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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-KSB
[X] Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended December 31, 1996.
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ________ to
________
COMMISSION FILE NO. 0-24812
BRASSIE GOLF CORPORATION
__________________________________________________________________
(Name of small business issuer as specified in its charter)
Delaware 56-1781650
______________________________ _______________________
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
5806-A Breckenridge Parkway, Tampa, Florida
__________________________________________________________
(Address of principal executive offices)
33610
____________
(Zip Code)
(813) 621-4653
__________________________
(Issuer's telephone number)
Securities registered pursuant to Section 12(b) of the Exchange Act:
None
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock, $.001 Par Value
____________________________________________________
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act 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 [ ]
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B in this form and no disclosure will be contained, to
the best of issuer's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]
The issuer's revenues for its most recent fiscal year: $5,231,902.
The aggregate market value at February 28, 1997 of shares of the
Common Stock held by non-affiliates of the issuer was $9,604,452 based upon the
closing price of the Common Stock in the NASDAQ System (as reported by the
National Quotation Bureau, Inc.). Solely for the purpose of this calculation,
shares held by the principal shareholders named in Item 12 hereof, as well as
shares held by directors and officers of the Registrant, have been excluded.
Such exclusion should not be deemed a determination or an admission by the
issuer that such shareholders or individuals are, in fact, affiliates of the
issuer.
On February 28, 1997, there were 28,205,095 shares of the Registrant's
Common Stock $.001 par value and 375,000 shares of the Registrant's Preferred
Stock, $.001 par value outstanding.
Documents Incorporated by Reference
_____________________________________
None
Transitional small business disclosure format Yes [ ] No [x]
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BRASSIE GOLF CORPORATION
FORM 10-KSB
YEAR ENDED DECEMBER 31, 1996
TABLE OF CONTENTS
_________________________________________
PART I
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Page
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Item 1. Description of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Item 2. Description of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . 21
PART II
Item 5. Market for Common Equity and Related
Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Item 6. Management's Discussion and Analysis or Plan of Operation . . . . . . . . . . . . . . . 23
Item 7. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . 53
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16 (a) of The Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . 54
Item 10. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Item 11. Security Ownership of Certain Beneficial Owners
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Item 12. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . . 60
Item 13. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
</TABLE>
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
A. CORPORATE HISTORY
Brassie Golf Corporation, a Delaware corporation (the "Company"),
together with its predecessors and subsidiaries, has engaged, since August
1988, in the acquisition, design, construction, operation and management of
private, semi-private and daily-fee (i.e., "public") golf courses in the United
States.
The Company was incorporated in Delaware on November 12, 1991
under the name "Longview Golf Corporation" as a holding company to acquire
majority interests in two corporations (one of which is now an operating
subsidiary of the Company), each of which was then developing a golf course.
On November 14, 1991, the Company entered into an Agreement and Plan of
Reorganization (the "Reorganization") with the shareholders of both The
Gauntlet at St. James, Inc. (a North Carolina corporation formerly known as
Longview Golf Corporation) ("GSJ") and The Gauntlet at Laurel Valley, Inc.
(formerly known as Laurel Valley Golf Corporation) ("GLV") pursuant to which
the Company acquired all of the outstanding shares of GSJ and GLV except those
shares owned, respectively, by Canadian PT Limited Partnership (a limited
partnership comprising three pension funds and referred to herein as "PT
Partnership") and Edmonton Pipe Industry Pension Trust Fund (referred to herein
as the "EPI Pension Fund").
On September 18, 1992, the Company changed its name from "Longview
Golf Corporation" to "Brassie Golf Holdings, Ltd." On March 29, 1993, the
Company changed its name from "Brassie Golf Holdings, Ltd." to "Brassie Golf
Corporation" and increased its authorized capital to 25,000,000 shares of
Common Stock, $.001 par value per share ("Common Stock"), and 1,000,000 shares
of Preferred Stock, $.001 par value per share ("Preferred Stock"). On July 18,
1994, the Company increased the number of authorized shares of Common Stock to
50,000,000 shares. In 1993, the Company changed its year-end from March 31 to
December 31, resulting in a nine-month fiscal period.
REORGANIZATION WITH HALE IRWIN GOLF SERVICES, INC. To enhance the
Company's visibility and its management, marketing and design capabilities, the
Company acquired 100% of the capital stock of Hale Irwin Golf Services, Inc.
("HIGSI"), an international golf course design, development and management
company based in St. Louis, Missouri, in exchange for 1,250,000 shares of the
Company's Common Stock in a stock-for-stock reorganization on May 16, 1994 (the
"Reorganization"). HIGSI, a Missouri corporation incorporated on October 28,
1986, was founded by Hale S. Irwin, a golf course designer, PGA TOUR
professional and Life Member of the Professional Golf Association of America,
and Richard J. Stahlhuth, a golf course owner and developer. HIGSI had two
operating divisions -- Hale Irwin Golf Design (the "Design Division") and Hale
Irwin Golf Management (the "Management Division"). On September 10, 1994,
HIGSI's operations were combined with the Company's and the Company's principal
executive office was moved from Southport, North Carolina to St. Louis,
Missouri. Messrs. Irwin and Stahlhuth became members of the Board of Directors
of the Company. Mr. Irwin is the President of the Design Division and Mr.
Stahlhuth assumed the role of President of the Company until January 17, 1995,
at which time
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he tendered his resignation as a Director and Officer of the Company in order
to pursue personal business interests. Mr. Irwin resigned as a Director on
August 19, 1996 and has reached an agreement with the Company to purchase
HIGSI. See Item 12. "Certain Relationships and Related Transactions".
MERGER AND REORGANIZATION WITH SUMMIT GOLF CORPORATION. On June
30, 1995, the Company acquired all the issued and outstanding shares of Summit
Golf Corporation, a Florida corporation ("Summit") through the consummation of
an Agreement of Merger and Reorganization (the "Agreement") whereby the
Company's newly incorporated Florida subsidiary, Brasmit Golf Corporation
("Brasmit") merged with Summit, thereby simultaneously vesting Summit
shareholders with the right to exchange their Summit shares for 1,875,000 newly
issued common shares, $.001 par value (the "Common Stock") of the Company,
which as a result were then issued. Copies of the Agreement, Amendment No.1
thereto, and a Pre-Closing Agreement in connection with the transaction were
filed as Exhibits 2.1, 2.2 and 2.3 respectively to the Company's Form 8-K filed
July 6, 1995 and are incorporated herein by reference. Additional consideration
paid by the Company comprised 375,000 shares of newly issued subordinated
redeemable preferred stock with a par value of $.001 per share (each share has
a stated value of $10.00 and is convertible into five shares of Common Stock;
the "Preferred Stock"), 500,000 five-year warrants exercisable at $2.50 per
share for the first three (3) years and $3.25 per share for the next two years,
$275,854 cash and notes for $224,146. The Company's Certificate of
Designations, Preferences and Rights of Junior Non-Cumulative Redeemable
Convertible Preferred Stock setting the qualities of the Preferred Stock was
filed as an Exhibit to the Company's current report on Form 10-Q filed November
14, 1995 and is incorporated herein by reference.
Pursuant to the Articles of Merger filed pursuant to the
Agreement, Brasmit was the surviving corporation and its acquired assets
include (1) all the shares of Club Operations and Property Management, Inc.
("COPM"), a Florida corporation based in Tallahassee which provided consulting
services to or managed, on the effective date of the merger, a portfolio of 44
facilities, including 39 private, semi-private and daily-fee golf courses in 14
states throughout the U.S. and five courses in Mexico; (2) all of Summit's
previously acquired assets of Resort Golf Clubs International, Inc. ("RGCI")
including the RGCI 1995 Marketing Plan which the Company presently intends
eventually to develop and implement in connection with its interval membership
and golf villa programs; and (3) Summit Golf Properties, Inc., an inactive
Delaware corporation.
