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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, 1998 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)
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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 January
20, 1999 was 1,842,525.
DOCUMENTS INCORPORATED BY REFERENCE
Registrant's Proxy Statement in connection with its 1999 Annual Meeting of
Shareholders on March 6, 1999 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, WHICH 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.
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SPSLC was established to construct a healthcare facility within the TidePointe
retirement community. The healthcare facility was completed and licensed in
February 1997 and was operated by the Company prior to its sale to TidePointe
Partners on July 31, 1997. Fifth Golf Course Club, Inc. owns certain acreage
which could be used to develop another golf course.
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.
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 1998, resort operations
accounted for approximately $26,554,000 (69%) of the Company's total revenues,
with golf and tennis activities responsible for revenues of approximately
$15,064,000 (39%) and home and villa rental management activities responsible
for revenues of approximately $10,168,000 (26%). 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%).
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During each of the fiscal years 1998, 1997 and 1996, 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
future 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 facilities. The remaining golf and tennis
revenues, approximately 30%, were generated from Hilton Head Island residents.
During fiscal years 1998, 1997 and 1996, 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 both inside and 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, such as payroll and occupancy 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.
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The Company is generally subject to various local and regional land
use and environmental regulations, ordinances and restrictive covenants. The
Company believes that it is currently in compliance with all such applicable
regulations and covenants and does not expect that compliance in the future
will have any material effect on the operations or the profitability of the
Company.
Resort operations are subject to significant competition from various
competing facilities on Hilton Head, as well as other destination resorts in
South Carolina, Georgia and Florida. Specifically, the Company believes its
golf courses are directly competitive with approximately 16 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 251 people as of October 31,
1998.
2. REAL ESTATE BROKERAGE. SPREC is engaged primarily in the brokerage
of residential real estate on Hilton Head Island and its neighboring
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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 1998, real estate brokerage operations accounted for
approximately $11,952,000 (31%) of the Company's total revenue. 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
brokerage operations accounted for approximately $8,504,000 (24%) 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 27 people and had 95 sales agents as of October 31, 1998.
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 Country Club members 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.
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
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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
loaned $1,505,000 to the Partnership. In 1998, the Partnership sold the assets
associated with the TidePointe development and the Company released its rights
in those assets. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Results of Operations - 1998 Compared to
1997 and 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 an inn and 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.
(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.
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(D) PLANTATION CLUB. SPC owns a tract of land with improvements
thereon known as the Plantation Club site containing approximately 9.4 acres.
It includes the golf pro shop associated with the Ocean and Sea Marsh golf
courses and a parking lot utilized by patrons on such courses. In addition, the
Plantation Club contains conference facilities, a food and beverage facility
leased to a restaurant operator, a health and fitness center, a swimming pool,
and a bike rental store.
The Company is considering construction of improved conference facilities
and possibly an inn on the Plantation Club site but has no immediate plans
regarding the timing and scope of such development.
(E) OTHER RECREATIONAL FACILITIES. In the vicinity of the Harbour Town
Golf Links, SPC owns and operates recreational areas containing a playground, a
swimming pool, and a snack bar leased to a restaurant operator.
SPC also owns and operates a Beach Club in the vicinity of the Plantation
Club, containing a retail shop, parking area, an outdoor food and beverage
facility leased to a restaurant operator and a real estate office.
In the South Beach area of Sea Pines, SPC owns and operates a 3.9 acre
recreational area containing a swimming pool and parking area.
(F) UNDEVELOPED TRACTS/DEVELOPMENT RIGHTS. SPC owns a number of
undeveloped tracts of land within Sea Pines briefly described as follows:
1. Sea Pines Academy Tract - approximately 3 acres;
2. Sea Pines Center Residual - approximately 1.4 acres;
3. Harbour Town Main Parking Tract - approximately 3.21 acres;
4. Artists Area Tract - approximately 1.5 acres;
5. Cordillo Parkway Tract - 6 acres; and
6. Fifth Golf Course Tract - approximately 8 acres.
Development plans for these tracts are undetermined at the present time.
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. See "Business
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Outlook and Recent Development" concerning discussion of planned 60 room inn 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, 1998
approximately 90 of the 404 acres had been donated and title transferred. The
remaining 314 acres are leased to the same not-for-profit organization for a
minimal amount.
(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. In 1997 the Company completed construction of
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 TidePointe
Partners, on July 31, 1997. TidePointe Partners subsequently sold the assets of
the healthcare facility in June 1998. See "Management's
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Discussion and Analysis of Financial Condition and Results of Operations -
Results of Operations - 1998 Compared to 1997 and 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 plaintiff 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 counter-claim against the plaintiff. The
suit is presently dormant. 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 plaintiff 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 was a defendant in a lawsuit filed in April 1997, relating to
its proposed construction of a new conference center in Harbour Town, adjacent
to the Harbour Town clubhouse. The suit, filed by the neighboring property
owners, challenged the Company's right to construct such a facility on the
site. The Court ruled on March 4, 1998 that the Company may proceed with the
construction of the conference center contingent upon the construction of a 50
to 60 room inn adjacent to the site. The Court's ruling required that
construction of the inn commence no later than two years after completion of
the conference center. The Company has begun construction of the inn in 1998.
The Plaintiffs in this lawsuit have filed an appeal of the Court's decision.
The Company has filed its answer to this appeal, which it intends to vigorously
pursue. No trial date has been set. Neither the Company nor its legal counsel
can form an opinion as to the outcome of this matter at this time. As of
October 31, 1998, the Company had also incurred and capitalized development
costs of $404,000 relating to the conference center. If the Company does not
construct the conference center 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
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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 answered to the complaint 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 subject to other claims and suits in the ordinary course of
business. In management's opinion, such currently pending legal 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, 1998 High Low
----------------- ---- ---
<S> <C> <C>
Fourth Quarter $5,500.00 $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
<CAPTION>
Fiscal Year Ended
October 31, 1998 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
</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 Common 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
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Securities Act of 1933 for sale by holders of such shares and the Company has
no present intention to publicly offer any of its Common Shares.
(B) HOLDERS. As of January 20, 1999 there were approximately 610
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 1998 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, 1999, April 15, 1999, July 15,
1999, and October 15, 1999 to shareholders of record on January 4, 1999, April
1, 1999, July 1, 1999 and October 1, 1999 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.
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1998 COMPARED TO 1997
The Company reported consolidated revenues for fiscal year 1998 of
$38,506,000, a 7.3% increase over fiscal year 1997. Resort revenues totaled
$26,554,000 for fiscal 1998 reflecting an increase of $232,000 over fiscal
1997. Real estate brokerage revenues totaled $11,952,000 for the year, an
increase of $2,378,000 or 24.8% as compared to 1997.
Guest occupied unit nights in the Company's lodging division totalled
59,066 for 1998, a 1.4% increase over 1997. The average daily rate of $164 in
1997 was maintained in 1998 after significant price increases were implemented
in 1997. Both revenues and operating margins from golf operations continued to
increase. The golf division produced operating margins of over 53% in 1998. The
average rate per round increased by 6.8% in 1998. The increase in average rates
results from the combined effect of price increases and yield management
resulting in fewer discounted rounds. The Company continues to maintain its
market share of golf rounds despite increased competition.
The Company's real estate brokerage operations closed over $275 million in
transactions for the year, a 27% increase over 1997. Many of the factors that
contributed to a successful 1997 continued for 1998. These included favorable
mortgage interest rates, the strong local and national economy and the
continued strong market demand for second homes. The operating margin from
brokerage operations in 1998 was 12.46%, an 11% increase over the prior year.
The trend of increasing gross revenues has lead to higher operating margins as
many of the costs associated with the real estate offices are fixed. The
Company has continued to maintain its island-wide market share of sales and
listings of real estate through creative marketing campaigns, aggressive
positioning in the market and by attracting and retaining professional real
estate sales executives.
Sales and marketing expenses were $1.3 million in 1998, representing a
6.3% decrease from 1997. The decrease was attributable to more cost effective
selective targeted marketing. The Company has planned future increases in
marketing expenses as it brings additional lodging and conference facilities on
line.
General and Administrative expenses increased by 2.3% or $104,000,
totaling $4.6 million for the year. The increase can primarily be attributable
to higher property taxes and the increased costs associated with maintaining
the Company's older facilities. These increases were partially offset by
significant reductions in the Company's property and casualty insurance
premiums.
On June 30, 1998, TidePointe Partners sold all of the TidePointe project
assets to CC-Hilton Head, Inc. (an affiliate of Classic Residences by Hyatt)
for a sales price of
14
<PAGE> 15
$23,200,000. At closing, the Company received no cash funds or other
consideration and released its mortgage on the TidePointe property, which
secured its investments and loans to the project. The Company has no ownership
interest in CC-Hilton Head, Inc. and no longer has any ownership interest in
the TidePointe community. TidePointe Partners is in the process of winding up
its Partnership affairs and intends to liquidate in the near future. The
Company will receive no additional funds from the Partnership, and is under no
obligation to fund the Partnership in any way.
Due to the sale of all of the TidePointe assets in June 1998, which
included the healthcare facility, the Company recognized the remaining gain of
$179,375, which had been deferred at the time of the sale of the healthcare
facility in July 1997. The Company has also entered into a 26-year license and
use agreement with CC-Hilton Head, Inc. for the use of the Company's logo,
trade name, a non-compete agreement and other services and amenity use in
connection with the TidePointe community. Under this agreement, the Company
will receive fixed annual license fees, ranging from $125,000 to $325,000 and
totaling $4,125,000 over the 26-year term. Approximately $67,000 of license fee
income has been recognized by the Company in fiscal year 1998.
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.
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
15
<PAGE> 16
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,
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,
totaling $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%
16
<PAGE> 17
of the total gain) in 1997, 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 of the Providers Enterprises, Inc. (the
82.5% general 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 had provided significant amounts of equity
capital, debt and debt collateral for the Partnership. Based on this
information, the significant uncertainties created by the majority partner's
financial problems and the significant losses incurred in the 1997 results of
operations of the TidePointe project, the Company recorded a write-down
representing all of its remaining investment in and advances to TidePointe
Partners, which when combined with its equity share of the fiscal 1997
TidePointe Partners' operating loss, totaled $2,658,000.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased by $419,000 during fiscal 1998 and
totaled approximately $2,599,000 at October 31, 1998, of which $2,008,000 is
restricted. This increase results from higher levels of advanced deposits held
on future lodging reservations and real estate transactions and increased
operating cash on hand at year-end. Working capital increased during the
current year by $502,000 resulting in a working capital deficit of $666,000 at
October 31, 1998.
The Company invested approximately $1,617,000 in resort capital
expenditures. Capital investments in 1998 included extensive renovation work at
the Plantation Club along with normal expenditures for equipment replacement
and resort facility improvements. During the 11-year period from November 1,
1987 through October 31, 1998, the Company has invested over $33 million in
capital purchases, property acquisitions and property improvements thereby
significantly enhancing the resort assets originally acquired in 1987.
Under a Master Credit Agreement with its principal corporate lender, the
Company maintains a term loan, a revolving line of credit and a seasonal line
of credit. Available funds under these facilities total $36,000,000, of which
$17,159,000 was outstanding at October 31, 1998. The outstanding balance
represents a $1,560,000 decrease in total outstanding long-term debt from 1997.
The term loan in the principal sum of $18,500,000 matures on October 31,
2008. As of October 31, 1998, $17,159,000 was outstanding under the term loan
and $1,341,000 was available to borrow until May 1, 1999 for general working
capital purposes.
17
<PAGE> 18
The $15,000,000 revolving line of credit is maintained by the Company
primarily to fund its capital projects. $11,000,000 has been pre-approved by
the bank for use in the construction of the Company's planned inn and
conference center. The remaining $4,000,000 is restricted to bank approved
uses. As of October 31, 1998 there was no outstanding amount under the
revolving line of credit.
The seasonal line of credit in the principal amount of $2,500,000 is used
to meet cash requirements during the Company's off-season winter months. As of
October 31, 1998, there was no outstanding balance on the seasonal line of
credit.
On September 30, 1998, the Company entered into an interest rate swap
agreement which effectively fixed the interest rate on an $18 million notional
principal amount under the term note described above at 5.24% plus a credit
margin ranging from 1.25% to 1.5%, based on the calculation of certain
financial ratios, for a period ending November 10, 2005. The lender has the
option of calling the swap agreement on November 10, 2003.
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, 1999.
BUSINESS OUTLOOK AND RECENT DEVELOPMENTS
The Company has started site work on The Inn at Harbour Town. The Inn at
Harbour Town will be a 47,000 square foot facility featuring 60 rooms and will
be adjacent to and provide views of the Harbour Town golf course. The current
schedule calls for drainage and other site preparation work to continue until
the end of January 1999, when construction will be suspended until after the
professional golf and tennis tournaments hosted by the Company. Full
construction is scheduled to resume in May 1999, moving towards a grand opening
in the summer of 2000. Total construction cost is estimated to be $6.5 million.
The Company has also started site work on The Heritage Conference Center
in Harbour Town. The Conference Center will be a 16,000 square foot facility,
featuring state of the art meeting amenities and catering facilities. The work
on this facility will also be suspended during the tournament season. The
resumption of work is currently scheduled for May 1999 moving towards a grand
opening in the spring of 2000. Total construction cost is estimated to be $4.5
million.
The Company is in the planning stages of a new racquet club, to be located
near the present site. The facility will be approximately 3,800 square feet and
feature an
18
<PAGE> 19
expanded pro shop, club offices and meeting room. Construction is scheduled to
start this summer.
The Company also is in the planning stages of a major renovation of the
Harbour Town golf course. This renovation is tentatively scheduled to commence
in May 2000. During construction and grow-in, the course will be closed for
approximately 8 months.
The Company's real estate brokerage operations also have expansion plans.
Three additional office locations have been leased and leasehold improvements
are underway with scheduled openings this spring. This will bring the total
number of offices to thirteen.
YEAR 2000 ISSUE
The year 2000 issue is the result of computer programs having been 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 its recently completed 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 has divided its year 2000 issues into what it considers to be
critical and non-critical issues. The Company believes that in its line of
business the critical issues revolve around the ability to process retail
transactions from the reservation stage through settlement and collection.
Additionally, of prime importance is the maintenance of accurate accounting and
corporate records.
The systems that the Company has identified as being critical include but
may not be limited to the following: AS400 Operating System, Lodging Management
System, Point of Sale System, General Ledger System, Credit Card Processing,
banking relationships, and its telecommunications vendors.
The Company has also identified non-critical issues including, but not
limited to, stand alone personal computers, computerized irrigation systems,
other third party vendors and possible security systems issues.
The Company presently believes that with modifications to existing
software and conversions to new software, the year 2000 issue can be mitigated.
The Company is
19
<PAGE> 20
currently working on these modifications. The Company will utilize both
internal and external resources to program, or replace and test its software
for the year 2000 modifications. The Company has not determined the total cost
of the year 2000 project. However, the costs are not expected to exceed
$150,000 nor have a material effect on its financial statements. The Company
has spent less than $75,000 to date, all of which has been expensed. The
Company plans to complete the year 2000 project not later than June 30, 1999
and is currently on schedule to meet this target.
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 has not yet determined the extent of
contingency planning that may be required for the Company's critical systems if
unanticipated problems or delays are encountered with its year 2000 project.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
On September 30, 1998, the Company entered into an interest rate swap
agreement, which effectively fixed the interest rate on an $18 million notional
principal amount under the term note that the Company maintains with its
corporate lender at 5.24% plus a credit margin ranging from 1.25% to 1.5%,
based on the calculation of certain financial ratios, for a period ending
November 10, 2005. The lender has the option of calling the swap agreement on
November 10, 2003.
The Company has minimal interest rate risks. A change in the LIBOR rate
would affect the rate at which the Company could borrow funds in excess of the
$18 million notional principal amount, which is effectively fixed by the above
swap agreement.
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.
20
<PAGE> 21
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.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information called for by Part III (Items 10, 11, 12 and 13) 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, 1998 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," (iii) with respect to Item 12, under the
caption "Principal Shareholders," and (iv) with respect to Item 13, under the
caption "Certain Transactions."
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-5
are filed as part of this report.
(b) Reports on Form 8-K:
None.
21
<PAGE> 22
SEA PINES ASSOCIATES, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Ernst & Young LLP.............................................................F-2
Consolidated Balance Sheets at October 31, 1998 and 1997.........................F-3 thru 4
Consolidated Statements of Operations for the years
ended October 31, 1998, 1997 and 1996.................................................F-5
Consolidated Statements of Shareholders' Equity
for the years ended October 31, 1998, 1997 and 1996 .................................F-6
Consolidated Statements of Cash Flows for the years
ended October 31, 1998, 1997 and 1996..........................................F-7 thru 8
Notes to Consolidated Financial Statements......................................F-9 thru 29
Report on Financial Statement Schedule.................................................F-30
Schedule II - Valuation and Qualifying Accounts
for the years ended October 31, 1998, 1997 and 1996..................................F-31
</TABLE>
F-1
<PAGE> 23
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, 1998 and 1997, and the
related consolidated statements of operations, shareholders' equity, and cash
flows for each of the three years in the period ended October 31, 1998. 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, 1998 and 1997, and the results of its
operations and its cash flows for each of the three years in the period ended
October 31, 1998 in conformity with generally accepted accounting principles.
/s/Ernst & Young LLP
Atlanta, Georgia
December 10, 1998
F-2
<PAGE> 24
Sea Pines Associates, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
OCTOBER 31
1998 1997
---------------------------------
(In Thousands of Dollars)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents
Unrestricted $ 591 $ 215
Restricted 2,008 1,965
---------------------------------
2,599 2,180
Accounts receivable, less allowance for
doubtful accounts of $50 and $73 at
October 31, 1998 and 1997, respectively 1,027 965
Current portion of notes receivable 441 402
Inventories 653 617
Prepaid expenses 132 240
---------------------------------
Total current assets 4,852 4,404
Notes receivable, less current portion 1,767 1,894
Deferred income taxes 316 805
Deferred loan fees, net 70 61
Other assets, net 82 87
---------------------------------
2,235 2,847
Real estate assets
Construction in progress 1,135 598
Operating properties, net 22,680 22,942
Properties held for future development 7,023 7,023
---------------------------------
30,838 30,563
---------------------------------
Total assets $37,925 $37,814
=================================
</TABLE>
F-3
<PAGE> 25
Sea Pines Associates, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
OCTOBER 31
1998 1997
--------------------------------
(In Thousands of Dollars)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 2,469 $ 1,810
Advance deposits 1,946 1,880
Line of credit with bank -- 467
Income taxes payable 113 166
Current portion of deferred revenue and other
liabilities
623 439
Current portion of long-term debt 367 810
--------------------------------
Total current liabilities 5,518 5,572
Long-term debt, less current portion 16,792 17,909
Deferred revenue and other long-term liabilities 897 778
--------------------------------
Total liabilities 23,207 24,259
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 5,334 4,171
--------------------------------
Total shareholders' equity 14,718 13,555
--------------------------------
Total liabilities and shareholders' equity $37,925 $37,814
================================
</TABLE>
See accompanying notes.
F-4
<PAGE> 26
Sea Pines Associates, Inc.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
1998 1997 1996
-----------------------------------------------------------
(In Thousands of Dollars, Except Per Share Amounts)
<S> <C> <C> <C>
Revenues, other than healthcare $ 38,506 $ 35,896 $ 34,958
Cost and expenses, other than healthcare:
Cost of revenues 27,068 24,752 24,758
Sales and marketing expenses 1,290 1,376 1,219
General and administrative expenses 4,579 4,475 4,137
Depreciation and amortization 1,408 1,586 1,745
Impairment loss on Carolina Center -- -- 810
-----------------------------------------------------------
34,345 32,189 32,669
-----------------------------------------------------------
Income from operations, other than healthcare 4,161 3,707 2,289
Healthcare income (expense)
Revenue -- 345 --
Cost of revenues -- (989) --
-----------------------------------------------------------
-- (644) --
-----------------------------------------------------------
Income from operations 4,161 3,063 2,289
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 179 846 --
Gain on equity club turnover -- -- 7,747
Interest income 154 325 176
Interest expense, net of amounts capitalized
Healthcare -- (381) --
Other (1,345) (1,476) (1,451)
-----------------------------------------------------------
(1,012) (3,344) 6,450
-----------------------------------------------------------
Income (loss) before income taxes 3,149 (281) 8,739
Provision for (benefit from) income taxes 1,099 (215) 3,340
-----------------------------------------------------------
Net income (loss) 2,050 (66) 5,399
Preferred stock dividend requirements 887 887 887
-----------------------------------------------------------
Net income (loss) attributable to common stock $ 1,163 $ (953) $ 4,512
===========================================================
Per share of common stock
Net income (loss) $ 0.63 $ (0.52) $ 2.45
===========================================================
See accompanying notes.
</TABLE>
F-5
<PAGE> 27
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, 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
Net income 2,050 2,050
Declaration of preferred stock
dividend of $ 0.722 per share -- -- -- -- (887) (887)
==================================================================================
Balance at October 31, 1998 1,228 $ 7,218 1,843 $ 2,166 $ 5,334 $ 14,718
==================================================================================
</TABLE>
See accompanying notes.
F-6
<PAGE> 28
Sea Pines Associates, Inc.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
1998 1997 1996
-----------------------------------------------
(In Thousands of Dollars)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 2,050 $ (66) $ 5,399
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 1,408 1,586 1,745
Gain on equity club turnover -- -- (7,747)
Allowance for doubtful accounts (23) 46 (3)
Deferred income taxes 489 (1,217) 3,074
Gain on sale of asset -- (226) --
Write off of assets -- 56 --
Loss on real estate assets -- -- 585
Equity in loss and write down of investment in and
advances to TidePointe Partners -- 2,658 22
Changes in assets and liabilities:
Restricted cash (43) (769) 442
Accounts and notes receivable 49 (317) 369
Inventories (36) 116 16
Prepaid expenses 108 53 (92)
Deferred loan fees (70) (41) --
Other assets -- -- 41
Accounts payable and accrued expenses 659 (227) (264)
Deferred revenue 119 564 107
Advance deposits 66 657 (223)
Income taxes payable (53) 24 129
Current portion of deferred revenue 184 68 (487)
Other liabilities -- -- (645)
-----------------------------------------------
Net cash provided by operating activities 4,907 2,965 2,468
INVESTING ACTIVITIES
Short-term investments -- -- 475
Proceeds from sale of assets -- 529 47
Capital expenditures and property acquisitions (1,617) (1,378) (2,407)
Increase in note receivable and accrued interest
from TidePointe Partners -- (155) (156)
-----------------------------------------------
Net cash used in investing activities (1,617) (1,004) (2,041)
</TABLE>
F-7
<PAGE> 29
Sea Pines Associates, Inc.
Consolidated Statements of Cash Flows (continued)
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
1998 1997 1996
---------------------------------------------
(In Thousands of Dollars)
<S> <C> <C> <C>
FINANCING ACTIVITIES
Reductions to line of credit with bank (467) (308) (525)
Additions to long-term debt -- -- 1,600
Principal repayments of debt (1,560) (783) (713)
Dividends paid (887) (887) (887)
---------------------------------------------
Net cash used in financing activities (2,914) (1,978) (525)
---------------------------------------------
Net increase (decrease) in unrestricted cash and
cash equivalents 376 (17) (98)
Unrestricted cash and cash equivalents at
beginning of year
215 232 330
=============================================
Unrestricted cash and cash equivalents at end of
year
$ 591 $ 215 $ 232
=============================================
</TABLE>
See accompanying notes.
F-8
<PAGE> 30
Sea Pines Associates, Inc.
Notes to Consolidated Financial Statements
October 31, 1998, 1997 and 1996
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, to develop
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 in 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> 31
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. Advance
deposits are required for certain resort reservations, but in general the
Company's accounts receivable are unsecured.
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. At the members' request, such sales and
resales are financed by the Company over periods of one to seven years under
interest-bearing notes; payments to the Club on resales are made as the Company
collects from the members.
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> 32
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, and $630,000 in 1997 and 1996, respectively. No interest
was capitalized in 1998. 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.
F-11
<PAGE> 33
Sea Pines Associates, Inc.
Notes to Consolidated Financial Statements (continued)
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
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.
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.
FINANCIAL INSTRUMENTS
The Company accounts for its interest rate swap by recording differences in
interest on the notational amount up to the amount of debt outstanding as
interest expense. Differences in fair value related to the excess of the
notational amount over the debt outstanding are recorded in the balance sheet
and as current period expense. Such excess fair value fluctuations were not
material at October 31, 1998.
INCOME TAXES
The Company accounts for income taxes using the liability method, 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. A valuation allowance is
established against net deferred tax assets if, based upon the available
evidence, it is more likely than not that some or all of the deferred tax
assets will not be realized.
F-12
<PAGE> 34
Sea Pines Associates, Inc.
Notes to Consolidated Financial Statements (continued)
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
INCOME (LOSS) PER SHARE
Income (loss) per share of common stock is calculated by dividing net income or
loss after preferred stock dividend requirements by the weighted average number
of outstanding shares of common stock. Furthermore, basic and diluted earnings
per share are identical for all periods presented. Potentially dilutive
securities consist of additional shares of common stock issuable when the stock
rights become exercisable. These contingently issuable shares have not been
included in basic or diluted earnings per share as the stock rights are not yet
exercisable. (See Note 7.)
NEW ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement No. 131, Disclosures about Segments of an Enterprise and Related
Information ("Statement 131"), which replaces FASB Statement No. 14, Financial
Reporting for Segment of a Business Enterprise. Statement 131 establishes
standards for the way that public business enterprises report information about
operating segments in annual financial statements and requires that those
enterprises report selected information about operating segments in interim
financial reports. Statement 131 also establishes standards for related
disclosures about products and services, geographic areas, and major customers.
The Company is not required to disclose segment information in accordance with
Statement 131 until its fiscal October 31, 1999 year-end. Management does not
anticipate that the adoption of the new Statement will have a significant
impact on its financial statement disclosures.
In June 1998, the Financial Accounting Standards Board issued Statement No.
133, Accounting for Derivative Instruments and Hedging Activities, which the
Company would be required to adopt, starting with fiscal year ending October
31, 2000. Statement 133 requires the recognition of all derivatives on the
balance sheet at fair value. Derivatives that are not hedges must be adjusted
to fair value through income. If the derivatives is a hedge, depending on the
nature of the hedge, changes in the fair value of derivatives will either be
offset against the change in fair value of the hedged assets, liabilities, or
firm commitments through earnings or recognized in other comprehensive
F-13
<PAGE> 35
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)
income until the hedged item is recognized in earnings. The effective portion
of a derivative's change in fair value will be immediately recognized in
earnings.
Currently, the Company has entered into an interest rate swap agreement as
described in Note 5, which would be subject to the new Statement. The Company
has not yet determined the effect of Statement 133 on the earnings and
financial position of the Company.
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
1998 1997 1996
---------------------------------------------
<S> <C> <C> <C>
Cash paid during the year for:
Interest $1,352 $1,452 $1,577
Income taxes 662 965 98
</TABLE>
F-14
<PAGE> 36
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
1998 1997
-----------------------------------
<S> <C> <C>
Merchandise $580 $546
Supplies, parts and accessories 35 35
Food and beverages 10 11
Other 28 25
-----------------------------------
$653 $617
===================================
</TABLE>
4. REAL ESTATE ASSETS
Operating properties consist of the following (in thousands of dollars):
<TABLE>
<CAPTION>
OCTOBER 31
1998 1997
-----------------------------------
<S> <C> <C>
Land and improvements $ 20,140 $ 19,884
Buildings 7,103 7,051
Machinery and equipment 6,399 5,645
Property held under capital leases 251 251
-----------------------------------
33,893 32,831
Less accumulated depreciation (11,213) (9,889)
-----------------------------------
$ 22,680 $ 22,942
===================================
</TABLE>
Properties held for future development of $7,023,000 at October 31, 1998 and
1997 consist primarily of land and certain future development rights.
F-15
<PAGE> 37
Sea Pines Associates, Inc.
Notes to Consolidated Financial Statements (continued)
5. LONG-TERM DEBT AND LINE OF CREDIT AGREEMENTS
Long-term debt consists of the following (in thousands of dollars):
<TABLE>
<CAPTION>
OCTOBER 31
1998 1997
---------------------------
<S> <C> <C>
Term note payable to bank, bearing interest at various
London Interbank Offered Rates (LIBOR) plus 1.5%
(6.91% at October 31, 1998), collateralized by
substantially all assets of the Company. Principal is
payable monthly from May through October each year in
amounts ranging from $61,193 in 1999 to $196,577 in
2008. Interest is payable monthly. The note matures
November 1, 2008. At October 31, 1998, $1.34 million
was available to borrow until May 1, 1999 for general
working capital purposes. $17,159 --
Note payable to bank, bearing interest at various London
Interbank Offered Rates (LIBOR) plus 1.5% (averaging
7.26% at October 31, 1997), collateralized by substantially
all assets of the Company. Note was fully repaid and
retired as of October 31, 1998. -- $11,119
Note payable to bank, bearing interest at LIBOR plus 1.5%
(7.14% at October 31, 1997). Note was fully repaid and
retired as of October 31, 1998. -- 7,600
---------------------------
17,159 18,719
Less current portion of long-term debt (367) (810)
---------------------------
Total long-term debt $16,792 $17,909
===========================
</TABLE>
F-16
<PAGE> 38
Sea Pines Associates, Inc.
Notes to Consolidated Financial Statements (continued)
5. LONG-TERM DEBT AND LINE OF CREDIT AGREEMENTS (CONTINUED)
Scheduled maturities of long-term debt as of October 31, 1998 are as follows
(in thousands of dollars):
<TABLE>
<S> <C>
Year ending October 31
1999 $ 367
2000 400
2001 654
2002 712
2003 775
Thereafter 14,251
-------------
Total $17,159
=============
</TABLE>
The loan agreements contain provisions and covenants which impose certain
restrictions on the use of the Company's assets. The more significant of these
restrictions include limitations as to new indebtedness, the sale or disposal
of certain assets, capital contributions and investments, and new lines of
business.
On September 30, 1998, the Company entered into an interest rate swap
agreement, which effectively fixed the interest rate on an $18 million notional
principal amount under the term note described above at 5.24% plus a credit
margin ranging from 1.25% to 1.5% for a period ending November 10, 2005. The
lender has the option of calling the swap agreement on November 10, 2003.
The Company also has available a revolving line of credit (the "Revolver") in
the amount of $15,000,000 of which $11,000,000 has been preapproved by the bank
for capital projects. The remaining $4,000,000 is restricted to bank approved
uses. Borrowings under the Revolver are collateralized by substantially all of
the assets of the Company. Interest is payable monthly at LIBOR plus 1.5% and
the Revolver expires October 31, 2002. The maturity date automatically extends
to October 31, 2003 unless the bank notifies the Company prior to October 31,
1999. As of October 31, 1998 there was no outstanding amount under the
Revolver.
F-17
<PAGE> 39
Sea Pines Associates, Inc.
