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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, 1997 Commission file number: 0-17517
SEA PINES ASSOCIATES, INC.
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(Exact name of registrant as specified in its charter)
South Carolina 57-0845789
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
32 Greenwood Drive
Hilton Head Island, South Carolina 29928
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(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)
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(Title of Class)
Series A Cumulative Preferred Stock ($0.722 Dividend
Rate/$7.60 Liquidation Preference and Redemption Price)
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(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
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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
February 9, 1998 was 1,842,525.
DOCUMENTS INCORPORATED BY REFERENCE
Registrant's Proxy Statement in connection with its 1997 Annual Meeting of
Shareholders on March 14, 1998 is incorporated by reference into Part III.
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PART I
THIS REPORT ON FORM 10-K AND OTHER STATEMENTS ISSUED OR MADE FROM TIME TO TIME
BY THE COMPANY OR ITS REPRESENTATIVES CONTAIN STATEMENTS WHICH MAY CONSTITUTE
"FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE SECURITIES ACT OF 1933,
AS AMENDED (THE "1933 ACT"), AND THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
BY THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. 15 U.S.C.A. SECTIONS
77Z-2 AND 78U-5 (SUPP. 1996). THOSE STATEMENTS INCLUDE STATEMENTS REGARDING THE
INTENT, BELIEF OR CURRENT EXPECTATIONS OF THE COMPANY AND MEMBERS OF ITS
MANAGEMENT TEAM, AS WELL AS THE ASSUMPTIONS ON WHICH SUCH STATEMENTS ARE BASED.
PROSPECTIVE INVESTORS ARE CAUTIONED THAT ANY SUCH FORWARD-LOOKING STATEMENTS ARE
NOT GUARANTEES OF FUTURE PERFORMANCE AND INVOLVE RISKS AND UNCERTAINTIES, AND
THAT ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY SUCH
FORWARD-LOOKING STATEMENTS. IMPORTANT FACTORS CURRENTLY KNOWN TO MANAGEMENT THAT
COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN FORWARD-LOOKING
STATEMENTS INCLUDE THOSE SET FORTH IN THIS REPORT, AS WELL AS THOSE CONTAINED IN
THE SAFE HARBOR COMPLIANCE STATEMENT FOR FORWARD-LOOKING STATEMENTS INCLUDED AS
EXHIBIT 99.1 TO THIS REPORT ON FORM 10-K, FACTORS ARE HEREBY INCORPORATED BY
REFERENCE. THE COMPANY UNDERTAKES NO OBLIGATION TO UPDATE OR REVISE
FORWARD-LOOKING STATEMENTS TO REFLECT CHANGED ASSUMPTIONS, THE OCCURRENCE OF
UNANTICIPATED EVENTS OR CHANGES TO FUTURE OPERATING RESULTS OVER TIME.
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 include 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, that has developed a continuing care
retirement community on Hilton Head Island. SPSLC was established to construct a
healthcare facility within the TidePointe retirement
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community. The healthcare facility was completed and licensed in February 1997
and was operated by the Company prior to its sale on July 31, 1997.
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.
(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 developed and operated a healthcare facility within
the TidePointe retirement community on Hilton Head Island until its sale on July
31, 1997. The Company retains an ownership interest in the partnership that is
developing TidePointe.
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 1997, resort operations accounted
for approximately $26,322,000 (73%) of the Company's total revenues, with golf
and tennis activities responsible for revenues of approximately $14,688,000
(41%) and home and villa rental management activities responsible for revenues
of approximately $10,001,000 (28%). 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%).
During each of the fiscal years 1997, 1996 and 1995, 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 Company believes its
success 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
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facilities. The remaining golf and tennis volume, approximately 30%, was
generated from Hilton Head Island residents.
During fiscal years 1997, 1996 and 1995, 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 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.
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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 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 financial results
are substantially dependent upon 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 249 people as of October 31,
1997.
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 1997, real estate brokerage operations accounted for
approximately $9,574,000 (27%) of the Company's total revenue. For fiscal year
1996, real estate
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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.
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 88 sales agents as of October 31,
1997.
3. COUNTRY CLUB OPERATIONS. 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 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.
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.
4. TIDEPOINTE RETIREMENT COMMUNITY. On January 14, 1994, Sea
Pines/TidePointe, Inc., a subsidiary of the Company, entered into a general
partnership, TidePointe Partners (the "Partnership"), with Providers
Enterprises, Inc., 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
partner made an initial cash contribution of $6,000,000 for an 82.5% interest in
the partnership. In addition the Company has loaned $1,505,000 to the
Partnership.
The Partnership has developed the infrastructure for a two-phase
residential development including an assisted living and skilled nursing
healthcare facility and general amenities including a clubhouse and fitness and
activities center. The project is planned to have a total of 329 fee simple
residential units, including 232 apartment-style
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villas, 10 quadraplex verandas, comprising a total of 40 units, and 57 single
family cottages.
The construction of the healthcare facility located within the
TidePointe retirement community was completed by the Company's wholly-owned
subsidiary, Sea Pines Senior Living Center, Inc., in February 1997. The Company
operated the facility from its opening in February through its sale on July 31,
1997 to the Rogers Center, LLC, an entity controlled by the Partnership. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Results of Operations - 1997 Compared to 1996."
In December 1997, the Company learned that PIE Mutual Insurance ("PIE
Mutual"), the ultimate parent company of the majority general partner of the
Partnership, had been placed under the supervision of the Insurance Department
of the State of Ohio for the purpose of rehabilitation and possible liquidation,
due to questions about PIE Mutual's financial condition. Based upon the
Partnership's 1997 results and the uncertainty caused by the majority partner's
financial problems, the Company has recorded a write down of all of its
remaining investment in and advances to the Partnership. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Results of Operations - 1997 Compared to 1996."
(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 the 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
Company is planning the construction of a conference center addition to this
site - see Business Outlook and Recent Developments.
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.
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(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 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
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6. Fifth Golf Course Tract - approximately 8 acres.
Development plans for these tracts are undetermined at the present time.
In addition to the foregoing tracts, SPC owns the right to construct
approximately 66 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, 1997 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) 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.
(k) 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 sales offices for Sea Pines
Real Estate Company.
(l) HEALTHCARE FACILITY. The Company agreed to construct a healthcare
facility within the TidePointe retirement community. This facility consists of
35 assisted living units, 44 skilled nursing rooms, including 10 dedicated to
Alzheimer patients, with dining room facilities and other common areas. All of
the assets, liabilities and operations of the healthcare facility were sold to
The Rogers Center, LLC, a wholly owned subsidiary of
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TidePointe Partners, on July 31, 1997. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations - Results of Operations - 1997
Compared to 1996."
ITEM 3. LEGAL PROCEEDINGS.
The Company is a defendant in a lawsuit filed in November 1995 in
Beaufort County, 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. 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.
The Company is a defendant in a lawsuit filed in January 1996 in
Beaufort County, South Carolina by Property Research Holdings, Inc. relating to
title of real and personal property. The suit alleges ownership of certain
parcels of real property and various personal property and seeks a declaratory
judgement. The Company has answered the suit and intends to defend its position
vigorously, however, neither the Company nor its legal counsel can form an
opinion as to the outcome of this matter at this time.
The Company is a defendant in a lawsuit filed in April 1997 in Beaufort
County, South Carolina by Harbour Town Villas, et al. relating to the
construction of a new conference Center in Harbour Town, adjacent to the Harbour
Town Clubhouse. The suit, filed by adjoining property owners, challenges the
Company's right to construct such a facility on the site. The Company is
currently defending the action. While no final decision has been reached, the
court has indicated that an order may be issued which would allow the
construction of the facility only if an inn or hotel is built in conjunction
with the conference facility. As of October 31, 1997 the Company had capitalized
predevelopment costs of $328,000 relating to the facility. If the Company is
prevented from constructing this facility in the future, these costs will be
expensed at that time.
The Company is also a defendant in a lawsuit filed on December 19, 1997
by thirteen condominium rental companies and two persons owning property within
Sea Pines Resort. The suit alleges that the Company has implemented a tying
arrangement by imposing certain restrictions regarding access to its pool and
parking facilities within Sea Pines resort for vacationers renting condominiums
not listed with the rental agency operated by the Company. The suit further
alleges that the Company is not the lawful owner in fee simple title of certain
swimming pools, roadways, permanent and common parks, and other amenities to
which it claims fee simple title. The complaint seeks treble damages,
injunctive relief and a declaratory judgment establishing the rights and
obligations of the parties in the contested areas, and the recovery of fees
collected by the Company for use of the contested areas. The Company has not
filed an answer to the complaint but it intends to contest the case vigorously.
The Company is subject to other claims and suits in the ordinary course
of business. In management's opinion, such currently pending legal proceedings
and claims and suits against the Company will not, in the aggregate, have a
material adverse effect on the Company.
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 of the last two fiscal years:
<TABLE>
<CAPTION>
Fiscal Year Ended
October 31, 1997 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, 1996 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 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.
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(b) HOLDERS. As of October 31, 1997 there were approximately 637
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, 1997.
At its December 1997 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, 1998, April 15, 1998, July 15, 1998, and October
15, 1998 to shareholders of record on January 2, 1998, April 1, 1998, July 1,
19987 and October 1, 1998 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.
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.
As more fully discussed in "1997 Compared with 1996", the Company
reported improvements to the financial results of its resort and real estate
brokerage operations. Revenues from the resort operations of Sea Pines Company
and the real estate brokerage operation of Sea Pines Real Estate Company
totalled $35.9 million in 1997. Income from operations, other than healthcare,
was $3.7 million in 1997, representing a 61.9% increase in operating income.
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Although the Company experienced improved results in its core business,
the Company is reporting a net loss of $66,000. This net loss is the result of
recording a write down of all the Company's remaining investment in and advances
to TidePointe Partners, which, when combined with its equity share of the fiscal
1997 TidePointe Partners operating loss, totalled $2.7 million. The Company
recorded this write down as a result of 1997 operations of the partnership and
the poor financial condition of the majority partner in the partnership. This
write down is more fully discussed below in "1997 Compared to 1996" and note 8
of the consolidated financial statements included in this report.
1997 COMPARED TO 1996
The Company reported increases in resort and real estate brokerage
revenues and gross margins in fiscal year 1997 as compared to fiscal year 1996.
Resort revenues increased $1.7 million, or 7.1%, in 1997 and real estate
brokerage revenues increased $1.1 million, or 12.6%, in 1997. Resort gross
margin increased 8.4% to $10.0 million during the year and real estate brokerage
gross margin increased 21.9% to $1.1 million.
Volume and average rate increases in the Company's lodging
accommodations during 1997 resulted in improvements in resort revenues and gross
margin. The Company experienced growth in demand for lodging accommodations
during the normally busy spring and summer vacation seasons during the year.
Occupied unit nights totalled 58,259 during the year, representing a 2.2%
increase over 1996. The average daily rate for lodging accommodations increased
8.8% in 1997, averaging $164 for 1997. Revenue from golf operations also
increased during the year as the average rate per golf round increased 3.9% in
1997. The Company has maintained its market share of golf rounds in an
increasingly competitive market by offering well maintained courses and
professionally staffed pro shops. The improved practice and teaching facility at
the Plantation Club has allowed the Company to expand its offering of golf
clinics and lessons to players of all skill levels. The Company also reported
increased food and beverage results in 1997 as a result of improvements made to
certain food and beverage facilities and the restructuring of the food and
beverage operations.
Several factors were attributable to the improved financial results
experienced by the Company's real estate brokerage operations. The market value
of real estate in Sea Pines and throughout the Hilton Head Island area continued
to escalate in 1997 producing higher sales prices and larger brokerage
commissions. The Hilton Head Island real estate market continues to experience
significant demand in the second home market, particularly ocean front and ocean
oriented property. This demand is supported by favorable economic conditions in
national stock and mutual fund financial markets and the generally favorable
business climate throughout the country. Mortgage interest rates available to
purchasers of real estate decreased in 1997 and were nearing a 30 year low at
the Company's year end. The Company has continued to maintain its island wide
market share of sales and listings of real estate through creative marketing
campaigns,
13
<PAGE> 14
aggressive positioning in the market, and by attracting and retaining
professional real estate sales executives.
Sales and marketing expenses were $1.4 million in 1997, representing a
12.9% increase over 1996. The increase was attributable to additional media
advertisements, marketing collateral materials, and sales commissions necessary
to maintain the Company's market share in its competitive lines of business.
General and administrative expenses increased 7.4% in 1997, or
$309,000, totalling $4.5 million for the year. This increase was primarily the
result of increased property and casualty insurance premiums from the Company's
decision to expand its coverage to include business interruption from the threat
of hurricanes and other major storms.
The Company, through its wholly owned subsidiary, Sea Pines/TidePointe,
Inc. owns a 17.5% general partnership interest in TidePointe Partners (the
"Partnership"). The Company formed the Partnership on January 14, 1994 with
Providers Enterprises, Inc. (a 82.5% general partner) 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 construction of the healthcare facility located within the
TidePointe retirement community was completed by the Company's wholly owned
subsidiary, Sea Pines Senior Living Center, Inc., in February 1997. The Company
operated the facility from its opening in February through its sale on July 31,
1997, a period of approximately five months. The start-up operations of the
healthcare facility produced an operating loss of $644,000 and interest expense
of $381,000 during the period the Company operated the facility. TidePointe
Partners funded the operating loss and interest expense, in accordance with the
partnership agreement. On July 31, 1997 Sea Pines Senior Living Center, Inc.
sold all of the assets, liabilities and operations relating to the healthcare
facility at TidePointe to the Rogers Center, LLC, a subsidiary of TidePointe
Partners. The Sale generated a net gain of $1,025,000 which was equal to the net
operating losses including interest expense incurred in operating the healthcare
facility through the closing date. As a result of this transaction the Company
has recognized a gain on the sale of $845,626 (82.5% of the total gain), and has
deferred $179,375 (17.5% of the total gain) because of its minority general
partner interest in TidePointe Partners.
In December 1997, the Company learned that PIE Mutual Insurance Company
("PIE Mutual"), the ultimate parent company of Providers Enterprises, Inc., the
82.5% majority partner in the partnership, had been placed under the supervision
of the Insurance Department of the State of Ohio for the purpose of
rehabilitation and possible liquidation, due to questions about PIE Mutual's
financial condition. PIE Mutual has provided significant equity capital, debt
and debt collateral for the Partnership. The Company is currently seeking to
understand the Insurance Department's intentions and its own rights, obligations
and options. The Company understands that the Insurance
14
<PAGE> 15
Department is evaluating all of the assets of PIE Mutual, including its interest
in the Partnership, and appears to be seeking buyers for either the 82.5%
interest owned by PIE Mutual or the TidePointe project assets.
The Company believes that its liability, if any, is limited to its
general partner interest and the assets of Sea Pines/TidePointe, Inc. Sea
Pines/TidePointe, Inc.'s only assets are its investment in and advances to the
Partnership. Pursuant to the partnership agreement, the Company is under no
obligation to fund additional monies to the Partnership.
The Company is uncertain at this time as to the impact that these
matters may have on the Partnership, the future of the TidePointe project and
its operations, or the recoverability of the amounts which the Company has
invested or advanced to the Partnership. Based on the results of the 1997
operations of the Partnership and the significant uncertainties created by the
majority partner's financial problems the Company has recorded a write down of
all of its remaining investment in and advances to TidePointe Partners, which,
when combined with its equity share of TidePointe Partners' operating loss,
totaled $2.7 million in fiscal 1997. The Company's share of any future proceeds,
if any, either from operations of the Partnership or from the sale of the
partnership assets or the Company's 17.5% partnership interest will be
recognized as income by the Company.
1996 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 income before tax during the fiscal year was $8,739,000, including
the gain on the Country Club turnover of $7,747,000 and the impairment loss on
the Carolina Center sale of $810,000. Excluding these items, consolidated income
for the year was $1,802,000, an increase of $2,219,000 from the consolidated net
loss of $417,000 reported for the fiscal year ended October 31, 1995. The
increases in consolidated 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.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased by $752,000 during fiscal 1997 and
totalled approximately $2,180,000 at October 31, 1997, of which $1,965,000 is
restricted. This increase results from higher levels of advanced deposits held
on future lodging
15
<PAGE> 16
reservations and real estate transactions. Working capital increased during the
current year by $336,000 resulting in a working capital deficit of $1,168,000 at
October 31, 1997.
The Company invested approximately $1,378,000 in resort capital
expenditures. Capital investments in 1997 included an enlargement and renovation
of the Harbour Town Golf Links practice facility and renovations to certain of
the Company's food and beverage facilities along with normal expenditures for
equipment replacement and resort facility improvements. During the ten year
period from November 1, 1987 through October 31, 1997, the Company has invested
over $31 million in capital purchases, property acquisitions and property
improvements thereby significantly enhancing the resort assets originally
acquired in 1987.
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, 1997, 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.
Long term debt, including the revolving credit facility totaled
$18,719,000 at October 31, 1997, a $7,856,000 decrease over 1996. This
significant decrease results from the repayment of the advances from TidePointe
Partners in connection with the construction and operation of the TidePointe
healthcare facility.
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, 1997, the outstanding balance on the seasonal line of
credit was $467,000.
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, 1998.
BUSINESS OUTLOOK AND RECENT DEVELOPMENTS
The Company is in the final planning stages for construction of a new
conference center in Harbour Town, adjacent to the Harbour Town Clubhouse. The
planned facility will include approximately 15,000 square feet and contain a
ballroom, meeting space and catering kitchen facilities. Management believes
such a facility will enhance the Company's existing facilities and enable the
Company to be more competitive in attracting small group meetings and other
functions to Sea Pines. Construction will begin upon completion of planning and
is anticipated to cost approximately $4,700,000 and take approximately one year
to construct. The Company intends to finance the project with the remaining $4.4
million available on its revolving credit facility with its principal corporate
lender.
16
<PAGE> 17
During fiscal 1998 the Company in its role as minority general partner
in the Partnership, plans to work closely with the Insurance Department of the
State of Ohio concerning the TidePointe project. This work will focus on helping
the project achieve its potential, while assisting the Insurance Department in
seeking a purchaser for PIE Mutual's 82.5% partnership interest or possibly for
the Partnership's assets in total.
YEAR 2000 ISSUE
The Year 2000 issue is the result of computer programs written using
two digits rather than four to define the applicable year. Any of the Company's
computer programs that have date-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices, or
engage in similar normal business activities.
Based on a recent assessment, the Company determined that it will be
required to modify or replace portions of its existing software so that its
computer systems will properly utilize dates beyond December 31, 1999. The
Company presently believes that with modifications to existing software and
conversions to new software, the Year 2000 issue can be mitigated. However, if
such modifications and conversions are not made, or are not completed timely,
the Year 2000 issue could have a material impact on the operations of the
Company.
The Company will utilize both internal and external resources to
program, or replace and test its software for year 2000 modifications. The
Company has discussed this issue with all of its third party software providers
and has planned for future year 2000 compliant updates. The Company has not
determined the total cost of the year 2000 project. However, the costs are not
expected to have a material effect on the results of operations. The Company
plans to complete the year 2000 project not later than June 30, 1999 and is
currently on schedule to meet this target.
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.
17
<PAGE> 18
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, 1997 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.
