<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
Commission file number 1-12246
NATIONAL GOLF PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
Maryland 95-4549193
(State of incorporation) (I.R.S. Employer Identification No.)
2951 28th Street, Suite 3001, Santa Monica, CA 90405
(Address of principal executive offices) (Zip Code)
(310) 664-4100
(Registrant's telephone number, including area code)
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
--- ----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
12,371,145 shares of common stock, $.01 par value, as of July 25, 1997
Page 1 of 21
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NATIONAL GOLF PROPERTIES, INC.
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets of National Golf
Properties, Inc. as of June 30, 1997 and
December 31, 1996 3
Consolidated Statements of Operations of
National Golf Properties, Inc. for the three
months ended June 30, 1997 and 1996 4
Consolidated Statements of Operations of
National Golf Properties, Inc. for the six
months ended June 30, 1997 and 1996 5
Consolidated Statements of Cash Flows of
National Golf Properties, Inc. for the six
months ended June 30, 1997 and 1996 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
Part II. Other Information 18
Exhibit Index 21
</TABLE>
2
<PAGE>
PART I. Financial Information
Item 1. Financial Statements
NATIONAL GOLF PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
------------- ------------
<S> <C> <C>
ASSETS
Property:
Land $ 65,056 $ 63,049
Buildings 157,485 147,678
Ground improvements 276,812 263,803
Furniture, fixtures and equipment 32,308 30,531
Construction in progress 13,866 10,733
-------- --------
545,527 515,794
Less: accumulated depreciation (84,315) (73,031)
-------- --------
Net property 461,212 442,763
Cash and cash equivalents 7,518 11,224
Investments 290 286
Mortgage notes receivable 2,200 2,971
Due from affiliates 496 -
Other assets, net 8,698 12,701
-------- --------
Total assets $480,414 $469,945
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable $239,832 $229,949
Accounts payable and other liabilities 7,639 3,134
Due to affiliates - 641
-------- --------
Total liabilities 247,471 233,724
-------- --------
Minority interest 19,114 20,831
-------- --------
Stockholders' equity:
Preferred stock, $.01 par value, 5,000,000
shares authorized - none issued - -
Common stock, $.01 par value, 40,000,000
shares authorized, 12,369,195 and 12,303,720
shares issued and outstanding at June 30, 124 123
1997 and December 31, 1996, respectively
Additional paid in capital 218,866 219,985
Accumulated deficit (1,360) (1,360)
Unamortized restricted stock compensation (3,801) (3,358)
-------- --------
Total stockholders' equity 213,829 215,390
-------- --------
Total liabilities and
stockholders' equity $480,414 $469,945
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
NATIONAL GOLF PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
For the three For the three
months ended months ended
June 30, 1997 June 30, 1996
-------------- --------------
<S> <C> <C>
Revenues:
Rent from affiliates $17,744 $13,531
Rent 770 313
Gain on sale of property 217 -
------- -------
Total revenues 18,731 13,844
------- -------
Expenses:
General and administrative 1,285 1,375
Depreciation and amortization 5,967 4,190
------- -------
Total expenses 7,252 5,565
------- -------
Operating income 11,479 8,279
Other income (expense):
Interest income from affiliates - 931
Interest income 85 85
Other income 407 98
Interest expense (4,691) (3,148)
------- -------
Income before provision for taxes and
minority interest 7,280 6,245
Provision for taxes (59) (55)
------- -------
Income before minority interest 7,221 6,190
Income applicable to minority interest (3,134) (2,851)
------- -------
Net income $ 4,087 $ 3,339
======= =======
Net income per share $ 0.33 $ 0.31
======= =======
Weighted average number of shares 12,511 10,726
======= =======
Distribution declared per common share
outstanding $ 0.42 $ 0.41
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
NATIONAL GOLF PROPERTIES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
For the six For the six
months ended months ended
June 30, 1997 June 30, 1996
------------- -------------
<S> <C> <C>
Revenues:
Rent from affiliates $34,420 $26,432
Rent 1,543 501
Gain on sale of property 217 25
------- -------
Total revenues 36,180 26,958
------- -------
Expenses:
General and administrative 2,499 2,614
Depreciation and amortization 11,885 8,298
------- -------
Total expenses 14,384 10,912
------- -------
Operating income 21,796 16,046
Other income (expense):
Interest income from affiliates - 1,682
Interest income 180 175
Other income 475 105
Interest expense (9,263) (6,073)
------- -------
Income before provision for taxes and
minority interest 13,188 11,935
Provision for taxes (113) (111)
------- -------
Income before minority interest 13,075 11,824
Income applicable to minority interest (5,710) (5,451)
------- -------
Net income $ 7,365 $ 6,373
======= =======
Net income per share $0.59 $0.59
======= =======
Weighted average number of shares 12,506 10,715
======= =======
Distribution declared per common share
outstanding $0.84 $0.82
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
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NATIONAL GOLF PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
For the six For the six
months ended months ended
June 30, 1997 June 30, 1996
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 7,365 $ 6,373
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 11,885 8,298
Amortization of restricted stock 764 496
Minority interest in earnings 5,710 5,451
Gain on sale of property (217) (25)
Other adjustments 54 101
Changes in assets and liabilities:
Other assets 2,960 (1,128)
Accounts payable and other
liabilities 4,600 98
Due from/to affiliates (616) (835)
-------- --------
Net cash provided by
operating activities 32,505 18,829
-------- --------
Cash flows from investing activities:
Purchase of available-for-sale securities (7) (4,875)
Proceeds from sale of available-for-
sale securities 3 5,525
Proceeds from mortgage loans 732 -
Purchase of property and related assets (30,595) (30,950)
Proceeds from sale of property and related assets 986 -
-------- --------
Net cash used by investing activities (28,881) (30,300)
-------- --------
Cash flows from financing activities:
Principal payments on notes payable (52,764) (14,416)
Proceeds from notes payable 62,550 41,250
Repurchase of op units - (116)
Proceeds from stock options exercised 695 -
Cash distributions (10,385) (8,723)
Limited partners' cash distributions (7,426) (7,183)
-------- --------
Net cash provided (used) by
financing activities (7,330) 10,812
-------- --------
Net decrease in cash (3,706) (659)
Cash and cash equivalents at beginning
of period 11,224 7,089
-------- --------
Cash and cash equivalents at end of period $ 7,518 $ 6,430
======== ========
Supplemental cash flow information:
Interest paid $ 9,155 $ 5,935
Taxes paid 172 136
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
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NATIONAL GOLF PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Organization and Summary of Significant Accounting Policies
-----------------------------------------------------------
National Golf Properties, Inc. (the "Company") owns substantially all of
the golf courses through its 58.4% general partner interest in National
Golf Operating Partnership, L.P. (the "Operating Partnership"). The
Operating Partnership has an 89% general partner interest in Royal Golf,
L.P. II ("Royal Golf"). Unless the context otherwise requires, all
references to the Company's business and properties include the business
and properties of the Operating Partnership and Royal Golf.
The consolidated financial statements include the accounts of the Company,
the Operating Partnership and Royal Golf. All significant intercompany
transactions and balances have been eliminated.
The accompanying consolidated financial statements for the three and six
months ended June 30, 1997 and 1996 have been prepared in accordance with
generally accepted accounting principles ("GAAP") and with the instructions
to Form 10-Q and Article 10 of Regulation S-X. These financial statements
have not been audited by independent public accountants, but include all
adjustments (consisting of normal recurring adjustments) which are, in the
opinion of management, necessary for a fair presentation of the financial
condition, results of operations and cash flows for such periods. However,
these results are not necessarily indicative of results for any other
interim period or for the full year. The accompanying consolidated balance
sheet as of December 31, 1996 has been derived from the audited financial
statements, but does not include all disclosures required by GAAP.
Certain information and footnote disclosures normally included in financial
statements in accordance with GAAP have been omitted pursuant to
requirements of the Securities and Exchange Commission. Management believes
that the disclosures included in the accompanying interim financial
statements and footnotes are adequate to make the information not
misleading, but should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's annual
report on Form 10-K for the year ended December 31, 1996.
The computation of primary earnings per share is based on the weighted
average number of outstanding common shares during the period and the
incremental shares, using the treasury stock method, from stock options.
The computation of fully diluted earnings per share is less than 3%
dilutive and accordingly has not been presented.
In February 1997, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 128,
"Earnings Per Share." SFAS No. 128 supersedes and simplifies the existing
computational guidelines under Accounting Principles Board Opinion No. 15,
"Earnings Per Share." It is effective for financial statements issued for
periods ending after December 15, 1997. Among
7
<PAGE>
other changes, SFAS No. 128 eliminates the presentation of primary earnings
per share ("EPS") and replaces it with basic EPS for which common stock
equivalents are not considered in the computation. It also revises the
computation of diluted EPS. Upon adoption of SFAS No. 128, there is no
material impact anticipated to the Company's earnings per share, financial
condition, or results of operations.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income," which establishes standards for reporting and display of
comprehensive income and its components. This statement requires a separate
statement to report the components of comprehensive income for each period
reported. The provisions of this statement are effective for fiscal years
beginning after December 15, 1997. Management believes that they currently
do not have items that would require presentation in a separate statement
of comprehensive income.
In June 1997, the FASB also issued SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information," which establishes
standards for the way that public business enterprises report information
about operating segments in annual financial statements and require that
those enterprises report selected information about operating segments in
interim financial reports issued to shareholders. This statement is
effective for financial statements for periods beginning after December 15,
1997. Management believes this statement will not require expanded
disclosure in the Company's financial statements.
(2) Property
--------
During the six months ended June 30, 1997, the Company purchased four golf
courses for an aggregate initial investment of approximately $26 million.
The acquisitions have been accounted for utilizing the purchase method of
accounting, and accordingly, the acquired assets are included in the
statement of operations from the date of acquisition. Initial investment
amount includes purchase price, closing costs and other direct costs
associated with the purchase. The aforementioned golf courses are leased to
American Golf Corporation ("AGC") pursuant to long-term triple net leases.
8
<PAGE>
<TABLE>
<CAPTION>
Acquisition Initial
Date Course Name Location Investment
----------- ----------- -------- --------------
<S> <C> <C> <C>
(In thousands)
1/2/97 Stonecreek Golf Phoenix,
Course Arizona $ 9,447
1/10/97 Tamarack Golf Club Naperville,
Illinois 5,386
4/10/97 Baymeadows Golf Club Jacksonville,
Florida 4,531
5/1/97 The Golf Club at Woodstock,
Bradshaw Farm Georgia 6,598
-------
Total Initial Investment $25,962
=======
</TABLE>
On May 23, 1997, the Company sold Stonebridge Country Club in New Orleans,
Louisiana for approximately $1.1 million. The Company recognized a gain of
approximately $217,000.
(3) Notes Payable
-------------
The Company has a $100 million credit facility, which terminates in April
2002, from a group of four commercial banks that may be used to finance
working capital, acquisitions and capital improvements. The Company has two
interest rate options under the credit facility depending upon the length
of time the advances are outstanding. For advances which will be
outstanding for less than a month, the advances bear interest at prime. At
June 30, 1997, prime was 8.5%. For advances which will be outstanding for
one month or more, the advances bear maximum interest at a floating rate
equal to LIBOR plus a spread of 1.125%. The spread will be reduced upon the
Company's receipt of specified credit ratings. There were outstanding
advances of $35.5 million under this credit facility as of June 30, 1997.
(4) Lease Rental Agreements
-----------------------
The minimum rent for the first year for each golf course under the leases
is initially set at a fixed amount. Thereafter, with respect to the leases
for the initial portfolio of golf courses at the time of the completion of
the Company's initial public stock offering on August 18, 1993 (the
"Offering"), minimum rent will be increased each year by 4% or, if lower,
150% of the annual percentage increase in the Consumer Price Index ("CPI")
(the "Base Rent Escalation"). For these leases, percentage rent will be
paid to the Company each year in the amount, if any, by which the sum of
35% of course revenue in excess of a baseline amount plus 5% of other
revenue in excess of a baseline amount exceeds the cumulative Base Rent
Escalation since the commencement date of such leases. Generally, for the
leases entered into subsequent to the
9
<PAGE>
Offering, the rent is based upon the greater of (a) the minimum base rent
or (b) a specified percentage of course revenue and other revenue. The
minimum base rent under these leases will be increased for specified years
during the lease term based upon increases in the CPI, provided that each
such annual CPI increase shall not exceed five percent. On an interim
basis, percentage rent is recognized taking into consideration the
seasonality of the golf courses. Such percentage rent income for the six
months ended June 30, 1997 and 1996 was approximately $2,887,000 and
$2,620,000, respectively.
(5) Pro Forma Financial Information
-------------------------------
The pro forma financial information set forth below is presented as if the
1997 acquisitions (Note 2) had been consummated as of January 1, 1997 and
1996.
The pro forma financial information is not necessarily indicative of what
actual results of operations of the Company would have been assuming the
acquisitions had been consummated as of January 1, 1997 and 1996, nor does
it purport to represent the results of operations for future periods.
<TABLE>
<CAPTION>
For the six
(In thousands, except per share amounts) months ended June 30,
---------------------------------------- ---------------------
1997 1996
--------- ---------
<S> <C> <C>
Revenues from rental property $36,563 $28,233
Net income $ 7,449 $ 6,227
Net income per share $ 0.60 $ 0.58
</TABLE>
The pro forma financial information includes the following adjustments: (i)
an increase in depreciation and amortization expense; (ii) an increase in
interest expense; and (iii) an increase for 1997 and a decrease for 1996 in
income applicable to minority interest.
(6) Statement of Cash Flows - Supplemental Disclosures
--------------------------------------------------
Non-cash transactions for the six months ended June 30, 1997 include
approximately $1 million in capital improvements accrued but not paid.
(7) Other Data
----------
AGC is the lessee of all but five of the golf course properties in the
Company's portfolio at June 30, 1997. David G. Price, the Chairman of the
Board of Directors of the Company, owns approximately 5.4% of the Company's
outstanding Common Stock and approximately 38.5% of the Operating
Partnership and a controlling interest in AGC. AGC is a golf course
management company that operates a diverse portfolio of golf courses for a
variety of golf course owners including municipalities, counties and
others. AGC does not own any golf courses, but rather manages and operates
golf courses either as a lessee under leases, generally triple net, or
pursuant to management agreements. AGC derives
10
<PAGE>
revenues from the operation of golf courses principally through receipt of
green fees, membership initiation fees, membership dues, golf cart rentals,
driving range charges and sales of food, beverages and merchandise.
The following table sets forth certain condensed unaudited financial
information concerning AGC:
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
------------ --------------
(In thousands)
<S> <C> <C>
Current assets $ 80,507 $ 57,511
Non-current assets 135,064 131,654
-------- --------
Total assets $215,571 $189,165
======== ========
Current liabilities $ 57,283 $ 50,993
Long-term liabilities 67,712 68,041
Minority interest 463 466
Stockholders' equity 90,113 69,665
-------- --------
Total liabilities and stockholders' equity $215,571 $189,165
======== ========
<CAPTION>
For the six months ended
June 30,
--------------------------
1997 1996
-------- --------
(In thousands)
Total revenues $255,869 $205,778
======== ========
Net income $ 20,597 $ 11,627
======== ========
</TABLE>
Total revenues from golf course operations and management agreements for
AGC increased by $50.1 million, or 24.3%, to $255.9 million for the six
months ended June 30, 1997 compared to $205.8 million for the six months
ended June 30, 1996. The increase in revenues was primarily attributable to
the addition of 29 leased courses and two management courses.
Net income increased by $9 million to $20.6 million for the six months
ended June 30, 1997 compared to $11.6 million for the corresponding six
months of 1996. The increase in net income was primarily due to the
increase in leased and management courses.
(8) Subsequent Events
-----------------
On July 9, 1997, the Board of Directors declared a distribution of $0.42
per share for the quarter ended June 30, 1997 to stockholders of record on
July 31, 1997, which distribution will be paid on August 15, 1997.
On July 31, 1997, the Company purchased Longwood Golf Club located in
Cypress, Texas for approximately $9.6 million.
11
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Overview
- --------
The following discussion should be read in conjunction with the accompanying
Consolidated Financial Statements and Notes thereto. The forward-looking
statements included in Management's Discussion and Analysis of Finanical
Condition and Results of Operations ("MD&A") relating to certain matters involve
risks and uncertainties, including anticipated financial performance, business
prospects, anticipated capital expenditures and other similar matters, which
reflect management's best judgement based on factors currently known. Actual
results and experience could differ materially from the anticipated results or
other expectations expressed in the Company's forward-looking statements as a
result of a number of factors, including but not limited to those discussed in
MD&A.
The discussion of the results of operations compares the three months ended June
30, 1997 with the three months ended June 30, 1996 and the six months ended June
30, 1997 with the six months ended June 30, 1996.
Results of Operations
- ---------------------
Comparison of the three months ended June 30, 1997 to the three months ended
June 30, 1996
Net income increased by $748,000 to $4,087,000 for the three months ended June
30, 1997 compared to $3,339,000 for the three months ended June 30, 1996. The
net increase was primarily attributable to: (i) an increase in rent revenue of
approximately $4,670,000; (ii) an increase in depreciation and amortization
expense of approximately $1,777,000; (iii) a decrease in interest income from
affiliates of approximately $931,000; (iv) an increase in other income of
approximately $309,000; and (v) an increase in interest expense of
approximately $1,543,000.
The increase in rent revenue was primarily attributable to: (i) the acquisition
of 35 golf course properties subsequent to June 30, 1996, which accounted for
approximately $3,992,000 of the increase; (ii) a full quarter of rent in 1997
on three golf course properties acquired in the second quarter of 1996, which
accounted for approximately $26,000 of the increase; (iii) an increase in
percentage rents under the leases with respect to the golf course properties
owned at March 31, 1996, which represents an increase of approximately $276,000;
and (iv) the increase in base rents under the leases with respect to the golf
course properties owned at March 31, 1996, which accounted for approximately
$376,000 of the increase.
The increase in depreciation and amortization expense was due to: (i) the
acquisition of 35 golf course properties subsequent to June 30, 1996 and (ii) a
full quarter of depreciation expense in 1997 on three golf course properties
acquired in the second quarter of 1996.
The rent revenue from the second quarter 1997 acquisitions of two golf course
properties represented approximately $209,000 of the total rent revenue of $18.5
million. The depreciation and amortization expense for these
12
<PAGE>
acquisitions represented approximately $60,000 of the total depreciation and
amortization expense of $6 million.
The decrease in interest income from affiliates was due to the retirement of the
participating mortgages in July 1996. The increase in other income was
primarily attributable to excess land sales. The increase in interest expense
was primarily attributable to $75 million fixed rate, unsecured notes issued in
1996.