Following the merger on June 30, 1995, William Horne, Tom
Richardson and Lance McNeill were nominated and elected as Directors at the
Company's Annual Meeting of Shareholders and appointed Officers of the Company
with the following responsibilities:
William E. Horne - President and Chief Executive Officer
Thomas K. Richardson - Senior Vice President - Operations and
Chief Operating Officer
Lance McNeill - Senior Vice President - Acquisitions
& Development
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Gary A. Nacht resigned as interim President and was appointed
Executive Vice President of the Company and acted as its Chief Financial
Officer until his resignation in all capacities on January 30, 1996.
To fund the cash portion of the transaction, the Company utilized
a portion of the proceeds received from a subsidiary's debt repayment which
repayment was funded by surplus proceeds from the subsidiary's May 1995
refinancing of its NationsBank first mortgage on its golf course in Southport,
NC. (See Item 1.c.1. - "The Company's Golf Courses - the Gauntlet at St.
James").
Effective September 4, 1995, the Company's St. Louis, Missouri and
Southport, North Carolina corporate offices were, simultaneously with COPM's
move from Tallahassee, relocated to leased premises at the Company's new
corporate headquarters in Tampa, Florida. The Company's Design Division
relocated to new premises and maintains its offices in St. Louis, Missouri.
(See Item 2 - "Description of Property" for information regarding the Company's
office facilities.)
In connection with the purchase of the shares and assets described
above, the Company entered into employment agreements (the "Employment
Agreements") with Mr. Horne and Mr. Richardson. Copies of the Employment
Agreements were filed as Exhibits 2.4 and 2.5 respectively to the Company's
Form 8-K filed July 6, 1995 and are incorporated herein by reference. The
Employment Agreements contain non-competition provisions and provisions for the
reimbursement of expenses, an automobile allowance, disability and other
customary benefits and are further described hereafter (See Item 12. "Certain
Relationships and Related Transactions".)
On October 27, 1995, Brasmit filed an amendment to its Articles of
Incorporation and changed its name to Brassie Golf Management Services, Inc.
("BGMS").
On December 27, 1995, BGMS transferred all its shares in Summit
Golf Properties, Inc. to the Company. Summit Golf Properties, Inc. was an
inactive Delaware subsidiary of Summit which on June 11, 1996 filed an
amendment to its Certificate of Incorporation and changed its name to Brassie
Construction Management Services, Inc. ("BCMS"). On July 1, 1995, BCMS (then
Summit Golf Properties, Inc.) was engaged to supervise the construction of the
second golf course on St. James Plantation, the site of the Company's first
golf course in Southport, North Carolina. Through BCMS, the Company intends to
offer construction supervision to such owners and developers as may require the
Company's expertise to coordinate and monitor their golf course construction
process (See Item 1.b. "General - Golf Course Construction Management
Services").
B. GENERAL.
The Company's principal business is the ownership, development and
operation of golf courses. As a result of the HIGSI and Summit acquisitions,
the Company also provides golf course design and management services to others
in exchange for design and management fees.
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OWNERSHIP AND OPERATION OF GOLF COURSES.
The Company's business plan is to expand, by acquisition and
development, its portfolio of golf courses primarily by capitalizing on the
present and projected need for quality golf courses in markets where management
believes (i) demand exceeds supply and (ii) buying power, integrated operating
systems and national account management can generate significant economies of
scale. The Company, through its subsidiaries, currently holds ownership
interests in four operating golf courses which are located in North Carolina,
South Carolina and Virginia (see Item 1.c. "The Company's Golf Courses").
Courses which are owned by others but managed by the Company are located in
Alabama, Arkansas, Colorado, Florida, New York, North Carolina, Ohio, South
Carolina, Tennessee and Virginia. All of the courses in which the Company has
an ownership interest in are open to the general public for daily-fee play at
normal greens fees ranging from $15.00 to $60.00 per round (including cart
fees) depending upon the time of year, location of the course and competitive
conditions. For a more complete description of the Company's current
facilities, see Item 1.c. "Business -- The Company's Golf Courses".
Sale of Resident Memberships. As more fully described below, by
agreement with the developer of the residential development contiguous to the
St. James golf course, initial membership fees are paid to the Company, on
behalf of the purchasing resident, by the developer upon the closing of each
lot sale. These "resident" members are entitled to preferential tee times
generally unavailable to the daily-fee player from other facilities. The
bylaws of the residential development at St. James limit the number of
"resident" memberships (and certain "resident" privileges) that may be sold to
and/or activated by lot owners. See Item 1.c.1. "Business -- The Company's
Golf Courses -- The Gauntlet at St. James" for a further discussion on the
limitation of the sale of such "resident" memberships.
Competitive Advantage. To distinguish itself from competing
daily-fee golf courses, the Company's management seeks to provide high quality
golf play, superior pro shop equipment and clothing lines and friendly service.
Quality golf play is achieved by striving for the highest standards of course
maintenance while utilizing golf course designs by P.B. Dye (son of golf course
architect Pete Dye) and Hale Irwin, both accomplished golf course designers.
Hale Irwin currently has an employment agreement with the Company which expires
on May 16, 1997. See Item 12. "Certain Relationships and Related
Transactions".
Acquisition and Expansion Strategy. The tourist trade and local
residents in the southern United States form the principal market for the
Company's daily-fee golf courses. Subject to the Company's ability to secure
financing, the Company intends to direct its expansion primarily in the
southern United States. The Company believes that expansion in specified
regions has numerous benefits, including economies of scale in management and
course operations, regional advertising and the ability to relocate personnel
expeditiously. The Company believes that the southern United States provides
other benefits as well, including a temperate climate, extended playing season,
extended construction season, advantageous market demographics and continuing
development of planned residential communities.
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Subject to securing acquisition financing, the Company intends to
continue to seek to purchase favorably priced existing courses from owners,
including financial institutions, that desire to sell the courses to
financially qualified buyers with access to capital and skilled course
management. Additionally, the Company seeks to capitalize on a trend in public
golf course development whereby residential golf course community developers,
often unable to obtain senior debt financing for the golf course component of
their development, provide significant incentives to a limited group of golf
course developers with credible financial strength and access to "designer
label" architects. Generally, the residential developers seek the premium
pricing and accelerated rate of sales which often inure to developments
associated with an efficiently-run, high-quality community golf course. For
example, as occurred with the Company's Gauntlet at St. James golf course, in
exchange for the Company's commitment to design and construct a golf course,
the underlying land was sold to the Company for nominal consideration and the
Company was provided with significant additional cash incentives (i.e., an
agreement to automatically fund memberships) based upon residential lot sales.
While the Company does not anticipate a shortage of development sites in the
near future, there can be no assurance that similarly suitable sites will
continue to be made available to the Company. Further, a failure of a
residential community project or poor lot sales at a development associated
with a golf course owned by the Company could negatively effect the financial
performance of the Company's course at such location.
In connection with its due diligence and market evaluation
activities for prospective acquisition and development opportunities, the
Company typically performs a market analysis of both the location and the
resident and tourist population, an examination of all existing facilities,
equipment and inventory, a review of an up-to-date property survey and Phase I
Environmental Audit, an examination of permits, variances and required
approvals for the development and/or operation of the golf course, an
investigation of the seller's or developer's financial history, an inspection
of infrastructure and improvements, which includes roads, utility services,
sewer, water and easements and an analysis of administrative changes and/or
capital improvements required to bring the facility in line with the Company's
level of service and operational quality.