(3) Exhibits:
The exhibits listed on the accompanying Exhibit Index at pages E-1 to
E-6 are filed as part of this report.
(b) Reports on Form 8-K:
None.
18
<PAGE> 19
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: February 13, 1998 By: /s/ 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.
Signature Title Date
--------- ----- ----
/s/ Charles W. Flynn Chairman and Director February 13, 1998
- --------------------------
Charles W. Flynn
/s/ Michael E. Lawrence Chief Executive Officer February 13, 1998
- -------------------------- and Director
Michael E. Lawrence
/s/ Thomas C. Morton Treasurer (Principal February 13, 1998
- -------------------------- Financial and
Thomas C. Morton Accounting Officer)
and Director
/s/ Norman P. Harberger Vice Chairman and February 13, 1998
- -------------------------- Director
Norman P. Harberger
/s/ Angus Cotton Secretary and February 13, 1998
- -------------------------- Director
Angus Cotton
19
<PAGE> 20
/s/ Paul B. Barringer, II* Director February 13, 1998
- --------------------------
Paul B. Barringer, II
/s/ Thomas G. Daniels Director February 13, 1998
- --------------------------
Thomas G. Daniels
/s/ Ralph L. Dupps, Jr. * Director February 13, 1998
- --------------------------
Ralph L. Dupps, Jr.
/s/ P. R. Easterlin, Jr. Director February 13, 1998
- --------------------------
P. R. Easterlin, Jr.
/s/ James L. Gray * Director February 13, 1998
- --------------------------
James L. Gray
/s/ John G. McGarty Director February 13, 1998
- --------------------------
John G. McGarty
/s/ Robert W. Siler, Jr. Director February 13, 1998
- --------------------------
Robert W. Siler, Jr.
/s/ Arthur P. Sundry Director February 13, 1998
- --------------------------
Arthur P. Sundry
/s/ Joseph F. Vercellotti Director February 13, 1998
- --------------------------
Joseph F. Vercellotti
/s/ Frank E. Zimmerman, Jr. Director February 13, 1998
- --------------------------
Frank E. Zimmerman, Jr.
*By: /s/ Angus Cotton
- --------------------------
Angus Cotton
Attorney-in-Fact for each
of the persons indicated
20
<PAGE> 21
SEA PINES ASSOCIATES, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
----
Report of Ernst & Young LLP . . . . . . . . . . . . . . . . . . . . . . . . F-2
Consolidated Balance Sheets at October 31, 1997 and 1996 . . . . . . F-3 thru 4
Consolidated Statements of Operations for the years
ended October 31, 1997, 1996 and 1995 . . . . . . . . . . . . . . . . . . F-5
Consolidated Statements of Shareholders' Equity
for the years ended October 31, 1997, 1996 and 1995 . . . . . . . . . . . F-6
Consolidated Statements of Cash Flows for the years
ended October 31, 1997, 1996 and 1995 . . . . . . . . . . . . . . . F-7 thru 8
Notes to Consolidated Financial Statements . . . . . . . . . . . . . F-9 thru 30
Report on Financial Statement Schedule . . . . . . . . . . . . . . . . . . F-31
Schedule II - Valuation and Qualifying Accounts
For the Years Ended October 31, 1997, 1996 and 1995 . . . . . . . . . . . F-32
F-1
<PAGE> 22
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, 1997 and 1996, and the
related consolidated statements of operations, shareholders' equity, and cash
flows for each of the three years in the period ended October 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Sea Pines
Associates, Inc. at October 31, 1997 and 1996, and the results of its
operations and its cash flows for each of the three years in the period ended
October 31, 1997 in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Atlanta, Georgia
January 27, 1998
F-2
<PAGE> 23
Sea Pines Associates, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
OCTOBER 31
1997 1996
--------------------------------------------
(In Thousands of Dollars)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents, including cash held in escrow
of $1,965 and $1,196 at October 31, 1997 and 1996,
respectively $ 2,180 $ 1,428
Accounts receivable, less allowance for doubtful accounts
of $73 and $27 at October 31, 1997 and 1996,
respectively 965 1,029
Current portion of notes receivable 402 344
Inventories 617 733
Prepaid expenses 240 293
--------------------------------------------
Total current assets 4,404 3,827
Notes receivable-other 1,894 1,617
Investment in and advances to TidePointe Partners, net - 2,503
Deferred income taxes 805 -
Deferred loan fees, net 61 49
Other assets, net 87 91
Intangibles, net of accumulated amortization of $1,310 and
$1,179 at October 31, 1997 and 1996, respectively - 131
--------------------------------------------
2,847 4,391
Real estate assets
Construction in progress 598 8,113
Operating properties, net 22,942 22,879
Properties held for future development 7,023 7,047
--------------------------------------------
30,563 38,039
--------------------------------------------
Total assets $ 37,814 $ 46,257
============================================
</TABLE>
F-3
<PAGE> 24
Sea Pines Associates, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
OCTOBER 31
1997 1996
--------------------------------------------
(In Thousands of Dollars)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 1,810 $ 2,037
Advance deposits 1,880 1,223
Line of credit with bank 467 775
Income taxes payable 166 142
Current portion of deferred revenue 439 371
Current maturities of long-term debt 810 783
--------------------------------------------
Total current liabilities 5,572 5,331
Long-term debt 17,909 18,719
Due to TidePointe Partners - 7,073
Other deferred revenue 778 214
Deferred income taxes - 412
--------------------------------------------
Total liabilities 24,259 31,749
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 7,218
Series B junior cumulative preferred stock,
no par value, 3,000 shares
authorized, none issued or outstanding - -
Common stock, 23,000,000 shares authorized,
no par value, 1,842,525 shares issued and
outstanding 2,166 2,166
Retained earnings 4,171 5,124
--------------------------------------------
Total shareholders' equity 13,555 14,508
--------------------------------------------
Total liabilities and shareholders' equity $ 37,814 $ 46,257
============================================
</TABLE>
See accompanying notes.
F-4
<PAGE> 25
Sea Pines Associates, Inc.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
1997 1996 1995
-----------------------------------------------------------
(In Thousands of Dollars, Except Per Share Amounts)
<S> <C> <C> <C>
Revenues, other than healthcare $ 35,896 $ 34,958 $ 33,044
Cost and expenses, other than healthcare:
Cost of revenues 24,781 24,758 24,772
Sales and marketing expenses 1,376 1,219 1,368
General and administrative expenses 4,446 4,137 4,165
Depreciation and amortization 1,586 1,745 1,920
Impairment loss on Carolina Center - 810 -
-----------------------------------------------------------
32,189 32,669 32,225
-----------------------------------------------------------
Income from operations, other than healthcare 3,707 2,289 819
Healthcare income (expense)
Revenue 345 - -
Cost of revenues (989) - -
-----------------------------------------------------------
(644) - -
-----------------------------------------------------------
Income from operations 3,063 2,289 819
Other income (expense):
Equity in loss and write down of investment
in and advances to TidePointe Partners (2,658) (22) -
Gain on sale of healthcare business and assets 846 - -
Gain on equity club turnover - 7,747 -
Interest income 325 176 61
Interest expense, net of amounts capitalized
Healthcare (381) - -
Other (1,476) (1,451) (1,297)
-----------------------------------------------------------
(3,344) 6,450 (1,236)
-----------------------------------------------------------
Income (loss) before income taxes (281) 8,739 (417)
Provision for (benefit from) income taxes (215) 3,340 (125)
-----------------------------------------------------------
Net income (loss) (66) 5,399 (292)
Preferred stock dividend requirements 887 887 887
===========================================================
Net income (loss) attributable to common stock $ (953) $ 4,512 $ (1,179)
===========================================================
Per share of common stock
Net income (loss) $ (0.52) $ 2.45 $ (0.64)
===========================================================
</TABLE>
See accompanying notes.
F-5
<PAGE> 26
Sea Pines Associates, Inc.
Consolidated Statements of Shareholders' Equity
<TABLE>
<CAPTION>
SERIES A RETAINED
PREFERRED STOCK COMMON STOCK EARNINGS
------------------------------------------- (ACCUMULATED
SHARES AMOUNT SHARES AMOUNT DEFICIT) TOTAL
----------------------------------------------------------------------------
(In Thousands of Dollars)
<S> <C> <C> <C> <C> <C> <C>
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
Net loss (66) (66)
Declaration of preferred stock
dividend of $ 0.722 per share - - - - (887) (887)
----------------------------------------------------------------------------
Balance at October 31, 1997 1,228 $7,218 1,843 $2,166 $4,171 $13,555
============================================================================
</TABLE>
See accompanying notes.
F-6
<PAGE> 27
Sea Pines Associates, Inc.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
1997 1996 1995
---------------------------------------------
(In Thousands of Dollars)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ (66) $ 5,399 $ (292)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 1,586 1,745 1,920
Gain on equity club turnover - (7,747) -
Allowance for doubtful accounts 46 (3) 9
Deferred income taxes (1,217) 3,074 (138)
Gain on sale of asset (226) - -
Write off of assets 56 - -
Loss on real estate assets - 585 123
Equity in loss and write down of investment in and
advances to TidePointe Partners 2,658 22 -
Changes in current assets and liabilities:
Accounts and notes receivable (317) 369 112
Inventories 116 16 (40)
Prepaid expenses 53 (92) 21
Deferred loan fees (41) - -
Other assets - 41 (36)
Accounts payable and accrued expenses (227) (264) (164)
Deferred revenue 564 107 (47)
Advance deposits 657 (223) 161
Income taxes payable 24 129 (154)
Current portion of deferred revenue 68 (487) 71
Other liabilities - (645) 191
---------------------------------------------
Net cash provided by operating activities 3,734 2,026 1,737
INVESTING ACTIVITIES
Short-term investments - 475 (40)
Proceeds from sale of equity memberships - - 259
Proceeds from sale of assets 529 47 -
Capital expenditures and property acquisitions (1,378) (2,407) (3,922)
Increase in note receivable and accrued interest from
TidePointe Partners (155) (156) (1,538)
---------------------------------------------
Net cash used in investing activities (1,004) (2,041) (5,241)
</TABLE>
F-7
<PAGE> 28
Sea Pines Associates, Inc.
Consolidated Statements of Cash Flows (continued)
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
1997 1996 1995
---------------------------------------------
(In Thousands of Dollars)
<S> <C> <C> <C>
FINANCING ACTIVITIES
Additions (reductions) to line of credit with bank (308) (525) 700
Additions to long-term debt - 1,600 4,500
Principal repayments of debt (783) (713) (650)
Principal payments under capital lease obligations - - (38)
Dividends paid (887) (887) (887)
---------------------------------------------
Net cash (used in) provided by financing activities (1,978) (525) 3,625
---------------------------------------------
Net increase (decrease) in cash and cash equivalents 752 (540) 121
Cash and cash equivalents at beginning of year 1,428 1,968 1,847
---------------------------------------------
Cash and cash equivalents at end of year $ 2,180 $ 1,428 $ 1,968
=============================================
</TABLE>
See accompanying notes.
F-8
<PAGE> 29
Sea Pines Associates, Inc.
Notes to Consolidated Financial Statements
October 31, 1997, 1996 and 1995
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, home and villa rental
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). SPSLC was
established to construct a healthcare 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
and advances to TidePointe Partners equals its capital contributions, plus its
share of net income or loss of the partnership, less any capital distributions
received and write downs due to doubtful recoverability.
F-9
<PAGE> 30
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 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 between the Company and the Club 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> 31
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.
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 $6,000,
$630,000, and $238,000, in 1997, 1996, and 1995, respectively (see Note 8).
Repairs and maintenance costs are expensed as incurred.
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 the lives of the corresponding debt.
F-11
<PAGE> 32
Sea Pines Associates, Inc.
Notes to Consolidated Financial Statements (continued)
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
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.
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.
NEW ACCOUNTING STANDARDS
In April 1997, the Financial Accounting Standards Board ("FASB") issued
Statement No. 128, Earnings Per Share (the "EPS Standard"). The EPS Standard
replaces APB Opinion No. 15, Earnings Per Share, and among other things
eliminates "primary" earnings per share and requires the presentation of "basic"
earnings per share, which excludes from consideration common stock equivalents.
The Company will adopt the EPS Standard in
F-12
<PAGE> 33
Sea Pines Associates, Inc.
Notes to Consolidated Financial Statements (continued)
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
NEW ACCOUNTING STANDARDS (CONTINUED)
the first quarter of 1998, and based on current circumstances, does not believe
the effect of adoption will be material.
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 prior years 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
1997 1996 1995
------------------------------------------
<S> <C> <C> <C>
Cash paid during the year for:
Interest $1,452 $1,577 $1,386
Income taxes 965 98 207
</TABLE>
F-13
<PAGE> 34
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
1997 1996
-----------------------------------
<S> <C> <C>
Merchandise $546 $654
Supplies, parts and accessories 35 35
Food and beverages 11 11
Other 25 33
-----------------------------------
$617 $733
===================================
</TABLE>
4. REAL ESTATE ASSETS
Operating properties consist of the following (in thousands of dollars):
<TABLE>
<CAPTION>
OCTOBER 31
1997 1996
-----------------------------------
<S> <C> <C>
Land and improvements $19,884 $19,712
Buildings 7,051 6,432
Machinery and equipment 5,645 5,034
Property held under capital leases 251 251
-----------------------------------
32,831 31,429
Less accumulated depreciation (9,889) (8,550)
-----------------------------------
$22,942 $22,879
===================================
</TABLE>
F-14
<PAGE> 35
Sea Pines Associates, Inc.
Notes to Consolidated Financial Statements (continued)
4. REAL ESTATE ASSETS (CONTINUED)
Construction in progress consists of the following (in thousands of dollars):
<TABLE>
<CAPTION>
OCTOBER 31
1997 1996
------------------------------------
<S> <C> <C>
Healthcare facility - $7,073
Other 598 1,040
====================================
$598 $8,113
====================================
</TABLE>
Properties held for future development of $7,023,000 and $7,047,000 at October
31, 1997 and 1996, respectively, consist primarily of land and certain future
development rights.
F-15
<PAGE> 36
Sea Pines Associates, Inc.
Notes to Consolidated Financial Statements (continued)
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 $37,814,000
at October 31, 1997) as follows (in thousands of dollars):
<TABLE>
<CAPTION>
OCTOBER 31
1997 1996
----------------------------------
<S> <C> <C>
Note payable to bank, bearing interest at various
London Interbank Offered Rates (LIBOR) plus 1.5%
(averaging 7.26% at October 31, 1997), with six
monthly principal payments of $135,000, plus
interest, and six interest only payments annually
through October 1999 with a balloon payment for the
balance on November 15, 1999, collateralized by
substantially all assets of SPCI. $11,119 $11,902
Note payable to bank, bearing interest at LIBOR plus
1.5% (7.14% at October 31, 1997), interest payable on
a monthly basis and adjustable as defined, all
principal is due November 15, 1999, collateralized by
substantially all assets of SPCI; $12,000 maximum
borrowing; as of October 31, 1997, $4,400 is
available if pre-approved by the bank for capital
projects. 7,600 7,600
----------------------------------
18,719 19,502
Less current portion of long-term debt (810) (783)
----------------------------------
Total long-term debt $17,909 $18,719
==================================
</TABLE>
Scheduled maturities of long-term debt as of October 31, 1997, are as follows
(in thousands of dollars):
<TABLE>
<S> <C>
Year ending October 31
1998 $ 810
1999 810
2000 17,099
------------------
Total $ 18,719
==================
</TABLE>
F-16
<PAGE> 37
Sea Pines Associates, Inc.
Notes to Consolidated Financial Statements (continued)
5. LONG-TERM DEBT AND LINE OF CREDIT AGREEMENTS (CONTINUED)
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, 1997 and 1996, $467,000 and $775,000 were
outstanding under this line of credit, respectively. Interest is payable monthly
at LIBOR plus 1.5% (7.31% and 7.0% at October 31, 1997 and 1996) and the line of
credit expires November 15, 1999. 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.
6. INCOME TAXES
The provision (benefit) for income taxes consists of the following (in thousands
of dollars):
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
1997 1996 1995
---------------------------------------------
<S> <C> <C> <C>
Current taxes:
Federal $ 856 $ 167 $ -
State 146 99 13
---------------------------------------------
1,002 266 13
Deferred income taxes (benefit):
Federal (1,053) 2,658 (124)
State (164) 416 (14)
---------------------------------------------
(1,217) 3,074 (138)
---------------------------------------------
$ (215) $3,340 $ (125)
=============================================
</TABLE>
F-17
<PAGE> 38
Sea Pines Associates, Inc.
Notes to Consolidated Financial Statements (continued)
6. INCOME TAXES (CONTINUED)
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
1997 1996 1995
---------------------------------------------
<S> <C> <C> <C>
Tax at statutory federal income tax rates $ (95) $2,971 $(142)
State income taxes, net of federal income tax benefit - 361 -
Decrease in valuation allowance (121) (13) -
Other 1 21 17
---------------------------------------------
$(215) $3,340 $(125)
=============================================
</TABLE>
The tax effects of the types of temporary differences and carryovers which give
rise to deferred income tax assets (liabilities) at October 31, 1997, 1996 and
1995 are as follows (in thousands of dollars):
<TABLE>
<CAPTION>
OCTOBER 31
1997 1996 1995
----------------------------------------------------
<S> <C> <C> <C>
Deferred revenue:
Country club membership sales $ 48 $ 52 $2,807
Health care transfer 67 - -
Charitable contribution carryover 295 392 410
Reserve for investment in and advances to
TidePointe Partners 805 - -
Accrued liabilities 110 99 121
Other assets 26 10 59
----------------------------------------------------
Gross deferred income tax assets 1,351 553 3,397
Valuation allowance (271) (392) (405)
----------------------------------------------------
Deferred income tax assets 1,080 161 2,992
----------------------------------------------------
Depreciation (91) (142) (179)
Intangible assets - (49) (98)
Equity loss from TidePointe Partners (97) (284) -
Other liabilities (87) (98) (53)
----------------------------------------------------
Gross deferred income tax liabilities (275) (573) (330)
----------------------------------------------------
Net deferred income tax (liabilities) assets $ 805 $(412) $2,662
====================================================
</TABLE>
F-18
<PAGE> 39
Sea Pines Associates, Inc.
Notes to Consolidated Financial Statements (continued)
6. INCOME TAXES (CONTINUED)
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.
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.
F-19
<PAGE> 40
Sea Pines Associates, Inc.
Notes to Consolidated Financial Statements (continued)
7. SHAREHOLDERS' EQUITY (CONTINUED)
COMMON STOCK (CONTINUED)
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.
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.
F-20
<PAGE> 41
Sea Pines Associates, Inc.
Notes to Consolidated Financial Statements (continued)
7. SHAREHOLDERS' EQUITY (CONTINUED)
STOCK PURCHASE RIGHTS PLAN (CONTINUED)
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.
8. TIDEPOINTE PARTNERS
On January 14, 1994, a subsidiary of the Company entered into a general
partnership, TidePointe Partners (the Partnership), with Providers Enterprises,
Inc., 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 partner made an initial cash
contribution of $6,000,000 for an 82.5% interest in the partnership.
The Partnership has developed the infrastructure for a two-phase residential
development including an assisted living and skilled nursing healthcare facility
and general amenities including a clubhouse and fitness and activities center.