Comparison of the six months ended June 30, 1997 to the six months ended June
30, 1996
Net income increased by $992,000 to $7,365,000 for the six months ended June 30,
1997 compared to $6,373,000 for the six months ended June 30, 1996. The net
increase was primarily attributable to: (i) an increase in rent revenue of
approximately $9,030,000; (ii) an increase in depreciation and amortization
expense of approximately $3,587,000; (iii) a decrease in interest income from
affiliates of approximately $1,682,000; (iv) an increase in other income of
approximately $370,000; and (v) an increase in interest expense of approximately
$3,190,000.
The increase in rent revenue was primarily attributable to: (i) the acquisition
of 35 golf course properties subsequent to June 30, 1996, which accounted for
approximately $7,499,000 of the increase; (ii) a full six months of rent in
1997 on four golf course properties acquired in the first six months of 1996,
which accounted for approximately $592,000 of the increase; (iii) an increase
in percentage rents under the leases with respect to the golf course properties
owned at December 31, 1995, which represents an increase of approximately
$216,000; and (iv) the increase in base rents under the leases with respect to
the golf course properties owned at December 31, 1995, which accounted for
approximately $723,000 of the increase.
The increase in depreciation and amortization expense was due to: (i) the
acquisition of 35 golf course properties subsequent to June 30, 1996 and (ii) a
full six months of depreciation expense in 1997 on four golf course properties
acquired in the first six months of 1996.
The rent revenue from the 1997 acquisitions of four golf course properties
represented approximately $742,000 of the total rent revenue of $36 million.
The depreciation and amortization expense for these acquisitions represented
approximately $425,000 of the total depreciation and amortization expense of
$11.9 million.
The decrease in interest income from affiliates was due to the retirement of the
participating mortgages in July 1996. The increase in other income was
primarily attributable to excess land sales. The increase in interest expense
was primarily attributable to $75 million fixed rate, unsecured notes issued in
1996.
Liquidity and Capital Resources
- -------------------------------
At June 30, 1997, the Company had approximately $7.8 million in cash and
investments, mortgage loans of $2.2 million, mortgage indebtedness of
approximately $25.2 million and unsecured indebtedness of approximately $214.6
13
<PAGE>
million. The $239.8 million principal amount of mortgage and unsecured
indebtedness bears interest at a weighted average rate of 7.98%. Of the $239.8
million of debt, $204.3 million is fixed rate debt and is payable either
quarterly or semi-annually and matures between 1999 and 2008.
In order to maintain its qualification as a real estate investment trust
("REIT") for federal income tax purposes, the Company is required to make
substantial distributions to its stockholders. The following factors, among
others, will affect funds from operations and will influence the decisions of
the Board of Directors regarding distributions: (i) increase in debt service
resulting from additional indebtedness; (ii) scheduled increases in base rent
under the leases with respect to the golf courses; and (iii) any payment to the
Company of percentage rent under the leases with respect to the golf courses.
Although the Company receives most of its rental payments on a monthly basis, it
has and intends to continue to pay distributions quarterly.
The Company anticipates that its cash from operations and its bank line of
credit, described below, will provide adequate liquidity to conduct its
operations, fund administrative and operating costs, interest payments, capital
improvements and acquisitions and allow distributions to the Company's
stockholders in accordance with the Code's requirements for qualification as a
REIT and to avoid any corporate level federal income or excise tax. Capital
improvements for which the Company is responsible would be limited to mandated
projects or projects intended to add value to the property. For golf courses
acquired through July 25, 1997, the Company is required under the leases to pay
for various remaining capital improvements totaling approximately $18.7 million,
of which approximately $18.1 million will be paid during the next two years.
The Company believes these improvements will add value to the golf courses and
bring the quality of the golf courses up to the Company's expected standards.
Any subsequent capital improvements are the responsibility of the lessees. Upon
completion of the capital improvements, the base rent payable under the leases
with respect to these golf courses will be adjusted to reflect, over the initial
term of the leases, the Company's investment in such improvements.
Future acquisitions will be made subject to the Company's investment objectives
and policies established to maximize both current income and long-term growth in
income. The Company's liquidity requirements with respect to future
acquisitions may be reduced to the extent the Company uses common stock or OP
Units as consideration for such purchases. The Company currently has with a
group of four commercial banks a $100 million credit facility, which terminates
in April 2002. The Company has two interest rate options under the credit
facility depending upon the length of time the advances are outstanding. For
advances which will be outstanding for less than a month, the advances bear
interest at prime. At June 30, 1997, prime was 8.5%. For advances which will
be outstanding for one month or more, the advances bear maximum interest at a
floating rate equal to LIBOR plus a spread of 1.125%. The spread will be
reduced upon the Company's receipt of specified credit ratings. There were
outstanding advances of $31.5 million and $35.5 million under the credit
facility, bearing interest at a weighted average rate of 6.89% and 7.07%, as of
July 25, 1997 and June 30, 1997, respectively.
For the period January 1, 1997 through July 25, 1997 the Company purchased four
golf courses for an aggregate initial investment of approximately $26
14
<PAGE>
million, which investment was financed by $11.4 million of cash from operations
and $14.6 million of advances under the Company's credit facility. In addition,
the Company has four golf courses under purchase contract for an aggregate
initial investment of approximately $33.3 million.
The limited partners of the Operating Partnership have the right, exercisable
once in any 12 month period, to sell up to one-third of their OP Units or
exchange up to the greater of 75,000 OP Units or one-third of their OP Units to
the Company. If the OP Units are sold for cash, the Company will have the
option to pay for such OP Units with available cash, borrowed funds or from the
proceeds of an offering of common stock. If the OP Units are exchanged for
shares of common stock, the Operating Partnership limited partner will receive
the number of shares of common stock having a market value at the time of
exercise equal to the fair market value of the OP Units being exchanged.
Other Data
- ----------
The Company believes that to facilitate a clear understanding of the historical
consolidated operating results, funds from operations should be examined in
conjunction with net income as presented in the Consolidated Financial
Statements. Funds from operations is considered by management as an appropriate
measure of the performance of an equity REIT because it is predicated on cash
flow analyses, which management believes is more reflective of the value of real
estate companies such as the Company rather than a measure predicated on
generally accepted accounting principles which gives effect to non-cash
expenditures such as depreciation. Funds from operations is generally defined
as net income (loss) plus certain non-cash items, primarily depreciation and
amortization. Funds from operations should not be considered as an alternative
to net income as an indication of the Company's performance or as an alternative
to cash flow as a measure of liquidity.
The funds from operations presented may not be comparable to funds from
operations for other REITs. The following table summarizes the Company's funds
from operations for the six months ended June 30, 1997 and 1996.
<TABLE>
<CAPTION>
Six months ended
June 30,
--------
(In thousands)
1997 1996
-------- -------
<S> <C> <C>
Net income $ 7,365 $ 6,373
Minority interest 5,710 5,451
Depreciation and amortization 11,885 8,298
Gain on sale of property (217) (25)
Excess land sales (448) -
Amortization - loan costs (107) (60)
Depreciation - corporate (37) (24)
------- -------
Funds from operations 24,151 20,013
Company's share of funds from operations 56.3% 53.9%
------- -------
Company's funds from operations $13,597 $10,787
======= =======
</TABLE>
15
<PAGE>
In order to maintain its qualification as a REIT for federal income tax
purposes, the Company is required to make distributions to its stockholders.
The Company's distributions to stockholders have been less than the total funds
from operations because the Company is obligated to make certain payments with
respect to principal debt and capital improvements. Management believes that to
continue the Company's growth, funds in excess of distributions, principal
reductions and capital improvement expenditures should be invested in assets
expected to generate returns on investment to the Company commensurate with the
Company's investment objectives and policies.
Inflation
- ---------
All the leases of the golf courses provide for base and participating rent
features. All of such leases are triple net leases requiring the lessees to pay
for all maintenance and repair, insurance, utilities and services, and, subject
to certain limited exceptions, all real estate taxes, thereby minimizing the
Company's exposure to increases in costs and operating expenses resulting from
inflation.
Seasonality
- -----------
Although the results of operations of the Company have not been significantly
impacted by seasonality, the Company generally expects that its results of
operations may be adversely affected as a function of reduced payments of
percentage rent in the first and fourth quarters of each year due to adverse
weather conditions and the scheduled closure of golf courses located in harsh
winter climates.
New Pronouncements Issued But Not Yet Effective
- -----------------------------------------------
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share." SFAS No.
128 supersedes and simplifies the existing computational guidelines under
Accounting Principles Board Opinion No. 15, "Earnings Per Share." It is
effective for financial statements issued for periods ending after December 15,
1997. Among other changes, SFAS No. 128 eliminates the presentation of primary
earnings per share ("EPS") and replaces it with basic EPS for which common stock
equivalents are not considered in the computation. It also revises the
computation of diluted EPS. Upon adoption of SFAS No. 128, there is no material
impact anticipated to the Company's earnings per share, financial condition, or
results of operations.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income,"
which establishes standards for reporting and display of comprehensive income
and its components. This statement requires a separate statement to report the
components of comprehensive income for each period reported. The provisions of
this statement are effective for fiscal years beginning after December 15, 1997.
Management believes that they currently do not have items that would require
presentation in a separate statement of comprehensive income.
In June 1997, the FASB also issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information," which establishes standards for the way
that public business enterprises report information about operating
16
<PAGE>
segments in annual financial statements and require that those enterprises
report selected information about operating segments in interim financial
reports issued to shareholders. This statement is effective for financial
statements for periods beginning after December 15, 1997. Management believes
this statement will not require expanded disclosure in the Company's financial
statements.
17
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of stockholders of the Company was held on May 6,
1997. The matters voted upon at the meeting were: (i) the election of
two directors to serve until the 2000 annual meeting of stockholders
and until their successors are elected and have qualified; and (ii)
the approval of the Company's 1997 Equity Participation Plan.
The results of the voting for election of Mr. Richard A. Archer and
Mr. David G. Price to the Board of Directors are as follows:
<TABLE>
<CAPTION>
Authority
Director Shares Cast for Withheld
-------- --------------- --------
<S> <C> <C>
Mr. Richard A. Archer 10,424,843 80,295
Mr. David G. Price 10,426,744 78,394
</TABLE>
In addition to the above directors, the following directors will
continue in office:
<TABLE>
<CAPTION>
Term
Name Expires
---- -------
<S> <C>
Mr. John C. Cushman, III 1999
Mr. Bruce Karatz 1998
Mr. Charles S. Paul 1999
Mr. Richard C. Price 1998
Mr. Edward R. Sause 1999
</TABLE>
The result of the voting for approval of the Company's 1997 Equity
Participation Plan is as follows:
<TABLE>
<S> <C>
For: 7,032,694
Against: 769,200
Abstain: 111,991
Broker No Vote: 2,591,253
</TABLE>
18
<PAGE>
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a)10.1 Form of Lease Agreement between the Company and AGC with respect to
the following golf courses: Southwyck, Dub's Dread, Kokopelli,
Summitpointe, Lake Wilderness, Links at Northfork, Hershey, Hershey
South, Canyon Oaks, Capitol City, Binks Forest, Port Royal, Shipyard,
Sugar Ridge, Wildhorse, Goshen Plantation, Hickory Heights, River's
Edge, Berry Creek, Creekside, Honey Bee, Wood Ranch, Monterey, Palm
Valley, Ruffled Feathers, Upland Hills, Oregon Golf, Golden Oaks,
Chesapeake, SeaCliff, Ancala, Arrowhead, BlackLake, Painted Desert,
Walden, Deer Creek, WestWinds, Stonecreek, Tamarack, Baymeadows,
Bradshaw Farm and Longwood; and Form of Lease Agreement between the
Company and Cobblestone Golf Group, Inc. with respect to the Carmel
Mountain golf course and the Sweetwater golf course (incorporated by
reference to Exhibit 10.3 to the Company's Annual Report on Form 10-K
dated February 29, 1996)
*10.2 National Golf Properties, Inc. Deferred Compensation Plan, effective
June 1, 1997
*10.3 National Golf Properties, Inc. Deferred Compensation Plan Trust
Agreement, dated as of June 1, 1997, by and between National Golf
Properties, Inc. and Imperial Trust Company
*10.4 Consulting Agreement, entered into as of the 30th day of April, 1997,
between National Golf Properties, Inc. and Edward R. Sause
11.1 Statement regarding computation of per share earnings
27 Financial Data Schedule
(b) None
* Management contract or compensatory plan or arrangement.
19
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
National Golf Properties, Inc.
Date: July 29, 1997 By: /s/ William C. Regan
--------------------
William C. Regan
Vice President - Controller
and Treasurer
20
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Description Page
- ---------- ----------- ------------
<S> <C> <C>
10.1 Form of Lease Agreement between the Company
and AGC with respect to the following golf
courses: Southwyck, Dub's Dread, Kokopelli,
Summitpointe, Lake Wilderness, Links at
Northfork, Hershey, Hershey South, Canyon
Oaks, Capitol City, Binks Forest, Port Royal,
Shipyard, Sugar Ridge, Wildhorse, Goshen
Plantation, Hickory Heights, River's Edge,
Berry Creek, Creekside, Honey Bee, Wood
Ranch, Monterey, Palm Valley, Ruffled Feathers,
Upland Hills, Oregon Golf, Golden Oaks,
Chesapeake, SeaCliff, Ancala, Arrowhead,
BlackLake, Painted Desert, Walden, Deer Creek,
WestWinds, Stonecreek, Tamarack, Baymeadows,
Bradshaw Farm and Longwood; and Form of Lease
Agreement between the Company and Cobblestone
Golf Group, Inc. with respect to the Carmel
Mountain golf course and the Sweetwater golf
course (incorporated by reference to Exhibit 10.3
to the Company's Annual Report on Form 10-K dated
February 29, 1996)
*10.2 National Golf Properties, Inc. Deferred
Compensation Plan, effective June 1, 1997
*10.3 National Golf Properties, Inc. Deferred
Compensation Plan Trust Agreement, dated as of
June 1, 1997, by and between National Golf
Properties, Inc. and Imperial Trust Company
*10.4 Consulting Agreement, entered into as of the
30th day of April, 1997, between National Golf
Properties, Inc. And Edward R. Sause
11.1 Statement regarding computation of per share
earnings
27 Financial Data Schedule
* Management contract or compensatory plan or
arrangement.
</TABLE>
21
<PAGE> EXHIBIT 10.2
NATIONAL GOLF PROPERTIES, INC.
Deferred Compensation Plan
Master Plan Document
================================================================================
EFFECTIVE JUNE 1, 1997
<PAGE>
NATIONAL GOLF PROPERTIES, INC.
Deferred Compensation Plan
Master Plan Document
================================================================================
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PURPOSE........................................................................1
ARTICLE I. Definitions.........................................................1
1.1. "Account Balance"....................................................1
1.2. "Annual Bonus".......................................................1
1.3. "Annual Company Contribution Amount".................................1
1.4. "Annual Company Matching Amount".....................................1
1.5. "Annual Deferral Amount".............................................1
1.6. "Annual Restricted Stock Amount".....................................2
1.7. "Annual Stock Option Amount".........................................2
1.8. "Base Annual Salary".................................................2
1.9. "Beneficiary"........................................................2
1.10. "Beneficiary Designation Form"......................................2
1.11. "Board".............................................................2
1.12. "Change in Control".................................................2
1.13. "Claimant"..........................................................3
1.14. "Code"..............................................................3
1.15. "Committee".........................................................3
1.16. "Company"...........................................................3
1.17. "Company Contribution Account"......................................3
1.18. "Company Matching Account"..........................................3
1.19. "Deduction Limitation"..............................................3
1.20. "Deferral Account"..................................................4
1.21. "Director"..........................................................4
1.22. "Directors Fees"....................................................4
1.23. "Disability"........................................................4
1.24. "Disability Benefit"................................................4
1.25. "Election Form".....................................................4
1.26. "Eligible Stock Option".............................................5
1.27. "Employee"..........................................................5
1.28. "Employer(s)".......................................................5
1.29. "ERISA".............................................................5
1.30. "First Plan Year"...................................................5
1.31. "401(k) Plan".......................................................5
1.32. "Quarterly Installment Method"......................................5
1.33. "Equity Plan".......................................................5
</TABLE>
- --------------------------------------------------------------------------------
-i-
<PAGE>
NATIONAL GOLF PROPERTIES, INC.
Deferred Compensation Plan
Master Plan Document
================================================================================
<TABLE>
<S> <C>
1.34. "Participant"........................................................5
1.35. "Plan" ..............................................................6
1.36. "Plan Agreement" ....................................................6
1.37. "Plan Year" .........................................................6
1.38. "Pre-Retirement Survivor Benefit" ...................................6
1.39. "Qualifying Gain"....................................................6
1.40. "Restricted Stock"...................................................6
1.41. "Restricted Stock Account"...........................................6
1.42. "Restricted Stock Amount"............................................7
1.43. "Retirement", "Retire(s)" or "Retired"...............................7
1.44. "Retirement Benefit" ................................................7
1.45. "Short-Term Payout"..................................................7
1.46. "Stock"..............................................................7
1.47. "Stock Option Account" ..............................................7
1.48. "Stock Option Amount"................................................7
1.49. "Termination Benefit"................................................8
1.50. "Termination of Employment"..........................................8
1.51. "Trust"..............................................................8
1.52. "Unforeseeable Financial Emergency"..................................8
1.53. "Years of Plan Participation"........................................8
1.54. "Years of Service"...................................................8
ARTICLE II. Selection, Enrollment, Eligibility.............................8
2.1. Selection By Committee................................................8
2.2. Enrollment Requirements...............................................9
2.3. Eligibility; Commencement of Participation............................9
2.4. Termination of Participation and/or Deferrals.........................9
ARTICLE III. Deferral Commitments/Company Matching/Crediting/Taxes.........9
3.1. Minimum Deferrals.....................................................9
3.2. Maximum Deferral.....................................................10
3.3. Election to Defer; Effect of Election Form...........................11
3.4. Withholding of Annual Deferral Amounts...............................12
3.5. Annual Company Contribution Amount...................................12
3.6. Annual Company Matching Amount.......................................13
3.7. Stock Option Amount..................................................13
3.8. Restricted Stock Amount..............................................13
3.9. Investment of Trust Assets...........................................13
3.10. Sources of Stock....................................................13
3.11. Vesting.............................................................13
- --------------------------------------------------------------------------------
</TABLE>
-ii-
<PAGE>
NATIONAL GOLF PROPERTIES, INC.