The Company estimates that in connection with due diligence,
market evaluation and deposit expenditures, it has incurred expenses of
approximately $281,000 and $200,000 for the years ended December 31, 1996 and
1995, respectively. The Company aggressively pursued opportunities to acquire
and/or develop courses during both years.
Competition with the Company's Golf Course Development Efforts and
Course Operations. The Company faces significant competition with respect to
golf course development and acquisitions. There are a number of regional and
national golf course developers which also offer "designer label" architectural
services. Competitors also include sophisticated real estate investment
groups, multi-course owners and strategic industry investors (often foreign),
many with greater capital resources than the Company.
The Company's courses also face substantial competition for the
business of the local and tourist golfer. Competitors for daily-fee play
include other public and private golf courses within each course's region. For
each of the Company's courses, there are numerous competitive alternative
courses within close proximity. For example, the Myrtle Beach area (which
includes two of the
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courses in which the Company has an ownership interest) has approximately ninety
18-hole courses within a ninety-minute drive.
Courses competitive with those of the Company generally have
on-site pro shops. Such shops, together with sporting goods stores and
clothing stores within each course's market vicinity, are the Company's
principal competitors with respect to product sales.
Seasonality. In operating its courses, the Company's revenues are
directly affected by the seasonal tourist trade, the weather, and the effects
of the local economy. For example, play often increases during the autumn and
spring months at its courses located in North and South Carolina, may cease
during the winter months at its course located in Virginia, and decreases at
all courses during unseasonably hot weather.
Trademarks. The Company believes that its current use of the name
"Gauntlet" and associated "glove and rose" logo does not infringe upon other
currently registered uses of the word or logo.
Under the terms of the Agreement and Plan of Reorganization
between the Company and the former shareholders of Hale Irwin Golf Services,
Inc., the Company was granted the exclusive right to use the following trade
names: "Hale Irwin Golf Services," "Hale Irwin Golf Management" and "Hale
Irwin Golf Design" through May 16, 1997. See Item 1.b. "Business General --
Golf Course Design Services and Golf Course Management Services" for a
discussion of the limitations relating to the Company's use of these names.
Thereafter, the Company will no longer use Mr. Irwin's name in connection with
its business.
Government Regulation Relating to the Environment. Three of the
four golf courses in which the Company has an ownership interest were developed
by the Company. During the construction of golf courses the Company must be
concerned with protecting land designated as "wetlands" and other development
and land use restrictions. Because Phase I environmental audits and permits
for the development sites have been procured in the past by the developers, the
Company has not been required to expend substantial funds on an annual basis in
complying with federal, state and local provisions relating to the environment.
There can be no assurance, however, that future compliance expenditures
incurred by the Company will not be substantial, or that necessary permits
and/or licenses will be granted. Accordingly, the Company might experience
development delays pending resolution of environmental concerns arising prior
to or during future construction.
Additionally, operations at the Company's golf courses involve the
use and storage of various hazardous materials such as herbicides, pesticides,
fertilizers, motor oil and gasoline. Various federal, state and local laws,
ordinances and regulations control the storage, use and discharge of such
materials. The Company believes that it is in substantial compliance with all
such laws, ordinances and regulations applicable to its storage and use of such
materials and does not currently incur substantial sums relating to compliance.
However, property owners and users are generally responsible for all
environmental conditions present on such property and for any discharge of any
hazardous substances thereon, regardless of knowledge or responsibility
therefor. Consequently, there can be no assurance
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that the Company will not in the future incur substantial sums in connection
with any such condition or future discharge.
GOLF COURSE DESIGN SERVICES.
The Company has derived revenue from the design of golf courses
for others through its wholly-owned golf course design division, Hale Irwin
Golf Services, Inc. ("HIGSI"). Hale Irwin has served as president of the
Company's Design Division and has been primarily responsible for the golf
course design projects undertaken by the Company.
On May 16, 1997, Mr. Irwin's three-year employment agreement with
the Company will expire. Such employment agreement governs Mr. Irwin's
employment as president of HIGSI, which was purchased by the Company on May 16,
1994. Mr. Irwin has informed the Company that he does not intend to renew the
employment agreement upon its expiration in order to pursue golf course design
independently. In addition, the Company and Mr. Irwin have reached an
agreement whereby the Company will sell HIGSI to Mr. Irwin for a combination of
Brassie stock currently held by Mr. Irwin and a portion of the earnings to be
received on design contracts that are currently in negotiation with clients as
well as a percentage of revenues on future design contracts procured by the
Company. As HIGSI has been less profitable than anticipated since its
acquisition by the Company in May 1994, the Company believes this agreement
will improve the financial results of the Company compared to previous years.
Operations. The Design Division was formed to market world-class
golf course design services to private and public developers of golf facilities
in the United States and internationally. Since its formation in March of
1987, the Design Division has designed and provided construction observation
for the following courses: Quail Creek Golf Club (opened during 1987 in St.
Louis, Missouri), New England Country Club (opened during 1989 in Bellingham,
Massachusetts), Southern Woods Country Club (opened during 1992 in Homosassa
Springs, Florida), Panther Creek Country Club (opened during 1992 in
Springfield, Illinois), Indian Peaks Golf Course (opened during 1993 in
Lafayette, Colorado), the Club at Cordillera (opened during July 1994 in
Edwards, Colorado), Meadowlands (opened during the fall of 1995 in Greensboro,
North Carolina), The Members Club (opened during 1996 in Southport, North
Carolina), The Valley Club (opened during 1996 in Sun Valley, Idaho), and Cape
Girardeau Country Club (completed in 1996 in Cape Girardeau, Missouri).
Currently, the Design Division has two courses under development, in Tunica,
Mississippi and Rock Hill, South Carolina, and a design consultation project in
Las Vegas, Nevada. (See Item 12. "Certain Relationships and Related
Transactions" for a description of the Company's relationships with entities
owned by Mr. Irwin and his associate, Richard Stahlhuth).
Design services include course planning, schematic design,
construction documentation and construction supervision. The Design Division
offers two levels of design: the "Hale Irwin Design Course" and the "Hale
Irwin Signature Course." Depending on a variety of factors, including the type
of course, competition and the level of promotional participation by Mr. Irwin,
fees for these 18-hole designs range from $150,000 to $450,000 (for a "Hale
Irwin Signature" course). Clients are primarily local, regional and national
real estate developers.
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Competition with the Design Division. The Company estimates that
there are more than 200 golf course architects providing architecture and
design services in North America. In addition, many local land planners and
engineers provide golf course design services in the early stages of site
development. In this competitive environment, the Design Division solicits new
business primarily by attendance at national industry seminars, trade shows and
conferences; networking with industry professionals including contractors,
engineers, accountants, attorneys, equipment and supply companies and others;
and direct mail campaigns. Following the initial introductions, qualified
prospects are invited to visit, at the Company's cost, sites of previously
completed or in-process design projects.
The Design Division's primary competitive advantages result from
its association with Hale Irwin as a golf course designer, the expertise of the
Company's in-house management team, and its affiliations with other designers
and architects that allow it to provide a broad range of services to meet the
needs of the market. The primary competitive disadvantage faced by the Design
Division is its relatively limited (ten years) operating history and the
limited number of existing projects available for inspection by prospective
clients.
Other Business Considerations. The business of the Design
Division is not seasonal and the Design Division generally has a backlog of
three to six design projects under bid and/or negotiation at any given time.
