to Registration
Statement on Form 10 filed March 1, 1989)
3(e) Amended Bylaws of Registrant Revised
February 26, 1996
4(a) Excerpt from Articles of Incorporation of
Registrant Relative to Preferred Stock
(Incorporated by reference to Exhibit 4
to Registration Statement on Form 10
filed March 1, 1989)
4(b) Rights Agreement, dated August 23, 1993, between
Sea Pines Associates, Inc. and Wachovia Bank
of North Carolina, N.A. (Incorporated by
reference to Exhibit 4 to Registrant's
Form 8-K filed August 23, 1993)
</TABLE>
<PAGE> 51
<TABLE>
<CAPTION>
Sequential
Exhibit No. Page No.
- ----------- ----------
<S> <C>
10(a) Exhibits and Schedules to Credit Agreement
Between Registrant and The South Carolina
National Bank, dated November 17, 1987
(Incorporated by reference to Exhibit 10(a)
to Amendment to Registration Statement on
Form 10 filed April 26, 1989)
10(b) Promissory Note given by Registrant to The
South Carolina National Bank in the
principal sum of $17,000,000 dated
November 17, 1987 with respect to the
Credit Agreement in 10(a) above
(Incorporated by reference to Exhibit
10(b) to Registration Statement on
Form 10 filed March 1, 1989)
10(c) Loan Agreement dated as of April 18, 1988
between Sea Pines Plantation Company, Inc.
and South Carolina National Bank
(Incorporated by reference to Exhibit 10(h)
to Amendment to Registration Statement on
Form 10 filed April 26, 1989)
10(d) Community Services Management Agreement
between Sea Pines Company, Inc. and
Community Services Associates, Inc.
dated December 14, 1993 (Incorporated by
reference to Exhibit 10(d) to Form 10-K
filed January 26, 1995)
10(e) Construction Contract dated as of
August 4, 1994 between Sea Pines
Senior Living Center, Inc. and M. B.
Kahn Construction Co., Inc. (Incorporated
by reference to Exhibit 10(e) to Form 10-K
filed January 26, 1995)
10(f) Second Amendment to Promissory Note
dated as of April 26, 1993
between Sea Pines Company, Inc.
and Wachovia Bank of South Carolina
(Incorporated by reference to Exhibit 10(f)
to Form 10-K filed January 26, 1995)
</TABLE>
<PAGE> 52
<TABLE>
<CAPTION>
Sequential
Exhibit No. Page No.
- ----------- ----------
<S> <C>
10(g) Second Amendment to Mortgage and Security
Agreement dated as of April 26, 1994
between Sea Pines Company, Inc. and
Wachovia Bank of South Carolina
(Incorporated by reference to Exhibit 10(g)
to Form 10-K filed January 26, 1995)
10(h) Third Amendment to Credit Agreement dated
as of April 26, 1994 between Sea Pines
Company, Inc. and Wachovia Bank of
South Carolina (Incorporated by reference
to Exhibit 10(h) to Form 10-K filed
January 26, 1995)
10(i) Sixth Amendment to Credit Agreement dated
as of March 15, 1994 between Sea Pines
Company, Inc. and Wachovia Bank of
South Carolina (Incorporated by Reference
to Exhibit 10(i) to Form 10-K filed
January 26, 1996
10(j) Third Amendment to $2.5 MM Promissory Note
dated as of March 15, 1994 between Sea
Pines Company, Inc. and Wachovia Bank of
South Carolina (Incorporated by Reference
to Exhibit 10(j) to Form 10-K filed
January 26, 1996
10(k) Fourth Amendment to $2.5 MM Promissory Note
dated as of March 15, 1995 between Sea
Pines Company, Inc. and Wachovia Bank of
South Carolina (Incorporated by Reference
to Exhibit 10(k) to Form 10-K filed
January 26, 1996
10(l) Fourth Amendment to $2.5 MM Mortgage and
Security Agreement dated as of March 15, 1995
between Sea Pines Company, Inc. and
Wachovia Bank of South Carolina (Incorporated by
Reference to Exhibit 10(l) to Form 10-K filed
January 26, 1996
</TABLE>
<PAGE> 53
<TABLE>
<CAPTION>
Sequential
Exhibit No. Page No.
- ----------- ----------
<S> <C>
10(m) Seventh Amendment to Credit Agreement dated
as of March 15, 1995 between Sea Pines
Company, Inc. and Wachovia Bank of
South Carolina (Incorporated by Reference
to Exhibit 10(m) to Form 10-K filed
January 26, 1996
10(n) Amendment to $17 MM Mortgage and Security
Agreement dated as of March 15, 1995 between
Sea Pines Company, Inc. and Wachovia Bank
of South Carolina (Incorporated by Reference
to Exhibit 10(n) to Form 10-K filed
January 26, 1996
10(o) Amended and Restated Partnership Agreement
of TidePointe Partners dated January
14, 1994 (Incorporated by reference
to Exhibit 19(a) to Form 10-K filed
January 26, 1995)
10(p) First Amendment to Amended and Restated
Partnership Agreement of TidePointe
Partners dated August 1, 1994 (Incorporated
by reference to Exhibit 19(b) to Form 10-k
filed January 26, 1995)
10(q) Settlement Agreement between Sea Pines Company, Inc.
and Asset Management Associates, Inc. dated
October 31, 1996
10(r) Agreement for Sale of Improved Land on Hilton Head
Island between Sea Pines Company, Inc. and
Carolina Center Building Corp. dated
October 31, 1996
10(s) Settlement Statement between Sea Pines Company, Inc.
and Carolina Center Building Corp. dated
October 31, 1996
10(t) Adjustable Rate Promissory Note between Sea Pines
Company, Inc. and Carolina Center Building
Corp. dated October 31, 1996
</TABLE>
<PAGE> 54
<TABLE>
<CAPTION>
Sequential
Exhibit No. Page No.
- ----------- ----------
<S> <C>
10(u) Mortgage Assignment and Security Agreement
between Sea Pines Company, Inc. and
Carolina Center Building Corp. dated
October 31, 1996
10(v) Agreement to Turnover Management and Control
between Sea Pines Company, Inc. and Sea Pines
Country Club, Inc. dated April 30, 1996
This Agreement contains certain supporting
schedules as outlined in the Agreement's
Schedule of Exhibits. Any omitted supporting
schedules will be furnished supplementally to
the Commission upon request.
10(w) Third Clarification of Membership Plan documents
between Sea Pines Company, Inc. and Sea Pines
Country Club, Inc. dated April 30, 1996
10(x) Collar Transaction Confirmation between Sea Pines
Company, Inc. and Wachovia Bank of South
Carolina, N.A. dated February 7, 1996
21 Subsidiaries of the Registrant
27 Financial Data Schedule (for SEC use only)
</TABLE>
<PAGE> 1
EXHIBIT 3(e)
BY-LAWS
OF
SEA PINES ASSOCIATES, INC.
Revised February 26, 1996
<PAGE> 2
TABLE OF CONTENTS
PAGE
----
I. NAME AND PURPOSES
1. Name......................................................5
2. Purposes..................................................5
II. OFFICES
1. Principal Office..........................................5
2. Registered Office.........................................5
III. SHAREHOLDERS
1. Place of Meetings.........................................5
2. Annual Meeting............................................6
3. Special Meetings..........................................6
4. Notice of Meetings of Shareholders........................6
5. Waiver of Notice..........................................6
6. Quorum of Shareholders....................................6
7. Adjournment...............................................7
8. Record Date...............................................7
9. Voting of Shares..........................................7
10. Proxies...................................................8
11. Written Consent of Shareholders...........................8
IV. BOARD OF DIRECTORS
1. General...................................................8
2. Qualifications............................................9
3. Number, Tenure and Election...............................9
4. Newly Created Directorships and Vacancies.................9
5. Quorum....................................................9
6. Action of the Board of Directors.........................10
7. Resignation and Removal..................................10
8. Place and Time of Board Meetings.........................10
9. Meeting by Conference Call...............................10
10. Regular Annual Meeting...................................10
11. Notice of Meetings of the Board..........................10
12. Adjournment..............................................11
13. Chairman for Board Meetings..............................11
14. Compensation.............................................11
15. Presumption of Assent....................................11
16. Written Consent of Directors.............................11
17. Advisory Directors.......................................11
-2-
<PAGE> 3
PAGE
----
V. OFFICERS
1. Number...................................................12
2. Election and Term of Office..............................12
3. Removal..................................................12
4. Execution of Instruments.................................12
5. Compensation.............................................12
6. Sureties and Bonds.......................................12
7. Chairman.................................................12
8. Vice Chairman............................................13
9. Secretary................................................13
10. Treasurer................................................13
11. Assistant Officers.......................................14
12. Chief Executive Officer..................................14
VI. CERTIFICATES FOR SHARES
1. Certificates.............................................14
2. Lost of Destroyed Certificates...........................14
3. Transfer of Shares.......................................15
4. Restrictions on Stock Certificates.......................15
VII. GENERAL PROVISIONS
1. Seal.....................................................15
2. Indemnification and Insurance............................15
3. References to Articles of Incorporation..................16
4. Fiscal Year..............................................16
5. By-Laws Amendments.......................................16
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<PAGE> 4
CERTIFICATION
I the undersigned, do hereby certify that I am the duly elected and
acting Secretary of Sea Pines Associates, Inc., a South Carolina corporation;
and
That the foregoing By-Laws constitute the By-Laws of the Corporation
reflecting amendments duly adopted at a meeting of the Board of Directors
thereof held on the 25th day of January, 1988. And again amended and adopted
by the Board of Directors on the 7th day of December 1992. And again amended
and adopted by the Board of Directors on the 26th day of February, 1996.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the
seal of the Corporation this 8th day of March, 1996.
/s/ Angus Cotton
----------------
Secretary
- 4 -
<PAGE> 5
BY-LAWS
OF
SEA PINES ASSOCIATES, INC.
Article I
Name and Purposes
Section 1. Name. The name of the corporation is Sea Pines Associates,
Inc. ("Corporation").
Section 2. Purposes. The Corporation is organized under the South
Carolina Business Corporation Code for those purposes set out in the Articles
of Incorporation of the Corporation.
Article II
Offices
Section 1. Principal Office. The principal office of the Corporation
is located at Sea Pines Welcome Center, 32 Greenwood Drive, Hilton Head Island,
South Carolina 29928. The Corporation may have such other offices either
within or without the State of South Carolina as the Board of Directors may
designate from time to time.
Section 2. Registered Office. The registered office of the Corporation
required by the South Carolina Business Corporation Code to be maintained in
the State of South Carolina may be, but need not be, identical with the
principal office and the address of the registered office may be changed from
time to time by the Board of Directors. In the absence of any action by the
Board, the registered office shall be as set forth in the Articles of the
Incorporation of the Corporation.
Article III
Shareholders
Section 1. Place of Meetings. Meetings of the shareholders shall be
held at the principal office of the Corporation or at such other place within
or outside the State of South Carolina as the Board of Directors shall
authorize.
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<PAGE> 6
Section 2. Annual Meeting. The annual meeting of shareholders shall
be held on the first Saturday in the month of March of each year, or at such
other time as may be determined by the Board of Directors subject to the other
requirements of this Article. At the annual meeting, the shareholders shall
elect members of the Board of Directors as provided herein and transact such
other business as may properly come before the meeting.
Section 3. Special Meetings. Special meetings of the shareholders may
be called by the Chairman of the Board of Directors, by a majority of the
Board, or by shareholders owning not less than ten (10%) percent of the shares
of stock of all classes of stock entitled to vote for members of the Board of
Directors. Such request and the notice of the meeting issued pursuant thereto
shall state the purpose or purposes of the proposed meeting, and all business
transacted at the special meeting shall be confined to the purposes stated in
the notice.
Section 4. Notice of Meetings of Shareholders. Written notice of any
shareholders meeting shall be delivered either personally or by first class
mail to each shareholder entitled to vote on any matter to be addressed at such
meeting. Such notice shall be delivered not less than ten (10) nor more than
fifty (50) days before the meeting. Notice of each meeting shall state the
place, date and hour of the meeting and, in the case of a special meeting, the
purpose or purposes for which the meeting is called. If mailed, such notice
shall be deemed delivered when deposited in the United States mail, with
postage prepaid, addressed to the shareholder at his address as it appears on
the Corporation's records, or if he shall have filed with the Secretary of the
Corporation a written request that notices to him be mailed to some other
address, then directed to him at such other address.
Section 5. Waiver of Notice. Notice of meetings need not be given to
any shareholder who signs a waiver of notice, either in person or by proxy,
either before or after the meeting. The attendance, whether in person or by
proxy, of any shareholder at a meeting without protesting the sufficiency of
notice of the meeting prior to the conclusion of such meeting shall constitute
a waiver of notice by such shareholder.
Section 6. Quorum of Shareholders. A majority of the outstanding
shares of the Corporation entitled to vote, represented in person or by proxy,
shall constitute a quorum at a meeting of shareholders for the transaction of
business. If a quorum is present at any meeting, the affirmative vote of a
majority of the shares represented and entitled to vote on the subject matter
shall be the act of the shareholders, unless the vote of a greater number or
voting by class is otherwise required by these By-Laws or the Articles of
Incorporation. Once a quorum is present, it shall not be broken by the
subsequent withdrawal of any shareholder, and the shareholders remaining may
continue to transact business until
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<PAGE> 7
adjournment, notwithstanding the withdrawal of enough shareholders to leave
less than a quorum.
Section 7. Adjournment. Upon the affirmative vote of a majority in
interest of shareholders present at a shareholder meeting, the meeting may be
adjourned from time to time to a fixed date for any valid business reason
without further notice as to the time and place of such adjourned meeting, but
such adjournment shall be for a period not in excess of thirty (30) days. At
any such adjourned meeting at which a quorum shall be present or represented,
only such business may be transacted which might have been transacted at the
meeting as originally scheduled, unless all shares are represented and do not
object.
Section 8. Record Date. For the purpose of determining the
shareholders qualified or entitled to notice of or to vote at any meeting of
shareholders or any adjournment thereof, or to express consent to or dissent
from any proposal without a meeting, or for the purpose of determining
shareholders qualified or entitled to receive payment of any dividend or the
allotment of any rights, or for any other proper purpose, the Board records
shall fix, in advance, a date as the record date for any such determination of
shareholders. Such date shall be not more than fifty (50) nor less than ten
(10) days before the date of such meeting or action. If no record date is
fixed by the Board, the record date for any such purposes shall be ten (10)
days before the date of such meeting or action. When such determination of
qualified or entitled shareholders has been made as provided above, such
determination shall also apply to any adjourned meeting, except where transfer
of stock to a new holder has been entered on the transfer books of the
Corporation after the original meeting was adjourned and at least ten (10) days
before the date of such adjourned meeting.
Section 9. Voting of Shares. At all meetings, shareholder's voting
will be conducted and recorded by mailed proxies prior to the meeting, or by
proxies personally delivered on the day of the meeting. However, any qualified
voter may demand a record vote, whereupon such vote shall be taken by ballot,
and the Secretary shall record the name of each shareholder voting, the number
of shares voted by each shareholder and, if such vote shall be by proxy, the
name of the proxy holder. A complete list of shareholders entitled to vote at
a shareholder meeting or any adjournment thereof, arranged in alphabetical
order and setting forth the number of voting shares held by each shareholder,
shall be prepared by the Secretary of the Corporation or the transfer agent of
the Corporation who shall have charge of the stock ledger and stock transfer
books for the Corporation. Such list shall be subject to inspection by any
shareholder at the principal office of the Corporation during business hours
for ten (10) days prior to such meeting and throughout the meeting or any
adjournment thereof. There shall be no cumulative voting.
- 7 -
<PAGE> 8
Section 10. Proxies. Every shareholder entitled to vote at a meeting
of the shareholders or to express consent or dissent to action without a
meeting may authorize another person or persons to act for him by proxy. Every
proxy must be signed by the shareholder or his attorney-in-fact and delivered
to the Secretary at the meeting prior to or during the roll call, or be
returned to the corporation with the signed consent or dissent to action
without a meeting. No proxy shall be valid after the date of the next meeting
of the shareholders or any adjournment thereof. Every proxy shall be revocable
at the pleasure of the shareholder executing it, except as otherwise provided
by law.
Section 11. Written Consent of Shareholders. Any action required to
be taken at a meeting of the shareholders may be taken without a meeting if
consent in writing setting forth the action so taken shall be signed by all of
the shareholders entitled to vote with respect to the subject matter thereof.
Article IV
Board of Directors
Section 1. General. Subject to these By-Laws and any lawful agreement
between the shareholders, the full and entire management of the affairs and
business of the Corporation shall be vested in the Board of Directors which
shall have and may exercise all of the powers that may lawfully be exercised or
performed by the Corporation, including, but not limited to, the following:
(a) the power to grant easements across, over and through the properties
of the Corporation;
(b) the power to borrow money and to grant mortgages on the properties of
the Corporation and any improvements thereon;,
(c) the power to advertise to the public at large;
(d) the power to hire, dismiss, pay and provide benefits to such employees
as are necessary for operation of the Corporation; and
(e) the power to appoint such committees as the Board shall deem necessary
with such powers as the Board shall authorize. Such committees shall
include, but not be limited to:
Finance;
Audit;
Personnel and Compensation; and
Nominations, Corporate Ethics, and Corporate
Governance.
- 8 -
<PAGE> 9
(f) the power to redeem any or all shares acquired by any Acquiring
Person pursuant to any Control Share Acquisition at their fair
value within sixty (60) days thereof, if the Acquiring Person fails
to file an Acquiring Person's Statement with the corporation within
the time required by law.
Section 2. Qualifications. Each director shall be at least eighteen (18)
years of age. Directors need not be shareholders nor residents of the State of
South Carolina. The mandatory retirement age for Directors is age 75.
Nominees, under the age of 75, may be elected and re-elected despite their 75th
birthday falling during their elected term; provided, however, a Director who
has reached his 75th birthday must resign at the annual meeting immediately
following his or her 75th birthday.
Section 3. Number, Tenure and Election.
(a) Number and Tenure. The Board of Directors shall consist of 14
directors. The Board of Directors may, by majority vote, increase or
decrease this number; but the number of directorships shall not be
less than eleven (11) nor more than fifteen (15). Directors shall be
elected for terms of three years or less, the terms overlapping such
that the number completing their terms will be as nearly equal as
possible from year to year.
(b) Nomination. At least sixty (60) days prior to every annual election
of directors, the Board of Directors shall receive the
recommendations of the committee responsible for nominations and
shall nominate a slate of candidates for Director vacancies with at
least as many candidates for election to the Board of Directors as
there are directorships to be filled.
(c) Election. Each shareholder shall be entitled to cast one
(1) vote per share of stock with voting rights held, for each
directorship to be filled. There shall be no cumulative voting.
Those directors receiving a majority of the votes cast shall be
elected.