Deferred Compensation Plan
Master Plan Document
================================================================================
<TABLE>
<S> <C>
3.12. Crediting/Debiting of Account Balances............................14
3.13. FICA and Other Taxes..............................................17
3.14. Distributions.....................................................18
ARTICLE IV. Short-Term Payout; Unforeseeable Financial Emergencies;
Withdrawal Election.....................................................18
4.1. Short-Term Payout.................................................18
4.2. Other Benefits Take Precedence Over Short-Term....................19
4.3. Withdrawal Payout/Suspensions for Unforeseeable Financial
Emergencies.....................................................19
4.4. Withdrawal Election...............................................19
4.5. Distribution of Dividends.........................................20
ARTICLE V. Retirement Benefit...............................................20
5.1. Retirement Benefit................................................20
5.2. Payment of Retirement Benefit.....................................20
5.3. Death Prior to Completion of Retirement Benefit...................20
ARTICLE VI. Pre-Retirement Survivor Benefit.................................20
6.1. Pre-Retirement Survivor Benefit...................................20
6.2. Payment of Pre-Retirement Survivor Benefit........................21
ARTICLE VII. Termination Benefit............................................21
7.1. Termination Benefit...............................................21
7.2. Payment of Termination Benefit....................................21
ARTICLE VIII. Disability Waiver and Benefit.................................21
8.1. Disability Waiver.................................................21
8.2. Continued Eligibility; Disability Benefit.........................22
ARTICLE IX. Beneficiary Designation.........................................22
9.1. Beneficiary.......................................................22
9.2. Beneficiary Designation; Change; Spousal Consent..................22
9.3. Acknowledgment....................................................23
9.4. No Beneficiary Designation........................................23
9.5. Doubt as to Beneficiary...........................................23
9.6. Discharge of Obligations..........................................23
ARTICLE X. Leave of Absence.................................................23
10.1. Paid Leave of Absence.............................................23
10.2. Unpaid Leave of Absence...........................................23
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
NATIONAL GOLF PROPERTIES, INC.
Deferred Compensation Plan
Master Plan Document
================================================================================
<TABLE>
<S> <C>
ARTICLE XI. Termination, Amendment or Modification..........................24
11.1. Termination.......................................................24
11.2. Amendment.........................................................24
11.3. Effect of Payment.................................................25
ARTICLE XII. Administration.................................................25
12.1. Committee Duties..................................................25
12.2. Agents............................................................25
12.3. Binding Effect of Decisions.......................................25
12.4. Indemnity of Committee............................................25
12.5. Employer Information..............................................26
ARTICLE XIII. Other Benefits and Agreements.................................26
13.1. Coordination with Other Benefits..................................26
ARTICLE XIV. Claims Procedures..............................................26
14.1. Presentation of Claim.............................................26
14.2. Notification of Decision..........................................26
14.3. Review of a Denied Claim..........................................27
14.4. Decision on Review................................................27
14.5. Legal Action......................................................27
ARTICLE XV. Trust...........................................................27
15.1. Establishment of the Trust........................................27
15.2. Interrelationship of the Plan and the Trust.......................28
15.3. Distributions From the Trust......................................28
15.4. Stock Transferred to the Trust....................................28
ARTICLE XVI. Miscellaneous..................................................28
16.1. Status of Plan....................................................28
16.2. Unsecured General Creditor........................................28
16.3. Employer's Liability..............................................28
16.4. Nonassignability..................................................29
16.5. Not a Contract of Employment......................................29
16.6. Furnishing Information............................................29
16.7. Terms.............................................................29
16.8. Captions..........................................................29
16.9. Governing Law.....................................................29
16.10. Notice...........................................................30
16.11. Successors.......................................................30
</TABLE>
- --------------------------------------------------------------------------------
-iv-
<PAGE>
NATIONAL GOLF PROPERTIES, INC.
Deferred Compensation Plan
Master Plan Document
================================================================================
<TABLE>
<S> <C>
16.12. Spouse's Interest.................................................30
16.13. Validity..........................................................30
16.14. Incompetent.......................................................30
16.15. Court Order.......................................................30
16.16. Distribution in the Event of Taxation.............................31
16.17. Insurance.........................................................31
16.18. Legal Fees to Enforce Rights After Change in Control..............31
16.19. Status of Company as a REIT.......................................32
</TABLE>
- --------------------------------------------------------------------------------
-v-
<PAGE>
NATIONAL GOLF PROPERTIES, INC.
Deferred Compensation Plan
Master Plan Document
================================================================================
NATIONAL GOLF PROPERTIES, INC.
DEFERRED COMPENSATION PLAN
EFFECTIVE JUNE 1, 1997
PURPOSE
The purpose of this Plan is to provide specified benefits to a select
group of management and highly compensated Employees and Directors who
contribute materially to the continued growth, development and future business
success of National Golf Operating Partnership, L.P., a Delaware limited
partnership, and National Golf Properties, Inc., a Maryland corporation, and its
subsidiaries, if any, that sponsor this Plan. This Plan shall be unfunded for
tax purposes and for purposes of Title I of ERISA.
ARTICLE I.
DEFINITIONS
For purposes of this Plan, unless otherwise clearly apparent from the
context, the following phrases or terms shall have the following indicated
meanings:
1.1. "Account Balance" shall mean, with respect to a Participant, a credit on
the records of the Employer equal to the sum of (i) the Deferral Account
balance, (ii) the vested Company Contribution Account balance, (iii) the
vested Company Matching Account balance, (iv) the Stock Option Account
balance and (v) the Restricted Stock Account balance. The Account
Balance, and each other specified account balance, shall be a bookkeeping
entry only and shall be utilized solely as a device for the measurement
and determination of the amounts to be paid to a Participant, or his or
her designated Beneficiary, pursuant to this Plan.
1.2. "Annual Bonus" shall mean any compensation, in addition to Base Annual
Salary relating to services performed during any calendar year, whether
or not paid in such calendar year or included on the Federal Income Tax
Form W-2 for such calendar year, payable to a Participant as an Employee
under any Employer's annual bonus and cash incentive plans, excluding
stock options and restricted stock.
1.3. "Annual Company Contribution Amount" shall mean, for any one Plan Year,
the amount determined in accordance with Section 3.5.
1.4. "Annual Company Matching Amount" for any one Plan Year shall be the
amount determined in accordance with Section 3.6.
1.5. "Annual Deferral Amount" shall mean that portion of a Participant's Base
Annual Salary, Annual Bonus and Directors Fees that a Participant elects
to have, and is deferred, in accordance with Article 3, for any one Plan
Year. In the event of a Participant's
- --------------------------------------------------------------------------------
-1-
<PAGE>
NATIONAL GOLF PROPERTIES, INC.
Deferred Compensation Plan
Master Plan Document
================================================================================
Retirement, Disability (if deferrals cease in accordance with Section
8.1), death or a Termination of Employment prior to the end of a Plan
Year, such year's Annual Deferral Amount shall be the actual amount
withheld prior to such event.
1.6. "Annual Restricted Stock Amount" shall mean, with respect to a
Participant for any one Plan Year, the value of unvested restricted stock
under an Equity Plan surrendered by the Participant in exchange for a
Restricted Stock Account balance, in accordance with Section 3.8 of this
Plan.
1.7. "Annual Stock Option Amount" shall mean, with respect to a Participant
for any one Plan Year, the amount of Qualifying Gains deferred on
Eligible Stock Option exercise in accordance with Section 3.7 of this
Plan, calculated using the closing price of Stock, regular way, on the
New York Stock Exchange, or such other exchange on which the Stock may
then be listed, as of the end of the business day on which such Eligible
Stock Option is exercised, or if it is not exercised on a business day,
as of the end of the business day closest to the date of such exercise.
1.8. "Base Annual Salary" shall mean the annual cash compensation relating to
services performed during any calendar year, whether or not paid in such
calendar year or included on the Federal Income Tax Form W-2 for such
calendar year, excluding bonuses, commissions, overtime, fringe benefits,
stock options, relocation expenses, incentive payments, non-monetary
awards, directors fees and other fees, automobile and other allowances
paid to a Participant for employment services rendered (whether or not
such allowances are included in the Employee's gross income). Base Annual
Salary shall be calculated before reduction for compensation voluntarily
deferred or contributed by the Participant pursuant to all qualified or
non-qualified plans of any Employer and shall be calculated to include
amounts not otherwise included in the Participant's gross income under
Code Sections 125, 402(e)(3), 402(h), or 403(b) pursuant to plans
established by any Employer; provided, however, that all such amounts
will be included in compensation only to the extent that, had there been
no such plan, the amount would have been payable in cash to the Employee.
1.9. "Beneficiary" shall mean one or more persons, trusts, estates or other
entities, designated in accordance with Article 9, that are entitled to
receive benefits under this Plan upon the death of a Participant.
1.10. "Beneficiary Designation Form" shall mean the form established from time
to time by the Committee that a Participant completes, signs and returns
to the Committee to designate one or more Beneficiaries.
1.11. "Board" shall mean the board of directors of the Company.
1.12. "Change in Control" shall mean the first to occur of any of the following
stockholder-approved transactions to which the Company is a party:
- --------------------------------------------------------------------------------
-2-
<PAGE>
NATIONAL GOLF PROPERTIES, INC.
Deferred Compensation Plan
Master Plan Document
================================================================================
(a) a merger or consolidation in which the Company is not the surviving
entity, except for a transaction the principal of which is to change
the State in which the Company is incorporated, form a holding company
or effect a similar reorganization as to form whereupon this Plan and
all obligations hereunder are assumed by the successor entity;
(b) the sale, transfer, exchange or other disposition of all or
substantially all of the assets of the Company, in complete
liquidation or dissolution of the Company in a transaction not covered
by the exception to clause (a), above; or
(c) any reverse merger in which the Company is the surviving entity but in
which securities possessing more than fifty percent (50%) of the total
combined voting power of the Company's outstanding securities are
transferred or issued to a person or persons different from those who
held such securities immediately prior to such merger.
1.13. "Claimant" shall have the meaning set forth in Section 14.1.
1.14. "Code" shall mean the Internal Revenue Code of 1986, as it may be amended
from time to time.
1.15. "Committee" shall mean the committee described in Article 12.
1.16. "Company" shall mean National Golf Properties, Inc., a Maryland
corporation, and any successor to all or substantially all of the
Company's assets or business.
1.17. "Company Contribution Account" shall mean (i) the sum of the Participant's
Annual Company Contribution Amounts, plus (ii) amounts credited in
accordance with all the applicable crediting provisions of this Plan that
relate to the Participant's Company Contribution Account, less (iii) all
distributions made to the Participant or his or her Beneficiary pursuant
to this Plan that relate to the Participant's Company Contribution
Account.
1.18. "Company Matching Account" shall mean (i) the sum of all of a
Participant's Annual Company Matching Amounts, plus (ii) amounts credited
in accordance with all the applicable crediting provisions of this Plan
that relate to the Participant's Company Matching Account, less (iii) all
distributions made to the Participant or his or her Beneficiary pursuant
to this Plan that relate to the Participant's Company Matching Account.
1.19. "Deduction Limitation" shall mean the following described limitation on a
benefit that may otherwise be distributable pursuant to the provisions of
this Plan. Except as otherwise provided, this limitation shall be applied
to all distributions that are "subject to the Deduction Limitation" under
this Plan. If an Employer determines in good faith prior
- --------------------------------------------------------------------------------
-3-
<PAGE>
NATIONAL GOLF PROPERTIES, INC.
Deferred Compensation Plan
Master Plan Document
================================================================================
to a Change in Control that there is a reasonable likelihood that any
compensation paid to a Participant for a taxable year of the Employer
would not be deductible by the Employer solely by reason of the limitation
under Code Section 162(m), then to the extent deemed necessary by the
Employer to ensure that the entire amount of any distribution to the
Participant pursuant to this Plan prior to the Change in Control is
deductible, the Employer may defer all or any portion of a distribution
under this Plan. Any amounts deferred pursuant to this limitation shall
continue to be credited/debited with additional amounts in accordance with
Section 3.11 below, even if such amount is being paid out in installments.
The amounts so deferred and amounts credited thereon shall be distributed
to the Participant or his or her Beneficiary (in the event of the
Participant's death) at the earliest possible date, as determined by the
Employer in good faith, on which the deductibility of compensation paid or
payable to the Participant for the taxable year of the Employer during
which the distribution is made will not be limited by Section 162(m), or
if earlier, the effective date a Change in Control. Notwithstanding
anything to the contrary in this Plan, the Deduction Limitation shall not
apply to any distributions made after a Change in Control.
1.20 "Deferral Account" shall mean (i) the sum of all of a Participant's Annual
Deferral Amounts, plus (ii) amounts credited in accordance with all the
applicable crediting provisions of this Plan that relate to the
Participant's Deferral Account, less (iii) all distributions made to the
Participant or his or her Beneficiary pursuant to this Plan that relate
to his or her Deferral Account.
1.21. "Director" shall mean any member of the board of directors of any
Employer.
1.22. "Directors Fees" shall mean the annual fees paid by any Employer,
including retainer fees and meetings fees, as compensation for serving on
the board of directors.
1.23. "Disability" shall mean a period of disability during which a Participant
qualifies for permanent disability benefits under the Participant's
Employer's long-term disability plan, or, if a Participant does not
participate in such a plan, a period of disability during which the
Participant would have qualified for permanent disability benefits under
such a plan had the Participant been a participant in such a plan, as
determined in the sole discretion of the Committee. If the Participant's
Employer does not sponsor such a plan, or discontinues to sponsor such a
plan, Disability shall be determined by the Committee in its sole
discretion.
1.24. "Disability Benefit" shall mean the benefit set forth in Article 8.
1.25. "Election From" shall mean the form established from time to time by the
Committee that a Participant completes, signs and returns to the
Committee to make an election under the Plan.
- -----------------------------------------------------------------------------
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NATIONAL GOLF PROPERTIES, INC.
Deferred Compensation Plan
Master Plan Document
================================================================================
1.26. "Eligible Stock Option" shall mean one or more qualified or non-qualified
stock option(s) selected by the Committee in its sole discretion and
exercisable under an Equity Plan.
1.27. "Employee" shall mean a person who is an employee of any Employer.
1.28. "Employer(s)" shall mean National Golf Properties Operating Partnership,
L.P., the Company and/or any of its subsidiaries (now in existence or
hereafter formed or acquired) that have been selected by the Board to
participate in the Plan and have adopted the Plan as a sponsor.
1.29. "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as it may be amended from time to time.
1.30. "First Plan Year" shall mean the period beginning June 1, 1997 and ending
December 31, 1997.
1.31. "401(k) Plan" shall be that certain National Golf Operating Partnership,
L.P. Employee Savings Plan, effective October 1, 1993, adopted by the
Company.
1.32. "Quarterly Installment Method" shall be a quarterly installment payment
over the number of quarters selected by the Participant in accordance
with this Plan, calculated as follows: The Account Balance of the
Participant shall be calculated as of the close of business three
business days prior to the last business day of the quarter. The
quarterly installment shall be calculated by multiplying this balance by
a fraction, the numerator of which is one, and the denominator of which
is the remaining number of quarterly payments due the Participant. By way
of example, if the Participant elects a 40 quarter Quarterly Installment
Method, the first payment shall be 1/40 of the Account Balance,
calculated as described in this definition. The following quarter, the
payment shall be 1/39 of the Account Balance, calculated as described in
this definition. Each quarterly installment shall be paid on or as soon
as practicable after the last business day of the applicable quarter.
1.33. "Equity Plan" shall mean any stock option or other incentive compensation
plan which is maintained by the Company or National Golf Operating
Partnership, L.P. and which provides for grants of stock options and/or
restricted stock.
1.34. "Participant" shall mean any Employee or Director (i) who is selected to
participate in the Plan, (ii) who elects to participate in the Plan,
(iii) who signs a Plan Agreement, an Election Form and a Beneficiary
Designation Form, (iv) whose signed Plan Agreement, Election Form and
Beneficiary Designation Form are accepted by the Committee, (v) who
commences participation in the Plan, and (vi) whose Plan Agreement has
not terminated. A spouse or former spouse of a Participant shall not be
treated as a Participant in the Plan or have an account balance under the
Plan, even if he or she has an
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NATIONAL GOLF PROPERTIES, INC.
Deferred Compensation Plan
Master Plan Document
================================================================================
interest in the Participant's benefits under the Plan as a result of
applicable law or property settlements resulting from legal separation or
divorce.
1.35. "Plan" shall mean the Company's Deferred Compensation Plan, which shall
be evidenced by this instrument and by each Plan Agreement, as they may
be amended from time to time.
1.36. "Plan Agreement" shall mean a written agreement, as may be amended from
time to time, which is entered into by and between an Employer and a
Participant. Each Plan Agreement executed by a Participant and the
Participant's Employer shall provide for the entire benefit to which such
Participant is entitled under the Plan; should there be more than one
Plan Agreement, the Plan Agreement bearing the latest date of acceptance
by the Employer shall supersede all previous Plan Agreements in their in
their entirety and shall govern such entitlement. The terms of any Plan
Agreement may be different for any Participant, and any Plan Agreement
may provide additional benefits not set forth in the Plan or limit the
benefits otherwise provided under the Plan; provided, however, that any
such additional benefits or benefit limitations must be agreed to by both
the Employer and the Participant.
1.37. "Plan Year" shall, except for the First Plan Year, mean a period
beginning on January 1 of each calendar year and continuing through
December 31 of such calendar year.
1.38. "Pre-Retirement Survivor Benefit" shall mean the benefit set forth in
Article 6.
1.39. "Qualifying Gain" shall mean the value accrued upon exercise of an
Eligible Stock Option (i) using a Stock-for-Stock payment method and (ii)
having an aggregate fair market value in excess of the total Stock
purchase price necessary to exercise the option. In other words, the
Qualifying Gain upon exercise of an Eligible Stock Option equals the
total market value of the shares (or share equivalent units) acquired
minus the total stock purchase price. For example, assume a Participant
elects to defer the Qualifying Gain accrued upon exercise of an Eligible
Stock Option to purchase 1000 shares of Stock at an exercise price of $20
per share, when Stock has a current fair market value of $25 per share.
Using the Stock-for-Stock payment method, the Participant would deliver
800 shares of Stock (worth $20,000) to exercise the Eligible Stock Option
and receive, in return, 800 shares of Stock plus a Qualifying Gain (in
this case, in the form of an unfunded and unsecured promise to pay money
or property in the future, as reflected by a credit of 800 shares of
Stock to the Participant's Stock Option Account) equal to $5,000 (i.e.,
the current value of the remaining 200 shares of Stock).