As a provider of design services, the Design Division does not bear direct
financial responsibility for compliance with federal or state environmental
regulations as these matters are and remain the contractual responsibility of,
and are funded by, the individual golf course owner/developer.
GOLF COURSE MANAGEMENT SERVICES.
The Company also derives revenue through Brassie Golf Management
Services, Inc. ("BGMS") and Club Operations and Property Management, Inc.
("COPM") (subsidiaries of the Company and collectively referred to as the
"Management Division") from operations relating to the day-to-day management of
golf courses for others. As of December 31, 1996, the Management Division
managed 30 facilities, including four golf courses in which the Company has
ownership interests, under Management and/or Financial and Accounting
contracts.
Operations. The Management Division has developed a proprietary
computer system for cash and inventory control, time management and course
reporting. The system allows the Management Division to monitor golf course
operations on a daily basis, providing clients (i.e., course owners) with
comprehensive "real-time" information necessary for efficient operations. Golf
courses are managed by the Management Division pursuant to Management and/or
Financial and Accounting agreements depending upon the degree of management
services requested by the client.
The Management Division benefits the Company not only through the
revenue that is derived from its activities, but also through the expertise it
brings to the management of the Company-owned and operated courses.
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Competition with the Management Division. The Company estimates
that there are approximately 40 golf course management companies nationwide.
The Management Division also derives business from the Design Division, which
offers post-construction management services in conjunction with its design
services. The Company's competitive advantage lies in its experienced
management team and competitive pricing. The Company's competitive
disadvantage is the fact that economies of scale have not yet been achieved,
notwithstanding the number of courses under management.
Other Business Considerations. The business of the Management
Division is not seasonal and there is no backlog of clients. As a provider of
management services, the Management Division does not bear direct financial
responsibility for compliance with federal or state environmental regulations
as these matters are and remain the contractual responsibility of, and are
funded by, the individual golf course owner/developer.
GOLF COURSE CONSTRUCTION MANAGEMENT SERVICES.
The Company also derives revenue through Brassie Construction
Management Services, Inc. ("BCMS"), a subsidiary of the Company, from the
supervision of unrelated parties' golf course construction projects. The
Company's management has had considerable exposure to all forms of land
development (See Item 9. "Directors and Executive Officers of the Registrant").
Experience gleaned from the construction of three of the courses in which the
Company has ownership interest and one of its managed courses located in
Southport, North Carolina that is currently under a management agreement, its
relationships with financing institutions, designers, engineers, contractors
and sub-trades enables the Company to offer this supervisory service.
Operations. The Construction Management Division's services
offered include managing the pre-bid and post-bid process, advising on the
letting of contracts, assisting with contract administration, participating in
the scheduling and budgeting processes, assisting and coordinating in
permitting all aspects of the job, assisting in construction draw
administration (including the preparation of AIA documents, lien waivers,
inspections, and monthly site reports), providing agronomy services throughout
the project including such turf and landscaping advice as necessary to provide
an appropriate "grow in" plan ensuring a smooth transition from the
construction phase to the opening of the course. This division currently has
no projects in progress at this time.
The Construction Management Division benefits the Company not only
through the revenue that is derived from its activities but also as a
follow-through feature of the Company's Design Division Services and as a means
to introduce the Company's Management Division to the owner/client.
Competition with the Construction Management Division. The Company
provides a service which can also be performed by architects, engineers,
contractors and the owners themselves except to the extent of the Division's
unique experience in land development related to golf course construction. The
Company solicits new business from its design project prospects, during
attendances at golf trade shows and by networking to build on its construction
project achievements to date. Trade journals and advertisements also provide
leads. Requests for Proposals (RFP's) from
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<PAGE> 12
governmental agencies provide another bidding opportunity. The Construction
Management Division's competitive advantages result from the relationship
skills and reputation of its principals and the Company's familiarity with golf
course construction in the Southern United States. Also, the ability to point
to the Company's Management Division can provide attractive incentives for
clients to engage BCMS for a seamless "turnkey" project. The primary
disadvantages faced by the Construction Management Division are its limited
number of completed projects available for inspection by prospective clients
and the multitude of alternate supervisors available to the owner/developer,
including other project managers, many of whom have vastly more resources,
reputation and achievements than the Company.
Other Business Considerations. The business of the Construction
Management Division is seasonal to the extent that the time frame for "grow in"
is limited and project start-up times are therefore predetermined. Also,
permitting is frequently a lengthy process and often delayed. The Company has
not developed a backlog of clients. As a provider of services, the Company has
no direct responsibility for federal or state environmental regulations as
these matters are and remain the contractual responsibility of, and are funded
by the individual golf course owner/developer.
EMPLOYEES.
As of February 28, 1997, the Company and its subsidiaries had 120
employees and consultants.
12
<PAGE> 13
C. THE COMPANY'S GOLF COURSES.
The Company has ownership interests in four golf courses. Two of
the courses, the Gauntlet at St. James and the Gauntlet at Curtis Park, are
each owned through an individual subsidiary in which the Company presently owns
80% and 100% of the outstanding equity respectively. The other two golf
courses, the Gauntlet at Laurel Valley and the Gauntlet at Myrtle West are
owned through two similar subsidiaries ("the GLV and GMW Subsidiaries"). The
GLV and GMW Subsidiaries are parties to and the subject of pending litigation
between the Company and the Edmonton Pipe Industry Pension Trust Fund ("the EPI
Pension Fund"). As a result of a preliminary injunction granted by the
Circuit Court in and for Hillsborough County, Florida on July 12, 1996, the
Company transferred 45% of the outstanding equity in both of the GLV and GMW
Subsidiaries to the EPI Pension Fund. The Company currently holds 30% of the
outstanding equity in each of these two subsidiaries. For further discussion
of the Company's pending litigation with the EPI Pension Fund see Item 3.
"Legal Proceedings". See also Notes 1 and 10 to Consolidated Financial
Statements. Through this reorganization, the EPI Pension Fund has increased
its ownership interest in and financial commitment to these two golf courses
and, as a result, the Company significantly reduced all short and long term
obligations associated with the ownership of these two golf courses.
Furthermore, the Company continues to manage The Gauntlet Courses on a fee
basis.
In the late fall of 1995, the Company engaged in discussions with
its three pension fund partners (the "Pension Funds") in the four courses in
which the Company has ownership interests ("The Gauntlet Courses") with a view
to modeling a future joint venture and reorganizing existing relationships to
enhance the Company's cash flows and profitability. During February 1996, the
parties established their mutual intentions and on February 21, 1996, the
parties memorialized their intentions in a document captioned an "agreement in
principle" (the "AIP"). In the second quarter of 1996, the Company reached an
agreement with two of its pension fund partners relating to two of the golf
courses. However, the Company was unable to reach a satisfactory agreement
with the EPI Pension Fund with respect to the other two golf courses. Certain
provisions of the AIP contemplate alternative ownership scenarios whereby the
Pension Funds would assume primary responsibility for The Gauntlet Courses.
These alternative ownership scenarios have been implemented for the Gauntlet at
Laurel Valley and the Gauntlet at Myrtle West (see Item 3. "Legal
Proceedings").