Section 4. Newly Created Directorships and vacancies. Newly created
directorships resulting from an increase in the number of directors or
vacancies occurring in the Board of Directors for any reason may be filled by a
vote of a majority of the directors then in office although less than a quorum
exists. Directors appointed pursuant to this section shall hold office until
the next annual meeting of shareholders and until their successors have been
elected and qualified, or until their death, resignation or removal.
Section 5. Quorum. A majority of the members of the Board
- 9 -
<PAGE> 10
of Directors shall constitute a quorum for the transaction of business or of
any specified item of business.
Section 6. Action of the Board of Directors. Unless otherwise
required by law, the vote of a majority of the members of the Board of
Directors present at the time of the vote, if a quorum is present at such time,
shall be an act of the Board of Directors. Each director present and voting
shall have one (1) equal vote, regardless of the number of shares, if any,
which be may hold.
Section 7. Resignation and Removal. A director may resign from the
Board of Directors, at any time, by giving written notice to the Board, the
Chairman, or the Secretary of the Corporation. Unless otherwise specified in
the notice, the resignation shall take effect upon receipt thereof by the Board
or such officer, and the acceptance of the resignation shall not be necessary
to make it effective. Any director may be removed at any time for cause upon
the vote of shareholders holding a majority of the outstanding shares with
voting rights. Any director may be removed at any time without cause upon the
vote of shareholders holding eighty (80%) percent of the outstanding shares
with voting rights.
Section 8. Place and Time of Board Meetings. The Board of Directors
may hold its meetings at the principal office of the Corporation or at such
other places, either within or without the State of South Carolina, as it may
from time to time determine. If the meeting is held outside the State of South
Carolina, notice must be given by certified mail, not less than five (5) days
before the meeting, and such notice shall contain the date, place and purpose
of the meeting. Regularly scheduled meetings of the Board will be held on the
third Monday of each month unless changed by an approving vote of the Board.
Section 9. Meeting by Conference Call. Members of the Board of
Directors or any committee designated by such Board may participate in the
meeting of the Board or committee by means of conference telephone or similar
communications equipment by which all persons participating in the meeting can
hear each other at the same time. Such participation shall constitute presence
in person at the meeting.
Section 10. Regular Annual Meeting. The regular annual meeting of the
Board of Directors shall be held immediately following the annual meeting of
the shareholders at the place of such annual meeting of the shareholders.
Section 11. Notice of Meetings of the Board. Regular meetings of
the Board may be held without notice at such time and place as the Board shall
from time to time determine. Special meetings of the Board shall be held upon
notice to the directors and may be called by the Chairman upon not less than
four (4) days
- 10 -
<PAGE> 11
notice to each director either personally or by mail, telegraph, telephone,
cable or wireless, facsimile transmission, courier service, or electronic mail,
except as provided in Section 8 of this Article with respect to meetings held
outside of the State of South Carolina. Special meetings shall be called by
the Chairman or by the Secretary in a like manner upon the written request of
at least two (2) directors. Notice of a meeting need not be given to any
director who submits a waiver of notice, either before or after the meeting, or
who attends the meeting without protesting prior thereto or at its commencement
the lack of notice to him.
Section 12. Adiournment. A majority of the directors present, whether
or not a quorum is present, may adjourn any meeting to another time and place.
Notice of the adjournment shall be given to all directors who were absent at
the time of the adjournment and, unless such time and place are announced at
the meeting, to all other directors.
Section 13. Chairman For Board Meetings. At all meetings of the Board
of Directors, the Chairman of the Board, if one has been elected, shall
preside. In the absence of the Chairman, the Vice Chairman shall preside. If
no duly elected Chairman or Vice Chairman is present, the Directors present
shall elect a chairman for the meeting.
Section 14. Compensation. No compensation shall be paid to
directors, as such, for their services but, by resolution of the Board, a fixed
sum and expense for actual attendance at each regular and special meeting of
the Board may be authorized. Nothing herein contained shall be construed to
preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor.
Section 15. Presumption of Assent. A director of the Corporation who
is, present at a meeting of the Board of Directors at which action of any
corporate matter is taken shall be presumed to have assented to the action
taken unless he shall file his written dissent to such action with the person
acting as the Secretary of the meeting before the adjournment thereof or shall
forward such dissent by registered mail to the Secretary of the Corporation
immediately after the adjournment of the meeting. Such right to dissent shall
not apply to a director who voted in favor of such action.
Section 16. Written Consent of Directors. Any action that may be
taken at a meeting of the Board of Directors may be taken without a meeting if
written consent setting forth the action so taken is signed by all the
directors entitled to vote thereon and is filed with the minutes of the
proceedings of the Board.
Section 17. Advisory Directors. In addition to the members of the
Board of Directors elected as provided above, the Board of
- 11 -
<PAGE> 12
Directors may appoint any number of advisory directors who may attend all
meetings of the Board of Directors and participate in all discussions at such
meetings provided, advisory directors may not vote on matters coming before the
Board.
Article V
Officers
Section 1. Number. The Board of Directors shall elect a Chairman who shall
also act as Chairman of the Board of Directors, a Vice-Chairman who shall also
act as Vice-Chairman of the Board of Directors, a Chief Executive officer, a
Secretary, a Treasurer, and one or more assistant officers. Any two or more
offices may be held by the same person, except that the Chairman, Vice
Chairman, and Secretary must be three different persons.
Section 2. Election and Term of office. An officer shall remain in office
until his or her successor shall have been duly elected and shall have
qualified or until his or her death or until he or she shall resign or shall
have been removed in the manner hereinafter provided.
Section 3. Removal. Any officer may be removed by the Board whenever in its
judgment the best interest of the Corporation will be served thereby. Any such
removal in violation of any written employment agreement with any officer shall
not limit the power of the Board of Directors to remove such officer, but the
corporation shall remain liable to the officer for the payment of all sums due
under any such agreement.
Section 4. Execution of Instruments. Contracts, deeds, checks and other
instruments shall be executed by the officer or those officers as shall be
determined by resolution of a majority of the Board of Directors.
Section 5. Compensation. The compensation of officers shall be fixed by
resolution of the Board of Directors and may include salary, insurance, expense
accounts, auto expense or other prerequisites deemed appropriate by the Board.
Section 6. Sureties and Bonds. If so required by the Board of Directors, any
officer or agent of the Corporation shall execute a bond in favor of the
Corporation in such sum and with such surety or sureties as the Board may
direct. The bond shall be conditioned upon the officer's or agent's faithful
performance of his duties to the Corporation, including responsibility for
negligence and for the accounting of all property, funds, or securities of the
Corporation which may come into his hands.
Section 7. Chairman. The Chairman shall oversee the work of the Board of
Directors and assure that the Board's
- 12 -
<PAGE> 13
responsibilities are carried out, consistent with such policies and procedures
as the Board may adopt. He shall, when present, preside at all meetings of the
shareholders and all meetings of the Board of Directors. He may sign, with the
Secretary or any other proper officer of the Corporation authorized by the
Board of Directors, certificates for shares of the Corporation, and any deeds,
mortgages, bonds, contracts or other instruments which the Board of Directors
authorizes to be executed, except in cases where the signing and execution
thereof shall be expressly delegated by at least a majority of the Board of
Directors or by these By-Laws to some other officer or agent of the
Corporation, or shall be required by law to be otherwise signed or executed.
The Chairman shall have primary responsibility for shareholder relations and
shareholder communication. He shall represent the Corporation at external
functions requiring Board representation. In general, the Chairman shall
perform all duties incident to the office and such other duties as may be
prescribed by the Board of Directors from time to time.
Section 8. Vice Chairman. In the absence of the Chairman or in the
event of his death, inability or refusal to act, the Vice Chairman, shall
perform the duties of the Chairman and, when so acting, shall have all the
powers of and be subject to all the restrictions that apply to the Chairman.
The Vice Chairman shall perform such other duties as from time to time may be
assigned to him by the Chairman or by the Board of Directors.
Section 9. Secretary. The Secretary shall attend all meetings of the
Board of Directors and of the shareholders and record all votes and minutes of
all proceedings in a book or books to be kept for that purpose. He shall keep
in safe custody the seal of the Corporation and affix it to any instrument when
authorized, and he shall keep all the documents and records of the Corporation
as required by law or otherwise in a proper and safe manner. When required, he
shall prepare or cause to be prepared and available at each meeting of
shareholders entitled to vote thereat, a list of shareholders indicating the
number of shares of each respective class held by each. In general, he shall
perform all duties incident to the office of Secretary and such other duties as
may be prescribed from time to time by the Chairman or the Board of Directors.
Section 10. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in the corporate books. He shall deposit all monies
and other valuables in the name and to the credit of the Corporation in such
depositories as may be designated by the Board and disburse the funds of the
Corporation as may be ordered or authorized by the Board and preserve proper
vouchers for such disbursements. He shall render to the Chairman and Board at
the regular meetings of the Board or whenever they require it, an account of
all of his
- 13 -
<PAGE> 14
transactions as Treasurer and of the financial condition of the Corporation,
and he shall render a full financial report at the annual meeting of the
shareholders if so requested by the Board. The Treasurer shall be furnished,
at his request, with such reports and statements as he may require from the
corporate officers and agents as to all financial transactions of the
Corporation. In general, he shall perform all duties as are given to him by
these By-Laws or as from time to time are assigned to him by the Board of
Directors or the Chairman.
Section 11. Assistant Officers. The Board of Directors may elect (or
delegate to the Chairman of the Board or to the Chairman the right to appoint)
such other officers and agents as may be necessary or desirable for the
business of the Corporation. Such other officers may include one or more
assistant secretaries and treasurers who have the power and authority to act in
place of the officer to whom they are elected or appointed as an assistant in
the event of the officer's inability or unavailability to act in his official
capacity.
Section 12. Chief Executive Officer. The Chief Executive Officer,
subject to the control of the Board of Directors and any limitations the Board
may choose to impose, shall direct the business and affairs of the Corporation
including its subsidiaries.
Article VI
Certificates for Shares
Section 1. Certificates. Each owner of stock of the Corporation shall
be entitled to have a certificate, in such form as shall be approved by the
Board of Directors, certifying the number of shares of stock of the Corporation
owned by him. The certificates representing shares of stock shall be signed in
the name of the Corporation by the Chairman or a Vice Chairman and by the
Treasurer or an assistant Treasurer or by the Secretary or an assistant
Secretary of the Corporation or a facsimile thereof. Any or all of the
signatures upon a certificate may be facsimiles if the certificate is
countersigned by a transfer agent or registered by a registrar other than the
Corporation itself or an employee of the Corporation. In case any officer who
shall have signed such certificates shall have ceased to be such officer before
such certificate shall be issued, they may nevertheless be issued by the
Corporation with the same effect as if such officers were still in office at
the date of their issue.
Section 2. Lost or Destroyed Certificates. The Board of Directors may
direct a new certificate or certificates to be issued in place of any
certificate or certificates theretofore issued by the Corporation alleged to
have been lost or destroyed, if permitted by applicable law, upon the making of
an affidavit of that fact by the person claiming the certificate to be lost or
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<PAGE> 15
destroyed. When authorizing such issue of a new certificate or certificates,
the Board may so long as permitted by applicable law, in its discretion and as
a condition precedent to the issuance thereof, require the owner of such lost
or destroyed certificate or certificates or his legal representative, to
advertise the same in such manner as it shall require and give the Corporation
a bond in such sum and with such surety or sureties as it may direct as
indemnity against any claim that may be made against the Corporation with
respect to the certificate alleged to have been lost or destroyed.
Section 3. Transfer of Shares. Transfers of shares of stock of the
Corporation shall be made on the stock records of the Corporation only upon
authorization by the registered holder thereof, or by his attorney thereunto
authorized by a power of attorney duly executed and filed with the Secretary or
with a transfer agent or a transfer clerk, and on surrender of the certificate
or certificates for such shares properly endorsed or accompanied by a duly
executed stock transfer power. The Corporation shall be entitled to treat the
holder of record of any share as the holder in fact thereof and, accordingly,
shall not be bound to recognize any equitable or other claim to or interest in
such share on the part of any other person whether or not it shall have express
or other notice thereof except as expressly provided by the laws of South
Carolina.
Section 4. Restrictions on Stock Certificates. The transfer of shares
in the Corporation shall be restricted. A legend evidencing the restrictions
on transfer, including restrictions regarding state and federal securities laws
shall be placed on the back of each stock certificate. A legend regarding the
preferences, privileges, restrictions and rights granted to or imposed upon any
classes of stock may also be placed on the back of each stock certificate.
Article VII
General Provisions
Section 1. Seal. The seal of the Corporation shall be in such form as
the Board of Directors may from time to time determine. In the event that it
is inconvenient to use such a seal at any time, the signature of the
Corporation following the words "seal" enclosed in parenthesis shall be deemed
the seal of the Corporation. The seal shall be in the custody of the
Secretary.
Section 2. Indemnification and Insurance. The Corporation shall
indemnify every officer and director against any and all expenses, including
attorney's fees, reasonably incurred by or imposed upon any officer or director
in connection with any action, suit or other proceeding (including settlement
of any suit or proceeding if approved by the then Board of Directors) to which
he
- 15 -
<PAGE> 16
or she may be a party by reason of having been an officer or director. The
officers and directors shall not be liable for any mistake of judgment,
negligent or otherwise, except for their own individual or willful misfeasance,
malfeasance, misconduct or bad faith. The officers and directors shall have no
personal liability with respect to any contract or other commitment made by the
Board, in good faith, on behalf of the Corporation (except to the extent that
such officers or directors may also be shareholders of the Corporation), and
the Corporation shall indemnify and forever hold each such officer and director
free and harmless against any and all liability to others on account of any
such contract or commitment. Any right to indemnification provided for herein
shall not be exclusive of any other rights to which any officer or director, or
former officer or director, may be entitled. The Corporation shall maintain
adequate general liability and officers and directors liability insurance to
fund this obligation, if such insurance is available at a reasonable cost as
determined by the Board of Directors.
Section 3. References to Articles of Incorporation. References to the
Articles of Incorporation of the Corporation in these By-Laws shall include all
amendments thereto unless otherwise stated.
Section 4. Fiscal Year. The fiscal year of the Corporation shall be
determined by resolution by the Board of Directors.
Section 5. By-Laws Amendments. These By-Laws may be amended by the
affirmative vote of a majority of the Board of Directors or by the affirmative
vote of shareholders holding a majority of the votes eligible to be cast and
present or represented by proxy at a duly called meeting of the shareholders;
provided, no amendment to the By-Laws adopted by a vote of the shareholders in
the manner provided above may be modified by the Board of Directors.
- 16 -
<PAGE> 1
EXHIBIT 10(q)
STATE OF SOUTH CAROLINA )
) SETTLEMENT AGREEMENT
COUNTY OF BEAUFORT )
AGREEMENT made this 31st day of October, 1996, by and between ASSET
MANAGEMENT ASSOCIATES, INC., a South Carolina corporation with a principal
place of business on Hilton Head Island, South Carolina (hereinafter "AMA");
KUMAR K. VISWANATHAN, an individual of Hilton Head Island, South Carolina and
the sole shareholder, Director and the President of AMA (hereinafter
"Viswanathan"); SEA PINES COMPANY, INC., a South Carolina corporation with a
principal place of business on Hilton Head Island, South Carolina (hereinafter
"SPC"); and SEA PINES ASSOCIATES, INC., a South Carolina corporation with a
principal place of business on Hilton Head island, South Carolina (hereinafter
"SPA"). SPC and SPC may sometimes hereinafter be referred to as "Sea Pines".
WHEREAS, AMA has filed suit against SPC and SPA in the Court of Common
Pleas for Beaufort County, South Carolina, Civil Action No. 94-CP-07-1503
(hereinafter "the Beaufort Action"), and has asserted that AMA has been
assigned all the rights of Marriott Ownership Resorts, Inc. (hereinafter
"MORI") by virtue of an assignment dated August 16, 1994, regarding the old Sea
Pines Welcome Center and MORI's rights in that property arising our of or in
any way connected to the contract between MORI and Palmetto Federal Savings
Bank dated May 25, 1994, or in any way arising out of Sea Pines' conduct
regarding the stated contract; and
WHEREAS, AMA (on its own behalf and as assignee of MORI), Viswanathan
and Sea Pines have agreed to resolve all claims which have been asserted by AMA
(whether on its own behalf of as assignee of MORI) including all claims that
could have been asserted by any party arising from the facts alleged in the
Beaufort Action;
NOW, THEREFORE, AMA, Viswanathan, SPC and SPA agree as follows:
<PAGE> 2
1. At Closing, as hereinafter defined (hereinafter "Closing"), Sea
Pines shall pay AMA $225,000.00.
2. At Closing, AMA's designee shall acquire the Old Sea Pines Welcome
Center from SPC pursuant to the Agreement for Sale of Improved Land on Hilton
Head Island, a true copy of which is annexed hereto and incorporated herein as
Exhibit 1.
3. At Closing, AMA's designee and SPC shall enter into the Commercial
Lease Agreement, a true copy of which is annexed hereto and incorporated herein
as Exhibit 2.
4. At Closing, AMA, Viswanathan and Sea Pines shall enter into the
Mutual Release Agreement, a true copy of which is annexed hereto as Exhibit 3.
5. At Closing, Sea Pines shall assign AMA all of its/their rights
arising from the March 10, 1995 letter of MORI that indicated MORI would return
to Sea Pines any monies paid MORI by AMA resulting from any recovery in the
Beaufort Action.
6. At Closing, AMA and Sea Pines shall direct their respective counsel
to file the Order of Dismissal with Prejudice, a true copy of which is annexed
hereto as Exhibit 4.
7. At Closing, AMA's designee shall assume the Carolina Community Bank
and Hilton Head Health Systems, L.P. leases, true copies of which are annexed
hereto as Exhibit 5 and 6, respectively.
8. "Closing" shall occur on or before October 31, 1996. The parties
acknowledge and agree that time is of the essence for Closing and is a
condition of this settlement. Because a condition to the real estate
transaction aspect of this Settlement (paragraph 2) is the completion and
payment of all improvements (including tenant improvements) by Sea Pines and
the issuance of a Certificate of Occupancy (hereinafter "CO") for all tenants to
the Old Sea Pines Welcome Center and the parties to this Agreement are not in
control of that event, they agree that Closing
<PAGE> 3
may be conducted in escrow upon the terms and conditions of the Escrow Closing
Letter annexed hereto as Exhibit 7.
9. The terms and conditions of this Settlement Agreement shall be
maintained confidentially, except that they may reveal to accountants, tax
advisors or lawyers as may be necessary for the proper preparation of financial
statements, tax returns, loan applications and/or to otherwise comply with
requirements of law or process of law.
10. If any dispute shall arise with respect to this Agreement after it
is executed, then the losing party shall reimburse all prevailing parties for
their attorney's fees incurred in dealing with such dispute.
IN WITNESS WHEREOF, the parties have set their hands and seals the day
and year first set forth above.