1.40. "Restricted Stock" shall mean unvested shares of restricted Stock which
are or have been awarded to a Participant under an Equity Plan.
1.41. "Restricted Stock Account" shall mean (i) the sum of the Participant's
Annual Restricted Stock Amounts, plus (ii) amounts credited/debited in
accordance with all the applicable
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NATIONAL GOLF PROPERTIES, INC.
Deferred Compensation Plan
Master Plan Document
================================================================================
crediting/debiting provisions of this Plan that relate to the
Participant's Restricted Stock Account, less (iii) all distributions made
to the Participant or his or her Beneficiary pursuant to this Plan that
relate to the Participant's Restricted Stock Account.
1.42. "Restricted Stock Amount" shall mean, for any grant of Restricted Stock,
the amount of such Restricted Stock deferred in accordance with Section
3.8 of this Plan, calculated using the closing price of Stock, regular
way, on the New York Stock Exchange or such other exchange on which the
Stock may then be listed, as of the end of the business day closest to the
date such Restricted Stock would otherwise vest, but for the election to
defer.
1.43. "Retirement", "Retire(s)" or "Retired" shall mean, with respect to an
Employee, severance from employment from all Employers for any reason
other than a leave of absence, death or Disability on or after the earlier
of the attainment of (a) age sixty-five (65) of (b) age fifty (50) with
ten (10) Years of Service; and shall mean with respect to a Director who
is not an Employee, severance of his or her directorships with all
Employers on or after the later of (y) the attainment of age seventy (70),
or (z) in the sole discretion of the Committee, an age later than age
seventy (70). If a Participant is both an Employee and a Director,
Retirement shall not occur until he or she Retires as both an Employee and
a Director, which Retirement shall be deemed to be a Retirement as a
Director; provided, however, that such a Participant may elect, at least
three years prior to Retirement and in accordance with the policies and
procedures established by the Committee, to Retire for purposes of this
Plan at the time he or she Retires as an Employee, which Retirement shall
be deemed to be a Retirement as an Employee.
1.44. "Retirement Benefit" shall mean the benefit set forth in Article 5.
1.45. "Short-Term Payout" shall mean the payout set forth in Section 4.1.
1.46. "Stock" shall mean National Golf Properties, Inc., common stock, $.01 par
value, or any other equity securities of the Company designated by the
Committee.
1.47. "Stock Option Account" shall mean the sum of (i) the Participant's Annual
Stock Option Amounts, plus (ii) amounts credited/debited in accordance
with all the applicable crediting/debiting provisions of this Plan that
relate to the Participant's Stock Option Account, less (iii) all
distributions made to the Participant or his or her Beneficiary pursuant
to this Plan that relate to the Participant's Stock Option Account.
1.48. "Stock Option Amount" shall mean, for any Eligible Stock Option, the
amount of Qualifying Gains deferred in accordance with Section 3.7 of this
Plan, calculated using the closing price of Stock, regular way, on the New
York Stock Exchange or such other exchange on which the Stock is then
listed, as of the end of the business day closest to the date of exercise
of such Eligible Stock Option.
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NATIONAL GOLF PROPERTIES, INC.
Deferred Compensation Plan
Master Plan Document
================================================================================
1.49. "Termination Benefit" shall mean the benefit set forth in Article 7.
1.50. "Termination of Employment" shall mean the severing of employment with
all Employers, or service as a Director of all Employers, voluntarily or
involuntarily, for any reason other than Retirement, Disability, death or
an authorized leave of absence. If a Participant is both an Employee and
a Director, a Termination of Employment shall occur only upon the
termination of the last position held; provided, however, that such a
Participant may elect, at least three years before Termination of
Employment and in accordance with the policies and procedures established
by the Committee, to be treated for purposes of this Plan as having
experienced a Termination of Employment at the time he or she ceases
employment with an Employer as an Employee.
1.51. "Trust" shall mean one or more trusts established pursuant to that
certain Master Trust Agreement, dated as of June 1, 1997 between the
Company and the trustee named therein, as amended from time to time.
1.52. "Unforeseeable Financial Emergency" shall mean an unanticipated emergency
that is caused by an event beyond the control of the Participant that
would result in severe financial hardship to the Participant resulting
from (i) a sudden and unexpected illness or accident of the Participant
or a dependent of the Participant, (ii) a loss of the Participant's
property due to casualty, or (iii) such other extraordinary and
unforeseeable circumstances arising as a result of events beyond the
control of the Participant, all as determined in the sole discretion of
the Committee.
1.53. "Years of Plan Participation" shall mean the total number of full Plan
Years a Participant has been a Participant in the Plan prior to his or
her Termination of Employment (determined without regard to whether
deferral elections have been made by the Participant for any Plan Year).
Any partial year shall not be counted. Notwithstanding the previous
sentence, a Participant's first Plan Year of participation shall be
treated as a full Plan Year for purposes of this definition, even if it
is only a partial Plan Year of participation.
1.54. "Years of Service" shall mean the total number of full years of "Vesting
Service," as defined in the 401(k) Plan and as it may be amended from
time to time.
ARTICLE II.
SELECTION, ENROLLMENT, ELIGIBILITY
2.1 SELECTION BY COMMITTEE. Participation in the Plan shall be limited to a
----------------------
select group of management and highly compensated Employees and Directors
of the Employers, as determined by the Committee in its sole discretion.
From that group, the Committee shall select, in its sole discretion,
Employees and Directors to participate in the Plan.
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NATIONAL GOLF PROPERTIES, INC.
Deferred Compensation Plan
Master Plan Document
================================================================================
2.2. ENROLLMENT REQUIREMENTS. As a condition to participation, each selected
-----------------------
Employee or Director shall complete, execute and return to the Committee a
Plan Agreement, an Election Form and Beneficiary Designation Form, all
within 30 days after he or she is selected to participate in the Plan. In
addition, the Committee shall establish from time to time such other
enrollment requirements as it determines in its sole discretion are
necessary.
2.3. ELIGIBILITY; COMMENCEMENT OF PARTICIPATION. Provided an Employee or
------------------------------------------
Director selected to participate in the Plan has met all enrollment
requirements set forth in this Plan and required by the Committee,
including returning all required documents to the Committee within the
specified time period, that Employee or Director shall commence
participation in the Plan on the first day of the month following the month
in which the Employee or Director completes all enrollment requirements. If
an Employee or a Director fails to meet all such requirements within the
period required, in accordance with Section 2.2, that Employee or Director
shall not be eligible to participate in the Plan until the first day of the
Plan Year following the delivery to and acceptance by the Committee of the
required documents.
2.4. TERMINATION OF PARTICIPATION AND/OR DEFERRALS. If the Committee determines
---------------------------------------------
in good faith that a Participant no longer qualifies as a member of a
select group of management or highly compensated employees, as membership
in such group is determined in accordance with Sections 201(2), 301(a)(3)
and 401(a)(1) of ERISA, the Committee shall have the right, in its sole
discretion, to (i) terminate any deferral election the Participant has made
for the remainder of the Plan Year in which the Participant's membership
status changes, (ii) prevent the Participant from making future deferral
elections and/or (iii) immediately distribute the Participant's then
Account Balance as a Termination Benefit and terminate the Participant's
participation in the Plan.
ARTICLE III.
DEFERRAL COMMITMENTS/COMPANY MATCHING/CREDITING/TAXES
3.1 MINIMUM DEFERRALS.
-----------------
(a) BASE ANNUAL SALARY, ANNUAL BONUS AND DIRECTOR'S FEES. For each Plan
----------------------------------------------------
Year, a Participant may elect to defer, as his or her Annual Deferral
Amount, Base Annual Salary, Annual Bonus and/or Director's Fees in
the following minimum amounts for each deferral elected:
DEFERRAL MINIMUM AMOUNT
-------- --------------
Base Annual Salary $2,000
Annual Bonus $2,000
Directors Fees $ 0
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NATIONAL GOLF PROPERTIES, INC.
Deferred Compensation Plan
Master Plan Document
================================================================================
If an election is made for less than stated minimum amounts, or
if no election is made, the amount deferred shall be zero.
(b) SHORT PLAN YEAR. Notwithstanding the foregoing, if a Participant
---------------
first becomes a Participant after the first day of a Plan Year, or in
the case of the first Plan Year of the Plan itself, the minimum Base
Annual Salary deferral shall be an amount equal to the minimum set
forth above, multiplied by a fraction, the numerator of which is the
number of complete months remaining in the Plan Year and the
denominator of which is 12.
(c) STOCK OPTION AMOUNT. For each Eligible Stock Option, a Participant
-------------------
may elect to defer, as his or her Stock Option Amount, the following
minimum percentage of Qualifying Gain with respect to exercise of the
Eligible Stock Option:
DEFERRAL MINIMUM
-------- -------
Qualifying Gain 10%
provided, however, that such Stock Option Amount shall be no less
than the lesser of $20,000 or 100% of such Qualifying Gain.
(d) RESTRICTED STOCK AMOUNT. For Restricted Stock, a Participant may
-----------------------
elect to defer, as his or her Restricted Stock Amount, the following
minimum percentage of the Participant's Restricted Stock:
DEFERRAL MINIMUM
-------- -------
RESTRICTED STOCK 10%
provided, however, that the Annual Restricted Stock Amount shall be
no less than the lesser of $20,000 or 100% of the Participant's
Restricted Stock.
3.2 MAXIMUM DEFERRAL
----------------
(a) BASE ANNUAL SALARY, ANNUAL BONUS AND DIRECTORS FEES. For each Plan
---------------------------------------------------
Year, a Participant may elect to defer, as his or her Annual Deferral
Amount, Base Annual Salary, Annual Bonus and/or Directors Fees up to
the following maximum percentages for each deferral elected:
DEFERRAL MAXIMUM AMOUNT
-------- --------------
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NATIONAL GOLF PROPERTIES, INC.
Deferred Compensation Plan
Master Plan Document
================================================================================
Base Annual Salary 100%
Annual Bonus 100%
Directors Fees 100%
(b) Notwithstanding the foregoing, if a Participant first becomes a
Participant after the first day of a Plan Year, or in the case of
the first Plan Year of the Plan itself, the maximum Annual Deferral
Amount, with respect to Base Annual Salary, Annual Bonus and
Directors Fees shall be limited to the amount of compensation not
yet earned by the Participant as of the date the Participant submits
a Plan Agreement and Election Form to the Committee for acceptance.
(c) For each Eligible Stock Option, a Participant may elect to defer, as
his or her Stock Option Amount, Qualifying Gain up to the following
maximum percentage with respect to exercise of the Eligible Stock
Option:
Deferral Maximum Percentage
-------- ------------------
Qualifying Gain 100%
(d) Stock Option Amounts may also be limited by other terms or conditions
set forth in the stock option plan or agreement under which such
options are granted.
(e) A Participant may elect to defer up to 100% of his or her Restricted
Stock.
3.3 Election to Defer; Effect of Election Form.
------------------------------------------
(a) First Plan Year. In connection with a Participant's commencement of
---------------
participation in the Plan, the Participant shall make an irrevocable
deferral election for the Plan Year in which the Participant commences
participation in the Plan, along with such other elections as the
Committee deems necessary or desirable under the Plan. For these
elections to be valid, the Election Form must be completed and signed
by the Participant, timely delivered to the Committee (in accordance
with Section 2.2 above) and accepted by the Committee.
(b) Subsequent Plan Years. For each succeeding Plan Year, an irrevocable
---------------------
deferral election for that Plan Year, and such other elections as the
Committee deems necessary or desirable under the Plan, shall be made
by timely delivering to the Committee, in accordance with its rules
and procedures, before the end of the Plan Year preceding the Plan
Year for which the election is made, a new Election Form. If no such
Election Form is timely delivered for a Plan Year, the Annual Deferral
Amount shall be zero for that Plan Year.
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NATIONAL GOLF PROPERTIES, INC.
Deferred Compensation Plan
Master Plan Document
================================================================================
(c) STOCK OPTION DEFERRAL. For an election to defer gain upon an Eligible
---------------------
Stock Option exercise to be valid: (i) a separate Election Form must
be completed and signed by the Participant which designates the
Eligible Stock Option; (ii) the Election Form must be timely delivered
to the Committee and accepted by the Committee at least six (6) months
prior to the date the Participant elects to exercise the Eligible
Stock Option; (iii) the Eligible Stock Option must be exercised using
an actual or attestation Stock-for-Stock payment method; and (iv) the
Stock actually or constructively delivered by the Participant to
exercise the Eligible Stock Option must have been owned by the
Participant during the entire six (6) month period prior to its
delivery.
(d) RESTRICTED STOCK. For an election to defer Restricted Stock Amounts to
----------------
be valid: (i) a separate irrevocable Election Form must be completed
and signed by the Participant, which designates such Restricted Stock;
(ii) such Election Form must be timely delivered to the Committee and
accepted by the Committee during the periods specified in clause
(iii), below, and (iii) with respect to the first Plan Year of the
Plan, such Restricted Stock must be surrendered to the Company at
least two (2) months prior to the date such Restricted Stock would
vest under the terms of an Equity Plan but for the election to defer
and with respect to subsequent Plan Years of the Plan, at least six
(6) months prior to such vesting date, but for the election to defer.
3.4. WITHHOLDING OF ANNUAL DEFERRAL AMOUNTS. For each Plan Year, the Base
--------------------------------------
Annual Salary portion of the Annual Deferral Amount shall be withheld from
each regularly scheduled Base Annual Salary payroll in equal amounts, as
adjusted from time to time for increases and decreases in Base Annual
Salary. The Annual Bonus and/or Directors Fees portion of the Annual
Deferral Amount shall be withheld at the time the Annual Bonus or
Directors Fees are or otherwise would be paid to the Participant, whether
or not this occurs during the Plan Year itself.
3.5. ANNUAL COMPANY CONTRIBUTION AMOUNT. For each Plan Year, an Employer, in
----------------------------------
its sole discretion, may, but is not required to, credit any amount it
desires to any Participant's Company Contribution Account under this Plan,
which amount shall be for that Participant the Annual Company Contribution
Amount for that Plan Year. The amount so credited to a Participant may be
smaller or larger than the amount credited to any other Participant, and
the amount credited to any Participant for a Plan Year may be zero, even
though one or more other Participants receive an Annual Company
Contribution Amount for that Plan Year. The Annual Company Contribution
Amount, if any, shall be credited as of the last day of the Plan Year. If
a Participant is not employed by an Employer as of the last day of a Plan
Year other than by reason of his or her Retirement or death while
employed, the Annual Company Contribution Amount for that Plan Year shall
be zero.
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NATIONAL GOLF PROPERTIES, INC.
Deferred Compensation Plan
Master Plan Document
================================================================================
3.6. ANNUAL COMPANY MATCHING AMOUNT. A Participant's Annual Company Matching
------------------------------
Amount for any Plan Year shall be equal to the maximum amount which an
Employer could contribute to the Participant's account in the 401(k) Plan,
reduced by the amount of any matching contributions made to the 401(k)
Plan on his or her behalf for the plan year of the 401(k) Plan that
corresponds to the Plan Year. If a Participant is not employed by an
Employer, or is no longer providing services as a Director, as of the last
day of a Plan Year other than by reason of his or her Retirement or death,
the Annual Company Matching Amount for such Plan Year shall be zero. In
the event of Retirement or death, a Participant shall be credited with the
Annual Company Matching Amount for the Plan Year in which he or she
Retires or dies.
3.7. STOCK OPTION AMOUNT. Subject to any terms and conditions imposed by the
-------------------
Committee, Participants may elect to defer, under the Plan, Qualifying
Gains attributable to an Eligible Stock Option exercise. Stock Option
Amounts shall be credited/debited to the Participant on the books of the
Employer at the time Stock would otherwise have been delivered to the
Participant pursuant to the Eligible Stock Option exercise, but for the
election to defer.
3.8. RESTRICTED STOCK AMOUNT. Subject to any terms and conditions imposed by
-----------------------
the Committee, Participants may elect to defer, under the Plan, Restricted
Stock Amounts. Restricted Stock Amounts shall be credited/debited to the
Participant on the books of the Employer in connection with such an
election at the time the Restricted Stock would otherwise vest under the
terms of an Equity Plan and the Participant's Restricted Stock Agreement
with respect to the Restricted Stock, but for the election to defer.
3.9. INVESTMENT OF TRUST ASSETS. The Trustee of the Trust shall be authorized,
--------------------------
upon written instructions received from the Committee or investment
manager appointed by the Committee, to invest and reinvest the assets of
the Trust in accordance with the applicable Trust Agreement, including the
disposition of Stock and reinvestment of the proceeds in one or more
investment vehicles designated by the Committee.
3.10. SOURCES OF STOCK. If Stock is credited under the Plan in the Trust in
------------------
connection with an Eligible Stock Option exercise or in connection with a
deferral of Restricted Stock, the shares so credited shall be deemed to
have originated, and shall be counted against the number of shares
reserved under the Equity Plan under which they were granted.
3.11. VESTING.
-------
(a) A Participant shall at all times be 100% vested in his or her Deferral
Account, Stock Option Account and Restricted Stock Account.
(b) A Participant shall be vested in his or her Company Contribution
Account in accordance with the vesting schedule contained in the
Participant's Plan Agreement:
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NATIONAL GOLF PROPERTIES, INC.
Deferred Compensation Plan
Master Plan Document
================================================================================
(c) A Participant shall be vested in his or her Company Matching Account
as follows: (i) with respect to all benefits under this Plan other
than the Termination Benefit, a Participant's vested Company Matching
Account shall equal 100% of such Participant's Company Matching
Account; and (ii) with respect to the Termination Benefit, a
Participant's Company Matching Account shall vest on the basis of the
Participant's Years of Service at the time the Participant experiences
a Termination of Employment, in accordance with the following
schedule:
<TABLE>
<CAPTION>
YEARS OF SERVICE
AT DATE OF VESTED PERCENTAGE OF
TERMINATION OF EMPLOYMENT COMPANY MATCHING ACCOUNT
------------------------- ------------------------
<S> <C>
Less than 1 year 0%
1 year or more, but less than 2 20%
2 years or more, but less than 3 40%
3 years or more, but less than 4 60%
4 years or more, but less than 5 80%
5 years or more 100%
</TABLE>
(d) Notwithstanding anything to the contrary contained in this Section
3.10, in the event of a Change in Control, a Participant's Company
Contribution Account and Company Matching Account shall immediately
become 100% vested (if it is not already vested in accordance with the
above vesting schedules).