1. THE GAUNTLET AT ST. JAMES,
BRUNSWICK COUNTY, SOUTHPORT, NORTH CAROLINA
The Gauntlet at St. James (formerly known as Longview Country
Club) is a 200 acre, 18-hole, daily-fee golf course located in the St. James
Plantation real estate development in Southport, North Carolina, which is 30
miles south of Wilmington, North Carolina and 35 miles north of Myrtle Beach,
South Carolina. The golf course was designed by P.B. Dye. Amenities include
a 16,000 square foot clubhouse (including the golf pro shop, restaurant, bar,
snack bar and cart storage), a swimming pool and two tennis courts with a
separate tennis pro shop. The Gauntlet at St. James is owned by a subsidiary
of the Company, The Gauntlet at St. James, Inc. ("GSJ"), a North Carolina
corporation. The Company owns 80%, and PT Partnership owns 20%, of the
outstanding equity shares of GSJ as follows:
13
<PAGE> 14
<TABLE>
<CAPTION>
Voting Non-Voting Percent of
Common Stock Common Stock Outstanding
------------ ------------ -----------
<S> <C> <C> <C>
PT Partnership 7,200 12,800 20%
The Company 28,800 51,200 80%
------ ------ ----
36,000 64,000 100%
</TABLE>
The GSJ Shareholders' Agreement provides PT Partnership with
certain powers and safeguards with respect to GSJ, including, without
limitation, control over certain expenditures (checks over $5,000 must be
co-signed by a representative of PT Partnership who acts as Secretary of GSJ),
the ability to appoint a majority of directors to the Board of Directors of GSJ
upon written notice to the Company, the ability to purchase the Company's GSJ
shares for fair market value in the event that PT Partnership determines its
investment to be "at risk" (after giving the Company notice of the condition
causing PT Partnership to believe the project is at risk and the Company's
failure to cure the default cited in the notice), a right of first refusal on
all sales of GSJ shares by the Company, certain buy-out provisions in the event
either shareholder receives a third-party offer to purchase its holdings, and
upon exercising its right to appoint a majority of the Board of Directors, the
requirement that at least two directors nominated by PT Partnership must vote
in favor of any resolution passed by the Board of Directors. Reference is made
to the GSJ Shareholders Agreement and Amendments where such provisions are set
forth in full.
Full service play at The Gauntlet at St. James began in October
1991. The residential community, which is adjacent to the golf course, is
owned and being developed by Homer E. Wright, Jr., Inc. ("Wright"), an
unaffiliated entity. For each residential lot or multi-family dwelling unit
sold, up to a maximum of 900, GSJ receives a $5,000 mandatory resident
membership fee from the developer. This membership fee entitles such buyer to
membership at The Gauntlet at St. James, the association in which residents are
granted memberships. For the years ended December 31, 1996 and 1995, there
were 96 and 138 lots or units sold, respectively, in connection with which the
Company received a resident membership fee. The number of buyers entitled to
activate their memberships at The Gauntlet at St. James is at any given time
limited to 485.
At such time as the Gauntlet at St. James has at least 485 active
resident members, its Bylaws provide that its membership may have an option to
purchase the golf course and certain related facilities at the then fair market
value. In addition, Wright, the developer, holds a twenty-five year right of
first refusal to purchase the golf course and certain related facilities on the
same terms as a third-party offeror. In addition, Wright is entitled to a
commission of 5% in the event the golf course is sold (within twenty-five years
from opening). For more information with respect to such provisions, see the
Bylaws of The Gauntlet at St. James and the Purchase Agreement between Wright
and GSJ, dated as of September 8, 1990.
The Gauntlet at St. James serves two client bases: (a) golf
vacationers primarily during the months of September through December and
February through May; and (b) local players throughout the year. The Company
estimates that it receives approximately 60% of its annual revenues at this
golf course from the Myrtle Beach tourist trade with the balance of revenues
from the local resident population. During the year ended December 31, 1996,
37,387 rounds were played compared to 39,842 rounds played in 1995. Rounds
played, which affect golf, food and beverage and pro shop
14
<PAGE> 15
revenues, were negatively impacted in the fourth quarter of 1996 due to the
second 18-hole golf course owned by Wright which is located on St. James
Plantation adjacent to The GSJ golf course.
See Item 1.c.3. for a discussion of the Company's pledge of its
GSJ shares to NationsBank in connection with the financing of The Gauntlet at
Curtis Park. Such pledge was consented to by PT Partnership pursuant to an
amendment to the GSJ Shareholders' Agreement.
2. THE GAUNTLET AT LAUREL VALLEY,
GREENVILLE COUNTY, TIGERVILLE, SOUTH CAROLINA
The Gauntlet at Laurel Valley is a 165 acre, 18-hole, daily-fee
golf course located near Greenville, South Carolina and 22 miles from
Spartanburg, South Carolina. The course was designed by P.B. Dye. The
Gauntlet at Laurel Valley includes a 4,500 square foot clubhouse with
restaurant, pro shop, members' lounge and underground cart storage facility.
The course was built in conjunction with a planned residential real estate
development. The Company has a 30% ownership interest in The Gauntlet at
Laurel Valley, Inc. ("GLV"), a South Carolina corporation. Edmonton Pipe
Industry Pension Trust Fund (the "EPI Pension Fund") owns the remaining 70% of
the outstanding equity shares of GLV as follows:
<TABLE>
<CAPTION>
Voting Non-Voting Percent of
Common Stock Common Stock Outstanding
------------ ------------ -----------
<S> <C> <C> <C>
EPI Pension Fund 7,000 6,720 70%
The Company 3,000 2,880 30%
------- ----- ----
10,000 9,600 100%
</TABLE>
The Shareholders' Agreement between the Company and the EPI
Pension Fund, dated as of October 30, 1991, (the "GLV Shareholders'
Agreement"), provides the EPI Pension Fund with certain rights with respect to
GLV, including, without limitation, control over all expenditures over $5,000
(checks over such amounts must be co-signed by a representative of EPI Pension
Fund who acts as Secretary of GLV), equal representation on the Board of
Directors of GLV (with a director selected jointly by the Company and the EPI
Pension Fund to break any ties), the ability to purchase the Company's shares
in GLV for fair market value in the event that the EPI Pension Fund determines
its investment to be "at risk" and the Company fails to cure the default cited
in the notice, and certain forced buy-out provisions in the event either
shareholder receives a third-party offer to purchase its holdings. Reference
is made to the GLV Shareholders' Agreement where such provisions are set forth
in full.
Full service play commenced in April 1993. There are
approximately 425 residential lots adjacent to this facility to be developed by
the residential developer. The current developer of such community, Laurel
Development Corporation ("LDC"), succeeded to its interest in May 1993. In
keeping with the present development plans and negotiations, GLV will receive a
mandatory membership fee from the developer of approximately $3,000 for each of
the lots sold, which entitles each lot owner to receive a golf membership. Lot
owners at Laurel Valley can activate their memberships by paying their annual
dues. As of December 31, 1996, the subdivision lots have not yet
15
<PAGE> 16
been marketed or sold. Although the residential developer plans to market its
lots during 1997, there can be no assurance that the development will be
successful.
The Gauntlet at Laurel Valley draws its golfing clientele
primarily from the Greenville/Spartanburg metropolitan area. During the year
ended December 31, 1996, 25,439 rounds were played compared to 28,095 rounds
played during the year ended December 31, 1995.
3. THE GAUNTLET AT CURTIS PARK,
STAFFORD COUNTY, VIRGINIA
The Gauntlet at Curtis Park, Inc. ("GCP") has a lease agreement
with the Board of Supervisors of Stafford County, Virginia to lease, through
the year 2026 (with two renewal options of 6 years each), land for the
development, construction and operation of an 18-hole golf course with room and
permission to expand to 27 holes (subject to market conditions) within Curtis
Memorial Park, Stafford County, Virginia (the "Lease"). The Lease requires the
Company to pay rental payments equaling the greater of $25,000 or 5% of net
revenues (excluding revenues from certain membership sales) for each of the
years remaining in the initial 33-year lease term. Rental payments are not to
exceed 7 1/2% and 11% of net revenues, respectively, for each year of the two
renewal terms. Amenities include a 6,000 square foot clubhouse which includes
a golf teaching center, driving range, practice putting green and parking
facilities. The golf course was designed by P.B. Dye and opened for public
play in June 1995.