Notes to Consolidated Financial Statements (continued)
5. LONG-TERM DEBT AND LINE OF CREDIT AGREEMENTS (CONTINUED)
In addition, the Company maintains a $2,500,000 seasonal line of credit (the
"Seasonal Line") with the same bank. Interest is payable monthly at LIBOR plus
1.5% (7.31% at October 31, 1997) and the Seasonal Line expires October 31,
2002. The maturity date automatically extends to October 31, 2003 unless the
bank notifies the Company prior to October 31, 1999. Borrowings under the
Seasonal Line are also collateralized by substantially all of the assets of the
Company. As of October 31, 1997, $467,000 was outstanding under a previous
seasonal line, which was due October 31, 1998. There was no outstanding balance
as of October 31, 1998.
6. INCOME TAXES
The provision (benefit) for income taxes consists of the following (in
thousands of dollars):
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
1998 1997 1996
---------------------------------------------
<S> <C> <C> <C>
Current taxes:
Federal $ 506 $ 856 $ 167
State 104 146 99
---------------------------------------------
610 1,002 266
Deferred income taxes (benefit):
Federal 423 (1,053) 2,658
State 66 (164) 416
---------------------------------------------
489 (1,217) 3,074
---------------------------------------------
$ 1,099 $ (215) $ 3,340
=============================================
</TABLE>
F-18
<PAGE> 40
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
1998 1997 1996
-------------------------------------------
<S> <C> <C> <C>
Tax at statutory federal income tax rates $ 1,071 $ (95) $ 2,971
State income taxes, net of federal income tax benefit
116 -- 361
Decrease in valuation allowance (80) (121) (13)
Other (8) 1 21
-------------------------------------------
$ 1,099 $ (215) $ 3,340
===========================================
</TABLE>
The tax effects of the types of temporary differences and carryovers, which
give rise to deferred income tax assets (liabilities) at October 31, 1998, 1997
and 1996, are as follows (in thousands of dollars):
<TABLE>
<CAPTION>
OCTOBER 31
1998 1997 1996
-------------------------------------------
<S> <C> <C> <C>
Deferred revenue:
Country club membership sales $ 43 $ 48 $ 52
Health care transfer -- 67 --
Charitable contribution carryover 235 295 392
License and fee income 200 -- --
Reserve for investment in and advances to
TidePointe Partners -- 805 --
Accrued liabilities 141 110 99
Other assets 19 26 10
-------------------------------------------
Gross deferred income tax assets 638 1,351 553
Less: Valuation allowance (191) (271) (392)
-------------------------------------------
Deferred income tax assets 447 1,080 161
-------------------------------------------
Depreciation (78) (91) (142)
Intangible assets -- -- (49)
Equity loss from TidePointe Partners -- (97) (284)
Other liabilities (53) (87) (98)
-------------------------------------------
Gross deferred income tax liabilities 131 (275) (573)
-------------------------------------------
Net deferred income tax assets (liabilities) $ 316 $ 805 $ (412)
===========================================
</TABLE>
F-19
<PAGE> 41
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.
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.
The Series B Junior cumulative preferred shares are subject to the prior and
superior rights of the holders of the Series A and all other classes of
preferred shares. These Series B shares provide for a cumulative dividend of
the greater of $0.25 per share or an amount as adjusted for the Antidilution
Number (initially 1,000). Each share of the Series B also entitles the holder
to the number of votes equal to the Antidilution Number. Generally, the Series
B and common shareholders shall vote together as one class on all matters
submitted to a vote. The Series B shares have a liquidation value of $100 per
share, plus dividends thereon. The Series B shares are not redeemable. No
shares of the Series B junior cumulative preferred stock have been issued (see
Stock Purchase Rights Plan).
F-20
<PAGE> 42
Sea Pines Associates, Inc.
Notes to Consolidated Financial Statements (continued)
7. SHAREHOLDERS' EQUITY (CONTINUED)
COMMON STOCK
Of the 23,000,000 authorized shares of common stock, 2,000,000 shares are
designated as special common stock and 1,000,000 are designated as nonvoting
common stock. All other shares are voting. The 1,842,525 shares of common stock
outstanding are all voting common stock.
Each share of common stock (regardless of class) shall participate on an equal
and pro rata basis in all dividends and other distributions, including
liquidation, subject to the rights of the preferred shareholders.
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
F-21
<PAGE> 43
Sea Pines Associates, Inc.
Notes to Consolidated Financial Statements (continued)
7. SHAREHOLDERS' EQUITY (CONTINUED)
STOCK PURCHASE RIGHTS PLAN (CONTINUED)
twice the exercise price of the Right. The Board of Directors has the
flexibility to lower the 20% threshold to not less than 10% under certain
circumstances.
In general, the Rights may be redeemed by the Company at $.01 per Right at
anytime before certain events occur. One Right is attached to and trades with
each share of common stock. The Rights will not trade separately unless they
become exercisable. All Rights expire on August 23, 2003.
8. TIDEPOINTE PARTNERS
In 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 developed phase one of the TidePointe community at a cost of
over $24 million which was designed as a two-phase residential development
consisting of multi-family buildings called villas, quadraplex units called
verandas and detached single family homes called cottages. The community also
includes an assisted living and skilled nursing healthcare facility, which a
subsidiary of the Company developed and operated until July 31, 1997, when the
Partnership purchased the facility for $9,015,000. Due to the Company's partial
ownership of the Partnership, $179,375 of the gain on this sale was not
recognized but was recorded as deferred gain at the time of the 1997 sale.
During the course of the development, the Partnership borrowed monies under
various construction loan facilities and also from the two general partners. As
of October 31,1997, the Company had loaned the Partnership $1,505,000, which
accrued interest at prime plus two percent (totaling $344,000 at October 31,
1997). This loan was secured by a third mortgage on the Partnership's real
estate assets. Pursuant to the Partnership
F-22
<PAGE> 44
Sea Pines Associates, Inc.
Notes to Consolidated Financial Statements (continued)
8. TIDEPOINTE PARTNERS (CONTINUED)
agreement, the Company was under no obligation to fund additional monies to the
Partnership.
In December 1997, the Company learned that PIE Mutual Insurance Company ("PIE
Mutual"), the ultimate parent of the Providers Enterprises, Inc. (the 82.5%
general 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 had provided significant amounts of equity capital, debt
and debt collateral for the Partnership. Based on this information, the
significant uncertainties created by the majority partner's financial problems
and the significant losses incurred in the 1997 results of operations of the
TidePointe project, the Company recorded a writedown representing all of its
remaining investment in and advances to TidePointe Partners, which when
combined with its equity share of the fiscal 1997 TidePointe Partners'
operating loss, totaled $2,658,000.
During 1998, the Partnership explored its options and on June 30, 1998,
TidePointe Partners closed on the sale of all of the TidePointe project assets
to CC-Hilton Head, Inc. (an affiliate of Classic Residences by Hyatt) for a
sales price of $23,200,000. At closing, the Company received no cash funds or
other consideration and released its mortgage on the TidePointe property, which
secured its investments and loans to the project. The Company has no ownership
interest in CC-Hilton Head, Inc. and no longer has any ownership interest in
the TidePointe community. TidePointe Partners, the Partnership, is in the
process of winding up its affairs and intends to liquidate. The Company will
receive no additional funds from the Partnership, and is under no obligation to
fund the Partnership in any way.
Due to the sale of the assets, which included the healthcare facility, the
Company has recognized the remaining gain of $179,375 in June 1998. The Company
has also entered into a 26-year license and use agreement with CC-Hilton Head,
Inc. for the use of the Company's logo, trade name, a non-compete agreement and
other services and amenity use in connection with the TidePointe community.
Under this agreement, the Company will receive fixed annual license fees,
ranging from $125,000 to $325,000 and totaling $4,125,000 over the 26-year
term. Approximately $67,000 of license fee income has been recognized by the
Company in fiscal year 1998.
F-23
<PAGE> 45
Sea Pines Associates, Inc.
Notes to Consolidated Financial Statements (continued)
9. COMMITMENTS AND CONTINGENCIES
Rent expense aggregated $554,077, $585,000 and $689,000 for the years ended
October 31, 1998, 1997 and 1996, respectively. Operating leases relate
primarily to office space and equipment. Minimum annual rental commitments
remaining at October 31, 1998, 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
1999 $ 419,736
2000 422,236
2001 391,102
2002 215,387
2003 217,174
Thereafter 834,150
===============
$ 2,499,785
===============
</TABLE>
The Company is a defendant in a lawsuit relating to a contractual relationship
related to its investment in TidePointe Partners. The plaintiff 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 plaintiff 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 was a defendant in a lawsuit filed in April 1997, relating to its
proposed construction of a new conference center in Harbour Town, adjacent to
the Harbour Town clubhouse. The suit, filed by the neighboring property owners,
challenged the Company's right to construct such a facility on the site. The
Court ruled on March 4, 1998 that the Company may proceed with the construction
of the conference center contingent upon the construction of a 50 to 60 room
inn adjacent to the site.
F-24
<PAGE> 46
Sea Pines Associates, Inc.
Notes to Consolidated Financial Statements (continued)
9. COMMITMENTS AND CONTINGENCIES (CONTINUED)
The Court's ruling required that construction of the inn commence no later than
two years after completion of the conference center. The Company has begun
construction of the inn in 1998. The Plaintiffs in this lawsuit have filed an
appeal of the Court's decision. The Company has filed its answer to this
appeal, which it intends to vigorously pursue. No trial date has been set.
Neither the Company nor its legal counsel can form an opinion as to the outcome
of this matter at this time. As of October 31, 1998, the Company had incurred
and capitalized predevelopment costs of $404,000 relating to the conference
center. If the Company does not construct the conference center 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, 1998 approximately 90 of the 404 acres have been
donated and title transferred. The remaining 314 acres has been leased to the
same not-for-profit organization for a nominal amount.
In 1998, the Company entered into a $676,000 construction contract for certain
site work at the inn and conference center, none of which has been incurred as
of October 31, 1998. The estimated construction cost of the two facilities is
approximately $11 million.
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
F-25
<PAGE> 47
Sea Pines Associates, Inc.
Notes to Consolidated Financial Statements (continued)
10. THE SEA PINES COUNTRY CLUB, INC. (CONTINUED)
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 or
resale of memberships of approximately $260,000, $260,000 and $494,000 in 1998,
1997 and 1996, respectively.
The Company had entered into an agreement with the Club to provide certain
administrative services, which terminated as of October 31, 1998. The Company
earned $63,000, $114,750 and $72,000 under this agreement during 1998, 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 1998 or 1997 as the Club directly
employed the individuals.
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 in cash. Furthermore, the Company agreed to finance the sale with a
15-year note bearing interest at 7.5% per annum and collateralized by the
property. Such note receivable had an outstanding balance of $1,387,000 at
October 31, 1998. As a result of the agreement, the Company recorded a pre-tax
impairment loss of $810,000 ($500,000) after income tax effect in 1996). On
October 31, 1996, the Company consummated the sale of the property, as agreed,
and no additional gain or loss was recorded.
F-26
<PAGE> 48
Sea Pines Associates, Inc.
Notes to Consolidated Financial Statements (continued)
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
6% of the participants' compensation. The Company's contributions to the plan
were $119,000, $106,000 and $80,000 for the years ended October 31, 1998, 1997
and 1996, 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, 1998. As of October 31, 1998,
the estimated fair value of the interest rate swap agreement is a negative
$411,000. Fair value of the interest rate swap was 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.
14. COMMUNITY SERVICES ASSOCIATES, INC.
Community Services Associates, Inc. ("CSA"), a homeowner association for Sea
Pines property owners, reimbursed the Company $594,000, related to payroll and
benefits in 1996. No amounts were reimbursed in 1998 or 1997 as CSA directly
employed the individuals and provided its own administrative services. In
addition, the Company paid approximately $104,000, $162,000, and $136,000 to
CSA for security service, landscaping and other related services during the
years ended October 31, 1998, 1997 and 1996, respectively.
F-27
<PAGE> 49
Sea Pines Associates, Inc.
Notes to Consolidated Financial Statements (continued)
15. BUSINESS SEGMENT INFORMATION
Under the guidance of FASB Statement No. 14, 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 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
1998 1997 1996
----------------------------------------------------
<S> <C> <C> <C>
Revenues:
Resort $ 26,554 $26,322 $24,588
Real estate brokerage 11,952 9,574 8,504
Country club -- -- 1,866
----------------------------------------------------
38,506 35,896 34,958
----------------------------------------------------
Cost of revenues:
Resort 16,605 16,249 15,320
Real estate brokerage 10,463 8,503 7,626
Country club -- -- 1,812
----------------------------------------------------
27,068 24,752 24,758
----------------------------------------------------
Depreciation and amortization expense:
Resort 1,378 1,411 1,364
Real estate brokerage 30 175 172
Country club -- -- 209
----------------------------------------------------
1,408 1,586 1,745
----------------------------------------------------
Corporate expenses:
Sales and marketing 1,290 1,376 1,219
General and administrative 4,579 4,475 4,137
Impairment loss on Carolina Center -- -- 810
Healthcare, net -- 644 --
----------------------------------------------------
5,869 6,495 6,166
----------------------------------------------------
Income from operations $ 4,161 $ 3,063 $ 2,289
====================================================
</TABLE>
F-28
<PAGE> 50
Sea Pines Associates, Inc.
Notes to Consolidated Financial Statements (continued)
15. BUSINESS SEGMENT INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
1998 1997 1996
-----------------------------------------------
<S> <C> <C> <C>
Identifiable assets:
Resort $35,431 $34,731 $37,167
Real estate brokerage 2,156 1,881 1,535
Healthcare -- -- 7,073
Corporate 338 1,202 482
-----------------------------------------------
$37,925 $37,814 $46,257
===============================================
<CAPTION>
YEAR ENDED OCTOBER 31
1998 1997 1996
-----------------------------------------------
<S> <C> <C> <C>
Capital expenditures:
Resort $1,590 $1,363 $2,267
Real estate brokerage 27 15 120
Country club -- -- 20
Healthcare -- 917 3,878
-----------------------------------------------
$1,617 $2,295 $6,285
===============================================
</TABLE>
F-29
<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, 1998 and 1997, and for each of the three years in the
period ended October 31, 1998, and have issued our report thereon dated
December 10, 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
December 10, 1998
F-30
<PAGE> 52
Sea Pines Associates, Inc.
Valuation and Qualifying Accounts
Schedule II
(Amounts in Thousands)
<TABLE>
<CAPTION>
Additions Net
Balance at charged to deductions Balance
beginning costs and and at end
of year expenses expenses of year
----------------------------------------------------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts receivable:
- --------------------------------------------------
For the year ended October 31, 1996 $ 30 $ 0 ($ 3) $ 27
For the year ended October 31, 1997 $ 27 $76 ($ 30) $ 73
For the year ended October 31, 1998 $ 73 $ 6 ($ 29) $ 50
Deferred tax asset valuation allowance:
- --------------------------------------------------
For the year ended October 31, 1996 $405 $ 0 ($ 13) $392
For the year ended October 31, 1997 $392 $ 0 ($121) $271
For the year ended October 31, 1998 $271 $ 0 ($ 80) $191
</TABLE>
F-31
<PAGE> 53
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant, Sea Pines Associates, Inc., has duly
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
SEA PINES ASSOCIATES, INC.
Dated: January 29, 1999 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.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/Charles W. Flynn Chairman and Director January 29, 1999
- -----------------------------------
Charles W. Flynn
/s/Michael E. Lawrence Chief Executive Officer January 29, 1999
- ----------------------------------- and Director
Michael E. Lawrence
/s/Thomas C. Morton Treasurer (Principal January 29, 1999
- ----------------------------------- Financial and
Thomas C. Morton Accounting Officer)
and Director
/s/Norman P. Harberger Vice Chairman and January 29, 1999
- ----------------------------------- Director
Norman P. Harberger
/s/Angus Cotton Secretary and January 29, 1999
- ----------------------------------- Director
Angus Cotton
</TABLE>
<PAGE> 54
<TABLE>
<S> <C> <C>
/s/Paul B. Barringer, II Director January 29, 1999
- -----------------------------------
Paul B. Barringer, II
/s/Thomas G. Daniels Director January 29, 1999
- -----------------------------------
Thomas G. Daniels
/s/Ralph L. Dupps, Jr. Director January 29, 1999
- -----------------------------------
Ralph L. Dupps, Jr.
/s/P.R. Easterlin, Jr. Director January 29, 1999
- -----------------------------------
P. R. Easterlin, Jr.
/s/James L. Gray Director January 29, 1999
- -----------------------------------
James L. Gray
/s/John G. McGarty Director January 29, 1999
- -----------------------------------
John G. McGarty
/s/Robert W. Siler, Jr. Director January 29, 1999
- -----------------------------------
Robert W. Siler, Jr.
/s/Arthur P. Sundry Director January 29, 1999
- -----------------------------------
Arthur P. Sundry
/s/Joseph F. Vercellotti Director January 29, 1999
- -----------------------------------
Joseph F. Vercellotti
/s/Frank E. Zimmerman, Jr. Director January 29, 1999
- -----------------------------------
Frank E. Zimmerman, Jr.
*By: /s/Angus Cotton
- -----------------------------------
Angus Cotton
Attorney-in-Fact for each
of the persons indicated
</TABLE>
<PAGE> 55
EXHIBIT INDEX
Pursuant to Item 601 of Regulation S-K
<TABLE>
<CAPTION>
Sequential
Exhibit No. Page No.
- ----------- ----------
<S> <C> <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)
3(f) Amended Bylaws of Registrant Revised
January 30, 1998
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)
</TABLE>
E-1
<PAGE> 56
<TABLE>
<CAPTION>
Sequential
Exhibit No. Page No.
- ----------- ----------
<S> <C> <C>
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)
10(a) 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(b) 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(c) 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(d) 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(e) 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)
</TABLE>
E-2
<PAGE> 57
<TABLE>
<CAPTION>
Sequential
Exhibit No. Page No.
- ----------- ----------
<S> <C> <C>
10(f) 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)
10(g) 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(h) 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(i) 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(j) Second Amendment to Amended and Restated Partnership
Agreement of TidePointe Partners dated May 24, 1995.
(Incorporated by reference to Exhibit 10(w) to Form 10-K
filed February 13, 1998)
</TABLE>
E-3
<PAGE> 58
<TABLE>
<CAPTION>
Sequential
Exhibit No. Page No.
- ----------- ----------
<S> <C> <C>
10(k) Third Amendment to Amended and Restated Partnership
Agreement of TidePointe Partners dated July 30, 1997
(Incorporated by reference to Exhibit 10(w) to
Form 10-K filed February 13, 1998)
10(l) Master Credit Agreement dated as of October 31, 1998
between Sea Pines Associates, Inc. and Sea Pines
Company, Inc. and Wachovia Bank, N.A.
10(m) Amended and Restated Term Note between Sea Pines Associates, Inc.
and Sea Pines Company, Inc. and Wachovia Bank, N.A.
in the principal sum of $18,500,000 dated October 31, 1998
with respect to the Credit Agreement in 10(l) above.
10(n) Amended and Restated Revolving Line of Credit Note between
Sea Pines Associates, Inc. and Sea Pines Company, Inc.
and Wachovia Bank, N.A. in the principal sum of
$15,000,000 dated October 31, 1998 with respect
to the Credit Agreement in 10(l) above.
10(o) Amended and Restated Seasonal Line of Credit Note
between Sea Pines Associates, Inc. and Sea Pines
Company, Inc. and Wachovia Bank, N.A. in the
principal sum of $2,500,000 dated October 31, 1998
with respect to the Credit Agreement in 10(l) above.
10(p) Mortgage Modification and Restatement Agreement dated
October 31, 1998 between Sea Pines Associates, Inc.
and Sea Pines Company, Inc. and Wachovia Bank,
N.A. with respect to the note in 10(m) above.
10(q) Mortgage Modification and Restatement Agreement dated
October 31, 1998 between Sea Pines Associates, Inc.
and Sea Pines Company, Inc. and Wachovia Bank,
N.A. with respect to the note in 10(n) above.
</TABLE>
E-4
<PAGE> 59
<TABLE>
<CAPTION>
Sequential
Exhibit No. Page No.
- ----------- ----------
<S> <C> <C>
10(r) Mortgage Modification and Restatement Agreement dated
October 31, 1998 between Sea Pines Associates, Inc.
and Sea Pines Company, Inc. and Wachovia Bank,
N.A. with respect to the note in 10(o) above.
10(s) Swap Transaction confirmation between Sea Pines Company,
Inc. and Wachovia Bank, N.A. dated September 30, 1998.
10(t) License and Use Agreement dated June 30, 1998 between
Sea Pines Company, Inc. and CC-Hilton Head, Inc.
10(u) Asset Purchase Agreement dated July 31, 1997 between
Sea Pines Senior Living Center, Inc. and
The Rogers Center, L.L.C.
(Incorporated by reference to Exhibit 10(w) to
Form 10-K filed February 13, 1998)
21 Subsidiaries of the Registrant
27 Financial Data Schedule (for SEC use only)
99.1 Safe Harbor Disclosure
</TABLE>
E-5
<PAGE> 1
EXHIBIT 3F
BY-LAWS
OF
SEA PINES ASSOCIATES, INC.
REVISED JANUARY 30, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
I. NAME AND PURPOSES
1. Name................................................ 5
2. Purposes............................................ 5
II. OFFICES
1. Principal Office.................................... 5
2. Registered Office................................... 5
III. SHAREHOLDERS
1. Place of Meetings................................... 5
2. Annual Meeting...................................... 6
3. Special Meetings.................................... 6
4. Notice of Meetings of Shareholders.................. 6
5. Waiver of Notice.................................... 6
6. Quorum of Shareholders.............................. 6
7. Adjournment......................................... 7
8. Record Date......................................... 7
9. Voting of Shares.................................... 7
10. Proxies............................................. 8
11. Written Consent of Shareholders..................... 8
IV. BOARD OF DIRECTORS
1. General............................................. 8
2. Qualifications...................................... 9
3. Number, Tenure and Election......................... 9
4. Newly Created Directorships and Vacancies........... 9
5. Quorum.............................................. 9
6. Action of the Board of Directors.................... 10
7. Resignation and Removal............................. 10
8. Place and Time of Board Meetings.................... 10
9. Meeting by Conference Call.......................... 10
10. Regular Annual Meeting.............................. 10
11. Notice of Meetings of the Board..................... 10
12. Adjournment......................................... 11
13. Chairman for Board Meetings......................... 11
14. Compensation........................................ 11
15. Presumption of Assent............................... 11
16. Written Consent of Directors........................ 11
17. Advisory Directors.................................. 11
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
V. OFFICERS
1. Number..............................................12
2. Election and Term of Office.........................12
3. Removal.............................................12
4. Execution of Instruments............................12
5. Compensation........................................12
6. Sureties and Bonds..................................12
7. Chairman............................................12
8. Vice Chairman.......................................13
9. Secretary...........................................13
10. Treasurer...........................................13
11. Assistant Officers..................................14
12. Chief Executive Officer.............................14
VI. CERTIFICATES FOR SHARES
1. Certificates........................................14
2. Lost or Destroyed Certificates......................14
3. Transfer of Shares..................................15
4. Restrictions on Stock Certificates..................15
VII. GENERAL PROVISIONS
1. Seal................................................15
2. Indemnification and Insurance.......................15
3. References to Articles of Incorporation.............16
4. Fiscal Year.........................................16
5. By-Laws Amendments..................................16
</TABLE>
- 3 -
<PAGE> 4
CERTIFICATION
I the undersigned, do hereby certify that I am the duly elected and acting
Secretary of Sea Pines Associates, Inc., a South Carolina corporation; and
That the foregoing By-Laws constitute the By-Laws of the Corporation
reflecting amendments duly adopted at a meeting of the Board of Directors
thereof held on the 25th day of January, 1988. And again amended and adopted by
the Board of Directors on the 7th day of December 1992. And again amended and
adopted by the Board of Directors on the 26th day of February, 1996. And again
amende and adopted by the Board of Directors on the 30th day of January, 1998.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the
seal of the Corporation this 30th day of January, 1998.
/s/ Angus Cotton
------------------------
Secretary
(SEAL)
-4-
<PAGE> 5
BY-LAWS
OF
SEA PINES ASSOCIATES, INC.
Article I
Name and Purposes
Section 1. Name. The name of the corporation is Sea Pines
Associates, Inc. ("Corporation").
Section 2. Purposes. The Corporation is organized under the South
Carolina Business Corporation Code for those purposes set out in the Articles
of Incorporation of the Corporation.
Article II
Offices
Section 1. Principal Office. The principal office of the
Corporation is located at Sea Pines Welcome Center, 32 Greenwood Drive, Hilton
Head Island, South Carolina 29928. The Corporation may have such other offices
either within or without the State of South Carolina as the Board of Directors
may designate from time to time.
Section 2. Registered Office. The registered office of the
Corporation required by the South Carolina Business Corporation Code to be
maintained in the State of South Carolina may be, but need not be, identical
with the principal office and the address of the registered office may be
changed from time to time by the Board of Directors. In the absence of any
action by the Board, the registered office shall be as set forth in the
Articles of the Incorporation of the Corporation.
Article III
Shareholders
Section 1. Place of Meetings. Meetings of the shareholders shall
be held at the principal office of the Corporation or at such other place
within or outside the State of South Carolina as the Board of Directors
shall authorize.
-5-
<PAGE> 6
Section 2. Annual Meeting. The annual meeting of shareholders shall be
held on the first Saturday in the month of March of each year, or at such other
time as may be determined by the Board of Directors subject to the other
requirements of this Article. At the annual meeting, the shareholders shall
elect members of the Board of Directors as provided herein and transact such
other business as may properly come before the meeting.
Section 3. Special Meetings. Special meetings of the shareholders may
be called by the Chairman of the Board of Directors, by a majority of the Board,
or by shareholders owning not less than ten (10%) percent of the shares of stock
of all classes of stock entitled to vote for members of the Board of Directors.
Such request and the notice of the meeting issued pursuant thereto shall state
the purpose or purposes of the proposed meeting, and all business transacted at
the special meeting shall be confined to the purposes stated in the notice.
Section 4. Notice of Meetings of Shareholders. Written notice of any
shareholders meeting shall be delivered either personally or by first class
mail to each shareholder entitled to vote on any matter to be addressed at such
meeting. Such notice shall be delivered not less than ten (10) nor more than
fifty (50) days before the meeting. Notice of each meeting shall state the
place, date and hour of the meeting and, in the case of a special meeting, the
purpose or purposes for which the meeting is called. If mailed, such notice
shall be deemed delivered when deposited in the United States mail, with
postage prepaid, addressed to the shareholder at his address as it appears on
the Corporation's records, or if he shall have filed with the Secretary of the
Corporation a written request that notices to him be mailed to some other
address, then directed to him at such other address.
Section 5. Waiver of Notice. Notice of meetings need not be given to
any shareholder who signs a waiver of notice, either in person or by proxy,
either before or after the meeting. The attendance, whether in person or by
proxy, of any shareholder at a meeting without protesting the sufficiency of
notice of the meeting prior to the conclusion of such meeting shall constitute a
waiver of notice by such shareholder.
Section 6. Quorum of Shareholders. A majority of the outstanding
shares of the Corporation entitled to vote, represented in person or by proxy,
shall constitute a quorum at a meeting of shareholders for the transaction of
business. If a quorum is present at any meeting, the affirmative vote of a
majority of the shares represented and entitled to vote on the subject matter
shall be the act of the shareholders, unless the vote of a greater number or
voting by class is otherwise required by these By-Laws or the Articles of
Incorporation. Once a quorum is present, it shall not be broken by the
subsequent withdrawal of any shareholder, and the shareholders remaining may
continue to transact business until
-6-
<PAGE> 7
adjournment, notwithstanding the withdrawal of enough shareholders to leave
less than a quorum.
Section 7. Adjournment. Upon the affirmative vote of a majority in
interest of shareholders present at a shareholder meeting, the meeting may be
adjourned from time to time to a fixed date for any valid business reason
without further notice as to the time and place of such adjourned meeting, but
such adjournment shall be for a period not in excess of thirty (30) days. At
any such adjourned meeting at which a quorum shall be present or represented,
only such business may be transacted which might have been transacted at the
meeting as originally scheduled, unless all shares are represented and do
not object.
Section 8. Record Date. For the purpose of determining the
shareholders qualified or entitled to notice of or to vote at any meeting of
shareholders or any adjournment thereof, or to express consent to or dissent
from any proposal without a meeting, or for the purpose of determining
shareholders qualified or entitled to receive payment of any dividend or the
allotment of any rights, or for any other proper purpose, the Board records
shall fix, in advance, a date as the record date for any such determination of
shareholders. Such date shall be not more than seventy (70) nor less than ten
(10) days before the date of such meeting or action. If no record date is fixed
by the Board, the record date for any such purposes shall be ten (10) days
before the date of such meeting or action. When such determination of qualified
or entitled shareholders has been made as provided above, such determination
shall also apply to any adjourned meeting, except where transfer of stock to a
new holder has been entered on the transfer books of the Corporation after the
original meeting was adjourned and at least ten (10) days before the date of
such adjourned meeting.
Section 9. Voting of Shares. At all meetings, shareholder's voting will
be conducted and recorded buy mailed proxies prior to the meeting, or by
proxies personally delivered on the day of the meeting. However, any qualified
voter may demand a record vote, whereupon such vote shall be taken by ballot,
and the Secretary shall record the name of each shareholder voting, the number
of shares voted by each shareholder and, if such vote shall be by proxy, the
name of the proxy holder. A complete list of shareholders entitled to vote at a
shareholder meeting or any adjournment thereof, arranged in alphabetical order
and setting forth the number of voting shares held by each shareholder, shall
be prepared by the Secretary of the Corporation or the transfer agent of the
Corporation who shall have charge of the stock ledger and stock transfer books
for the Corporation. Such list shall be subject to inspection by any shareholder
at the principal office of the Corporation during business hours for ten (10)
days prior to such meeting and throughout the meeting or any adjournment
thereof. There shall be no cumulative voting.
- 7 -
<PAGE> 8
Section 10. Proxies. Every shareholder entitled to vote at a meeting of
the shareholders or to express consent or dissent to action without a meeting
may authorize another person or persons to act for him by proxy. Every proxy
must be signed by the shareholder or his attorney-in-fact and delivered to the
Secretary at the meeting prior to or during the roll call, or be returned to
the corporation with the signed consent or dissent to action without a meeting.
No proxy shall be valid after the date of the next meeting of the shareholders
or any adjournment thereof. Every proxy shall be revocable at the pleasure of
the shareholder executing it, except as otherwise provided by law.
Section 11. Written Consent of Shareholders. Any action required to be
taken at a meeting of the shareholders may be taken without a meeting if
consent in writing setting forth the action so taken shall be signed by all of
the shareholders entitled to vote with respect to the subject matter thereof.
Article IV
Board of Directors
Section 1. General. Subject to these By-Laws and any lawful agreement
between the shareholders, the full and entire management of the affairs and
business of the Corporation shall be vested in the Board of Directors which
shall have and may exercise all of the powers that may lawfully be exercised or
performed by the Corporation, including, but not limited to, the following:
(a) the power to grant easements across, over and through the properties
of the Corporation;
(b) the power to borrow money and to grant mortgages on the properties of
the Corporation and any improvements thereon;
(c) the power to advertise to the public at large;
(d) the power to hire, dismiss, pay and provide benefits to such
employees as are necessary for operation of the Corporation; and
(e) the power to appoint such committees as the Board shall deem
necessary with such powers as the Board shall authorize. Such
committees shall include, but not be limited to:
Finance;
Audit;
Personnel and Compensation; and
Nominations, Corporate Ethics, and Corporate Governance.