(e) Notwithstanding subsection (d), the vesting schedule for a
Participant's Company Contribution Account and Company Matching
Account shall not be accelerated to the extent that the Committee
determines that such acceleration would cause the deduction
limitations of Section 280G of the Code to become effective. In the
event that all of a Participant's Company Contribution Account and/or
Company Matching Account is not vested pursuant to such a
determination, the Participant may request independent verification of
the Committee's calculations with respect to the application of
Section 280G. In such case, the Committee must provide to the
Participant within 15 business days of such a request an opinion from
a nationally recognized accounting firm selected by the Participant
(the "Accounting Firm"). The opinion shall state the Accounting Firm's
opinion that any limitation in the vested percentage hereunder is
necessary to avoid the limits of Section 280G and contain supporting
calculations. The cost of such opinion shall be paid for by the
Company.
3.12. CREDITING/DEBITING OF ACCOUNT BALANCES. In accordance with, and subject
--------------------------------------
to, the rules and procedures that are established from time to time by
the Committee, in its sole
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NATIONAL GOLF PROPERTIES, INC.
Deferred Compensation Plan
Master Plan Document
================================================================================
discretion, amounts shall be credited or debited to a Participant's Account
Balance in accordance with the following rules:
(a) Election of Measurement Funds. A Participant, in connection with his
-----------------------------
or her initial deferral election in accordance with Section 3.3(a)
above, shall elect, on the Election Form, one or more Measurement
Fund(s) (as described in Section 3.12 (c) below) to be used to
determine the additional amounts to be credited to his or her Account
Balance for the first calendar quarter or portion thereof in which the
Participant commences participation in the Plan and continuing
thereafter for each subsequent calendar quarter in which the
Participant participates in the Plan, unless changed in accordance
with the next sentence. Commencing with the first calendar quarter
that follows the Participant's commencement of participation in the
Plan and continuing thereafter for each subsequent calendar quarter in
which the Participant participates in the Plan, no later than the next
to last business day of the calendar quarter, the Participant may (but
is not required to) elect, by submitting an Election Form to the
Committee that is accepted by the Committee, to add or delete one or
more Measurement Fund(s) to be used to determine the additional
amounts to be credited to his or her Account Balance, or to change the
portion of his or her Account Balance allocated to each previously or
newly elected Measurement Fund. If an election is made in accordance
with the previous sentence, it shall apply to the next calendar
quarter and continue thereafter for each subsequent calendar quarter
in which the Participant participates in the Plan, unless changed in
accordance with the previous sentence.
(b) Proportionate Allocation. In making any election described in Sentence
------------------------
3.12 (a) above, the Participant shall specify on the Election Form, in
increments of five percentage points (5%), the percentage of his or
her Account Balance to be allocated to a Measurement Fund (as if the
Participant was making an investment in that Measurement Fund with
that portion of his or her Account Balance).
(c) Measurement Funds. The Participant may elect one or more of the
-----------------
following measurement funds, or portfolios or subfunds within such
funds (collectively, the "Measurement Funds") as may be selected and
made available by the Committee for the purpose of crediting
additional amounts to his or her Account Balance:
(1) Vanguard Equity Income Fund;
(2) Vanguard Index Trust;
(3) Vanguard Money Market Portfolios;
(4) Vanguard Balanced Index Fund;
(5) Vanguard International Growth Portfolio;
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NATIONAL GOLF PROPERTIES, INC.
Deferred Compensation Plan
Master Plan Document
================================================================================
(6) Company Stock Measurement Fund, with dividends reinvested;
(7) Company Stock Measurement Fund, with dividends distributed on
a current basis.
As necessary, the Committee may, in its sole discretion, discontinue,
substitute or add a Measurement Fund. Each such action will take effect
as of the first day of the calendar quarter that follows by thirty (30)
days the day on which the Committee gives Participants advance written
notice of such change.
(d) Crediting or Debiting Method. The performance of each elected
----------------------------
Measurement Fund (either positive or negative) will be determined by the
Committee, in its sole discretion, based on the performance of the
Measurement Funds themselves. A Participant's Account Balance shall be
credited or debited on a daily basis based on the performance of each
Measurement Fund selected by the Participant, as determined by the
--------------------
Committee in its sole discretion, as though (i) a Participant's Account
--------------------------------
Balance were invested in the Measurement Fund(s) selected by the
Participant, in the percentages applicable to such calendar quarter, as
of the close of business on the first business day of such calendar
quarter, at the closing price on such date; (ii) the portion of the
Annual Deferral Amount that was actually deferred during any calendar
quarter were invested in the Measurement Fund(s) selected by the
Participant, in the percentages applicable to such calendar quarter, no
later than the close of business on the first day of the month after the
day on which such amounts are actually deferred from the Participant's
Base Annual Salary through reductions in his or her payroll, at the
closing price on such date; and (iii) any distribution made to a
Participant that decreases such Participant's Account Balance ceased
being invested in the Measurement Fund(s), in the percentages applicable
to such calendar quarter, no earlier than three business days prior to
the distribution, at the closing price on such date. The Participant's
Annual Company Matching Amount shall be credited to his or her Company
Matching Account for purposes of this Section 3.12 (d) as of the close of
business on the first business day in February of the Plan Year following
the Plan Year to which it relates. The Participant's Annual Stock Option
Amount(s) shall be credited to his or her Stock Option Account no later
than the close of business on the third business day after the day on
which the Eligible Stock Option was exercised or otherwise disposed of.
The Participant's Annual Restricted Stock Amount(s) shall be credited to
his or her Restricted Stock Account on the day on which the Restricted
Stock would otherwise vest under the Equity Plan under which it was
granted, but for the election to defer.
(e) No Actual Investment. Notwithstanding any other provision of this Plan
--------------------
that may be interpreted to the contrary, the Measurement Funds are to be
used for measurement purposes only, and a Participant's election of any
such
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NATIONAL GOLF PROPERTIES, INC.
Deferred Compensation Plan
Master Plan Document
================================================================================
Measurement Fund, the allocation to his or her Account Balance
thereto, the calculation of additional amounts and the crediting or
debiting of such amounts to a Participant's Account Balance shall not
----- ---
be considered or construed in any manner as an actual investment of
his or her Account Balance in any such Measurement Fund. In the event
that the Company or the Trustee (as that term is defined in the
Trust), in its own discretion, decides to invest funds in any or all
of the Measurement Funds, no Participant shall have any rights in
or to such investments themselves. Without limiting the foregoing, a
Participant's Account Balance shall at all times be a bookkeeping
entry only and shall not represent any investment made on his or her
behalf by the Company or the Trust; the Participant shall at all
times remain an unsecured creditor of the Company.
(f) COMPANY STOCK MEASUREMENT FUNDS. Notwithstanding any other provision
-------------------------------
of this Plan to the contrary, the following provisions shall apply to
Stock Option Amounts and Restricted Stock Amounts deferred under this
Plan and Account Balances which are allocated to any of the Company
Stock Measurement Funds: (i) each Participant's Stock Option Amounts
and Restricted Stock Amounts shall initially be credited to the
Company Stock Measurement Fund elected by the Participant and may
not be allocated to any other Measurement Fund until such amounts
have been allocated to such Company Stock Measurement Fund for at
least six (6) months, (ii) no Participant may elect to have Stock
Option Amounts or Restricted Stock Amounts which are allocated to a
Company Stock Measurement Fund reallocated to any other Measurement
Fund unless the Participant shall then hold Stock and/or interests in
the Company Stock Measurement Funds under this Plan which shall have
a fair market value which is at least equal to 300% of the
Participant's annual base salary on such date and any such
reallocation election may only apply with respect to Stock Option
Amounts or Restricted Stock Amounts credited to such Measurement
Funds in excess of such amount, (iii) no election made by a
Participant who is subject to Section 16 of the Securities Exchange
Act of 1934 (the "Act") to change Measurement Funds shall be
effective if it would subject the Participant to liability under
Section 16(b) of the Act and (iv) the Committee, in its sole
discretion, shall have the right to distribute a Participant's
Account Balance allocated to any of the Company Stock Measurement
Funds either in cash or in Stock, or partially in cash and partially
in Stock.
3.13. FICA AND OTHER TAXES
--------------------
(a) ANNUAL DEFERRAL AMOUNTS. For each Plan Year in which an Annual
-----------------------
Deferral Amount is being withheld from a Participant, the
Participant's Employer(s) shall withhold from that portion of the
Participant's Base Annual Salary and Bonus that is not being
deferred, in a manner determined by the Employer(s), the
Participant's share of FICA and other employment taxes on such Annual
Deferral
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NATIONAL GOLF PROPERTIES, INC.
Deferred Compensation Plan
Master Plan Document
================================================================================
Amount. If necessary, the Committee may reduce the Annual Deferral
Amount in order to comply with this Section 3. 13.
(b) COMPANY MATCHING AMOUNTS. When a participant becomes vested in a
------------------------
portion of his or her Company Matching Account, the Participant's
Employer(s) shall withhold from the Participant's Base Annual Salary
and/or Bonus that is not deferred, in a manner determined by the
Employer(s), the Participant's share of FICA and other employment
taxes. If necessary, the Committee may reduce the vested portion of
the Participant's Company Matching Account in order to comply with
this Section 3. 13.
(c) ANNUAL STOCK OPTION AMOUNTS AND ANNUAL RESTRICTED STOCK AMOUNTS. For
---------------------------------------------------------------
each Plan Year in which an Annual Stock Option Amount or Annual
Restricted Stock Amount is being first credited to a Participant's
Account Balance, the Participant's Employer(s) shall withhold from
that portion of the Participant's Base Annual Salary, Bonus,
Qualifying Gains and Restricted Stock that is not being deferred, in a
manner determined by the Employer(s), the Participant's share of FICA
and other employment taxes on such Annual Stock Option Amount or
Annual Restricted Stock Amount. If necessary, the Committee may reduce
the Annual Stock Option Amount or Annual Restricted Stock Amount in
order to comply with this Section 3. 13.
3.14. DISTRIBUTIONS. The Participant's Employer(s), or the trustee of the Trust,
-------------
shall withhold from any payments made to a Participant under this Plan all
federal, state and local income, employment and other taxes required to be
withheld by the Employer(s), or the trustee of the Trust, in connection
with such payments, in amounts and in a manner to be determined in the
sole discretion of the Employer(s) and the trustee of the Trust.
ARTICLE IV.
SHORT-TERM PAYOUT; UNFORESEEABLE FINANCIAL EMERGENCIES; WITHDRAWAL
ELECTION
4.1. SHORT-TERM PAYOUT. In connection with each election to defer an Annual
-----------------
Deferral Amount, a Participant may irrevocably elect to receive a future
"Short-Term Payout" from the Plan with respect to such Annual Deferral
Amount. Subject to the Deduction Limitation, the Short-Term Payout shall
be a lump sum payment in an amount that is equal to the Annual Deferral
Amount plus amounts credited or debited in the manner provided in Section
3.12 above on that amount, determined at the time that the Short-Term
Payout becomes payable (rather than the date of a Termination of
Employment). Subject to the Deduction Limitation and the other terms and
conditions of this Plan, each Short-Term Payout elected shall be paid out
during a period beginning 1 day and ending 60 days after the last day of
any Plan Year designated by the Participant that is at least three Plan
Years after the Plan Year in which the Annual Deferral Amount is actually
deferred. By way of example, if a three year Short-Term Payout is elected
for
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NATIONAL GOLF PROPERTIES, INC.
Deferred Compensation Plan
Master Plan Document
================================================================================
Annual Deferral Amounts that are deferred in the Plan Year commencing June
1, 1997, the three year Short-Term Payout would become payable during a 60
day period commencing January 1, 2001.
4.2. OTHER BENEFITS TAKE PRECEDENCE OVER SHORT-TERM. Should an event occur that
----------------------------------------------
triggers a benefit under Article 5, 6, 7 or 8, any Annual Deferral Amount,
plus amounts credited or debited thereon, that is subject to a Short-Term
Payout election under Section 4.1 shall not be paid in accordance with
Section 4.1 but shall be paid in accordance with the other applicable
Article.
4.3. WITHDRAWAL PAYOUT/SUSPENSIONS FOR UNFORESEEABLE FINANCIAL EMERGENCIES. If
-----------------------------------------------------------------------
the Participant experiences an Unforeseeable Financial Emergency, the
Participant may petition the Committee to (i) suspend any deferrals
required to be made by a Participant and/or (ii) receive a partial or full
payout from the Plan. The payout shall not exceed the lesser of the
Participant's vested Account Balance, calculated as if such Participant
were receiving a Termination Benefit, or the amount reasonably needed to
satisfy the Unforeseeable Financial Emergency. If, subject to the sole
discretion of the Committee, the petition for a suspension and/or payout
is approved, suspension shall take effect upon the date of approval and
any payout shall be made within 60 days of the date of approval. The
payment of any amount under this Section 4.3 shall not be subject to the
Deduction Limitation.
4.4. WITHDRAWAL ELECTION. A Participant (or, after a Participant's death, his
-------------------
or her Beneficiary) may elect, at any time, to withdraw all of his or her
vested Account Balance, calculated as if there had occurred a Termination
of Employment as of the day of the election, less a withdrawal penalty
equal to 10% of such amount (the net amount shall be referred to as the
"Withdrawal Amount"). This election can be made at any time, before or
after Retirement, Disability, death or Termination of Employment, and
whether or not the Participant (or Beneficiary) is in the process of being
paid pursuant to an installment payment schedule. If made before
Retirement, Disability or death, a Participant's Withdrawal Amount shall
be his or her vested Account Balance calculated as if there had occurred a
Termination of Employment as of the day of the election. No partial
withdrawals of the Withdrawal Amount shall be allowed. The Participant (or
his or her Beneficiary) shall make this election by giving the Committee
advance written notice of the election in a form determined from time to
time by the Committee. The Participant (or his or her Beneficiary) shall
be paid the Withdrawal Amount within 60 days of his or her election. Once
the Withdrawal Amount is paid, the Participant's participation in the Plan
shall terminate and the Participant shall not be eligible to participate
in the Plan for the remainder of the Plan Year during which the Withdrawal
Amount is paid and the subsequent two Plan Years. The payment of this
Withdrawal Amount shall not be subject to the Deduction Limitation.
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NATIONAL GOLF PROPERTIES, INC.
Deferred Compensation Plan
Master Plan Document
================================================================================
4.5. DISTRIBUTION OF DIVIDENDS. If a Participant has elected to have additional
-------------------------
amounts credited to any part of his or her Account Balance under the
Company Stock Measurement Fund with dividends distributed on a current
basis, at any time the Company pays any dividends with respect to the
Stock, the Participant shall receive a distribution equal to the amount of
the dividends which would have been payable to the Participant if the
Participant held a number of shares of Stock equal to the number of shares
credited to his or her Account Balance under such measurement fund.
ARTICLE V.
RETIREMENT BENEFIT
5.1. RETIREMENT BENEFIT. Subject to the Deduction Limitation, a Participant who
------------------
Retires shall receive, as a Retirement Benefit, his or her Account
Balance.
5.2. PAYMENT OF RETIREMENT BENEFIT. A Participant, in connection with his or
-----------------------------
her commencement of participation in the Plan, shall elect on an Election
Form to receive the Retirement Benefit in a lump sum or pursuant to a
Quarterly Installment Method of 20, 40 or 60 quarters. The Participant may
annually change his or her election to an allowable alternative payout
period by submitting a new Election Form to the Committee, provided that
any such Election Form is submitted at least 3 years prior to the
Participant's Retirement and is accepted by the Committee in its sole
discretion. The Election Form most recently accepted by the Committee
shall govern the payout of the Retirement Benefit. If a Participant does
not make any election with respect to the payment of the Retirement
Benefit, then such benefit shall be payable in a lump sum. The lump sum
payment shall be made, or installment payments shall commence, no later
than 30 days after the date the Participant retires. Any payment made
shall be subject to the Deduction Limitation.
5.3. DEATH PRIOR TO COMPLETION OF RETIREMENT BENEFIT. If a Participant dies
-----------------------------------------------
after Retirement but before the Retirement Benefit is paid in full, the
Participant's unpaid Retirement Benefit payments shall continue and shall
be paid to the Participant's Beneficiary (a) over the remaining number of
months and in the same amounts as that benefit would have been paid to the
Participant had the Participant survived, or (b) in a lump sum, if
requested by the Beneficiary and allowed in the sole discretion of the
Committee, that is equal to the Participant's unpaid remaining Account
Balance.
ARTICLE VI.
PRE-RETIREMENT SURVIVOR BENEFIT
6.1. PRE-RETIREMENT SURVIVOR BENEFIT. Subject to the Deduction Limitation, the
-------------------------------
Participant's Beneficiary shall receive a Pre-Retirement Survivor Benefit
equal to the Participant's Account Balance if the Participant dies before
he or she Retires, experiences a Termination of Employment or suffers a
Disability.
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NATIONAL GOLF PROPERTIES, INC.
Deferred Compensation Plan
Master Plan Document
================================================================================
6.2. PAYMENT OF PRE-RETIREMENT SURVIVOR BENEFIT. A Participant, in connection
------------------------------------------
with his or her commencement of participation in the Plan, shall elect on
an Election Form whether the Pre-Retirement Survivor Benefit shall be
received by his or her Beneficiary in a lump sum or pursuant to a
Quarterly Installment Method of 20, 40 or 60 quarters. The Participant may
annually change this election to an allowable alternative payout period by
submitting a new Election Form to the Committee, which form must be
accepted by the Committee in its sole discretion. The Election Form most
recently accepted by the Committee prior to the Participant's death shall
govern the payout of the Participant's Pre-Retirement Survivor Benefit. If
a Participant does not make any election with respect to the payment of
the Pre-Retirement Survivor Benefit, then such benefit shall be paid in a
lump sum. Despite the foregoing, if the Participant's Account Balance at
the time of his or her death is less than $25,000, payment of the Pre-
Retirement Survivor Benefit may be made, in the sole discretion of the
Committee, in a lump sum or pursuant to a Quarters Installment Method of
not more than 20 quarters. The lump sum payment shall be made, or
installment payments shall commence, no later than 30 days after the date
the Committee is provided with proof that is satisfactory to the Committee
of the Participant's death. Any payment made shall be subject to the
Deduction Limitation.
ARTICLE VII.
TERMINATION BENEFIT
7.1. TERMINATION BENEFIT. Subject to the Deduction Limitation, the Participant
-------------------
shall receive a Termination Benefit, which shall be equal to the
Participant's vested Account Balance if a Participant experiences a
Termination of Employment prior to his or her Retirement, death or
Disability.