By: /s/ Kumar K. Viswanathan
- -------------------------------- ----------------------------------
WITNESS Kumar K. Viswanathan, an
individual of Hilton Head,
South Carolina
ASSET MANAGEMENT ASSOCIATES, INC.,
a South Carolina corporation
/s/ Kumar K. Viswanathan
- -------------------------------- ----------------------------------
WITNESS Its: President
<PAGE> 4
SEA PINES COMPANY, INC., a
South Carolina corpora
/s/ By: /s/ Michael E. Lawrence
- ---------------------------- ---------------------------
WITNESS Its: President
SEA PINES ASSOCIATES, INC.,
a South Carolina corporation
/s/ By: /s/ Michael E. Lawrence
- ---------------------------- ---------------------------
WITNESS Its: Chief Executive Officer
<PAGE> 1
EXHIBIT 10(r)
STATE OF SOUTH CAROLINA ) AGREEMENT FOR SALE OF
) IMPROVED LAND ON
COUNTY OF BEAUFORT ) HILTON HEAD ISLAND
THIS AGREEMENT is entered into this 31st day of October, 1996, by and between
Sea Pines Company, Inc., its successors and assigns (hereinafter called the
"Seller"), of Hilton Head Island, South Carolina, and Carolina Center Building
Corp. its successors and assigns, (hereinafter called the "Purchaser"), of
Hilton Head Island, South Carolina.
WHEREAS, as part of a mediated settlement reached on August 13, 1996 in
connection with certain litigation pending in the Beaufort county Court of
Civil Pleas (Civil Action No.: 94-CP-07-1503), certain real property described
below is to be sold by the Seller to the Purchaser;
WHEREAS, the Purchaser desires to purchase and the Seller desires to sell the
below described real estate under the terms and conditions of this Agreement;
NOW, THEREFORE, for and in consideration of the mutual promises contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which is acknowledged, and intending to be legally bound, the
parties hereto agree as follows, to-wit:
1. Recitals. The above "Whereas" clauses are incorporated
herein as if restated verbatim.
2. Property. The Seller agrees to sell and the Purchaser
agrees to purchase, upon Seller obtaining a final Certificate of Occupancy for
the Premises from the Town of Hilton Head, all that certain piece, parcel or
lot of land, with all improvements thereto, described as 2.26 acres as more
fully described on Exhibit 1, attached hereto (hereinafter referred to as
"Subject Property"). Further, Seller shall assign to Purchaser, without
warranty, all right, title and interest it may have in that certain Commercial
Lease Agreement by Sea Pines Company, Inc. with Carolina Community Bank (Bank),
dated May 23, 1996 and that certain Commercial Lease Agreement by Sea Pines
Company, Inc. with Hilton Head Health Systems, L.P. (Hospital), dated July 16,
1996, as well as any permits, applications for permits, easements, licenses,
surveys, drawings, engineering plans and warranties, associated directly with
the Subject Property. Purchaser at closing expressly agrees to honor and
assume the above two referenced leases with Bank and Hospital.
1
<PAGE> 2
3. Purchase Price.
THE PURCHASE PRICE FOR THE PROPERTY SHALL BE: $1,500,000
PAYABLE, AS FOLLOWS:
(a) An initial earnest money deposit, $-0-
the receipt of which is hereby acknowledged,
to be held by the Escrow Agent named below,
such deposit to be applied to the purchase
price at closing;
(b) Financing - To be provided by Seller pursuant $1,500,000
to the note and mortgage, attached hereto
as Exhibits 2 and 3. ----------
(c) Balance in cash, due and payable at closing. $-0-
4. Conveyance of Property. The Seller shall convey marketable
title to the Property to the Purchaser in fee simple by general warranty deed
with documentary stamps affixed, free from encumbrances other than applicable
restrictions, covenants, easements, options and affirmative obligations
recorded in the RMC Office for Beaufort County, South Carolina, hereinafter
referred to as "Permitted Exceptions", as more fully described on Exhibit 4;
and applicable laws and ordinances.
5. Title. The Purchaser agrees to notify the Seller in writing of
any defects in or unacceptable encumbrances on the title within fourteen (14)
days of the signing of this Contract, or prior to closing, whichever occurs
first. Purchaser's failure to so object shall be deemed to be an approval of
title. Seller shall be allowed a reasonable period of time to cure any valid
title objections or defects. If Seller is unable to cure such objections or
defects, Purchaser shall either: (1) waive said objections and defects and
close; (2) notify Seller in writing that title is unacceptable.
6. Closing. It is agreed by and between the parties hereto that
the terms of this Agreement shall be complied with and the closing of this
transfer shall take place on or before October 31, 1996. Purchaser agrees to
cooperate with Seller to close in escrow, with appropriate and reasonable
conditions, if so requested by Seller, in the event the conditions required
under this Contract cannot be met by the closing date.
7. Prorations. All Beaufort County and Town of Hilton Head Island
taxes, applicable sewer and water charges, maintenance
2
<PAGE> 3
assessments, and other applicable charges shall be prorated as of the date
of Closing.
8. Closing Expenses. Both the Seller and the Purchaser shall
pay such closing expenses customarily paid by sellers and purchasers in
Beaufort County, South Carolina. As an example of such charges, Seller shall
be responsible for paying documentary stamps on the deed, as well as for the
preparation of the deed. Purchaser shall be responsible for all financing
costs, attorneys' fees in connection with the title examination, title
insurance costs, Hilton Head transfer fees, recording fees for the deed and
mortgage, and any loan documentation.
9. Risk of Loss. The risk of loss of the Property prior to
closing shall be on the Seller. However, in case the property is wholly or
partially damaged by fire, storm or other casualty prior to closing, the Seller
shall notify the Purchaser immediately thereof, in writing, and the Purchaser
shall have thirty (30) days after receiving such written notice within which to
elect to proceed hereunder with a mutually agreed adjustment in the purchase
price, or to terminate this Agreement and receive a refund of all monies
deposited hereunder.
10. Conditions to Closing. Notwithstanding anything to the
contrary, the obligations of Purchaser to purchase are expressly made subject
to the following conditions:
(a) That the Town of Hilton Head Island has issued a final
Certificate of Occupancy (C.O.) for all leased portions of
the property.
11. Furnishings and Systems. The property to be sold hereunder
includes all heating and air conditioning systems, all fixtures attached to the
Property and all plumbing and other equipment. Said items will be sold in
their present condition, where is, as is. Seller to provide Purchaser by
assignment all warranties provided to it by agents, subcontractors, and
equipment manufacturers.
12. Brokerage Fees. The parties acknowledge and agree that no
real estate agent or broker is due any monies in connection with this
transaction.
13. Lease to Seller - Purchaser at the time of closing will
lease-back to Seller approximately 1765 square feet, more or less (subject to
confirmation by measurement), consistent with the terms of the mediated
settlement, under a separate Lease Agreement.
14. Miscellaneous. This Agreement shall be binding upon and
inure to the benefit of the respective successors and assigns of the parties
hereto. The invalidity or unenforceability of any
3
<PAGE> 4
provision of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if such invalid and
unenforceable provisions were omitted. For the convenience of the parties
hereto, duplicate originals of this Agreement may be executed. This Agreement
shall be governed by and construed and interpreted in accordance with the laws
of the State of South Carolina. This Agreement is intended by the parties
hereto to be the final expression of their Agreement and constitutes a complete
and exclusive statement of the terms hereof, notwithstanding any representations
or statements to the contrary heretofore made. This Agreement may not be
amended, modified, altered or changed in any respect whatsoever, except by a
further written agreement duly executed by the parties hereto.
15. Miller Inspection 10/23/96 - Seller agrees to take such
steps as are necessary to bring into compliance with the 1994 Edition Standard;
Building Code and the 1992 American National Standard Accessible and Usable
Buildings and Facilities (hereinafter Code) the following three (3) items
listed in the October 23, 1996 Miller Consulting Inspection Report (Ex.5): (1)
Front steps for main entrance to the Real Estate Company, Building A (p.1 para.
6); (2) Handrail to second level in Building A (p.2, para. 2); and (3) Front
steps to the main entrance to Building A (p.2, para. 8). Purchaser has the
right to allow Miller Consulting, at Purchaser's expense, to complete the
inspection of the rear building and small free standing building towards
Greenwood Drive (p.3, para. 7) within fifteen (15) days of the issuance of the
final C.O. for said area. Said supplemental report must be received and agreed
to by Sea Pines within thirty (30) days of the issuance of the C.O. (the
original report and only those items referring to external items in the
supplemental report shall hereinafter be referred to as the report). As to all
other items (i.e. those not corrected by Seller) identified on said report, if
a governmental agency, department or authorized employee of same, within twelve
(12) months of the date of this Agreement (10/31/96) requires Purchaser, or any
Tenant of the Property to bring same into compliance with Code, and after a
reasonable period of time after notification of said action Seller cannot
persuade said complaining agency to allow said item(s) to remain in its present
condition, Seller shall be obligated to take the necessary steps to bring said
item into compliance with Code. After 10/31/97, Seller has no such liability
and obligation whatsoever.
15. Additional Terms and Conditions
(a) Seller is responsible for payment of certain road improvements
required by CSA and/or the Town of Hilton Head Island, as is
described in Thomas Norby's memo of July 15, 1996 to Ed
Gibbons and memo of July 1, 1996 from Ed Gibbons to Tom Norby;
4
<PAGE> 5
(b) Purchaser agrees to assume the two Contracts for Outdoor
Lighting with Palmetto Electric for the Welcome Center;
(c) Upon issuance of final C.O., Seller to receive return of all
monies deposited with the Town of Hilton Head Island, South
Carolina.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed.
WITNESSES: SELLER: SEA PINES COMPANY, INC.
/s/ By: /s/ Michael E. Lawrence
- -------------------- ---------------------------
/s/ Its: President
- -------------------- ---------------------------
PURCHASER:
CAROLINA CENTER BUILDING CORP.
By: /s/ Kumar K. Viswanathan
- -------------------- ---------------------------
Its: President
- -------------------- ---------------------------
5
<PAGE> 1
EXHIBIT 10(s)
SETTLEMENT STATEMENT
Sea Pines Company, Inc. to Carolina Center Building Corp.
Old Reception Center Site
October 31, 1996
<TABLE>
<S> <C>
Purchase Price: $1,500,000.00
Seller Financing (1,500,000.00)
-------------
Balance Due at Closing -0-
-------------
-----------------------------------------------------
SELLER CLOSING COSTS:
Documentary Stamps $ 5,500.00
Recording Fees 14.00
Water/Sewer Charges POC
Property Taxer 17,517.40
Attorneys Fees POC
-------------
Total Closing Costs to Seller $ 23,031.40
-------------
PURCHASER CLOSING COSTS:
Hilton Head Transfer Fee (50%) $ 3,750.00
Mortgage Recording Fee 25.00
Property Taxes (1/l/96-12/31/96) 3,515.01
-------------
Total Purchaser Closing Costs $ 7,290.01
-------------
- ------------------------------------------------------------------------------------------------
Closing Disbursements From Escrow
AMOUNT DUE FROM SELLER:
Seller Closing Costs $ 23,031.40
Settlement Payment to Asset Management $ 225,000.00
-------------
Total Payment from Seller $ 248,031.40
-------------
AMOUNT PAID TO PURCHASER:
Settlement Payment from Sea Pines $ 225,000.00
Closing Costs of Purchaser ( 7,290.01)
Net Payment to Purchaser $ 217,709.99
-------------
</TABLE>
<PAGE> 1
EXHIBIT 10(t)
ADJUSTABLE RATE
PROMISSORY NOTE
$1,500,000 Oct 31, 1996
FOR VALUE RECEIVED, Carolina Center Building Corp. ("Carolina")
promises to pay to the order of Sea Pines Company, Inc. ("Sea Pines") at Post
Office Box 7000, Hilton Head Island, South Carolina 29938, or at such other
place or to such other party or parties as the holder of this Note may from
time to time designate, the principal sum of One Million Five Hundred Thousand
and No/100 ($1,500,000) Dollars, together with interest thereon. The principal
obligation herein shall be paid, plus interest on the unpaid balance over a
period of fifteen (15) years, by monthly payments, with the first of said
payments occurring on December 1, 1996, and continuing on the same day of each
successive month thereafter until the entire principal obligation and all
interest is paid-in-full in fifteen (15) years on November 1, 2011.
Interest shall accrue on said obligation for the first ten (10) years
at the fixed rate of seven and one-half (7.5%) percent. Thus, monthly payments
of $13,905.18 shall be made, consistent with the attached amortization
schedule, for the first ten (10) years. Said interest rate will be adjusted
annually thereafter at the end of years 10, 11, 12, 13, and 14. Said annual
adjustment shall be based upon the prime rate of Wachovia Bank of South
Carolina, N.A. ("Wachovia"). If said prime rate is equal to nine (9%) percent
or greater on November 1 of years 10, 11, 12, 13 or 14, the interest rate on
this obligation shall be adjusted for the following year to eight and one-half
(8.5%) percent. If said prime rate for any succeeding year is less than nine
(9%) percent, the interest rate for the following year on this obligation shall
be seven and onehalf (7.5%) percent. Thus, at the end of years 10, 11, 12, 13
and 14, the rate on this obligation shall either be seven and one-half (7.5%)
percent or eight and one-half (8.5%) percent, depending on the annual
determination made on November 1 of the Wachovia rate.
All installments of principal and all interest are payable in lawful
money of the United States of America, which shall be legal tender in payment
of all debts and dues, public and private, at the time of payment; and in the
event of (a) default in the payment of any interest hereinafter provided for,
or in the payment of any installments of principal and interest due hereunder,
(b) the filing of a petition by the undersigned under the provisions of any
state insolvency law or under the provisions of the Federal Bankruptcy Act or a
filing against the undersigned which is not stayed within ninety (90) days, or
(c) any assignment by the
1
<PAGE> 2
undersigned for the benefits of its creditors, then or at any time thereafter,
at the option of the holder of this Note, the whole of the principal sum then
remaining unpaid hereunder together with all interest accrued thereon, shall,
unless such default is cured within ten (10) days of receipt of written notice
of such default from the holder to the maker, immediately become due and
payable without notice. From and after the maturity of this Note either
according to its terms or as the result of a declaration of maturity, the
entire principal remaining unpaid hereunder shall bear interest at the South
Carolina judgment rate. Failure to exercise such option or any other rights
the holders may in the event of any such default be entitled to, shall not
constitute a waiver of the right to exercise such option or any other rights in
the event of any subsequent default, whether of the same or different nature.
If this Note is placed in the hands of an attorney for collection or
is collected through any legal proceedings, the undersigned jointly and
severally promise to pay costs of collection, including a reasonable attorney's
fee.
The undersigned and all endorsers, guarantors and all persons liable
or to become liable on this Note waive presentment, protest and demand, notice
of protest, demand and dishonor and nonpayment of this Note, and consent to any
and all renewals and extensions of the time of payment hereof, and agree,
further, that at any time and from time to time without notice, the terms of
payment herein may be modified or increased, changed or exchanged by agreement
between the holders hereof without in anywise affecting the liability of any
party to this instrument or any person liable with respect to any indebtedness
evidenced hereby.
None of the rights and remedies of the holder hereunder are to be
waived or affected by failure or delay to exercise them. All remedies
conferred on a holder by this Note or any other instrument or agreement shall
be cumulative, and none is exclusive. Such remedies may be exercised
concurrently or consecutively at the holder's option.
This Note shall be governed as to validity, interpretation,
construction, effect, and in all other respects by the laws and decisions of
the State of South Carolina.
This note shall be secured by a valid first priority, purchase money
mortgage on the old Sea Pines Welcome Center, located on 2.26 acres on the
corner of Greenwood Drive and the Sea Pines Circle, Hilton Head Island, South
Carolina. This obligation shall become immediately due and payable upon the
sale by Carolina Center Building Corp. of all or part of said collateral. This
Note and the accompanying Mortgage can be assigned by Sea Pines.
2
<PAGE> 3
Wherever possible each provision of this Note shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Note or portion thereof shall be prohibited by or invalid
under such law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Note.
<TABLE>
<S> <C>
CAROLINA CENTER BUILDING CORP.
/s/ BY: /s/ Kumar K. Viswanathan
- ----------------------------------------- ---------------------------
Its: President
- ----------------------------------------- --------------------------
CORPORATE SEAL
</TABLE>
3
<PAGE> 1
EXHIBIT 10(u)
STATE OF SOUTH CAROLINA )
) MORTGAGE, ASSIGNMENT AND SECURITY AGREEMENT
COUNTY OF BEAUFORT )
THIS MORTGAGE, ASSIGNMENT, AND SECURITY AGREEMENT made and delivered
this 31st day of October, 1996, by Carolina Center Building Corp.
("Mortgagor"), whose address is Post Office Box 7567, Hilton Head Island, South
Carolina 29938 and Sea Pines Company, Inc. ("Mortgagee"), whose address is Post
Office Box 7000, Hilton Head Island, South Carolina 29938.
W I T N E S S E T H
WHEREAS, Mortgagor is indebted to Mortgagee in the principal sum of
One Million Five Hundred Thousand and No/100 ($1,500,000) Dollars, together
with interest thereon, as evidenced by a Promissory Note (hereinafter referred
to as the "Note"), dated October 31 , 1996, which document by reference is made
a part hereof to the same extent as though set out in full herein;
NOW, THEREFORE, to secure the performance and observance by Mortgagor
of all covenants and conditions contained in the Note, in any renewal,
extension or modification thereof, in this Mortgage, Assignment, and Security
Agreement and in all other instruments securing the Note. Mortgagor does
hereby grant, bargain, sell, alien, remise, release, convey, assign, transfer,
mortgage, hypothecate, pledge, deliver, set over, warrant and confirm unto
Mortgagee, its successors and assigns forever all right, title and interest of
Mortgagor, by way of mortgage lien, in and to that certain property described
below:
(A) THE LAND. All the land located in the County of Beaufort, State
of South Carolina (the "Land"), described in Exhibit "1" attached hereto and
made a part hereof;
(B) THE IMPROVEMENTS. TOGETHER WITH all buildings, structures and
improvements of every nature whatsoever now or hereafter situated in or on the
Land, and all fixtures, machinery, appliances, equipment, furniture, and
personal property of every nature whatsoever now or hereafter owned by
Mortgagor and located in or on, or attached to, or used or intended to be used
in connection with or with the operation of, the Land, buildings, structures or
other improvements, including all extensions, additions, improvements,
betterments, renewals and replacements to any of the foregoing and all of the
right, title and interest of Mortgagor in and to any such personal property or
fixtures subject to any lien, security interest or claim together with the
benefit of any deposits or payments now or hereafter made by Mortgagor or on
its behalf (the "Improvements").