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<PAGE> 9
(f) the power to redeem any or all shares acquired by any Acquiring Person
pursuant to any Control Share Acquisition at their fair value within
sixty (60) days thereof, if the Acquiring Person fails to file an
Acquiring Person's Statement with the corporation within the time
required by law.
Section 2. Qualifications. Each director shall be at least eighteen (18)
years of age. Directors need not be shareholders nor residents of the State of
South Carolina. The mandatory retirement age for Directors is age 75. Nominees,
under the age of 75, may be elected and re-elected despite their 75th birthday
falling during their elected term; provided, however, a Director who has reached
his 75th birthday must resign at the annual meeting immediately following his or
her 75th birthday.
Section 3. Number, Tenure and Election.
(a) Number and Tenure. The Board of Directors shall consist of 14
directors. The Board of Directors may, by majority vote, increase or
decrease this number; but the number of directorships shall not be
less than eleven (11) nor more than fifteen (15). Directors shall be
elected for terms of three years or less, the terms overlapping such
that the number completing their terms will be as nearly equal as
possible from year to year.
(b) Nomination. At least sixty (60) days prior to every annual election
of directors, the Board of Directors shall receive the
recommendations of the committee responsible for nominations and
shall nominate a slate of candidates for Director vacancies with at
least as many candidates for election to the Board of Directors as
there are directorships to be filled.
(c) Election. Each shareholder shall be entitled to cast one (1) vote
per share of stock with voting rights held, for each directorship to
be filled. There shall be no cumulative voting. Those directors
receiving a majority of the votes cast shall be elected.
Section 4. Newly Created Directorships and Vacancies. Newly created
directorships resulting from an increase in the number of directors or vacancies
occurring in the Board of Directors for any reason may be filled by a vote of a
majority of the directors then in office although less than a quorum exists.
Directors appointed pursuant to this section shall hold office until the next
annual meeting of shareholders and until their successors have been elected and
qualified, or until their death, resignation or removal.
Section 5. Quorum. A majority of the members of the Board
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<PAGE> 10
of Directors shall constitute a quorum for the transaction of business or of
any specified item of business.
Section 6. Action of the Board of Directors. Unless otherwise required by
law, the vote of a majority of the members of the Board of Directors present at
the time of the vote, if a quorum is present at such time, shall be an act of
the Board of Directors. Each director present and voting shall have one (1)
equal vote, regardless of the number of shares, if any, which he may hold.
Section 7. Resignation and Removal. A director may resign from the Board
of Directors, at any time, by giving written notice to the Board, the Chairman,
or the Secretary of the Corporation. Unless otherwise specified in the notice,
the resignation shall take effect upon receipt thereof by the Board or such
officer, and the acceptance of the resignation shall not be necessary to make
it effective. Any director may be removed at any time for cause upon the vote
of shareholders holding a majority of the outstanding shares with voting
rights. Any director may be removed at any time without cause upon the vote of
shareholders holding eighty (80%) percent of the outstanding shares with voting
rights.
Section 8. Place and Time of Board Meetings. The Board of Directors may
hold its meetings at the principal office of the Corporation or at such other
places, either within or without the State of South Carolina, as it may from
time to time determine. If the meeting is held outside the State of South
Carolina, notice must be given by certified mail, not less than five (5) days
before the meeting, and such notice shall contain the date, place and purpose
of the meeting. Regularly scheduled meetings of the Board will be held on the
third Monday of each month unless changed by an approving vote of the Board.
Section 9. Meeting by Conference Call. Members of the Board of Directors
or any committee designated by such Board may participate in the meeting of the
Board or committee by means of conference telephone or similar communications
equipment by which all persons participating in the meeting can hear each other
at the same time. Such participation shall constitute presence in person at the
meeting.
Section 10. Regular Annual Meeting. The regular annual meeting of the
Board of Directors shall be held immediately following the annual meeting of
the shareholders at the place of such annual meeting of the shareholders.
Section 11. Notice of Meetings of the Board. Regular meetings of the
Board may be held without notice at such time and place as the Board shall from
time to time determine. Special meetings of the Board shall be held upon notice
to the directors and may be called by the Chairman upon not less than four (4)
days
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<PAGE> 11
notice to each director either personally or by mail, telegraph, telephone,
cable or wireless, facsimile transmission, courier service, or electronic mail,
except as provided in Section 8 of this Article with respect to meetings held
outside of the State of South Carolina. Special meetings shall be called by the
Chairman or by the Secretary in a like manner upon the written request of at
least two (2) directors. Notice of a meeting need not be given to any director
who submits a waiver of notice, either before or after the meeting, or who
attends the meeting without protesting prior thereto or at its commencement the
lack of notice to him.
Section 12. Adjournment. A majority of the directors present, whether or
not a quorum is present, may adjourn any meeting to another time and place.
Notice of the adjournment shall be given to all directors who were absent at
the time of the adjournment and, unless such time and place are announced at
the meeting, to all other directors.
Section 13. Chairman For Board Meetings. At all meetings of the Board of
Directors, the Chairman of the Board, if one has been elected, shall preside.
In the absence of the Chairman, the Vice Chairman shall preside. If no duly
elected Chairman or Vice Chairman is present, the Directors present shall elect
a chairman for the meeting.
Section 14. Compensation. No compensation shall be paid to directors, as
such, for their services but, by resolution of the Board, a fixed sum and
expense for actual attendance at each regular and special meeting of the Board
may be authorized. Nothing herein contained shall be construed to preclude any
director from serving the Corporation in any other capacity and receiving
compensation therefor.
Section 15. Presumption of Assent. A director of the Corporation who is
present at a meeting of the Board of Directors at which action of any corporate
matter is taken shall be presumed to have assented to the action taken unless
he shall file his written dissent to such action with the person acting as the
Secretary of the meeting before the adjournment thereof or shall forward such
dissent by registered mail to the Secretary of the Corporation immediately
after the adjournment of the meeting. Such right to dissent shall not apply to
a director who voted in favor of such action.
Section 16. Written Consent of Directors. Any action that may be taken at
a meeting of the Board of Directors may be taken without a meeting if written
consent setting forth the action so taken is signed by all the directors
entitled to vote thereon and is filed with the minutes of the proceedings of
the Board.
Section 17. Advisory Directors. In addition to the members of the Board
of Directors elected as provided above, the Board of
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<PAGE> 12
Directors may appoint any number of advisory directors who may attend all
meetings of the Board of Directors and participate in all discussions at such
meetings; provided, advisory directors may not vote on matters coming before the
Board.
Article V
Officers
Section 1. Number. The Board of Directors shall elect a Chairman who
shall also act as Chairman of the Board of Directors, a Vice-Chairman who shall
also act as Vice-Chairman of the Board of Directors, a Chief Executive officer,
a Secretary, a Treasurer, and one or more assistant officers. Any two or more
offices may be held by the same person, except that the Chairman, Vice Chairman,
and Secretary must be three different persons.
Section 2. Election and Term of Office. An officer shall remain in
office until his or her successor shall have been duly elected and shall have
qualified or until his or her death or until he or she shall resign or shall
have been removed in the manner hereinafter provided.
Section 3. Removal. Any officer may be removed by the Board whenever
in its judgment the best interest of the Corporation will be served thereby. Any
such removal in violation of any written employment agreement with any officer
shall not limit the power of the Board of Directors to remove such officer, but
the corporation shall remain liable to the officer for the payment of all sums
due under any such agreement.
Section 4. Execution of Instruments. Contracts, deeds, checks and
other instruments shall be executed by the officer or those officers as shall be
determined by resolution of a majority of the Board of Directors.
Section 5. Compensation. The compensation of officers shall be fixed
by resolution of the Board of Directors and may include salary, insurance,
expense accounts, auto expense or other prerequisites deemed appropriate by the
Board.
Section 6. Sureties and Bonds. If so required by the Board of
Directors, any officer or agent of the Corporation shall execute a bond in favor
of the Corporation in such sum and with such surety or sureties as the Board may
direct. The bond shall be conditioned upon the officer's or agent's faithful
performance of his duties to the Corporation, including responsibility for
negligence and for the accounting of all property, funds, or securities of the
Corporation which may come into his hands.
Section 7. Chairman. The Chairman shall oversee the work of the Board
of Directors and assure that the Board's
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responsibilities are carried out, consistent with such policies and procedures
as the Board may adopt. He shall, when present, preside at all meetings of the
shareholders and all meetings of the Board of Directors. He may sign, with the
Secretary or any other proper officer of the Corporation authorized by the Board
of Directors, certificates for shares of the Corporation, and any deeds,
mortgages, bonds, contracts or other instruments which the Board of Directors
authorizes to be executed, except in cases where the signing and execution
thereof shall be expressly delegated by at least a majority of the Board of
Directors or by these By-Laws to some other officer or agent of the Corporation,
or shall be required by law to be otherwise signed or executed. The Chairman
shall have primary responsibility for shareholder relations and shareholder
communication. He shall represent the Corporation at external functions
requiring Board representation. In general, the Chairman shall perform all
duties incident to the office and such other duties as may be prescribed by the
Board of Directors from time to time.
Section 8. Vice Chairman. In the absence of the Chairman or in the
event of his death, inability or refusal to act, the Vice Chairman, shall
perform the duties of the Chairman and, when so acting, shall have all the
powers of and be subject to all the restrictions that apply to the Chairman. The
Vice Chairman shall perform such other duties as from time to time may be
assigned to him by the Chairman or by the Board of Directors.
Section 9. Secretary. The Secretary shall attend all meetings of the
Board of Directors and of the shareholders and record all votes and minutes of
all proceedings in a book or books to be kept for that purpose. He shall keep
in safe custody the seal of the Corporation and affix it to any instrument when
authorized, and he shall keep all the documents and records of the Corporation
as required by law or otherwise in a proper and safe manner. When required, he
shall prepare or cause to be prepared and available at each meeting of
shareholders entitled to vote thereat, a list of shareholders indicating the
number of shares of each respective class held by each. In general, he shall
perform all duties incident to the office of Secretary and such other duties as
may be prescribed from time to time by the Chairman or the Board of Directors.
Section 10. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in the corporate books. He shall deposit all monies
and other valuables in the name and to the credit of the Corporation in such
depositories as may be designated by the Board and disburse the funds of the
Corporation as may be ordered or authorized by the Board and preserve proper
vouchers for such disbursements. He shall render to the Chairman and Board at
the regular meetings of the Board or whenever they require it, an account of
all of his
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<PAGE> 14
transactions as Treasurer and of the financial condition of the Corporation,
and he shall render a full financial report at the annual meeting of the
shareholders if so requested by the Board. The Treasurer shall be furnished, at
his request, with such reports and statements as he may require from the
corporate officers and agents as to all financial transactions of the
Corporation. In general, he shall perform all duties as are given to him by
these By-Laws or as from time to time are assigned to him by the Board of
Directors or the Chairman.
Section 11. Assistant Officers. The Board of Directors may elect (or
delegate to the Chairman of the Board or to the Chairman the right to appoint)
such other officers and agents as may be necessary or desirable for the
business of the Corporation. Such other officers may include one or more
assistant secretaries and treasurers who have the power and authority to act in
place of the officer to whom they are elected or appointed as an assistant in
the event of the officer's inability or unavailability to act in his official
capacity.
Section 12. Chief Executive Officer. The Chief Executive Officer, subject
to the control of the Board of Directors and any limitations the Board may
choose to impose, shall direct the business and affairs of the Corporation
including its subsidiaries.
Article VI
Certificates for Shares
Section 1. Certificates. Each owner of stock of the Corporation shall be
entitled to have a certificate, in such form as shall be approved by the Board
of Directors, certifying the number of shares of stock of the Corporation owned
by him. The certificates representing shares of stock shall be signed in the
name of the Corporation by the Chairman or a Vice Chairman and by the Treasurer
or an assistant Treasurer or by the Secretary or an assistant Secretary of the
Corporation or a facsimile thereof. Any or all of the signatures upon a
certificate may be facsimiles if the certificate is countersigned by a transfer
agent or registered by a registrar other than the Corporation itself or an
employee of the Corporation. In case any officer who shall have signed such
certificates shall have ceased to be such officer before such certificate shall
be issued, they may nevertheless be issued by the Corporation with the same
effect as if such officers were still in office at the date of their issue.
Section 2. Lost or Destroyed Certificates. The Board of Directors may
direct a new certificate or certificates to be issued in place of any
certificate or certificates theretofore issued by the Corporation alleged to
have been lost or destroyed, if permitted by applicable law, upon the making of
an affidavit of that fact by the person claiming the certificate to be lost or
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<PAGE> 15
destroyed. When authorizing such issue of a new certificate or certificates,
the Board may so long as permitted by applicable law, in its discretion and as
a condition precedent to the issuance thereof, require the owner of such lost
or destroyed certificate or certificates or his legal representative, to
advertise the same in such manner as it shall require and give the Corporation
a bond in such sum and with such surety or sureties as it may direct as
indemnity against any claim that may be made against the Corporation with
respect to the certificate alleged to have been lost or destroyed.
Section 3. Transfer of Shares. Transfers of shares of stock of the
Corporation shall be made on the stock records of the Corporation only upon
authorization by the registered holder thereof, or by his attorney thereunto
authorized by a power of attorney duly executed and filed with the Secretary or
with a transfer agent or a transfer clerk, and on surrender of the certificate
or certificates for such shares properly endorsed or accompanied by a duly
executed stock transfer power. The Corporation shall be entitled to treat the
holder of record of any share as the holder in fact thereof and, accordingly,
shall not be bound to recognize any equitable or other claim to or interest in
such share on the part of any other person whether or not it shall have express
or other notice thereof except as expressly provided by the laws of South
Carolina.
Section 4. Restrictions on Stock Certificates. The transfer of shares in
the Corporation shall be restricted. A legend evidencing the restrictions on
transfer, including restrictions regarding state and federal securities laws
shall be placed on the back of each stock certificate. A legend regarding the
preferences, privileges, restrictions and rights granted to or imposed upon any
classes of stock may also be placed on the back of each stock certificate.
Article VII
General Provisions
Section 1. Seal. The seal of the Corporation shall be in such form as the
Board of Directors may from time to time determine. In the event that it is
inconvenient to use such a seal at any time, the signature of the Corporation
following the words "seal" enclosed in parenthesis shall be deemed the seal of
the Corporation. The seal shall be in the custody of the Secretary.
Section 2. Indemnification and Insurance. The Corporation shall indemnify
every officer and director against any and all expenses, including attorney's
fees, reasonably incurred by or imposed upon any officer or director in
connection with any action, suit or other proceeding (including settlement of
any suit or proceeding if approved by the then Board of Directors) to which he
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<PAGE> 16
or she may be a party by reason of having been an officer or director. The
officers and directors shall not be liable for any mistake of judgment,
negligent or otherwise, except for their own individual or willful misfeasance,
malfeasance, misconduct or bad faith. The officers and directors shall have no
personal liability with respect to any contract or other commitment made by the
Board, in good faith, on behalf of the Corporation (except to the extent that
such officers or directors may also be shareholders of the Corporation), and
the Corporation shall indemnify and forever hold each such officer and director
free and harmless against any and all liability to others on account of any
such contract or commitment. Any right to indemnification provided for herein
shall not be exclusive of any other rights to which any officer or director, or
former officer or director, may be entitled. The Corporation shall maintain
adequate general liability and officers and directors liability insurance to
fund this obligation, if such insurance is available at a reasonable cost as
determined by the Board of Directors.
Section 3. References to Articles of Incorporation. References to the
Articles of Incorporation of the Corporation in these By-Laws shall include all
amendments thereto unless otherwise stated.
Section 4. Fiscal Year. The fiscal year of the Corporation shall be
determined by resolution by the Board of Directors.
Section 5. By-Laws Amendments. These By-Laws may be amended by the
affirmative vote of a majority of the Board of Directors or by the affirmative
vote of shareholders holding a majority of the votes eligible to be cast and
present or represented by proxy at a duly called meeting of the shareholders;
provided, no amendment to the By-Laws adopted by a vote of the shareholders in
the manner provided above may be modified by the Board of Directors.
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<PAGE> 1
WACHOVIA BANK, N.A.
SEA PINES ASSOCIATES, INC.
AND
SEA PINES COMPANY, INC.
MASTER CREDIT AGREEMENT
OCTOBER 31, 1998
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I. DEFINITIONS.............................................. 1
ARTICLE II. CROSS COLLATERALIZATION, CROSS DEFAULT, AND
JOINT AND SEVERAL LIABILITY.............................. 10
ARTICLE III. THE REVOLVING LOAN FACILITY ............................. 10
ARTICLE IV. THE SEASONAL LINE OF CREDIT FACILITY .................... 16
ARTICLE V. THE TERM LOAN FACILITY................................... 17
ARTICLE VI. CONDITIONS PRECEDENT..................................... 19
ARTICLE VII. REPRESENTATIONS AND WARRANTIES........................... 20
ARTICLE VIII. BORROWER'S AFFIRMATIVE COVENANTS......................... 22
ARTICLE IX. BORROWER'S NEGATIVE COVENANTS............................ 30
ARTICLE X. EVENTS OF DEFAULT........................................ 34
ARTICLE XI. REMEDIES................................................. 36
ARTICLE XII. MISCELLANEOUS PROVISIONS................................. 38
SCHEDULE I COMPLIANCE CERTIFICATE................................... S-1
SCHEDULE II ASSET RELEASE SCHEDULE................................... S-3
i
<PAGE> 3
THIS MASTER CREDIT AGREEMENT is entered into as of October 31, 1998 by
SEA PINES ASSOCIATES, INC. and SEA PINES COMPANY, INC., both corporations
organized and existing under the laws of the State of South Carolina
(collectively the "Borrower") and WACHOVIA BANK, N.A., a national banking
association (the "Bank").
WHEREAS, the Borrower and the Bank desire to establish uniform
agreements, obligations, covenants and other matters for all Obligations, as
defined, whether now existing or hereinafter arising, owed to the Bank and to
collateralize and cross-default all said Obligations, as defined.
WHEREAS, the Borrower and the Bank also desire to re-establish,
re-state and modify: (1) the Borrower's term loan facility in an amount up to
Eighteen Million Five Hundred Thousand Dollars ($18,500,000) (the "Term Loan
Facility"); (2) the Borrower's revolving line of credit facility in an amount up
to Fifteen Million Dollars ($15,000,000) (the "Revolving Line of Credit
Facility"); and (3) the Borrower's seasonal line of credit facility in an amount
up to Two Million Five Hundred Thousand Dollars ($2,500,000) (the "Seasonal Line
of Credit Facility").
NOW, THEREFORE, in consideration of these premises and the following
promises and undertakings, the Bank and the Borrower agree as follows:
ARTICLE I. DEFINITIONS
1.01 The following terms shall have the following meanings unless the
context otherwise expressly requires:
(a) "Adjusted LIBOR Index" for an applicable Interest Period
shall mean a rate per annum equal to the quotient obtained by dividing (i) the
applicable "LIBOR Index" for such Interest Period by (ii) 1.00 minus the
"Eurodollar Reserve Percentage."
(b) "Advance" means each advance, re-advance or loan made to
the Borrower in accordance with this Agreement in any amount designated by the
Borrower.
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<PAGE> 4
(c) "Approved Project" means development and construction
projects undertaken by the Borrower located on the Secured Properties which have
been underwritten and approved in writing by the Bank.
(d) "Applicable Margin" as to each Note shall mean One and
50/100 percent (1.50%) (150 basis points); provided, that for the Revolving Line
of Credit Note and the Term Loan Note, the Applicable Margin shall be adjusted
to the percentage indicated below for each fiscal quarter based on the
Borrower's DSC Ratio (as defined in ss. 8.02 hereof) for the previous fiscal
quarter:
DSC Ratio Applicable Margin
--------- -----------------
< 1.50 1.50% (150 basis points)
=> 1.50 but <1.75 1.35% (135 basis points)
=> 1.75 1.25% (125 basis points)
The Applicable Margin shall be adjusted as of the first Business Day of
each fiscal quarter based upon the quarterly Compliance Certificate required by
Section 8.01(d) hereof and shall be applicable to the entire then-current fiscal
quarter, including any necessary retroactive adjustment to the first Business
Day of such quarter, and until adjusted as of the first Business Day of the next
fiscal quarter based on the next quarterly Compliance Certificate.
Notwithstanding the foregoing, in the event the above required
certificate is not received by the Bank within the time period required hereby,
the Applicable Margin shall automatically be 1.50% for the entire then-current
fiscal quarter, including a retroactive adjustment to the first Business Day of
such fiscal quarter, and for each subsequent fiscal quarter until such a
certificate is timely received and the Applicable Margin shall not be adjusted
until the first Business Day of the next fiscal quarter following receipt of
said certificate.
2
<PAGE> 5
(e) "Assignment Modification" means modification to the
outstanding Assignments granted to the Bank modified so as to
cross-collateralize and secure the Obligations, as well as provide for
cross-default with the Obligations and other modifications.
(f) "Assignments" mean the Assignment of Rents, Leases and
Profits, the Collateral Assignment of Contracts, the Assignment of Tournament
Contracts and Agreements, the Assignment of Permits and Licenses, the Collateral
Assignment of Rights and Easements, the Collateral Assignment of Trademarks,
Trade Names, Intangibles and Proprietary Rights, the Security Agreement, and the
Stock Pledge, all dated November 17, 1987, as amended by the Assignment
Modification and other amendments and all other assignments and pledges granting
security interests to the Bank in the Secured Personalty.
(g) "Collateral" means the Secured Properties and the Secured
Personalty and any and all other security or collateral now or hereafter pledged
to the Bank to secure the Obligations.
(h) "Commitment Letter" means the Bank's letter of September
9, 1998 to the Borrower regarding the Facilities.
(i) "Default Rate" shall mean the then applicable Adjusted
LIBOR Index plus the Applicable Margin and an additional Two (2.00%) percent
(200 basis points).
(j) "Documents" mean this Agreement, the Notes, the Mortgages,
the Commitment Letter, the Assignments, the ISDA Agreement, the FMA Agreement
and all other documents, instruments, financing statements, certificates and
other items deemed reasonably necessary to document or evidence the Advances or
the Obligations, all of which are incorporated herein as if set forth in full.
(k) "Eurodollar Reserve Percentage" means for any day that
percentage (expressed as a decimal) which is in effect on such day, as
prescribed by the Board of Governors of the Federal Reserve System (or any
successor) for determining the maximum
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<PAGE> 6
reserve requirement for a member bank of the Federal Reserve System in respect
of "Eurocurrency liabilities" (as adjusted automatically on and as of the
effective date of any change in the Eurodollar Reserve Percentage).
(l) "FMA Agreement" means that certain agreement dated May 30,
1997 entered into by and between the Bank and the Borrower relating to the
automated investing and borrowing feature of the Seasonal Line of Credit
Facility.
(m) "Facilities" mean the Term Loan Facility, the Revolving
Line of Credit Facility and the Seasonal Line of Credit Facility, as set forth
herein.
(n) "Facility Fee" means a fee of $10,000 paid annually by the
Borrower to the Bank for the Revolving Line of Credit Facility and any
additional fees charged for any extension of any of the Facilities, which fees
shall be fully earned when paid and nonrefundable.
(o) "Fiscal Year" means November 1 to October 31.
(p) "GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board.
(q) "Hazardous Materials" mean and shall include, without
limitation, any flammable explosives, radioactive materials, hazardous
materials, hazardous wastes, hazardous or toxic substances, or related or
similar materials, asbestos or any material containing asbestos, or any other
hazardous substance or material as defined by any federal, state or local
environmental law, ordinance, rule or regulation including, without limitation,
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended, the Hazardous Materials Transportation Act, as amended, the
Resource Conservation and Recovery Act, as amended, the South Carolina Hazardous
Waste Management Act, the South Carolina Pollution
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<PAGE> 7
Control Act, and in the regulations adopted and publications promulgated
pursuant to any such laws.
(r) "ISDA Agreement" means any agreements and related
schedules and transactions executed by and between the Borrower and the Bank in
connection with any interest rate derivative product; including, but not limited
to, an interest rate swap transaction, interest rate cap transaction, interest
rate floor transaction, interest rate collar transaction or other similar
transaction.
(s) "Interest Period" for the Term Note and the Seasonal Line
of Credit Note shall mean each successive calendar month, with the first
Interest Period being the period from the date of the applicable Note until the
last day of that calendar month. For the Revolving Line of Credit Note,
"Interest Period" shall mean each successive one, two, three, six or twelve
month period commencing as of the first day of each calendar month, as selected
from time to time by the Borrower in accordance with ss. 3.02 below.
(t) "Interest Rate" means the rate of interest as to any
Advance or Obligation as specified in each of the Notes, this Agreement or other
Documents.
(u) "LIBOR Index" shall mean for the applicable Interest
Period the rate per annum, at which deposits of United States dollars with
maturities comparable to the applicable Interest Period, that appears on the
display designated as page "3750" of the Telerate Service (or such other page as
may replace page 3750 of that service or such other service or services as may
be designated by the British Bankers' Association for the purpose of displaying
London Interbank Offered Rates for U.S. dollar deposits), determined as of 11:00
a.m. (London time) (rounded upward to the next higher of 1/10,000 of 1%), two
(2) business days prior to the commencement of the applicable Interest Period.
If the Bank should at any time determine that it is not possible to determine
the LIBOR Index or that the LIBOR Index is no longer available, then the
applicable Note(s) shall continue to bear interest at the rate in effect during
the last Interest
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<PAGE> 8
Period in which the LIBOR Index was available or determinable until the
beginning of the next Interest Period in which the LIBOR Index is available or
determinable.
(v) "Material Agreement" means any agreement, lease, contract
or other instrument creating liabilities (whether actual or contingent) or
revenues (whether actual or projected) for the Borrower in excess of $250,000.00
within any Fiscal Year.
(w) "Material Adverse Effect" means an event or action which
would impair the ability of either the Borrower or Sea Pines Real Estate
Company, Inc. to carry on its business substantially as now conducted or would
materially and adversely affect the financial condition, business or operations
of either the Borrower or Sea Pines Real Estate Company, Inc. or has a material
impact on the intended uses or the valuation of the Collateral.
(x) "Mortgage Modifications" mean modifications to the
outstanding Mortgages granted to the Bank modified to extend the maturity dates,
cross-collateralize and secure the Obligations, as well as provide for
cross-default with the Obligations and other modifications.
(y) "Mortgages" mean the Bank's first lien mortgage, security
agreement and fixture filing(s) as applicable encumbering the Secured Properties
(as hereinafter defined), as modified by the Mortgage Modifications, including,
without limitation, the following:
(i) Mortgage, Security Agreement and Financing
Statement dated November 17, 1987 as amended;
(ii) Mortgage and Security Agreement dated January
17, 1992 as amended; and
(iii) Mortgage, Security Agreement and Financing
Statement dated October 15, 1993 as amended.
(z) "Notes" mean all promissory notes of the Borrower or any
Subsidiary, whether now existing or hereafter arising, evidencing the
Obligations as appropriately completed, duly authorized and issued to the Bank,
including without limitation the following:
6
<PAGE> 9
(i) $15,000,000 Amended and Restated Revolving Line
of Credit Note of the Borrower dated as of October 31, 1998 (the "Revolving Line
of Credit Note");
(ii) $2,500,000 Amended and Restated Seasonal Line of
Credit Note of the Borrower dated as of October 31, 1998 (the "Seasonal Line of
Credit Note");
(iii) $18,500,000 Amended and Restated Term Note of
the Borrower dated as of October 31, 1998 (the "Term Note");
(iv) ISDA Agreement and all related transactions now
or hereafter entered into between the Borrower and the Bank; and
(v) FMA Agreement entered into by and between the
Borrower and the Bank together with any modifications, renewals or extensions
thereof.
(aa) "Obligations" means the joint and several indebtedness
evidenced by the Documents, including but not limited to the Notes, and any and
all other indebtedness or liabilities of the Borrower or any Subsidiary to the
Bank, now or hereafter incurred, however and whenever evidenced, whether direct
or indirect, absolute or contingent, together with all interest accrued thereon.
(bb) "Permitted Encumbrances" mean any third-party lien,
security interest, charge or encumbrance upon the Collateral created or existing
with the express written consent of the Bank, any purchase money debt for
equipment, or operating leases, entered into in the ordinary course of business.
(cc) "Project Funds" means the maximum amount of funds
designated in writing by the Bank as available to be disbursed from the
Revolving Line of Credit Facility for the development and construction of
Approved Project(s); provided in no event will Project
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Funds exceed the amounts specified in the Development Cost Analysis (as defined
in Section 3.05) without the prior written consent of the Bank or except as
provided in Section 3.10.
(dd) "Project Completion" means the determination by the Bank
of the completion of an Approved Project based upon receipt by the Bank of the
following: (i) an affidavit from the contractor(s) that all labor and materials
supplied in connection with the Approved Project have been (or will with such
final disbursement be) fully paid for and that no rights exist on the part of
any party to claim a lien against the Approved Project or any portion thereof
and/or other evidence that arrangements satisfactory to the Bank have been made
with respect to any such rights or potential claims or claimants; (ii) a
certificate from the record architect that the Approved Project has been
constructed and completed in substantial accordance with the Plans and
Specifications; (iii) a copy of the certificate of occupancy or other document
from appropriate governmental authority evidencing that all the improvements
have been completed in accordance with the applicable governmental requirements;
and (iv) a final as-built survey showing the location of the completed
improvements.
(ee) "Revolving Line of Credit Note Maturity Date" means
November 1, 2002 or as extended pursuant to any future commitment letter or
modification hereof executed by the Borrower and the Bank; provided, that this
Maturity Date will extend automatically to November 1, 2003 unless the Bank
gives notice to the Borrower at least thirty (30) days prior to November 1, 1999
that this Maturity Date will not be extended.
(ff) "Seasonal Line of Credit Note Maturity Date" means
November 1, 2002 or as extended pursuant to any future commitment letter or
modification hereof executed by the Borrower and the Bank; provided, that this
Maturity Date will extend automatically to November 1, 2003 unless the Bank
gives notice to the Borrower at least thirty (30) days prior to November 1, 1999
that this Maturity Date will not be extended.
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(gg) "Secured Personalty" means all receivables, related
contracts and other personal property now or hereafter pledged to the Bank
pursuant to the Assignments or other Documents.
(hh) "Secured Properties" mean the real properties, fixtures
and/or facilities as described in the Mortgages.
(ii) "Subsidiary" or "Subsidiaries" means Sea Pines Real
Estate Company, Inc., Sea Pines/Tide Pointe, Inc., Sea Pines Senior Living
Center, Inc., Fifth Golf Course Club, Inc., and any other wholly owned
subsidiary, entity or enterprise of the Borrower, excepting, however, Sea Pines
Company, Inc. as Borrower.
(jj) "Term Note Maturity Date" means November 1, 2008 or as
extended pursuant to any future commitment letter or modification hereof
executed by the Borrower and the Bank.