7.2. PAYMENT OF TERMINATION BENEFIT. If the Participant's vested Account
------------------------------
Balance at the time of his or her Termination of Employment is less than
$25,000, payment of his or her Termination Benefit shall be paid in a lump
sum. If his or her vested Account Balance at such time is equal to or
greater than that amount, the Committee, in its sole discretion, may cause
the Termination Benefit to be paid in a lump sum or in substantially equal
monthly installment payments over a period of time that does not exceed
five years in duration. The lump sum payment shall be made, or installment
payments shall commence, no later than 30 days after the date the date of
the Participant's Termination of Employment. Any payment made shall be
subject to the Deduction Limitation.
ARTICLE VIII.
DISABILITY WAIVER AND BENEFIT
8.1. DISABILITY WAIVER.
-----------------
(a) WAIVER OF DEFERRAL. A Participant who is determined by the Committee
--------------------
to be suffering from a Disability shall be (i) excused from fulfilling
that portion of the Annual Deferral Amount commitment that would
otherwise have been withheld
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NATIONAL GOLF PROPERTIES, INC.
Deferred Compensation Plan
Master Plan Document
================================================================================
from a Participant's Base Annual Salary, Annual Bonus and/or Directors
Fees for the Plan Year during which the Participant first suffers a
Disability and (ii) excused from fulfilling any existing unvested
Restricted Stock Amount or unexercised Stock Option Amount
commitments. During the period of Disability, the Participant shall
not be allowed to make any additional deferral elections, but will
continue to be considered a Participant for all other purposes of this
Plan.
(b) RETURN TO WORK. If a Participant returns to employment, or service
--------------
as a Director, with an Employer, after a Disability ceases, the
Participant may elect to defer an Annual Deferral Amount, Stock Option
Amount and Restricted Stock Amount for the Plan Year following his or
her return to employment or service and for every Plan Year thereafter
while a Participant in the Plan; provided such deferral elections are
otherwise allowed and an Election Form is delivered to and accepted by
the Committee for each such election in accordance with Section 3.3
above.
8.2. CONTINUED ELIGIBILITY; DISABILITY BENEFIT. A Participant suffering a
-------------------------------------------
Disability shall, for benefit purposes under this Plan, continue to be
considered to be employed, or in the service of an Employer as a Director,
and shall be eligible for the benefits provided for in Articles 4, 5, 6 or
7 in accordance with the provisions of those Articles. Notwithstanding the
above, the Committee shall have the right to, in its sole and absolute
discretion and for purposes of this Plan only, and must in the case of a
Participant who is otherwise eligible to Retire, deem the Participant to
have experienced a Termination of Employment, or in the case of a
Participant who is eligible to Retire, to have Retired, at any time (or in
the case of a Participant who is eligible to Retire, as soon as
practicable) after such Participant is determined to be suffering a
Disability, in which case the Participant shall receive a Disability
Benefit equal to his or her Account Balance at the time of the Committee's
determination; provided, however, that should the Participant otherwise
have been eligible to Retire, he or she shall be paid in accordance with
Article 5. The Disability Benefit shall be paid in a lump sum within 60
days of the Committee's exercise of such right. Any payment made shall be
subject to the Deduction Limitation.
ARTICLE IX.
BENEFICIARY DESIGNATION
9.1. BENEFICIARY. Each Participant shall have the right, at any time, to
-----------
designate his or her Beneficiary(ies) (both primary as well as contingent)
to receive any benefits payable under the Plan to a beneficiary upon the
death of a Participant. The Beneficiary designated under this Plan may be
the same as or different from the Beneficiary designation under any other
plan of an Employer in which the Participant participates.
9.2. BENEFICIARY DESIGNATION; CHANGE; SPOUSAL CONSENT. A Participant shall
------------------------------------------------
designate his or her Beneficiary by completing and signing the Beneficiary
Designation Form, and returning it to the Committee or its designated
agent. A Participant shall have the right to change a Beneficiary by
completing, signing and otherwise complying with the terms of
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NATIONAL GOLF PROPERTIES, INC.
Deferred Compensation Plan
Master Plan Document
================================================================================
the Beneficiary Designation Form and the Committee's rules and procedures,
as in effect from time to time. If the Participant names someone other
than his or her spouse as a Beneficiary, a spousal consent, in the form
designated by the Committee, must be signed by that Participant's spouse
and returned to the Committee. Upon the acceptance by the Committee of a
new Beneficiary Designation Form, all Beneficiary designations
previously filed shall be canceled. The Committee shall be entitled to
rely on the last Beneficiary Designation Form filed by the Participant and
accepted by the Committee prior to his or her death.
9.3. ACKNOWLEDGMENT. No designation or change in designation of a Beneficiary
--------------
shall be effective until received and acknowledged in writing by the
Committee or its designated agent.
9.4. NO BENEFICIARY DESIGNATION. If a Participant fails to designate a
--------------------------
Beneficiary, as provided in Sections 9.1, 9.2 and 9.3 above or, if all
designated Beneficiaries predecease the Participant or die prior to
complete distribution of the Participant's benefits then the
Participant's designated Beneficiary shall be deemed to be his or her
surviving spouse. If the Participant has no surviving spouse, the benefits
remaining under the Plan to be paid to a Beneficiary shall be payable to
the executor or personal representative of the Participant's estate.
9.5. DOUBT AS TO BENEFICIARY. If the Committee has any doubt as to the proper
-----------------------
Beneficiary, to receive payments pursuant to this Plan, the Committee
shall have the right, exercisable in its discretion, to cause the
Participant's Employer to withhold such payments until this matter is
resolved to the Committee's satisfaction.
9.6. DISCHARGE OF OBLIGATIONS. The payment of benefits under the Plan to a
------------------------
Beneficiary shall fully and completely discharge all Employers and the
Committee from all further obligations under this Plan with respect to the
Participant, and that Participant's Plan Agreement shall terminate upon
such full payment of benefits.
ARTICLE X.
LEAVE OF ABSENCE
10.1. PAID LEAVE OF ABSENCE. If a Participant is authorized by the Participant's
-----------------------
Employer for any reason to take a paid leave of absence from the
employment of the Employer, the Participant shall continue to be
considered employed by the Employer and the Annual Deferral Amount shall
continue to be withheld during such paid leave of absence in accordance
with Section 3.3.
10.2. UNPAID LEAVE OF ABSENCE. If a Participant is authorized by the
-------------------------
Participant's Employer for any reason to take an unpaid leave of absence
from the employment of the Employer, the Participant shall continue to be
considered employed by the Employer and the Participant shall be excused
from making deferrals until the earlier of the date the leave of
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NATIONAL GOLF PROPERTIES, INC.
Deferred Compensation Plan
Master Plan Document
================================================================================
absence expires or the Participant returns to a paid employment status.
Upon such expiration or return, deferrals shall resume for the remaining
portion of the Plan Year in which the expiration or return occurs, based
on the deferral election, if any, made for that Plan Year. If no election
was made for that Plan Year, no deferral shall be withheld.
ARTICLE XI.
TERMINATION, AMENDMENT OR MODIFICATION
11.1. TERMINATION. Although each Employer anticipates that it will continue the
-----------
Plan for an indefinite period of time, there is no guarantee that any
Employer will continue the Plan or will not terminate the Plan at any time
in the future. Accordingly, each Employer reserves the right to
discontinue its sponsorship of the Plan and/or to terminate the Plan at
any time with respect to any or all of its participating Employees and
Directors, by action of its board of directors. Upon the termination of
the Plan with respect to any Employer, the Plan Agreements of the affected
Participants who are employed by that Employer, or in the service of that
Employer as Directors, shall terminate and their Account Balances,
determined as if they had experienced a Termination of Employment on the
date of Plan termination or, if Plan termination occurs after the date
upon which a Participant was eligible to Retire, then with respect to that
Participant as if he or she had Retired on the date of Plan termination,
shall be paid to the Participants as follows: Prior to a Change in
Control, if the Plan is terminated with respect to all of its
Participants, an Employer shall have the right, in its sole discretion,
and notwithstanding any elections made by the Participant, to pay such
benefits in a lump sum or pursuant to a Monthly Installment Method of up
to 15 years, with amounts credited and debited during the installment
period as provided herein. If the Plan is terminated with respect to less
than all of its Participants, an Employer shall be required to pay such
benefits in a lump sum. After a Change in Control, the Employer shall be
required to pay such benefits in a lump sum. The termination of the Plan
shall not adversely affect any Participant or Beneficiary who has become
entitled to the payment of any benefits under the Plan as of the date of
termination; provided however, that the Employer shall have the right to
accelerate installment payments without a premium or prepayment penalty by
paying the Account Balance in a lump sum or pursuant to a Monthly
Installment Method using fewer months (provided that the present value of
all payments that will have been received by a Participant at any given
point of time under the different payment schedule shall equal or exceed
the present value of all payments that would have been received at that
point in time under the original payment schedule).
11.2. AMENDMENT. Any Employer may, at any time, amend or modify the Plan in
---------
whole or in part with respect to that Employer by the action of its board
of directors; provided, however, that no amendment or modification shall
be effective to decrease or restrict the value of a Participant's Account
Balance in existence at the time the amendment or modification is made,
calculated as if the Participant had experienced a Termination of
Employment as of the effective date of the amendment or modification or,
if the
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<PAGE>
NATIONAL GOLF PROPERTIES, INC.
Deferred Compensation Plan
Master Plan Document
================================================================================
amendment or modification occurs after the date upon which the Participant
was eligible to Retire, the Participant had Retired as of the effective
date of the amendment or modification. The amendment or modification of
the Plan shall not affect any Participant or Beneficiary who has become
entitled to the payment of benefits under the Plan as of the date of the
amendment or modification; provided, however, that the Employer shall have
the right to accelerate installment payments by paying the Account Balance
in a lump sum or pursuant to a Monthly Installment Method using fewer
months (provided that the present value of all payments that will have
been received by a Participant at any given point of time under the
different payment schedule shall equal or exceed the present value of all
payments that would have been received at that point in time under the
original payment schedule).
11.3. EFFECT OF PAYMENT. The full payment of the applicable benefit under
-----------------
Articles 4, 5, 6, 7 or 8 of the Plan shall completely discharge all
obligations to a Participant and his or her designated Beneficiaries under
this Plan and the Participant's Plan Agreement shall terminate.
ARTICLE XII.
ADMINISTRATION
12.1. COMMITTEE DUTIES. This Plan shall be administered by a Committee which
----------------
shall consist of the Board, or such committee as the Board shall appoint.
Members of the Committee may be Participants under this Plan. The
Committee shall also have the discretion and authority to (i) make, amend,
interpret, and enforce all appropriate rules and regulations for the
administration of this Plan and (ii) decide or resolve any and all
questions including interpretations of this Plan, as may arise in
connection with the Plan. Any individual serving on the Committee who is a
Participant shall not vote or act on any matter relating solely to himself
or herself. When making a determination or calculation, the Committee
shall be entitled to rely on information furnished by a Participant or the
Company.
12.2. AGENTS. In the administration of this Plan, the Committee may, from time
------
to time, employ agents and delegate to them such administrative duties as
it sees fit (including acting through a duly appointed representative) and
may from time to time consult with counsel who may be counsel to any
Employer.
12.3. BINDING EFFECT OF DECISIONS. The decision or action of the Committee with
---------------------------
respect to any question arising out of or in connection with the
administration, interpretation and application of the Plan and the rules
and regulations promulgated hereunder shall be final and conclusive and
binding upon all persons having any interest in the Plan.
12.4. INDEMNITY OF COMMITTEE. All Employers shall indemnify and hold harmless
----------------------
the members of the Committee, and any Employee to whom the duties of the
Committee may be delegated, against any and all claims, losses, damages,
expenses or liabilities arising
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NATIONAL GOLF PROPERTIES, INC.
Deferred Compensation Plan
Master Plan Document
================================================================================
from any action or failure to act with respect to this Plan, except in the
case of willful misconduct by the Committee or any of its members or any
such Employee.
12.5. EMPLOYER INFORMATION. To enable the Committee to perform its functions,
--------------------
each Employer shall supply full and timely information to the Committee on
all matters relating to the compensation of its Participants, the date and
circumstances of the Retirement, Disability, death or Termination of
Employment of its Participants, and such other pertinent information as
the Committee may reasonably require.
ARTICLE XIII.
OTHER BENEFITS AND AGREEMENTS
13.1. COORDINATION WITH OTHER BENEFITS. The benefits provided for a Participant
--------------------------------
and Participant's Beneficiary under the Plan are in addition to any other
benefits available to such Participant under any other plan or program for
employees of the Participant's Employer. The Plan shall supplement and
shall not supersede, modify or amend any other such plan or program except
as may otherwise be expressly provided.
ARTICLE XIV.
CLAIMS PROCEDURES
14.1. PRESENTATION OF CLAIM. Any Participant or Beneficiary of a deceased
---------------------
Participant (such Participant or Beneficiary being referred to below as a
"Claimant") may deliver to the Committee a written claim for a
determination with respect to the amounts distributable to such Claimant
from the Plan. If such a claim relates to the contents of a notice
received by the Claimant, the claim must be made within 60 days after such
notice was received by the Claimant. All other claims must be made within
180 days of the date on which the event that caused the claim to arise
occurred. The claim must state with particularity the determination
desired by the Claimant.
14.2. NOTIFICATION OF DECISION. The Committee shall consider a Claimant's claim
------------------------
within a reasonable time, and shall notify the Claimant in writing:
(a) that the Claimant's requested determination has been made, and that
the claim has been allowed in full; or
(b) that the Committee has reached a conclusion contrary, in whole or in
part, to the Claimant's requested determination, and such notice must
set forth in a manner calculated to be understood by the Claimant:
(i) the specific reason(s) for the denial of the claim, or any part
of it;
(ii) specific reference(s) to pertinent provisions of the Plan upon
which such denial was based;
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NATIONAL GOLF PROPERTIES, INC.
Deferred Compensation Plan
Master Plan Document
================================================================================
(iii) a description of any additional material or information
necessary for the Claimant to perfect the claim, and an
explanation of why such material or information is necessary;
and
(iv) an explanation of the claim review procedure set forth in
Section 14.3 below.
14.3. REVIEW OF A DENIED CLAIM. Within 60 days after receiving a notice from the
------------------------
Committee that a claim has been denied, in whole or in part, a Claimant
(or the Claimant's duly authorized representative) may file with the
Committee a written request for a review of the denial of the claim.
Thereafter, but not later than 30 days after the review procedure began,
the Claimant (or the Claimant's duly authorized representative):
(a) may review pertinent documents;
(b) may submit written comments or other documents; and/or
(c) may request a hearing, which the Committee, in its sole discretion,
may grant.
14.4. DECISION ON REVIEW. The Committee shall render its decision on review
------------------
promptly, and not later than 60 days after the filing of a written request
for review of the denial, unless a hearing is held or other special
circumstances require additional time, in which case the Committee's
decision must be rendered within 120 days after such date. Such decision
must be written in a manner calculated to be understood by the Claimant,
and it must contain:
(a) specific reasons for the decision;
(b) specific reference(s) to the pertinent Plan provisions upon which the
decision was based; and
(c) such other matters as the Committee deems relevant.
14.5. LEGAL ACTION. A Claimant's compliance with the foregoing provisions of
------------
this Article 14 is a mandatory prerequisite to a Claimant's right to
commence any legal action with respect to any claim for benefits under
this Plan.
ARTICLE XV.
TRUST
15.1. ESTABLISHMENT OF THE TRUST. The Company shall establish the Trust, and
--------------------------
each Employer shall at least annually transfer over to the Trust such
assets as the Employer determines, in its sole discretion, are necessary
to provide, on a present value basis, for its respective future
liabilities created with respect to the Annual Deferral Amounts, Annual
Company Contribution Amounts, Company Matching Amounts, Annual Stock
Option Amounts
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NATIONAL GOLF PROPERTIES, INC.
Deferred Compensation Plan
Master Plan Document
================================================================================
and Annual Restricted Stock Amounts for such Employer's Participants for
all periods prior to the transfer, as well as any debits and credits to
the Participants' Account Balances for all periods prior to the transfer,
taking into consideration the value of the assets in the trust at the time
of the transfer.
15.2. INTERRELATIONSHIP OF THE PLAN AND THE TRUST. The provisions of the Plan
-------------------------------------------
and the Plan Agreement shall govern the rights of a Participant to receive
distributions pursuant to the Plan. The provisions of the Trust shall
govern the rights of the Employers, Participants and the creditors of the
Employers to the assets transferred to the Trust. Each Employer shall at
all times remain liable to carry out its obligations under the Plan.
15.3. DISTRIBUTIONS FROM THE TRUST. Each Employer's obligations under the Plan
----------------------------
may be satisfied with Trust assets distributed pursuant to the terms of
the Trust, and any such distribution shall reduce the Employer's
obligations under this Plan.
15.4. STOCK TRANSFERRED TO THE TRUST. Notwithstanding any other provision of
------------------------------
this Plan or the Trust: (i) if Trust assets are distributed to a
Participant in a distribution which reduces the Participant's Stock Option
Account balance under this Plan, such distribution must be made in the
form of Stock during every 6 month period beginning on the date an
Eligible Stock Option of the Participant is exercised, to the extent of
the Qualifying Gain deferred in accordance with Section 3.7 with respect
to that Eligible Stock Option; and (ii) any Stock transferred to the Trust
in accordance with Section 3.7 may not be otherwise distributed or
disposed of by the Trustee until at least 6 months after the date such
Stock is transferred to the Trust.
ARTICLE XVI.
MISCELLANEOUS
16.1. STATUS OF PLAN. The Plan is intended to be a plan that is not qualified
--------------
within the meaning of Code Section 401 (a) and that "is unfunded and is
maintained by an employer primarily for the purpose of providing deferred
compensation for a select group of management or highly compensated
employee" within the meaning of ERISA Sections 201(2), 301(a)(3) and
401(a)(1). The Plan shall be administered and interpreted to the extent
possible in a manner consistent with that intent.
16.2. UNSECURED GENERAL CREDITOR. Participants and their Beneficiaries, heirs,
--------------------------
successors and assigns shall have no legal or equitable rights, interests
or claims in any property or assets of an Employer. For purposes of the
payment of benefits under this Plan, any and all of an Employer's assets
shall be, and remain, the general, unpledged unrestricted assets of the
Employer. An Employer's obligation under the Plan shall be merely that of
an unfunded and unsecured promise to pay money in the future.
16.3. EMPLOYER'S LIABILITY. An Employer's liability for the payment of benefits
--------------------
shall be defined only by the Plan and the Plan Agreement, as entered into
between the Employer
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NATIONAL GOLF PROPERTIES, INC.
Deferred Compensation Plan
Master Plan Document
================================================================================
and a Participant. An Employer shall have no obligation to a Participant
under the Plan except as expressly provided in the Plan and his or her
Plan Agreement.