The project is planned to have a total of 329 fee simple residential units,
including 232 apartment-style villas, 10 quadraplex verandas, comprising a total
of 40 units, and 57 single family cottages. As of October 31, 1997, a total of
111 phase I villas, veranda units, and cottages have been sold and title has
been transferred to the homeowners, 34 phase I villa or veranda units are
completed and available for sale and a total of 58 phase I veranda units and
cottages are under construction or yet to be constructed. A total of 126 villas
are planned for phase II, which has not yet commenced construction and for which
no committed financing is currently in place. As of October 31, 1997, 19
reservation agreements have been signed by potential purchasers of phase II
units. Approximately $28 million in additional construction costs will be
required to complete construction of both phase I and phase II. The healthcare
facility has 35 assisted living units and 44 skilled nursing units, including 10
dedicated to Alzheimer patients. As of October 31, 1997, 12 of the assisted
living units were occupied and 16 of the skilled nursing units were occupied.
TidePointe may also derive future revenues from brokerage commissions from
resales of the TidePointe
F-21
<PAGE> 42
Sea Pines Associates, Inc.
Notes to Consolidated Financial Statements (continued)
8. TIDEPOINTE PARTNERS (CONTINUED)
units and management fees derived from the healthcare facility and the
homeowners association.
The Partnership has guaranteed the other partner's repayment to its parent
company of up to $34,095,000 in funds borrowed relating to the Partnership. As
of October 31, 1997, approximately $21,000,000 of the borrowed funds is being
held by the Partnership's primary lender as cash collateral on the development
loan. As a general partner, the Company's subsidiary (Sea Pines/TidePointe,
Inc.) has also inherently assumed other risks of the Partnership and its
obligations, however the Company has no further commitments or obligations to
fund the Partnership.
As of October 31, 1997, the Company has loaned the Partnership $1,505,000 which
accrues interest at prime plus two percent. Such loan, with accrued interest of
$344,000 and $189,000 at October 31, 1997 and 1996, respectively, is secured by
third mortgage on the Partnership's real estate assets and matures on December
15, 1999.
The following is an unaudited summary of TidePointe Partners' statement of
financial condition:
<TABLE>
<CAPTION>
OCTOBER 31
1997 1996
-----------------------------------------
<S> <C> <C>
Development costs $23,996 $35,904
Receivable from SPSLC - 7,073
Healthcare facility and
Equipment 8,948 -
Total assets 34,785 43,531
Bank loans 19,162 20,344
Partner loans & accrued
interest 10,864 9,335
Total liabilities 31,755 36,927
Partners' equity 3,030 6,604
</TABLE>
F-22
<PAGE> 43
Sea Pines Associates, Inc.
Notes to Consolidated Financial Statements (continued)
8. TIDEPOINTE PARTNERS (CONTINUED)
In the partnership agreement, the Company agreed to construct a healthcare
facility within TidePointe. Sea Pines Senior Living Center, Inc. (SPSLC), the
Company's subsidiary, secured the certificate of need required for the
healthcare facility. The certificate of need could not be transferred to the
Partnership until the facility was operating and licensed because of certain
South Carolina Department of Health and Environmental Control (DHEC)
regulations. The facility was completed in early 1997 at a cost of $7,990,000.
The facility received its operating licenses and began operations in February
1997. Operating losses totaling $644,000, net of revenues of $345,000 relating
to start-up operations of the healthcare facility through July 31, 1997, and
interest expense of $381,000 have been included in the Company's consolidated
financial statements. TidePointe Partners advanced the Company the funds
necessary to construct and operate the facility through July 31, 1997.
On July 31, 1997, SPSLC sold all of the assets, liabilities and operations
relating to the healthcare facility to The Rogers Center, LLC. The Rogers
Center, LLC is a wholly owned subsidiary of TidePointe Partners of which the
Company is a 17.5% minority general partner. The sale price of $9,015,000
equaled the funds advanced to the Company by TidePointe Partners to construct
and operate the facility. The sale generated a net gain of $1,025,000 which is
equal to the net operating losses including interest expense incurred in
operating the healthcare facility through the closing date. As a result of this
transaction the Company has recognized a gain on the sale of $845,625 (82.5% of
the total gain), and has deferred $179,375 (17.5% of the gain) because of its
minority general partner interest in TidePointe Partners. At this point, the
Company's involvement in the TidePointe development and related healthcare
operations is limited to its 17.5% general partner interest.
In December 1997, the Company learned that PIE Mutual Insurance Company ("PIE
Mutual"), the ultimate parent company of Providers Enterprises, Inc., the 82.5%
majority partner in the partnership, had been placed under the supervision of
the Insurance Department of the State of Ohio for the purpose of rehabilitation
and possible liquidation, due to questions about PIE Mutual's financial
condition. PIE Mutual has provided significant equity capital, debt and debt
collateral for the Partnership. The Company is currently seeking to understand
the Insurance Department's intentions and its own rights, obligations and
options. The Company understands that the Insurance Department is evaluating all
of the assets of PIE Mutual, including its interest in the Partnership, and
F-23
<PAGE> 44
Sea Pines Associates, Inc.
Notes to Consolidated Financial Statements (continued)
8. TIDEPOINTE PARTNERS (CONTINUED)
appears to be seeking buyers for either the 82.5% interest owned by PIE Mutual
or the TidePointe project assets.
The Company believes that its liability, if any, is limited to its general
partner interest and the assets of Sea Pines/TidePointe, Inc. Sea
Pines/TidePointe, Inc.'s only assets are its investment in and advances to the
Partnership. Pursuant to the partnership agreement, the Company is under no
obligation to fund additional monies to the Partnership.
The Company is uncertain at this time as to the impact that these matters may
have on the Partnership, the future of the TidePointe project and its
operations, or the recoverability of the amounts which the Company has invested
or advanced to the Partnership. Based on the results of 1997 operations of the
Partnership and the significant uncertainties created by the majority partner's
financial problems, the Company has recorded a write down of all of its
remaining investment in and advances to TidePointe Partners, which, when
combined with its equity share of fiscal 1997 TidePointe Partners' operating
loss, totaled $2,658,000 in fiscal 1997.
9. COMMITMENTS AND CONTINGENCIES
Rent expense aggregated $585,000, $689,000 and $681,000 for the years ended
October 31, 1997, 1996 and 1995, respectively. Operating leases relate primarily
to office space and equipment. Minimum annual rental commitments remaining at
October 31, 1997, 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
1998 $ 349,667
1999 230,826
2000 93,580
2001 93,580
2002 84,615
Thereafter 860,200
---------------
$ 1,712,468
===============
</TABLE>
F-24
<PAGE> 45
Sea Pines Associates, Inc.
Notes to Consolidated Financial Statements (continued)
9. COMMITMENTS AND CONTINGENCIES (CONTINUED)
The Company has entered into real estate purchase agreements totaling $589,800
for two condominiums units. A deposit of $58,980 was made in connection with
these contracts, and the balance of $530,820 is due at closing which is
scheduled for 1998. The Company expects to find other purchasers for these units
prior to the closing dates.
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. 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.
The Company is a defendant in a lawsuit relating to title of real and personal
property. The suit alleges ownership of certain parcels of real property and
various personal property and seeks a declaratory judgement. The Company has
answered the suit and intends to defend its position vigorously, however,
neither the Company nor its legal counsel can form an opinion as to the outcome
of this matter at this time.
The Company is a defendant in a lawsuit relating to the construction of a new
conference center in Harbour Town, adjacent to the Harbour Town Clubhouse. The
suit, filed by adjoining property owners, challenges the Company's right to
construct such a facility on the site. The Company is currently defending the
action. While no final decision has been reached, the court has indicated that
an order may be issued which would allow the construction of the facility only
if an inn or hotel is built in conjunction with the conference facility. As of
October 31, 1997, the Company had capitalized predevelopment costs of $328,000
relating to the facility. If the Company is prevented from constructing this
facility in the future, these costs will be expensed at that time.
The Company is subject to other claims and suits in the ordinary course of
business. In management's opinion, such currently pending claims and suits
against the Company will not, in the aggregate, have a material adverse effect
on 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, 1997 approximately 90 of the 404 acres has been
donated and title
F-25
<PAGE> 46
Sea Pines Associates, Inc.
Notes to Consolidated Financial Statements (continued)
9. COMMITMENTS AND CONTINGENCIES (CONTINUED)
transferred. The remaining 314 acres has been leased to the same not-for-profit
organization for a nominal amount.
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.
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 turnover, the Company has recognized revenues from the sale of
memberships of approximately $260,000 and $494,000 in 1997 and 1996,
respectively.
The Company has entered into an agreement with the Club to provide certain
administrative services. The Company earned $114,750 and $72,000 under this
agreement during 1997 and 1996, respectively. Additionally the Club has
reimbursed the Company $887,000 related to payroll and benefits during the
period May 1, 1996 through October 31, 1996. No amounts were reimbursed during
1997 as the Club directly employed the individuals.
F-26
<PAGE> 47
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. Such note receivable had an outstanding
balance of $1,444,000 at October 31, 1997. 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
5% of the participants' compensation. Effective January 1, 1998, the Company's
match has been increased to 50% of the first 6% of the participants'
compensation. The Company's contributions to the plan were $106,000, $80,000 and
$82,000 for the years ended October 31, 1997, 1996 and 1995, 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, 1997. As of October 31, 1997,
the estimated fair value of the interest rate collar is $1,056 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-27
<PAGE> 48
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 and $2,681,000, related
to payroll and benefits and for certain administrative services provided to CSA
during the years ended October 31, 1996 and 1995, respectively. No amounts were
reimbursed in 1997 as CSA directly employed the individuals and provided its own
administrative services. In addition, the Company paid approximately $162,000,
$136,000 and $95,000 to CSA for security service, landscaping and other related
services during the years ended October 31, 1997, 1996 and 1995, respectively.
F-28
<PAGE> 49
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
1997 and 1995) 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
1997 1996 1995
----------------------------------------------------
<S> <C> <C> <C>
Revenues:
Resort $26,322 $24,588 $22,299
Real estate brokerage 9,574 8,504 7,070
Country club - 1,866 3,675
----------------------------------------------------
35,896 34,958 33,044
----------------------------------------------------
Cost of revenues:
Resort 16,278 15,320 14,652
Real estate brokerage 8,503 7,626 6,630
Country club - 1,812 3,490
----------------------------------------------------
24,781 24,758 24,772
----------------------------------------------------
Depreciation and amortization expense:
Resort 1,411 1,364 1,334
Real estate brokerage 175 172 172
Country club - 209 414
----------------------------------------------------
1,586 1,745 1,920
----------------------------------------------------
Corporate expenses:
Sales and marketing 1,376 1,219 1,368
General and administrative 4,446 4,137 4,165
Impairment loss on Carolina Center - 810 -
Healthcare, net 644 - -
----------------------------------------------------
6,466 6,166 5,533
----------------------------------------------------
Income from operations $ 3,063 $ 2,289 $ 819
====================================================
</TABLE>
F-29
<PAGE> 50
Sea Pines Associates, Inc.
Notes to Consolidated Financial Statements (continued)
15. BUSINESS SEGMENT INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
1997 1996 1995
-----------------------------------------------
<S> <C> <C> <C>
Identifiable assets:
Resort $34,731 $37,167 $36,267
Real estate brokerage 1,881 1,535 1,611
Country club - - 7,104
Healthcare - 7,073 3,195
Corporate 1,202 482 3,529
-----------------------------------------------
$37,814 $46,257 $51,706
===============================================
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
1997 1996 1995
-----------------------------------------------
<S> <C> <C> <C>
Capital expenditures:
Resort $1,363 $2,267 $3,695
Real estate brokerage 15 120 23
Country club - 20 204
Healthcare 917 3,878 2,895
-----------------------------------------------
$2,295 $6,285 $6,817
===============================================
</TABLE>
F-30
<PAGE> 51
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, 1997 and 1996, and for each of the three years in the
period ended October 31, 1997, and have issued our report thereon dated January
27, 1998, 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 27, 1998
F-31
<PAGE> 52
Sea Pines Associates, Inc.
Valuation and Qualifying Accounts
Schedule II
(Amounts in Thousands)
<TABLE>
<CAPTION>
Additions
Balance charged to Net
at costs deductions Balance
beginning and and at end
of year expenses expenses of year
--------------------------------------------------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts receivable:
For the year ended October 31, 1995 $ 21 $ 7 $ 2 $ 30
For the year ended October 31, 1996 $ 30 $ 0 ($ 3) $ 27
For the year ended October 31, 1997 $ 27 $76 ($ 30) $ 73
Deferred tax asset valuation allowance:
For the year ended October 31, 1995 $405 $ 0 $ 0 $405
For the year ended October 31, 1996 $405 $ 0 ($ 13) $392
For the year ended October 31, 1997 $392 $ 0 ($121) $271
</TABLE>
F-32
<PAGE> 53
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
(Incorporated by reference to Exhibit 3(e) to Form
10-K filed January 29, 1997)
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>
E-1
<PAGE> 54
<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) 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)
10(e) 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)
</TABLE>
E-2
<PAGE> 55
<TABLE>
<CAPTION>
Sequential
Exhibit No. Page No.
- ----------- ----------
<S> <C>
10(f) 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(g) 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(h) 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(i) 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(j) 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)
10(k) 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)
</TABLE>
E-3
<PAGE> 56
<TABLE>
<CAPTION>
Sequential
Exhibit No. Page No.
- ----------- ----------
<S> <C>
10(l) 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(m) 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(n) 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(o) Settlement Agreement between Sea Pines Company, Inc. and Asset
Management Associates, Inc. dated October 31, 1996
(Incorporated by reference to Exhibit 10(q) to Form
10-K filed January 29, 1997)
10(p) Agreement for Sale of Improved Land on Hilton Head Island
between Sea Pines Company, Inc. and Carolina Center
Building Corp. dated October 31, 1996 (Incorporated
by reference to Exhibit 10(r) to Form 10-K filed
January 29, 1997)
10(q) Settlement Statement between Sea Pines Company, Inc. and
Carolina Center Building Corp. dated October 31, 1996
(Incorporated by reference to Exhibit 10(s) to Form
10-K filed January 29, 1997)
10(r) Adjustable Rate Promissory Note between Sea Pines Company,
Inc. and Carolina Center Building Corp. dated October
31, 1996 (Incorporated by reference to Exhibit 10(t)
to Form 10-K filed January 29, 1997)
</TABLE>
E-4
<PAGE> 57
<TABLE>
<CAPTION>
Sequential
Exhibit No. Page No.
- ----------- ----------
<S> <C>
10(s) Mortgage Assignment and Security Agreement between Sea Pines
Company, Inc. and Carolina Center Building Corp.
dated October 31, 1996 (Incorporated by reference to
Exhibit 10(u) to Form 10-K filed January 29, 1997)
10(t) Agreement to Turnover Management and Control between Sea Pines
Company, Inc. and Sea Pines Country Club, Inc. dated
April 30, 1996 (Incorporated by reference to Exhibit
10(v) to Form 10-K filed January 29, 1997)
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(u) Third Clarification of Membership Plan documents between
Sea Pines Company, Inc. and Sea Pines Country Club,
Inc. dated April 30, 1996 (Incorporated by reference
to Exhibit 10(w) to Form 10-K filed January 29, 1997)
10(v) Collar Transaction Confirmation between Sea Pines Company,
Inc. and Wachovia Bank of South Carolina, N.A. dated
February 7, 1996 (Incorporated by reference to
Exhibit 10(x) to Form 10-K filed January 29, 1997)
10(w) Eighth Amendment to Credit Agreement dated as of October 24,
1997 between Sea Pines Associates, Inc. and Wachovia
Bank, N.A.
10(x) Second Amendment to $17 million Promissory Note dated as of
October 24, 1997 between Sea Pines Associates, Inc.
and Wachovia Bank, N.A.
10(y) Fourth Amendment to $17 million Mortgage and Security
Agreement dated as of October 24, 1997 between Sea
Pines Associates, inc. and Wachovia Bank, N.A.
</TABLE>
E-5
<PAGE> 58
<TABLE>
<CAPTION>
Sequential
Exhibit No. Page No.
- ----------- ----------
<S> <C>
10(z) Fifth Amendment to $2.5 million Promissory Note dated as of
October 24, 1997 between Sea Pines Associates, Inc.
and Wachovia Bank, N.A.
10(aa) Fifth Amendment to $2.5 million Mortgage and Security
Agreement dated as of October 24, 1997 between Sea
Pines Associates, Inc. and Wachovia Bank, N.A.
10(bb) First Amendment to $12 million Promissory Note dated as of
October 24, 1997 between Sea Pines Associates, Inc.
and Wachovia Bank, N.A.
10(cc) First Amendment to $12 million Mortgage, Security Agreement
and Financing Statement dated as of October 24, 1997
between Sea Pines Associates, Inc. and Wachovia Bank,
N.A.
10(dd) Second Amendment to Amended and Restated Partnership
Agreement of TidePointe Partners dated May 24, 1995.
10(ee) Third Amendment to Amended and Restated Partnership
Agreement of TidePointe Partners dated July 30, 1997
10(ff) Asset Purchase Agreement dated July 31, 1997 between Sea
Pines Senior Living Center, Inc. and The Rogers
Center, L.L.C.
21 Subsidiaries of the Registrant
24 Powers of Attorney
27 Financial Data Schedule (for SEC use only)
99.1 Safe Harbor Disclosure
</TABLE>
E-6
<PAGE> 1
EXHIBIT 10.w
STATE OF SOUTH CAROLINA ) EIGHTH AMENDMENT
) TO
COUNTY OF BEAUFORT ) CREDIT AGREEMENT
THIS EIGHTH AMENDMENT TO CREDIT AGREEMENT is made and entered into as
of this 24th day of October, 1997, by and between WACHOVIA BANK, N.A. as
Successor to The South Carolina National Bank, a national banking corporation
chartered under the laws of the United States of America (the "Lender") and SEA
PINES ASSOCIATES, INC., a South Carolina corporation ("SPA") and SEA PINES
COMPANY, INC. (formerly known as Sea Pines Plantation Company, Inc.), a South
Carolina corporation ("SPCO") (both SPA and SPCO hereinafter collectively
referred to as the "Borrower").