1
<PAGE> 2
(C) EASEMENTS OR OTHER INTERESTS. TOGETHER WITH all easements,
rights of way, gores of land, streets, ways, alleys, passages, sewer rights,
waters, water courses, water rights and powers, and all estates, rights,
titles, interests, privileges, liberties, tenements, hereditament and
appurtenances whatsoever, in any way belonging, relating or appertaining to any
of the property hereinabove described, or which hereafter shall in any way
belonging, relate or be appurtenant thereto, whether now owned or hereafter
acquired by Mortgagor, and the reversion and reversions, remainder and
remainders, rents, issues and profits thereof, and all the estate, right,
title, interest, property, possession, claim and demand whatsoever, at law as
well as in equity, of Mortgagor of, in and to the same, including but not
limited to all judgments, awards of damages and settlements hereafter made
resulting from condemnation proceedings or the taking of the property described
in paragraphs (A), (B) and (C) hereof or any part thereof under the power of
eminent domain, or for any damage (whether caused by such taking or otherwise)
to the property described in paragraphs (A), (B) and (C) hereof or any part
thereof, or to any rights appurtenant thereto, all sales contracts for, and all
proceeds of any sales or other dispositions of, the property described in
paragraphs (A) , (B) and (C) hereof or any part thereof, and all construction
contracts involving the development of, or improvements in or on the property
described in paragraphs (A), (B) and (C) hereof or any part thereof.
(D) ASSIGNMENT OF RENTS. TOGETHER WITH all rents, royalties, issues
profits, revenue, income and other benefits from the property described in
paragraphs (A) , (B) and (C) hereof to be applied against the indebtedness and
other sums secured hereby, provided, however, that permission is hereby given
to Mortgagor so long as no default has occurred hereunder, to collect, receive,
take, use and enjoy such rents, royalties, issues, profits, revenue, income and
other benefits as they become due and payable, but not in advance thereof. The
foregoing assignment shall be fully operative without any further action on the
part of either party and specifically Mortgagee shall be entitled, at its
option upon the occurrence of a default hereunder, to all rents, royalties,
issues, profits, revenue, income and other benefits from the property described
in paragraphs (A), (B) and (C) hereof whether or not Mortgagee takes possession
of the property described in paragraphs (A), (B) and (C) hereof.
Upon any such default hereunder, the permission hereby given to
Mortgagor to collect such rents, royalties, issues, profits, revenue, income
and other benefits from the property described in paragraphs (A), (B) and (C)
hereof shall terminate and such permissions shall not be reinstated upon a cure
of the default without Mortgagee's specific consent, unless the default has
been timely cured under the terms hereof. Neither the exercise of any rights
under this paragraph by Mortgagee nor the application of any such rents,
royalties, issues, profits, revenue, income or other benefits to the
indebtedness and other sums secured hereby, shall cure or waive any default or
notice of default hereunder or invalidate any act done pursuant hereto or to
any such notice, but shall be cumulative of all other rights and remedies.
2
<PAGE> 3
(E) ASSIGNMENT OF LEASES. TOGETHER WITH all right, title and
interest of Mortgagor in and to any and all leases now or hereafter on or
affecting the property described in paragraphs (A), (B) and (C) hereof,
together with all security therefor and all monies payable thereunder, subject,
however, to the conditional permission hereinabove given to Mortgagor to
collect the rentals under any such lease and to carry out the rights and
responsibilities of Landlord under such leases, so long as Mortgagor is not in
default hereunder. The foregoing assignment of any lease shall not be deemed
to impose upon Mortgagee any of the obligations or duties of Mortgagor provided
in any such lease, and Mortgagor agrees to fully perform all obligations of the
lessor under all such leases. Upon Mortgagee's request, Mortgagor agrees to
send to Mortgagee a list of all leases affecting the property described in
paragraphs (A), (B) and (C) hereof. Mortgagee shall have the right, at any
time and from time to time, to notify any lessee of the rights of Mortgagee as
provided by this paragraph. From time to time, upon request of Mortgagee,
Mortgagor shall specifically assign to Mortgagee as additional security
hereunder, by an instrument in writing in such form as may be approved by
Mortgagee, all right, title and interest of Mortgagor in and to any and all
leases now or hereafter on or affecting the Mortgaged Property, together with
all security therefor and all monies payable thereunder, subject to the
conditional permission hereinabove given to Mortgagor to collect the rentals
under any such lease and to carry out the rights and responsibilities of
Landlord, so long as Mortgagor is not in default hereunder.
This instrument constitutes an absolute and present assignment of the
rents, royalties, issues, profits, revenue, income and other benefits from the
Mortgaged Property, subject, however, to the conditional permission given to
Mortgagor to collect, receive, take, use and enjoy the same as provided
hereinabove; provided, further, that the evidence or exercise of such right or
Mortgagor shall not operate to subordinate this assignment to any subsequent
assignment, in whole or in part, by Mortgagor, and any such subsequent
assignment by Mortgagor shall be subject to the rights of Mortgagee hereunder.
(F) PERSONAL PROPERTY - Everything referred to in paragraphs (A),
(B), (C), (D), and (E), hereof and any additional property hereafter acquired
by Mortgagor and subject to the lien of this Mortgage or intended to be so is
herein referred to as the "Mortgaged Property."
TO HAVE AND TO HOLD the Mortgaged Property and all parts thereof unto
Mortgagee, its successors and assigns, to its own proper use and benefit
forever, subject, however, to the terms and conditions herein:
PROVIDED, HOWEVER, that if Mortgagor shall promptly pay or cause to be
paid to Mortgagee the principal and interest payable under the Note at the
times and in the manner stipulated therein, herein, and in all other
instruments securing the Note, all without any deduction or credit for taxes or
other similar charges paid by Mortgagor, and in this Mortgage and in all other
instruments securing the Note, to be kept, performed or observed by Mortgagor,
then this Mortgage, and all the
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properties, interest and rights hereby granted, conveyed and assigned shall
cease and be void, but shall otherwise remain in full force and effect.
Mortgagor covenants and agrees with Mortgagee as follows:
ARTICLE ONE
COVENANTS OF MORTGAGOR
1.01 Performance of Note, Mortgage, etc. Mortgagor shall perform,
observe and comply with all provisions hereof, of the Note (insofar as its
compliance is required) of every other instrument securing the Note, and will
promptly pay to Mortgagee the principal with interest thereon and all other
sums required to be paid by. Mortgagor under the Note and pursuant to the
provisions of this Mortgage and of every other instrument securing the Note
when payment shall become due, all without deduction or credit for taxes or
other similar charges paid by Mortgagor.
1.02 Restrictive Covenants, Zoning and Environmental Laws.
Mortgagor covenants and warrants to comply with all restrictive covenants,
environmental and ecological laws, ordinances and regulations affecting the
Mortgaged Property from the date of closing forward (specifically excluding the
items noted in the October 23, 1996 inspection by Miller Consulting consisting
of three pages). Mortgagee agrees that for a default to arise under this
provision allowing for Mortgagee to exercise any of its legal remedies under
this Mortgage, said breach must be material and adversely impact the
Mortgagee's collateral or the Mortgagor's ability to repay the underlying debt.
1.03 Taxes and Liens.
(a) Mortgagor shall pay or bond promptly, when and as due, and shall
promptly exhibit to Mortgagee receipts for the payment of all taxes,
assessments, rates, dues, charges, fees, levies, fines, impositions,
liabilities, obligations and encumbrances of every kind whatsoever (including
those encumbrances, if any, permitted pursuant to Paragraph 1.03) now or
hereafter proposed, levied or assessed upon or against the Mortgaged Property
or any part thereof, or upon or against this Mortgage or the indebtedness or
other sums secured hereby, or upon or against the interest of Mortgagee in the
Mortgaged Property, as well as all income taxes, assessments and other
governmental charges levied and imposed by the United States of America or any
state, county, municipality, borough or other taxing authority upon or against
Mortgagor or in respect of the Mortgaged Property or any part thereof, and any
charge which, if unpaid, would become a lien or charge upon the Mortgaged
Property before they become delinquent and before any interest attaches or any
penalty is incurred.
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(b) Mortgagor shall not permit or suffer more than ten (10) days any
mechanics', laborers', materialmen's, statutory or other lien upon any or the
Mortgaged Property.
1.04 Insurance.
(a) Mortgagor shall at its sole expense obtain for, deliver to and
maintain for the benefit of Mortgagee, during the life of this Mortgage,
insurance policies in such amounts as Mortgagee may require in no event less
than the full insurable value or the loan amount, insuring the Mortgaged
Property against fire, extended coverage and such other insurable hazards,
casualties and contingencies as Mortgagee may require including flood damage,
and shall pay promptly, when due, any premiums on such insurance policies and
on any renewals thereof. The form of such policies and the companies issuing
them, and the coverage provided shall be acceptable to Mortgagee. All such
policies and renewals thereof shall be held by Mortgagee and shall contain a
noncontributory mortgagee endorsement making losses payable to Mortgagee. The
coverage under such policies shall be limited to the improvements now or
hereafter located on the Mortgaged Property. At least fifteen (15) days prior
to the expiration date of all such policies, renewals thereof satisfactory to
Mortgagee shall be delivered to Mortgagee. Mortgagor shall deliver to
Mortgagee receipts evidencing the payment of all premiums on such insurance
policies and renewals. Delivery of the insurance policies and renewals thereof
shall constitute an assignment to Mortgagee, as further security, of all
unearned premiums. In the event of loss, Mortgagor will give immediate written
notice to Mortgagee and Mortgagee may make proof of loss if not made promptly
by Mortgagor. In the event of the foreclosure of this Mortgage or any other
transfer of title to the Mortgaged Property in extinguishment of the
indebtedness and other sums secured hereby, all right, title and interest of
Mortgagor in and to all insurance policies and renewals thereof then in force
shall pass to the purchaser or grantee. Mortgagee may at any time at its own
discretion procure and substitute for any and all of the insurance so held as
aforesaid, such other policy or policies of insurance, in like amount, as it
may determine without prejudice to its right to foreclose hereunder should
Mortgagor fail or refuse to keep said premises so insured.
(b) Mortgagor hereby assigns to Mortgagee all proceeds from any
insurance policies, and Mortgagee is hereby authorized and empowered in its
reasonable discretion, to adjust or compromise any loss under any insurance
from any such policy or policies, to the extent necessary to secure payment
hereunder.
(c) Mortgagor shall at its sole expense obtain for, deliver to and
maintain for the benefit of Mortgagee, during the life of this Mortgage,
liability insurance policies relating to the Mortgaged Property, in such
amounts, with such companies and in such form as may be reasonably required by
Mortgagee. Mortgagee may require such policies to contain an endorsement, in
form satisfactory to Mortgagee, naming Mortgagee as
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an additional insured thereunder. Mortgagor shall pay promptly, when due, any
premiums on such insurance policies and renewals thereof.
1.05 Care of Property.
(a) Mortgagor shall preserve and maintain the Mortgaged Property in
good condition and repair. Mortgagor shall not permit, commit or suffer any
waste, impairment or deterioration of the Mortgaged Property or of any part
thereof, and will not take any action which will increase the risk of fire or
other hazard to the Mortgaged Property or to any part thereof.
(b) Except as otherwise provided in this Mortgage, no fixture,
personal property or other part of the Mortgaged Property shall be removed,
demolished or altered, without the prior written consent of Mortgagee, if such
action would materially impair the value of the security hereby provided.
Mortgagor may sell or otherwise dispose of, free from the lien of this
Mortgage, furniture, furnishings, equipment, tools, appliances, machinery,
fixtures or appurtenances, subject to the lien hereof, which may become worn
out, undesirable or obsolete only if they are replaced immediately with similar
items of at least equal value which shall, without further action, become
subject to' the lien of this Mortgage, except as otherwise provided in this
Mortgage.
(c) Mortgagee may enter upon and inspect the Mortgaged Property at
any reasonable time during the term of this Mortgage, upon at least twenty-four
(24) hours advance notice to Mortgagor.
(d) If all or any part of the Mortgaged Property shall be lost,
damaged or destroyed by fire or any other cause, Mortgagor will give immediate
written notice thereof to Mortgagee and shall promptly restore the Mortgaged
Property to the equivalent of its original condition regardless of whether or
not there shall be any insurance proceeds therefor. If a part of the Mortgaged
Property shall be lost, physically damaged or destroyed through condemnation,
Mortgagor will promptly restore, repair or alter the remaining property in a
manner satisfactory to Mortgagee.
1.06 Transfer of Property.
If all or any part of the Property or an interest therein is
sold or transferred by Borrower without Lender's prior written consent
excluding the creation of a lien or encumbrance subordinate to this Mortgage,
Lender may, at Lender's option, declare all the sums secured by this Mortgage
to be immediately due and payable. Lender shall have waived such option to
accelerate if, prior to the sale or transfer, Lender and the person to whom the
Property is to be sold or transferred reach agreement in writing that the
credit of such person is satisfactory to Lender and that the interest payable
on the sums secured by this Mortgage shall be at such rate as Lender shall
request. if
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Lender has waived the option to accelerate provided in this paragraph, and if
Borrower's successor in interest has executed a written assumption accepted in
writing by Lender, Lender shall release Borrower from all obligations under
this Mortgage and the Note. Lender's decision on the assumption of said
obligation shall be at its sole discretion. Lender can deny said assumption
for a good reason, or no reason at all.
If Lender exercises such option to accelerate, Lender shall mail
Borrower notice of acceleration. Such notice shall provide a period of not
less than thirty (30) days from the date the notice is mailed within which
Borrower may pay the sums declared due. If Borrower fails to pay such sums
prior to the expiration of such period, Lender may, without further notice or
demand on Borrower, invoke any remedies permitted hereunder.
1.07 Further Assurances. At any time and from time to time, upon
Mortgagee's request Mortgagor shall make, execute and deliver or cause to be
made, executed and delivered to Mortgagee and, where appropriate, shall cause
to be recorded or filed and from time to time thereafter to be rerecorded or
refiled at such time and in such offices and places as shall be deemed
desirable by Mortgagee any and all such further mortgages, instruments of
further assurance and other documents and Mortgagee may consider necessary or
desirable in order to effectuate, complete, or perfect, or to continue and
preserve the obligations of Mortgagor under the Note and this Mortgage, and the
lien of the Mortgage as a first and prior lien upon all of the Mortgaged
Property.
1.08 Leases Affecting Mortgaged Property. Mortgagor shall comply
with and observe its obligations as landlord under all leases affecting the
Mortgaged Property or any part thereof. Mortgagor, if required by Mortgagee,
shall furnish promptly to Mortgagee, executed copies of all such leases now
existing or hereafter created. Mortgagor shall not, without the express
written consent of Mortgagee, modify, surrender, terminate or extend any such
lease now existing or hereafter created or permit or suffer an assignment of
sublease. Mortgagor shall not accept permit payment of rent more than one (1)
month in advance without the prior written consent of Mortgagee.
1.09 Expenses. Mortgagor shall pay or reimburse Mortgagee for all
costs, charges and expenses, including reasonable attorney's fees and
disbursements, and costs incurred or paid by Mortgagee in any action which is
threatened, pending or completed or proceeding or dispute in which Mortgagee is
or might be made a party or appears as a party plaintiff or party defendant and
which affects or might affect the Note, or the Mortgaged Property or any part
thereof, or the interests of Mortgagor or Mortgagee therein, including but not
limited to the foreclosure of this Mortgage, condemnation involving all or part
of the Mortgaged Property or any action to protect the security hereof, to the
extent that such action may be the result of Mortgagor's default hereunder.
The amounts so incurred or paid by Mortgagee, together with interest thereon at
the Default Rate as hereinafter defined from the
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date incurred until paid by Mortgagor, shall be added to the indebtedness and
secured by the lien of this Mortgage.
1.10 Mortgagor's Performance of Defaults. If Mortgagor defaults in
the payment of any tax, assessment, encumbrance of other imposition, in its
obligation to furnish insurance hereunder or in the performance of observance
of any other covenant, conditions or term in this Mortgage or in any other
instrument securing the Note or in any other mortgage or security agreement
conveying an interest in the Mortgaged Property or any part thereof, Mortgagee
may at its option perform or observe the same, and all payments made (whether
such payments are regular or accelerated payments) and costs and expenses
incurred or paid by Mortgagee in connection therewith shall become due and
payable immediately by Mortgagor. The amounts so incurred or paid by
Mortgagee, together with interest thereon at the Default Rate as hereinafter
defined from the date incurred until paid by Mortgagor, shall be added to the
indebtedness and secured by the lien of this Mortgage. Nothing contained
herein shall be construed as requiring Mortgagee to advance or expend monies
for any purposes mentioned in this paragraph, or for any other purpose.
Mortgagee is hereby empowered to enter and to authorize others to enter upon
the Mortgaged Property or any part thereof for the purpose of performing or
observing any such defaulted covenant, condition or terms, without thereby
becoming liable to Mortgagor or any person in possession holding under the
Mortgagor.
1.11 Estoppel Affidavits. Mortgagor, within ten (10) days after
written request from Mortgagee, shall furnish a written statement, duly
acknowledged, setting forth the unpaid principal of, and interest on, the Note,
and any other unpaid sums secured hereby, and whether or not any offsets of
defenses exist against such principal and interest or other sums.
ARTICLE TWO
DEFAULTS
2.01 Event of Default. The term Event of Default, wherever used in
this Mortgage, shall mean any one or more of the following events:
(a) Failure by Mortgagor to duly keep, perform and observe any
covenant, condition or agreement in the Note, this Mortgage and Security
Agreement, which failure is not cured following thirty (30) days written notice
to Mortgagor, stating the failure or default and the action necessary to cure.
(b) A breach by Mortgagor of any of the covenants, agreements and
conditions of this Mortgage and Security Agreement.
(c) If Mortgagor: (a) (i) files a voluntary petition in
bankruptcy, or (ii) is adjudicated as a bankrupt or insolvent, or (iii) files
any petition or answer seeking or acquiescing in any reorganization,
management, composition, readjustment, liquidation, dissolution or
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similar relief for itself under any law relating to bankruptcy
insolvency or other relief for 'debtors, or (iv) seeks or consents to or
acquiesces in the appointment of any trustee, receiver, master or liquidator of
itself or of all or any substantial part of the Mortgaged Property or of any or
all of the rents, revenues, issues, earnings, profits or income thereof, or (v)
makes any general assignment for the benefit of creditors or (vi) makes and
admission in writing of its inability to pay its debts generally as they become
due; or (b) a court of competent jurisdiction enters an order, judgment or
decree approving a petition filed against Mortgagor or any guarantor or
endorser of the Note, seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any present or
future federal, state, or other statute law of regulation relating to
bankruptcy, insolvency or other relief for debtors, which order, judgment or
decree remains unvacated and unstayed for an aggregate of sixty (60) days
(whether or not consecutive) from the date of entry thereof; or (c) any
trustee, receiver or liquidator of Mortgagor or of all or any substantial part
of the Mortgaged Property or any or all of the rents, revenues, issues,
earnings, profits or income thereof, is appointed without the prior written
consent of Mortgagee, which appointment shall remain unvacated and unstayed for
an aggregate of sixty (60) days (whether or not consecutive).