16.4. NONASSIGNABILITY. Neither a Participant nor any other person shall have
----------------
any right to commute, sell, assign, transfer, pledge, anticipate, mortgage
or otherwise encumber, transfer, hypothecate, alienate or convey in
advance of actual receipt, the amounts, if any, payable hereunder, or any
part thereof, which are, and all rights to which are expressly declared to
be, unassignable and non-transferable. No part of the amounts payable
shall, prior to actual payment, be subject to seizure, attachment,
garnishment or sequestration for the payment of any debts, judgments,
alimony or separate maintenance owed by a Participant or any other person,
be transferable by operation of law in the event of a Participant's or any
other person's bankruptcy or insolvency or be transferable to a spouse as
a result of a property settlement or otherwise.
16.5. NOT A CONTRACT OF EMPLOYMENT. The terms and conditions of this Plan shall
----------------------------
not be deemed to constitute a contract of employment between any Employer
and the Participant. Such employment is hereby acknowledged to be an "at
will" employment relationship that can be terminated at any time for any
reason, or no reason, with or without cause, and with or without notice,
unless expressly provided in a written employment agreement. Nothing in
this Plan shall be deemed to give a Participant the right to be retained
in the service of any Employer, either as an Employee or a Director, or to
interfere with the right of any Employer to discipline or discharge the
Participant at any time.
16.6. FURNISHING INFORMATION. A Participant or his or her Beneficiary will
----------------------
cooperate with the Committee by furnishing any and all information
requested by the Committee and take such other actions as may be requested
in order to facilitate the administration of the Plan and the payments of
benefits hereunder, including but not limited to taking such physical
examinations as the Committee may deem necessary.
16.7. TERMS. Whenever any words are used herein in the masculine, they shall be
-----
construed as though they were in the feminine in all cases where they
would so apply; and whenever any words are used herein in the singular or
in the plural, they shall be construed as though they were used in the
plural or the singular, as the case may be, in all cases where they would
so apply.
16.8. CAPTIONS. The captions of the articles, sections and paragraphs of this
--------
Plan are for convenience only and shall not control or affect the meaning
or construction of any of its provisions.
16.9. GOVERNING LAW. Subject to ERISA, the provisions of this Plan shall be
-------------
construed and interpreted according to the internal laws of the State of
California without regard to its conflicts of laws principles.
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NATIONAL GOLF PROPERTIES, INC.
Deferred Compensation Plan
Master Plan Document
================================================================================
16.10. NOTICE. Any notice or filing required or permitted to be given to the
------
Committee under this Plan shall be sufficient if in writing and hand-
delivered, or sent by registered or certified mail, to the address below:
General Counsel, National Golf Properties, Inc.
2951 28th Street, Suite 3001
Santa Monica, California 90405-2961
Such notice shall be deemed given as of the date of delivery or, if
delivery is made by mail, as of the date shown on the postmark on the
receipt for registration or certification.
Any notice or filing required or permitted to be given to a Participant
under this Plan shall be sufficient if in writing and hand-delivered, or
sent by mail, to the last known address of the Participant.
16.11. SUCCESSORS. The provisions of this Plan shall bind and inure to the
----------
benefit of the Participant's Employer and its successors and assigns and
the Participant and the Participant's designated Beneficiaries.
16.12. SPOUSE'S INTEREST. The interest in the benefits hereunder of a spouse of
-----------------
a Participant who has predeceased the Participant shall automatically
pass to the Participant and shall not be transferable by such spouse in
any manner, including but not limited to such spouse's will, nor shall
such interest pass under the laws of intestate succession.
16.13. VALIDITY. In case any provision of this Plan shall be illegal or invalid
--------
for any reason, said illegality or invalidity shall not affect the
remaining parts hereof, but this Plan shall be construed and enforced as
if such illegal or invalid provision had never been inserted herein.
16.14. INCOMPETENT. If the Committee determines in its discretion that a benefit
-----------
under this Plan is to be paid to a minor, a person declared incompetent
or to a person incapable of handling the disposition of that person's
property, the Committee may direct payment of such benefit to the
guardian, legal representative or person having the care and custody of
such minor, incompetent or incapable person. The Committee may require
proof of minority, incompetence, incapacity or guardianship, as it may
deem appropriate prior to distribution of the benefit. Any payment of a
benefit shall be a payment for the account of the Participant and the
Participant's Beneficiary, as the case may be, and shall be a complete
discharge of any liability under the Plan for such payment amount.
16.15. COURT ORDER. The Committee is authorized to make any payments directed
-----------
by court order in any action in which the Plan or the Committee has been
named as a party. In addition, if a court determines that a spouse or
former spouse of a Participant has an interest in the Participant's
benefits under the Plan in connection with a property settlement or
otherwise, the Committee, in its sole discretion, shall have the right,
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NATIONAL GOLF PROPERTIES, INC.
Deferred Compensation Plan
Master Plan Document
================================================================================
notwithstanding any election made by a Participant, to immediately
distribute the spouse's or former spouse's interest in the Participant's
benefits under the Plan to that spouse or former spouse.
16.16. DISTRIBUTION IN THE EVENT OF TAXATION.
-------------------------------------
(a) IN GENERAL. If, for any reason, all or any portion of a Participant's
----------
benefits under this Plan becomes taxable to the Participant prior to
receipt, a Participant may petition the Committee before a Change in
Control, or the trustee of the Trust after a Change in Control, for a
distribution of that portion of his or her benefit that has become
taxable. Upon the grant of such a petition, which grant shall not be
unreasonably withheld (and, after a Change in Control, shall be
granted), a Participant's Employer shall distribute to the
Participant immediately available funds in an amount equal to the
taxable portion of his or her benefit (which amount shall not exceed
a Participant's unpaid Account Balance under the Plan). If the
petition is granted, the tax liability distribution shall be made
within 90 days of the date when the Participant's petition is
granted. Such a distribution shall affect and reduce the benefits to
be paid under this Plan.
(b) TRUST. If the Trust terminates in accordance with the provisions of
-----
the Trust and benefits are distributed from the Trust to a
Participant in accordance with such provisions, the Participant's
benefits under this Plan shall be reduced to the extent of such
distributions.
16.17. INSURANCE. The Employers, on their own behalf or on behalf of the
---------
trustee of the Trust, and, in their sole discretion, may apply for and
procure insurance on the life of the Participant, in such amounts and in
such forms as the Trust may choose. The Employers or the trustee of the
Trust, as the case may be, shall be the sole owner and beneficiary of any
such insurance. The Participant shall have no interest whatsoever in any
such policy or policies, and at the request of the Employers shall submit
to medical examinations and supply such information and execute such
documents as may be required by the insurance company or companies to
whom the Employers have applied for insurance.
16.18. LEGAL FEES TO ENFORCE RIGHTS AFTER CHANGE IN CONTROL. The Company and
----------------------------------------------------
each Employer is aware that upon the occurrence of a Change in Control,
the Board or the board of directors of a Participant's Employer (which
might then be composed of new members) or a shareholder of the Company or
the Participant's Employer, or of any successor corporation might then
cause or attempt to cause the Company, the Participant's Employer or such
successor to refuse to comply with its obligations under the Plan and
might cause or attempt to cause the Company or the Participant's Employer
to institute, or may institute, litigation seeking to deny Participants
the benefits intended under the Plan. In these circumstances, the purpose
of the Plan could be frustrated. Accordingly, if, following a Change in
Control, it should appear to any Participant that the Company, the
Participant's Employer or any successor corporation has failed to
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NATIONAL GOLF PROPERTIES, INC.
Deferred Compensation Plan
Master Plan Document
================================================================================
comply with any of its obligations under the Plan or any agreement
thereunder or, if the Company, such Employer or any other person takes
any action to declare the Plan void or unenforceable or institutes any
litigation or other legal action designed to deny, diminish or to recover
from any Participant the benefits intended to be provided, then the
Company and the Participant's Employer irrevocably authorize such
Participant to retain counsel of his or her choice at the expense of the
Company and the Participant's Employer (who shall be jointly and
severally liable) to represent such Participant in connection with the
initiation or defense of any litigation or other legal action, whether by
or against the Company, the Participant's Employer or any director,
officer, shareholder or other person affiliated with the Company, the
Participant's Employer or any successor thereto in any jurisdiction.
16.19. STATUS OF COMPANY AS A REIT. Notwithstanding any provision of this Plan
---------------------------
or any Participant's election to the contrary, the Company and the
Committee shall have the right at any time, and from time to time, to
amend or terminate this Plan or to take any other action which it or they
deem to be necessary or appropriate in order to avoid or cure any
impairment of the Company's status as a real estate investment trust
under Sections 856 et. seq. of the Code or to avoid or cure any violation
of the Company's Restated Certificate of Incorporation.
IN WITNESS WHEREOF, the Company and National Golf Operating
Partnership, L.P. have signed this Plan document as of June 1, 1997.
"Company"
National Golf Properties, Inc., a Maryland
corporation
By: /s/ Richard C. Price
-----------------------------------
Title: President
-------------------------------
National Golf Operating Partnership, L.P.,
a Delaware limited partnership
By: National Golf Properties, Inc.,
a Maryland Corporation, its general
partner
By: /s/ Richard C. Price
-----------------------------------
Title: President
-------------------------------
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<PAGE>
EXHIBIT 10.3
NATIONAL GOLF PROPERTIES, INC.
DEFERRED COMPENSATION PLAN
TRUST AGREEMENT
This Agreement made as of June 1, 1997, by and between National Golf
Properties, Inc., a Maryland corporation, ("Company") and Imperial Trust Company
("Trustee");
(a) WHEREAS, Company has adopted the National Golf Properties, Inc.
Deferred Compensation Plan (the "Plan"), which is administered by a committee
(the "Committee");
(b) WHEREAS, Company has incurred or expects to incur liability under
the terms of the Plan with respect to the individuals participating in the Plan;
(c) WHEREAS, Company wishes to establish a trust (hereinafter called
"Trust") and to contribute to the Trust assets that shall be held therein,
subject to the claims of Company's creditors in the event of the Company's
Insolvency, as herein defined, until paid to Plan participants and their
beneficiaries in such manner and at such times as specified in the Plan;
(d) WHEREAS, it is the intention of the parties that this Trust shall
constitute an unfunded arrangement and shall not affect the status of the Plan
as an unfunded plan maintained for the purpose of providing deferred
compensation for a select group of management or highly compensated employees
for purposes of Title I of the Employee Retirement Income Security Act of 1974;
(e) WHEREAS, it is the intention of Company to make contributions to
the Trust to provide itself with a source of funds to assist it in the meeting
of its liabilities under the Plan;
NOW, THEREFORE, the parties do hereby establish the Trust and agree
that the Trust shall be comprised, held and disposed of as follows:
Section 1. Establishment of Trust
(a) Company hereby deposits with Trustee in trust $1,000.00, which
shall become the principal of the Trust to be held, administered and disposed
of by Trustee as provided in this Trust Agreement.
(b) The Trust hereby established shall be irrevocable.
1
<PAGE>
(c) The Trust is intended to be a grantor trust, of which Company is the
grantor, within the meaning of subpart E, part I, subchapter J, chapter 1,
subtitle A of the Internal Revenue Code of 1986, as amended, and shall be
construed accordingly.
(d) The principal of the Trust, and any earnings thereon shall be held
separate and apart from other funds of Company and shall be used exclusively for
the uses and purposes of Plan participants and general creditors as herein set
forth. Plan participants and their beneficiaries shall have no preferred claim
on, or any beneficial ownership interest in, any assets of the Trust. Any rights
created under the Plan and this Trust Agreement shall be mere unsecured
contractual rights of Plan participants and their beneficiaries against Company.
Any assets held by the Trust will be subject to the claims of Company's general
creditors under federal and state law in the event of Insolvency, as defined in
Section 3(a) herein.
(e) Company, in its sole discretion, may at any time, or from time to
time, make additional deposits of cash or other property in trust with Trustee
to augment the principal to be held, administered and disposed of by Trustee as
provided in this Trust Agreement. Neither Trustee nor any Plan participant or
beneficiary shall have any right to compel such additional deposits.
Section 2. Payments to Plan Participants and Their Beneficiaries.
(a) Company shall deliver to Trustee a schedule (the "Payment Schedule")
that indicates the amounts payable in respect of each Plan participant (and his
or her beneficiaries), that provides a formula or other instructions acceptable
to Trustee for determining the amounts so payable, the form in which such amount
is to be paid (as provided for or available under the Plan), and the time of
commencement for payment of such amounts. Except as otherwise provided herein,
Trustee shall make payments to the Plan participants and their beneficiaries in
accordance with such Payment Schedule. Trustee shall make provision for the
reporting and withholding of any federal, state or local taxes that may be
required to be withheld with respect to the payment of benefits pursuant to the
terms of the Plan and shall pay amounts withheld to the appropriate taxing
authorities or determine that such amounts have been reported, withheld and paid
by Company.
(b) The entitlement of a Plan participant or his or her beneficiaries to
benefits under the Plan shall be determined by Company or such party as it shall
designate under the Plan, and any claim for such benefits shall be considered
and reviewed under the procedures set out in the Plan.
(c) Company may make payment of benefits directly to Plan participants or
their beneficiaries as they become due under the terms of the Plan. Company
shall notify Trustee of its decision to make payment of benefits directly prior
to the time amounts are payable to participants or their beneficiaries. In
addition, if the principal of the Trust, and any earnings thereon, are not
sufficient to make payments of benefits in accordance with the terms of the
Plan, Company shall make the balance of each such payment as it falls due.
Trustee shall notify Company where principal and earnings are not sufficient.
2
<PAGE>
Section 3. Trustee Responsibility Regarding Payments to Trust
Beneficiary When Company Is Insolvent.
(a) Trustee shall cease payment of benefits to Plan participants
and their beneficiaries if Company is Insolvent. Company shall be considered
"Insolvent" for purposes of this Trust Agreement if (i) Company is unable to pay
its debts as they become due, or (ii) Company is subject to a pending proceeding
as a debtor under the United States Bankruptcy Code.
(b) At all times during the continuance of this Trust, as
provided in Section 1(d) hereof, the principal and income of the Trust shall be
subject to claims of general creditors of Company under federal and state law as
set forth below.
(1) The Board of Directors of the Company (the "Board of
Directors") and the Chief Executive Officer of Company shall have the duty to
inform Trustee in writing of Company's Insolvency. If a person claiming to be a
creditor of Company alleges in writing to Trustee that Company has become
Insolvent, Trustee shall determine whether Company is Insolvent and, pending
such determination, Trustee shall discontinue payment of benefits to Plan
participants or their beneficiaries.
(2) Unless Trustee has actual knowledge of Company's
Insolvency, or has received notice from Company or a person claiming to be a
creditor alleging that Company is Insolvent, Trustee shall have no duty to
inquire whether Company is Insolvent. Trustee may in all events rely on such
evidence concerning Company's solvency as may be furnished to Trustee and that
provides Trustee with a reasonable basis for making a determination concerning
Company's solvency.
(3) If at any time Trustee has determined that Company is
Insolvent, Trustee shall discontinue payments to Plan participants or their
beneficiaries and shall hold the assets of the Trust for the benefit of
Company's general creditors. Nothing in this Trust Agreement shall in any way
diminish any rights of Plan participants or their beneficiaries to pursue their
rights as general creditors of Company with respect to benefits due under the
Plan or otherwise.
(4) Trustee shall resume the payment of benefits to Plan
participants or their beneficiaries in accordance with Section 2 of this Trust
Agreement only after Trustee has determined that Company is not Insolvent (or is
no longer Insolvent).
(c) Provided that there are sufficient assets, if Trustee
discontinues the payment of benefits from the Trust pursuant to Section 3(b)
hereof and subsequently resumes such payments, the first payment following such
discontinuance shall include the aggregate amount of all payments due to Plan
participants or their beneficiaries under the terms of the Plan for the period
of such discontinuance, less the aggregate amount of any payments made to Plan
participants or their beneficiaries by Company in lieu of the payments provided
for hereunder during any such period of discontinuance.
3
<PAGE>
Section 4. Payments to Company.
Company shall have no right or power to direct Trustee to return to
Company or to divert to others any of the Trust assets before all payment of
benefits have been made to Plan participants and their beneficiaries pursuant to
the terms of the Plan.
Section 5. Investment Authority.
(a) Trustee may invest in securities (including stock or rights to
acquire stock) or obligations issued by Company. All rights associated with
assets of the Trust shall be exercised by Trustee or the person designated by
Trustee, and shall in no event be exercisable by or rest with Plan participants.
(b) Except as provided in this subsection (b) and subsection (c)
below, the Committee shall provide Trustee with all investment instructions.
Trustee shall neither affect nor change investments of the Trust Fund, except as
directed in writing by the Committee, and shall have no right, duty or
responsibility to recommend investments or investment changes; provided, that
Trustee may (a) deposit cash on hand from time to time in any bank savings
account, certificate of deposit, or other instrument creating a deposit
liability for a bank, including Trustee's own banking department, if Trustee is
a bank, without such prior direction or (b) invest in government securities,
bonds with specific ratings, or stock of "Fortune 500" companies, all within
broad investment guidelines established by the Committee from time to time.
(c) In the event of a "Change in Control", as defined in the Plan (a
"Change in Control"), the authority of the Committee to direct investments of
the Trust Fund shall cease and Trustee shall complete authority to direct
investments of the Trust Fund. The Chief Executive Officer of Company shall
notify Trustee in writing when a Change in Control has occurred. Trustee has no
duty to inquire whether a Change in Control has occurred and may rely on
notification by the Chief Executive Officer of Company of a Change in Control;
provided, however, that if any officer, former officer, director or former
director of Company or any subsidiary (other than the Chief Executive Officer of
Company), or any Participant notifies Trustee that there has been or there may
be a Change in Control, Trustee shall have the duty to satisfy itself as to
whether a Change in Control has in fact occurred. Company and its subsidiaries
shall indemnify and hold harmless Trustee for any damages or costs (including
attorneys' fees) that may be incurred because of reliance on the Chief Executive
Officer's notice or lack thereof.
Section 6. Disposition of Income.
During the term of this Trust, all income received by the Trust, net
of expenses and taxes, shall be accumulated and reinvested.
Section 7. Accounting by Trustee.