W I T N E S S E T H:
WHEREAS, the Lender and the Borrower previously entered into that
certain Credit Agreement, dated November 17, 1987, in order to set forth the
terms and conditions of the loan from the Lender to the Borrower in the original
principal amount of Seventeen Million and 00/100 ($17,000,000.00) Dollars
(hereinafter "Credit Agreement"); and
WHEREAS, in connection with the execution of the Credit Agreement, and
in order to secure the $17,000,000.00 loan ("17 MM Loan"), SPCO and the Lender
entered into that certain Mortgage, Security Agreement, and Financing Statement,
dated November 17, 1987 and recorded on November 17, 1987 in the RMC Office for
Beaufort County, South Carolina ("RMC Office") in Mortgage Book 410 at Page 540
and recorded accompanying UCC-1 Financing Statements (hereinafter the "17 MM
Mortgage"); and
WHEREAS, in order to evidence the 17 MM Loan, the Borrower executed
that certain Promissory Note, dated November 17, 1987, in the original principal
amount of Seventeen Million and No/100 ($17,000,000.00) Dollars ("17 MM Note");
and
WHEREAS, the Credit Agreement and the 17 MM Mortgage imposed certain
conditions on the Borrower in regard to new loans and after-acquired Property;
and
WHEREAS, on January 17, 1992, the parties entered into that certain
Amendment to Credit Agreement (hereinafter "Amendment to Credit Agreement")
which set forth the terms and conditions of a Two Million Five Hundred Thousand
and 00/100 ($2,500,000.00) Dollar line of credit which was
1
<PAGE> 2
made available to the Borrower as of January 17, 1992 ("2.5 MM Line of Credit"),
as well as incorporating into the Credit Agreement the terms and conditions of
the Commitment Letter, the 7/22/91 Letter Agreement, and the 8/8/91 Letter
Agreement (all as defined in the Amendment to Credit Agreement); and
WHEREAS, in order to evidence the 2.5 MM Line of Credit, the Borrower
did execute that certain Promissory Note, dated January 17, 1992, in favor of
the Lender, in the original principal amount of $2,500,000.00 (hereinafter "2.5
MM Note"); and
WHEREAS, in order to secure the 2.5 MM Note, the Borrower executed and
delivered to the Lender that certain Mortgage and Security Agreement dated
January 17, 1992 and recorded in the RMC Office for Beaufort County, South
Carolina in Mortgage Book 499 at Page 980 (the "2.5 MM Mortgage"), which
Mortgage provided for a first priority lien on certain property described
therein (the "Property"); and
WHEREAS, on March 20, 1992, the Borrower and Lender entered into that
certain Second Amendment to Credit Agreement, which set forth the terms and
conditions of the extension of the maturity date of the 2.5 MM Note to March 1,
1993 ("Second Amendment to Credit Agreement"); and
WHEREAS, in connection with the Borrower and the Lender entering into
the Second Amendment to Credit Agreement, the parties executed an Amendment to
the 2.5 MM Note dated March 20, 1992 and the Amendment to 2.5 MM Mortgage dated
March 20, 1992 and recorded in the RMC Office for Beaufort County, South
Carolina in Mortgage Book 506 at Page 486; and
WHEREAS, on April 26, 1993, the Borrower and Lender entered into that
certain Third Amendment to Credit Agreement, which set forth the terms and
conditions of the extension of the maturity date of the 2.5 MM Note to March 1,
1994 ("Third Amendment to Credit Agreement"); and
WHEREAS, in connection with the Borrower and the Lender entering into
the Third Amendment to Credit Agreement , the parties executed the Second
Amendment to the 2.5 MM Note dated April 26, 1993 and the Second Amendment to
2.5 MM Mortgage dated April 26, 1993, and recorded in the RMC Office for
Beaufort County, South Carolina in Book 544 at Page 292; and
WHEREAS, on June 29, 1993, the Borrower and Lender entered into that
certain Fourth Amendment to Credit Agreement recorded in the RMC Office for
Beaufort County, South Carolina in Book 638 at Page 2219, which set forth the
terms and conditions of the extension of the Maturity Date of the 17 MM Note to
June 17, 1998 and amended the appropriate sections of the Credit Agreement, the
Amendment to Credit Agreement, the Second Amendment to Credit Agreement, and the
Third Amendment to Credit Agreement and all attendant Loan Documents; and
2
<PAGE> 3
WHEREAS, in connection with the Borrower and the Lender entering into
the Fourth Amendment to Credit Agreement, the parties executed the Amendment to
the 17 MM Note dated June 29, 1993 and the Amendment to 17 MM Mortgage dated
June 29, 1993, and recorded in the RMC Office for Beaufort County, South
Carolina in Book 638 at Page 2212; and
WHEREAS, pursuant to the Revolving Credit Agreement dated October 15,
1993, the Lender made a Twelve Million ($12,000,000.00) Dollar Line of Credit
(the "12 MM Revolver") available to the Borrower and the parties entered into
that certain Fifth Amendment to Credit Agreement dated October 15, 1993 and
recorded in the RMC Office for Beaufort County, South Carolina in Book 659 at
Page 1786 to provide for said 12 MM loan and that certain Second Amendment to 17
MM Mortgage dated October 15, 1993 and recorded in the RMC Office for Beaufort
County, South Carolina in Book 659 at Page 1772; and
WHEREAS, in order to evidence the 12 MM Revolver, the Borrower did
execute that certain Promissory Note dated October 15, 1993, in favor of Lender,
in the original principal amount of $12,000,000.00 (hereinafter "12 MM Note");
and
WHEREAS, in order to secure the 12 MM Note, SPCO executed and delivered
to the Lender that certain Mortgage, Security Agreement and Financing Statement
dated October 15, 1993 and recorded in the RMC Office for Beaufort County, South
Carolina in mortgage Book 659 at Page 1683 (the "12 MM Mortgage"), so as to
evidence the security interest of the Lender in the Land and Improvements
thereon (as defined in the 12 MM Mortgage); and
WHEREAS, on March 15, 1994, the Borrower and the Lender entered into
that certain Sixth Amendment to Credit Agreement, which set forth the terms of
and conditions of the extension of the Maturity Date of the 2.5 MM Note to March
15, 1995; and
WHEREAS, in connection with the Borrower and Lender entering into the
Sixth Amendment to Credit Agreement, the parties executed the Third Amendment to
the 2.5 MM Note dated March 15, 1994 and the Third Amendment to 2.5 MM Mortgage
and Security Agreement dated March 15, 1994, and recorded in the RMC Office for
Beaufort County, South Carolina in Book 697 at Page 1790; and
WHEREAS, on March 15, 1995, the Borrower and the Lender entered into
that certain Seventh Amendment to Credit Agreement, which set forth the terms of
and conditions of the extension of the Maturity Date of the 2.5 MM Note to
October 15, 1998 and the securing of additional collateral for the 17 MM Loan
and the 2.5 MM Line of Credit; and
WHEREAS, in connection with the Borrower and Lender entering into the
Seventh Amendment to Credit Agreement, the parties executed the Third Amendment
to the 17 MM Mortgage dated March 15, 1995 and recorded in the RMC Office for
Beaufort County, South Carolina in Book 792 at Page 1223, the Fourth Amendment
to the 2.5 MM Note, dated March 15, 1995, and the Fourth Amendment to 2.5 MM
Mortgage and Security Agreement dated March 15,
3
<PAGE> 4
1995, and recorded in the RMC Office for Beaufort County, South Carolina in Book
792 at Page 1234; and
WHEREAS, from time to time during the term of Credit Agreement, the
Borrower and the Lender have entered into those certain Letter Agreements dated
November 18, 1993, June 6, 1994, and June 16, 1995, March 19, 1997 and June 4,
1997, all of which are attached hereto at Exhibit "A" (the "Amendment Letters")
which have modified or waived certain provisions of the Credit Agreement, the 17
MM Note, the 17 MM Mortgage, the 2.5 MM Note, the 2.5 MM Mortgage, the 12 MM
Note, and the 12 MM Mortgage, all as amended; and
WHEREAS, the Borrower and the Lender now wish to ratify and confirm the
terms and conditions of the Amendment Letters and incorporate said terms and
conditions into the Credit Agreement, the 17 MM Note, the 17 MM Mortgage, the
2.5 MM Note, the 2.5 MM Mortgage, the 12 MM Note, and the 12 MM Mortgage as
applicable.
WHEREAS, pursuant to the specific provisions of that certain Commitment
Letter, dated August 28, 1997, from the Lender to the Borrower, as amended
(hereinafter the "8/28/97 Commitment Letter") which is attached hereto at
Exhibit "B," the terms of which are incorporated herein by reference, the Lender
has agreed to extend the Maturity Date of the 17 MM Note, the 2.5 MM Note and
the 12 MM Note to November 15, 1999; and
WHEREAS, this Eighth Amendment to Credit Agreement is entered into in
order to amend the appropriate sections of the Credit Agreement, the Amendment
to Credit Agreement, the Second Amendment to Credit Agreement, the Third
Amendment to Credit Agreement, the Fourth Agreement to Credit Agreement, the
Fifth Amendment to Credit Agreement, the Sixth Amendment to Credit Agreement,
the Seventh Amendment to Credit Agreement and other related Loan Documents
referred to therein to reflect and incorporate the terms and provisions of the
8/28/97 Commitment Letter.
NOW, THEREFORE, for and in consideration of Ten and 00/100 ($10.00)
Dollars and other good and valuable consideration, the receipt and adequacy of
which is hereby acknowledged, the parties hereto agree as follows:
1. WHEREAS CLAUSES. The above "Whereas" clauses are incorporated herein
as if repeated verbatim.
2. AMENDMENT. This document shall amend the terms and provisions of the
Credit Agreement, the Amendment to Credit Agreement, the Second Amendment to
Credit Agreement, the Third Amendment to Credit Agreement, the Fourth Amendment
to Credit Agreement, the Fifth Amendment to Credit Agreement, the Sixth
Amendment to Credit Agreement and the Seventh Amendment to Credit Agreement as
hereinafter provided. Except as specifically amended in this document, the terms
of the Credit Agreement, the Amendment to Credit Agreement, the Second Amendment
to Credit Agreement, the Third Amendment to Credit Agreement, the Fourth
4
<PAGE> 5
Amendment to Credit Agreement, the Fifth Amendment to Credit Agreement, the
Sixth Amendment to Credit Agreement, the Seventh Amendment to Credit Agreement
and the attendant Loan Documents described in each agreement, as amended to
date, are hereby ratified and shall remain unchanged and in full force and
effect. All capitalized terms herein shall have the same meaning as in the
Credit Agreement, as amended, except as otherwise stated.
3. EXTENSION OF MATURITY DATES. The Maturity Date of the 17 MM Note of
June 17, 1998 set forth for the Fourth Amendment to Credit Agreement and the
Amendment to the 17 MM Note is hereby deleted and the date of November 15, 1999
is hereby inserted as the "Maturity Date" throughout the 17 MM Note. The
Maturity Date of the 2.5 MM Note of October 15, 1998 set forth in the Seventh
Amendment to Credit Agreement and the Fourth Amendment to 2.5 MM Note is hereby
deleted and the date of November 15, 1999 is hereby inserted as the "Maturity
Date" throughout the 2.5 MM Note. The final Maturity of Date of October 15, 1998
set forth in the 12 MM Note is deleted and the date of November 15, 1999 is
hereby inserted as the AMaturity Date@ throughout the 12 MM Note. The Borrower
and the Lender acknowledge and agree that the principal balance outstanding as
of the date hereof of the 17 MM Loan, subject to the within amendments, is
$11,118,566.17. The Borrower and the Lender acknowledge and agree that the
principal balance outstanding as of the date hereof of the 2.5 MM Loan, subject
to the within amendments, is $983,000.00. The Borrower and the Lender
acknowledge and agree that the principal balance outstanding as of the date
hereof of the 12 MM Loan, subject to the within amendments, is $6,750,000.00.
4. REPAYMENT. The principal payments due under the 17 MM Note shall be
modified as herein provided and shall become effective as of October 18, 1997.
Interest shall continue to be paid monthly on the principal balance outstanding,
based on the interest rate in effect and the number of days elapsed as provided
in the First Amendment to 17 MM Note, as amended by the Amendment Letters of
June 6, 1994 and June 16, 1995. The schedule of principal payments set forth in
the Fourth Amendment to Credit Agreement is hereby deleted and the following
shall be substituted in lieu thereof:
May 17, 1998 through October 17, 1998:
$135,000.00 per month;
May 17, 1999 through October 17, 1999:
$135,000.00 per month.
5. PARAGRAPH 9A. The covenants set forth in paragraph 9a of the Fourth
Amendment to Credit Agreement dated June 29, 1993 regarding the minimum current
ratio requirement of 1.2 and the minimum working capital requirement of
$1,000,000.00 are hereby deleted. All other covenants contained in paragraph 9a
of the Fourth Amendment to Credit Agreement shall remain unchanged and are
hereby ratified by the parties hereto.
5
<PAGE> 6
6. AMENDMENT LETTERS. By execution hereof, the parties ratify and
confirm the terms and conditions of the Amendment Letters and incorporate said
Amendment Letters into the Credit Agreement, as amended.
7. CONDITIONS PRECEDENT TO EXECUTION OF THE EIGHTH AGREEMENT TO CREDIT
AGREEMENT. The Lender shall have received, on or before the day of the execution
of this Eighth Amendment to Credit Agreement, the following instruments,
certificates, policies, and/or documents which shall be incorporated into and
included among documents in the definition of the 17 MM Loan Documents, 2.5 MM
Line of Credit Loan Documents and the 12 MM Revolver Loan Documents, each dated
the date of execution of this Eighth Amendment to Credit Agreement, in a form
satisfactory to the Lender and at the Borrower's expense:
A. Commitment Letter. The Commitment Letter dated August 28,
1997, as amended by the letter of October 17, 1997, executed
by Borrower;
B. Fourth Amendment to 17 MM Mortgage. The Fourth Amendment to
the 17 MM Mortgage duly executed by the Borrower and the
Lender.
C. Second Amendment to 17 MM Note. The Second Amendment to 17 MM
Note duly executed by the Borrower and the Lender.
D. Fifth Amendment to 2.5 MM Mortgage. The Fifth Amendment to the
2.5 MM Mortgage duly executed by the Borrower and the Lender.
E. Fifth Amendment to 2.5 MM Note. The Fifth Amendment to 2.5 MM
Note duly executed by the Borrower and the Lender.
F. First Amendment to 12 MM Mortgage. The First Amendment to the
12 MM Mortgage duly executed by the Borrower and the Lender.
G. First Amendment to 12 MM Note. The First Amendment to 12 MM
Note duly executed by the Borrower and the Lender.
H. Corporate Resolution. A duly certified Corporate Resolution
from Borrower duly authorizing the Borrower to obtain this
Eighth Amendment to Credit Agreement, authorizing designated
officers to execute all documents necessary to consummate this
Eighth Amendment to the Credit Agreement (as set forth in the
8/28/97 Commitment Letter).
I. Certificate of Compliance with South Carolina Department of
Revenue. Certificate of Compliance with South Carolina
Department of Revenue evidencing SPA's and SPCO's payment of
current taxes.
6
<PAGE> 7
J. Outstanding Loan Fees. On the date of closing, the Borrower
shall pay the outstanding loan fees contained in paragraph 9
hereof.
8. COLLATERAL AND SECURITY. The Collateral necessary for the 17 MM Loan
is a first priority mortgage on the Property (as defined in the 17 MM Mortgage)
and a first priority security interest in the improvements thereon. The
necessary documentation to evidence the first priority security interest of the
Lender in the Property and the improvements thereon are set forth in Section 2
of the Credit Agreement and Section 6 of the Fourth Amendment to Credit
Agreement. The execution and recordation of the Fourth Amendment to 17 MM
Mortgage, the Fifth Amendment to 2.5 MM Mortgage and First Amendment to 12 MM
Mortgage shall not be construed so as to affect the priority of the 17 MM
Mortgage and the attendant 17 MM Loan Documents. Upon recordation of the Fourth
Amendment to 17 MM Mortgage, Fifth Amendment to 2.5 MM Mortgage and First
Amendment to 12 MM Mortgage, the Borrower shall deliver to the Lender Lawyers
Title Insurance Company policies replacing Chicago Title Insurance Policy
Numbers 41 0246 61 000167, 41 0246 02 000001 and 41 0246 92 000343, which
policies shall (a) amend the Date of the Policy to bring such date current as
the recordation of the Fourth Amendment to 17 MM Mortgage, the Fifth Amendment
to 2.5 MM Mortgage and the First Amendment to 12 MM Mortgage, (b) add the Fourth
Amendment to 17 MM Mortgage, the Fifth Amendment to 2.5 MM Mortgage and First
Amendment to 12 MM Mortgage as insured instruments under Schedule A, (c) amend
Schedule B to provide for coverage regarding taxes and assessments for the year
1997, and (d) provide for such other matters as the Lender, in it sole
discretion, may require.
9. REPRESENTATIONS AND WARRANTIES. The Borrower hereby restates to the
Lender the terms and conditions of Section 10 in the Amendment to the Credit
Agreement, as well as each and every warranty and representation set forth in
Article III, Section 3.01 of the Credit Agreement, and reaffirms the Covenants
of the Borrower contained in Article IV of the Credit Agreement, specifically
including the 17 MM Loan Documents, the 2.5 MM Loan Documents, the 12 MM Loan
Documents, as amended, this Eighth Amendment to Credit Agreement and actions
taken by the Borrower in conjunction therewith as amended by that certain
Officers Certificate of even date herewith.
10. CLOSING COSTS. All costs associated with this Eighth Amendment to
Credit Agreement shall be paid by the Borrower and all expenses incurred in
connection with the closing of this Eighth Amendment to Credit Agreement (as
required by the 8/28/97 Commitment Letter) including the Lender's counsel fees,
recording costs and premiums for the endorsement of the above referenced title
insurance policies shall be paid by the Borrower. Furthermore, the Borrower
agrees to pay to the Lender Seventeen Thousand Five Hundred ($17,500.00) Dollars
of earned but unpaid loan fees associated with the 12 MM Revolver. This amount
shall be due and payable upon execution of this Eighth Amendment to Credit
Agreement.
11. AMENDMENT AND MODIFICATION. This Eighth Amendment to Credit
Agreement shall not be further amended or modified unless any such amendment or
modification is set forth in writing and executed by the Lender and the
Borrower.
7
<PAGE> 8
IN WITNESS WHEREOF, the Borrower has duly executed this Eighth
Amendment to Credit Agreement, and the Lender has caused this Agreement to be
executed by its duly authorized officer, as of the date first above written.
WITNESSES: BORROWER:
SEA PINES ASSOCIATES, INC.
Connie Smith By: C. W. Flynn
- ---------------------------------- ---------------------------------
Its: Chairman
---------------------------------
Jennifer Bialocki-Prynada Attest: Angus Cotton
- ---------------------------------- ---------------------------------
Its: Secretary
---------------------------------
SEA PINES COMPANY, INC.
(formerly known as Sea Pines Plantation
Company, Inc.)
Connie Smith By: Michael E. Lawrence
- ---------------------------------- ---------------------------------
Its: President
---------------------------------
Jennifer Bialocki-Prynada Attest: Steven P. Birdwell
- ---------------------------------- ---------------------------------
Its: Secretary
---------------------------------
LENDER:
WACHOVIA BANK, N.A.
(as Successor to The South Carolina
National Bank)
Birdie Sargent By: William D. Priester
- ---------------------------------- ---------------------------------
Its: Asst. Vice President
---------------------------------
Marla S. Nasuti Attest: Douglas E. Stetson
- ---------------------------------- ---------------------------------
Its: Vice President
---------------------------------
8
<PAGE> 9
STATE OF SOUTH CAROLINA )
) PROBATE
COUNTY OF BEAUFORT )
PERSONALLY appeared before me Birdie Sargent who, on oath says that
(s)he saw the within-named WACHOVIA BANK, N.A. (as Successor to The South
Carolina National Bank) by its appropriate officers, sign, seal, and as its act
and deed, deliver the within-written Eighth Amendment to Credit Agreement, and
that (s)he with witnessed the execution thereof.
Birdie Sargent
---------------------------
SWORN to before me this 27th day
of October, 1997.