In 1994, the Company entered into a Shareholders' Agreement
concerning GCP with UA Canadian Pipeline Industry National Pension Plan ("UA
Pension Fund") of which the Company owned 80% and the UA Pension Fund owned 20%
of the outstanding equity shares of GCP. On September 13, 1996 the Company
purchased the remaining 20% of GCP from the UA Pension Fund for $50,000. At
the same time, the Company paid down the $1,600,000 second mortgage loan held
by the UA Pension Fund. The remaining loan balance was purchased by, and
assigned to, A & E Capital Funding, Inc. (see Item 12. "Certain Relationships
and Related Transactions") thereby completely terminating the UA Pension Fund's
interest in GCP.
The Company has guaranteed GCP's first mortgage obligation and
pledged, pursuant to a Stock Pledge Agreement (the "Pledge Agreement"), its
shares in GSJ, GLV and GCP to NationsBank as security for such guarantee (the
'Guarantee"). The Company is to be released from the Guaranty and the Pledge
Agreement upon the attainment by GCP of two consecutive years of specified
levels of performance.
Pursuant to a Subscription Agreement between UA Pension Fund and
the Company, on April 19, 1994, UA Pension Fund was issued 79,010 shares of the
Company's Common Stock for an aggregate price of $400,000 (Canadian) or $5.06
(Canadian) per share. The shares of the Company's Common Stock issued to UA
Pension Fund were guaranteed by the Company to have a value in the event of a
public sale of $400,000 (Canadian) for a period of six months following the
expiration of the one-year hold period under the Securities Act (Ontario) and
the regulations of The Toronto Stock Exchange. For a period of two years
thereafter (ending October 19, 1997) the Company had guaranteed that one-half
of the issued shares shall maintain their issue price. The terms of the
16
<PAGE> 17
guaranty appear in the GCP Shareholders' Agreement discussed above. The Company
was to be released from these guaranty provisions upon the public price of the
Company's Common Stock exceeding the issue price by 40% for a period of 30
consecutive calendar days. During the fall of 1995 and at the end of the price
guarantee period for one half (39,505) of the shares issued to UA Pension Fund,
negotiations commenced in respect of a lock-up period for the balance of the
shares. Negotiations were not successful and on October 18, 1995, a related
party collateralized the UA Pension Fund against a $200,000 (Canadian)
shortfall anticipated to result from the UA Pension Funds' disposition of all
79,010 of the shares. During 1996, the Company reimbursed the related party
for $200,000 (Canadian) and contributed an additional $8,000 USD to close the
transaction and be released from the guaranty. See Item 12. "Certain
Relationships and Related Transactions".
GCP seeks to draw golfing clientele from, and sell memberships to,
the residents of the surrounding areas, which include the Washington, D.C.
metropolitan area and the suburbs of Richmond, Virginia. The Curtis Park golf
course has no contiguous or adjacent residential community and therefore there
is no developer with whom GCP has an agreement regarding imposition of
mandatory residential membership fees as a condition of its sale of lots. The
golf course opened for public play on June 1, 1995 and from such opening
through December 31, 1995, 24,654 rounds of golf were played. During the year
ended December 31, 1996, 31,167 rounds were played.
4. THE GAUNTLET AT MYRTLE WEST,
HORRY COUNTY, NORTH MYRTLE BEACH, SOUTH CAROLINA
The Gauntlet at Myrtle West is a 196 acre, 18-hole, daily-fee golf
course located in North Myrtle Beach, South Carolina. The course was designed
by Tom Jackson. The Gauntlet at Myrtle West includes an 8,000 square foot
clubhouse with restaurant, pro shop, member's lounge and a 6,600 square foot
underground cart storage facility. The course, which was previously known as
The Myrtle West Golf and Country Club, was purchased by The Gauntlet at Myrtle
West, Inc. ("GMW"), a South Carolina corporation, on December 30, 1993. The
Company owns 30%, and the EPI Pension Fund owns 70%, of the outstanding equity
shares of GMW as follows:
<TABLE>
<CAPTION>
Voting Non-Voting Percent of
Common Stock Common Stock Outstanding
------------ ------------ -----------
<S> <C> <C> <C>
EPI Pension Fund 7,000 6,720 70%
The Company 3,000 2,880 30%
------ ----- ---
10,000 9,600 100%
</TABLE>
The Shareholders' Agreement between the Company and the EPI Pension
Fund (the "GMW Shareholders' Agreement"), provides the EPI Pension Fund with
certain rights with respect to GMW, including, without limitation, approval
over expenditures that are in excess of $5,000 or outside the annual budget
(which requires the consent of both the President and the Secretary/Treasurer
(an EPI Pension Fund representative) of GMW, equal representation on the Board
of Directors of GMW (with a director selected jointly by EPI and the Company to
break any deadlocks), the ability to purchase the Company's shares in GMW for
fair market value in the event EPI determines its investment to be "at risk"
and the Company fails to cure the default cited in the notice, and certain
forced buy-out
17
<PAGE> 18
provisions in the event either shareholder receives a third-party offer to
purchase its holdings. Reference is made to the GMW Shareholders' Agreement
where such provisions are set forth in full.
The shares of the Company's Common Stock issued to the North Myrtle
Beach Golf Club, Inc. ("the MW Seller") in connection with the Company's
acquisition of GMW from the MW Seller, were under certain circumstances,
guaranteed by the Company to have a value in the event of a public sale of
$350,000. On December 11, 1995, MW Seller filed a Complaint against GMW and
the Company, alleging an inability to sell the Company's common shares. GMW and
the Company dispute the claim and, as described in Item 3. "Legal Proceedings",
have filed an Answer and will vigorously oppose the action.
The Company took possession of, and commenced operations at, The
Gauntlet at Myrtle West on December 30, 1993. The golf course draws its
clientele predominantly from the Myrtle Beach area golf market. This course
generated approximately 40,741 and 46,868 rounds of golf during 1996 and 1995,
respectively. There is no residential development contiguous to GMW, nor is
there a developer from whom the Company will receive automatic membership fees.
The rounds of golf were negatively impacted due to extraordinarily inclement
weather in 1996.
ITEM 2. DESCRIPTION OF PROPERTY
The Company's principal business office is located at: Brassie Golf
Corporation, 5806-A Breckenridge Parkway, Tampa, Florida 33610. Effective
September 1, 1995 the Company took occupancy of 11,200 square feet of newly
leased office space at the above address (the "Premises") after the Company's
renovation of the Premises (with $120,000 of tenant improvements funded by the
landlord). A 5 1/2 year lease ending January 31, 2001 provides for an initial
6 month rent-free period whereafter, on a monthly basis and for each of the
ensuing years of the term, the Company has agreed to pay annual base rents of
$92,288, $95,312, $109,536, $123,872 and $127,232 respectively. The landlord's
operating expenses for services provided to the Company and other lessees of
the business park that accommodates the Premises are estimated, paid monthly as
additional rent, adjusted annually and according to the lease, shall not
annually exceed $2.35 per rentable square foot for the first two years of the
lease. In the event of an overholding of the term, the lease becomes a month to
month lease and as a monthly rent therefor, the Company will be charged 150% of
the base rent and additional rent. The Company may not sublet the Premises or
assign the lease (unless to a qualified and approved affiliate) without the
consent of the landlord. The lease contains other such customary provisions
including a force majeure clause and indemnities. The Premises include the use
of 44 parking spaces and to provide for expansion space should the Company
require additional room, the lease grants to the Company a two year option for
1,000 square feet of contiguous space. This option is terminable should the
Company fail to exercise the option after the landlord advises that a
prospective tenant desires to lease the option space.