ARTICLE II. CROSS COLLATERALIZATION, CROSS DEFAULT
AND JOINT AND SEVERAL LIABILITY
2.01 All Obligations, including specifically, without limitation, all
Notes, are secured by the Collateral given by the Borrower or its Subsidiaries
to the Bank.
2.02 The Collateral given by the Borrower or any Subsidiary pursuant to
the Mortgages, the Assignments or other Documents shall secure and
cross-collateralize all Obligations; including, without limitation, all Notes,
owed to the Bank whether now outstanding or arising in the future.
2.03 An Event of Default or declaration of default under this Agreement
or any of the Obligations, including specifically, without limitation, the
Notes, after the expiration of any applicable grace period contained therein,
shall constitute a default under all other Notes, all Documents, Mortgages or
other instruments securing said Notes and shall entitle the Bank, at its option
to exercise all rights and remedies thereunder.
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2.04 An Event of Default or declaration of default under any of the
Notes, Documents or Mortgages or other instruments after the expiration of any
applicable grace period contained therein, securing said Notes shall constitute
a default under this Agreement.
2.05 Each of Sea Pines Associates, Inc. and Sea Pines Company, Inc. is
jointly and severally liable for all of the Obligations, including specifically,
without limitation, all Notes owed to the Bank, whether now outstanding or
arising in the future.
ARTICLE III. THE REVOLVING LINE OF CREDIT FACILITY
3.01 Subject to the terms and conditions of this Agreement, the Bank
agrees to lend to the Borrower and the Borrower agrees to borrow from the Bank
up to Fifteen Million Dollars ($15,000,000) on a revolving line of credit basis
(the "Revolving Line of Credit Facility"). Except as provided herein, Advances
under the Revolving Line of Credit Facility are to be used only as Project Funds
for the development, construction and completion of Approved Projects. Upon
Project Completion, should the Borrower re-pay or otherwise reduce the amount of
Project Funds advanced, other than by any scheduled principal payments required
hereby or by the Notes, or should the Bank not advance the entirety of Project
Funds so designated, then Advances and re-Advances may be made for the
Borrower's general business purposes in accordance herewith without the Bank's
approval so long as the outstanding amount of Advances or re-Advances does not
exceed the amount of Project Funds so designated and allocated for the Approved
Project(s).
3.02 The Revolving Line of Credit Note shall bear interest from the
date of the Note at a rate per annum equal to the Adjusted LIBOR Index for the
applicable Interest Period plus the Applicable Margin. Prior to the commencement
of each Interest Period, the Borrower shall have the option for each Interest
Period to select in the manner hereinafter provided, the desired Interest Period
and the corresponding LIBOR Index to be applicable for the outstanding principal
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balance during the upcoming Interest Period by giving to the Bank written or
telephonic notice thereof at least two business days prior to the first day of
such Interest Period; provided (1) any telephonic notice shall be confirmed in a
writing received by the Bank within two business days following the date of such
telephonic notice, (2) all notices given pursuant to this sentence shall be
irrevocable, (3) if the Borrower fails to give such notice to the Bank as herein
required, the Borrower shall be deemed to have selected one (1) month as the
duration of the upcoming Interest Period, and (4) the Interest Period which ends
on the applicable Maturity Date must have a duration of either exactly one (1)
month or, if such exact duration is not possible, a duration of less than 30
days and the Borrower shall be deemed to have selected the Interest Period for a
one (1) month period.
3.03 So long as there exists no Event of Default (as herein defined),
the Bank will disburse the Project Funds out of the Revolving Line of Credit
Facility for Approved Project construction costs in proportion to progress of
construction (less applicable retainage) and as to costs other than construction
costs as such costs are incurred, provided the obligation of the Bank to
disburse proceeds shall be subject to the Bank's reservation of the right to
retain availability under this Facility funds that the Bank deems sufficient to
complete and pay for the Approved Project(s). Disbursements of Project Funds
shall be limited to one (1) per month unless otherwise expressly permitted by
the Bank, shall be made by wiring or depositing the same to an account of the
Borrower, or at the Bank's election, by the issuance of one or more checks
payable to the Borrower, the Borrower's counsel, the general contractor,
subcontractors, materialmen, or any one or more of them.
3.04 Any material changes in the scope of an Approved Project, the
Development Cost Analysis (as defined), the construction contract for the
Approved Project, as approved by the Bank (the "Construction Contract") or the
final plans and specifications for the Approved Project as approved by the Bank
(the "Plans and Specifications") shall require the prior written
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approval of the Bank with the Bank having the right to make corresponding
changes to the amount of designated Project Funds.
3.05 Prior to any disbursement hereunder and in addition to other
requirements set forth in this Agreement, the Bank shall receive a cost
breakdown for the planned project approved by the Bank on the Bank's form,
certified by the Borrower to be correct to the best of the Borrower's knowledge,
showing the costs of the Approved Project and the sources for the payment of
such costs (the "Development Cost Analysis").
3.06 Each request for disbursement of the Project Funds for work
performed under the Construction Contract shall be accompanied by (i) a written
request of the Borrower stating the amount of request and (ii) an appropriate
AIA Form G702, G702A or G703, signed by the contractor(s) for the Approved
Project, the architect of record and the Borrower or other similar documentation
satisfactory to the Bank and shall in all cases be limited to items and
certifiable costs set forth in the Development Cost Breakdown.
3.07 The Borrower will begin construction of the Approved Project in a
timely manner and will make reasonable efforts to continually prosecute the work
in accordance with the applicable Plans or Specifications. The work shall be
performed in conformity with the Plans and Specifications and in compliance with
building and zoning codes and all other applicable legal requirements and
restrictions. The Borrower will keep the Secured Properties free from all liens
for services, labor and materials.
3.08 The Bank shall have the right, during construction, to inspect the
Approved Project or to cause the construction to be inspected by an independent
inspecting representative. Should there occur any discrepancy in quantity or
quality of workmanship in connection with the construction of the Improvements,
the Bank shall be relieved of the obligation to make an Advance of Project Funds
until such time as the discrepancy shall have been corrected to the satisfaction
of the Bank (and any independent inspecting representative
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appointed by the Bank pursuant to this Section). The reasonable costs and
expenses incurred in connection with the use of any independent inspecting
representative shall be paid by the Borrower.
3.09 Prior to any disbursement of Project Funds, the Bank must have
received, in addition to other requirements set forth in this Agreement, the
following as to each Approved Project:
(a) Evidence satisfactory to the Bank that the Plans and
Specifications have been approved by the Borrower and all government agencies
having jurisdiction that require approval.
(b) Copies of the development, grading, building and any other
governmental permits and approvals required for construction.
(c) Written evidence from the appropriate governmental
authority(ies) that the Approved Project and its intended use are in compliance
with all applicable zoning ordinances and land use laws and regulations.
(d) A certificate from the record architect (i) that the
Approved Project if constructed and completed in substantial accordance with the
Plans and Specifications will comply with the applicable ANSI Standard under the
Fair Housing Act (as amended) and applicable regulations, if applicable, and/or
with the requirements of Title III of the Americans with Disabilities Act of
1990 (as amended) and the implementing physical accessibility regulations
promulgated thereunder by the Department of Justice and the Americans with
Disabilities Act Accessibility Guidelines (ADAAG) associated therewith, if
applicable; (ii) that all required licenses, permits and other governmental
approvals for the construction of the Improvements have been issued; and (iii)
that the Approved Project, if completed in accordance with the final Plans and
Specifications, will comply with all zoning, fire and building code, etc.
statutes and regulations to which the Project is subject.
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(e) A current survey prepared, certified and sealed by a
surveyor satisfactory to the Bank showing, among other things, the location of
any existing or proposed improvements, any setback lines or building lines, the
location of all easements and rights-of-way and all matters affecting title, to
the extent such matters can be shown, and any jurisdictional wetlands area. The
survey shall also be revised periodically during construction, as required by
the Bank, to show footings, foundations, easements, rights-of-way, building
setback lines and progress in construction.
(f) A collateral assignment of the Construction Contract and
Plans and Specifications.
(g) An appraisal of the Approved Project satisfactory in all
respects to the Bank.
3.10 Notwithstanding the foregoing relating to the disbursement of
Project Funds for construction purposes, the Bank reserves the right based on
the complexity or scope of each Approved Project to require additional matters
in order to monitor construction of the Approved Project and/or to waive
compliance with, or reduce the extent of, the aforesaid provisions should
circumstances so warrant.
3.11 Upon the occurrence of an Event of Default, the Bank may, at its
option and in lieu of resorting to any other remedy available to it and without
the appointment of a receiver for the Approved Project or the Borrower, take
possession of the Approved Project and all materials, tools, machinery and other
equipment used for said project or in possession of the Borrower being used in
connection with and in the construction of the project, and, in the name of and
for the account of the Borrower, may complete the improvements either in
accordance with the Plans and Specifications or in accordance with such change
or changes in the Plans and Specifications as may be considered necessary or
desirable by the Bank and may take such other and further action as may be
required to achieve completion of the Approved
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Project. For such purposes, the Bank may use any funds of the Borrower at any
time in the hands of the Bank by deposit or otherwise, including the undisbursed
proceeds of the Revolving Line of Credit Facility. Any money advanced by the
Bank for such purposes shall be payable by the Borrower upon demand, shall bear
interest at the rate set forth in the Revolving Line of Credit Note, and its
payment shall be secured by the Mortgages and other Documents. The Bank,
however, shall be under no obligation to complete the Improvements, and the
Bank's action in this respect shall be wholly at its option.
3.12 The agreements, obligations and covenants established hereby as to
the Revolving Line of Credit Facility shall supersede and replace all
agreements, obligations and covenants set forth in that certain Revolving Credit
Agreement between the Borrower and the Bank dated as of October 15, 1993, as
amended (the "1993 Facility").
3.13 The Revolving Line of Credit Facility and all Advances thereunder
shall be repaid by the Borrower to the Bank in strict accordance with the terms
and provisions as set forth in this Agreement and the Revolving Line of Credit
Note.
3.14 In no event shall the Bank be under any obligation to make an
Advance after the occurrence of an Event of Default or the Maturity Date for the
Revolving Line of Credit Facility or the occurrence of an event which with
notice or the passage of time or both would constitute an Event of Default, and
all amounts due and owing shall be paid on said Maturity Date.
3.15 Interest on the funds drawn by the Borrower under this Revolving
Loan Facility shall be calculated on the basis of actual days elapsed in a
360-day year based on the Interest Rate set forth in the Revolving Line of
Credit Note.
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ARTICLE IV. THE SEASONAL LINE OF CREDIT FACILITY
4.01 Subject to the terms and conditions of this Agreement, the Bank
agrees to lend to the Borrower and the Borrower agrees to borrow from the Bank
up to Two Million Five Hundred Thousand Dollars ($2,500,000) on a seasonal line
of credit basis (the "Seasonal Line of Credit Facility").
4.02 The Seasonal Line of Credit Note shall bear interest from the date
of the Note at a rate per annum equal to the Adjusted LIBOR Index for the
applicable one (1) month Interest Period plus the Applicable Margin.
4.03 Advances under the Seasonal Line of Credit Facility are to be used
only for the Borrower's general working capital purposes and such cash needs as
relate to the Borrower's operations.
4.04 The agreements, obligations and covenants established hereby shall
supersede and replace all agreements, obligations and covenants set forth in
that certain Amendment to Credit Agreement between the Borrower and the Bank
dated January 17, 1992, as amended and modified (the "1992 Facility").
4.05 The Seasonal Line of Credit Facility and all Advances thereunder
shall be repaid by the Borrower to the Bank in strict accordance with the terms
and provisions as set forth in this Agreement, the Seasonal Line of Credit Note
and the FMA Account Agreement.
4.06 Funds from the Seasonal Line of Credit Facility may be borrowed,
reborrowed, paid and repaid throughout the term at the Borrower's discretion,
subject to and as limited herein.
4.07 In no event shall the Bank be under any obligation to make an
Advance after the occurrence of an Event of Default or the Maturity Date for the
Seasonal Line of Credit Facility or the occurrence of an event which with notice
or the passage of time or both would constitute an Event of Default, and all
amounts due and owing shall be paid on said Maturity Date.
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4.08 Interest on the funds drawn by the Borrower under this Seasonal
Line of Credit Facility shall be calculated on the basis of actual days elapsed
in a 360-day year based on the Interest Rate set forth in the Seasonal Line of
Credit Note.
ARTICLE V. THE TERM LOAN FACILITY
5.01 Subject to the terms and conditions of this Agreement, the Bank
agrees to lend to the Borrower and the Borrower agrees to borrow from the Bank
up to Eighteen Million Five Hundred Thousand Dollars ($18,500,000) on a term
basis (the "Term Loan Facility").
5.02 The Term Note shall bear interest from the date of the Note at a
rate per annum equal to the Adjusted LIBOR Index for the applicable one (1)
month Interest Period plus the Applicable Margin.
5.03 The Borrower acknowledges that upon execution of this Agreement
and satisfaction of all requirements of Article VI, the balance of the Term Loan
Facility is $17,158,566.00, as of the date hereof. Additional Advances under the
Term Loan Facility, up to the stated amount will be made for the Borrower's
general working capital purposes and such cash needs as relate to the Borrower's
operations. No re-Advances will be made under the Term Loan Facility. In no
event shall the Bank be under any obligation to make an Advance after May 1,
1999 or after the occurrence of an Event of Default or the occurrence of an
event which with notice or the passage of time or both would constitute an Event
of Default, and all amounts due and owing shall be paid on the Maturity Date.
5.04 The agreements, obligations and covenants established hereby shall
supersede and replace all agreements, obligations and covenants set forth in
that certain Credit Agreement between the Borrower and the Bank dated November
17, 1987, as amended (the "1987 Facility").
5.05 The Term Loan Facility and all Advances thereunder shall be repaid
by the Borrower to the Bank in strict accordance with the terms and provisions
as set forth in this
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Agreement and the Term Note, provided, that the Bank, in its sole discretion,
may agree to reduce or delay certain principal payments required by the Term
Note should Advances of Project Funds be delayed or reduced below projected
amounts.
5.06 Interest on the funds drawn by the Borrower under this Term Loan
Facility shall be calculated on the basis of actual days elapsed in a 360-day
year based on the Interest Rate set forth in the Term Note.
ARTICLE VI. CONDITIONS PRECEDENT
6.01 The Bank shall not be required to make any Facility available nor
make any initial or subsequent Advance thereunder unless each of the following
conditions have been fulfilled to the Bank's satisfaction on or before the date
of each Advance:
(a) The Borrower shall deliver to the Bank the Documents duly
executed and delivered in accordance with all agreed-upon terms and provisions
including appropriate organizational documents and authorization for the
Borrower to enter into the Documents;
(b) The Borrower shall pay all fees and costs due the Bank,
including, without limitation, any Facility Fee, the Bank's attorney's fees and
all other fees and costs payable pursuant to the Commitment Letter or Documents;
(c) Upon the Bank's request with respect to any particular
aspect of the Borrower's financial condition, business or prospects, the
Borrower shall provide evidence satisfactory to the Bank as to such request that
there has been no Material Adverse Effect on the financial condition of the
Borrower from that reflected in the annual Financial Statements prepared by
Ernst and Young, LLP and dated October 31, 1997 nor in any subsequent Financial
Statements submitted to the Bank;
(d) The Borrower shall remain in substantial compliance with
all covenants contained in the Documents, excepting those covenants set forth in
Section 8.02 herein in which
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specific compliance will be required, all representations and warranties made to
the Bank in the Documents remain valid and accurate and no Event of Default
shall have occurred nor any event which with notice or lapse of time or both
would constitute an Event of Default; and
(e) The Borrower shall deliver such other papers and documents
as may be reasonably required in the opinion of the Bank's counsel to comply
with the conditions of this Agreement.
ARTICLE VII. REPRESENTATIONS AND WARRANTIES
7.01 To induce the Bank to enter into this Agreement, to make the
Advances provided for herein and to extend credit evidenced by the Obligations,
the Borrower represents and warrants to the Bank that:
(a) Each Borrower is a corporation duly organized, validly
existing, and in good standing under the laws of the State of South Carolina;
each Borrower has the corporate power and authority to own its properties and
assets and to carry on its business as now being conducted and is qualified to
do business in every jurisdiction in which, by reason of the character of its
business, it is required to qualify as a foreign corporation and in which
failure to be so qualified would have a material adverse effect on each
Borrower; the Borrower has the corporate power to borrow hereunder and execute
and perform all the Documents, and when executed and delivered, the Documents
shall be valid and binding obligations of each Borrower enforceable in
accordance with their terms;
(b) The execution, delivery and performance of the Documents
and the borrowings thereunder by the Borrower have been duly authorized by all
corporation action required for the lawful creation and issuance of the
Documents and shall not violate any provision of law, any order of any court or
other agency of government, the charter documents or bylaws of
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each Borrower, any provision of any Material Agreement, or be in conflict with,
result in a breach of or constitute a default under any such Material Agreement;
(c) The financial statements which the Borrower has submitted
to the Bank to induce the Bank to extend the credit evidenced by the Notes have
been prepared from the Borrower's books and records in accordance with GAAP and
fairly represent the financial condition of the Borrower at the respective dates
stated therein;
(d) Except as set forth in the Financial Statements, there is
no action, suit or proceeding at law or in equity or by or before any
governmental instrumentality or other agency now pending, or to the knowledge of
the Borrower, threatened by or against or affecting either Borrower or any
properties or rights of either Borrower which, if adversely determined, would
have a Material Adverse Effect;
(e) The Borrower has filed or caused to be filed all federal,
state and local tax returns which are required to be filed and has paid or
caused to be paid all taxes as shown on said returns or on any assessment
received by them, to the extent that such taxes have become due;
(f) The Borrower is not a party to any judgment, order, decree
or any agreement or instrument, nor is subject to any corporate restrictions
having a Material Adverse Effect and is in substantial compliance in the
performance, observance of fulfillment of any of the obligations, covenants or
conditions contained in any Material Agreement;
(g) No part of any Advances under the Notes shall be used to
purchase or carry, or to reduce or retire any loan incurred to purchase or
carry, any margin stocks (within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System) or to extend credit to others for the
purpose of purchasing or carrying any such margin stocks. If requested by the
Bank, the Borrower shall furnish the Bank in connection with any loan hereunder
a statement in conformance with the requirements of Federal Reserve Form U-1
referred to in said Regulation.
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In addition, no part of any Advances hereunder shall be used for the purchase of
commodity future contracts (or margins therefor for short sales) for any
commodity not required for the normal inventory of the Borrower;
(h) None of the Documents contain any material
misrepresentation or untrue statement of fact, or omit to state a material fact
necessary in order to make any representation or statement contained therein not
misleading;
(i) This Agreement and the issuance and delivery of the Notes
as contemplated hereby will not involve any prohibited transaction within the
meaning of the Employee Retirement Income Security Act of 1974, as amended
(hereinafter as in effect from time to time called "ERISA") or Section 4975 of
the Internal Revenue Code, as amended. Based upon ERISA and the regulations and
published interpretations thereunder, the Borrower and each Subsidiary is in
compliance in all material respects with the applicable provisions of ERISA. No
Reportable Event, as defined in Section 4043 (b) of Title IV of ERISA, has
occurred with respect to any of the plans maintained by the Borrower or any
Subsidiary;
(j) Except for the Borrower's use of Hazardous Materials in
the ordinary course of its business, which uses have been and are in substantial
compliance with all applicable laws and regulations, no properties of the
Borrower have or are now being used by Borrower to generate, manufacture,
refine, transport, treat, store, handle, dispose, transfer, produce, process or
in any manner deal with Hazardous Materials;
(k) Except for uses in compliance with subparagraph (j) above,
to the best of the Borrower's knowledge, no Hazardous Materials have ever been
previously installed, placed, or in any manner dealt with on said properties in
violation of applicable laws and regulations other than as has been disclosed in
writing to the Bank pursuant to reports or documents previously provided to the
Bank;
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(l) The Mortgages and Assignments continue to constitute valid
and perfected security interests in the property described therein, ranking
prior to any liens, security interest, mortgages or encumbrances of others,
except any Permitted Encumbrances; and
(m) The Borrower has made and will continue to make all
regulatory filings, and has complied with all reporting and disclosure
requirements, as required by applicable state and federal securities laws.
ARTICLE VIII. BORROWER'S AFFIRMATIVE COVENANTS
8.01 Until the expiration of this Agreement as hereinafter provided,
the Borrower shall:
(a) Promptly pay to the Bank the Obligations due or to become
due at the times and places and in the amounts and manner specified in the Notes
and or any other Documents, including without limitation, any Facility Fees,
promptly perform with respect to all covenants contained in the Documents, and
take all necessary actions for the representation and warranties made to the
Bank in the Documents to remain valid and accurate;
(b) At all times keep proper books and records of accounts for
the Borrower and any Subsidiaries in which full, true and correct entries shall
be made of their transactions in accordance with GAAP and permit representatives
of the Bank to examine such books and records upon reasonable request;
(c) Deliver to the Bank with respect to the Borrower and the
Subsidiaries on a consolidated basis (the "Financial Statements"):
(i) As soon as practicable and in any event within
forty-five (45) days after the end of each fiscal quarter: (x) income statement
for the quarter period just ended, (y) balance sheet in reasonable detail as of
the end of such quarter; and (z) cash flow statements; all certified to the best
of his knowledge by an authorized financial officer of the Borrower, prepared in
accordance with GAAP and presented in a format acceptable to the Bank;
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(ii) As soon as practicable and in any event within
one hundred twenty (120) days after the end of each Fiscal Year of the Borrower:
(x) an audit report including an income statement for such Fiscal Year, (y) a
balance sheet as of the end of such year, and (z) such other cash flow
statements, reconciliations of net worth, and notes as are customary; all
prepared in accordance with GAAP and bearing an auditor's unqualified opinion
from a certified public accountant or firm of certified public accountants
satisfactory to the Bank (who may be Ernst and Young, LLP or another certified
public accounting firm acceptable to the Bank). Such consolidated reports and
statements shall set forth in reasonable detail the results of operations and
the financial condition of the Borrower and shall be certified to the best of
his knowledge by the President or chief financial officer of the Borrower as
true, accurate and complete;
(iii) As soon as practicable and in any event within
ten (10) days after filing, copies of all reports or other documents filed by
the Borrower with the United States Securities Exchange Commission or any state
securities regulators;
(iv) The Borrower shall also provide to the Bank on
written request such other information as the Bank may reasonably request
regarding the Collateral, the Borrower and any Subsidiary;
(d) Deliver to the Bank with each delivery of the annual and
quarterly Financial Statements, a quarterly compliance certificate substantially
in the form attached as Schedule I, being acceptable to the Bank, and setting
forth in reasonable detail such information as may be necessary for the Bank to
determine the Net Worth and DSC Ratios, as defined in Section 8.02 herein;
(e) Preserve and maintain its corporate existence in good
standing;
(f) In addition to the requirements of any other Documents,
maintain and preserve in good working order and condition, ordinary wear and
tear excepted, the Secured
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Properties with respect to which failure to so maintain and preserve would have
a Material Adverse Effect;
(g) Expend sufficient funds during each Fiscal Year as may be
necessary to operate and maintain the Secured Properties and especially the
recreational and resort amenities; including specifically, but not limited to,
all golf courses, tennis courts, transportation systems, conference centers,
racquet club facilities, pro shop facilities, and restaurants, in substantially
the same manner and of substantially the same quality as the Secured Properties
are operated and maintained as of the date of this Agreement (a "First Class
Premier Resort Operation");
(h) Make all payments, and otherwise perform all of its
Material Agreements;
(i) Preserve and keep in force all licenses, permits,
contracts, management agreements, franchises, trade names, trademarks, rights,
easements, intangibles and leases and other Secured Personalty, as more
particularly described in the Assignments and other Documents;
(j) Permit any person designated by the Bank to visit and
inspect any of the properties of the Borrower and to discuss its affairs,
finances and accounts with its officers, all at such reasonable times, and as
often, as the Bank may reasonably request;
(k) Execute the necessary Documents required by the Bank to
evidence the indebtedness created under the Notes or the Obligations and to
provide the Bank with such evidence of the accuracy of the Borrower's
representations as the Bank shall reasonably request;
(l) Pay to the Bank, upon demand, any amount necessary to
compensate the Bank for any cost, expense, lost benefit, reduction in rate of
return, or reduced receivable attributable to (i) any change in taxation,
reserve requirements, capital adequacy requirement, or any other government
regulation applicable to the Notes or Obligations or payments to the Bank
thereunder, or (ii) any improper prepayments in accordance with this Agreement.
A certificate by the Bank as to any amounts payable under this subparagraph
shall be conclusive proof of the
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<PAGE> 27
amount owed. The Borrower's obligations under this subparagraph shall survive
the later of (i) the termination of this Agreement or (ii) the payment of all
amounts payable hereunder;
(m) Furnish the Bank within five (5) business days after the
Borrower's executive management obtains knowledge of, or should have known of,
an Event of Default hereunder, including any failure to comply with the
covenants herein, written notice setting forth the details thereof;
(n) Maintain appropriate and reasonable insurance as to the
Collateral including hazard, general liability, builders risk (where
appropriate) and business interruption insurance with such insurers and such
amounts and coverage as is acceptable to the Bank, shall name the Bank as
insured, certificate holder, loss payee or mortgagee, as applicable, and shall
provide the Bank with satisfactory evidence thereof;
(o) Preserve and maintain, and cause each of its Subsidiaries
to preserve and maintain, all of its and their rights, privileges and franchises
(including, without limitation, licenses) necessary or desirable in the normal
conduct of its business, and conduct its business in an orderly, efficient and
regular manner and continuously except for periodic shut-downs in the ordinary
course of business and interruptions caused by strike, labor dispute, lack of
materials or labor, catastrophe, or other events over which it has no control.
Nothing herein contained shall prevent the termination of the business or
corporate existence of any such Subsidiary which in the judgment of the Borrower
is no longer necessary or desirable, the temporary suspension of the normal
conduct of a portion of the Borrower's business in accordance with the Plans and
Specifications for an Approved Project, or the temporary closing of either the
Harbour Town or Sea Marsh golf course for no more than a six (6) month period
each, in connection with major renovations to said golf courses.
(p) Use its best efforts to ensure preservation of a gate
entry policy for Sea Pines Plantation, preservation of ingress and egress over
the roads of Sea Pines Plantation to
25
<PAGE> 28
the Secured Properties and preservation of all easements for parking and access
to and over open space and common areas in Sea Pines Plantation in a manner
which is reasonably intended to promote the use of recreational and resort
facilities, (including, but not limited to, the golf courses, tennis courts and
beach access facilities) included in the Secured Properties by tourists, guests,
licensees, and invitees of the Borrower, encourage the maintenance of a First
Class Premiere Resort Operation, enhance Borrower's ability to produce optimum
annual net revenue from said Secured Properties and/or the Secured Personalty,
and enhance Borrower's ability to produce optimal annual real estate sales
commission revenue from its real estate sales brokerage Subsidiaries;
(q) Until such time as the Obligations are fully paid and
satisfied, Borrower shall keep and maintain with the Bank its primary banking
accounts (investment, disbursement, operating, etc.)of the Borrower and its
Subsidiaries; including, but not limited to, working capital accounts, real
estate brokerage accounts, investment accounts, operating accounts, property
management accounts, securities escrow accounts and corporate accounts;
(r) In the event Borrower or any Subsidiary utilizes Advances
under the Revolving Line of Credit Facility to acquire additional assets, either
real or personal, or develops new facilities, the Borrower agrees to cause such
additional security instruments, mortgages and assignments to be executed as the
Bank may from time to time request and the Borrower agrees said assets shall be
deemed additional Secured Properties and shall become subject to the Bank's
mortgage or security interest, all as more particularly set forth in the
Mortgages;
(s) At all times until and through November 1, 2003, Borrower
agrees to maintain its existing interest rate hedge position, unless the Bank
approves modifications or substitute position(s) in writing, in an amount of at
least Eighteen Million Dollars ($18,000,000); and
26
<PAGE> 29
(t) Upon the Bank's request, the Borrower shall reimburse the
Bank for the cost of appraisals by duly certified appraisers acceptable to Bank
for any or all of the Secured Properties or other Collateral, as may be required
of the Bank by statutes or other regulatory directives.
8.02 For the term of this Agreement:
(a) The Borrower shall not allow the amount of its Total
Liabilities at any time to exceed Two Hundred and Fifty Percent (250%) of the
amount of its Tangible Net Worth, as defined below (the "Net Worth Ratio") and
shall provide, upon request of the Bank, such information, in addition to other
information required hereby, as may be necessary to verify compliance therewith.
"Tangible Net Worth" means the remainder after subtracting Total Liabilities
from the book value of total tangible assets (total assets less good will and
other intangible assets) based upon GAAP. "Total Liabilities" means the book
value of total liabilities based upon GAAP plus the amount of indebtedness for
which the Borrower is liable on a contingent or conditional basis, including
guarantees.
(b) The Borrower shall maintain a debt service coverage ratio
("DSC Ratio") of at least 1.25 to be measured as of the end of each fiscal
quarter on a rolling four-quarter basis. The DSC ratio will be calculated as the
quotient of Cash Flow divided by Debt Service with "Cash Flow" equaling the sum
of net income, depreciation and amortization and "Debt Service" equaling the sum
of current maturities of long term debt, current portion of capital leases and
dividends paid, all based upon GAAP; and
(c) In the event the Borrower fails to meet either the Net
Worth or DSC Ratios and such failure is not waived by the Bank, the Borrower
shall have thirty (30) days from the date when the Borrower's executive
management knew or should have known of such a failure in which to cure any such
failure. During such cure period, the Bank shall have no obligation to make any
Advance hereunder to the Borrower. Upon the Borrower's cure of any such default,
the
27
<PAGE> 30
Borrower shall provide the Bank with satisfactory written evidence thereof prior
to the end of the cure period. Failure to cure any such default within the time
period described herein shall constitute an Event of Default under of this
Agreement; provided, however, that there shall be no requirement that the Bank
give written notice of such default and there shall be no additional thirty (30)
day cure period pursuant to this Agreement.
8.03 The Borrower shall protect, defend, indemnify and save harmless
the Bank and its employees, officers and agents from and against all
liabilities, obligations, claims, damages, penalties, causes of action, costs
and expenses (including attorneys' fees and expenses) imposed upon or incurred
by the Bank or its employees, officers or agents by reason of (a) any claim for
brokerage fees or other such commissions relating to the Collateral, the Notes
or the Obligations, or (b) the condition of the Collateral, including, without
limitation, any Hazardous Materials which are currently on or affecting the
Secured Properties (including Secured Properties owned by any Subsidiary) which
come on, from or affect such Secured Properties or which are hereafter placed
upon or under such Secured Properties, or (c) failure to pay recording,
mortgage, intangibles or similar taxes, roll back taxes, fees or charges
relating to the Obligations or any one or more of the Documents, or (d) the
Documents or any claim or demand whatsoever which may be asserted against the
Bank or its employees, officers or agents by reason of any alleged action,
obligation or undertaking of the Bank or its employees, officers or agents
relating in any way to the Obligations or matter contemplated by the Documents,
or (e) any and all liability arising from any of the Collateral or any
negligence (other than the Bank's gross negligence or wilful misconduct) in the
management, operation, upkeep, repair or control of the Collateral resulting in
loss or injury or death to any tenant, occupant, licensee, employee or stranger.