Marla S. Nasuti
- ------------------------------------
Notary Public for South Carolina
My Commission Expires: Oct. 10, 1998
-------------
9
<PAGE> 10
STATE OF SOUTH CAROLINA )
) PROBATE
COUNTY OF BEAUFORT )
PERSONALLY appeared before me Connie Smith, who, on oath, says that
(s)he saw the within-named SEA PINES COMPANY, INC., by its appropriate officers,
sign, seal, and as its act and deed, deliver the within-written Eighth Amendment
to Credit Agreement, and that (s)he with Jennifer Bialocki-Prynada witnessed the
execution thereof.
Connie Smith
---------------------------
SWORN to before me this 24th day
of October, 1997.
Jennifer Bialocki-Prynada
- -------------------------------------
Notary Public for South Carolina
My Commission Expires: Sept. 30, 2004
--------------
10
<PAGE> 11
STATE OF SOUTH CAROLINA )
) PROBATE
COUNTY OF BEAUFORT )
PERSONALLY appeared before me Connie Smith who, on oath says that (s)he
saw the within-named SEA PINES ASSOCIATES, INC., by its appropriate officers,
sign, seal, and as its act and deed, deliver the within-written Eighth Amendment
to Credit Agreement, and that (s)he with Jennifer Bialocki-Prynada witnessed the
execution thereof.
Connie Smith
---------------------------
SWORN to before me this 24th day of October, 1997.
Jennifer Bialocki-Prynada
- -------------------------------------
Notary Public for South Carolina
My Commission Expires: Sept. 30, 1997
--------------
11
<PAGE> 1
EXHIBIT 10.x
STATE OF SOUTH CAROLINA ) SECOND AMENDMENT
) TO
COUNTY OF BEAUFORT ) 17 MM PROMISSORY NOTE
THIS SECOND AMENDMENT TO 17 MM PROMISSORY NOTE is made and entered into
this 24th day of October, 1997, by and among SEA PINES ASSOCIATES, INC. ("SPA"),
SEA PINES COMPANY, INC. ("SPCO") (SPA and SPCO collectively referred to as the
"Borrower") and WACHOVIA BANK, N.A., as Successor to The South Carolina National
Bank ("Lender").
W I T N E S S E T H :
WHEREAS, pursuant to that certain Credit Agreement of November 17, 1987
which set forth the terms of a Seventeen Million and No/100 ($17,000,000.00)
Dollar term loan (the "17 MM Loan"), the Borrower did execute that certain
Promissory Note, in the original principal amount of $17,000,000.00, payable to
the order of the Lender (the "17 MM Note"); and
WHEREAS, the Amendment to 17 MM Note dated June 29, 1993 extended the
Maturity Date of the 17 MM Note to June 17, 1998 (the AFirst Amendment to 17 MM
Note"); and
WHEREAS, certain interest rate options were extended to the Borrower
pursuant to the Amendment Letters of June 6, 1994 and June 16, 1995, as more
particularly described in the Eighth Amendment to Credit Agreement; and
WHEREAS, pursuant to that certain Commitment Letter dated August 28,
1997, as amended, from the Lender to the Borrower (the "8/28/97 Commitment
Letter"), the Lender has agreed to further extend the Maturity Date of the 17 MM
Note to November 15, 1999; and
WHEREAS, this Second Amendment to 17 MM Note is made and entered into
in order to modify the 17 MM Note so as to reflect the terms and conditions of
the 8/28/97 Commitment Letter and to incorporate the terms of the Amendment
Letters of June 6, 1994 and June 16, 1995.`
NOW, THEREFORE, for and in consideration of the mutual covenants ad
promises herein, and other good and valuable consideration, the parties hereto
agree as follows:
1. The above "Whereas" clauses are incorporated herein as is repeated
verbatim.
2. The "Maturity Date" of June 17, 1998 (as contained in the First
Amendment to 17 MM Note) is hereby deleted and the "Maturity Date" of November
15, 1999 is hereby inserted as the "Maturity Date" throughout the 17 MM Note (as
amended).
1
<PAGE> 2
3. The principal payments due under the 17 MM Note shall be modified as
herein provided and shall become effective as of October 18, 1997. Interest
shall continue to be paid monthly on the principal balance outstanding, based
upon the interest rate in effect and the number of days elapsed as provided in
the First Amendment to 17 MM Note, as amended by the Amendment Letters of June
6, 1994 and June 16, 1995. The schedule of principal payments set forth in the
First Amendment to 17 MM Note is hereby deleted and the following shall be
substituted in lieu thereof:
May 17, 1998 through October 17, 1998:
$135,000.00 per month;
May 17, 1999 through October 17, 1999:
$135,000.00 per month.
4. The Loan Documents described in the 17 MM Note (including, but not
limited to, the Credit Agreement, as amended, and the 17 MM Mortgage, as
amended) are hereby modified and construed to include the 8/28/97 Commitment
Letter, this Second Amendment to 17 MM Note and the Eighth Amendment to Credit
Agreement, said documents being entered into of even date herewith in
conjunction with the terms and conditions of the 8/28/97 Commitment Letter.
5. The cross-default provisions contained in the 17 MM Note are hereby
modified and construed to include the 8/28/97 Commitment Letter, this Second
Amendment to 17 MM Note, the Fourth Amendment to 17 MM Mortgage and the Eighth
Amendment to Credit Agreement, said documents being entered into of even date
herewith in conjunction with the terms and conditions of the 8/28/97 Commitment
Letter as additional agreements whereby defaults and/or noncompliance with the
terms of said agreements shall result in a default under the 17 MM Note.
6. This Second Amendment to 17 MM Note shall be incorporated into and
made a part of the 17 MM Note and all references to the 17 MM Note shall be
construed to include the terms and conditions of this Second Amendment to 17 MM
Note.
7. The execution and delivery of this Second Amendment to 17 MM Note
shall not be construed to affect the priority of the 17 MM Mortgage, as amended.
8. Except as heretofore amended or modified, the terms and conditions
of the 17 MM Note shall remain unchanged.
2
<PAGE> 3
IN WITNESS WHEREOF, the parties have duly executed this Second
Amendment to 17 MM Promissory Note on the day and year first above written.
SEA PINES ASSOCIATES, INC.
Connie Smith By: C. W. Flynn
- ---------------------------------- --------------------------------
Its: Chairman
--------------------------------
Jennifer Bialocki-Prynada Attest: Angus Cotton
- ---------------------------------- --------------------------------
Its: Secretary
--------------------------------
SEA PINES COMPANY, INC.
(formerly known as Sea Pines Plantation
Company, Inc.)
Connie Smith By: Michael E. Lawrence
- ---------------------------------- --------------------------------
Its: President
--------------------------------
Jennifer Bialocki-Prynada Attest: Steven P. Birdwell
- ---------------------------------- --------------------------------
Its: Secretary
WACHOVIA BANK, N.A.
(as Successor to The South Carolina
National Bank)
Birdie Sargent By: William D. Priester
- ---------------------------------- --------------------------------
Its: Asst. Vice President
--------------------------------
Marla S. Nasuti Attest: Douglas E. Stetson
- ---------------------------------- --------------------------------
Its: Vice President
--------------------------------
3
<PAGE> 1
EXHIBIT 10.y
STATE OF SOUTH CAROLINA ) FOURTH AMENDMENT TO
) 17 MM MORTGAGE
COUNTY OF BEAUFORT ) AND SECURITY AGREEMENT
THIS FOURTH AMENDMENT TO 17 MM MORTGAGE AND SECURITY AGREEMENT is made
and entered into as of this 24th day of October, 1997 by and between SEA PINES
COMPANY, INC. (formerly known as Sea Pines Plantation Company, Inc.) ("SPCO")
(the "Mortgagor"), 32 Greenwood Drive, Hilton Head Island, South Carolina 29928,
in favor of WACHOVIA BANK, N.A. as Successor to The South Carolina National
Bank, its successors and assigns (hereinafter referred to as the "Mortgagee"),
One Sea Pines Circle, Hilton Head Island, South Carolina 29928.
W I T N E S S E T H:
WHEREAS, Mortgagee did previously loan to Mortgagor and Sea Pines
Associates, Inc. ("SPA") (Mortgagor and SPA are collectively referred to herein
as "Borrower") the principal amount of Seventeen Million and No/100
($17,000,000.00) Dollars as evidenced by that certain Promissory Note dated
November 17, 1987 (the "17 MM Note"); and
WHEREAS, the Mortgagee and Borrower did enter into that certain Credit
Agreement, dated November 17, 1987, which set forth the terms and conditions of
the $17,000,000.00 loan from the Mortgagee to the Borrower (the "1987 Credit
Agreement"); and
WHEREAS, as security for the 17 MM Note, a Mortgage and Security
Agreement was made and entered into by and between the parties on November 17,
1987, and recorded on November 17, 1987 in the RMC Office for Beaufort County,
South Carolina in Mortgage Book 410 at Page 540 (the "17 MM Mortgage"), so as to
evidence the security interest of the Mortgagee in the Land and Improvements
thereon (as defined in the Mortgage); and
WHEREAS, the 1987 Credit Agreement was subsequently amended on January
17, 1992, March 2, 1992, April 26, 1992, June 29, 1993, October 15, 1993, March
15, 1994 and March 15, 1995 by appropriate documentation entered into by the
parties; and
WHEREAS, the 17 MM Mortgage was amended by the Amendment to 17 MM
Mortgage and Security Agreement dated June 29, 1993 and recorded in the RMC
Office for Beaufort County, South Carolina in Book 638 at Page 2212 (the "First
Amendment to 17 MM Mortgage"), the Amendment to 17 MM Mortgage and Security
Agreement dated October 15, 1993 and recorded in the RMC Office for Beaufort
County, South Carolina in Book 659 at Page 1772 (the "Second Amendment to 17 MM
Mortgage"), and the Amendment to 17 MM Mortgage and Security Agreement dated
March 15, 1995 and recorded in the RMC Office for Beaufort County, South
Carolina in Book _____ at Page _____ (the "Third Amendment to 17 MM Mortgage");
and
<PAGE> 2
WHEREAS, the Mortgagee and Borrower have entered into that certain
Eighth Amendment to Credit Agreement of even date which among other things,
provides for the extension of the Maturity Date of the 17 MM Note from June 17,
1998 to November 15, 1999; and
WHEREAS, this Fourth Amendment to 17 MM Mortgage and Security Agreement
is made and entered into for the purpose of making the modifications set forth
below incorporating the terms and conditions of the Eighth Amendment to Credit
Agreement into the 17 MM Mortgage.
NOW, THEREFORE, for and in consideration of the sum of One and No/100
($1.00) Dollar paid by the Mortgagee to the Mortgagor this date and of the
mutual covenants and conditions contained herein, the parties, hereto agree as
follows:
1. The above "Whereas" clauses are incorporated herein as if repeated
verbatim.
2. The 17 MM Mortgage is hereby amended throughout so as to incorporate
therein the terms and conditions of the Eighth Amendment to Credit Agreement,
all previous amendments to the Credit Agreement and the Second Amendment to 17
MM Note.
3 The Maturity Date of June 17, 1998 (as contained in the First
Amendment to 17 MM Mortgage) is hereby deleted and the Maturity Date of November
15, 1999 is hereby inserted as the Maturity Date throughout the 17 MM Mortgage,
as amended.
4. The principal payments due under the 17 MM Note shall be modified as
herein provided and shall become effective as of October 18, 1997. Interest
shall continue to be paid monthly on the principal balance outstanding, based
upon the interest rate in effect and the number of days elapsed as provided in
the First Amendment to 17 MM Note, as amended by the Amendment Letters of June
6, 1994 and June 16, 1995 described in the Eighth Amendment to Credit Agreement
and the Second Amendment to 17 MM Note. The schedule of principal payments set
forth in the First Amendment to 17 MM Mortgage is hereby deleted and the
following shall be substituted in lieu thereof:
May 17, 1998 through October 17, 1998:
$135,000.00 per month;
May 17, 1999 through October 17, 1999:
$135,000.00 per month.
5. This Fourth Amendment to 17 MM Mortgage is made and entered into for
the purpose of making the modifications set forth in paragraphs 2 through 4
above and incorporating the terms and conditions of the Eighth Amendment to
Credit Agreement and the Second Amendment to 17 MM Note into the 17 MM Mortgage.
This Fourth Amendment to the 17 MM Mortgage is not intended to and shall not
affect the priority of the lien of the 17 MM Mortgage.
2
<PAGE> 3
6. Except as heretofore amended or modified, the terms and conditions
of the Mortgage shall remain unchanged and by execution hereof, the undersigned
Mortgagor does hereby ratify and confirm all said terms.
IN WITNESS WHEREOF, the Mortgagor has duly executed this Fourth
Amendment to 17 MM Mortgage and Security Agreement, and the Mortgagee has caused
this Agreement to be executed by its duly authorized officers, as of the date
first above written.
WITNESSES: MORTGAGOR:
SEA PINES COMPANY, INC.
(formerly known as Sea Pines Plantation
Company, Inc.)
Connie Smith By: Michael E. Lawrence
- ----------------------------------- ---------------------------------
Its: President
---------------------------------
Jennifer Bialocki-Prynada Attest: Steven P. Birdwell
- ----------------------------------- ---------------------------------
Its: Secretary
---------------------------------
MORTGAGEE:
WACHOVIA BANK, N.A.
(as Successor to The South Carolina
National Bank)
Birdie Sargent By: William D. Priester
- ----------------------------------- ---------------------------------
Its: Assistant Vice President
---------------------------------
Marla S. Nasuti Attest: Douglas E. Stetson
- ----------------------------------- ---------------------------------
Its: Vice President
---------------------------------
3
<PAGE> 4
STATE OF SOUTH CAROLINA )
) PROBATE
COUNTY OF BEAUFORT )
PERSONALLY appeared before me Birdie Sargent who, on oath says that
(s)he saw the within-named WACHOVIA BANK, N.A. (as Successor to the South
Carolina National Bank) by its appropriate officer, sign, seal, and as its act
and deed, deliver the within-written Amendment to 17 MM Mortgage and Security
Agreement, and that (s)he with Marla S. Nasuti witnessed the execution thereof.
Birdie Sargent
--------------------------------
SWORN to before me this 27th day
of October, 1997.
Marla S. Nasuti
- ------------------------------------
Notary Public for South Carolina
My Commission Expires: Oct. 10, 1998
-------------
4
<PAGE> 5
STATE OF SOUTH CAROLINA )
) PROBATE
COUNTY OF BEAUFORT )
PERSONALLY appeared before me Connie Smith, who, on oath, says that
(s)he saw the within-named SEA PINES COMPANY, INC., by its appropriate officers,
sign, seal, and as its act and deed, deliver the within-written Amendment to 17
MM Mortgage and Security Agreement, and that (s)he with Jennifer
Bialocki-Prynada witnessed the execution thereof.
Connie Smith
--------------------------------
SWORN to before me this 24th day
of October, 1997.
Jennifer Bialocki-Prynada
- -------------------------------------
Notary Public for South Carolina
My Commission Expires: Sept. 30, 2004
--------------
5
<PAGE> 1
EXHIBIT 10.z
STATE OF SOUTH CAROLINA ) FIFTH AMENDMENT
) TO
COUNTY OF BEAUFORT ) 2.5 MM PROMISSORY NOTE
THIS FIFTH AMENDMENT TO 2.5 MM PROMISSORY NOTE is made and entered into
this 24th day of October, 1997, by and among SEA PINES ASSOCIATES, INC. ("SPA"),
SEA PINES COMPANY, INC. ("SPCO") (SPA and SPCO collectively referred to as the
"Borrower") and WACHOVIA BANK, N.A., as Successor to The South Carolina National
Bank ("Lender").
W I T N E S S E T H :
WHEREAS, pursuant to that certain Amendment to Credit Agreement of
January 17, 1992 which set forth the terms of a Two Million Five Hundred
Thousand and No/100 ($2,500,000.00) Dollar line of credit (the "2.5 MM Line of
Credit"), the Borrower did execute that certain Promissory Note, in the original
principal amount of $2,500,000.00, payable to the order of the Lender (the "2.5
MM Note"); and
WHEREAS, the First Amendment to 2.5 MM Note dated March 20, 1992
extended the Maturity Date of the 2.5 MM Note to March 1, 1993; and
WHEREAS, the Second Amendment to 2.5 MM Note dated April 26, 1993
extended the Maturity Date of the 2.5. MM Note to March 1, 1994; and
WHEREAS, the Third Amendment to 2.5 MM Note dated March 15, 1994
extended the Maturity Date of the 2.5 MM Note to March 15, 1995; and
WHEREAS, the Fourth Amendment to 2.5 MM Note dated March 15, 1995
extended the Maturity Date of the 2.5 MM Note to October 15, 1998; and
WHEREAS, the interest rate of the 2.5 MM Note was modified by that
certain Amendment Letter of June 4, 1997, attached hereto as Exhibit "A"; and
WHEREAS, pursuant to that certain Commitment Letter dated August 28,
1997, as amended, from the Lender to the Borrower (the "8/28/97 Commitment
Letter"), the Lender has agreed to further extend the Maturity Date of the 2.5
MM Note to November 15, 1999; and
WHEREAS, this Fifth Amendment to 2.5 MM Note is made and entered into
in order to modify the 2.5 MM Note so as to reflect the terms and conditions of
the 8/28/97 Commitment Letter.
1
<PAGE> 2
NOW, THEREFORE, for and in consideration of the mutual covenants ad
promises herein, and other good and valuable consideration, the parties hereto
agree as follows:
1. The above "Whereas" clauses are incorporated herein as if repeated
verbatim.
2. The "Maturity Date" of October 15, 1998 (as contained in the Fourth
Amendment to 2.5 MM Note) is hereby deleted and the "Maturity Date" of November
15, 1999 is hereby inserted as the "Maturity Date" throughout the 2.5 MM Note
(as amended).
3. The Loan Documents described in the 2.5 MM Note (including, but not
limited to, the Mortgage, the Credit Agreement, as amended, and the 2.5 MM
Mortgage, as amended) are hereby modified and construed to include the 8/28/97
Commitment Letter, this Fifth Amendment to 2.5 MM Note and the Eighth Amendment
to Credit Agreement, said documents being entered into of even date herewith in
conjunction with the terms and conditions of the 8/28/97 Commitment Letter and
the Amendment Letter of June 4, 1997 which is hereby ratified and incorporated
into the 2.5 MM Note.
4. The cross-default provisions contained in the 2.5 MM Note are hereby
modified and construed to include the 8/28/97 Commitment Letter, this Fifth
Amendment to 2.5 MM Note, the Fifth Amendment to 2.5 MM Mortgage and the Eighth
Amendment to Credit Agreement, said documents being entered into of even date
herewith in conjunction with the terms and conditions of the 8/28/97 Commitment
Letter as additional agreement whereby defaults and/or noncompliance with the
terms of said agreements shall result in a default under the 2.5 MM Note.
5. This Fifth Amendment to 2.5 MM Note shall be incorporated into and
made a part of the 2.5 MM Note and all references to the 2.5 MM Note shall be
construed to include the terms and conditions of this Fifth Amendment to 2.5 MM
Note.