(d) Default by Mortgagor under any other mortgage or any other
agreement or obligation of Mortgagor affecting any portion of the Mortgaged
Property; or default by Mortgagor under any other documents or instruments
securing the Note or any other indebtedness or Mortgagor to Mortgagee, if such
default is not cured within any grace period permitted therein and if such
default permits the holder to cause such obligation to become due prior to its
stated maturity. Mortgagor shall notify Mortgagee in writing of the occurrence
of such default within five (5) days thereof, specifying the nature of such
default.
(e) Material breach of any warranty or material untruth of any
representation of Mortgagor contained in the Note, this Mortgage or any other
instrument securing the Note.
2.02 Acceleration of Maturity. If an Event of Default shall have
occurred, and shall not be cured by Mortgagor within the proscribed period,
Mortgagee may declare the outstanding principal amount of the Note and the
interest accrued thereon, and all other sums secured hereby, to be due and
payable immediately, and upon such declaration such principal and interest and
other sums shall immediately become and be due and payable without demand or
notice.
2.03 Mortgagee's Power to Enforcement. If an uncured Event of
Default shall have occurred, Mortgagee may, either with or without entry or
taking possession as hereinabove provided or otherwise, proceed by suit or
suits at law or in equity or by any other appropriate proceeding or remedy: (a)
to enforce payment of the Note or the performance of any term hereof or any
other right; (b) to foreclose this Mortgage and to sell, as an entirety or in
separate lots or parcels, the Mortgaged
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Property, under the judgment or decree of a court or courts of competent
jurisdiction; (c) to foreclose any other mortgage or instruments securing the
Note and to sell, as an entirety or in separate lots or parcels, the property
mortgaged therein or in which a security interest is conveyed thereby under the
judgment of decree of a court or courts of competent jurisdiction or as
otherwise provided by law; and (d) to pursue any other remedy available to it
or at law or in equity in order to secure payment of sums due hereunder.
Mortgagee shall take action either by such proceedings or by the exercise of
its powers with respect to entry or taking possession, or both, as the
Mortgagee may determine.
2.04 Mortgagee's Right to Enter and Take Possession, Operate, and
Apply Income.
(a) If an uncured Event of Default shall have occurred, Mortgagor,
upon demand of Mortgagee, shall forthwith surrender to Mortgagee the actual
possession, and if and to the extent permitted by law, Mortgagee itself, or by
such officers or agents as it may appoint, may enter and take possession of all
the Mortgaged Property.
(b) If Mortgagor shall for any reason fail to surrender or deliver
the Mortgaged Property or any part thereof after Mortgagee's demand, Mortgagee
may obtain a judgment or decree conferring on Mortgagee the right to immediate
possession or requiring Mortgagor to deliver immediate possessions of all or
part of the Mortgaged Property to Mortgagee along with all books, paper and
accounts of Mortgagor, to the entry of which judgment or decree Mortgagor
hereby specifically consents, or, at Mortgagee's option, it may seek the
appointment of a Receiver.
(c) Mortgagor shall pay to Mortgagee, upon demand, all reasonable
costs and expenses of obtaining such judgment or decree and reasonable
compensation to Mortgagee, its attorneys and agents, and all such costs,
expenses and compensation shall, until paid, be secured by the lien of this
Mortgage.
(d) Upon every such entering upon or taking of possession,
Mortgagee may hold, store, use, operate, manage and control the Mortgaged
Property and conduct the business thereof, and, from time to time:
(i) make all necessary and proper maintenance, repairs,
renewals, replacements, additions, betterments and improvements thereto and
thereon and purchase or otherwise acquire additional fixtures, personalty and
other property:
(ii) insure or keep the Mortgaged Property insured;
(iii) Manage and operate the Mortgaged Property and
exercise all the rights and powers of Mortgagor in its name or otherwise, with
respect to the same;
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(iv) enter into agreements with others to exercise the
powers herein granted Mortgagee;
all as Mortgagee in its reasonable judgment from time to time may determing and
Mortgagee may collect and receive all the income, revenues, rents, issues and
profits of the same, including those past due as well as those accruing
thereafter; and shall apply the monies so received by Mortgagee in such
priority as Mortgagee may determine to (1) the reasonable compensation,
expenses and disbursements of the agents and attorneys; (2) the cost of
insurance, taxes, assessments and other proper charges upon the Mortgaged
Property or any part thereof; (3) the deposits for taxes and assessments and
insurance premiums due; and (4) the payment of accrued interest on the Note.
Mortgagee shall surrender possession of the Mortgaged Property to
Mortgagor only when all that is due upon such interest, tax and insurance
deposits and principal installments, and under any of the terms of this
Mortgage, shall have been paid and all defaults made good. The same right of
taking possession, however, shall exist if any subsequent Event of Default
shall occur and be continuing.
2.05 Leases. Mortgagee, at its option, is authorized to foreclose
this Mortgage subject to any rights of any tenants of the Mortgaged Property,
and the failure to make such tenants party defendants to any such foreclosure
proceedings and to foreclose their rights will not be, not be asserted by
Mortgagor to be, a defense to any proceeding instituted by Mortgagee to collect
the sums secured hereby or to collect any deficiency remaining unpaid after the
foreclosure sale of the Mortgaged Property.
2.06 Purchase by Mortgagee. Upon and foreclosure sale, Mortgagee
may bid for and purchase the Mortgaged Property and, upon compliance with the
terms of sale, may hold, retain and possess and dispose of such property in its
own absolute right without further accountability.
2.07 Application of Indebtedness Toward Purchase Price. Upon any
such foreclosure sale, Mortgagee may, if permitted by law, after allowing for
the proportion of the total purchase price required to be paid in cash and for
the costs and expenses of the sale, compensation and other charges, in paying
the purchase price apply any portion of or all sums due to Mortgagee under the
Note, this Mortgage or any other instrument securing the Note, in lieu of cash,
to the amount which shall, upon distribution of the net proceeds of such sale,
be payable thereon.
2.08 Waiver of Appraisement, Valuation, Stay, Extension and
Redemption Laws. Mortgagor agrees to the full extent permitted by law that in
case of a default on its part hereunder, neither Mortgagor nor anyone claiming
through of under it shall or will set up, claim or seek to take advantage of
any appraisement, valuation, stay, extension or redemption laws now or
hereafter in force, in order to prevent or hinder the enforcement or
foreclosure of this Mortgage, or the absolute sale
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of the Mortgaged Property or the final and absolute putting into possession
thereof, immediately after such sale, of the purchasers thereat, and Mortgagor,
for itself and all who may at any time claim through, or under it, hereby
waives, to the full extent that it may lawfully so do, the benefit of all such
laws, and any and all right to have the assets comprising the Mortgaged
Property marshalled upon any foreclosure of the lien hereof or appraised for
the purpose of reducing any deficiency judgment obtained by Mortgagee against
Mortgagor and agrees that Mortgagee or any court having jurisdiction to
foreclose such lien may sell the Mortgaged Property in part or as an entirety.
/s/ CCBC
-------------
lnitials CCBC
2.09 Receiver. If an Event of Default shall have occurred,
Mortgagee, to the extent permitted by law and without regard to the value or
occupancy of the security, shall be entitled as a matter of right if it so
elects to the appointment of a receiver to enter upon and take possession of
the Mortgaged Property and to collect all rents, revenues, issues, income,
products and profits thereof and apply the same as the court may direct. The
receiver shall have all rights and powers permitted under the laws of the state
where the Land is located and such other powers as the court making such
appointment shall confer. The expenses, including receiver's fees, attorneys'
fees, costs and agent's compensation, incurred pursuant to the powers herein
contained shall be secured by this Mortgage. The right to enter and take
possession of and to manage and operate the Mortgaged Property, and to collect
the rents, issues and profits thereof, whether by a receiver or otherwise,
shall be cumulative to any other right or remedy hereunder or afforded by law,
and may be exercised concurrently therewith or independently thereof.
Mortgagee shall be liable to account only for such rents, issues and profits
actually received by Mortgagee, whether received pursuant to this Paragraph or
Paragraph 2.03. Notwithstanding the appointment of any receiver or other
custodian, Mortgagee shall be entitled as secured party hereunder to the
possession and control of any cash, deposits or instruments at the time held
by, or payable or deliverable under the terms of this Mortgage to, Mortgagee.
2.10 Proofs of Claim. In the case of any receivership, insolvency,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceedings affecting Mortgagor, any person, partnership or
corporation guaranteeing or endorsing any of Mortgagor's obligations, its
creditors or its property, Mortgagee, to the extent permitted by law, shall be
entitled to file such proofs of claim and other documents as may be necessary
or advisable in order to have its claims allowed in such proceedings for the
entire amount due and payable by Mortgagor under the Note, this Mortgage and
any other instrument securing the Note, at the date of this institution of such
proceedings, and for any additional amounts which may become due and payable by
Mortgagor after such date.
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2.11 Mortgagor to Pay the Note on Any Default in Payment;
Application of Monies by Mortgagee.
(a) If default shall be made in the payment of any amount due
under the Note, this Mortgage or any other instrument securing the Note, and
should Mortgagor fail to cure such default after thirty (30) day notice, then,
upon Mortgagee's demand, Mortgagor will pay to Mortgagee the whole amount due
and payable under the Note and all other sums secured hereby; and if Mortgagor
shall fail to pay the same forthwith upon such demand, Mortgagee shall be
entitled to sue for and to recover judgment for the whole amount so due and
unpaid together with costs and expenses including the reasonable compensation,
expenses and disbursements of Mortgagee's agents and attorneys incurred in
connection with such suit and any appeal in connection therewith, Mortgagee
shall be entitled to sue and recover judgment as aforesaid either before, after
of during the pendency of any proceedings for the enforcement of this Mortgage,
and the right of Mortgagee to recover such judgment shall not be affected by
any taking, possession of foreclosure sale hereunder, or by the exercise of any
other right, power of remedy for the enforcement of the terms of this Mortgage,
or the foreclosure of the lien hereof.
(b) In case of a foreclosure sale of all or any part of the
Mortgaged Property and of the application of the proceeds of sale to the
payment of the sums secured hereby, Mortgagee shall be entitled to enforce
payment of and to receive all amounts then remaining due and unpaid and to
recover judgment for any portion thereof remaining unpaid, with interest.
(c) Mortgagor hereby agrees, to the extent permitted by law, that
no recovery of any such judgment by Mortgagee and no attachment or levy of any
execution upon any of the Mortgaged Property or any other property shall in any
way affect the lien of this Mortgage upon the Mortgaged Property or any part
thereof or any liens, rights, powers or remedies of Mortgagee hereunder, but
such lien, rights, powers and remedies shall continue unimpaired as before.
(d) Any monies collected or received by Mortgagee under this
Paragraph 2.11 shall be applied as follows:
(i) First, to the payment of reasonable compensation,
expenses and disbursements of the agents and attorneys, as may be reasonable
and necessary as a result of the default of Mortgagor; and
(ii) Second, to payment of amounts due and unpaid under
the Note, this Mortgage and all other instruments securing the Note.
2.12 Delay or Omission of Waiver. No delay or omission of
Mortgagee or of any holder of the Note to exercise any right, power or remedy
accruing upon any Event of Default shall exhaust or impair any such right,
power or remedy or shall be construed to waive any such Event of Default or to
constitute acquiescence therein. Every right,
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power and remedy given to Mortgagee may be exercised from time to time and as
often as may be deemed expedient by Mortgagee.
2.13 No Waiver of One Default to Affect Another. No waiver of any
Event of Default hereunder shall extend to or affect any subsequent or any
other Event of Default then existing, or impair any rights, powers or remedies
consequent thereon. If Mortgagee (a) grants forbearance or an extension of
time for the payment of any sums secured hereby; (b) takes other or additional
security for the payment thereof; (c) waivers or does not exercise any right
granted in the Note, the Loan Agreement, this Mortgage or any other instrument
securing the Note; (d) releases any part of the Mortgaged Property from the
lien of this Mortgage or any other instrument securing the Note; (e) consents
to the filing of any map, plat or replat of the Land; (f) consents to any
agreement changing the terms of this Mortgage or subordinating the lien or any
charge hereof, no such act or omission shall release, discharge, modify, change
or affect the original liability under the Note, this Mortgage or otherwise of
Mortgagor, or any subsequent purchaser of the Mortgaged Property or any part
thereof or any maker, cosigner, endorser, surety or guarantor. No such act or
omission shall preclude Mortgagee from exercising any right, power or privilege
herein granted or in case of any Event of Default then existing or of any
subsequent, Event of Default nor, except as otherwise expressly provided in an
instrument or instruments executed by Mortgagee, shall the lien of this
Mortgage be altered thereby. In the event of the sale or transfer by operation
of law or otherwise of all or any part of the Mortgaged Property, unless
Mortgagee is paid in full hereunder, Mortgagee, without notice to any person,
firm or corporation, is hereby authorized and empowered to deal with any such
vendee or transferee with reference to the Mortgaged Property or the
indebtedness secured hereby, or with reference to any of the terms or
conditions hereof, as fully and to the same extent as it might deal with
original parties hereto and without in any way releasing or discharging any of
the liabilities or undertakings hereunder.
2.14 Discontinuance of Proceedings; Position of Parties Restored.
If Mortgagee shall have proceeded to enforce any right or remedy under this
Mortgage by foreclosure, entry or otherwise, and such proceedings shall have
been discontinued or abandoned for any reason, or shall have been determined
adversely to Mortgagee, then and in every such case, Mortgagor and Mortgagee
shall be restored to their former positions and rights hereunder, and all
rights, powers and remedies of Mortgagee shall continue as if no such
proceeding had occurred or had been taken.
2.15 Remedies Cumulative. No right, power or remedy conferred upon
or reserved to Mortgagee by the Note, this Mortgage or any other instrument
securing the Note is exclusive of any other right, power or remedy, but each
and every such right, power and remedy shall be cumulative and concurrent and
shall be in addition to any other right, power and remedy given hereunder or
under the Note or any other instrument securing the Note, or now or hereafter
existing at law, in equity or by statute.
14
<PAGE> 15
ARTICLE THREE
MISCELLANEOUS PROVISIONS
3.01 Heirs, Successors and Assigns Included in Parties. Whenever
one of the parties hereto is named or referred to herein, the heirs, successors
and assigns of such party shall be included and all covenants and agreements
contained in this Mortgage, by or on behalf of Mortgagor or Mortgagee, shall
bind and inure to the benefit of their respective heirs, successors and
assigns, whether so expressed or not.
3.02 Addresses for Notices, Etc. Any notice, report, demand or
other instrument authorized or required to be given or furnished under this
Mortgage to Mortgagor or Mortgagee shall be deemed given or furnished if mailed
with appropriate postage or delivered to the address set forth in this
Agreement unless such address is changed in writing.
3.03 Headings. The headings of the articles, sections, paragraphs
and subdivisions of this Mortgage are for convenience of reference only, are
not to be considered a part hereof, and shall not limit or expend or otherwise
affect any of the terms hereof.
3.04 Invalid Provisions to Affect No Others. In the event that any
of the covenants, agreement, terms or provisions contained in the Note, this
Mortgage or any other instrument securing the Note shall be invalid, illegal or
unenforceable in any respect, the validity of the remaining covenants,
agreements, terms or provisions contained herein and in the Note and any other
instrument securing the Note shall be in no way affected, prejudiced or
disturbed thereby.
3.05 Changes, Etc. Neither this Mortgage nor any term hereof may
be changed, waiver, discharged or terminated orally, or by any action or
inaction, but only by an instrument in writing signed by the party against
which enforcement of the change, waiver, discharge or termination is sought.
Any agreement hereafter made by Mortgagor and Mortgagee relating to this
Mortgage shall be superior to the rights of the holder of any intervening lien
or encumbrance.
3.06 Governing Law. This Mortgage is made by the Mortgagor and
accepted by Mortgagee in the State of South Carolina, with reference to the
laws of such state, and shall be construed, interpreted, enforced and governed
by and in accordance with such laws (excluding the principles thereof governing
conflicts of law).
3.07 Default Rate. The Default Rate shall be as provided in the
Note; in the event no such rate is provided therein, the Default Rate shall be
the maximum rate of Lnterest permitted by law at the time of default or
eighteen (18%) percent per annum, whichever is less.
3.08 Assignment by Mortgagee - This Mortgage and the accompanying
Note can be assigned by the Mortgagee.
15
<PAGE> 16
ARTICLE FOUR
LENDING PROVISIONS
4.01 Breach of Other Documents. Notwithstanding anything to the
contrary contained in this Mortgage or in the Note, or in any other instrument
securing the loan evidenced by such Note, upon an uncured Event of Default,
Mortgagee may at its option declare the entire indebtedness hereunder,
immediately due and payable and/or exercise all additional rights accruing to
it under this Mortgage in the event of a breach by Mortgagor of any covenant
contained in this Mortgage or in the Note between Mortgagor and Mortgagee.
4.02 Partial Foreclosure. In the event the Mortgaged Property is
comprised of more than one (1) parcel of real property, Mortgagor hereby waives
any right to require Mortgagee to foreclose of exercise any of its other
remedies against all of the Mortgaged Property as a whole or to require
Mortgagee to foreclose or exercise such remedies against one portion of the
Mortgaged Property prior to the foreclosure or exercise of said remedies
against other portions of the Mortgaged Property.
IN WITNESS WHEREOF, the undersigned have executed this instrument the
day and year first above written.
<TABLE>
<S> <C>
SIGNED, SEALED AND DELIVERED CAROLINA CENTER BUILDING CORP.
IN THE PRESENCE OF:
/s/ BY: /s/ Kumar K. Viswanathan
- ---------------------------------- ------------------------------
/s/ Attest:
- ---------------------------------- -------------------------
</TABLE>
16
<PAGE> 17
<TABLE>
<S> <C> <C>
STATE OF SOUTH CAROLINA )
) P R 0 B A T E
COUNTY OF BEAUFORT )
</TABLE>
PERSONALLY appeared before me, the undersigned witness, and
made oath that s/he saw the within named ???, as authorized officer of Carolina
Center Building Corp., seal and as its act and deed, deliver the within written
Instrument, and that s/he, with the other witness whose signature appears
above, witnessed the execution.
<TABLE>
<S> <C>
/s/
-----------------------------
SWORN TO before me this
31st day of October, 1996.
/s/
- --------------------------------
Notary Public for South Carolina
My Commission Expires: 10/2/2001
---------
</TABLE>
17
<PAGE> 1
EXHIBIT 10(V)
SEA PINES COUNTRY CLUB
AGREEMENT TO TURNOVER MANAGEMENT AND CONTROL
This AGREEMENT TO TURNOVER MANAGEMENT AND CONTROL is made as of this 30th
day of April, 1996 by and between SEA PINES COMPANY, INC. (formerly known as Sea
Pines Plantation Company, Inc.), a South Carolina corporation (the "Company")
and SEA PINES COUNTRY CLUB, INC., a South Carolina not-for-profit corporation
(the "Club").