In the event the Bank or its employees, officers or agents incurs any liability,
loss or damage arising out of or in any way relating to the transactions
contemplated by the Documents (including any of the matters referred to in this
section but not the gross negligence or wilful misconduct of the Bank or its
employees,
28
<PAGE> 31
officers or agents), the amounts of such liability, loss or damage shall be
added to the Obligations, shall bear interest at the Interest Rate specified in
the appropriate Note from the date incurred until paid and shall be payable on
demand.
ARTICLE IX. BORROWER'S NEGATIVE COVENANTS
9.01 Until payment in full of all of the Obligations, the Borrower
agrees that, unless expressly permitted by this Agreement or the Bank shall have
otherwise consented in writing:
(a) Other than Permitted Encumbrances, the Borrower will not
create, incur, assume, or suffer to exist any mortgages, liens or security
interests of any kind representing aggregate claims in excess of $100,000 upon
any of the Collateral, whether now owned or hereafter acquired, except: (i)
liens in connection with workers' compensation or any statutory employment
provision, unemployment insurance, or other social security obligations; (ii)
deposits or pledges to secure the performance of bids, tenders, contracts (other
than contracts for the payment of moneys), statutory obligations, surety and
appeal bonds, and other obligations of like nature arising in the ordinary
course of business; (iii) liens for taxes which are not delinquent or are being
contested in good faith; or (iv) mechanics', workmen's, materialmen's, and other
like liens arising in the ordinary course of business in respect of obligations
which are not overdue or which are being contested in good faith; provided,
however that said liens described by items (i) - (iv) above shall be allowed
only if they do not have a Material Adverse Effect;
(b) Neither Borrower nor any Subsidiary will enter into any
merger or consolidation (except with the Borrower or any Subsidiary), or issue
or sell any shares of any Subsidiary;
(c) The Borrower shall not sell or lease, or otherwise dispose
of all or any of its assets, including the Collateral, other than pursuant to
the provisions of the Asset Release
29
<PAGE> 32
Schedule attached hereto as Schedule II, which Schedule is incorporated as if
repeated fully herein, or effect the sale of any material segment of the
Borrower's business in any manner, whether through sale of stock in a subsidiary
or otherwise, or change its corporate name. Nothing herein contained shall
prevent a public or private offering of common stock by Sea Pines Associates,
Inc.
(d) The Borrower will not consent to, acknowledge or otherwise
permit any encumbrance on any of the capital stock of any Subsidiary, except
such lien(s) as may be granted to the Bank;
(e) Except as required by pronouncements of the Financial
Accounting Standards Board, the Borrower will not change, in any material
fashion, any accounting method used in preparation of its financial statements
or change its Fiscal Year;
(f) The Borrower shall not invest cash representing its
working capital in any investments other than marketable securities rated "A" or
higher by Standard & Poor's or Moody's and purchased by the Borrower in the
ordinary course of business;
(g) The Borrower shall not enter into or invest in any
corporate joint ventures, partnerships or other similar entities involving less
than 100% ownership by the Borrower which involve an aggregate investment of
more than One Million ($1,000,000) Dollars, except as may be permitted by
written approval of the Bank;
(h) The Borrower shall not, and shall not permit any
Subsidiary to, engage in any business activity or operation until the
Obligations are fully paid and satisfied other than the operation, maintenance
and orderly expansion of resort service and community activities (including food
and beverage facilities), operation of lodging facilities and operation of
sports facilities, real estate and business brokerage activities, real estate
securities brokerage activities, and the provision of various community services
to Hilton Head Island property owners;
30
<PAGE> 33
(i) Borrower and its Subsidiaries shall not take or consent to
any actions to further restrict rights of access, ingress, egress over the roads
of Sea Pines Plantation or limit parking rights, or modify gate entry policies
as currently provided under applicable easements, covenants and operating
policies in such a way as to materially diminish, impair, or inhibit the use by
tourists, guests, licensees and invitees of Borrower of the recreational or
resort facilities, (including, but not limited to, the golf courses, tennis
courts, and beach access facilities) included in the Secured Properties or
otherwise adversely or materially reduce Borrower's ability to produce optimal
annual net revenue from the said recreational or resort facilities and/or
materially reduce Borrower's ability to produce optimal real estate commission
revenue from the Borrower's real estate sales brokerage Subsidiaries;
(j) Borrower shall not take or consent to any actions to
further restrict or diminish access to and/or use of the recreational or resort
facilities included in the Secured Properties by tourists, guests, licensees,
and invitees of Borrower or in any way attempt to create private clubs with such
facilities or impose special use rights, not currently existing, available only
to Sea Pines Plantation Property Owners or other selected classes of membership
which would materially reduce Borrower's ability to produce optimal annual net
revenue from said facilities or otherwise encumber the Secured Property with use
limitations not currently existing;
(k) To the extent that such action or omission would have a
Material Adverse Effect, Borrower will not, without the prior written consent of
Bank, (i) initiate or support any zoning reclassification of the Secured
Properties, seek any variance under existing zoning ordinances applicable to the
Secured Properties, or modify or agree to the modification of any recorded
covenants or the Master Plan of Sea Pines Plantation, or use or permit the use
of the Secured Properties in a manner which would result in such use becoming a
non-conforming use under applicable zoning ordinances, covenants and/or the
Master Plan or otherwise
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<PAGE> 34
change the existing classification of the Secured Properties or further restrict
the Secured Properties, (ii) modify or amend any of the Permitted Encumbrances,
(iii) impose any restrictive covenants or encumbrances upon the Secured
Properties, (iv) execute or file any subdivision plat affecting the Secured
Properties or consent to the annexation of the Secured Properties to any
municipality, or (v) permit or suffer the Secured Properties to be used by the
public or any person in such manner as might make possible a claim or adverse
usage or possession or of any implied dedication or easement; and
(l) The Borrower shall not declare or pay any dividend or
return of capital if it is aware of an Event of Default under this Agreement, or
any event which, with notice or passage of time or both, would become such an
Event of Default or default.
ARTICLE X. EVENTS OF DEFAULT
10.01 Upon the occurrence of any of the following events ("Events of
Default"), the Borrower shall be in default under this Agreement:
(a) Failure to pay any of the Obligations when due, including,
without limitation, scheduled payments of principal or interest or upon any
original, accelerated, renewed or extended maturity, within fifteen (15) days
after written notice thereof;
(b) If the Borrower shall breach or fail to comply with any
other covenant, term or condition of, or any other of its obligations under this
Agreement, including, without limitation, the obligation for all representations
and warranties to remain continually valid and accurate, and the same is not
cured by the Borrower within thirty (30) days after written notice from the
Bank;
(c) Upon the occurrence of a default under any of the
Documents other than this Agreement, including, without limitation, the Notes,
the Mortgages or the Assignments, all of which are cumulative to this Agreement
and to each other, whether specifically set forth above or not, and such default
is not cured within the cure time, if any, provided therein;
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<PAGE> 35
(d) If the Borrower or any Subsidiary (i) files a petition
under the Federal Bankruptcy Code or initiates any other proceeding for the
relief of insolvent debtors; (ii) generally fails to pay its debts as such debts
become due; (iii) shall seek or consent to the appointment of a custodian or
receiver for all or a substantial portion of its assets; (iv) benefits from or
is subject to the entry of an order for relief by any court of insolvency; (v)
makes an admission of insolvency seeking the relief provided in the Federal
Bankruptcy Code or any other insolvency law;
(e) If the Borrower or any Subsidiary defaults in the payment
of the principal of, premium, if any, or interest with respect to any
indebtedness for or guaranty of borrowed money to any other person or entity, or
commits or permits to exist any default or event of default under any Material
Agreement for or guaranty of borrowed money to any person or entity not remedied
within any applicable cure period, whether or not such indebtedness shall have
been accelerated;
(f) Failure of the Borrower or any Subsidiary within sixty
(60) days after the commencement of any proceeding against it seeking any
reorganization, arrangement, liquidation, dissolution or similar relief under
present or future law, to have such proceeding dismissed or stayed, to the
extent such proceeding affects the operations of the Borrower;
(g) If any warranty, representation or statement made or
furnished to the Bank by or on behalf of the Borrower in connection with the
Obligations and/or covenants contained in the Documents, be or proves to have
been materially false or misleading when made or furnished;
(h) If an order, judgment or decree shall be entered by any
court appointing a receiver of the property of the Borrower (unless said
appointment shall have been sought by the Bank or its assigns to enforce any of
the Documents or other agreement made or executed in connection herewith), and
such order, judgment or decree be not appealed from within the time allowed by
law, or if appealed, if such order, judgment or decree shall have been affirmed;
(i) Subject to the provisions of the Mortgages, if the Secured
Properties described in the Mortgages, or any part or parcel thereof, be
condemned under power of eminent
33
<PAGE> 36
domain by any legally constituted authority and such condemnation, in the
reasonable opinion of the Bank, has a Material Adverse Effect;
(j) In the event a final judgment or judgments is/are filed or
rendered against the Borrower in excess of $100,000.00 in the aggregate, and (i)
such judgments have not been appealed from within the time provided by law, or
if appealed, such judgments shall have been affirmed, and (ii) such judgments
have not been paid or bonded off by the Borrower within ninety (90) days after
they become final and no longer appealable;
(k) Any actual or threatened demolition or injury or waste to
the Collateral for the Obligations which has a Material Adverse Effect; or
(l) If the Bank deems itself insecure of the prospect of
payment or performance impaired for any reason whatsoever, including but not
limited to, dissolution, termination of existence, insolvency, business failure,
appointment of a receiver of any part of the property of, assignment for the
benefit of creditors by, or the commencement of any proceeding under any
bankruptcy or insolvency laws by or against, the Borrower, or entry of any
judgment against any of them, or failure of the Borrower to provide the Bank
with financial information promptly when requested.
10.02 No Event of Default shall be waived by the Bank except in writing
and no waiver of any Event of Default shall operate as a waiver of any other
Event of Default or of the same Event of Default on future occasions.
ARTICLE XI. REMEDIES
11.01 Upon the occurrence of any Event of Default, and at any time
thereafter, the Bank shall have the following rights and remedies:
(a) The Bank shall be under no obligation to make any further
Advances hereunder and may terminate the Facilities;
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<PAGE> 37
(b) The Bank may, at its option, without presentment, demand,
notice of dishonor, or protest, declare one or more or all of the Obligations
and all amounts advanced hereunder immediately due and payable in full;
(c) The Bank shall have the right from time to time to sue for
all or any part of the Obligations, whether interest, principal or any
installment of either or both, taxes, fees, penalties or any other sums required
to be paid under the terms of the Documents, without regard to whether all of
the Obligations shall be then due and without prejudice to the right of the Bank
thereafter to enforce any appropriate remedy against the Borrower, including
actions for a default or defaults by the Borrower existing at the time such
earlier action was commenced; or
(d) The Bank may, at its option, pursue any and all rights and
remedies under the Notes, and/or the Mortgages or other Documents as to any or
all of the Collateral, including but not limited to any or all of the Secured
Properties or the Secured Personalty.
11.02 The rights of the Bank, granted and arising under the Documents
shall be separate, distinct and cumulative of other rights and powers herein
granted and all other rights which the Bank may have at law or in equity, and
none of them shall be in exclusion of the others; and all of them are cumulative
to the remedies for collection of the security provided by law. Any foreclosure
or other sale of less than all of the Collateral or any defective or irregular
sale made in connection herewith shall not exhaust the power of foreclosure or
of sale provided for in the Documents; and subsequent sales may be made until
all of the Obligations have been satisfied or all of the Collateral has been
sold. No act of the Bank shall be construed as an election to proceed under any
one provision of any of the Documents to the exclusion of any other provision or
an election of remedies to the bar of any other remedy allowed at law or in
equity, anything herein or otherwise to the contrary notwithstanding.
11.03 The Borrower hereby waives, in the event of the foreclosure of as
to any of the Collateral or the enforcement by the Bank of any rights and
remedies hereunder, any right
35
<PAGE> 38
otherwise available in respect to marshalling of assets which secure the
Obligations or to require the Bank to pursue or delay the pursuit of its
remedies against any such assets. Further, the Borrower agrees that neither the
Borrower nor anyone claiming through or under the Borrower shall or will set up,
claim or seek an advantage of any exemption (including homestead exemptions),
stay, extension or redemption laws now or hereafter in force, in order to
prevent or hinder the enforcement or foreclosure of any Collateral, or the
absolute sale of the Collateral, or the final and absolute putting into
possession thereof, immediately after such sale, of the purchasers thereat and
the Borrower does hereby waive the benefit of all such laws or right of
redemption, exemption or stay.
ARTICLE XII. MISCELLANEOUS PROVISIONS
12.01 In no event shall the Bank be liable to the Borrower for
indirect, special or consequential damages, or the loss of anticipated profits,
which may arise out of or are in any way connected with the Obligations or the
Documents.
12.02 The covenants and all representations and warranties of the
Borrower shall survive the execution and delivery of the Documents and shall
remain in full force and effect until the expiration of this Agreement as
hereinafter provided. No investigation by the Bank shall affect the
representations or warranties or the right of the Bank to rely upon and enforce
them.
12.03 Regardless of the amount of the Obligations outstanding at any
time and regardless of whether there is any indebtedness outstanding at all, it
is the intention of the Bank and the Borrower that this Agreement and all of the
Documents shall remain in full force and effect until the last to occur of the
following events: (a) the Obligations have been fully paid; (b) all covenants in
the Documents have been fully and adequately performed; and (c) the Bank has not
agreed to make and is not obligated to make any further Advance to or on behalf
of the Borrower.
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<PAGE> 39
12.04 All demands, notices and other communications hereunder except
those relating to selection of interest rate options shall be in writing and
shall be deemed to have been given upon receipt when the writing is delivered in
person, sent by facsimile transmission, provided that a confirmation copy of the
notice is also sent by mail as provided herein or is mailed by first class,
registered or certified mail, postage prepaid, addressed as follows:
To the Bank: Wachovia Bank, N.A.
Post Office Box 700
16 Broad Street
Charleston, SC 29402
Attention: Donald R. Sanders
To the Borrower: Sea Pines Associates, Inc.
Post Office Box 7000
32 Greenwood Drive
Hilton Head Island, SC 29938
Attention: President
AND
Sea Pines Company, Inc.
Post Office Box 7000
32 Greenwood Drive
Hilton Head Island, SC 29938
Attention: President
12.05 The Borrower shall pay to the Bank upon demand: (a) all expenses
incurred or to be incurred at, before and/or in connection with the execution of
this Agreement and any subsequent Advances, including without limitation;
reasonable attorney's fees incurred for or by the Bank's legal counsel; and (b)
other expenses incurred by the Bank in connection with the maintenance of the
Facilities or other Obligations; including, but not limited to: (i) reasonable
attorney's fees incurred by the Bank in connection with the negotiation,
alteration, amendment or modification in any respect of the Documents or in the
preparation of additional documents or other legal work rendered as a part of
such alterations, amendments or modifications; and (ii) all costs and expenses
of the Bank in connection with the collection of the Obligations and enforcement
of the covenants, including reasonable attorney's fees.
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<PAGE> 40
12.06 This Agreement, the Documents and the books and records of the
Bank shall constitute prima facie evidence of all matters with respect to the
Obligations and amounts due hereunder.
12.07 If any provision or any part thereof of any of the Documents
shall be invalid or unenforceable under applicable law, said part shall be
ineffective to the extent of such invalidity only, without in any way affecting
the remaining parts of said provision or the remaining provisions of said
Document.
12.08 The Borrower agrees that where, by the terms of the Documents a
day is named or a time fixed for the payment of any of the Obligations or the
performance of any of the covenants, the time stated enters into the
consideration and is of the essence of the whole contract.
12.09 To the extent permitted by applicable law, if the Bank shall
refuse to make Advances hereunder because the Bank reasonably believes it is not
required to do so, the Bank shall not be liable to the Borrower for any
consequential damages resulting therefrom.
12.10 The Bank and the Borrower do not intend to be partners or joint
venturers by reason of the transactions contemplated in the Documents.
Notwithstanding any provision in any of the Documents to the contrary, the
Borrower has no authority to act for or on behalf of or to legally bind the Bank
and the Bank possesses only such authority as is provided by law or in the
Documents which authority is intended only to preserve and protect the
Obligations and any security therefor.
12.11 The Obligations, the covenants and the Documents are made under
and governed by the laws of the State of South Carolina and the Borrower hereby
consents to the jurisdiction of all courts in said State.
12.12 This Agreement may be executed in several counterparts, each of
which shall be an original and all collectively shall constitute but one
instrument.
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<PAGE> 41
12.13 The Documents constitute the entire agreement of the parties on
the subject matter hereof, and may not be modified except in writing signed by
the parties.
12.14 The Borrower may not assign or otherwise transfer or convey its
interest in the Documents.
IN WITNESS WHEREOF, the undersigned have duly executed and sealed this
Agreement as of the 31st day of October, 1998.
WACHOVIA BANK, N.A.
/s/ Steve D. HeyBoer By: /s/ Donald R. Sanders
- ---------------------------- ------------------------------
/s/ Tom S Cullen Its: Senior Vice President
- ---------------------------- --------------------------
SEA PINES ASSOCIATES, INC.
/s/ Steve D. HeyBoer By: /s/ C. W. Flynn
- ---------------------------- ------------------------------
/s/ Tom S. Cullen Its: Chairman
- ---------------------------- --------------------------
(CORPORATE SEAL)
SEA PINES COMPANY, INC.
/s/ Steve D. HeyBoer By: /s/ Michael E. Lawrence
- ---------------------------- ------------------------------
/s/ Tom S. Cullen Its: President
- ---------------------------- --------------------------
(CORPORATE SEAL)
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<PAGE> 42
SCHEDULE I
COMPLIANCE CERTIFICATE
I. DEBT SERVICE COVERAGE RATIO CALCULATION (as of __________, 19___)
<TABLE>
<CAPTION>
Four Quarters
Quarter Ended Ended
------- ------- ------- ------- ------------
<S> <C> <C> <C> <C> <C>
Net Income (Loss)
Non Cash Expenses - Section IV
------- ------- ------- ------- ------------
Total Numerator ------- ------- ------- ------- ------------
Current Portion of Long Term Debt *
Current Portion of Capital Leases *
Dividends Paid **
------- ------- ------- ------- ------------
Total Denominator ------- ------- ------- ------- ------------
DEBT SERVICE
COVERAGE RATIO ============
Minimum Debt Service
Coverage Ratio 1.25
</TABLE>
Incentive Debt Service
Coverage Ratio and
Applicable margins
DSC Ratio Applicable Margin
--------- -----------------
< 1.50 1.50% (150 basis points)
=> 1.50 but <1.75 1.35% (135 basis points)
=> 1.75 1.25% (125 basis points)
* Current quarter balances
** Dividends accrued or paid during the past four quarters
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<PAGE> 43
II. NET WORTH RATIO CALCULATION (as of ____________________, 19__)
Total Liabilities (including contingent and conditional liabilities)
Tangible Net Worth
NET WORTH RATIO ============
Maximum Net Worth Ratio 2.50
III. OFFICER CERTIFICATION
To the best of my knowledge, the loan covenant calculations above are
correct and have been prepared in accordance with the definitions
included in the Master Credit Agreement. No Event of Default exists
under the Master Credit Agreement or any other governing loan document.
SEA PINES ASSOCIATES, INC.
By:
- ---------------------------- ------------------------------
Date Its:
--------------------------
IV. DEBT SERVICE COVERAGE RATIO CALCULATION (as of ___________, ____)
<TABLE>
<CAPTION>
Four Quarters
Quarter Ended Ended
<S> <C>
Non Cash Expenses _______ _______ _______ _______ _____________
Depreciation and amortization
Health Care Operations/Sale
Equity Loss in TidePonte Partners
Tax Provision Adjustment
------- ------- ------- ------- ------------
Total Non Cash Expenses
======= ======= ======= ======= ============
</TABLE>
41
<PAGE> 44
SCHEDULE II
ASSET RELEASE
SCHEDULE
Certain of the Collateral, as hereinafter described, shall be released
from the lien of the Assignments, Mortgages or other Documents upon request of
the Borrower and payment or delivery of the consideration described herein (the
"Release Price") in accordance with the following terms and conditions.
The Bank shall not be obligated to release any Collateral if (i) an
Event of Default has occurred under the Master Credit Agreement, (ii) an event
has occurred which with the passage of time or the giving of notice the Bank
reasonably anticipates would constitute an Event of Default under the Master
Credit Agreement, or (iii) the Bank reasonably anticipates that the requested
release may result in an Event of Default or cause a Material Adverse Effect
under the Master Credit Agreement.
The Bank reserves the right to apply all Release Price payments to any
Note or Notes, in its sole discretion, and, notwithstanding any provision in the
Notes, such payments will be applied to the principal balances outstanding under
any such Note(s) (and to pay any applicable prepayment charge) unless the Bank
chooses, in its sole discretion, to apply such payments to accrued interest or
other Obligations. Any payments attributable to Major Groups of Collateral as
described in Section I below may also result in a reduction of funds available
under the Facilities in the Bank's sole discretion.
The term "Gross Proceeds" as used in this Asset Release Schedule shall
mean the amount equal to the gross sales price payable to the Borrower as stated
in the Contract (as defined) from or in connection with any sale or transfer of
all or any part of any of the Collateral, including, without limitation, the
proceeds of any reserves or escrows (other than those reserves or escrows
established by the Borrower).
The term "Current Obligations" as used in this Asset Release Schedule
shall mean the then-current principal amount outstanding and any unfunded
commitments under the Obligations (as defined in the Master Credit Agreement) of
the Borrower, including, without limitation, in the Bank's sole discretion,
estimates of the potential exposure, if any, of the Borrower to the Bank for
contingent, conditional and indirect liabilities constituting a portion of said
Obligations.
The term "Contract" as used in this Asset Release Schedule shall mean
the applicable contract of sale or purchase agreement including any and all
amendments and other related documents pertaining to a sale or other transfer of
any Collateral as submitted to the Bank for its review.
The property references below are abbreviated commonly used
descriptions, and the legal descriptions for said parcels are contained in the
Mortgages, which descriptions shall be controlling as to actual acreage and
location. Certain legal descriptions are indicated by reference to specific
exhibits of the Mortgages.
COLLATERAL TYPES TO BE RELEASED:
42
<PAGE> 45
I. Major Groups of Collateral which must be released in the groups
indicated below and may not be released separately unless otherwise agreed to by
the Bank in its sole discretion:
(1) Harbour Town Golf Course (A-2), Clubhouse (A-5),
Recreation Area (A-5) and Driving Range (A-3), Conference Center (to be
built):
Release Price Greater of:
75% of Gross Proceeds or 60% of Current Obligations or
Note 1 Calculation
(2) Ocean Golf Course (A-16), Sea Marsh Golf Course (A-6), and
Ocean/Sea Marsh Driving Range (A-28) (to include Collateral connected
with the pro shop operations for these courses):
Release Price Greater of:
75% of Gross Proceeds or 60% of Current Obligations or
Note 1 Calculation
Note 1. The Release Price shall be the greater of (a) the above percentage of
Gross Proceeds, or (b) the above percentage of Current Obligations, or
(c) the dollar amount calculated by applying the following formula:
75% x (8 x net annual Cash Flow from Collateral being released)
"Cash Flow" equals operating revenues minus operating expenses, not
including depreciation or debt service.
II. Stock or Assets of Sea Pines Real Estate Company., Inc.:
Release Price Greater of:
70% of Gross Proceeds or 4% of Current Obligations
III. Welcome Center/Administrative Building (A-33):
Release Price Greater of:
80% of Gross Proceeds or 5% of Current Obligations
IV. Harbour Town Inn (to be built):
43
<PAGE> 46
Release Price Greater of:
80% of Gross Proceeds or 20% of Current Obligations
V. Plantation Club (A-32):
Release Price Greater of:
80% of Gross Proceeds or 4% of Current Obligations
The release of the Plantation Club property will be subject to
the Bank's prior approval of a satisfactory alternative plan for
providing pro shop facilities for the Ocean Golf Course and/or the Sea
Marsh Golf Course if either of those courses are to continue as
Collateral following release of the Plantation Club.
VI. The Bank and the Borrower acknowledge and agree that the Borrower
may determine it is in its best financial interest to enter into a joint venture
or other development or investment entity for the purpose of developing or
improving certain parcels included within the Secured Properties and in that
regard the Borrower may be required to contribute to said entity the property to
be developed or improved free and clear of the lien of the Mortgages. Subject to
the provisions of ss. 9.01(g) and other provisions of the Master Credit
Agreement and other Documents and the Bank's approval of the nature of the
proposed development or improvements of Secured Properties, the Bank shall
release portions of the Secured Properties to be contributed by the Borrower
from the lien of the Mortgages upon receipt of a collateral assignment and first
security interest in the Borrower's interest in said development or investment
entity in such form as may be acceptable to the Bank in its discretion;
provided, however, the Bank shall not be required to release the Harbour Town
Golf Links Golf Course, the Ocean Course or the Sea Marsh Course or any
ancillary or support facilities related thereto or used in connection therewith
for said purposes.
VII. All remaining Collateral except for Trademarks, Trade names,
Servicemarks and Logos described in the Assignment of Trademarks, Trade Names,
Intangibles and Proprietary Rights dated November 17, 1987, as amended, the
rights to the various tournaments held on the Secured Properties, if any, and
the various rights described in the Collateral Assignment of Rights and
Easements dated November 17, 1987, as amended, all remaining Collateral may be
sold at the Borrower's option in the ordinary course of business and shall be
released without payment of any Release Price from the liens of the Assignments,
Mortgages or other Documents.
The Bank reserves the right to review this Schedule annually with the
Borrower and make such amendments as may be mutually agreed upon as may be
necessary to insure that the Bank's collateral position and/or cash flow/debt
service coverage have not been or will not be adversely affected.
All requests for release of Collateral shall be in writing, and
accompanied by a release instrument in a form and content approved by the Bank .
For all releases for collateral other than as described in section VII above,
the Borrower shall also provide a current recordable survey, identifying the
parcel or parcels to be released, the Borrower's calculations regarding
44
<PAGE> 47
Cash Flow and prospective covenant compliance, if applicable, and a copy of the
Contract and closing statement signed by an attorney establishing the Gross
Proceeds. For approved releases, the release instruments shall be executed and
tendered to the Borrower or its purchaser upon receipt by the Bank of the
Release Price in certified funds or by fed bank wire. All costs and expenses
incurred by the Bank in connection with providing said release to the Borrower
including the Bank's attorney's fees shall be paid by the Borrower.
45
<PAGE> 48
SCHEDULE I
COMPLIANCE CERTIFICATE
I. DEBT SERVICE COVERAGE RATIO CALCULATION (as of __________, 19___)
<TABLE>
<CAPTION>
Four Quarters
Quarter Ended Ended
------- ------- ------- ------- ------------
<S> <C> <C> <C> <C> <C>
Net Income (Loss)
Non Cash Expenses - Section IV
------- ------- ------- ------- ------------
Total Numerator ------- ------- ------- ------- ------------
Current Portion of Long Term Debt *
Current Portion of Capital Leases *
Dividends Paid **
------- ------- ------- ------- ------------
Total Denominator ------- ------- ------- ------- ------------
DEBT SERVICE
COVERAGE RATIO ============
Minimum Debt Service
Coverage Ratio 1.25
</TABLE>
Incentive Debt Service
Coverage Ratio and
Applicable margins
DSC Ratio Applicable Margin
--------- -----------------
< 1.50 1.50% (150 basis points)
=> 1.50 but <1.75 1.35% (135 basis points)
=> 1.75 1.25% (125 basis points)
* Current quarter balances
** Dividends accrued or paid during the past four quarters
S-1
<PAGE> 49
II. NET WORTH RATIO CALCULATION (as of ____________________, 19__)
Total Liabilities (including contingent and conditional liabilities)
Tangible Net Worth
NET WORTH RATIO ============
Maximum Net Worth Ratio 2.50
III. OFFICER CERTIFICATION
To the best of my knowledge, the loan covenant calculations above are
correct and have been prepared in accordance with the definitions
included in the Master Credit Agreement. No Event of Default exists
under the Master Credit Agreement or any other governing loan document.
SEA PINES ASSOCIATES, INC.
By:
- ---------------------------- ------------------------------
Date Its:
--------------------------
IV. DEBT SERVICE COVERAGE RATIO CALCULATION (as of ___________, ____)
<TABLE>
<CAPTION>
Four Quarters
Quarter Ended Ended
<S> <C>
Non Cash Expenses _______ _______ _______ _______ _____________
Depreciation and amortization
Health Care Operations/Sale
Equity Loss in TidePonte Partners
Tax Provision Adjustment
------- ------- ------- ------- ------------
Total Non Cash Expenses
======= ======= ======= ======= ============
</TABLE>
S-2
<PAGE> 50
SCHEDULE II
ASSET RELEASE
SCHEDULE
Certain of the Collateral, as hereinafter described, shall be released
from the lien of the Assignments, Mortgages or other Documents upon request of
the Borrower and payment or delivery of the consideration described herein (the
"Release Price") in accordance with the following terms and conditions.
The Bank shall not be obligated to release any Collateral if (i) an
Event of Default has occurred under the Master Credit Agreement, (ii) an event
has occurred which with the passage of time or the giving of notice the Bank
reasonably anticipates would constitute an Event of Default under the Master
Credit Agreement, or (iii) the Bank reasonably anticipates that the requested
release may result in an Event of Default or cause a Material Adverse Effect
under the Master Credit Agreement.
The Bank reserves the right to apply all Release Price payments to any
Note or Notes, in its sole discretion, and, notwithstanding any provision in the
Notes, such payments will be applied to the principal balances outstanding under
any such Note(s) (and to pay any applicable prepayment charge) unless the Bank
chooses, in its sole discretion, to apply such payments to accrued interest or
other Obligations. Any payments attributable to Major Groups of Collateral as
described in Section I below may also result in a reduction of funds available
under the Facilities in the Bank's sole discretion.
The term "Gross Proceeds" as used in this Asset Release Schedule shall
mean the amount equal to the gross sales price payable to the Borrower as stated
in the Contract (as defined) from or in connection with any sale or transfer of
all or any part of any of the Collateral, including, without limitation, the
proceeds of any reserves or escrows (other than those reserves or escrows
established by the Borrower).
The term "Current Obligations" as used in this Asset Release Schedule
shall mean the then-current principal amount outstanding and any unfunded
commitments under the Obligations (as defined in the Master Credit Agreement) of
the Borrower, including, without limitation, in the Bank's sole discretion,
estimates of the potential exposure, if any, of the Borrower to the Bank for
contingent, conditional and indirect liabilities constituting a portion of said
Obligations.
The term "Contract" as used in this Asset Release Schedule shall mean
the applicable contract of sale or purchase agreement including any and all
amendments and other related documents pertaining to a sale or other transfer of
any Collateral as submitted to the Bank for its review.