6. The execution and delivery of this Fifth Amendment to 2.5 MM Note
shall not be construed to effect the priority of the 2.5 MM Mortgage, as
amended.
7. Except as heretofore amended or modified, the terms and conditions
of the 2.5 MM Note shall remain unchanged.
2
<PAGE> 3
IN WITNESS WHEREOF, the parties have duly executed this Fifth Amendment
to 2.5 MM Promissory Note on the day and year first above written.
SEA PINES ASSOCIATES, INC.
Connie Smith By: C.W. Flynn
- ----------------------------------- -------------------------------
Its: Chairman
-------------------------------
Jennifer Bialocki-Prynada Attest: Angus Cotton
- ----------------------------------- -------------------------------
Its: Secretary
-------------------------------
SEA PINES COMPANY, INC.
(formerly known as Sea Pines Plantation
Company, Inc.)
Connie Smith By: Michael E. Lawrence
- ----------------------------------- -------------------------------
Its: President
-------------------------------
Jennifer Bialocki-Prynada Attest: Steven P. Birdwell
- ----------------------------------- -------------------------------
Its: Secretary
-------------------------------
WACHOVIA BANK, N.A.
(as Successor to The South Carolina
National Bank)
Birdie Sargent By: William D. Priester
- ----------------------------------- -------------------------------
Its: Asst. Vice President
-------------------------------
Marla S. Nasuti Attest: Douglas E. Stetson
- ----------------------------------- -------------------------------
Its: Vice President
-------------------------------
3
<PAGE> 1
EXHIBIT 10.aa
STATE OF SOUTH CAROLINA ) FIFTH AMENDMENT TO
) 2.5 MM MORTGAGE
COUNTY OF BEAUFORT ) AND SECURITY AGREEMENT
THIS FIFTH AMENDMENT TO 2.5 MM MORTGAGE AND SECURITY AGREEMENT is made
and entered into as of this 24th day of October, 1997 by and between SEA PINES
COMPANY, INC. (formerly known as Sea Pines Plantation Company, Inc.) ("SPCO")
and SEA PINES ASSOCIATES, INC. ("SPA") (collectively referred to as the
"Mortgagor"), 32 Greenwood Drive, Hilton Head Island, South Carolina 29928, in
favor of WACHOVIA BANK, N.A. as Successor to The South Carolina National Bank,
its successors and assigns (hereinafter referred to as the "Mortgagee"), One Sea
Pines Circle, Hilton Head Island, South Carolina 29928.
W I T N E S S E T H:
WHEREAS, Mortgagee did previously loan to Mortgagor the principal
amount of Two Million Five Hundred Thousand and No/100 ($2,500,000.00) Dollars
as evidenced by that certain Promissory Note dated January 17, 1992 (the "2.5 MM
Note"); and
WHEREAS, the Mortgagee and Mortgagor did enter into that certain First
Amendment to Credit Agreement, dated January 17, 1992, which set forth the terms
and conditions of the $2,500,000.00 loan from the Mortgagee to the Mortgagor
(the "First Amendment to Credit Agreement"); and
WHEREAS, as security for the 2.5 MM Note, a Mortgage and Security
Agreement was made and entered into by and between the parties on January 17,
1992, and recorded in the RMC Office for Beaufort County, South Carolina in
Mortgage Book 499 at Page 980 (the "2.5 MM Mortgage"), so as to evidence the
security interest of the Mortgagee in the Land and Improvements thereon (as
defined in the Mortgage); and
WHEREAS, the 2.5 MM Mortgage was amended by the First Amendment to 2.5
MM Mortgage and Security Agreement dated March 20, 1992 and recorded in the RMC
Office for Beaufort County, South Carolina in Mortgage Book 506 at Page 486 (the
"First Amendment to 2.5 MM Mortgage"), the Second Amendment to 2.5 MM Mortgage
and Security Agreement dated April 26, 1993 and recorded in the RMC Office for
Beaufort County, South Carolina in Mortgage Book 544 at Page 292 (the "Second
Amendment to 2.5 MM Mortgage"), the Third Amendment to 2.5 MM Mortgage and
Security Agreement dated March 15, 1994 and recorded in the RMC Office for
Beaufort County, South Carolina in Mortgage Book 697 at Page 1790 (the "Third
Amendment to 2.5 MM Mortgage") and the Fourth Amendment to 2.5 MM Mortgage and
Security Agreement dated March 15, 1995 and recorded in the RMC Office for
Beaufort County, South Carolina in Mortgage Book 792 at Page 1234 (the "Fourth
Amendment to 2.5 MM Mortgage"); and
<PAGE> 2
WHEREAS, the Mortgagee and Mortgagor have entered into that certain
Eighth Amendment to Credit Agreement of even date which among other things,
provides for the extension of the Maturity Date from October 15, 1998 to
November 15, 1999; and
WHEREAS, this Fifth Amendment to 2.5 MM Mortgage is made and entered
into for the sole purpose of incorporating the terms and conditions of the
Eighth Amendment to Credit Agreement into the 2.5 MM Mortgage.
NOW, THEREFORE, for and in consideration of the sum of One and No/100
($1.00) Dollar paid by the Mortgagee to the Mortgagor this date and of the
mutual covenants and conditions contained herein, the parties, hereto agree as
follows:
1. The above "Whereas" clauses are incorporated herein as if repeated
verbatim.
2. The 2.5 MM Mortgage is hereby amended throughout so as to
incorporate therein the terms and conditions of the Eighth Amendment to Credit
Agreement and the Fifth Amendment to the 2.5 MM Note.
3 The Maturity Date of October 15, 1998 (as contained in the Fourth
Amendment to 2.5 MM Mortgage) is hereby deleted and the Maturity Date of
November 15, 1999 is hereby inserted as the Maturity Date throughout the 2.5 MM
Mortgage; and
4. This Fifth Amendment to 2.5 MM Mortgage is made and entered into for
the sole purpose of incorporating the terms and conditions of the Eighth
Amendment to Credit Agreement into the 2.5 MM Mortgage. This Fifth Amendment to
the 2.5 MM Mortgage is not intended to and shall not affect the priority of the
lien of the 2.5 MM Mortgage.
5. Except as heretofore amended or modified, the terms and conditions
of the Mortgage shall remain unchanged and by execution hereof, the undersigned
Mortgagor does hereby ratify and confirm all said terms.
2
<PAGE> 3
IN WITNESS WHEREOF, the Mortgagor has duly executed this Fifth
Amendment to 2.5 MM Mortgage and Security Agreement, and the Mortgagee has
caused this Agreement to be executed by its duly authorized officers, as of the
date first above written.
WITNESSES: MORTGAGOR:
SEA PINES COMPANY, INC.
(formerly known as Sea Pines Plantation
Company, Inc.)
Connie Smith By: Michael E. Lawrence
- ----------------------------------- -------------------------------
Its: President
Jennifer Bialocki-Prynada Attest: Steven P. Birdwell
- ----------------------------------- -------------------------------
Its: Secretary
MORTGAGEE:
WACHOVIA BANK, N.A.
(as Successor to The South Carolina
National Bank)
Birdie Sargent By: William D. Priester
- ----------------------------------- -------------------------------
Its: Assistant Vice President
Marla S. Nasuti Attest: Douglas E. Stetson
- ----------------------------------- -------------------------------
Its: Vice President
MORTGAGOR:
SEA PINES ASSOCIATES, INC.
Connie Smith By: C. W. Flynn
- ----------------------------------- -------------------------------
Its : Chairman
Jennifer Bialocki-Prynada Attest: Angus Cotton
- ----------------------------------- -------------------------------
Its: Secretary
3
<PAGE> 4
STATE OF SOUTH CAROLINA )
) PROBATE
COUNTY OF BEAUFORT )
PERSONALLY appeared before me Birdie Sargent who, on oath says that
(s)he saw the within-named WACHOVIA BANK, N.A. (as Successor to the South
Carolina National Bank) by its appropriate officer, sign, seal, and as its act
and deed, deliver the within-written Fifth Amendment to 2.5 MM Mortgage and
Security Agreement, and that (s)he with Marla S. Nasuti witnessed the execution
thereof.
Birdie Sargent
-----------------------------
SWORN to before me this 27th day
of October, 1997.
Marla S. Nasuti
- ------------------------------------
Notary Public for South Carolina
My Commission Expires: Oct. 10, 1998
-------------
4
<PAGE> 5
STATE OF SOUTH CAROLINA )
) PROBATE
COUNTY OF BEAUFORT )
PERSONALLY appeared before me Connie Smith, who, on oath, says that
(s)he saw the within-named SEA PINES COMPANY, INC., by its appropriate officers,
sign, seal, and as its act and deed, deliver the within-written Fifth Amendment
to 2.5 MM Mortgage and Security Agreement, and that (s)he with Jennifer
Bialocki-Prynada witnessed the execution thereof.
Connie Smith
------------------------------
SWORN to before me this 24th day
of October, 1997.
Jennifer Bialocki-Prynada
- -------------------------------------
Notary Public for South Carolina
My Commission Expires: Sept. 30, 2004
--------------
5
<PAGE> 6
STATE OF SOUTH CAROLINA )
) PROBATE
COUNTY OF BEAUFORT )
PERSONALLY appeared before me Connie Smith who, on oath says that (s)he
saw the within-named SEA PINES ASSOCIATES, INC., by its authorized officers,
sign, seal, and as its act and deed, deliver the within-written Fifth Amendment
to 2.5 MM Mortgage and Security Agreement, and that (s)he with Jennifer
Bialocki-Prynada witnessed the execution thereof.
Connie Smith
-----------------------------
SWORN to before me this 24th day
of October, 1997.
Jennifer Bialocki-Prynada
- -------------------------------------
Notary Public for South Carolina
My Commission Expires: Sept. 30, 2004
--------------
6
<PAGE> 1
EXHIBIT 10.bb
STATE OF SOUTH CAROLINA ) FIRST AMENDMENT
) TO
COUNTY OF BEAUFORT ) 12 MM PROMISSORY NOTE
THIS FIRST AMENDMENT TO 12 MM PROMISSORY NOTE is made and entered into
this 24th day of October, 1997, by and among SEA PINES ASSOCIATES, INC. ("SPA"),
SEA PINES COMPANY, INC. ("SPCO") (SPA and SPCO collectively referred to as the
"Borrower") and WACHOVIA BANK, N.A., as Successor to The South Carolina National
Bank (ALender@).
W I T N E S S E T H :
WHEREAS, pursuant to that certain Fifth Amendment to Credit Agreement
of October 15, 1993 which set forth the terms of a Twelve Million and No/100
($12,000,000.00) Dollar revolving credit loan (the "12 MM Revolver"), the
Borrower did execute that certain Promissory Note, in the original principal
amount of $12,000,000.00, payable to the order of the Lender (the "12 MM Note");
and
WHEREAS, pursuant to that certain Commitment Letter dated August 28,
1997, from the Lender to the Borrower (the "8/28/97 Commitment Letter"), the
Lender has agreed to further extend the Maturity Date of the 12 MM Note to
November 15, 1999; and
WHEREAS, pursuant to that certain Amendment Letter of March 19, 1997, a
copy of which is attached hereto as Exhibit "A," the Lender extended certain
interest rate options to the Borrower as described therein; and
WHEREAS, this First Amendment to 12 MM Note is made and entered into in
order to modify the 12 MM Note so as to reflect the terms and conditions of the
8/28/97 Commitment Letter and to incorporate the terms of the Amendment Letter
of March 19, 1997 into the 12 MM Note.
NOW, THEREFORE, for and in consideration of the mutual covenants ad
promises herein, and other good and valuable consideration, the parties hereto
agree as follows:
1. The above "Whereas" clauses are incorporated herein as if repeated
verbatim.
2. The "Maturity Date" of October 15, 1998 (as contained in the 12 MM
Note) is hereby deleted and the "Maturity Date" of November 15, 1999 is hereby
inserted as the "Maturity Date" throughout the 12 MM Note.
3. The terms and conditions of the March 19, 1997 Amendment Letter are
incorporated by reference into the 12 MM Note.
1
<PAGE> 2
4. The Loan Documents described in the 12 MM Note (including, but not
limited to, the Mortgage, the Credit Agreement, as amended, and the 12 MM
Mortgage) are hereby modified and construed to include the 8/28/97 Commitment
Letter, this First Amendment to 12 MM Note and the Eighth Amendment to Credit
Agreement, said documents being entered into of even date herewith in
conjunction with the terms and conditions of the 8/28/97 Commitment Letter.
5. The cross-default provisions contained in the 12 MM Note are hereby
modified and construed to include the 8/28/97 Commitment Letter, this First
Amendment to 12 MM Note, the First Amendment to 12 MM Mortgage and the Eighth
Amendment to Credit Agreement, said documents being entered into of even date
herewith in conjunction with the terms and conditions of the 8/28/97 Commitment
Letter as additional agreement whereby defaults and/or noncompliance with the
terms of said agreements shall result in a default under the 12 MM Note.
6. This First Amendment to 12 MM Note shall be incorporated into and
made a part of the 12 MM Note and all references to the 12 MM Note shall be
construed to include the terms and conditions of this First Amendment to 12 MM
Note.
7. The execution and delivery of this First Amendment to 12 MM Note
shall not be construed to affect the priority of the 12 MM Mortgage, as amended.
8. Except as heretofore amended or modified, the terms and
conditions of the 12 MM Note shall remain unchanged.
IN WITNESS WHEREOF, the parties have duly executed this First Amendment
to 12 MM Promissory Note on the day and year first above written.
SEA PINES ASSOCIATES, INC.
Connie Smith By: C. W. Flynn
- ------------------------------------ -------------------------------
Its: Chairman
Jennifer Bialocki-Prynada Attest: Angus Cotton
- ------------------------------------ -------------------------------
Its: Secretary
-------------------------------
SEA PINES COMPANY, INC.
(formerly known as Sea Pines Plantation
Company, Inc.)
Connie Smith By: Michael E. Lawrence
- ------------------------------------ -------------------------------
Its: President
-------------------------------
Jennifer Bialocki-Prynada Attest: Steven P. Birdwell
- ------------------------------------ -------------------------------
Its: Secretary
-------------------------------
2
<PAGE> 3
WACHOVIA BANK, N.A.
(as Successor to The South Carolina
National Bank)
Birdie Sargent By: William D. Priester
- ------------------------------------ -------------------------------
Its: Asst. Vice President
-------------------------------
Marla S. Nasuti Attest: Douglas E. Stetson
- ------------------------------------ -------------------------------
Its: Vice President
-------------------------------
3
<PAGE> 1
EXHIBIT 10.cc
STATE OF SOUTH CAROLINA ) FIRST AMENDMENT TO
) 12 MM MORTGAGE, SECURITY
COUNTY OF BEAUFORT ) AGREEMENT AND FINANCING STATEMENT
THIS FIRST AMENDMENT TO 12 MM MORTGAGE, SECURITY AGREEMENT AND
FINANCING STATEMENT is made and entered into as of this 24th day of October,
1997 by and between SEA PINES COMPANY, INC. (formerly known as Sea Pines
Plantation Company, Inc.) ("SPCO") (the "Mortgagor"), 32 Greenwood Drive, Hilton
Head Island, South Carolina 29928, in favor of WACHOVIA BANK, N.A. as Successor
to The South Carolina National Bank, its successors and assigns (hereinafter
referred to as the "Mortgagee"), One Sea Pines Circle, Hilton Head Island, South
Carolina 29928.
W I T N E S S E T H:
WHEREAS, Mortgagee did previously loan to Mortgagor and Sea Pines
Associates, Inc. ("SPA") (Mortgagor and SPA are collectively referred to herein
as "Borrower") the principal amount of Twelve Million and No/100
($12,000,000.00) Dollars as evidenced by that certain Promissory Note dated
October 15, 1993 (the "12 MM Note"); and
WHEREAS, the Mortgagee and Borrower did enter into that certain Fifth
Amendment to Credit Agreement, dated October 15, 1993, which set forth the terms
and conditions of the $12,000,000.00 loan from the Mortgagee to the Borrower
(the "Fifth Amendment to Credit Agreement"); and
WHEREAS, as security for the 12 MM Note, a Mortgage, Security Agreement
and Financing Statement was made and entered into by and between the parties on
October 15, 1993, and recorded in the RMC Office for Beaufort County, South
Carolina in Mortgage Book 659 at Page 1683 (the "12 MM Mortgage"), so as to
evidence the security interest of the Mortgagee in the Land and Improvements
thereon (as defined in the Mortgage); and
WHEREAS, the Mortgagee and Borrower have entered into that certain
Eighth Amendment to Credit Agreement of even date which among other things,
provides for the extension of the Maturity Date from October 15, 1998 to
November 15, 1999; and
WHEREAS, this First Amendment to 12 MM Mortgage is made and entered
into for the sole purpose of incorporating the terms and conditions of the
Eighth Amendment to Credit Agreement into the 12 MM Mortgage.
NOW, THEREFORE, for and in consideration of the sum of One and No/100
($1.00) Dollar paid by the Mortgagee to the Mortgagor this date and of the
mutual covenants and conditions contained herein, the parties, hereto agree as
follows:
<PAGE> 2
1. The above "Whereas" clauses are incorporated herein as if repeated
verbatim.
2. The 12 MM Mortgage is hereby amended throughout so as to incorporate
therein the terms and conditions of the Eighth Amendment to Credit Agreement and
the First Amendment to the 12 MM Note.
3. The Maturity Date of October 15, 1998 (as contained in the 12 MM
Mortgage) is hereby deleted and the Maturity Date of November 15, 1999 is hereby
inserted as the Maturity Date throughout the 12 MM Mortgage; and
4. This First Amendment to 12 MM Mortgage is made and entered into for
the sole purpose of incorporating the terms and conditions of the Eighth
Amendment to Credit Agreement and the First Amendment to the 12 MM Note into the
12 MM Mortgage. This First Amendment to the 12 MM Mortgage is not intended to
and shall not affect the priority of the lien of the 12 MM Mortgage.
6. Except as heretofore amended or modified, the terms and conditions
of the Mortgage shall remain unchanged and by execution hereof, the undersigned
Mortgagor does hereby ratify and confirm all said terms.
IN WITNESS WHEREOF, the Mortgagor has duly executed this First
Amendment to 12 MM Mortgage, Security Agreement and Financing Statement, and the
Mortgagee has caused this Agreement to be executed by its duly authorized
officers, as of the date first above written.
WITNESSES: MORTGAGOR:
SEA PINES COMPANY, INC.
(formerly known as Sea Pines
Plantation Company, Inc.)
Connie Smith By: Michael E. Lawrence
- ------------------------------------ ----------------------------
Its: President
----------------------------
Jennifer Bialocki-Prynada Attest: Steven P. Birdwell
- ------------------------------------ ----------------------------
Its: Secretary
----------------------------
2
<PAGE> 3
MORTGAGEE:
WACHOVIA BANK, N.A.
(as Successor to The South Carolina
National Bank)
Birdie Sargent By: William D. Priester
- ----------------------------------- ----------------------------
Its: Asst. Vice President
----------------------------
Marla S. Nasuti Attest: Douglas E. Stetson
- ----------------------------------- ----------------------------
Its: Vice President
----------------------------
STATE OF SOUTH CAROLINA )
) PROBATE
COUNTY OF BEAUFORT )
PERSONALLY appeared before me Birdie Sargent who, on oath says that
(s)he saw the within-named WACHOVIA BANK, N.A. (as Successor to the South
Carolina National Bank) by its appropriate officer, sign, seal, and as its act
and deed, deliver the within-written First Amendment to 12 MM Mortgage, Security
Agreement and Financing Statement, and that (s)he with Marla S. Nasuti witnessed
the execution thereof.