The Company's Hale Irwin Design Division offices are located c/o
Hale Irwin Golf Services, Inc., #208-9909 Clayton Road, St. Louis MO 63124.
This office space comprises 1,102 square feet was leased by HIGSI for the
period commencing August, 1995 to October 31, 1997 simultaneous with the
relocation of the Company's corporate offices to Tampa, Florida. HIGSI pays a
monthly rent of $1,426 which includes all electricity, lighting, heating,
cooling and elevator services. The Company's
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<PAGE> 19
lease obligations on this property will terminate upon the sale of HIGSI (see
Item 12. " Certain Relationships and Related Transactions).
The office space occupied by the Company is sufficient for the
conduct of the Company's business therein.
In December 1996 the Company, through a wholly-owned subsidiary,
Divot Properties WGV, Inc., purchased for $810,617 approximately 4.25 acres
described as Southeast Parcel 2 of the St. Johns Planned Unit Development
located in St. Johns County, Florida, as well as certain license rights. The
land is located within the World Golf Village development which is currently
being developed within the 6,300 acre St. Johns planned community. The World
Golf Village resort, located approximately 15 miles south of Jacksonville,
Florida, upon completion, will be home to the World Golf Hall of Fame Museum,
the World Golf Village Resort Hotel and Conference Center, three 18-hole
championship golf courses, PGA Tour Productions, a PGA Tour Golf Academy, and
other amenities. The license rights entitle the Company, for a period of
twenty-five years, to use the World Golf Village names and logos in connection
with the promotion and operation of certain service enterprises, and the
marketing of certain consumer products related to the World Golf Village.
For a complete description of all other properties owned or leased
by the Company, see Item 1.c. "Business -- The Company's Golf Courses."
ITEM 3. LEGAL PROCEEDINGS
A confidential Settlement Agreement ("Settlement") was reached on
May 17, 1995 between the Company and the sellers ("Sellers") of the Wedgefield
Country Club in Orlando, Florida, the Palisades Golf and Country Club in Lake
County near Orlando, Florida and the Northshore Golf and Country Club near
Corpus Christi in San Patricio County, Texas (the "Golf Courses"). A court
hearing was conducted on May 3, 1996 to try mutual allegations of a breach of
the Settlement. The issues tried related primarily to an accounting for
adjustments made at closing and a determination of responsibility for
outstanding and long overdue Golf Course payables assumed by the Sellers
pursuant to the Settlement. Additionally, the Sellers alleged that the
Company, through one of its officers and in breach of the Settlement, made
false and disparaging remarks regarding the Sellers. On July 5, 1996 the
Company and the Sellers participated in a mediation and entered into a
Settlement Agreement resolving the alleged breach of the Settlement.
On August 28, 1993, the City of Lafayette, Colorado, opened a Hale
Irwin Golf Services, Inc. (HIGSI) designed golf course in Colorado surrounded
by a residential community simultaneously developed by an unrelated party. In
March of 1995, purchasers of a building lot on the 18th fairway sought
injunctive relief and damages from the City, the developer, and HIGSI, alleging
that the faulty design of the residential community and golf course denigrated
the value of the other property on which they had recently built a home which
frequently had to accommodate errant golf balls. In July of 1995, the
homeowners' request for a temporary restraining order was dismissed based on
the Judge's ruling that the course was not negligently designed and that the
manner of use by golfers of the 18th fairway did not constitute a dangerous
condition. In spite of the adverse ruling, the homeowners commenced an action
in District Court, Boulder County, Colorado (Civil Action No.
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<PAGE> 20
95CV635) against the developer/owner of the residential community and golf
course, the City of Lafayette as the operator of the course, and amongst
others, HIGSI. In this action the Plaintiffs seek damages which are claimed to
arise from property damage and the threat of bodily injury, resulting from golf
balls that have entered onto their property from golfers' drives from the tee
of the 18th hole at the Indian Peaks Golf Course. Plaintiffs have asserted
twelve claims in their Second Amended Complaint and Request for Injunctive
Relief. The claims which pertain to HIGSI include a second claim for relief
for fraud (based upon allegations that the course was represented to them as a
"world class" golf course designed in accordance with Hale Irwin design
standards when it was not so designed), the third claim for negligent
misrepresentation (based upon the same allegations), a fourth claim for
negligent design, construction, operation and maintenance, a fifth claim for
deceptive trade practices under C.R.S. Section 6-1-101, a sixth claim for
"civil conspiracy", a seventh claim for trespass, and an eighth claim for
nuisance. Almost all defendants are also parties to the above claims as well.
HIGSI has answered the previous Complaint denying the allegations and asserting
numerous affirmative defenses. Damages sought by the Plaintiffs include
monetary damages to be proven at trial, including treble damages, attorney
fees, pre- and post-judgment interest, costs and other expenses of litigation,
punitive damages, preliminary and permanent injunction enjoining the City of
Lafayette, Colorado (co-Defendant) from continuing to operate the 18th hole in
a manner that continues to allow golf balls to strike the property and for such
other and further relief as the Court deems just and proper. HIGSI has filed
an Answer, and is vigorously defending all the allegations, and deems the
Complaint without merit. The case is currently set for trial on May 12, 1997.
On August 10, 1995, the Company and its subsidiary, The Gauntlet at
Myrtle West, Inc. ("GMW") received from North Myrtle Beach Golf Club, Inc.,
("MW Seller") a "Notice of Default Under Indemnity Agreement and Guaranty"
dated December 28, 1993 in connection with MW Seller's alleged inability to
realize $350,000 or any proceeds through its attempts at a public sale of its
102,010 shares of the Company's Common Stock. The stock was issued to MW
Seller and the Indemnity Agreement and Guaranty (the "Guaranty") was entered
into by the Company and GMW as part consideration for the December 28, 1993
sale to GMW of certain of MW Seller's assets, inclusive of certain golf course
lands and improvements in Myrtle Beach, S.C. The obligations under the
Guaranty are secured by a third mortgage and security agreement over the golf
course. The Company has disputed the claim that its shares held by MW Seller
have no value and on February 12, 1996 filed an Answer to the December 11, 1995
Complaint and Third Mortgage Foreclosure proceedings filed by MW Seller under
Civil Action No. 5-CR26.3462 in The Court of Common Pleas, County of Horry,
State of South Carolina. The Company denies liability and states that MW
Seller's failure to sell the stock as required by the Guaranty discharges the
Company's and GMW's obligations. The Company believes its maximum liability
exposure will be the shortfall, if any, from $350,000 and the sale proceeds at
the time MW Seller's 102,010 Company shares are sold or should have been sold.
The Company has recorded a $150,000 expense in the accompanying Consolidated
Financial Statements as a reserve for its estimated maximum liability for
this case.
In connection with the Company's February 21, 1996 Agreement in
Principle ("AIP") with its three Pension Fund Partners (see introduction to
Item 1.c. "The Company's Golf Courses" for further discussion of the AIP and
see Exhibit 10.47), definitive agreements were reached during the second
quarter of 1996 with regards to two of the Company's four golf courses.