The property references below are abbreviated commonly used
descriptions, and the legal descriptions for said parcels are contained in the
Mortgages, which descriptions shall be controlling as to actual acreage and
location. Certain legal descriptions are indicated by reference to specific
exhibits of the Mortgages.
COLLATERAL TYPES TO BE RELEASED:
S-3
<PAGE> 51
I. Major Groups of Collateral which must be released in the groups
indicated below and may not be released separately unless otherwise agreed to by
the Bank in its sole discretion:
(1) Harbour Town Golf Course (A-2), Clubhouse (A-5),
Recreation Area (A-5) and Driving Range (A-3), Conference Center (to be
built):
Release Price Greater of:
75% of Gross Proceeds or 60% of Current Obligations or
Note 1 Calculation
(2) Ocean Golf Course (A-16), Sea Marsh Golf Course (A-6), and
Ocean/Sea Marsh Driving Range (A-28) (to include Collateral connected
with the pro shop operations for these courses):
Release Price Greater of:
75% of Gross Proceeds or 60% of Current Obligations or
Note 1 Calculation
Note 1. The Release Price shall be the greater of (a) the above percentage of
Gross Proceeds, or (b) the above percentage of Current Obligations, or
(c) the dollar amount calculated by applying the following formula:
75% x (8 x net annual Cash Flow from Collateral being released)
"Cash Flow" equals operating revenues minus operating expenses, not
including depreciation or debt service.
II. Stock or Assets of Sea Pines Real Estate Company., Inc.:
Release Price Greater of:
70% of Gross Proceeds or 4% of Current Obligations
III. Welcome Center/Administrative Building (A-33):
Release Price Greater of:
80% of Gross Proceeds or 5% of Current Obligations
IV. Harbour Town Inn (to be built):
S-4
<PAGE> 52
Release Price Greater of:
80% of Gross Proceeds or 20% of Current Obligations
V. Plantation Club (A-32):
Release Price Greater of:
80% of Gross Proceeds or 4% of Current Obligations
The release of the Plantation Club property will be subject to
the Bank's prior approval of a satisfactory alternative plan for
providing pro shop facilities for the Ocean Golf Course and/or the Sea
Marsh Golf Course if either of those courses are to continue as
Collateral following release of the Plantation Club.
VI. The Bank and the Borrower acknowledge and agree that the Borrower
may determine it is in its best financial interest to enter into a joint venture
or other development or investment entity for the purpose of developing or
improving certain parcels included within the Secured Properties and in that
regard the Borrower may be required to contribute to said entity the property to
be developed or improved free and clear of the lien of the Mortgages. Subject to
the provisions of ss. 9.01(g) and other provisions of the Master Credit
Agreement and other Documents and the Bank's approval of the nature of the
proposed development or improvements of Secured Properties, the Bank shall
release portions of the Secured Properties to be contributed by the Borrower
from the lien of the Mortgages upon receipt of a collateral assignment and first
security interest in the Borrower's interest in said development or investment
entity in such form as may be acceptable to the Bank in its discretion;
provided, however, the Bank shall not be required to release the Harbour Town
Golf Links Golf Course, the Ocean Course or the Sea Marsh Course or any
ancillary or support facilities related thereto or used in connection therewith
for said purposes.
VII. All remaining Collateral except for Trademarks, Trade names,
Servicemarks and Logos described in the Assignment of Trademarks, Trade Names,
Intangibles and Proprietary Rights dated November 17, 1987, as amended, the
rights to the various tournaments held on the Secured Properties, if any, and
the various rights described in the Collateral Assignment of Rights and
Easements dated November 17, 1987, as amended, all remaining Collateral may be
sold at the Borrower's option in the ordinary course of business and shall be
released without payment of any Release Price from the liens of the Assignments,
Mortgages or other Documents.
The Bank reserves the right to review this Schedule annually with the
Borrower and make such amendments as may be mutually agreed upon as may be
necessary to insure that the Bank's collateral position and/or cash flow/debt
service coverage have not been or will not be adversely affected.
All requests for release of Collateral shall be in writing, and
accompanied by a release instrument in a form and content approved by the Bank .
For all releases for collateral other than as described in section VII above,
the Borrower shall also provide a current recordable survey, identifying the
parcel or parcels to be released, the Borrower's calculations regarding
S-5
<PAGE> 53
Cash Flow and prospective covenant compliance, if applicable, and a copy of the
Contract and closing statement signed by an attorney establishing the Gross
Proceeds. For approved releases, the release instruments shall be executed and
tendered to the Borrower or its purchaser upon receipt by the Bank of the
Release Price in certified funds or by fed bank wire. All costs and expenses
incurred by the Bank in connection with providing said release to the Borrower
including the Bank's attorney's fees shall be paid by the Borrower.
S-6
<PAGE> 1
AMENDED AND RESTATED TERM NOTE
$18,500,000.00 Hilton Head Island, S. C.
October 31, 1998
FOR VALUE RECEIVED, the undersigned SEA PINES ASSOCIATES, INC. AND SEA
PINES COMPANY, INC. both South Carolina corporations (hereinafter referred to
collectively as the "Maker") jointly and severally promise to pay to the order
of WACHOVIA BANK, N.A., a national banking association (which, together with any
subsequent holder(s) of this Note, from time to time hereinafter referred to as
the "Holder") at Charleston, South Carolina, or at such other place or to such
other party or parties as the Holder of this Note may from time to time
designate, the principal sum of EIGHTEEN MILLION, FIVE HUNDRED THOUSAND AND
NO/100 DOLLARS ($18,500,000.00) or so much thereof as may be advanced, with
interest thereon computed from the date of each advance at the annual rate
designated herein computed on the basis of a 360-day year for the actual number
of days in each interest period.
This Note shall bear interest from the date hereof at a rate per annum
equal to the Adjusted LIBOR Index for the applicable one month Interest Period
plus the Applicable Margin, all as defined in that certain Master Credit
Agreement dated the same date hereof by and between Maker and the initial Holder
(the "Master Credit Agreement").
Interest only on the principal amount outstanding shall be due and
payable on the first (1st) day of each month.
The outstanding principal balance shall be repaid with monthly seasonal
principal payments due on the first (1st )day of each month from May through
October of each year as follows:
<TABLE>
<CAPTION>
Year $ Monthly Payments
---- ------------------
<S> <C> <C>
1999 61,193
2000 66,602
2001 108,976
2002 118,609
2003 129,093
2004 140,504
2005 152,923
2006 166,440
2007 181,151
2008 196,577
</TABLE>
The entire principal balance of this Note, together with interest
accrued thereon and all other sums due the Holder, shall be due and payable in
full on the Term Note Maturity Date, as defined in the Master Credit Agreement.
Monthly payments of interest shall be applied first to any late charges
or other charges due and then to interest due. Upon the occurrence of an Event
of Default under this Note, all payments of principal and/or interest may be
applied in such order as the Holder of this Note may in its sole discretion
determine. All payments of principal and/or interest are payable in lawful
<PAGE> 2
money of the United States of America, which shall be legal tender in payment of
all debts and dues, public and private, at the time of payment.
In the event ("Event(s) of Default") (a) Maker fails to make a payment
of any interest or any installment of principal or any other sums payable
pursuant to the terms of this Note on or before the date on which it is due, or
(b) Maker fails to pay in full the entire amount outstanding under this Note on
the Maturity Date, (c) of the occurrence of an Event of Default under the Master
Credit Agreement or any other document or instrument which secures or evidences
this Note , or (d) an event of default by Maker on any of the "Obligations" as
defined in the Master Credit Agreement ; and if such default or failure is not
cured within the time, if any, provided in the Master Credit Agreement or other
document or instrument, then or at any time thereafter, at the option of the
Holder of this Note, the whole of the principal sum then remaining unpaid
hereunder together with all interest accrued thereon, shall immediately become
due and payable without notice, and the liens given to secure the payment of
this Note may be foreclosed. In order to compensate the Holder for the increased
risk of collection after an Event of Default, from and after the maturity of
this Note either according to its terms or as the result of a lawful declaration
of maturity, the entire principal remaining unpaid hereunder shall bear interest
at a rate equal to the Default Rate, as defined in the Master Credit Agreement.
Failure to exercise such option or any other rights to which the Holder may in
the event of any such default be entitled shall not constitute a waiver of the
right to exercise such option or any other rights in the event of any subsequent
default, whether of the same or different nature.
This Note is secured by, among other security, certain Mortgages,
Assignments and other Collateral, all as defined and more fully described in the
Master Credit Agreement. The terms and conditions of the Master Credit Agreement
and the other Documents as defined in the Master Credit Agreement shall be
considered a part hereof to the same extent as if written herein, including any
amendments thereto.
If this Note is placed in the hands of an attorney for collection or is
collected through any legal proceedings, the Maker of this Note promises to pay
a reasonable attorney's fee.
In the event the interest provisions hereof or any exactions provided
for herein or any other instruments securing this Note shall result for any
reason in an effective rate of interest which, for any period of time,
transcends the limit of the usury or any other law applicable to the loan
evidenced hereby, all sums in excess of those lawfully collectible as interest
for the period in question shall, without further agreement or notice between or
by any party hereto, be applied to principal immediately upon receipt of such
monies by the Holder.
The Maker and all endorsers, and all persons liable or to become liable
on this Note waive presentment, protest and demand, notice of protest, demand
and dishonor and nonpayment of this Note (except for notice expressly required
by this Note), and consent to any and all renewals and extensions of the time of
payment hereof, and agree, further, that at any time and from time to time
without notice, the terms of payment herein may be modified or the security
described in the lien document securing this Note released in whole or in part,
or increased, changed or exchanged by agreement between the Holder hereof and in
the case of payments, the Maker, and in the case of liens, any owner of premises
affected by said lien document securing this Note without in any way affecting
the liability of any party to this instrument or any person liable with respect
to any indebtedness evidenced hereby.
<PAGE> 3
The Holder is not required to rely on the Collateral, as defined in the
Master Credit Agreement, for the payment of the Note in the event of default by
the Maker, but may proceed directly against the Maker, endorsers, or guarantors,
if any, in such manner as it deems desirable. None of the rights and remedies of
the Holder hereunder are to be waived or affected by failure or delay to
exercise them. All remedies conferred on a Holder by this Note or any other
instrument or agreement shall be cumulative, and none is exclusive. Such
remedies may be exercised concurrently or consecutively at the Holder's option.
This Note may be prepaid in whole or in part without penalty upon the
maturity of the then current Interest Period. If the Holder allows the Maker to
prepay the Loan prior to the maturity of the then current Interest Period, the
Maker shall pay a prepayment premium determined by the Holder, in its
commercially reasonable discretion, at the time of the prepayment to compensate
the Holder for any loss.
The Holder may collect a late charge not to exceed an amount equal to
four (4%) per cent of any installment of principal which is not paid within
fifteen (15) days of the due date thereof to cover the extra expenses involved
in handling delinquent payments. The collection of the late charge shall not be
deemed a waiver by the Holder of any of its other rights under this Note,
including the right, upon the expiration of any applicable cure period, to
accelerate this Note due to Maker's default for nonpayment.
This Note shall be governed as to validity, interpretation,
construction, effect, and in all other respects by the laws and decisions of the
State of South Carolina.
Wherever possible each provision of this Note shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Note or portion thereof shall be prohibited by or invalid
under such law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Note.
<PAGE> 4
This Note amends and restates that certain promissory note of Maker
dated November 17, 1987 as amended from time to time.
IN WITNESS WHEREOF, this Amended and Restated Term Note is executed and
delivered by the Maker to be legally binding and effective as of the date first
above written.
(CORPORATE SEAL) MAKER:
SEA PINES ASSOCIATES, INC.
By: /s/ C. W. Flynn
-----------------------------------------
Its: Chairman
----------------------------------------
(CORPORATE SEAL) SEA PINES COMPANY, INC.
By: Michael W. Lawrence
-----------------------------------------
Its: President
----------------------------------------
<PAGE> 1
AMENDED AND RESTATED REVOLVING LINE OF CREDIT NOTE
$15,000,000.00 Hilton Head Island, S. C.
October 31, 1998
FOR VALUE RECEIVED, the undersigned SEA PINES ASSOCIATES, INC. and SEA
PINES COMPANY, INC., both South Carolina corporations (hereinafter referred to
collectively as the "Maker") jointly and severally promise to pay to the order
of WACHOVIA BANK, N.A., a national banking association (which, together with any
subsequent holder(s) of this Note, from time to time hereinafter referred to as
the "Holder") at Charleston, South Carolina, or at such other place or to such
other party or parties as the Holder of this Note may from time to time
designate, the principal sum of FIFTEEN MILLION AND NO/100 DOLLARS
($15,000,000.00) or so much thereof as may be advanced or re-advanced from time
to time and remains unpaid, with interest thereon computed on the basis of a
360-day year for the actual number of days in each interest period.
This Note shall bear interest from the date hereof at a rate per annum
equal to the Adjusted LIBOR Index for the applicable Interest Period plus the
Applicable Margin, all as defined in that certain Master Credit Agreement dated
of even date hereof by and between Maker and the initial Holder (the "Master
Credit Agreement").
Interest only on the principal amount outstanding shall be due and
payable on the first (1st) day of each month. All outstanding principal and
accrued but unpaid interest shall be due and payable on or before the Revolving
Line of Credit Note Maturity Date, as defined in the Master Credit Agreement.
Monthly payments of interest shall be applied first to any late charges
or other charges due and then to interest due. Upon the occurrence of an Event
of Default under this Note, all payments of principal and/or interest may be
applied in such order as the Holder of this Note may in its sole discretion
determine. All payments of principal and/or interest are payable in lawful money
of the United States of America, which shall be legal tender in payment of all
debts and dues, public and private, at the time of payment.
In the event ("Event(s) of Default") (a) Maker fails to make a payment
of any interest or any installment of principal or any other sums payable
pursuant to the terms of this Note on or before the date on which it is due, or
(b) Maker fails to pay in full the entire amount outstanding under this Note on
the Maturity Date, (c) of the occurrence of an Event of Default under the Master
Credit Agreement or any other document or instrument which secures or evidences
this Note , or (d) an event of default by Maker on any of the "Obligations" as
defined in the Master Credit Agreement ; and if such default or failure is not
cured within the time, if any, provided in the Master Credit Agreement or other
document or instrument, then or at any time thereafter, at the option of the
Holder of this Note, the whole of the principal sum then remaining unpaid
hereunder together with all interest accrued thereon, shall immediately become
due and payable without notice, and the liens given to secure the payment of
this Note may be foreclosed. In order to compensate the Holder for the increased
risk of collection after an Event of Default, from and after the maturity of
this Note either according to its terms or as the result of a lawful declaration
of maturity, the entire principal remaining unpaid hereunder shall bear interest
at a rate equal to the Default Rate, as defined in the Master Credit Agreement.
Failure to exercise such option or any other rights to which the Holder may in
the event of any such default be entitled shall not
<PAGE> 2
constitute a waiver of the right to exercise such option or any other rights in
the event of any subsequent default, whether of the same or different nature.
This Note is secured by, among other security, certain Mortgages,
Assignments and other Collateral, all as defined and more fully described in the
Master Credit Agreement. The terms and conditions of the Master Credit Agreement
and other Documents as defined in the Master Credit Agreement shall be
considered a part hereof to the same extent as if written herein, including any
amendments thereto.
If this Note is placed in the hands of an attorney for collection or is
collected through any legal proceedings, the Maker of this Note promises to pay
a reasonable attorney's fee.
In the event the interest provisions hereof or any exactions provided
for herein or any other instruments securing this Note shall result for any
reason in an effective rate of interest which, for any period of time,
transcends the limit of the usury or any other law applicable to the loan
evidenced hereby, all sums in excess of those lawfully collectible as interest
for the period in question shall, without further agreement or notice between or
by any party hereto, be applied to principal immediately upon receipt of such
monies by the Holder.
The Maker and all endorsers, and all persons liable or to become liable
on this Note waive presentment, protest and demand, notice of protest, demand
and dishonor and nonpayment of this Note (except for notice expressly required
by this Note), and consent to any and all renewals and extensions of the time of
payment hereof, and agree, further, that at any time and from time to time
without notice, the terms of payment herein may be modified or the security
described in the lien document securing this Note released in whole or in part,
or increased, changed or exchanged by agreement between the Holder hereof and in
the case of payments, the Maker, and in the case of liens, any owner of premises
affected by said lien document securing this Note without in any way affecting
the liability of any party to this instrument or any person liable with respect
to any indebtedness evidenced hereby.
The Holder is not required to rely on the Collateral, as defined in the
Master Credit Agreement, for the payment of the Note in the event of default by
the Maker, but may proceed directly against the Maker, endorsers, or guarantors,
if any, in such manner as it deems desirable. None of the rights and remedies of
the Holder hereunder are to be waived or affected by failure or delay to
exercise them. All remedies conferred on a Holder by this Note or any other
instrument or agreement shall be cumulative, and none is exclusive. Such
remedies may be exercised concurrently or consecutively at the Holder's option.
This Note may be prepaid in whole or in part without penalty upon the
maturity of the then current Interest Period. If the Holder allows the Maker to
prepay the Note prior to the maturity of the then current Interest Period, the
Maker shall pay a prepayment premium determined by the Holder, in its
commercially reasonable discretion, at the time of the prepayment to compensate
the Holder for any loss.
The Holder may collect a late charge not to exceed an amount equal to
four (4%) per cent of any installment of principal which is not paid within
fifteen (15) days of the due date thereof to cover the extra expenses involved
in handling delinquent payments. The collection of the late charge shall not be
deemed a waiver by the Holder of any of its other rights under this Note,
2
<PAGE> 3
including the right, upon the expiration of any applicable cure period, to
accelerate this Note due to Maker's default for nonpayment.
This Note shall be governed as to validity, interpretation,
construction, effect, and in all other respects by the laws and decisions of the
State of South Carolina.
Wherever possible each provision of this Note shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Note or portion thereof shall be prohibited by or invalid
under such law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Note.
This Note amends and restates that certain promissory note of Maker
dated October 15, 1993, as amended from time to time.
IN WITNESS WHEREOF, this Amended and Restated Revolving Line of Credit
Note is executed and delivered by the Maker to be legally binding and effective
as of the date first above written.
MAKER:
(CORPORATE SEAL) SEA PINES ASSOCIATES, INC.
By: /s/ C. W. Flynn
-----------------------------------------
Its: Chairman
----------------------------------------
(CORPORATE SEAL) SEA PINES COMPANY, INC.
By: Michael E. Lawrence
-----------------------------------------
Its: President
----------------------------------------
<PAGE> 1
AMENDED AND RESTATED SEASONAL LINE OF CREDIT NOTE
$2,500,000.00 Hilton Head Island, S. C.
October 31, 1998
FOR VALUE RECEIVED, the undersigned SEA PINES ASSOCIATES, INC. and SEA
PINES COMPANY, INC., both South Carolina corporations (hereinafter referred to
collectively as the "Maker") jointly and severally promise to pay to the order
of WACHOVIA BANK, N.A., a national banking association (which, together with any
subsequent holder(s) of this Note, from time to time hereinafter referred to as
the "Holder") at Charleston, South Carolina, or at such other place or to such
other party or parties as the Holder of this Note may from time to time
designate, the principal sum of TWO MILLION, FIVE HUNDRED THOUSAND NO/100
DOLLARS ($2,500,000.00) or so much thereof as may be advanced or re-advanced
from time to time and remains unpaid, with interest thereon computed on the
basis of a 360-day year for the actual number of days in each interest period.
This Note shall bear interest from the date hereof at a rate per annum
equal to the Adjusted LIBOR Index for the applicable one month Interest Period
plus the Applicable Margin, all as defined in that certain Master Credit
Agreement dated the same date hereof by and between Maker and the initial Holder
(the "Master Credit Agreement").
Interest only on the principal amount outstanding shall be due and
payable on the first (1st) day of each month. All outstanding principal and
accrued but unpaid interest shall be due and payable on or before the Seasonal
Line of Credit Note Maturity Date, as defined in the Master Credit Agreement.
Monthly payments of interest shall be applied first to any late charges
or other charges due and then to interest due. Upon the occurrence of an Event
of Default under this Note, all payments of principal and/or interest may be
applied in such order as the Holder of this Note may in its sole discretion
determine. All payments of principal and/or interest are payable in lawful money
of the United States of America, which shall be legal tender in payment of all
debts and dues, public and private, at the time of payment.
In the event ("Event(s) of Default") (a) Maker fails to make a payment
of any interest or any installment of principal or any other sums payable
pursuant to the terms of this Note on or before the date on which it is due, or
(b) Maker fails to pay in full the entire amount outstanding under this Note on
the Maturity Date, (c) of the occurrence of an Event of Default under the Master
Credit Agreement or any other document or instrument which secures or evidences
this Note , or (d) an event of default by Maker on any of the "Obligations" as
defined in the Master Credit Agreement ; and if such default or failure is not
cured within the time, if any, provided in the Master Credit Agreement or other
document or instrument, then or at any time thereafter, at the option of the
Holder of this Note, the whole of the principal sum then remaining unpaid
hereunder together with all interest accrued thereon, shall immediately become
due and payable without notice, and the liens given to secure the payment of
this Note may be foreclosed. In order to compensate the Holder for the increased
risk of collection after an Event of Default, from and after the maturity of
this Note either according to its terms or as the result of a lawful declaration
of maturity, the entire principal remaining unpaid hereunder shall bear interest
at a rate equal to Default Rate, as defined in the Master Credit Agreement.
Failure to exercise such option or any other rights to which the Holder may in
the event of any such default be entitled shall not
1
<PAGE> 2
constitute a waiver of the right to exercise such option or any other rights in
the event of any subsequent default, whether of the same or different nature.
This Note is secured by, among other security, certain Mortgages,
Assignments and other Collateral, all as defined and more fully described in the
Master Credit Agreement. The terms and conditions of the Master Credit Agreement
and the other Documents as defined in the Master Credit Agreement shall be
considered a part hereof to the same extent as if written herein, including any
amendments thereto.
If this Note is placed in the hands of an attorney for collection or is
collected through any legal proceedings, the Maker of this Note promises to pay
a reasonable attorney's fee.
In the event the interest provisions hereof or any exactions provided
for herein or any other instruments securing this Note shall result for any
reason in an effective rate of interest which, for any period of time,
transcends the limit of the usury or any other law applicable to the loan
evidenced hereby, all sums in excess of those lawfully collectible as interest
for the period in question shall, without further agreement or notice between or
by any party hereto, be applied to principal immediately upon receipt of such
monies by the Holder.
The Maker and all endorsers, and all persons liable or to become liable
on this Note waive presentment, protest and demand, notice of protest, demand
and dishonor and nonpayment of this Note (except for notice expressly required
by this Note), and consent to any and all renewals and extensions of the time of
payment hereof, and agree, further, that at any time and from time to time
without notice, the terms of payment herein may be modified or the security
described in the lien document securing this Note released in whole or in part,
or increased, changed or exchanged by agreement between the Holder hereof and in
the case of payments, the Maker, and in the case of liens, any owner of premises
affected by said lien document securing this Note without in any way affecting
the liability of any party to this instrument or any person liable with respect
to any indebtedness evidenced hereby.
The Holder is not required to rely on the Collateral, as defined in the
Master Credit Agreement, for the payment of the Note in the event of default by
the Maker, but may proceed directly against the Maker, endorsers, or guarantors,
if any, in such manner as it deems desirable. None of the rights and remedies of
the Holder hereunder are to be waived or affected by failure or delay to
exercise them. All remedies conferred on a Holder by this Note or any other
instrument or agreement shall be cumulative, and none is exclusive. Such
remedies may be exercised concurrently or consecutively at the Holder's option.
This Note may be prepaid in whole or in part without penalty upon the
maturity of the then current Interest Period. If the Holder allows the Maker to
prepay the Loan prior to the maturity of the then current Interest Period, the
Maker shall pay a prepayment premium determined by the Holder, in its
commercially reasonable discretion, at the time of the prepayment to compensate
the Holder for any loss.
The Holder may collect a late charge not to exceed an amount equal to
four (4%) per cent of any installment of principal which is not paid within
fifteen (15) days of the due date thereof to cover the extra expenses involved
in handling delinquent payments. The collection of the late charge shall not be
deemed a waiver by the Holder of any of its other rights under this Note,
2
<PAGE> 3
including the right, upon the expiration of any applicable cure period, to
accelerate this Note due to Maker's default for nonpayment.
This Note shall be governed as to validity, interpretation,
construction, effect, and in all other respects by the laws and decisions of the
State of South Carolina.
Wherever possible each provision of this Note shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Note or portion thereof shall be prohibited by or invalid
under such law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Note.
This Note amends and restates that certain promissory note of Maker
dated January 17, 1992 as amended from time to time.
IN WITNESS WHEREOF, this Amended and Restated Seasonal Line of Credit
Note is executed and delivered by the Maker to be legally binding and effective
as of the date first above written.
(CORPORATE SEAL) MAKER:
SEA PINES ASSOCIATES, INC.
By: /s/ C. W. Flynn
-----------------------------------------
Its: Chairman
----------------------------------------
(CORPORATE SEAL) SEA PINES COMPANY, INC.
By: Michael E. Lawrence
-----------------------------------------
Its: President
----------------------------------------
3
<PAGE> 1
[WACHOVIA LETTERHEAD]
This instrument was prepared by and is to be returned to Benton D. Williamson,
whose address is Sinkler & Boyd, P.A., P.O. Box 11889, Columbia, South Carolina
29211-1889.
MORTGAGE MODIFICATION AND RE-STATEMENT AGREEMENT
("AGREEMENT")
(BOOK 410, PAGE 540)
STATE OF SOUTH CAROLINA )
)
COUNTY OF BEAUFORT )
THIS MORTGAGE MODIFICATION AND RE-STATEMENT AGREEMENT, made as of the
31st day of October, 1998 by and among WACHOVIA BANK, N.A. (formerly known as
WACHOVIA BANK OF SOUTH CAROLINA, N.A. and formerly known as THE SOUTH CAROLINA
NATIONAL BANK) (the "Mortgagee"), whose address is P.O. Box 700, Charleston,
South Carolina 29401, Attention: Real Estate Lending, and SEA PINES ASSOCIATES,
INC. and SEA PINES COMPANY, INC. (collectively, the "Mortgagor").
WITNESSETH:
WHEREAS, the Mortgagor has made and issued certain notes as follows:
1. That certain promissory note dated the 17th day of November,
1987 evidencing an original indebtedness of SEVENTEEN MILLION and NO/100 DOLLARS
($17,000,000.00) which note has been amended and restated as of the date hereof
to evidence an indebtedness of EIGHTEEN MILLION, FIVE HUNDRED THOUSAND and
NO/100 DOLLARS ($18,500,000.00); and
2. That certain promissory note dated the 17th day of January,
1992 evidencing an original indebtedness of TWO MILLION, FIVE HUNDRED THOUSAND
and NO/100 DOLLARS ($2,500,000.00) which note has been amended and restated as
of the date hereof; and
3. That certain promissory note dated the 15th day of October,
1993 evidencing an original indebtedness of TWELVE MILLION and NO/100 DOLLARS
($12,000,000.00) which note has been amended and restated as of the date hereof
to evidence an indebtedness of FIFTEEN MILLION and NO/100 DOLLARS
($15,000,000.00);
which notes, as amended and restated, are collectively referred to herein as the
"Notes" and are made a part hereof by reference as if fully set out herein
verbatim; and
WHEREAS, the Mortgagor to partially secure the indebtedness
evidenced by the Notes executed and delivered a Mortgage, Security Agreement and
Financing Statement dated November 17, 1987, as amended from time to time, and
recorded in the RMC Office or Clerk of Court, as appropriate (the "Registry")
for Beaufort County in Book 410, Page 540, made a part hereof by this reference
as fully as if set out herein verbatim (such document, as heretofore amended,
being herein referred to as the "Mortgage"); and
<PAGE> 2
WHEREAS, the Mortgagor and Mortgagee have entered into that certain
Master Credit Agreement dated the same date hereof pursuant to which the
Mortgagor and Mortgagee have established uniform agreements, obligations,
covenants and other matters governing the Obligations, as defined in said
Agreement, whether now existing or hereinafter arising, owed to the Mortgagee;
and (the "Master Credit Agreement"); and
WHEREAS, the Mortgagor and Mortgagee desire to re-establish, re-state
and modify the Facilities as defined in the Master Credit Agreement; and
WHEREAS, the Mortgagor and Mortgagee have agreed to make certain
modifications to the Mortgage in order to secure, collateralize and
cross-default all Obligations ,as defined in the Master Credit Agreement; and
WHEREAS, the Mortgagor has consented to waive Mortgagor's appraisal
rights as set forth in S.C. Code Ann. Section 29-3-680; and
WHEREAS, the Mortgagor has been informed in writing of the requirement
of the waiver of appraisal rights before this loan modification transaction
closed and has consented thereto as part of the Mortgagor's inducement of
Mortgagee to enter into the loan modification transaction described herein; and
WHEREAS, the Mortgagee, as holder and owner of the Mortgage, and the
Mortgagor mutually desire to modify and amend the provisions of the same in the
manner hereinafter set out, it being specifically understood that except as
herein modified and amended, the terms and provisions of the Mortgage shall
remain unchanged and continue in full force and effect as therein written; and
NOW, THEREFORE, the Mortgagee and the Mortgagor, in consideration of
the sum of One Dollar ($1.00) and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged and the mutual
covenants herein does hereby agree that the Mortgage should be, and the same
hereby are modified and amended as follows:
1. The provisions of the Notes, as amended and restated, and the
Master Credit Agreement, are incorporated as fully as if set out herein
verbatim.
2. Notwithstanding anything to the contrary contained in the
Notes and Mortgage, and any amendments thereto, the Mortgage is hereby amended
to include as additional Events of Default the following:
a. the occurrence of an Event of Default under the
Master Credit Agreement, or
b. a default by the Mortgagor on any of the Obligations,
as defined in the Master Credit Agreement.
3. Notwithstanding anything to the contrary contained in the
Mortgage, and any amendments thereto, the Mortgage is further amended, in order
(a) to secure the performance and observance by the Mortgagor of all covenants
and conditions contained in the Notes, or in any renewals, replacements,
extensions or modifications thereof, and in all other instruments securing or
evidencing the Obligations, as defined, and (b) to secure in accordance with
Section 29-3-50, as amended, Code of Laws of South Carolina (1976) all future
advances and re-advances that may subsequently be made to or on behalf of
Mortgagor by Mortgagee, evidenced by the aforesaid Notes or any other promissory
notes, Documents, as
-2-
<PAGE> 3
defined in the Master Credit Agreement, and all renewals, replacements,
extensions or modifications thereof; and all other indebtedness of Mortgagor to
Mortgagee now or hereafter existing, whether direct or indirect, the maximum
amount of all indebtedness outstanding at any one time secured hereby not to
exceed twice the aggregate face amount of the Notes plus interest thereon, all
charges and expenses of collection incurred by Mortgagee, including court costs,
and reasonable attorneys' fees; and to the extent provided in the Notes,
interest or discount will be deferred, accrued or capitalized; and (c) to also
charge the Secured Properties, as defined in the Master Credit Agreement, and
all properties, interests and rights described herein with such payment,
performance and observance.