Birdie Sargent
--------------------------------------
SWORN to before me this 27th day
of October, 1997.
Marla S. Nasuti
- ------------------------------------
Notary Public for South Carolina
My Commission Expires: Oct. 10, 1998
-------------
3
<PAGE> 4
STATE OF SOUTH CAROLINA )
) PROBATE
COUNTY OF BEAUFORT )
PERSONALLY appeared before me Connie Smith, who, on oath, says that
(s)he saw the within-named SEA PINES COMPANY, INC., by its appropriate officers,
sign, seal, and as its act and deed, deliver the within-written First Amendment
to 12 MM Mortgage, Security Agreement and Financing Statement, and that (s)he
with Jennifer Bialocki-Prynada witnessed the execution thereof.
Connie Smith
-------------------------------
SWORN to before me this 24th day
of October, 1997.
Jennifer Bialocki-Prynada
- -------------------------------------
Notary Public for South Carolina
My Commission Expires: Sept. 30, 2004
--------------
4
<PAGE> 1
EXHIBIT 10.dd
SECOND AMENDMENT TO AMENDED AND RESTATED
PARTNERSHIP AGREEMENT OF
TIDE POINTE PARTNERS
THIS SECOND AMENDMENT to Amended and Restated Partnership Agreement of
Tide Pointe Partners (the "Amendment") is entered into this 24th day of May,
1995, by and between PROVIDERS ENTERPRISES, INC., an Ohio corporation ("PE") and
SEA PINES/TIDE POINTE, INC., a South Carolina corporation ("Sea Pines").
RECITALS:
A. PE and Sea Pines are parties to an Amended and Restated
Partnership Agreement of Tide Pointe Partners (the "Partnership Agreement").
Unless otherwise stated, all terms defined in the Partnership Agreement are
used in this Second Amendment with the same meaning.
B. PE and Sea Pines desire to amend the Partnership Agreement in
accordance with the terms and conditions of this Second Amendment.
NOW, THEREFORE, intending to be legally bound hereby, the parties
hereby agree to continue the Partnership under the Act, upon the following
terms and conditions:
Section I. Amendments to Partnership Agreement. The Partnership
Agreement is hereby amended as follows:
1. On or after the effective date of this Amendment, each
reference in the Partnership Agreement and this Amendment to "this Agreement,"
"hereunder" and "hereof" or words of like import referring to the Partnership
Agreement shall mean and refer to the Partnership Agreement, as amended by the
First Amendment dated August 1, 1994, and by this Second Amendment. The
Partnership Agreement, as amended by the Amendment, is, and shall continue to
be, in full force and effect and hereby is ratified and confirmed in all
respects.
2. Article 5 of the Partnership Agreement is amended by
deleting Section 5.3 in its entirety and substituting a restated Section 5.3 as
follows:
ARTICLE 5
...
Section 5.3 Guaranty of PE Debt
(a) On January 18, 1994, the Partnership executed and
delivered a Guaranty (the "Original Guaranty") of PE's Demand
Promissory Note in the
<PAGE> 2
principal amount of $5,000,000.00 dated January 18, 1994 (the "Original
Note") payable to P-I-E Financial Corp., an Ohio corporation, the sole
shareholder of PE ("P-I-E Financial"). The Original Guaranty was
secured by a Mortgage on the project (the "$5,000,000.00 Mortgage")
which Mortgage was junior and subordinate to the mortgage securing the
then existing senior bank financing for the project in favor of
NationsBank of South Carolina (the "NationsBank Mortgage").
Concurrently herewith, the Partnership has executed and delivered an
Amendment to Promissory Note amending the Original Note (the Original
Note, as so amended, being hereinafter referred to as the
"$5,000,000.00 Note") and a Revised and Restated Guaranty Agreement
(the "$5,000,000.00 Guaranty") revising and restating the Original
Guaranty. If, pursuant to the $5,000,000.00 Guaranty, the Partnership
pays all or any portion of the principal amount of the $5,000,000.00
Note, the Unpaid Capital Contributions of PE shall be reduced by the
amount of such payment.
(b) On August 4, 1994, to evidence the Partner Loan by PE
referred to in Section 6.1 of this Agreement, the Partnership executed
and delivered a Promissory Note payable to PE in the principal amount
of $7,095,000.00. Such Note was secured by a Mortgage on the project
(the "$7,095,000.00 Mortgage"), which Mortgage was junior and
subordinate to the NationsBank Mortgage and the $5,000,000.00 Mortgage.
Concurrently herewith, the Partnership has executed and delivered a
Guaranty (the "$7,095,000.00 Guaranty") of PE's Promissory Note in the
principal amount of $7,095,000.00 dated August 4, 1994 payable to P-I-E
Financial as amended by an Amendment to Promissory Note of even date
herewith.
(c) As part of the development and construction loan of the
Partnership with First Union National Bank ("FUNB") in the amount of
$27,500,000.00 (the Tide Pointe Development Loan) and $5,500,000.00
(the Cottage Construction Line of Credit) FUNB is requiring certain
additional collateral over and above the real estate collateral
required for a development/construction loan, said additional
collateral consisting of either cash or securities to be placed in the
custody of FUNB through its South Carolina Capital Management Group.
Pursuant to a Loan Agreement of even date herewith, (the "P-I-E Loan
Agreement"), P-I-E Financial will loan to PE the securities required as
"Additional Collateral" under the FUNB loan, and PE hereby agrees to
pledge such required collateral for the benefit of the Partnership
pursuant to the terms of this Section 5.3. Said Additional Collateral
is in the amount of $6,875,000.00 if cash, and $7,218,750.00 if
securities and the Pre-Sales Shortfall Funds is limited in the P-I-E
Loan Agreement to the amount of $5,000,000.00 if cash and $5,250,000.00
if securities. For purposes of this Partnership Agreement, the
"Additional Collateral" and "Pre-Sales Shortfall Funds" shall be
collectively
-2-
<PAGE> 3
referred to as "FUNB Collateral", recognizing, however, that the funds
and/or securities will be pledged to FUNB at different times. In
summary, the total FUNB Collateral provided as a loan by P-I-E
Financial to PE for purposes of the FUNB loan is $11,875,000.00 if
cash and $12,468,750.00 if securities.
Simultaneously with the closing date for the FUNB loan, the
Partnership will execute and deliver a Guaranty in favor of P-I-E
Financial (the "$12,468,750.00 Guaranty") of PE's obligation under the
P-I-E Loan Agreement in the total amount of up to $12,468,750.00. The
$12,468,750.00 Guaranty will be secured by a Mortgage and other
corollary loan documents on the project (the "Consolidated Mortgage"),
which Consolidated Mortgage shall be junior and subordinate to the FUNB
loan for the project. Said Consolidated Mortgage shall supersede and
replace the $5,000,000.00 Mortgage and the $7,095,000.00 Mortgage so
that the total potential indebtedness secured by said Consolidated
Mortgage shall be the $5,000,000.00 represented by the $5,000,000.00
Guaranty, the $7,095,000.00 represented by the $7,095,000.000 Guaranty
and the $12,468,750.00 for the FUNB Collateral, or a total of
$24,563,750.00. The $7,095,000 Guaranty, the $12,468,750.00 Guaranty,
the Consolidated Mortgage and all corollary loan documents shall be in
a form and substance reasonably satisfactory to PE and its counsel.
(d) Upon the closing and the funding of the FUNB loan as
referenced above, the priorities of the real estate mortgages against
the project will be as follows:
(i) FUNB Mortgage;
(ii) Consolidated Mortgage securing the $5,000,000
Guaranty, the $7,095,000 Guaranty, and the $12,468,750
Guaranty;
(iii) The $1,505,000 Mortgage in favor of Sea Pines
dated August 4, 1994 which Mortgage shall be considered on a
par with the $7,095,000 portion of the Consolidated Mortgage.
(e) The Consolidated Mortgage and related loan documentation
will provide for the following priorities:
(i) The $12,468,750 Guaranty;
(ii) The $5,000,000 Guaranty;
(iii) The $7,095,000 Guaranty.
-3-
<PAGE> 4
(f) The Partners recognize and acknowledge that upon and
after the occurrence and continuance of an Event of Default (as defined
in the P-I-E Loan Agreement), then among other things, in the event
that PE is unable to return and/or repay any FUNB Collateral because
FUNB fails or refuses to release such FUNB Collateral or for any other
reason whatsoever, then the Partnership will be obligated pursuant to
the $12,468,750.00 Guaranty to immediately pay to P-I-E Financial, in
immediately available funds, an amount in cash equal to the sum of (i)
the aggregate principal amount of such FUNB collateral, (ii) the total
of all Interest Remittances (as defined in the P-I-E Loan Agreement)
which shall not have been made to P-I-E Financial, and all other
payments required to be made to P-I-E Financial under the P-I-E Loan
Agreement, together with interest on all of the foregoing at the
Default Rate (as defined in the P-I-E Loan Agreement) from the time of
such Event of Default.
Section II. Counterparts. This Amendment may be executed in multiple
counterparts, all of which when taken together shall constitute one document.
IN WITNESS WHEREOF, the parties have executed this Amendment, in
multiple counterparts, as of the day and year first above written.
WITNESSES: TIDE POINTE PARTNERS,
an Ohio Partnership
By: PROVIDERS ENTERPRISES, INC., an
Ohio Corporation, its General Partner
By: /s/ Herbert L. McKee
- --------------------------------- --------------------------------
Herbert L. McKee
Its Vice-President
Attest: /s/ Warren L. Udisky
- --------------------------------- ----------------------------
Warren L. Udisky
Its Secretary
-4-
<PAGE> 5
WITNESSES: By: SEA PINES/TIDE POINTE, INC., a
South Carolina Corporation,
its General Partner
By: /s/ Michael E. Lawrence
- --------------------------------- --------------------------------
Michael E. Lawrence
Its President
Attest: /s/ Carol P. Cramer
- --------------------------------- ----------------------------
Carol P. Cramer
Its Secretary
-5-
<PAGE> 1
EXHIBIT 10.ee
THIRD AMENDMENT TO AMENDED AND RESTATED
PARTNERSHIP AGREEMENT OF
TIDE POINTE PARTNERS
THIS THIRD AMENDMENT to Amended and Restated Partnership Agreement of
Tide Pointe Partners (this "Amendment") is entered into this 30th day of July,
1997, by and between PROVIDERS ENTERPRISES, INC., an Ohio corporation ("PE") and
SEA PINES/TIDE POINTE, INC., a South Carolina corporation ("Sea Pines").
RECITALS:
A. PE and Sea Pines are parties to an Amended and Restated
Partnership Agreement of Tide Pointe Partners, as amended by a First Amendment
dated January 14, 1994 and a Second Amendment dated May 24, 1995 (the
"Partnership Agreement"). Unless otherwise stated, all terms defined in the
Partnership Agreement are used in this Amendment with the same meaning.
B. PE and Sea Pines desire to amend the Partnership Agreement in
accordance with the terms and conditions of this Amendment.
NOW, THEREFORE, intending to be legally bound hereby, the parties
hereby agree to continue the Partnership under the Act, upon the following
terms and conditions:
Section I. Amendments to Partnership Agreement. The Partnership
Agreement is hereby amended as follows:
1. On or after the effective date of this Amendment, each
reference in the Partnership Agreement and this Amendment to "this Agreement,"
"hereunder" and "hereof" or words of like import referring to the Partnership
Agreement shall mean and refer to the Partnership Agreement, as amended by the
First Amendment dated August 1, 1994, the Second Amendment dated May 24, 1995
and by this Amendment. The Partnership Agreement, as amended by the Amendment,
is, and shall continue to be, in full force and effect and hereby is ratified
and confirmed in all respects.
2. Article 5 of the Partnership Agreement is amended by
deleting Section 5.3 in its entirety and substituting a restated Section 5.3 as
follows:
ARTICLE 5
...
Section 5.3 Guaranty of PE Debt
(a) On January 18, 1994, the Partnership executed and
delivered a Guaranty (the "Original Guaranty") of PE's Demand
Promissory Note in the principal amount of $5,000,000.00 dated
January 18, 1994 (the "Original Note") payable to P-I-E Financial
Corp., an Ohio corporation, the sole shareholder of PE ("P-I-E
Financial"). The Original
<PAGE> 2
Guaranty was secured by a Mortgage on the project (the "$5,000,000.00
Mortgage"), which Mortgage was junior and subordinate to the mortgage
securing the then-existing senior bank financing for the project in
favor of NationsBank of South Carolina (the "NationsBank Mortgage"). On
May 24, 1995, the Partnership executed and delivered an Amendment to
Promissory Note amending the Original Note (the Original Note, as so
amended, being hereinafter referred to as the "$5,000,000.00 Note") and
a Revised and Restated Guaranty Agreement (the "$5,000,000.00
Guaranty") revising and restating the Original Guaranty. If, pursuant
to the $5,000,000.00 Guaranty, the Partnership pays all or any portion
of the principal amount of the $5,000,000.00 Note, the Unpaid Capital
Contributions of PE shall be reduced by the amount of such payment.
(b) On August 4, 1994, to evidence the Partner Loan by PE
referred to in Section 6.1 of this Agreement, the Partnership executed
and delivered a Promissory Note payable to PE in the principal amount
of $7,095,000.00. Such Note was secured by a Mortgage on the project
(the "$7,095,000.00 Mortgage"), which Mortgage was junior and
subordinate to the NationsBank Mortgage and the $5,000,000.00 Mortgage.
On May 24, 1995, the Partnership executed and delivered a Guaranty (the
"$7,095,000.00 Guaranty") of PE's Promissory Note in the principal
amount of $7,095,000.00 dated August 4, 1994 payable to P-I-E Financial
as amended by an Amendment to Promissory Note dated May 24, 1995.
(c) As part of the development and construction loan of the
Partnership with First Union National Bank ("FUNB") in the amount of
$27,500,000.00 and subsequently increased to $33,260,000 (the Tide
Pointe Development Loan) and $5,500,000.00 (the Cottage Construction
Line of Credit), FUNB required certain additional collateral over
and above the real estate collateral required for a
development/construction loan, said additional collateral consisting of
securities placed in the custody of FUNB through its Carolina Capital
Management Group. Pursuant to a Loan Agreement originally dated May 24,
1995 and amended pursuant to an Amended and Restated Loan Agreement of
even date herewith, (the "P-I-E Loan Agreement"), P-I-E Financial
loaned to PE the securities required as "Additional Collateral" as
"Pre-Sales Shortfall Collateral" under the FUNB loan, and PE agreed to
pledge such required collateral for the benefit of the Partnership
pursuant to the terms of this Section 5.3. Said "Additional Collateral"
is in the amount of $8,000,000.00 and the "Pre-Sales Shortfall
Collateral" is in the amount of $14,000,000.00. For purposes of this
Partnership Agreement, the "Additional Collateral" and "Pre-Sales
Shortfall Collateral" shall be collectively referred to as "FUNB
Collateral". In summary, the total FUNB Collateral provided as a loan
by P-I-E Financial to PE for purposes of the FUNB loan is
$22,000,000.00.
Simultaneously with the date hereof, the Partnership will
execute and deliver an Amendment of Guaranty Agreement in favor of
P-I-E Financial (the Guaranty Agreement as so amended being referred
to as the "$22,000,000.00 Guaranty") with respect to PE's obligation
under the P-I-E Loan Agreement in the total amount of up to
$22,000,000.00. The $22,000,000.00 Guaranty will be secured by a
Commercial Mortgage of Real Estate and
-2-
<PAGE> 3
Security Agreement, as amended by an Amendment of even date herewith,
and other corollary loan documents on the project (the "Consolidated
Mortgage"), which Consolidated Mortgage shall be junior and subordinate
to the FUNB loan for the project. Said Consolidated Mortgage shall
supersede and replace the $5,000,000.00 Mortgage and the $7,095,000.00
Mortgage so that the total potential indebtedness secured by said
Consolidated Mortgage shall be the $5,000,000.00 represented by the
$5,000,000.00 Guaranty, the $7,095,000.00 represented by the
$7,095,000.00 Guaranty and the $22,000,000.00 represented by the
$22,000,000.00 Guaranty or a total of $34,495,000.00. The
$22,000,000.00 Guaranty, the Consolidated Mortgage and all corollary
loan documents shall be in a form and substance reasonably satisfactory
to PE and its counsel.
(d) The priorities of the real estate mortgages against
the project are as follows:
(i) FUNB Mortgage;
(ii) Consolidated Mortgage securing the $5,000,000.00
Guaranty, the $7,095,000.00 Guaranty, and the $22,000,000.00
Guaranty;
(iii) The $1,505,000 Mortgage in favor of Sea Pines
dated August 4, 1994, which Mortgage shall be considered on a
par with the $7,095,000.00 portion of the Consolidated
Mortgage.
(e) The Consolidated Mortgage and related loan documentation
will provide for the following priorities:
(i) The $22,000,000.00 Guaranty;
(ii) The $5,000,000.00 Guaranty;
(iii) The $7,095,000.00 Guaranty.
(f) The Partners recognize and acknowledge that upon and
after the occurrence and continuance of an Event of Default (as defined
in the P-I-E Loan Agreement), then among other things, in the event
that PE is unable to return and/or repay any FUNB Collateral because
FUNB fails or refuses to release such FUNB Collateral or for any other
reason whatsoever, then the Partnership will be obligated pursuant to
the $22,000,000.00 Guaranty to immediately pay to P-I-E Financial, in
immediately available funds, an amount in cash equal to the sum of (i)
the aggregate principal amount of such FUNB collateral, (ii) the total
of all Interest Remittances (as defined in the P-I-E Loan Agreement)
which shall not have been made to P-I-E Financial, and all other
payments required to be made to P-I-E Financial under the P-I-E Loan
Agreement, together with interest on all of the foregoing at the
Default Rate (as defined in the P-I-E Loan Agreement) from the time of
such Event of Default.
-3-
<PAGE> 4
Section II. Counterparts. This Amendment may be executed in multiple
counterparts, all of which when taken together shall constitute one document.
IN WITNESS WHEREOF, the parties have executed this Amendment, in
multiple counterparts, as of the day and year first above written.
SEA PINES/TIDE POINTE, INC., a PROVIDERS ENTERPRISES, INC., an
South Carolina corporation Ohio Corporation
By: /s/ Michael E. Lawrence By: /s/ Chuck Dinunzio
--------------------------------- --------------------------------
Michael E. Lawrence Chuck Dinunzio
Its: President Its: Vice-President
--------------------------------- --------------------------------
-4-
<PAGE> 1
EXHIBIT 10.ff
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement") is dated as of the 31st day of
July, 1997, by and between SEA PINES SENIOR LIVING CENTER, INC., a South
Carolina corporation ("Seller") and THE ROGERS CENTER, L.L.C., a South Carolina
limited liability company ("Purchaser").
A. Seller owns a 44-long term care nursing bed, 35-assisted living bed
health facility (the "Health Care Center") located at 801 Lemon Grass Court,
Hilton Head Island, South Carolina.