STATEMENT OF BACKGROUND INFORMATION
WHEREAS, the Club is a private golf, tennis, exercise, swimming and social
club which has been organized to provide services exclusively for the pleasure
and recreation of its members and their guests;
WHEREAS, the Company and the Club established an equity membership program
providing members of the Club the exclusive opportunity to use certain
recreational amenities situated within Sea Pines Plantation in Beaufort County,
Hilton Head Island, South Carolina pursuant to that certain Plan for the
Offering of Memberships in Sea Pines Country Club, Inc., Subscription Agreement
between the Company and the Club, By-Laws of the Club and other related
membership materials dated August 4, 1989 (the "Initial Membership Plan");
WHEREAS, the Company and the Club have modified certain provisions of the
Initial Membership Plan by agreement known as the "First Clarification of
Membership Plan Documents" dated October 9, 1989;
WHEREAS, the Company and the Club have modified the Initial Membership
Plan by agreement known as the "Second Clarification of Membership Plan
Documents" dated June 1, 1994;
WHEREAS, the Company and the Club have further modified the Initial
Membership Plan by agreement known as the "Third Clarification of Membership
Plan Documents" dated April 30, 1996;
WHEREAS, the Initial Membership Plan provides that the turnover of
management and control of the Club to the Equity Members will occur within one
hundred eighty (180) days of the occurrence of the earlier of the following
events: (a) the initial sale of all of the Equity Memberships permitted to be
sold by the Company, or (b) such earlier date determined by the Company;
WHEREAS, the Company and the Club hereby agree that even though all of the
Equity Memberships permitted to be sold by the Company have not been issued as
of the date of this Agreement that the turnover of management and control of
the Club to the Equity Members shall occur on May 1, 1996; and
WHEREAS, the Company and the Club hereby agree on the terms and conditions
of the early turnover of management and control of the Club to the Equity
Members as further set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants herein contained and for other good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, the parties intending to
be legally bound agree as follows:
<PAGE> 2
1. DEFINITION OF TERMS. All of the defined terms used in this Agreement
shall have the same meaning as defined in the Initial Membership Plan.
2. RATIFICATION OF THE MEMBERSHIP DOCUMENTS. The Company and the Club
hereby agree that the Initial Membership Plan is attached to this Agreement as
Exhibit A.
The Company and the Club hereby acknowledge and agree that three amendments
to the Initial Membership Plan have previously been executed by the parties
modifying certain terms of the Initial Membership Plan. The first amendment is
known as the First Clarification of Membership Plan Documents and dated October
9, 1989, the second amendment is known as the Second Clarification of Membership
Plan Documents and dated June 1, 1994 and the third amendment is known as the
Third Clarification of Membership Plan Documents and dated April 30, 1996. A
copy of each of these amendments is attached to this Agreement as Exhibit B. The
parties hereto agree that the Initial Membership Plan, the First Clarification
of Membership Plan Documents, the Second Clarification of Membership Plan
Documents and the Third Clarification of Membership Plan Documents are
hereinafter collectively referred to as the "Membership Documents".
Except as modified by the terms of this Agreement, the Company and the
Club hereby ratify, reaffirm and agree to abide by each and every term,
condition, obligation and provision of the Membership Documents following the
turnover of management and control of the Club to the Equity Members.
3. TURNOVER OF MANAGEMENT AND CONTROL OF SEA PINES COUNTRY CLUB TO THE
EQUITY MEMBERS. The Company and the Club hereby agree to turn over management
and control of Sea Pines Country Club to the Equity Members as further
described and limited in the Membership Documents and that the Turnover Date
shall occur on May 1, 1996 as further described in the Membership Documents and
this Agreement. The parties hereto further agree that nothing in this
Agreement or as a result of the turnover of management and control of Sea Pines
Country Club to the Equity Members shall restrict or otherwise prohibit the
Company from selling all of its remaining unissued Equity Memberships after the
Turnover Date or from exercising all of its rights and privileges as further
set forth in the Membership Documents and this Agreement after the Turnover
Date.
4. CLUB FACILITIES. The parties hereto acknowledge and agree that page 1
of the Plan for the Offering of Memberships and Section 2 of the Subscription
Agreement appearing on page A-2 describe the Club Facilities to be provided at
the Club. Both the Company and the Club hereby acknowledge and agree that the
Company has provided the facilities required by the Membership Documents, the
Company has fulfilled all of its obligations regarding the Club Facilities and
that the Company has transferred the Club Facilities to the Club. In addition,
the parties acknowledge that the Club Facilities include the golf maintenance
facility and the golf cart storage facility which are currently being used by
the Club and are located between the ninth fairway and the practice range.
The parties also acknowledge the ongoing problems relating to the leaking
of the roof of the clubhouse which has also caused damage to certain areas of
the ceiling of the clubhouse. The Company agrees to continue its discussions
with the contractor and other appropriate persons to resolve any necessary
repairs to the roof and ceiling. The Company acknowledges and agrees that the
<PAGE> 3
Company is responsible and not the Club for repairing the roof of the clubhouse
and any resulting damage to the ceiling at no expense to the Club within a
reasonable time after the Turnover Date.
5. PAYMENT OF CASH FLOW FROM OPERATIONS TO THE CLUB. The parties hereto
agree that any cash flow from the operations of Sea Pines Country Club
commencing November 1, 1995 through April 30, 1996 shall be paid by the Company
to the Club on May 31, 1996. This cash flow amount will be the amount which
remains from operation of Sea Pines Country Club after all of the expenses that
the Company is responsible for through April 30, 1996 have been paid. Cash
flow shall be determined by deducting all payroll and related expenses and
other operating expenses (excluding depreciation and other non-cash items)
incurred in the operation of Sea Pines Country Club from all operating revenue
generated from the operation of Sea Pines Country Club (excluding membership
fees/contributions) as of April 30, 1996. Any resulting cash flow shall be
paid by the Company to the Club on May 31, 1996.
6. INVENTORY. The Club hereby acknowledges that the Membership Documents
provide that the Club shall pay the book value of the Inventory and Supplies as
of the Turnover Date to the Company no later than May 31, 1996. As a result,
the Company and the Club hereby agree that a physical inventory of the
Inventory and Supplies shall be taken on April 30, 1996 to determine the book
value of the Inventory and Supplies and that the Club shall pay the book value
of the Inventory and Supplies based on the inventory taken to the Company on or
before May 31, 1996.
7. CLUB FUND. In accordance with the Membership Documents, the Company has
deposited in an escrow account at a financial institution the portion of the
membership contributions retained by the Club upon the reissuance of resigned
Equity Memberships through February 1, 1995. The Club Fund has been invested as
directed by the Board of Governors. The total value of the Club Fund as of the
date of the last monthly trust statement dated March 29, 1996 is $503,226.12 in
cash and investments. A copy of the monthly trust statement dated March 29,
1996 is attached hereto as Exhibit C. By agreement between the Company and the
Club, the parties hereto agreed that the Company would no longer deposit the
membership contributions to be retained by the Club upon reissuance of resigned
Equity Memberships in the escrow account commencing February 1, 1995 and that
the Company would maintain a Schedule describing all of the membership transfers
that occurred after February 1, 1995, and the amount of the membership
contributions to be retained by the Club upon the reissuance of the Equity
Memberships and that amount plus interest, based on the money market fund rate
identified on the monthly trust statements for the Club Fund, would be paid to
the Club on the Turnover Date. The amount to be paid by the Company to the Club
on the Turnover Date from the reissuance of resigned Equity Memberships after
February 1, 1995, including interest, is $243,902.84 as of the date of this
Agreement. Attached as Exhibit D to this Agreement is a Schedule describing the
transfers of resigned memberships and the amount retained by the Club and
deposited in the Club Fund through February 1, 1995 and the transfers of
resigned Equity Memberships which have occurred after February 1, 1995 and the
amount retained by the Company plus interest that shall be paid to the Club on
the Turnover Date. The authority on the account in which the Club Fund has been
<PAGE> 4
deposited shall be transferred to the President and Treasurer of the Club on the
Turnover Date.
8. ASSIGNMENT OF LICENSES, PERMITS AND SERVICE CONTRACTS. Attached as
Exhibit E to this Agreement is a Schedule describing the current licenses,
permits and service agreements relating to the Club Facilities currently
executed in the name of the Company that will be assigned to the Club on the
Turnover Date. On the Turnover Date, the Company will execute an assignment
agreement, the form of which is attached hereto as Exhibit F, assigning all of
its interest in these agreements to the Club and the Club shall assume from the
Company all rights, liabilities and obligations of these licenses, permits and
service agreements commencing on the Turnover Date.
9. INSURANCE. The parties hereto agree that the Company has obtained
insurance policies for casualty, liability, workmen's compensation, and other
matters deemed necessary by the Company relating to the assets currently owned
by the Company and the Club Facilities. Attached as Exhibit G to this
Agreement is a listing of those current insurance policies including the policy
number, policy period, deductible amounts, policy limits and other information.
The Club agrees to pay to the Company on the Turnover Date an amount equal to
$35,902.96 which represents the cost of the unexpired premium for these
insurance policies and an allocation of the annual fee charged by the insurance
broker for the placement of these policies as further set forth on Exhibit G. In
addition, the Club will be responsible to cover claims up to the policy
deductible amount for any claims incurred after the Turnover Date and all
amounts in excess of the policy limits for these claims. The Club further
agrees to obtain insurance policies in the name of Sea Pines Country Club, Inc.
for casualty, liability, and any other matters deemed appropriate by the Board
of Directors of the Club on or before the expiration date of each of these
insurance policies.
10. MEMBERSHIPS IN THE CLUB. As of the date of this Agreement, the
Company has sold a total of 1,148 Equity Memberships and has a total of 152
remaining Equity Memberships to be sold. Attached to this Agreement as Exhibit
H is a Schedule setting forth the names of the members in each category of
membership and each annual dues plan, including Equity Memberships, Associate
Memberships, complimentary memberships and all other memberships currently
issued in the Club.
Attached as Exhibit I to this Agreement is a Schedule listing the names of
all Equity Members which are currently on the resigned membership list
maintained by the Club and attached as Exhibit J to this Agreement is a
Schedule of the dues, fees and other charges currently charged at the Club.
11. PRORATION OF REVENUE AND EXPENSES AND COLLECTION OF ACCOUNTS
RECEIVABLE ON BEHALF OF THE COMPANY. The Company and the Club hereby agree to
prorate all revenue and expense items as of the Turnover Date no later than May
31, 1996, including, but not limited to, the following:
* All water, sewer, electric and other utility charges,
* Any property taxes, assessments or property owners' association
assessments on property conveyed pursuant to the Initial Membership
Plan,
<PAGE> 5
* Rents and revenues of the Club Facilities,
* Wages and payroll taxes of employees of the Company which
relate to the operation of the Club Facilities,
* Service and other agreements if applicable, or any other
accrued expenses incurred in connection with the operation of the
Club Facilities,
* Outstanding gift certificates,
* License, permit fees and liquor, beer and wine escrow deposits, and
* Any dues, charges and fees paid in advance by members of the Club.
The Club hereby agrees after the Turnover Date to collect on behalf of the
Company the accounts receivable owed by members of the Club to the Company by
taking such usual and customary action as is deemed appropriate by the Board of
Directors of the Club, including, but not limited to, suspension of membership
privileges when necessary until the delinquent accounts have been paid in full.
All amounts collected by the Club from its members will be first applied to said
accounts receivable owed to the Company prior to the Turnover Date and will be
paid to the Company prior to the end of the month in which the amounts are
collected.
12. RESPONSIBILITY FOR MEMBERSHIP SALES. The parties hereto agree that
there should be a coordinated marketing effort to sell memberships in the Club
and, therefore, until the initial issuance of all of the Equity Memberships
permitted to be issued by the Company, the Company shall hire a Membership
Director whose responsibility will be to sell the remaining unissued Equity
Memberships to be sold by the Company, sell non-equity Social/Tennis
Memberships as described in the Third Clarification of Membership Plan
Documents dated April 30, 1996, and resell resigned Equity Memberships on the
resigned membership list on behalf of the Club. The Club shall provide an
office located in the Clubhouse at the Club. In addition, the Club shall pay
to the Company an amount determined by the Company for each Equity Membership
reissued on behalf of the Club. The initial amount to be paid to the Company
shall be $1,000.00 for each Equity Membership reissued from the resigned
membership list, which amount shall continue through October 31, 1997. After
October 31, 1997, the Company and the Club shall establish the amount of this
payment, provided, however, until the parties hereto agree to a different
amount the Club shall continue to pay $1,000.00 for each Equity Membership
reissued from the resigned membership list.
13. DIFFERENCE BETWEEN CREDIT AND INITIATION FEE IS PAID TO THE COMPANY.
The parties hereto acknowledge that page 6 of the Plan for the Offering of
Memberships in the Section entitled "Difference Between Credit and Initiation
Fee is Paid to the Company" provides that the amount by which the total credit
received by a particular member exceeds the initiation fee actually paid by
that particular member, if any, will be paid by the Club to the Company
immediately upon the reissuance of the resigned Equity Membership. The Initial
Membership Plan also provides an example by which this provision would apply.
Attached to this Agreement as Exhibit K is a Schedule which describes the total
credits received by each Equity Member of the Club and the amount to be paid to
the Company by the Club upon the reissuance of a resigned Equity Membership by
the Club.
14. RELEASE OF CLAIMS BY THE CLUB. Except as provided in Section 4 above
relating to the roof of the clubhouse and resulting damage to certain areas of
<PAGE> 6
the ceiling in the clubhouse, the Club hereby agrees to and does hereby release,
satisfy and forever discharge the Company, its directors, officers, employees,
agents, stockholders, affiliates, representatives, successors and assigns from
any and all manners of action, causes of action, damages, claims and demands
whatsoever, in law or in equity, which the Club ever had, now has or may have in
the future, for, upon or by reason of any matter, cause or thing related in any
way to the Club Facilities, the use of the Club Facilities and the Membership
Documents and any amendments thereto.
15. MISCELLANEOUS PROVISIONS.
A. ENTIRE AGREEMENT. This Agreement represents the entire
understanding and agreement between the parties with respect to the subject
matter hereof and supersedes all other negotiations, understandings and
representations (if any) made by and between such parties.
B. AMENDMENTS. The provisions of this Agreement may not be amended,
supplemented, waived or changed orally, but only by a writing signed by the
party as to whom enforcement of any such amendment, supplement, waiver or
modification is sought and making specific reference to this Agreement.
C. ASSIGNMENTS. The Club and the Company may assign their rights
and/or obligations under this Agreement in whole or in part upon the prior
written approval of the other party, such approval shall not be unreasonably
withheld.
D. FURTHER ASSURANCES. The parties hereto agree from time to time to
execute and deliver such further assurances and other transfers, assignments
and documents and do all matters and things which may be necessary to more
effectively and completely carry out the intentions of this Agreement.
E. BINDING EFFECT. All of the terms and provisions of this Agreement,
whether so expressed or not, shall be binding upon, inure to the benefit of,
and be enforceable by the parties and their respective legal representatives,
successors and permitted assigns.
F. NOTICES. All notices, requests, consents and other communications
required or permitted under this Agreement shall be in writing and shall be (as
elected by the person giving such notice) delivered or mailed by registered or
certified mail (postage prepaid), return receipt requested, addressed to:
If to the Company:
Sea Pines Company, Inc.
Post Office Box 7000
Hilton Head Island, South Carolina 29938
Attention: President
If to the Club:
Sea Pines Country Club, Inc.
Post Office Box 7487
Hilton Head Island, South Carolina 29938
Attention: President
<PAGE> 7
or to such other address as any party may designate by notice complying with
the terms of this Section. Each such notice shall be deemed delivered on the
date: (a) delivered if by personal delivery, and (b) upon which the return
receipt is signed or delivery is refused, or the notice is designated by the
postal authorities as not deliverable, as the case may be, if mailed.
G. HEADINGS. Headings contained in this Agreement are for convenience of
reference only and shall not limit or otherwise affect in any way the meaning
or interpretation of this Agreement.
H. SEVERABILITY. If any part of this Agreement or any other agreement
entered into pursuant hereto is contrary to, prohibited by, or deemed invalid
under applicable law or regulation, the provision shall be inapplicable and
deemed omitted to the extent so contrary, prohibited or invalid, but the
remainder hereof shall not be invalidated thereby and shall be given full force
and effect so far as possible.
I. SURVIVAL. All covenants, agreements, representations and warranties
made herein or otherwise made in writing by any party pursuant hereto shall
survive the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby.
J. WAIVERS. The failure or delay of any party at any time to require
performance by another party of any provision of this Agreement, even if known,
shall not affect the right of that party to require performance of that
provision or to exercise any right, power or remedy hereunder, and any waiver
by any party of any breach of any provision of this Agreement should not be
construed as a waiver of any continuing or succeeding breach of such provision,
a waiver of the provision itself, or a waiver of any right, power or remedy
under this Agreement.
K. JURISDICTION AND VENUE. The parties acknowledge that a substantial
portion of negotiations, anticipated performance, and execution of this
Agreement occurred or shall occur in Hilton Head Island, South Carolina and
that, therefore, without limiting the jurisdiction or venue of any other
federal or state courts, each of the parties irrevocably and unconditionally:
(a) agrees that any suit, action or legal proceeding arising out of or relating
to this Agreement may be brought in the courts of record in the State of South
Carolina in Beaufort County or the District Court of the United States,
District of South Carolina, Charleston Division; (b) consents to the
jurisdiction of each such court and any such suit, action or proceeding; (c)
waives any objection which it may have to the laying of venue of any such suit,
action or proceeding in any of such courts; and (d) agrees that service of any
court paper may be effected on such party by mail, as provided in this
Agreement, or in such other manner as may be provided under applicable laws or
court rules in said State.
L. GOVERNING LAW. This Agreement and all transactions contemplated by
this Agreement shall be governed by, and construed and enforced in accordance
with, the internal laws of the State of South Carolina without regard to
principles of conflicts of laws.
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto, being duly authorized to enter
into this Agreement, have caused this Agreement to be duly executed and their
seals to be affixed hereto the day and year first above written.