4. Any reference contained in the Mortgage, as amended herein, to
the "Credit Agreement," the "Revolving Credit Agreement," the "1987 Credit
Agreement" or any other loan or credit agreement shall hereinafter be deemed to
be a reference to the Master Credit Agreement.
5. The final payment of the Notes shall be the maturity dates as
respectively set out in the Master Credit Agreement for each of the Notes, but
no later than October 31, 2008.
IT IS MUTUALLY AGREED by and between the parties hereto that this
Agreement shall become a part of the Mortgage by reference and that nothing
herein contained shall impair the security now held for the indebtedness
represented by the Notes, nor shall waive, annul, vary or affect any provision,
condition, covenant or agreement contained in the Notes and the Mortgage except
as herein amended, nor affect or impair any rights, powers or remedies under the
Notes and the Mortgage as hereby amended. Furthermore, the Mortgagee does hereby
reserve all rights and remedies it may have as against all parties who may be or
may hereafter become primarily or secondarily liable for the repayment of the
indebtedness evidenced by the Notes.
The execution and delivery hereof shall not constitute a novation or
modification of the lien, encumbrance or security title of the Mortgage, which
Mortgage shall retain its priority as originally filed for record. Mortgagor
expressly agrees that the Mortgage remains in full force and effect and that
Mortgagor has no right to setoff, counterclaim or defense to the lien granted
thereby.
This Agreement shall be governed by and construed in accordance with
the laws of the State of South Carolina without regard to principles of conflict
of laws.
Any reference contained in the Notes or the Mortgage, as amended
herein, to the Mortgage shall hereinafter be deemed to be a reference to such
document as amended hereby. In amplification thereof, the Mortgage, as amended
hereby, shall secure the Notes, and any further modifications, renewals or
extensions thereof.
This Agreement shall be binding upon and inure to the benefit of any
assignee or the respective successors and assigns of the parties hereto.
This Agreement may be executed in any number of counterparts, each of
which shall be an original but all of which taken together shall constitute one
and the same instrument, and any of the parties hereto may execute any of such
counterparts.
-3-
<PAGE> 4
The laws of South Carolina provide that in any real estate foreclosure
proceeding a defendant against whom a personal judgment is taken or asked may
within thirty days after the sale of the mortgaged property apply to the court
for an order of appraisal. The statutory appraisal value as approved by the
court would be substituted for the high bid and may decrease the amount of any
deficiency owing in connection with the transaction. THE UNDERSIGNED HEREBY
WAIVES AND RELINQUISHES THE STATUTORY APPRAISAL RIGHTS WHICH MEANS THE HIGH BID
AT THE JUDICIAL FORECLOSURE SALE WILL BE APPLIED TO THE DEBT REGARDLESS OF ANY
APPRAISED VALUE OF THE MORTGAGED PROPERTY.
IN WITNESS WHEREOF, this instrument has been executed under seal by the
parties hereto and delivered on the date and year first above written.
MORTGAGEE:
WACHOVIA BANK, N.A.
SIGNED, SEALED AND DELIVERED By: /s/ Donald R. Sanders
IN THE PRESENCE OF: --------------------------------
Its: Senior Vice-President
-------------------------------
/s/ Steve D. HeyBoer
- ----------------------------------
(Witness)
/s/ Tom Cullen
- ----------------------------------
(Witness)
MORTGAGOR:
/s/ Steve D. HeyBoer
- ---------------------------------- SEA PINES ASSOCIATES, INC.
(Witness)
By: /s/ C. W. Flynn
--------------------------------
/s/ Tom Cullen Its: Chairman
- ---------------------------------- -------------------------------
(Witness) (CORPORATE SEAL)
/s/ Steve D. HeyBoer SEA PINES COMPANY, INC.
- ----------------------------------
(Witness) By: /s/ Michael E. Lawrence
--------------------------------
/s/ Tom Cullen Its: President
- ---------------------------------- -------------------------------
(Witness)
(CORPORATE SEAL)
-4-
<PAGE> 5
STATE OF SOUTH CAROLINA
PROBATE
COUNTY OF BEAUFORT
PERSONALLY appeared before me the undersigned witness, who, being duly sworn,
says that (s)he saw Charles W. Flynn, Chairman of Sea Pines
Associates, Inc. sign the foregoing instrument, and that (s)he with the other
witness named above witnessed the execution and delivery thereof as the act and
deed of the said corporation.
/s/ Tom Cullen
------------------------------------
(Signature of Witness)
SWORN to before me this 4th
day of November, 1998. ---
/s/ Patricia W. Siebert
- ----------------------------
Notary Public,
State of South Carolina
My commission expires: 10/19/2002
-----------
[Notarial Seal]
STATE OF SOUTH CAROLINA
PROBATE
COUNTY OF BEAUFORT
PERSONALLY appeared before me the undersigned witness, who, being duly sworn,
says that (s)he saw Donald R. Sanders, Senior Vice President of Wachovia
Bank, N.A., sign the foregoing instrument, and that (s)he with the other witness
named above witnessed the execution and delivery thereof as the act and deed of
the said Wachovia Bank, N.A.
/s/ Tom Cullen
-------------------------------------
(Signature of Witness)
SWORN to before me this 4th
day of November, 1998. ---
/s/ Patricia W. Siebert
- ----------------------------
Notary Public,
State of South Carolina
My commission expires: 10/19/2002
-----------
[Notarial Seal]
-5-
<PAGE> 6
STATE OF SOUTH CAROLINA
PROBATE
COUNTY OF BEAUFORT
PERSONALLY appeared before me the undersigned witness, who, being duly sworn,
says that (s)he saw Michael E. Lawrence, President of Sea Pines Company,
Inc. sign the foregoing instrument, and that (s)he with the other witness named
above witnessed the execution and delivery thereof as the act and deed of the
said corporation.
/s/ Tom Cullen
-------------------------------------
(Signature of Witness)
SWORN to before me this 4th
day of November, 1998. ---
/s/ Patricia W. Siebert
- ----------------------------
Notary Public,
State of South Carolina
My commission expires: 10/19/2002
-----------
[Notarial Seal]
-6-
<PAGE> 1
[WACHOVIA LETTERHEAD]
This instrument was prepared by and is to be returned to Benton D. Williamson,
whose address is Sinkler & Boyd, P.A., P.O. Box 11889, Columbia, South Carolina
29211-1889.
MORTGAGE MODIFICATION AND RE-STATEMENT AGREEMENT
("AGREEMENT")
(BOOK 499, PAGE 980)
STATE OF SOUTH CAROLINA )
)
COUNTY OF BEAUFORT )
THIS MORTGAGE MODIFICATION AND RE-STATEMENT AGREEMENT, made as of the
31st day of October, 1998 by and among WACHOVIA BANK, N.A. (formerly known as
WACHOVIA BANK OF SOUTH CAROLINA, N.A. and formerly known as THE SOUTH CAROLINA
NATIONAL BANK) (the "Mortgagee"), whose address is P.O. Box 700, Charleston,
South Carolina 29401, Attention: Real Estate Lending, and SEA PINES ASSOCIATES,
INC. and SEA PINES COMPANY, INC. (collectively, the "Mortgagor").
WITNESSETH:
WHEREAS, the Mortgagor has made and issued certain notes as follows:
1. That certain promissory note dated the 17th day of November,
1987 evidencing an original indebtedness of SEVENTEEN MILLION and NO/100 DOLLARS
($17,000,000.00) which note has been amended and restated as of the date hereof
to evidence an indebtedness of EIGHTEEN MILLION, FIVE HUNDRED THOUSAND and
NO/100 DOLLARS ($18,500,000.00); and
2. That certain promissory note dated the 17th day of January,
1992 evidencing an original indebtedness of TWO MILLION, FIVE HUNDRED THOUSAND
and NO/100 DOLLARS ($2,500,000.00) which note has been amended and restated as
of the date hereof; and
3. That certain promissory note dated the 15th day of October,
1993 evidencing an original indebtedness of TWELVE MILLION and NO/100 DOLLARS
($12,000,000.00) which note has been amended and restated as of the date hereof
to evidence an indebtedness of FIFTEEN MILLION and NO/100 DOLLARS
($15,000,000.00);
which notes, as amended and restated, are collectively referred to herein as the
"Notes" and are made a part hereof by reference as if fully set out herein
verbatim; and
WHEREAS, the Mortgagor to partially secure the indebtedness evidenced
by the Notes executed and delivered a Mortgage and Security Agreement dated
January 17, 1992, as amended from time to time, and recorded in the RMC Office
or Clerk of Court, as appropriate (the "Registry") for Beaufort County in Book
499, Page 980, made a part hereof by this reference as fully as if set out
herein verbatim (such document, as heretofore amended, being herein referred to
as the "Mortgage"); and
-1-
<PAGE> 2
WHEREAS, the Mortgagor and Mortgagee have entered into that certain
Master Credit Agreement dated the same date hereof pursuant to which the
Mortgagor and Mortgagee have established uniform agreements, obligations,
covenants and other matters governing the Obligations, as defined in said
Agreement, whether now existing or hereinafter arising, owed to the Mortgagee;
and (the "Master Credit Agreement"); and
WHEREAS, the Mortgagor and Mortgagee desire to re-establish, re-state
and modify the Facilities as defined in the Master Credit Agreement; and
WHEREAS, the Mortgagor and Mortgagee have agreed to make certain
modifications to the Mortgage in order to secure, collateralize and
cross-default all Obligations, as defined in the Master Credit Agreement; and
WHEREAS, the Mortgagor has consented to waive Mortgagor's appraisal
rights as set forth in S.C. Code Ann. Section 29-3-680; and
WHEREAS, the Mortgagor has been informed in writing of the requirement
of the waiver of appraisal rights before this loan modification transaction
closed and has consented thereto as part of the Mortgagor's inducement of
Mortgagee to enter into the loan modification transaction described herein; and
WHEREAS, the Mortgagee, as holder and owner of the Mortgage, and the
Mortgagor mutually desire to modify and amend the provisions of the same in the
manner hereinafter set out, it being specifically understood that except as
herein modified and amended, the terms and provisions of the Mortgage shall
remain unchanged and continue in full force and effect as therein written; and
NOW, THEREFORE, the Mortgagee and the Mortgagor, in consideration of
the sum of One Dollar ($1.00) and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged and the mutual
covenants herein does hereby agree that the Mortgage should be, and the same
hereby are modified and amended as follows:
1. The provisions of the Notes, as amended and restated, and the
Master Credit Agreement, are incorporated as fully as if set out herein
verbatim.
2. Notwithstanding anything to the contrary contained in the
Notes and Mortgage, and any amendments thereto, the Mortgage is hereby amended
to include as additional Events of Default the following:
a. the occurrence of an Event of Default under the
Master Credit Agreement, or
b. a default by the Mortgagor on any of the Obligations,
as defined in the Master Credit Agreement.
3. Notwithstanding anything to the contrary contained in the
Mortgage, and any amendments thereto, the Mortgage is further amended, in order
(a) to secure the performance and observance by the Mortgagor of all covenants
and conditions contained in the Notes, or in any renewals, replacements,
extensions or modifications thereof, and in all other instruments securing or
evidencing the Obligations, as defined, and (b) to secure in accordance with
Section 29-3-50, as amended, Code of Laws of South Carolina (1976) all future
advances and re-advances that may subsequently be made to or on behalf of
Mortgagor by Mortgagee, evidenced by the aforesaid Notes or any other promissory
notes, Documents, as
-2-
<PAGE> 3
defined in the Master Credit Agreement, and all renewals, replacements,
extensions or modifications thereof; and all other indebtedness of Mortgagor to
Mortgagee now or hereafter existing, whether direct or indirect, the maximum
amount of all indebtedness outstanding at any one time secured hereby not to
exceed twice the aggregate face amount of the Notes plus interest thereon, all
charges and expenses of collection incurred by Mortgagee, including court costs,
and reasonable attorneys' fees; and to the extent provided in the Notes,
interest or discount will be deferred, accrued or capitalized; and (c) to also
charge the Secured Properties, as defined in the Master Credit Agreement, and
all properties, interests and rights described herein with such payment,
performance and observance.
4. Any reference contained in the Mortgage, as amended herein, to
the "Credit Agreement," the "Revolving Credit Agreement," the "1987 Credit
Agreement" or any other loan or credit agreement shall hereinafter be deemed to
be a reference to the Master Credit Agreement.
5. The final payment of the Notes shall be the maturity dates as
respectively set out in the Master Credit Agreement for each of the Notes, but
no later than October 31, 2008.
IT IS MUTUALLY AGREED by and between the parties hereto that this
Agreement shall become a part of the Mortgage by reference and that nothing
herein contained shall impair the security now held for the indebtedness
represented by the Notes, nor shall waive, annul, vary or affect any provision,
condition, covenant or agreement contained in the Notes and the Mortgage except
as herein amended, nor affect or impair any rights, powers or remedies under the
Notes and the Mortgage as hereby amended. Furthermore, the Mortgagee does hereby
reserve all rights and remedies it may have as against all parties who may be or
may hereafter become primarily or secondarily liable for the repayment of the
indebtedness evidenced by the Notes.
The execution and delivery hereof shall not constitute a novation or
modification of the lien, encumbrance or security title of the Mortgage, which
Mortgage shall retain its priority as originally filed for record. Mortgagor
expressly agrees that the Mortgage remains in full force and effect and that
Mortgagor has no right to setoff, counterclaim or defense to the lien granted
thereby.
This Agreement shall be governed by and construed in accordance with
the laws of the State of South Carolina without regard to principles of conflict
of laws.
Any reference contained in the Notes or the Mortgage, as amended
herein, to the Mortgage shall hereinafter be deemed to be a reference to such
document as amended hereby. In amplification thereof, the Mortgage, as amended
hereby, shall secure the Notes, and any further modifications, renewals or
extensions thereof.
This Agreement shall be binding upon and inure to the benefit of any
assignee or the respective successors and assigns of the parties hereto.
This Agreement may be executed in any number of counterparts, each of
which shall be an original but all of which taken together shall constitute one
and the same instrument, and any of the parties hereto may execute any of such
counterparts.
-3-
<PAGE> 4
The laws of South Carolina provide that in any real estate foreclosure
proceeding a defendant against whom a personal judgment is taken or asked may
within thirty days after the sale of the mortgaged property apply to the court
for an order of appraisal. The statutory appraisal value as approved by the
court would be substituted for the high bid and may decrease the amount of any
deficiency owing in connection with the transaction. THE UNDERSIGNED HEREBY
WAIVES AND RELINQUISHES THE STATUTORY APPRAISAL RIGHTS WHICH MEANS THE HIGH BID
AT THE JUDICIAL FORECLOSURE SALE WILL BE APPLIED TO THE DEBT REGARDLESS OF ANY
APPRAISED VALUE OF THE MORTGAGED PROPERTY.
IN WITNESS WHEREOF, this instrument has been executed under seal by the
parties hereto and delivered on the date and year first above written.
MORTGAGEE:
WACHOVIA BANK, N.A.
SIGNED, SEALED AND DELIVERED By: /s/ Donald R. Sanders
IN THE PRESENCE OF: --------------------------------
Its: Senior Vice-President
/s/ Tom Cullen
- ----------------------------------
(Witness)
/s/ Steve D. HeyBoer
- ----------------------------------
(Witness)
MORTGAGOR:
/s/ Tom Cullen
- ---------------------------------- SEA PINES ASSOCIATES, INC.
(Witness)
By: /s/ C. W. Flynn
/s/ Steve D. HeyBoer --------------------------------
- ---------------------------------- Its: Chairman
(Witness) -------------------------------
(CORPORATE SEAL)
SEA PINES COMPANY, INC.
/s/ Tom Cullen
- ----------------------------------
(WITNESS) By: /s/ Michael E. Lawrence
/s/ Steve D. HeyBoer --------------------------------
- ---------------------------------- Its: President
(Witness) -------------------------------
(CORPORATE SEAL)
-4-
<PAGE> 5
STATE OF SOUTH CAROLINA
PROBATE
COUNTY OF BEAUFORT
PERSONALLY appeared before me the undersigned witness, who, being duly sworn,
says that (s)he saw Charles W. Flynn, Chairman of Sea Pines Associates, Inc.
sign the foregoing instrument, and that (s)he with the other witness named above
witnessed the execution and delivery thereof as the act and deed of the said
corporation.
/s/ Tom S. Cullen
-------------------------------------
(Signature of Witness)
SWORN to before me this 4th
day of November, 1998. ---
/s/ Patricia W. Siebert
- ----------------------------
Notary Public,
State of South Carolina
My commission expires: 10/19/2002
-----------
[Notarial Seal]
STATE OF SOUTH CAROLINA
PROBATE
COUNTY OF BEAUFORT
PERSONALLY appeared before me the undersigned witness, who, being duly sworn,
says that (s)he saw Donald R. Sanders, Senior Vice President of Wachovia
Bank, N.A., sign the foregoing instrument, and that (s)he with the other witness
named above witnessed the execution and delivery thereof as the act and deed of
the said Wachovia Bank, N.A.
/s/ Tom S. Cullen
-------------------------------------
(Signature of Witness)
SWORN to before me this 4th
day of November, 1998. ---
/s/ Patricia W. Siebert
- ----------------------------
Notary Public,
State of South Carolina
My commission expires: 10/19/2002
[Notarial Seal]
-5-
<PAGE> 6
STATE OF SOUTH CAROLINA
PROBATE
COUNTY OF BEAUFORT
PERSONALLY appeared before me the undersigned witness, who, being duly sworn,
says that (s)he saw Michael E. Lawrence, President of Sea Pines Company, Inc.
sign the foregoing instrument, and that (s)he with the other witness named above
witnessed the execution and delivery thereof as the act and deed of the said
corporation.
/s/ Tom S. Cullen
-------------------------------------
(Signature of Witness)
SWORN to before me this 4th
day of November, 1998. ---
/s/ Patricia W. Siebert
- ----------------------------
Notary Public,
State of South Carolina
My commission expires: 10/19/2002
[Notarial Seal]
-6-
<PAGE> 1
[WACHOVIA LETTERHEAD]
This instrument was prepared by and is to be returned to Benton D. Williamson,
whose address is Sinkler & Boyd, P.A., P.O. Box 11889, Columbia, South Carolina
29211-1889.
MORTGAGE MODIFICATION AND RE-STATEMENT AGREEMENT
("AGREEMENT")
(BOOK 659, PAGE 1683)
STATE OF SOUTH CAROLINA )
)
COUNTY OF BEAUFORT )
THIS MORTGAGE MODIFICATION AND RE-STATEMENT AGREEMENT, made as of the
31st day of October, 1998 by and among WACHOVIA BANK, N.A. (formerly known as
WACHOVIA BANK OF SOUTH CAROLINA, N.A. and formerly known as THE SOUTH CAROLINA
NATIONAL BANK) (the "Mortgagee"), whose address is P.O. Box 700, Charleston,
South Carolina 29401, Attention: Real Estate Lending, and SEA PINES ASSOCIATES,
INC. and SEA PINES COMPANY, INC. (collectively, the "Mortgagor").
WITNESSETH:
WHEREAS, the Mortgagor has made and issued certain notes as follows:
1. That certain promissory note dated the 17th day of November,
1987 evidencing an original indebtedness of SEVENTEEN MILLION and NO/100 DOLLARS
($17,000,000.00) which note has been amended and restated as of the date hereof
to evidence an indebtedness of EIGHTEEN MILLION, FIVE HUNDRED THOUSAND and
NO/100 DOLLARS ($18,500,000.00); and
2. That certain promissory note dated the 17th day of January,
1992 evidencing an original indebtedness of TWO MILLION, FIVE HUNDRED THOUSAND
and NO/100 DOLLARS ($2,500,000.00) which note has been amended and restated as
of the date hereof; and
3. That certain promissory note dated the 15th day of October,
1993 evidencing an original indebtedness of TWELVE MILLION and NO/100 DOLLARS
($12,000,000.00) which note has been amended and restated as of the date hereof
to evidence an indebtedness of FIFTEEN MILLION and NO/100 DOLLARS
($15,000,000.00);
which notes, as amended and restated, are collectively referred to herein as the
"Notes" and are made a part hereof by reference as if fully set out herein
verbatim; and
WHEREAS, the Mortgagor to partially secure the indebtedness evidenced
by the Notes executed and delivered a Mortgage, Security Agreement and Financing
Statement dated October 15, 1993, as amended from time to time, and recorded in
the RMC Office or Clerk of Court, as appropriate (the "Registry") for Beaufort
County in Book 659, Page 1683, made a part hereof by this reference as fully as
if set out herein verbatim (such document, as heretofore amended, being herein
referred to as the "Mortgage"); and
-1-
<PAGE> 2
WHEREAS, the Mortgagor and Mortgagee have entered into that certain
Master Credit Agreement dated the same date hereof pursuant to which the
Mortgagor and Mortgagee have established uniform agreements, obligations,
covenants and other matters governing the Obligations, as defined in said
Agreement, whether now existing or hereinafter arising, owed to the Mortgagee;
and (the "Master Credit Agreement"); and
WHEREAS, the Mortgagor and Mortgagee desire to re-establish, re-state
and modify the Facilities as defined in the Master Credit Agreement; and
WHEREAS, the Mortgagor and Mortgagee have agreed to make certain
modifications to the Mortgage in order to secure, collateralize and
cross-default all Obligations ,as defined in the Master Credit Agreement; and
WHEREAS, the Mortgagor has consented to waive Mortgagor's appraisal
rights as set forth in S.C. Code Ann. Section 29-3-680; and
WHEREAS, the Mortgagor has been informed in writing of the requirement
of the waiver of appraisal rights before this loan modification transaction
closed and has consented thereto as part of the Mortgagor's inducement of
Mortgagee to enter into the loan modification transaction described herein; and
WHEREAS, the Mortgagee, as holder and owner of the Mortgage, and the
Mortgagor mutually desire to modify and amend the provisions of the same in the
manner hereinafter set out, it being specifically understood that except as
herein modified and amended, the terms and provisions of the Mortgage shall
remain unchanged and continue in full force and effect as therein written; and
NOW, THEREFORE, the Mortgagee and the Mortgagor, in consideration of
the sum of One Dollar ($1.00) and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged and the mutual
covenants herein does hereby agree that the Mortgage should be, and the same
hereby are modified and amended as follows:
1. The provisions of the Notes, as amended and restated, and the
Master Credit Agreement, are incorporated as fully as if set out herein
verbatim.
2. Notwithstanding anything to the contrary contained in the
Notes and Mortgage, and any amendments thereto, the Mortgage is hereby amended
to include as additional Events of Default the following:
a. the occurrence of an Event of Default under the
Master Credit Agreement, or
b. a default by the Mortgagor on any of the Obligations,
as defined in the Master Credit Agreement.
3. Notwithstanding anything to the contrary contained in the
Mortgage, and any amendments thereto, the Mortgage is further amended, in order
(a) to secure the performance and observance by the Mortgagor of all covenants
and conditions contained in the Notes, or in any renewals, replacements,
extensions or modifications thereof, and in all other instruments securing or
evidencing the Obligations, as defined, and (b) to secure in accordance with
Section 29-3-50, as amended, Code of Laws of South Carolina (1976) all future
advances and re-advances that may subsequently be made to or on behalf of
Mortgagor by Mortgagee, evidenced by the aforesaid Notes or any other promissory
notes, Documents, as
-2-
<PAGE> 3
defined in the Master Credit Agreement, and all renewals, replacements,
extensions or modifications thereof; and all other indebtedness of Mortgagor to
Mortgagee now or hereafter existing, whether direct or indirect, the maximum
amount of all indebtedness outstanding at any one time secured hereby not to
exceed twice the aggregate face amount of the Notes plus interest thereon, all
charges and expenses of collection incurred by Mortgagee, including court costs,
and reasonable attorneys' fees; and to the extent provided in the Notes,
interest or discount will be deferred, accrued or capitalized; and (c) to also
charge the Secured Properties, as defined in the Master Credit Agreement, and
all properties, interests and rights described herein with such payment,
performance and observance.
4. Any reference contained in the Mortgage, as amended herein, to
the "Credit Agreement," the "Revolving Credit Agreement," the "1987 Credit
Agreement" or any other loan or credit agreement shall hereinafter be deemed to
be a reference to the Master Credit Agreement.
5. The final payment of the Notes shall be the maturity dates as
respectively set out in the Master Credit Agreement for each of the Notes, but
no later than October 31, 2008.
IT IS MUTUALLY AGREED by and between the parties hereto that this
Agreement shall become a part of the Mortgage by reference and that nothing
herein contained shall impair the security now held for the indebtedness
represented by the Notes, nor shall waive, annul, vary or affect any provision,
condition, covenant or agreement contained in the Notes and the Mortgage except
as herein amended, nor affect or impair any rights, powers or remedies under the
Notes and the Mortgage as hereby amended. Furthermore, the Mortgagee does hereby
reserve all rights and remedies it may have as against all parties who may be or
may hereafter become primarily or secondarily liable for the repayment of the
indebtedness evidenced by the Notes.
The execution and delivery hereof shall not constitute a novation or
modification of the lien, encumbrance or security title of the Mortgage, which
Mortgage shall retain its priority as originally filed for record. Mortgagor
expressly agrees that the Mortgage remains in full force and effect and that
Mortgagor has no right to setoff, counterclaim or defense to the lien granted
thereby.
This Agreement shall be governed by and construed in accordance with
the laws of the State of South Carolina without regard to principles of conflict
of laws.
Any reference contained in the Notes or the Mortgage, as amended
herein, to the Mortgage shall hereinafter be deemed to be a reference to such
document as amended hereby. In amplification thereof, the Mortgage, as amended
hereby, shall secure the Notes, and any further modifications, renewals or
extensions thereof.
This Agreement shall be binding upon and inure to the benefit of any
assignee or the respective successors and assigns of the parties hereto.
This Agreement may be executed in any number of counterparts, each of
which shall be an original but all of which taken together shall constitute one
and the same instrument, and any of the parties hereto may execute any of such
counterparts.
-3-
<PAGE> 4
The laws of South Carolina provide that in any real estate foreclosure
proceeding a defendant against whom a personal judgment is taken or asked may
within thirty days after the sale of the mortgaged property apply to the court
for an order of appraisal. The statutory appraisal value as approved by the
court would be substituted for the high bid and may decrease the amount of any
deficiency owing in connection with the transaction. THE UNDERSIGNED HEREBY
WAIVES AND RELINQUISHES THE STATUTORY APPRAISAL RIGHTS WHICH MEANS THE HIGH BID
AT THE JUDICIAL FORECLOSURE SALE WILL BE APPLIED TO THE DEBT REGARDLESS OF ANY
APPRAISED VALUE OF THE MORTGAGED PROPERTY.
IN WITNESS WHEREOF, this instrument has been executed under seal by the
parties hereto and delivered on the date and year first above written.
MORTGAGEE:
WACHOVIA BANK, N.A.
SIGNED, SEALED AND DELIVERED By: /s/ Donald R. Sanders
IN THE PRESENCE OF: --------------------------------
Its: Senior Vice-President
-------------------------------
/s/ Steve D. HeyBoer
- ----------------------------------
(Witness)
/s/ Tom S. Cullen
- ----------------------------------
(Witness)
MORTGAGOR:
/s/ Steven D. HeyBoer
- ---------------------------------- SEA PINES ASSOCIATES, INC.
(Witness)
/s/ Tom S. Cullen By: /s/ C. W. Flynn
- ---------------------------------- --------------------------------
(Witness) Its: Chairman
-------------------------------
(CORPORATE SEAL)
/s/ Steve D. HeyBoer
- ---------------------------------- SEA PINES COMPANY, INC.
(Witness)
/s/ Tom S. Cullen By: /s/ Michael E. Lawrence
- ---------------------------------- --------------------------------
(Witness) Its: President
-------------------------------
(CORPORATE SEAL)
-4-
<PAGE> 5
STATE OF SOUTH CAROLINA
PROBATE
COUNTY OF BEAUFORT
PERSONALLY appeared before me the undersigned witness, who, being duly sworn,
says that (s)he saw Charles W. Flynn, Chairman of Sea Pines Associates, Inc.
sign the foregoing instrument, and that (s)he with the other witness named above
witnessed the execution and delivery thereof as the act and deed of the said
corporation.
/s/ Tom S. Cullen
-------------------------------------
(Signature of Witness)
SWORN to before me this 4th
day of November, 1998 ---
/s/ Patricia W. Siebert
- ----------------------------
Notary Public,
State of South Carolina
My commission expires: 10/19/2002
-----------
[Notarial Seal]
STATE OF SOUTH CAROLINA
PROBATE
COUNTY OF BEAUFORT
PERSONALLY appeared before me the undersigned witness, who, being duly sworn,
says that (s)he saw Donald R. Sanders, Senior Vice President of Wachovia
Bank, N.A., sign the foregoing instrument, and that (s)he with the other witness
named above witnessed the execution and delivery thereof as the act and deed of
the said Wachovia Bank, N.A.
/s/ Tom S. Cullen
-------------------------------------
(Signature of Witness)
SWORN to before me this 4th
day of November, 1998. ---
/s/ Patricia W. Siebert
- ----------------------------
Notary Public,
State of South Carolina
My commission expires: 10/19/2002
-----------
[Notarial Seal]
-5-
<PAGE> 6
STATE OF SOUTH CAROLINA
PROBATE
COUNTY OF BEAUFORT
PERSONALLY appeared before me the undersigned witness, who, being duly sworn,
says that (s)he saw Michael E. Lawrence, President of Sea Pines Company,
Inc. sign the foregoing instrument, and that (s)he with the other witness named
above witnessed the execution and delivery thereof as the act and deed of the
said corporation.
/s/ Tom S. Cullen
-------------------------------------
(Signature of Witness)
SWORN to before me this 4th
day of November, 1998. ---
/s/ Patricia W. Siebert
- ----------------------------
Notary Public,
State of South Carolina
My commission expires: 10/19/2002
-----------
[Notarial Seal]
-6-
<PAGE> 1
EXHIBIT 10(S)
SWAP TRANSACTION CONFIRMATION
TO: Sea Pines Company, Inc.
ATTN: Steve Birdwell
FAX: (843) 363-4536
FROM: Rafeek Ghafur
Wachovia Bank, N.A.
Derivative Products Services
DATE: September 30, 1998
- --------------------------------------------------------------------------------
THIS CONFIRMATION CANCELS AND REPLACES IN ITS ENTIRETY OUR CONFIRMATIONS DATED
NOVEMBER 20, 1997 AND APRIL 6, 1998, EVIDENCING THAT CERTAIN SWAP TRANSACTION
ENTERED INTO BETWEEN WACHOVIA BANK, N.A. AND SEA PINES COMPANY, INC. ON
NOVEMBER 20, 1997 AND THAT CERTAIN COLLAR TRANSACTION ENTERED INTO BETWEEN
WACHOVIA BANK, N.A. AND SEA PINES COMPANY, INC. ON APRIL 6, 1998 (THE
"TRANSACTIONS").
The purpose of this letter agreement is to confirm the terms and conditions of
the transaction entered into between Wachovia Bank, N.A. ("Wachovia") and Sea
Pines Company, Inc. ("Company") on the Trade Date specified below (the "Amended
and Restated Transaction"). This letter agreement constitutes a "Confirmation"
as referred to in the Agreement (as defined below).