B. Tide Pointe Partners, an Ohio general partnership ("Partners") is the
developer and operator of Tide Pointe, a continuing care retirement community
licensed under South Carolina law and connected to the Health Care Center by a
climate-controlled walkway.
C. Pursuant to a Ground Lease dated August 4, 1994 (the "Ground Lease"),
Partners leased to Seller the approximately one-acre tract of land (the "Land")
upon which the Health Care Center is situated. In addition, Partners financed
the development of the Health Care Center by advancing to Seller funds in the
aggregate amount of approximately $8,725,000 (the "Facility Loan"). The Facility
Loan is evidenced in part by the Promissory Note of Seller dated August 4, 1994
in the principal amount of $4,749,740 (the "Note") and is secured by a Leasehold
Mortgage and Security Agreement dated May 24, 1995 between Seller and Partners
(the "Leasehold Mortgage"). In addition, pursuant to an Option Agreement dated
December 17, 1993 among Partners, Seller and Sea Pines Company, Inc. (the
"Option Agreement"), Partners has an option to purchase all of the issued and
outstanding shares of Seller.
D. Partners has assigned and conveyed to Purchaser all of Partners' right,
title and interest in and to (i) the Land, (ii) the Ground Lease, (iii) the
Facility Loan, (iv) the Note and (v) the Leasehold Mortgage.
E. Seller desires to sell to Purchaser, and Purchaser agrees to purchase
from Seller, all of the assets comprising the Health Care Center (including,
without limitation, all of Seller's right, title and interest in and to the
Ground Lease), upon the terms and conditions set forth in this Agreement.
F. By its order dated July 10, 1997, the South Carolina Department of
Health and Environmental Control has approved such transaction.
NOW, THEREFORE, in consideration of the mutual representations, covenants
and agreements set forth in this Agreement, Seller and Purchaser agree as
follows:
ARTICLE I
PURCHASE AND SALE
1.1 Purchased Assets. Upon the terms and subject to the conditions of
this Agreement, Seller hereby sells, transfers, assigns, conveys and delivers
to Purchaser, and Purchaser hereby
<PAGE> 2
purchases from Seller, free and clear of all liens, charges, security interests
or encumbrances (collectively, "Encumbrances") except Permitted Encumbrances
(defined below), all assets and properties comprising or in any way relating to
the Health Care Center (herein collectively called the "Assets") including,
without limitation, the following:
(a) All buildings, structures and improvements of every nature
whatsoever now or hereafter situated on the Land, and all fixtures,
machinery, appliances, equipment, furniture, inventory, materials and other
personal property of every nature whatsoever and located in or on, or
attached to, or used or usable in connection with, the Health Care Center
or the Land, buildings, structures or other improvements;
(b) All right, title and interest of Seller in and to (i) the Ground
Lease, (ii) the Management Agreement dated August 10, 1996 by and between
Seller and Volare Systems Limited Liability Company and (iii) the contracts
and agreements set forth on Schedule 1.1(b) (collectively, the "Business
Agreements");
(c) All books and records of Seller relating to the Health Care
Center; and
(d) All rights, claims, and causes of action against third parties
relating to the Health Care Center.
"Permitted Encumbrances" means (i) the Leasehold Mortgage and (ii) the liens
granted pursuant to the FUNB Security Documents (as defined in the Leasehold
Mortgage).
1.2 Liabilities. Purchaser assumes and agrees to discharge all
liabilities and obligations of Seller arising out of the operation of the
Health Care Center, whether incurred before or after the closing of the
transactions contemplated by this Agreement. Purchaser shall not assume any
liability or obligation that is not directly or indirectly related to the
operation of the Health Care Center.
ARTICLE II
PURCHASE PRICE
2.1 Purchase Price. The purchase price for the Assets ("Purchase Price")
shall be an amount equal to the aggregate principal balance and accrued
interest under the Facility Loan. As payment in full of the Purchase Price,
Purchaser shall, and hereby does, release Seller of all of Seller's obligations
and liabilities pursuant to the Facility Loan, the Note and the Leasehold
Mortgage.
ARTICLE III
CLOSING
3.1 Closing Date. The Closing of the transactions contemplated by this
Agreement shall take place concurrently with the execution of this Agreement.
2
<PAGE> 3
3.2 Seller's Deliveries. At the Closing Seller shall deliver to Purchaser
the following:
(a) Copies of resolutions of the Board of Directors of Seller
authorizing the execution and performance of this Agreement and the
transactions contemplated hereby, certified by the secretary of Seller;
(b) Bills of sale, endorsements, assignments and other instruments of
transfer, all in such form as Purchaser reasonably requests, vesting in
Purchaser good and marketable title to the Assets, free and clear of all
Encumbrances.
3.3 Option Agreement. In consideration of the agreements of the parties
set forth in this Agreement, all obligations of all parties to the Option
Agreement are hereby terminated.
3.4 Further Assurances. Seller, at any time and from time to time after
the date of this Agreement, upon request of Purchaser, will do, execute,
acknowledge and deliver, all such further acts, deeds, assignments, transfers,
conveyances and assurances as may be reasonably required for the better
conveying, transferring, assigning and delivering to Purchaser, or to its
successors and assigns, and for aiding and assisting in collecting and reducing
to possession, all the Assets.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser as follows:
4.1 Organization of Seller. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of South
Carolina.
4.2 Authority of Seller. Seller has the corporate power and authority to
execute, deliver and perform this Agreement. This Agreement has been duly
authorized, executed and delivered by Seller and is the legal, valid and
binding obligation of Seller enforceable in accordance with its terms.
4.3 Conflicts. Neither the execution and delivery of this Agreement or
the consummation of any of the transactions contemplated hereby nor compliance
with or fulfillment of the terms, conditions and provisions hereof will:
(a) conflict with, result in a breach of, the terms, conditions or
provisions of, or constitute a default, an event of default or an event
creating rights of acceleration, termination or cancellation or a loss of
rights under, or result in the creation or imposition of any Encumbrance
upon any of the Assets, under (1) the charter or By-laws of Seller, (2) any
material note, instrument, agreement, mortgage, lease, license, franchise,
permit or other authorization, right, restriction or obligation to which
Seller is a party or any of the Assets is subject or by which Seller is
bound, (3) any court order or injunction to which Seller is a party or any
of the Assets is subject or by which Seller is bound, or (4) any statute or
regulation affecting Seller or the Assets, or
3
<PAGE> 4
(b) require the approval, consent, authorization or act of, or the
making by Seller of any declaration, filing or registration with, any
person or entity.
4.3 Title to Property. Seller has good and marketable title to all of the
Assets, free and clear of all Encumbrances except Permitted Encumbrances. Upon
delivery to Purchaser of the instruments of transfer contemplated by Section
3.2, Seller will thereby transfer to Purchaser good and marketable title to all
of the Assets, free and clear of all Encumbrances except Permitted Encumbrances.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller as follows:
5.1 Organization of Purchaser. Purchaser is a limited liability company
duly organized, validly existing and in good standing under the laws of the
State of South Carolina.
5.2 Authority of Purchaser. Purchaser has full power and authority to
execute, deliver and perform this Agreement. This Agreement has been duly
authorized, executed and delivered by Purchaser and is the legal, valid
and binding agreement of Purchaser enforceable in accordance with its terms.
5.3 Conflicts. Neither the execution and delivery of this Agreement nor
the consummation of any of the transactions contemplated hereby nor compliance
with or fulfillment of the terms, conditions and provisions hereof will:
(a) conflict with, result in a breach of the terms, conditions or
provisions of, or constitute a default, an event of default or an event
creating rights of acceleration, termination or cancellation or a loss of
rights under (1) the Articles of Organization or Operating Agreement of
Purchaser, (2) any material note, instrument, agreement, mortgage, lease,
license, franchise, permit or other authorization, right, restriction or
obligation to which Purchaser is a party or by which Purchaser is bound,
(3) any court order or injunction to which Purchaser is a party or by
which it is bound or (4) any statute or regulation affecting Purchaser, or
(b) require the approval, consent, authorization or act of, or
the making by Purchaser of any declaration, filing or registration with,
any person or entity.
ARTICLE VI
GENERAL PROVISIONS
6.1 Survival of Obligations. All representations, warranties, covenants
and obligations contained in this Agreement shall survive Closing and shall be
binding upon and inure to the
4
<PAGE> 5
successors and permitted assigns of the parties. The rights and obligations of
this Agreement may not be assigned, in whole or in part, by operation of law or
otherwise, without the express written consent of the parties, which consent is
not to be unreasonably withheld or delayed.
6.2 Entire Agreement; Waivers. This Agreement contains the entire
agreement between the parties and supersedes any and all written and verbal
prior and contemporaneous agreements and understandings between the parties.
The waiver of any term or condition of this Agreement must be in writing and
signed by the party waiving its rights. No waiver shall constitute a waiver of
any subsequent obligation or breach.
6.3 Counterparts. This Agreement may be executed in multiple
counterparts, all of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have duly executed this Agreement on the
date first above written.
SEA PINES SENIOR LIVING CENTER, INC.
By: /s/ Michael E. Lawrence
------------------------------------
Michael E. Lawrence
Its: President
------------------------------------
THE ROGERS CENTER, L.L.C.
By: Tide Pointe Partners, its sole member
By: Sea Pines/Tide Pointe, Inc.,
its general partner
By: /s/ Michael E. Lawrence
-------------------------------------
Michael E. Lawrence
Its: President
------------------------------------
By: Providers Enterprises, Inc.,
its general partner
By: /s/ Chuck Dinunzio
-------------------------------------
Chuck Dinunzio
Its: Vice President
------------------------------------
5
<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.
<PAGE> 1
EXHIBIT 24
SEA PINES ASSOCIATES, INC.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer and/or
director of SEA PINES ASSOCIATES, INC., a South Carolina corporation
(hereinafter referred to as the "Company"), does hereby constitute and appoint
Charles W. Flynn, Michael E. Lawrence and Angus Cotton, respectively, and each
of them severally, with full power of substitution, his true and lawful
attorneys and agents (each with authority to act alone), to do any and all acts
and things and to execute any and all instruments which said attorneys and
agents or any of them may deem necessary or advisable to enable the Company to
comply with the Securities Exchange Act of 1934, as amended (the "Act"), and any
rules, regulations and requirements of the Securities and Exchange Commission
(the "Commission") in respect thereof, in connection with the filing under the
Act of the Company's Annual Report on Form 10-K for the Company's fiscal year
ended October 31, 1997, including all amendments thereto (the "Form 10-K"), and
including specifically, but without limiting the generality of the foregoing,
the power and authority to sign for and on behalf of the undersigned the name
of the undersigned as officer and/or director of the Company to the Form 10-K
filed with the Commission and to any instrument or document filed as part of,
as an exhibit to, or in connection with said Form 10-K; and the undersigned
does hereby ratify and confirm as his own act and deed all that said attorneys
and agents, and each of them, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents, this
26th day of January, 1998.
/s/ Paul B. Barringer, II
---------------------------------------------
(Signature)
Paul B. Barringer, II
---------------------------------------------
(Print Name)
<PAGE> 2
EXHIBIT 24
SEA PINES ASSOCIATES, INC.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer and/or
director of SEA PINES ASSOCIATES, INC., a South Carolina corporation
(hereinafter referred to as the "Company"), does hereby constitute and appoint
Charles W. Flynn, Michael E. Lawrence and Angus Cotton, respectively, and each
of them severally, with full power of substitution, his true and lawful
attorneys and agents (each with authority to act alone), to do any and all acts
and things and to execute any and all instruments which said attorneys and
agents or any of them may deem necessary or advisable to enable the Company to
comply with the Securities Exchange Act of 1934, as amended (the "Act"), and any
rules, regulations and requirements of the Securities and Exchange Commission
(the "Commission") in respect thereof, in connection with the filing under the
Act of the Company's Annual Report on Form 10-K for the Company's fiscal year
ended October 31, 1997, including all amendments thereto (the "Form 10-K"), and
including specifically, but without limiting the generality of the foregoing,
the power and authority to sign for and on behalf of the undersigned the name
of the undersigned as officer and/or director of the Company to the Form 10-K
filed with the Commission and to any instrument or document filed as part of,
as an exhibit to, or in connection with said Form 10-K; and the undersigned
does hereby ratify and confirm as his own act and deed all that said attorneys
and agents, and each of them, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents, this
26th day of January, 1998.
/s/ James L. Gray
---------------------------------------------
(Signature)
James L. Gray
---------------------------------------------
(Print Name)
<PAGE> 3
EXHIBIT 24
SEA PINES ASSOCIATES, INC.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer and/or
director of SEA PINES ASSOCIATES, INC., a South Carolina corporation
(hereinafter referred to as the "Company"), does hereby constitute and appoint
Charles W. Flynn, Michael E. Lawrence and Angus Cotton, respectively, and each
of them severally, with full power of substitution, his true and lawful
attorneys and agents (each with authority to act alone), to do any and all acts
and things and to execute any and all instruments which said attorneys and
agents or any of them may deem necessary or advisable to enable the Company to
comply with the Securities Exchange Act of 1934, as amended (the "Act"), and any
rules, regulations and requirements of the Securities and Exchange Commission
(the "Commission") in respect thereof, in connection with the filing under the
Act of the Company's Annual Report on Form 10-K for the Company's fiscal year
ended October 31, 1997, including all amendments thereto (the "Form 10-K"), and
including specifically, but without limiting the generality of the foregoing,
the power and authority to sign for and on behalf of the undersigned the name
of the undersigned as officer and/or director of the Company to the Form 10-K
filed with the Commission and to any instrument or document filed as part of,
as an exhibit to, or in connection with said Form 10-K; and the undersigned
does hereby ratify and confirm as his own act and deed all that said attorneys
and agents, and each of them, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents, this
26th day of January, 1998.
/s/ Ralph L. Dupps, Jr.
---------------------------------------------
(Signature)
Ralph L. Dupps, Jr.
---------------------------------------------
(Print Name)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS CONTAINED IN THE OCTOBER 31, 1997 FORM 10-K
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH OCTOBER 31, 1997 FORM
10-K.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<CASH> 2,180
<SECURITIES> 0
<RECEIVABLES> 1,038
<ALLOWANCES> 73
<INVENTORY> 617
<CURRENT-ASSETS> 4,404
<PP&E> 40,452
<DEPRECIATION> 9,889
<TOTAL-ASSETS> 37,814
<CURRENT-LIABILITIES> 5,572
<BONDS> 0
0
7,218
<COMMON> 2,166
<OTHER-SE> 4,171
<TOTAL-LIABILITY-AND-EQUITY> 37,814
<SALES> 35,896
<TOTAL-REVENUES> 35,896
<CGS> 15,744
<TOTAL-COSTS> 24,781
<OTHER-EXPENSES> 8,052
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,857
<INCOME-PRETAX> (281)
<INCOME-TAX> (215)
<INCOME-CONTINUING> (66)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (66)
<EPS-PRIMARY> (0.52)
<EPS-DILUTED> (0.52)
</TABLE>
<PAGE> 1
EXHIBIT 99.1
TO FORM 10-K OF
SEA PINES ASSOCIATES, INC.
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
SAFE HARBOR COMPLIANCE STATEMENT
FOR FORWARD-LOOKING STATEMENTS
In passing the Private Securities Litigation Reform Act of 1995 (the
"Reform Act"), 15 U.S.C.A. Sections 77z-2 and 78u-5 (Supp. 1996), congress
encouraged public companies to make "forward-looking statements" by creating a
safe harbor to protect companies from securities law liability in connection
with forward-looking statements. Sea Pines Associates, Inc. ("Sea Pines" or the
"Company") intends to qualify both its written and oral forward-looking
statements for protection under the Reform Act and any other similar safe harbor
provisions.
"Forward-looking statements" are defined by the Reform Act. Generally,
forward-looking statements include expressed expectations of future events and
the assumptions on which the expressed expectations are based. All
forward-looking statements are inherently uncertain as they are based on various
expectations and assumptions concerning future events and they are subject to
numerous known and unknown risks and uncertainties which could cause actual
events or results to differ materially from those projected. Due to those
uncertainties and risks, the investment community is urged not to place undue
reliance on written or oral forward-looking statements of Sea Pines. The Company
undertakes no obligation to update or revise this Safe Harbor Compliance
Statement for Forward-Looking Statements (the "Safe Harbor Statement") to
reflect future developments. In addition, Sea Pines undertakes no obligation to
update or revise forward-looking statements to reflect changed assumptions, the
occurrence of unanticipated events or changes to future operating results over
time.
Sea Pines provides the following risk factor disclosure in connection
with its continuing effort to qualify its written and oral forward-looking
statements for the safe harbor protection of the Reform Act and other similar
safe harbor provisions. Important factors currently known to management that
could cause actual results to differ materially from those in forward-looking
statements include the disclosures contained in the Annual Report on Form 10-K
to which this statement is appended as an exhibit and also include the
following:
RISKS RELATED TO RESORT OPERATIONS. The risks associated with the
Company's resort operations include the intense competition among local,
regional and national resorts, the dependence upon Sea Pines and Hilton Head
continuing to be considered as prime destination resort areas, the seasonality
of the resort business, economic conditions which may adversely affect tourism
generally, adverse weather conditions, the possibility of oil or hazardous waste
spills offshore, the impact of increased fuel or other transportation costs on
travel, adverse changes in applicable environmental regulation
<PAGE> 2
and the possible loss of one or more of the Company's national golf or tennis
tournaments. There can be no assurance that the Company will be able to compete
successfully in the future with existing and future competitors, or that the
Company and Hilton Head Island will be able to continue to attract the level of
resort business the Company has experienced in the past.
RISKS RELATED TO REAL ESTATE BROKERAGE OPERATIONS. Risks associated
with the Company's real estate brokerage operations include general reductions
in resort visitors, rising interest rates, other economic conditions which may
adversely affect real estate sales in general or vacation or second-home sales
in particular, competition from other real estate brokerage firms and the loss
of key brokers.
RISKS RELATED TO RETIREMENT COMMUNITY INVESTMENT. Risks associated with
the TidePointe Retirement Community include the risk that the Company's
investment in the Partnership may not be recovered, or may be recovered much
later than originally anticipated, by reason of operational difficulties of the
Partnership and the disruption resulting from the financial and regulatory
difficulties facing the parent company of its majority general partner.
RISKS RELATED TO LITIGATION AND OTHER FACTORS. Other factors which
could affect the Company's operations include the risk of adverse outcomes on
pending litigation, the availability of adequate capital to finance possible
future capital improvements and repairs, and the loss of key members of
management.
RISKS RELATED TO POTENTIAL "YEAR 2000" PROBLEMS. There can be no
assurance that the Company will identify all year 2000 problems in its computer
systems in advance of their occurrence or that the Company will be able to
successfully remedy any problems that are discovered. The Company cannot be
assured that it has adequately estimated the expenses of the Company's efforts
to identify and address such problems, or the expenses to which the Company may
become subject as a result of such problems, or that such expenses will not,
ultimately have a material adverse effect on the Company's business, financial
condition and results of operations. In addition, failure of the Company to
identify and remedy Year 2000 problems could put the Company at a competitive
disadvantage relative to companies that have corrected such problems.