WITNESSES: SEA PINES COMPANY, INC., a South Carolina
corporation
Connie Smith By: Michael E. Lawrence
- ---------------------- ---------------------------------------
Its: President
Joan Potter Attest: Steve P. Birdwell
- ---------------------- -----------------------------------
Its: Secretary
-------------------------------
(Corporate Seal)
SEA PINES COUNTRY CLUB, INC., a South
Carolina not-for-profit corporation
Connie Smith By: Michael E. Lawrence
- ---------------------- ---------------------------------------
Its: President
Joan Potter Attest: Steve P. Birdwell
- ---------------------- -----------------------------------
Its: Secretary
-------------------------------
(Corporate Seal)
The persons listed below currently serve on either the Advisory Board of
Governors established at Sea Pines Country Club or have been elected by the
Equity Members of Sea Pines Country Club to serve as the initial members of the
Board of Directors of Sea Pines Country Club, Inc. commencing on the Turnover
Date and have signed below solely to acknowledge their agreement on behalf of
Sea Pines Country Club, Inc. to the early turnover of management and control of
the Club to the Equity Members pursuant to the terms and conditions set forth
in this Agreement and the elected members to the Board of Directors agree to
ratify
<PAGE> 9
and affirm this Agreement on behalf of Sea Pines Country Club, Inc. at its
first meeting after the Turnover Date.
<TABLE>
<CAPTION>
ELECTED MEMBERS
ADVISORY BOARD OF GOVERNORS TO THE BOARD OF DIRECTORS
<S> <C>
/s/ Allen A. Lincoln /s/ Fred W. Caswell
- ----------------------------------- -----------------------------------
Allen A. Lincoln Fred W. Caswell
/s/ Joseph G. Ludwig, Jr. /s/ Thomas E. Hamilton
- ----------------------------------- -----------------------------------
Joseph G. Ludwig, Jr. Thomas E. Hamilton
/s/ Elaine C. Meister /s/ Joseph G. Ludwig, Jr.
- ----------------------------------- -----------------------------------
Elaine C. Meister Joseph G. Ludwig, Jr.
/s/ H. Kay Morton /s/ Walter R. Maguire
- ----------------------------------- -----------------------------------
H. Kay Morton Walter R. Maguire
/s/ Joseph A. Myers /s/ Susanne C. McMichael
- ----------------------------------- -----------------------------------
Joseph A. Myers Susanne C. McMichael
/s/ James F. Newman /s/ Elaine C. Meister
- ----------------------------------- -----------------------------------
James F. Newman Elaine C. Meister
/s/ James R. Michael
- ----------------------------------- -----------------------------------
Barbara C. Pollard James R. Michael
/s/ Edward W. Smith /s/ H. Kay Morton
- ----------------------------------- -----------------------------------
Edward W. Smith H. Kay Morton
/s/ Charles H. Steingraber /s/ James F. Newman
- ----------------------------------- -----------------------------------
Charles H. Steingraber James F. Newman
/s/ R. Douglas Watson /s/ R. Douglas Watson
- ----------------------------------- -----------------------------------
R. Douglas Watson R. Douglas Watson
/s/ Wade J. Webster /s/ Wade J. Webster
- ----------------------------------- -----------------------------------
Wade J. Webster Wade J. Webster
/s/ Anne H. Wygal /s/ James J. Young
- ----------------------------------- -----------------------------------
Anne H. Wygal James J. Young
/s/ James J. Young
- -----------------------------------
James J. Young
</TABLE>
<PAGE> 10
SEA PINES COUNTRY CLUB
AGREEMENT TO TURNOVER MANAGEMENT AND CONTROL
SCHEDULE OF EXHIBITS
<TABLE>
<CAPTION>
NAME OF EXHIBIT EXHIBIT REFERENCE
- --------------- -----------------
<S> <C>
Initial Membership Plan A
First Clarification of Membership Plan Documents
dated October 9, 1989, Second Clarification
of Membership Plan Documents dated June 1, 1994
and Third Clarification of Membership Plan
Documents dated April 30, 1996 B
Monthly Trust Statement for Club Fund dated C
March 29, 1996
Schedule of Membership Transfers and Deposits to
Club Fund D
Schedule of Agreements to be Assigned E
Form of Assignment Agreement F
Schedule of Existing Insurance Policies and Unexpired
Amount Allocated to the Club G
Schedule of Existing Members in Each Membership
Category H
Schedule of Existing Resigned Equity Memberships I
Schedule of Existing Dues, Fees and Charges J
Schedule of Credits Received by Equity Members and
the Amount to be Paid to the Company Upon
Repurchase of These Resigned Memberships K
</TABLE>
<PAGE> 1
EXHIBIT 10(W)
SEA PINES COUNTRY CLUB
THIRD CLARIFICATION OF MEMBERSHIP PLAN
This THIRD CLARIFICATION OF MEMBERSHIP PLAN DOCUMENTS (the "Third
Clarification"), is made as of this 30th day of April, 1996, by and between SEA
PINES COMPANY, INC. (formerly known as Sea Pines Plantation Company, Inc.), a
South Carolina corporation (the "Company") and SEA PINES COUNTRY CLUB, INC., a
South Carolina not-for-profit corporation (the "Club").
STATEMENT OF BACKGROUND INFORMATION
A. The Company and the Club executed a Subscription Agreement
dated as of August 4, 1989 (the "Subscription Agreement"); and
B. The Subscription Agreement is part of the equity membership
materials establishing the equity membership program at Sea Pines Country Club
dated August 4, 1989 (the Subscription Agreement and the other equity membership
materials are collectively referred to as the "Plan Documents"); and
C. The Company and the Club have executed a First Clarification
of Membership Plan Documents dated October 9, 1989 (the "First Clarification")
and a Second Clarification of Membership Plan Documents dated June 1, 1994 (the
"Second Clarification") modifying certain terms of the Plan Documents; and
D. The Company and the Club desire to further modify certain terms
of the Plan Documents as hereinafter set forth.
STATEMENT OF AGREEMENT
In consideration of the foregoing premises and the mutual covenants
herein contained, the parties intending to be legally bound agree that the Plan
Documents are modified as follows:
1. DEFINITION OF TERMS. All of the defined terms used in this
Third Clarification shall have the same meaning as defined in the Plan
Documents.
2. ELECTION OF BOARD OF DIRECTORS OF THE CLUB BY THE EQUITY
MEMBERS. The parties hereto agree that the second paragraph in the Section
entitled "Board of Governors" which appears on page 12 of the Plan for the
Offering of Memberships, shall be deleted in its entirety and replaced with the
following:
Not more than sixty (60) days prior to the Turnover Date, the
Equity Members shall elect twelve (12) Equity Members to serve
as the Board of Directors of the Club commencing on the
Turnover Date. The twelve (12) members elected by the Equity
Members shall work with the Board of Governors until the
Turnover Date. On the Turnover Date, the members of the Board
of Directors of the Club previously appointed by the Company
shall resign and the twelve (12) members elected by the Equity
Members shall become the Board of Directors of the Club
commencing on the Turnover Date. The Equity Members shall
designate four (4) members who shall serve on the Board of
Directors commencing on the Turnover Date for three (3) years,
four (4) members who shall serve on the Board of Directors
commencing
<PAGE> 2
on the Turnover Date for two (2) years, and four (4) members
who shall serve on the Board of Directors commencing on the
Turnover Date for one (1) year. Each year after the Turnover
Date, the Equity Members shall elect four (4) members to the
Board of Directors of the Club who shall serve for three (3)
year terms. The Board of Governors will terminate on the
Turnover Date.
3. NON-EQUITY SOCIAL/TENNIS MEMBERSHIP PRIVILEGES IN THE CLUB.
Effective as of February 20, 1996, the Club began making available a new
category of membership known as a "Social/Tennis Membership". The Social/Tennis
Membership is a non-equity membership and does not entitle the member to any
equity or ownership interest in the Club or the Club Facilities and does not
permit voting privileges on any matters. The Social/Tennis Membership permits
the Social/Tennis Member to select either social dues or tennis dues. In the
event the Social/Tennis Member elects social dues, then the member will be
permitted to use all of the pool, dining and social facilities of the Club. In
addition, these members may use the golf and tennis facilities of the Club six
times each per membership year, shall have a seven-day sign-up privilege to
reserve golf tee times and tennis court times and shall pay greens fees, golf
cart fees and court fees for use of the golf and tennis facilities. In the
event the Social/Tennis Member elects tennis dues, then the member will be
permitted to use the tennis facilities of the Club with a seven-day sign-up
privilege to reserve tennis court times and will not be charged court fees.
These members may also use the golf facilities of the Club twelve times per
membership year and shall have a seven-day sign-up privilege to reserve golf
tee times and shall pay greens fees and golf cart fees.
Social/Tennis Membership is available to persons who own a residential
lot or family dwelling unit in Sea Pines Plantation who are approved for
membership in the Club. In order to obtain a Social/Tennis Membership in the
Club, a prospective member must make application for membership, pay the
required non-refundable membership fee and be approved for membership.
Social/Tennis Members shall pay a non-refundable membership fee, dues, fees and
other charges incurred at the Club. The membership fee paid by a Social/Tennis
Member is not refundable under any circumstances unless the prospective member
is not approved for membership. In addition, the Social/Tennis Membership is not
transferable and shall terminate upon resignation of membership privileges,
death of the Social/Tennis Member and any surviving spouse, or such earlier date
in accordance with the terms of the Plan Documents. Social/Tennis Memberships
may not be upgraded to an Equity Membership in the Club and are not currently
available to current or past Equity Members of the Club.
4. ACCOUNTING FOR MEMBERSHIP PROCEEDS AND NUMBER OF FULL EQUITY
MEMBERSHIPS REMAINING TO BE SOLD BY THE COMPANY. The parties hereto agree to set
out below the method by which the Company and the Club will account for the
proceeds to be paid in connection with the issuance of both previously unissued
and resigned Equity Memberships, Social/Tennis Memberships and Equity
Memberships in which the member elects to pay the required membership
contribution in non-refundable installments. Until the initial issuance of all
of the remaining Equity Memberships to be sold by the Company, the parties
hereto agree that all proceeds paid for the issuance of both previously unissued
and resigned Equity Memberships, Social/Tennis Memberships and Equity
Memberships to persons who elect to pay the required membership contribution in
installments shall be paid to the Company. Once the Company has collected a
<PAGE> 3
cumulative amount of membership proceeds from the issuance of Social/Tennis
Memberships, non-refundable installment payments received from the issuance of
Equity Memberships and the issuance of both previously unissued and resigned
Equity Memberships to those persons who have paid the entire membership
contribution in full upon making application for membership, equal to the
membership contribution then charged by the Company for an Equity Membership,
the Company shall pay to the Club the membership contribution then charged for
an Equity Membership, provided, however, the Company and the Club are in the
period of time in which resigned Equity Memberships are being reissued from the
resigned membership list as further described in Section 9 herein. In addition,
the Company shall deduct from its payment to the Club any amount which the
Company is entitled to be paid as a result of the total credit received by a
particular member at the time the Equity Membership was acquired exceeds the
initiation fee actually paid by that particular member, if any, as further
described in Section 13 of that certain Agreement to Turnover Management and
Control between the Company and the Club dated April 30, 1996 and further
described on Exhibit K of that agreement. Upon receipt of this amount from the
Company, the Club shall have the responsibility to repay the appropriate amount
in accordance with the Plan Documents to the next resigned Equity Member whose
resigned Equity Membership is being reissued by the Club and the difference
between the amount received from the Company and the amount repaid to the
resigned Equity Member by the Club shall be retained by the Club in accordance
with the Plan Documents.
During the period of time that previously unissued memberships from the
Company are being issued in accordance with Section 9 herein, the Company and
the Club hereto agree that the number of Full Equity Memberships remaining to be
sold by the Company shall be reduced by one each time the cumulative amount of
membership fees collected and paid to the Company from the issuance of
Social/Tennis Memberships, non-refundable membership fees collected from the
issuance of Equity Memberships to persons who have elected to pay the membership
contribution on an installment basis and the membership contributions paid for
the issuance of Equity Memberships by those persons who have paid the entire
membership contribution in full upon making application for membership, equal
the current membership contribution charged by the Company for an Equity
Membership. In other words, assuming the current membership contribution for an
Equity Membership is $27,000 and the non-refundable membership fee for a
Social/Tennis Membership is $9,000, and the first non-refundable installment due
by those persons purchasing an Equity Membership on an installment basis is
$11,000, then upon the issuance of two Social/Tennis Memberships and payment to
the Company of $18,000 (two Social/Tennis Memberships x $9,000 each) and the
issuance of one Equity Membership to a person who electes to pay the required
membership contribution on an installment basis and pays to the Company the
first non-refundable installment of $11,000, then the number of Equity
Memberships remaining to be sold by the Company shall be reduced by one. The
parties hereto acknowledge and agree that this procedure of reducing the number
of Equity Memberships to be sold by the Company upon receipt of the appropriate
amounts only applies during that period of time in which previously unissued
Equity Memberships are being issued to prospective members in accordance with
Section 9 herein.
The parties hereto further agree that once the Company has received
membership proceeds from the issuance of all of the memberships permitted to be
sold by the Company and the Company no longer has Equity Memberships for sale,
then the proceeds paid thereafter for any type of membership in the Club shall
<PAGE> 4
be paid directly to the Club and the Club shall repay the required amounts upon
reissuance of the resigned Equity Memberships in accordance with the Plan
Documents.
5. MEMBERSHIP CONTRIBUTION/FEE FOR MEMBERSHIPS IN THE CLUB. The
parties hereto acknowledge and agree that persons desiring to be Equity Members
of the Club will be required to pay a membership contribution set forth in their
Membership Purchase Agreement and those persons desiring a Social/Tennis
Membership shall be required to pay a non-refundable membership fee set forth in
their Application for Social/Tennis Membership Privileges. Until the initial
sale of all Equity Memberships permitted to be sold by the Company, the Company
will establish the required membership contribution for Equity Memberships and
the non-refundable membership fee for Social/Tennis Memberships and the manner
of payment of these fees. After the initial sale of all Equity Memberships
permitted to be sold by the Company, the Board of Directors of the Club will
establish the membership contribution for Equity Memberships and the
non-refundable membership fee for Social/Tennis Memberships and the manner of
payment of the required membership contribution or membership fee.
6. USE OF FOUR HARBOUR TOWN RACQUET CLUB TENNIS COURTS. The parties
hereto agree that the paragraph appearing on page 4 of the Plan for the
Offering of Memberships entitled "Use of Four of the Harbour Town Racquet Club
Tennis Courts" and the second paragraph of the section entitled "Tennis Dues
Plan" appearing on page C-9 of Exhibit C to the Plan for the Offering of
Memberships shall be deleted in its entirety and replaced with the following:
In addition to the tennis facilities owned by the Club, the
Company may reserve up to four tennis courts at the Harbour Town
Racquet Club for use by those members who have selected the
annual tennis dues plan. The Company will periodically evaluate
the use of these tennis courts by members of the Club and has
retained the right to reduce the number of reserved tennis courts
at the Harbour Town Racquet Club from time to time based upon use
by members of the Club. The Club shall pay to the Company an
amount equal to twenty-five percent (25%) of the dues charged an
annual dues plan for each member selecting an annual tennis dues
plan. The Club shall pay these amounts to the Company within
twenty days after the beginning of each dues period in which dues
are paid by members of the Club and immediately upon receipt of
such amounts if paid after the beginning of a dues period. In the
event the Company reduces the number of tennis courts reserved at
the Harbour Town Racquet Club, the parties hereto agree that the
amount paid to the Company by the Club shall be reduced
proportionately to the number of tennis courts reduced. In other
words, if the Company reduces the number of reserved tennis
courts from four to two then the amount paid to the Company by
the Club shall be reduced by fifty percent (50%). Members
selecting the annual tennis dues plan will be permitted unlimited
play on the four tennis courts reserved at the Harbour Town
Racquet Club. If any of these four tennis courts have not been
reserved one day prior to the day of play, then the Company shall
be permitted to sell the unreserved court times to persons it
deems appropriate, including making them available for tournament
play.
<PAGE> 5
7. DUES, FEES AND CHARGES. The parties hereto agree that the second
paragraph under the Section "Dues and Assessments" and entitled "Dues, Fees and
Charges Set Prior to Each Membership Year" appearing on page 10 of the Plan for
the Offering of Memberships shall be deleted in its entirety and replaced with
the following:
Each year following the Turnover Date, the Board of Directors of
the Club will determine the amount of dues to be paid by each
annual dues plan for the next membership year. Dues may be set at
any level deemed appropriate by the Board of Directors of the
Club. Dues shall be due and payable in advance on a quarterly
basis unless otherwise established by the Club from time to time.
The current dues for use of the Club Facilities are set forth on
the Schedule of Dues and Charges. The amount of dues for
subsequent years is subject to change. The amount of dues payable
by each member will depend upon the dues plan selected and
whether the member has elected to provide membership privileges
to members of his or her immediate family. A member who has not
selected an annual dues plan will be deemed by the Club to have
selected the same annual dues plan the member participated in
during the previous membership year. In addition, the Club may
determine from time to time to charge less dues to those members
who reside in their dwelling unit in Sea Pines Plantation less
than one hundred twenty-two (122) days per membership year.
8. ALLOCATION AND PAYMENT OF DUES TO THE COMPANY. Commencing on the
Turnover Date, the Board of Directors of the Club will establish the amount of
dues to be paid by each annual dues plan for the next membership year. The Club
and the Company agree that golf dues for Plans II and III have been established
for the 1996 membership year and shall increase each membership year thereafter
in an amount at least equal to the most recent twelve months' increase in the
Bureau of Labor Statistics Consumer Price Index for the Southeast Region. Prior
to implementation of any change in the dues for Plans I, II and III, the Club
shall review all such changes with the Company.
The Company and the Club acknowledge that the Plan Documents currently
provide for a certain allocation of dues revenue which is paid to the Company.
The parties hereto agree that provision shall be modified as described herein.
Commencing on the Turnover Date and continuing for a period of three full
membership years after the Turnover Date, the Club shall pay to the Company
within twenty (20) days after the commencement of each quarter during the
membership year an amount equal to forty-seven percent (47%) of the gross dues
billed for Plan II and sixty-five percent (65%) of the gross dues billed for
Plan III. Following the expiration of the three-year period, either the Company
or the Club may elect to cancel this revenue allocation procedure upon ninety
(90) days prior written notice before the end of any membership year. In the
event either party provides written notice to cancel the revenue allocation
procedure, then the parties hereto must negotiate in good faith to agree on
another allocation formula. However, until there is an agreement between the
Company and the Club on a new allocation formula, the allocation set forth in
this paragraph shall continue.
9. RESALE OF RESIGNED EQUITY MEMBERSHIPS. The parties hereto agree
that the second paragraph appearing on page 6 of the Plan for the Offering of
<PAGE> 6
Memberships entitled "Club Will Repurchase a Resigned Membership" is hereby
deleted in its entirety and replaced with the following:
Effective as of November 1, 1995, and continuing until the initial
issuance of all of the Equity Memberships permitted to be issued
by the Company the procedure for reissuing resigned Equity
Memberships by the Club shall be as set forth herein. The Club
shall maintain a waiting list of eligible persons who desire to
acquire an Equity Membership. While there remains unissued Equity
Memberships to be sold by the Company and there are less than one
hundred sixteen (116) resigned Equity Memberships on the resigned
membership list then both previously unissued memberships issued
by the Company and resigned memberships reissued by the Club shall
be in accordance with the following procedure: (i) the first
twenty (20) Equity Memberships issued in any given membership year
shall be resigned Equity Memberships reissued from the resigned
membership list, (ii) the next twenty (20) Equity Memberships
issued in any given membership year shall be previously unissued
Equity Memberships issued by the Company, and (iii) any Equity
Memberships issued in excess of forty (40) in any given membership
year shall be issued on an alternating basis so that one
membership will be issued from the resigned membership list and
the next membership issued will be an unissued membership from the
Company and this every other one alternating basis will continue
for the remainder of that membership year.