Trustee shall keep accurate and detailed records of all investments,
receipts, disbursements, and all other transactions required to be made,
including such specific records
4
<PAGE>
as shall be agreed upon in writing between Company and Trustee. Within 60 days
following the close of each calendar year and within 60 days after the removal
or resignation of Trustee, Trustee shall deliver to Company a written account of
its administration of the Trust during such year or during the period from the
close of the last preceding year to the date of such removal or resignation,
setting forth all investments, receipts, disbursements and other transactions
effected by it, including a description of all securities and investments
purchased and sold with the cost or net proceeds of such purchases or sales
(accrued interest paid or receivable being shown separately), and showing all
cash, securities and other property held in the Trust at the end of such year or
as of the date of such removal or resignation, as the case may be.
Section 8. Responsibility of Trustee.
(a) Trustee shall act with the care, skill, prudence and diligence under
the circumstances then prevailing that a prudent person acting in like capacity
and familiar with such matters would use in the conduct of an enterprise of a
like character and with like aims, provided, however, that Trustee shall incur
no liability to any person for any action taken pursuant to a direction, request
or approval given by Company which is contemplated by, and in conformity with,
the terms of the Plan or this Trust and is given in writing by Company. In the
event of a dispute between Company and a party, Trustee may apply to a court of
competent jurisdiction to resolve the dispute.
(b) If Trustee undertakes or defends any litigation arising in connection
with this Trust, Company agrees to indemnify Trustee against Trustee's costs,
expenses and liabilities (including, without limitation, attorneys' fees and
expenses) relating thereto and to be primarily liable for such payments. If
Company does not pay such costs, expenses and liabilities in a reasonably timely
manner, Trustee may obtain payment from the Trust.
(c) Trustee may consult with legal counsel (who may also be counsel for
Company generally) with respect to any of its duties or obligations hereunder.
(d) Trustee may hire agents, accountants, actuaries, investment advisors,
financial consultants or other professionals to assist it in performing any of
its duties or obligations hereunder.
(e) Trustee shall have, without exclusion, all powers conferred on
Trustees by applicable law, unless expressly provided otherwise herein,
provided, however, that if an insurance policy is held as an asset of the Trust,
Trustee shall have no power to name a beneficiary of the policy other than the
Trust, to assign the policy (as distinct from conversion of the policy to a
different form) other than to a successor Trustee, or to loan to any person the
proceeds of any borrowing against such policy.
(f) Notwithstanding any powers granted to Trustee pursuant to this Trust
Agreement or to applicable law, Trustee shall not have any power that could give
this Trust the objective of carrying on a business and dividing the gains
therefrom, within the meaning of section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Internal Revenue Code.
5
<PAGE>
Section 9. Compensation and Expenses of Trustee.
Company shall pay all administrative and Trustee's fees and expenses. If
not so paid, the fees and expenses shall be paid from the Trust.
Section 10. Resignation and Removal of Trustee.
(a) Trustee may resign at any time by written notice to Company, which
shall be effective 30 days after receipt of such notice unless Company and
Trustee agree otherwise.
(b) Trustee may be removed by Company on 30 days notice or upon shorter
notice accepted by Trustee.
(c) Upon a Change of Control, as defined in the Plan, Trustee may not be
removed by Company for two years.
(d) Upon resignation or removal of Trustee and appointment of a successor
Trustee, all assets shall subsequently be transferred to the successor Trustee.
The transfer shall be completed within 60 days after receipt of notice of
resignation, removal or transfer, unless Company extends the time limit.
(e) If Trustee resigns or is removed, a successor shall be appointed, in
accordance with Section 11 hereof, by the effective date of resignation or
removal under this section. If no such appointment has been made, Trustee may
apply to a court of competent jurisdiction for appointment of a successor or for
instructions. All expenses of Trustee in connection with the proceeding shall be
allowed as administrative expenses of the Trust.
Section 11. Appointment of Successor.
(a) If Trustee resigns or is removed in accordance with Section 10 hereof,
Company may appoint any third party, such as a bank trust department or other
party that may be granted corporate trustee powers under state law, as a
successor to replace Trustee upon resignation or removal. The appointment shall
be effective when accepted in writing by the new Trustee, who shall have all of
the rights and powers of the former Trustee, including ownership rights in the
Trust assets. The former Trustee shall execute any instrument necessary or
reasonably requested by Company or the successor Trustee to evidence the
transfer.
(b) The successor Trustee need not examine the records and acts of any
prior Trustee and may retain or dispose of existing Trust assets, subject to
Sections 7 and 8 hereof. The successor Trustee shall not be responsible for and
Company shall indemnify and defend the successor Trustee from any claim or
liability resulting from any action or inaction of any prior Trustee or from any
other past event, or any condition existing at the time it becomes successor
Trustee.
6
<PAGE>
Section 12. Amendment or Termination.
(a) This Trust Agreement may be amended by a written
instrument executed by Trustee and Company. Notwithstanding the foregoing, no
such amendment shall conflict with the terms of the Plan or shall make the Trust
revocable.
(i) Subject to subsections (ii), (iii) and (iv) below,
this Agreement may be amended: (a) by Company and Trustee, provided, however,
that if an amendment would in any way adversely affect the rights accrued under
the Plan in the Trust Fund by any Participant or beneficiary, each and every
Participant and beneficiary whose rights in the Trust Fund would be adversely
affected must consent to the amendment before this Agreement may be so amended
and (b) by Company and Trustee as may be necessary to comply with laws which
would otherwise render the Trust void, voidable or invalid in whole or in part.
(ii) Notwithstanding that an amendment may be
permissible under subsection (i) above, this Agreement shall not be amended by
an amendment that would: (a) cause any of the assets of the Trust to be used for
or diverted to purposes other than for the exclusive benefit of Participants and
beneficiaries as set forth in the Plan, except as is required to satisfy the
claims of Company's general creditors pursuant to Section 3 or (b) be
inconsistent with the terms of the Plan, including the terms of the Plan
regarding termination, amendment or modification of Plan.
(iii) Any amendment to this Agreement shall be set forth
in writing and signed by Company and Trustee and, if consent of any Participant
or beneficiary is required under subsection (i), the Participant or beneficiary
whose consent is required. Any amendment may be current, retroactive or
prospective, in each case as provided herein.
(iv) In connection with the exercise of the rights under
this Section 12(a): (a) prior to a Change in Control, Trustee shall have no
responsibility to determine whether any proposed amendment complies with the
terms and conditions set forth in subsections (i) and (ii) above and may
conclusively rely on the directions of the Committee with respect thereto,
unless Trustee has knowledge of a proposed transaction or transactions that
would result in a Change in Control and (b) after a Change in Control, the power
of Company to amend this Agreement shall cease, and the power to amend that was
previously held by Company shall, instead, be exercised by a majority of the
Participants and, if a Participant is dead, his or her beneficiaries (who
collectively shall have one vote among them and shall vote in place of such
deceased Participant), with the consent of Trustee, provided that such amendment
otherwise complies with the requirements of subsections (i), (ii), and (iii)
above.
(b) The Trust shall not terminate until the date on which
Plan Participants and their beneficiaries are no longer entitled to benefits
pursuant to the terms of the Plan. Upon termination of the Trust any assets
remaining the Trust shall be returned to Company.
7
<PAGE>
(c) Upon written approval of participants or beneficiaries entitled to
payment of benefits pursuant to the terms of the Plan, Company may terminate
this Trust prior to the time all benefit payments under the Plan have been made.
All assets in the Trust at termination shall be returned to Company.
Section 13. General Administration.
(a) Until a Change in Control has occurred, this Section 13(a) shall be
effective and the Committee shall direct Trustee as to the administration of the
Trust in accordance with the following provisions:
(i) The Committee shall be identified to Trustee by a certificate
of an officer of the Company certifying the identity of the members of the
Committee. Persons authorized to give directions to Trustee on behalf of the
Committee shall be identified to Trustee by written notice from the Committee,
and such notice shall contain specimens of the authorized signatures. Trustee
shall be entitled to rely on such written notice as evidence of the identity and
authority of the persons appointed until a written cancellation of the
appointment, or the written appointment of a successor, is received by Trustee.
(ii) Directions by the Committee, or its delegate, to Trustee shall
be in writing and signed by the Committee or persons authorized by the
Committee, or may be made by such other method as is acceptable to Trustee.
(iii) Trustee may conclusively rely upon directions from the
Committee in taking any action with respect to this Agreement, including the
making of payments from the Trust Fund and the investment of the Trust Fund
pursuant to this Agreement. Trustee shall have no liability for actions taken
or for failure to act, on the direction of the Committee. Trustee shall have no
liability for failure to act in the absence of proper written directions.
(iv) Trustee may request instructions from the Committee and shall
have no duty to act or liability for failure to act if such instructions are not
forthcoming from the Committee. If requested instructions are not received
within a reasonable time, Trustee may, but is under to duty to, act on its own
discretion to carry out the provisions of this Agreement in accordance with this
Agreement and the Plan.
(b) In the event of a Change in Control, the authority of the Committee
to administer the Trust and direct Trustee, as set forth in Section 13(a) above,
shall cease, and Trustee shall have complete authority to administer the Trust.
Section 14. Miscellaneous.
(a) Any provision of this Trust Agreement prohibited by law shall be
ineffective to the extent of any such prohibition, without invalidating the
remaining provisions hereof.
8
<PAGE>
(b) Benefits payable to Plan participants and their beneficiaries
under this Trust Agreement may not be anticipated, assigned (either at law or in
equity), alienated, pledged, encumbered or subjected to attachment, garnishment,
levy, execution or other legal or equitable process.
(c) This Trust Agreement shall be governed by and construed in
accordance with the laws of California.
Section 15. Effective Date.
The effective date of this Trust Agreement shall be June 1, 1997.
"Trustee"
Imperial Trust Company
By: /s/ John C. Henry
---------------------
IMPERIAL TRUST COMPANY
By: JOHN C. HENRY
---------------------
VICE PRESIDENT
"Company"
National Golf Properties, Inc.,
a Maryland corporation
By: /s/ Richard C. Price
---------------------
By: /s/ William C. Regan
---------------------
9
<PAGE>
EXHIBIT 10.4
CONSULTING AGREEMENT
--------------------
THIS AGREEMENT, entered into as of the 30th day of April, 1997 between
National Golf Properties, Inc., a Maryland corporation (the "Company") and
Edward R. Sause, an individual (the "Consultant"):
RECITALS
WHEREAS, the Consultant has, concurrently with the execution hereof,
resigned his position as Chief Financial Officer and Executive Vice President of
the Company to accept a position at American Golf Corporation ("AGC") as its
Executive Vice President-Finance; and
WHEREAS, the Consultant remains a member of the Company's board of
directors (the "Board") and has been appointed Chairman of the Financial
Committee of the Board; and
WHEREAS, the Consultant has extensive experience and knowledge with respect
to the capital raising, budgeting, financial reporting, acquisitions, corporate
governance and strategic planning aspects of the business now conducted by the
Company, and desires and is willing to act as a consultant to the Company on the
basis and to the extent provided herein; and
WHEREAS, the Company desires to retain the Consultant in order to obtain
the benefit of his services and advice form time to time on the basis and to the
extent provided herin.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements of the parties hereto, it is agreed as follows:
1. Retention of Consultant. On the terms and subject to the conditions set
-----------------------
forth herein, the Company hereby retains the Consultant to provide the
consulting services described in section 2, and the Consultant hereby agrees to
provide such consulting services to the Company.
2. Consulting Services.
-------------------
(a) During the Term (as defined in Section 5(b), the Consultant will assist
the Company from time to time at the request of the Board in the following areas
of the Company's business: capital raising, budgeting, financial reporting,
acquisitions, corporate governance and strategic planning (the "Consulting
Areas"). For so long as the Consultant is an employee of AGC the Consultant
shall not consult with, or in any manner provide services or advice to, the
Company with respect to any matters which relate to AGC (including, without
limitation, leasing issues). The Consultant will perform such duties with
1
<PAGE>
respect to the Consulting Areas as the Board or the President of the Company may
prescribe from time to time, and shall report to, and shall be subject to
supervision by, the President of the Company. The Consultant shall be available
to render services to the Company hereunder for at least five hours per month.
(b) The Company recognizes that the Consultant has primary
responsibilities to AGC as its Executive Vice President-Finance, and that the
Consultant's employment agreement with AGC allows him to engage in other work
activities (including matters for the Company) as long as such other work does
not impair his ability to function effectively as an officer of AGC.
3. Compensation. In consideration for the services to be provided
------------
by the Consultant hereunder, the Company will pay to the Consultant a consulting
fee at a rate of $200 per hour for services rendered. Such fees shall be payable
to the Consultant on the last business day of the month following the month in
which consulting services were rendered. The Consultant shall submit an invoice
of his consulting hours, itemized in reasonable detail, to the Company not later
than the 10th business day of the month following the month in which services
were rendered hereunder.
4. Expenses.
--------
Subject to the further provisions of this section 4, the Company will
reimburse the Consultant for all reasonable out-of-pocket expenses incurred by
the Consultant in connection with the performance by the Consultant of his
services in accordance with section 2. Such expenses shall be payable only
against itemized reports thereof prepared consistent with good business
practices.
5. Term: Early Termination.
-----------------------
(a) The initial term of the Consultant's employment pursuant to this
Agreement (the "Initial Term") shall commence on the date of this Agreement and
shall continue until the first anniversary of the date of this Agreement,
subject to early termination as provided in this section 11.
(b) At the expiration of the Initial Term and each anniversary
thereafter, the term of this Agreement shall automatically be extended for an
additional year (the "Extension Term"), subject to early termination as provided
in this Section 11, unless either party shall have given written notice to the
other party at least thirty (30) days prior to the end of the Initial Term or
the Extension Term, as the case may be, that it does not desire to extend the
term of this Agreement. References herein to the "Term" of this Agreement shall
refer to both such Initial Term and any Extension Term.
2
<PAGE>
(c) The Term shall terminate immediately upon delivery by the Company
to the Consultant of written notice of termination (except in the case of death
of the Consultant, which shall result in automatic termination) if:
(i) the Consultant ceases, or is unable, to perform his duties under
this Agreement by reason of death or permanent disability; or
(ii) the Consultant commits a material breach of the terms,
conditions, undertakings, obligations or agreements contained in this
Agreement; or
(iii) the Consultant engages in serious misconduct injurious to the
Company.
(d) The Company may terminate the Consultant's employment hereunder
with or without cause upon 30 days written notice to the Consultant, and the
Consultant may resign his employment with or without cause upon 30 days written
notice to the Company. The Consultant's employment hereunder may be terminated
by mutual agreement of the Consultant and the Company at any time.
6. Employment Status. The Consultant shall be an employee of the
-----------------
Company, and shall be obligated to adhere to all Company policies applicable to
similarly situated employees.
7. Headings. The headings of this Agreement are inserted for
--------
convenience only and shall not affect the meaning or interpretation of this
Agreement.
8. Amendment. The Agreement may be altered, modified or amended
---------
only by an agreement in writing signed by the parties hereto.
9. Notices. Any notice, request, claim, demand, document and other
-------
communication hereunder to any party shall be effective upon receipt (or refusal
of receipt) and shall be in writing and delivered personally or sent by telex,
telecopy, or certified or registered mail, postage prepaid, as follows:
(a) If to the Company, addressed to its principal offices to the
attention of Scott S. Thompson, at National Golf Properties, Inc.; 2951 28th
Street, Suite 3001, Santa Monica, California 90405.
(b) If to the Executive, to his attention at American Golf
Corporation, 2951 28th Street, Santa Monica, California 90405;
or at any other address as any party shall have specified by notice in writing
to the other parties.
3
<PAGE>
10. Entire Agreement. This Agreement constitutes the entire
----------------
agreement and understanding between the parties hereto with respect to the
subject matter hereof.
11. Counterparts. This Agreement may be executed in several
------------
counterparts, each of which shall be deemed an original, and all of which
taken together shall constitute one and the same instrument.
12. Severability. If any provision of this Agreement shall be
------------
declared invalid or unenforceable because of its scope or duration, such
provision shall be reduced in scope or duration or otherwise modified and shall
be enforced to the extent permitted by law. If any provision of this Agreement
shall be declared invalid, illegal or unenforceable altogether, such provision
shall be severed. In any event, all other remaining provisions of this Agreement
shall continue in full force and effect.
13. Governing Law. This Agreement shall be governed in all respects
-------------
by and construed and enforced in accordance with the laws of the State of
California.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
NATIONAL GOLF PROPERTIES, INC.,
a Maryland corporation
By: /s/ David G. Price
------------------------------
CONSULTANT
/s/ Edward R. Sause
---------------------------------
Edward R. Sause
4
<PAGE>
Exhibit 11.1
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
FOR THE FOR THE FOR THE FOR THE
THREE MONTHS THREE MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
JUNE 30, 1997 JUNE 30, 1996 JUNE 30, 1997 JUNE 30, 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Primary:
Net income.............................. $ 4,087 $ 3,339 $ 7,365 $ 6,373
=========== =========== =========== ===========
Weighted average number of shares
outstanding............................ 12,355,924 10,642,042 12,350,680 10,632,008
Incremental shares resulting from stock
options................................ 155,257 83,635 155,286 83,009
----------- ----------- ----------- -----------
Weighted average number of common stock
and common stock equivalents........... 12,511,181 10,725,677 12,505,966 10,715,017
=========== =========== =========== ===========
Primary earnings per share.............. $ 0.33 $ 0.31 $ 0.59 $ 0.59
=========== =========== =========== ===========
Fully diluted:
Net income.............................. $ 4,087 $ 3,339 $ 7,365 $ 6,373
=========== =========== =========== ===========
Weighted average number of shares
outstanding............................ 12,355,924 10,642,042 12,350,680 10,632,008
Incremental shares resulting from
stock options.......................... 183,634 83,635 183,634 83,009
----------- ----------- ----------- -----------
Weighted average number of common
stock and common stock equivalents..... 12,539,558 10,725,677 12,534,314 10,715,017
=========== =========== ----------- -----------
Fully diluted earnings per share........ $ 0.33 $ 0.31 $ 0.59 $ 0.59
=========== =========== =========== ===========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NATIONAL
GOLF PROPERTIES, INC. FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 7,518
<SECURITIES> 290
<RECEIVABLES> 2,696
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 8,304
<PP&E> 545,527
<DEPRECIATION> 84,315
<TOTAL-ASSETS> 480,414
<CURRENT-LIABILITIES> 7,639
<BONDS> 239,832
0
0
<COMMON> 124
<OTHER-SE> 213,705
<TOTAL-LIABILITY-AND-EQUITY> 480,414
<SALES> 0
<TOTAL-REVENUES> 36,180
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 14,384
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,263
<INCOME-PRETAX> 13,188
<INCOME-TAX> 113
<INCOME-CONTINUING> 13,075
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,365
<EPS-PRIMARY> .59
<EPS-DILUTED> .59
</TABLE>