The definitions and provisions contained in the 1991 ISDA Definitions published
by the International Swap Dealers Association, inc. (the "Definitions") are
incorporated into this confirmation. For these purposes, all references in
those Definitions to a "Swap Transaction" shall be deemed to apply to the
Amended and Restated Transaction referred to herein In the event of any
inconsistency between those definitions and provisions and this Confirmation,
this Confirmation will govern.
1. This Confirmation supplements, forms part of, and is subject to the 1992
Master Agreement dated August 29, 1995 as amended and supplemented from
time to time (the "Agreement") between you and us. All provisions contained
in the Agreement will govern this Confirmation except as expressly modified
below.
2. The terms of the particular Amended and Restated Transaction to which this
Confirmation relates are as follows:
A. TRADE DETAILS
NOTIONAL AMOUNT: $18,000,000.00
<PAGE> 2
TRADE DATE: September 30, 1998
EFFECTIVE DATE: October 13, 1998
TERMINATION DATE: November 10, 2005
FIXED AMOUNTS:
Fixed Rate Player: The Company
Fixed Rate Payment Dates: The 10th day of each month
commencing November 10, 1998
up to and including the
Termination Date subject to
adjustment in accordance with The
Modified Following Business Day
Convention.
Fixed Rate: 5.24% per annum
Fixed Rate Day Count Fraction: Actual / 360
FLOATING AMOUNTS:
Floating Rate Payer: Wachovia
Floating Rate Payer Payment Dates: The 10th day of each month,
commencing November 10, 1998
up to and including the
adjustment in accordance with The
Modified Following Business Day
Convention.
Floating Rate for Initial Calculation Period: To Be Determined
Floating Rate Option: USD-LIBOR-BBA
Designated Maturity: One Month
Floating Rate Day Count Fraction: Actual / 360
BUSINESS DAYS: London Business Days for rate
resets and London and New York
Business Days for payments.
CALCULATION AGENT: Wachovia Bank, N.A.
OPTIONAL TERMINATION DATE: Wachovia has the option to
terminate this Amended and
Restated Transaction on
November 10, 2003.
<PAGE> 3
OPTIONAL TERMINATION PAYMENT: If the Transaction is terminated
under this option, then there will
be no payment by either party except
for interest accrued to the Optional
Termination Date.
NOTICE REQUIREMENTS: Wachovia will provide Company
notice of its intent to terminate the
Amended and Restated Transaction
no later than 5:00 p.m. (EDT) on
November 6, 2003. Notice may
be provided orally by telephone.
OPTION STYLE: European
OTHER PROVISIONS: Company will pay Wachovia
accrued interest in the amount of
$870.83 on October 13, 1998.
B. ACCOUNT DETAILS
PAYMENTS TO WACHOVIA: Wachovia Bank, N.A.
Fed Routing No.: 061-000-010
Account Number: 18805813
For the Account of: Derivatives Settlement
Attention: Susan Lucia
PAYMENTS TO THE COMPANY: Wachovia Bank, N.A.
Fed Routing No.: 061-000-010
Account Number: 7300-59086
For the Account of: Sea Pines Company, Inc.
Attention: Steve Heyboer
C. OFFICES
WACHOVIA BANK, N.A.: 191 Peachtree Street
Atlanta, Georgia 30303
Telephone (404) 332-6970
Fax (404) 332-6880
SEA PINES COMPANY, INC.: 32 Greenwood Drive
PO Box 7000
Hilton Head, SC 29928
Telephone (843) 785-3333
Fax (843) 363-4536
<PAGE> 4
3. THE COMPANY HAS CONSULTED, TO THE EXTENT IT HAS DEEMED NECESSARY, WITH ITS
LEGAL, TAX AND FINANCIAL ADVISORS REGARDING ITS DECISION TO ENTER INTO THE
AMENDED AND RESTATED TRANSACTION AND HAS HAD AN OPPORTUNITY TO ASK
QUESTIONS OF, AND HAS OBTAINED ALL REQUESTED INFORMATION FROM, WACHOVIA
CONCERNING THE AMENDED AND RESTATED TRANSACTION. THE COMPANY HAS MADE ITS
OWN INDEPENDENT DECISION TO ENTER INTO THE AMENDED AND RESTATED TRANSACTION
BASED UPON ITS OWN JUDGMENT, WITH FULL UNDERSTANDING OF THE ECONOMIC, LEGAL
AND OTHER RISKS ASSOCIATED WITH THE AMENDED AND RESTATED TRANSACTION (WHICH
RISKS IT IS WILLING TO ASSUME) AND IS ENTERING INTO THE AMENDED AND
RESTATED TRANSACTION WITHOUT RELYING UPON ANY ADVICE (ORAL OR WRITTEN) OR
PROJECTIONS PROVIDED BY WACHOVIA. THE COMPANY UNDERSTANDS THAT WACHOVIA IS
RELYING ON THE STATEMENTS MADE BY THE COMPANY IN THIS PARAGRAPH IN ENTERING
INTO THE AMENDED AND RESTATED TRANSACTION.
Please confirm that the foregoing correctly sets out the terms of our agreement
by signing a copy of this Confirmation and returning it to us within two
Business Days.
Wachovia Bank, N.A. Sea Pines Company, Inc.
By: /s/ Rafeek Ghafur By: /s/ Michael E. Lawrence
------------------ ------------------------
Name: Rafeek Ghafur Name: Michael E. Lawrence
Title: Vice President Title: President
<PAGE> 1
EXHIBIT 10(t)
LICENSE AND USE AGREEMENT
THIS LICENSE AND USE AGREEMENT (this "License Agreement") is made and
entered into as of the 30th day of June, 1998, by and between SEA PINES
COMPANY, INC., a South Carolina corporation ("Licensor"), and CC-HILTON HEAD,
INC., a Delaware corporation ("Licensee").
R E C I T A L S :
WHEREAS, Tide Pointe Partners, an Ohio general partnership (the
"Partnership"), is the owner of a certain senior living business and assets
relating to the TidePointe Senior Living Community, located in Hilton Head
Island, South Carolina (the "Project"), including without limitation The Rogers
Center, LLC, a South Carolina limited liability company ("Rogers LLC"), a
health center containing 44 skilled nursing beds and 33 assisted living units
(the "Health Care Center"); Volare Systems Limited Liability Company, an Ohio
limited liability company ("Volare"), which has the right to manage the
Project; certain residential condominium units subject to the terms of The
TidePointe Community Horizontal Property Regime, Master Deed, dated August 16,
1996; and other common elements as described in the master deed and certain
land improved with roads, sanitary and storm sewers and utilities required for
the future construction of garden style villa units in two and three story
structures (collectively, the "Assets"); and
WHEREAS, Licensee has agreed to purchase, upon the terms and conditions
set forth in that certain Agreement of Purchase and Sale dated May 11, 1998, as
amended, by and between Sea Pines/Tide Pointe, Inc., a South Carolina
corporation ("SPTP"), the Partnership, Rogers LLC, Volare and Licensee (the
"Purchase Agreement"), all of the Assets; and
WHEREAS, Licensee desires to have the right to use the name "TidePointe, a
Sea Pines Community" as the name of the Project and to use the name "Sea Pines"
and the Sea Pines "lighthouse" logo in connection with the promotion and
marketing of the Project; and
WHEREAS, Licensee desires that Sea Pines confirm and continue its grant to
residents of the Project of all resort amenities offered by Sea Pines to the
members of the Sea Pines Country Club (the "Country Club") on the same terms as
are granted to members of the Country Club; and
WHEREAS, Licensor and Licensee have made certain other agreements as set
forth herein;
NOW, THEREFORE, for and in consideration of ten dollars ($10.00) paid by
each party to the other, the mutual covenants and agreements herein contained,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. GRANT OF LICENSE. Licensor hereby grants to Licensee the
non-exclusive non-transferable right (except as otherwise provided herein) to
use "TidePointe, a Sea Pines Community" as the name of the Project (the
"Project Name") and to use the trade name "Sea Pines" (the "Trade Name") and
the Sea Pines "lighthouse" logo, a copy of which is attached hereto as Exhibit
A, as
<PAGE> 2
modified by Licensor from time to time, (the "Logo") (collectively, the
"Trademarks") in connection with the promotion and marketing of the Project
throughout the Term (as defined in Section 8). Except as set forth in Section 10
of this License Agreement, Licensor reserves the right, in its sole discretion,
to continue to use the Trademarks in connection with the operation of its
business and to grant licenses to any other persons or entities for the use of
the Trademarks from time to time. License covenants that it shall at all times
during which Licensee is using the Trademarks conduct its business or operations
in a manner which does not materially injure the reputation or the value of the
Trademarks. Licensor agrees that "Hyatt", "Classic Residence by Hyatt" and other
forms of these names are trademarks, and Licensor shall not use such trademarks
in any respect without Licensee's prior written consent, which Licensee may
withhold in its discretion.
2. OWNERSHIP OF THE SEA PINES NAME AND LOGO. As between Licensor and
Licensee, Licensor represents, and Licensee acknowledges and agrees, that
Licensor owns, and shall own, all right, title and interest in and to the words
"Sea Pines" in the Project Name, the Trade Name and the Logo subject to the
rights granted to Licensee hereunder, and Licensor shall protect its right and
interest in the Trademarks and shall indemnify Licensee and its Affiliates
against claims concerning Sea Pines' ownership of such Trademarks and its right
to license such trademarks to Licensee.
3. SCOPE OF LICENSE. Licensee agrees that the Trademarks shall only be
used in connection with the promotion and marketing of the Project and that
such use will be in accordance with all applicable federal, state and local
laws, regulations, and ordinances. Licensee understands and agrees that this
License Agreement and the license granted hereunder are limited solely to the
use of the Trademarks in connection with the promotion and marketing of the
Project, and this License Agreement neither permits nor implies the use of the
Trademarks in connection with the provision of other services or the production
of other goods by Licensee.
4. TRANSFERABILITY OF LICENSE. This License Agreement and the rights and
licenses granted hereunder shall inure to the benefit of and shall be binding
upon the parties hereto and their respective permitted successors and assigns,
including without limitation successor owners of the Project. Except as set
forth specifically below, the rights and licenses granted hereunder may not be
transferred or assignee without the prior written consent of Licensor. Provided
that the assignee is also the assignee (whether by a general assignment or a
collateral assignment) of all of the Assets (other than real property Assets
sold in the ordinary course of business) and subject to the other terms and
conditions of this License Agreement (including the obligation to pay the Fee
(as defined in Section 7)):
(a) the rights granted in Sections 5 and 6 may be assigned by
Licensee, at its election and without Licensor's consent; and
(b) The license granted in Section 1 may be assigned by Licensee to
an Affiliate (as defined herein) or to a lender or other party as security
for loans or other extensions of credit to Licensee without Licensor's
prior written consent.
The license granted in Section 1 may otherwise be assigned by Licensee
only with Licensor's prior written consent, which consent will not be
unreasonably withheld; provided, however, that if
2
<PAGE> 3
Licensor elects to withhold such consent, the Fee shall thereafter be reduced
by an amount equal to $50,000 per annum.
No assignment of this License Agreement or any portion hereof shall be
valid or effective unless the assignee shall have assumed all of the
obligations of the Licensee hereunder and agreed to be bound by the terms
hereof, except as specifically set forth in this Section 4.
As used herein, "Affiliate" shall mean (i) Classic Residence Management,
Inc.; (ii) HG, Inc., a Delaware corporation ("HG"); or (iii)(A) any natural
Person that is the immediate ancestor of Nicholas J. Pritzker, deceased, or any
descendant of such immediate ancestor (and for this purpose an adopted natural
Person shall be deemed to be the natural issue of his or her adopting parent) or
the spouse of former spouse of any such descendant; (B) the trustee of any trust
principally for the benefit of any natural Person described in (iii)(A)
preceding; (C) any corporation or other entity of which the Controlling Persons,
directly or indirectly, are Classic Residence Management, Inc., HG or any one or
more of the persons or trustees described in (iii)(A) or (iii)(B) preceding; or
(D) any partnership of which the Controlling Persons, directly or indirectly,
are Classic Residence Management, Inc., HG, or any one or more of the Persons
described in (iii)(A), (iii)(B), or (iii)(C) preceding. "Controlling Persons"
shall mean the Persons who have control of another Person. The term "control"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether through voting
securities, by contract or otherwise. As used in this Section 4, "Person" shall
mean any individual, partnership, corporation, trust or other entity or
association.
5. GRANT OF RIGHT TO USE AMENITIES. Licensor at all times shall, to the
extent it is legally able to do so, cause the Country Club to grant to its
members the right to retain their membership in the Country Club in the event
such members move to the Project. In addition, Licensor at all times shall
grant to residents of the Project all resort amenities offered by Licensor on
substantially the same terms as are granted to members of the Country Club,
including without limitation, the use of (a) the golf courses on Hilton Head
Island owned by Licensor including the Ocean course, the Sea Marsh course, the
Harbour Town course, and any additional golf courses which may be constructed
and/or owned by Sea Pines or any of its affiliated companies on Hilton Head
Island during the term of this License Agreement, (b) the Sea Pines Racquet
Club, and (c) the Sea Pines Beach Club. The scope of the resort amenities
described herein is consistent with the current practice enjoyed by the
residents of the Project, and said grant is supplemental to and in confirmation
of (and not in replacement for) the grants set forth in that certain
Nonexclusive License for Amenities Use and Access Implementation Agreement (the
"Association Agreement") issued in 1996 by Licensor in favor of The TidePointe
Community Association, Inc. (the "Association").
6. OTHER AGREEMENTS. In addition to the licenses and other rights
granted in the Association Agreement, Licensor agrees, upon the request of and
without additional charges to Licensee (other than as set forth in this License
Agreement) and at Licensee's reasonable discretion, to:
(a) Assist Licensee in negotiating a reasonable management agreement
with the Association upon substantially the same terms as the existing
agreement with Volare;
3
<PAGE> 4
(b) Assist Licensee in assigning, renegotiating or terminating, as the
case may be, existing service or construction agreements;
(c) Assist Licensee in negotiations or discussions in regards to local
planning and zoning issues;
(d) Assist Licensee in negotiating the potential purchase of adjacent
land by Licensee for the potential expansion of the Project;
(e) Provide the same level of support as it has historically provided to
the Project with regard to local sporting events and general public relations
in the community;
(f) Provide to Licensee each year during the initial five years of the
Term, the following use of Licensor's facilities and amenities, and admission
to events held at such amenities, without charge to Licensee or the pass
holder: (i) 48 starting times for individual rounds of golf on a space
available basis; (ii) 15 grounds badges to the MCI Classic, Heritage of Golf
Tournament; and (iii) 10 season tickets for the Family Circle Cup Tennis
Tournament (or any substitute event); and
(g) For the initial two (2) years of the Term, serve as the broker of
record for sales of residential units at the Project, and in connection
therewith Licensor shall: (i) maintain its residential brokerage license in full
force and effect; (ii) engage as independent contractors those employees of
Licensee designated by Licensee from time to time to serve as sales agents for
residential units at no charge to Licensee or its employees; and (iii) generally
provide marketing and sales support to the Project; provided that Licensee
agrees to indemnify and/or hold Licensor harmless from and against any and all
loss, cost, damage and expense which Licensor may suffer or incur as a result of
serving as such broker of record except to the extent caused by the gross
negligence, willful misconduct or unlawful acts or omissions of Licensor,
provided that the costs and expenses of Licensor's general and administrative
overhead are excluded from the foregoing indemnity, and provided further that
Licensor shall be entitled to conduct such brokerage operation, and implement
such policies and procedures, as are customary in the brokerage industry, upon
such basis and in such manner as it deems appropriate under the circumstances in
its reasonable discretion exercised in good faith.
7. PAYMENTS TO THE LICENSOR
(a) Fee. In consideration of the grant of rights and licenses, and the
covenants and agreements, of Licensor contained herein, and irrespective of
whether Licensee elects to exercise the right or to make use of the licenses
granted in this License Agreement, Licensee shall pay to Licensor annual fees
as follows: (a) commencing on the date hereof and continuing on July 1, 1999
and on each anniversary of such date through and including July 1, 2002, annual
payments of $200,000 each (for a total of $1,000,000), and (b) commencing on
July 1, 2000 and continuing through June 1, 2024, additional annual payments of
$125,000 each, payable in monthly installments of $10,416.67 on the first day
of ech calendar month (for a total of $3,125,000). Such amounts may be
collectively referred to herein as the "Fee".
4
<PAGE> 5
(b) Subordination. Notwithstanding any other provision of this License
Agreement, or any other agreement to which Licensee or a Licensee Affiliate (as
defined herein), is a party, any and all payments of a Management Fee (as herein
defined) to Manager (as defined herein) by any Person, shall not be paid to or
accepted by Manager upon the occurrence of a Licensee Event of Default and while
it is continuing, and all Management Fees shall be subordinate to the Fee and
the payment of the Fee to Licensor. Notwithstanding the foregoing, Management
Fees may be paid to and received by Manager at all times other than those during
which a Licensee Event of Default (as defined in Section 8) has occurred and is
continuing. Upon the occurrence of a Licensee Event of Default and while it is
continuing, no payment of any Management Fee shall be made by Licensee or
accepted by Manager until all payments of the Fee including all amounts due upon
an acceleration of the Fee pursuant to this Section 7 or Section 8 of this
License Agreement, have been paid in full. Licensee warrants, represents and
covenants that, prior to the occurrence of a Sale Event, the manager of the
Project and the only person to whom Management Fees will be paid is Classic
Residence Management Limited Partnership ("Manager"), which also manages similar
properties for Affiliates of Licensee. Contemporaneously with the execution of
this License Agreement, Manager shall acknowledge and agree to the provisions
concerning the Management Fees as provided herein in the form set forth in
Exhibit B. Licensee further agrees that it shall not enter into any agreement
pursuant to which it shall pay Management Fees to any Person without obtaining
such person's acknowledgement of such agreement concerning Management Fees
contained herein. The term "Management Fees'' shall mean all amounts paid to
Manager as an "Annual Management Fee" as defined in Section 4.2 of the
Management and Marketing Agreement of even date herewith between the Association
and the Manager and in Section 4.2 of a Marketing and Management Agreement
between Licensee and Manager concerning the Health Care Center (which shall be
substantially identical to the Management and Marketing Agreement of even date
herewith between the Association and Manager); provided, however, that under no
circumstances shall either Management and Marketing Agreement be amended to
reduce the Annual Management Fee to less than six percent (6%). A "Licensee
Affiliate" shall mean an Affiliate (as defined in Section 4) or any other Person
who controls, is controlled by, or is under common control with Licensee or a
permitted successor or assign. As used in this Section 7, the term "Person"
shall mean any natural person, corporation, limited liability company, limited
partnership, general partnership, limited liability partnership or other entity
other than a natural person who is an employee of Licensee.
(c) Sale Event. Upon any Sale Event (as defined herein), Licensor shall,
upon the request of the Purchaser (as defined herein), negotiate in good faith
to arrive at an arrangement pursuant to which Licensor is provided reasonable
assurance satisfactory to Licensor that the Fees will be paid as provided in
this License Agreement. If such negotiations are unsuccessful, Licensor shall
have the right and option, exercisable only in connection with and payable at
the time of the closing of a Sale Event (if ever), to receive an amount which is
the present value of the balance of the Fee remaining to be paid over the Term.
The discount rate applicable to any Sale Event which closes during the first
three (3) years of the Term is eight percent (8%) per annum, while the discount
rate applicable to a Sale Event which closes during the balance of the Term
shall be twelve percent (12%) per annum. If
5
<PAGE> 6
Licensor exercises said right and receives said payment, no further payment
of the Fee shall be due from Licensee or the Purchaser, and this License
Agreement shall continue in effect in accordance with its terms. If
Licensor does not exercise such right, its option to accelerate the
payments shall lapse upon the occurrence of the Sale Event with respect to
such Sale Event, but it shall continue to apply to any subsequent Sale
Event. "Sale Event" shall mean a sale of all or substantially all of the
assets of Licensee, a sale of fifty percent (50%) or more of the voting or
equity securities of Licensee, or a merger, consolidation, or other
reorganization involving Licensee or involving a change in control of
Licensee. A "Sale Event" shall not include any assignment or other transfer
to a Licensee Affiliate or to a lender or other party as security for loans
or other extensions to credit to Licensee. "Purchaser" shall mean a party
or parties involved in a Sale Event other than Licensee.
(d) Licensor's Option. At any time during the Term, upon written notice
from Licensee to Licensor, Licensee shall have the right to accelerate the
payment of the Fee, provided that the amount payable upon such acceleration
shall be an amount which is the present value of the balance of the Fee
remaining to be paid over the Term, discounted at the rate of eight percent
(8%) per annum. If Licensee exercises such right and makes such payment, no
further payment of the Fee shall be due from Licensee, and this License
Agreement shall continue in effect in accordance with its terms.
8. TERM; TERMINATION. The term (the "Term") of this License Agreement,
and the licenses and rights granted to Licensee hereunder, shall commence on
the date of this License Agreement and shall continue until June 30, 2024,
unless earlier terminated as follows:
(a) upon the mutual agreement of both parties;
(b) upon notice by Licensor to Licensee in the event that Licensee
breaches any of its covenants or obligations under this License Agreement
and, provided that such breach is capable of being cured, fails to cure
such breach within thirty (30) days after written notice thereof by
Licensor, or, if such cure cannot reasonably be completed with such thirty
(30) day period, fails to promptly commence and diligently pursue such cure
and actually cure such breach within a reasonable time thereafter;
(c) immediately upon the filing of any petition in bankruptcy by or
against Licensee or CC-Development Group, Inc. (a "CCHH Entity") (if
against a CCHH Entity, Licensee shall have ninety (90) days to dismiss or
otherwise terminate such bankruptcy); the application for or acquiescence
in the appointment of a receiver, liquidator, custodian, trustee or similar
officer for a CCHH Entity; an assignment for the benefit of creditors of a
CCHH Entity, or a CCHH Entity shall be or become insolvent or unable
generally to pay its debts as they become due; or
(d) immediately at any time upon notice by Licensee to Licensor in
the event that Licensor breaches any of its covenants or obligations under
this License Agreement and, provided that such breach is capable of being
cured, fails to cure such breach within thirty (30) days after written
notice thereof by Licensee, or, if such cure cannot reasonably be
6
<PAGE> 7
completed within such thirty (30) day period, fails to promptly commence
and diligently pursue such cure and actually cure such breach within a
reasonable time thereafter (a "Licensor Event of Default").
Notwithstanding any provision of this License Agreement to the contrary,
if Licensor notifies Licensee of a breach of Sections 1, 2 or 3 of this License
Agreement pursuant to subsection (b) above and this License Agreement is
terminated as a result of such breach and pursuant to said notice, such
termination shall constitute a termination of this License Agreement as to the
license granted in Section 1 hereof only and the provisions of this License
Agreement, other than Sections 1 and 3, shall remain in full force and effect,
including the obligation to pay the full amount of the Fee pursuant to Section
7 and the rights referred to in Sections 5 and 6, notwithstanding such
termination. Further, notwithstanding any other provision of this License
Agreement to the contrary, upon a termination of this License Agreement by
Licensee pursuant to subsection (d) above, no further payment of the Fee shall
be due after the effective date of termination. The occurrence of an event or
events giving rise to a right on behalf of Licensor to terminate this License
Agreement pursuant to subsections (b) or (c) above shall constitute a "Licensee
Event of Default" and, in addition to the right to terminate this License
Agreement, Licensor shall be entitled to accelerate all current and future
payments of the Fee upon notice to Licensee. Notwithstanding any other
provision of this License Agreement to the contrary, upon a Licensor Event of
Default or a Licensee Event of Default, the non-defaulting party shall have all
rights and remedies granted to it under this License Agreement, at law or in
equity and may exercise such rights in such manner as the non-defaulting party
shall elect, and the non-defaulting party's election to exercise one or more
of the rights or remedies available to it shall not constitute a waiver of any
of its other rights or remedies.
9. EFFECT OF TERMINATION. Upon termination of this License Agreement
or the licenses or rights granted in Section 1 hereof, Licensee, at its sole
expense, shall cease using the Trademarks in connection with the Project and
the marketing and promotion of the Project, and shall cease using and destroy
or return to Licensor any and all property containing or displaying the
Trademarks, including but not limited to all signage of the Project.
10. NONCOMPETITION COVENANT. During the term of this License Agreement,
neither Sea Pines nor any of its affiliates shall own any interest in, manage
or operate a continuing care retirement community in the State of South
Carolina, nor shall any Sea Pines entity grant or license the use of any trade
name or trade mark of Sea Pines to any continuing care retirement community in
the State of South Carolina.
11. OTHER AGREEMENTS. Upon the execution of this Agreement, Licensor
agrees to cause SPTP, its wholly-owned subsidiary, to execute and deliver a
cancellation of the mortgage executed by the Partnership in favor of SPTP,
dated August 4, 1994 and recorded in Beaufort County, South Carolina in Book
723 at page 1426 with respect to the real property owned by the Partnership,
and to mark "PAID IN FULL" on the face of the promissory note secured by such
mortgage. Neither party shall record this License Agreement in the land records
of Beaufort County, South Carolina without the prior written consent of the
other party.
7
<PAGE> 8
12. MISCELLANEOUS.
(a) Severability. Each provision of this License Agreement is
intended to be and shall be deemed a severable unit. If any court of competent
jurisdiction determines that any portion of one or more of the provisions
contained in this License Agreement is invalid, illegal or unenforceable in any
respect, such holding shall not affect the validity or enforceability of any
other provision of this License Agreement, and this License Agreement shall be
construed as if such invalid, illegal or unenforceable provision had never been
contained in this License Agreement.
(b) Notices. All notices, consents, approvals and the like required
under any of the provisions of this License Agreement shall be in writing and
shall be deemed to be effective (a) if personally delivered or sent by
overnight courier (such as Federal Express), upon delivery, (b) if sent by
facsimile, upon successful transmission, or (c) is sent by U.S. Mail registered
or certified, return receipt requested, with sufficient postage affixed
thereto, four (4) days after being mailed, addressed as follows:
(i) If to Licensee, to:
c/o Classic Residence by Hyatt
200 West Madison
Suite 3700
Chicago, Illinois 60606
Attn: John Kevin Poorman
Executive Vice President
Facsimile Number: (312) 750-8597
(ii) If to Licensor, to:
Sea Pines Company, Inc.
32 Greenwood Drive
Hilton Head Island, South Carolina 29928
Facsimile Number: (803) 842-1464
Attn: Michael E. Lawrence
or as may be otherwise specified by any party by notice to the other party.
(c) Amendments and Waivers; Cumulative Remedies. This License
Agreement may not be amended or modified in any manner except by an instrument
in writing signed by each of the parties. The failure of any party to enforce
at any time any of the provisions of this License Agreement shall in no way be
construed to be a waiver of any such provision or the right of any party
thereafter to enforce each and every such provision. No waiver of any breach of
this License Agreement shall be held to be a waiver of any other or subsequent
breach. Furthermore, all remedies are cumulative, including the right of either
party to seek equitable relief in addition to money damages.
8
<PAGE> 9
(d) Law Applicable. This License Agreement shall be governed,
construed, and enforced in accordance with the laws of the State of South
Carolina.
(e) No Merger. This License Agreement shall survive the closing of
the Purchase Agreement and shall not merge into any of the documents
executed by Licensor or Licensee or its Affiliates at closing. This License
Agreement, and the Subordination Agreement executed by the Manager,
constitute the sole and entire agreement between the parties with respect
to the subject matter hereof. No other writing or documents, course of
prior dealings between the parties, and no usage of the trade shall be
relevant or admissible to supplement, explain, or vary the terms of this
License Agreement. Acceptance of, or acquiescence in, a course of
performance rendered under this or any prior agreement shall not be
relevant or admissible to determine the meaning of this License Agreement
even though the accepting party has knowledge of the nature of the
performance and an opportunity to make objection. No other representations,
understandings, or agreements have been made or relied upon in the making
of this License Agreement other than those specifically set forth in this
License Agreement.
(f) Authorization. Each party hereto warrants and represents that the
execution, delivery and performance of this License Agreement have been
fully authorized by their respective boards of directors, and no other
consents or approvals of any other persons or entities are required. The
parties hereto further warrant and represent that, upon its execution and
delivery by the undersigned, this License Agreement shall be binding upon
the parties hereto and enforceable in accordance with its terms. This
License Agreement may be executed in two or more counterparts.
(g) Expenses. In the event either party initiates litigation to
enforce its rights under this License Agreement, the prevailing party shall
be entitled to recover its reasonable costs and expenses, including
attorney's fees, from the non-prevailing party.
9
<PAGE> 10
IN WITNESS WHEREOF, the parties have executed this License Agreement as of
the day and year first above written.
CC-HILTON HEAD, INC.
By: /s/ John Kevin Poorman
------------------------
Title: EVP
SEA PINES COMPANY, INC.
By: /s/ Michael E. Lawrence
------------------------
Title: President
10
<PAGE> 1
EXHIBIT 21
TO FORM 10-K OF
SEA PINES ASSOCIATES, INC.
Subsidiaries of Sea Pines Associates, Inc.
Sea Pines Company, Inc., a South Carolina corporation, a wholly owned
and the only subsidiary of Sea Pines Associates, Inc. The active subsidiaries of
Sea Pines Company, Inc. are:
(a) Sea Pines Real Estate Company, Inc., a South Carolina
corporation doing business as Sea Pines Real Estate Company.
(b) Sea Pines Senior Living Center, Inc., a South Carolina
corporation.
(c) Sea Pines Forest Preserve Conservation Association, Inc., a
Delaware corporation.
(d) Lighthouse Realty, Inc., a South Carolina corporation.
(e) The Hilton Head Company, Inc., a South Carolina corporation.
(f) Sea Pines/TidePointe, Inc., a South Carolina corporation.
(g) Fifth Golf Course Club, Inc., a Delaware corporation.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS CONTAINED IN THE OCTOBER 31, 1998 FORM 10K AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH OCTOBER 31, 1998 FORM 10K.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<CASH> 2,599
<SECURITIES> 0
<RECEIVABLES> 3,235
<ALLOWANCES> 50
<INVENTORY> 653
<CURRENT-ASSETS> 4,852
<PP&E> 42,051
<DEPRECIATION> 11,213
<TOTAL-ASSETS> 37,925
<CURRENT-LIABILITIES> 5,518
<BONDS> 0
0
7,218
<COMMON> 2,166
<OTHER-SE> 5,334
<TOTAL-LIABILITY-AND-EQUITY> 37,925
<SALES> 38,506
<TOTAL-REVENUES> 38,506
<CGS> 27,068
<TOTAL-COSTS> 27,068
<OTHER-EXPENSES> 7,277
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,345
<INCOME-PRETAX> 3,149
<INCOME-TAX> 1,099
<INCOME-CONTINUING> 2,050
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,050
<EPS-PRIMARY> .63
<EPS-DILUTED> .63
</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 or other conditions which may adversely affect
tourism, vacation resorts or the vacation or retirement home industries,
generally, adverse weather conditions, the possibility of oil or hazardous waste
spills offshore, the impact of increased fuel or other transportation costs
<PAGE> 2
on travel, adverse changes in applicable environmental regulation 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 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.