When there remains unissued memberships to be issued by the
Company and there are more than one hundred fifteen (115) resigned
Equity Memberships on the resigned membership list, then the
following procedure shall apply: (i) with the next calendar month
following the month in which the condition is satisfied, the first
ten (10) Equity Memberships issued will be previously unissued
memberships from the Company, (ii) all Equity Memberships issued
following the initial issuance of ten (10) previously unissued
Equity Memberships will be resigned memberships from the resigned
membership list for the remainder of the twelve (12) month period
which commenced the first day of the month in which the ten (10)
unissued Equity Memberships were to be issued, and (iii) following
the expiration of this twelve (12) month period described in (ii)
above, the procedure for issuing memberships in the Club, whether
previously unissued memberships or resigned memberships, shall
once again depend on the number of memberships on the resigned
membership list as further described in this Section.
10. FINANCE COMMITTEE. The parties hereto agree that Section 4b of
Article IX of the By-Laws is hereby deleted in its entirety and replaced with
the following:
b. The Finance Committee shall in general supervise, direct
and control all matters pertaining to the Club's finances
including, but not limited to, the placing of insurance, the
filing of tax returns, the payment of taxes, the preparation of
the annual operating budget, the preparation of the current
reports for the Board of Directors on the Club's financial
condition and the issuance to Equity Members of a condensed
operating statement on such periodic basis as may be established
by the Board of Directors. The Finance Committee shall
<PAGE> 7
have the power, with the approval of the Board of Directors, to
direct the General Manager to employ, at the expense of the Club,
such clerical aid and assistance as may be necessary to handle the
accounts. The account books and vouchers shall at all times be
open to the inspection of any member of the Board of Directors.
11. GOLF CART PLAN FOR MEMBERS OF THE CLUB. The parties hereto agree
to make available an annual golf cart plan to members of the Club. The annual
golf cart plan will allow use of golf carts by members of the Club that have
selected such plan without payment of daily golf cart fees. Commencing on the
Turnover Date, the Board of Directors of the Club will establish the amount of
dues to be paid by each member for the annual golf cart plan. However, the Club
and the Company agree that the annual cart plan fees have been established for
the 1996 membership year and shall increase each membership year thereafter in
an amount at least equal to the most recent twelve months' increase in the
Bureau of Labor Statistics Consumer Price Index for the Southeast Region.
Commencing on the Turnover Date and continuing for a period of three
full membership years after the Turnover Date, the Club shall pay to the
Company within twenty (20) days after the commencment of each quarter during
the membership year an amount equal to fifty-five percent (55%) of the gross
dues billed each member for the annual golf cart plan. Following the expiration
of the three (3) year period, then either the Company or the Club may elect to
cancel this revenue allocation procedure or the availability of the annual golf
cart plan upon ninety (90) days prior written notice to the other party before
the end of any membership year. In the event either party provides written
notice to cancel the revenue allocation procedure, the parties hereto must
negotiate in good faith to agree on another allocation formula. However, until
there is an agreement between the parties on a new allocation formula, the
allocation set forth in this paragraph shall continue.
12. INDEMNIFICATION. The parties hereto agree that Section 27 of the
Subscription Agreement between the Club and the Company dated August 4, 1989 is
hereby amended by adding the following paragraph as the second paragraph:
The Company shall indemnify, defend and hold harmless the Club,
its employees, agents, directors, officers and affiliates against
and in respect of, and to reimburse the Club, its employees,
agents, directors, officers and affiliates on demand for, any and
all claims, demands, losses, costs, expenses, obligations,
damages, recoveries and efficiencies, including, but not limited
to, interest, penalties, attorneys' fees and disbursements (even
if incident to any appeals) that the Club, its employees, agents,
directors, officers and affiliates shall incur or suffer, which
arise, result from or relate to the ownership, operation or
management of the Club Facilities prior to the Turnover Date and
the marketing and sales of new (unissued) and resigned (resale
list) memberships occurring prior to the Turnover Date and the
management, operation or control of marketing and sales of new
(unissued) and resigned (resale list) memberships subsequent to
the Turnover Date during the period that the Company continues to
manage the marketing and sales of new and resigned Equity
Memberships.
13. PLAN DOCUMENTS. All of the Plan Documents, the First Clarification
and the Second Clarification shall be amended as specifically required in order
<PAGE> 8
effectuate the terms and conditions of this Third Clarification and all other
terms and conditions of the Plan Documents, the First Clarification and the
Second Clarification shall remain in force and effect.
14. CONFLICT OF DOCUMENTS. In the event of any conflict or ambiguity
between this Third Clarification and the Plan Documents, the First Clarification
or the Second Clarification, then the terms and conditions of this Third
Clarification shall prevail.
15. MISCELLANEOUS PROVISIONS.
A. ENTIRE AGREEMENT. This Agreement represents the entire
understanding and agreement between the parties with respect to the subject
matter hereof and supersedes all other negotiations, understandings and
representations (if any) made by and between such parties.
B. AMENDMENTS. The provisions of this Agreement may not be
amended, supplemented, waived or changed orally, but only by a writing signed
by the party as to whom enforcement of any such amendment, supplement, waiver
or modification is sought and making specific reference to this Agreement.
C. ASSIGNMENTS. The Club and the Company may assign their
rights and/or obligations under this Agreement in whole or in part upon the
prior written approval of the other party, such approval shall not be
unreasonably withheld.
D. FURTHER ASSURANCES. The parties hereto agree from time to
time to execute and deliver such further assurances and other transfers,
assignments and documents and do all matters and things which may be necessary
to more effectively and completely carry out the intentions of this Agreement.
E. BINDING EFFECT. All of the terms and provisions of this
Agreement, whether so expressed or not, shall be binding upon, inure to the
benefit of, and be enforceable by the parties and their respective legal
representatives, successors and permitted assigns.
F. NOTICES. All notices, requests, consents and other
communications required or permitted under this Agreement shall be in writing
and shall be (as elected by the person giving such notice) delivered or mailed
by registered or certified mail (postage prepaid), return receipt requested,
addressed to:
If to the Company:
Sea Pines Company, Inc.
Post Office Box 7000
Hilton Head Island, South Carolina 29938
Attention: President
If to the Club:
Sea Pines Country Club, Inc.
Post Office Box 7487
Hilton Head Island, South Carolina 29938
Attention: President
<PAGE> 9
or to such other address as any party may designate by notice complying with
the terms of this Section. Each such notice shall be deemed delivered on the
date: (a) delivered if by personal delivery, and (b) upon which the return
receipt is signed or delivery is refused, or the notice is designated by the
postal authorities as not deliverable, as the case may be, if mailed.
G. HEADINGS. Headings contained in this Agreement are for
convenience of reference only and shall not limit or otherwise affect in any
way the meaning or interpretation of this Agreement.
H. SEVERABILITY. If any part of this Agreement or any other
agreement entered into pursuant hereto is contrary to, prohibited by, or deemed
invalid under applicable law or regulation, the provision shall be inapplicable
and deemed omitted to the extent so contrary, prohibited or invalid, but the
remainder hereof shall not be invalidated thereby and shall be given full force
and effect so far as possible.
I. SURVIVAL. All covenants, agreements, representations and
warranties made herein or otherwise made in writing by any party pursuant
hereto shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby.
J. WAIVERS. The failure or delay of any party at any time to
require performance by another party of any provision of this agreement, even if
known, shall not affect the right of that party to require performance of that
provision or to exercise any right, power or remedy hereunder, and any waiver by
any party of any breach of any provision of this Agreement should not be
construed as a waiver of any continuing or succeeding breach of such provision,
a waiver of the provision itself, or a waiver of any right, power or remedy
under this Agreement.
K. JURISDICTION AND VENUE. The parties acknowledge that a
substantial portion of negotiations, anticipated performance, and execution of
this Agreement occurred or shall occur in Hilton Head Island, South Carolina and
that, therefore, without limiting the jurisdiction or venue of any other federal
or state courts, each of the parties irrevocably and unconditionally: (a) agrees
that any suit, action or legal proceeding arising out of or relating to this
Agreement may be brought in the courts of record in the State of South Carolina
in Beaufort County or the District Court of the United States, District of South
Carolina, Charleston Division; (b) consents to the jurisdiction of each such
court and any such suit, action or proceeding; (c) waives any objection which it
may have to the laying of venue of any such suit, action or proceeding in any of
such courts; and (d) agrees that service of any court paper may be effected on
such party by mail, as provided in this Agreement, or in such other manner as
may be provided under applicable laws or court rules in said State.
L. GOVERNING LAW. This Agreement and all transactions
contemplated by this Agreement shall be governed by, and construed and enforced
in accordance with, the internal laws of the State of South Carolina without
regard to principles of conflicts of laws.
IN WITNESS WHEREOF, the parties hereto, being duly authorized to enter
into this Third Clarification, have caused this Third Clarification to be duly
<PAGE> 10
executed and their seals to be affixed hereto the day and year first above
written.
WITNESSES: SEA PINES COMPANY, INC., a South Carolina
corporation
Connie Smith By: Michael E. Lawrence
- ---------------------- ---------------------------------------
Its: President
Joan Potter Attest: Steve P. Birdwell
- ---------------------- -----------------------------------
Its: Secretary
-------------------------------
(Corporate Seal)
SEA PINES COUNTRY CLUB, INC., a South
Carolina not-for-profit corporation
Connie Smith By: Michael E. Lawrence
- ---------------------- ---------------------------------------
Its: President
Joan Potter Attest: Steve P. Birdwell
- ---------------------- -----------------------------------
Its: Secretary
-------------------------------
(Corporate Seal)
The persons listed below currently serve on the Advisory Board of Governors
established at Sea Pines Country Club and have signed below solely to
acknowledge their agreement on behalf of the Advisory Board of Governors of Sea
Pines Country Club to the modifications to the Plan Documents set forth herein.
/s/ Allen A. Lincoln /s/ Edward W. Smith
- ---------------------------------- ----------------------------------
Allen A. Lincoln Edward W. Smith
/s/ Joseph G. Ludwig, Jr. /s/ Charles H. Steingraber
- ---------------------------------- ----------------------------------
Joseph G. Ludwig, Jr. Charles H. Steingraber
/s/ Elaine C. Meister /s/ R. Douglas Watson
- ---------------------------------- ----------------------------------
Elaine C. Meister R. Douglas Watson
/s/ H. Kay Morton /s/ Wade J. Webster
- ---------------------------------- ----------------------------------
H. Kay Morton Wade J. Webster
/s/ Joseph A. Myers /s/ Anne H. Wygal
- ---------------------------------- ----------------------------------
Joseph A. Myers Anne H. Wygal
/s/ James F. Newman /s/ James J. Young
- ---------------------------------- ----------------------------------
James F. Newman James J. Young
- ----------------------------------
Barbara C. Pollard
<PAGE> 1
EXHIBIT 10(X)
COLLAR TRANSACTION CONFIRMATION
TO: Sea Pines Company, Inc.
ATTN: Steve Birdwell
FAX: (803) 842-1907
FROM: Rafeek Ghafur
Wachovia Bank of South Carolina, N.A.
Derivatives Processing Unit
DATE: February 7, 1996
===============================================================================
AMENDED CONFIRMATION-REPLACES CONFIRMATION DATED FEBRUARY 5, 1996 ISSUED TO SEA
PINES ASSOCIATES, INC WHICH IS HEREBY CANCELED
The purpose of this letter agreement is to confirm the terms and conditions of
the Collar Transaction entered into between Wachovia Bank of South Carolina,
N.A. ("Wachovia") and Sea Pines Company, Inc. ("Company") on the Trade Date
specified below (the "Collar Transaction"). This letter agreement constitutes a
"Confirmation" as referred to in the Agreement (as defined below).
The definitions and provisions contained in the 1991 ISDA Definitions published
by the International Swap Dealers Association, Inc. (the "Definitions") are
incorporated into this confirmation. In the event of any inconsistency between
those definitions and provisions and this Confirmation, this Confirmation will
govern.
1. This Confirmation supplements, forms part of, and is subject to the
Master Agreement dated as of August 29, 1995 as amended and supplemented
from time to time (the "Agreement") between you and us. All provisions
contained in the Agreement will govern this Confirmation except as
expressly modified below.
2. The terms of the particular Collar Transaction to which this Confirmation
relates are as follows:
A. TRADE DETAILS
NOTIONAL AMOUNT: USD 10,000,000.
TRADE DATE: February 2, 1996
EFFECTIVE DATE: March 11, 1996
TERMINATION DATE: June 10, 1998
<PAGE> 2
<TABLE>
<S> <C>
CAP FLOATING AMOUNTS:
Floating Rate Payer: Wachovia
Cap Rate: 6.25% per annum
Cap Floating Rate Payer Payment Dates: Each March 10, June 10, September
10, December 10, commencing June
10, 1996 up to and including the
Termination Date, subject to
adjustment in accordance with the Modified
Following Business Day Convention
FLOOR FLOATING AMOUNTS:
Floating Rate Payer: Company
Floor Rate: 4.49% per annum
Floor Floating Rate Payer Payment Dates: Each March 10, June 10, September
10, December 10, commencing June
10, 1996 up to and including the Termination
Date, subject to adjustment in accordance
with the Modified Following Business Day
Convention
The following terms are applicable to both the Cap and the Floor:
Floating Rate Option: USD-LIBOR-BBA-3 Months
Floating Rate Day Count Fraction: Actual/360
Total Collar Cost: Zero cost
BUSINESS DAYS: New York and London
CALCULATION AGENT: Wachovia Bank of South Carolina
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
B. ACCOUNT DETAILS
PAYMENTS TO WACHOVIA:
Payments to Wachovia: Wachovia Bank of South Carolina,
N.A.
Fed Routing No.: ABA No: 061-000010
For the Account of: a/c no: 18805813
Account Number: Derivatives Settlement
Attention: Betty Scott
PAYMENTS TO COMPANY:
Payments to Company: Wachovia Bank of South Carolina,
Fed Routing No.: 061-000010
For the Account of: Sea Pines Associates
Account Number: 7300-59086
Attention: Steve Birdwell
C. OFFICES
WACHOVIA BANK OF SOUTH CAROLINA, N.A.: 191 Peachtree Street
Atlanta, Georgia 30303
Telephone (404) 332-6970
Fax (404) 332-1354
SEA PINES COMPANY INC. P.O. Box 7000,
Hilton Head, SC 29938
Telephone (803) 842-1419
Fax (803) 842-1907
</TABLE>
3. THE COMPANY HAS CONSULTED, TO THE EXTENT IT HAS DEEMED NECESSARY, WITH ITS
LEGAL, TAX AND FINANCIAL ADVISORS REGARDING ITS DECISION TO ENTER INTO THE
COLLAR TRANSACTION AND HAS HAD AN OPPORTUNITY TO ASK QUESTIONS OF, AND HAS
OBTAINED ALL REQUESTED INFORMATION FROM, WACHOVIA CONCERNING THE COLLAR
TRANSACTION. THE COMPANY HAS MADE ITS OWN INDEPENDENT DECISION TO ENTER
INTO THE COLLAR TRANSACTION BASED UPON IT OWN JUDGMENT, WITH FULL
UNDERSTANDING OF THE ECONOMIC, LEGAL AND OTHER RISKS ASSOCIATED WITH THE
COLLAR TRANSACTION (WHICH RISKS IT IS WILLING TO ASSUME) AND IS ENTERING
INTO THE COLLAR TRANSACTION WITHOUT RELYING UPON ANY ADVICE (ORAL OR
WRITTEN) OR PROJECTIONS PROVIDED BY WACHOVIA . THE COMPANY UNDERSTANDS THAT
WACHOVIA IS RELYING ON THE STATEMENTS MADE BY THE COMPANY IN THIS PARAGRAPH
IN ENTERING INTO THE COLLAR TRANSACTION.
<PAGE> 4
Please confirm that the foregoing correctly set out the terms of our agreement
by signing a copy of this Confirmation and returning it to us within two
Business Days.
Wachovia Bank of South Carolina, N.A. Sea Pines Company, Inc.
By: /s/ Christopher S. Grubbs By: /s/ Steven P. Birdwell
-------------------------- -----------------------
Name: Christopher S. Grubbs Name: Steven P. Birdwell
Title: Asst Vice President Title: Treasurer
<PAGE> 1
EXHIBIT 21
TO FORM 10-K OF
SEA PINES ASSOCIATES, INC.
Subsidiaries of Sea Pines Associates, Inc.
Sea Pines Company, Inc., a South Carolina corporation, a wholly-owned
and the only subsidiary of Sea Pines Associates, Inc. The active subsidiaries
of Sea Pines Company, Inc. are:
(a) Sea Pines Real Estate Company, Inc., a South Carolina
corporation doing business as Sea Pines Real Estate Company.
(b) Sea Pines Senior Living Center, Inc., a South Carolina
corporation.
(c) Sea Pines Forest Preserve Conservation Association, Inc., a
Delaware corporation.
(d) Lighthouse Realty, Inc., a South Carolina corporation.
(e) The Hilton Head Company, Inc., a South Carolina corporation.
(f) Sea Pines/TidePointe, Inc., a South Carolina corporation.
(g) Fifth Golf Course Club, Inc., a Delaware corporation.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS CONTAINED IN THE OCTOBER 31, 1996 FORM 10-K
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH OCTOBER 31, 1996
FORM 10-K.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> OCT-31-1996
<CASH> 1,428
<SECURITIES> 0
<RECEIVABLES> 1,056
<ALLOWANCES> 27
<INVENTORY> 733
<CURRENT-ASSETS> 3,827
<PP&E> 46,589
<DEPRECIATION> 8,550
<TOTAL-ASSETS> 46,257
<CURRENT-LIABILITIES> 5,331
<BONDS> 0
0
7,218
<COMMON> 2,166
<OTHER-SE> 5,124
<TOTAL-LIABILITY-AND-EQUITY> 46,257
<SALES> 34,958
<TOTAL-REVENUES> 34,958
<CGS> 14,470
<TOTAL-COSTS> 24,758
<OTHER-EXPENSES> 7,911
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,451
<INCOME-PRETAX> 8,739
<INCOME-TAX> 3,340
<INCOME-CONTINUING> 5,399
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,399
<EPS-PRIMARY> 2.45
<EPS-DILUTED> 2.45
</TABLE>