However, the Company's efforts to interpret the AIP and negotiate with the
Edmonton Pipe Industry Pension Trust Fund (the
20
<PAGE> 21
"EPI Pension Fund") regarding the two other courses were unsuccessful. On May
31, 1996, the EPI Pension Fund commenced an action claiming breach of contract,
specific performance, a constructive trust and temporary and permanent
injunctive relief. At a hearing conducted on July 12, 1996 in the Circuit
Court in and for Hillsborough County, Florida, the court issued a preliminary
injunction which required the Company to transfer to the EPI Pension Fund 45%
of the outstanding equity in the Company's GLV and GMW subsidiaries whereby the
Company now holds 30% of the outstanding equity in each of these two
subsidiaries and the EPI Pension Fund holds 70%. The Company filed an appeal
brief to this preliminary injunction on August 14, 1996 in the 2nd District
Court of Appeals for the 13th Judicial District in and for Hillsborough County,
Florida. The District Court denied this appeal on February 11, 1997. The
Company continues to negotiate with the EPI Pension Fund regarding the AIP.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
No matters were submitted to a vote of the security holders
during the fourth quarter of 1996.
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<PAGE> 22
PART II
ITEM 5. MARKET FOR THE COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
From August 6, 1993 through July 17, 1996, the Company's Common Stock
traded on the Toronto Stock Exchange (the "TSE") under the trading symbol
"TEE".
The following table sets forth the high and low closing prices on the
TSE for each quarter from January 1, 1996 through the Company's voluntary
request to delist from the TSE on July 17, 1996 (all such prices are in
Canadian dollars):
<TABLE>
<CAPTION>
Closing Prices
--------------
Period Ended High Low
- ------------ ---- -----
<S> <C> <C>
March 31, 1995 $4.69 $2.69
June 30, 1995 3.50 2.30
September 30, 1995 4.00 2.30
December 31, 1995 3.75 1.78
March 30, 1996 3.60 2.10
June 30, 1996 2.25 1.05
July 17, 1996 1.25 .68
</TABLE>
Since November 22, 1994, trading of the Company's Common Stock has
been quoted on the National Association of Securities Dealers, Inc. ("NASD")
Automated Quotation ("NASDAQ") System (SmallCap). The following table sets
forth, for the periods indicated, the quarterly range of the high and low
closing prices of the Common Stock as reported by the NASD in the NASDAQ System
(all such prices are in U.S. dollars):
<TABLE>
<CAPTION>
Closing Prices
--------------
Quarter Ended High Low
- ------------- ----- -----
<S> <C> <C>
March 31, 1995 $3.50 $1.88
June 30, 1995 2.63 1.63
September 30, 1995 3.00 1.63
December 31, 1995 2.88 1.25
March 31, 1996 2.69 1.50
June 30, 1996 1.69 .88
September 30, 1996 1.00 .25
December 31, 1996 .50 .25
</TABLE>
On April 11, 1997 the closing price was $0.31 on the Nasdaq (U.S.).
As of April 11, 1997, there were approximately 307 holders of record
of the Company's Common Stock and two holders of the Company's Preferred Stock.
22
<PAGE> 23
The Company has not paid dividends on its Common Stock or Preferred
Stock and does not anticipate paying any dividends in the foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion and analysis should be read in conjunction
with the Consolidated Financial Statements included herein for the years ended
December 31, 1996 and 1995.
Brassie Golf Corporation (the "Company") together with its
predecessors and subsidiaries, has been engaged since 1988 in the design,
acquisition, development and management of private, semi-private and daily-fee
(i.e., "public") golf courses. The Company's portfolio currently consists of
30 owned, leased or managed golf courses including ownership interests in three
golf courses in the states of North Carolina (1) and South Carolina (2) and one
leased golf course in Virginia which opened for public play in June 1995; Hale
Irwin Golf Services, Inc., an international golf course design and management
company based in St. Louis, Missouri; and, as a result of the June 30, 1995
acquisition of Summit Golf Corporation further described in Note 8 to the
accompanying Consolidated Financial Statements, a portfolio of 26 facilities
under management contracts at December 31, 1996, including private, semi-
private and daily-fee golf courses in 10 states throughout the U.S. For
purposes of this discussion and analysis, the Gauntlet at St. James and the
Gauntlet at Curtis Park are referred to hereafter as "Owned courses."
The Company's consolidated financial statements include the accounts
of the Company and all majority-owned subsidiaries. The following table
indicates the number of full months each Owned course was operating during the
respective periods:
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31 December 31
1996 1995
---- ----
<S> <C> <C> <C>
St. James (opened for play October 1991) 12 12
Curtis Park (opened for play June 1995) 12 7
</TABLE>
As of December 31, 1996, the Company's total assets were
approximately $14,099,000 and the Company's total debt, including capitalized
leases, was approximately $10,073,000.
The following three golf courses, which were acquired by the
Company in a single transaction during April 1994 were transferred back to the
previous owners during May 1995:
Palisades (Orlando, FL)
Wedgefield (Orlando, FL)
Northshore (Corpus Cristi, TX)
The operating results of these three facilities are included from the date of
acquisition through the date of disposition. The Company incurred a loss of
$4,130,000 on the disposition of these courses, which item is included in the
Consolidated Statement of Operations for the year ended December 31, 1995, as
an extraordinary item.
23
<PAGE> 24
See Item 3. "Legal Proceedings" and Note 9 to Consolidated Financial
Statements for further details on the disposition of the previously owned
courses.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
(A) REVENUES
The Company derives its revenues primarily from golf fees
(including greens fees, range fees and cart fees), management and design fees,
membership fees and annual dues, pro shop sales and food and beverage sales.
The period-to-period change in each of the revenues categories is as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, December 31, Increase
1996 1995 (Decrease)
------------ ------------ ----------
<S> <C> <C> <C>
Golf Fees $1,878,273 $2,555,799 (677,526)
Design and Management Fees 1,785,818 1,211,240 574,578
Membership Fees and Annual Dues 774,594 1,223,464 (448,870)
Food & Beverage 508,911 743,835 (234,924)
Pro Shop Sales 277,188 356,016 (78,828)
Other Income 7,118 15,484 (8,366)
---------- ---------- --------
$5,231,902 6,105,838 (873,936)
</TABLE>
In the aggregate, the Company generated $5,231,902 in revenues during the year
ended December 31, 1996 compared to $6,105,838 in the year ended December 31,
1995, a decrease of $873,936. The decrease primarily consists of $1,698,196
related to the operations of previously owned courses that were disposed of in
May 1995, $210,000 in lot release fees at the Gauntlet at St. James and
$101,878 in design fees offset by $676,456 attributable to the golf course
management division and $438,944 attributable to the Gauntlet at Curtis Park
being open for the entire year.
(B) COSTS AND EXPENSES
The Company's total operating expenses increased from $10,935,785
during the year ended December 31, 1995 to $11,056,005 during the year ended
December 31, 1996, an increase of $120,220. This increase is largely
attributable to additional costs of $457,740 associated with a full year of
operations for the golf course at Curtis Park, a $427,093 increase in costs
related to the golf course management division, $372,198 in increased costs
for the golf course design division, a $250,000 reserve for potential
uncollectible receivables, a $50,000 increase in the writedown to
24
<PAGE> 25
goodwill, and a $150,442 increase in other general and administrative costs,
offset by a reduction of $1,587,253 of costs were attributable to the
previously owned courses which costs were included only through the date of
disposition in May 1995.
The Company incurred write downs of goodwill of $4,050,000 and
$4,000,000 related to the Summit merger at December 31, 1996 and 1995. These
write downs were a result of management's evaluation of the future value of
goodwill on the Company's financial statements at year end. See Note 1 on
"Goodwill", in the accompanying Consolidated Financial Statements, for
additional disclosure of the goodwill write downs.
Golf course operations include the compensation and benefits costs
of course personnel and related payroll taxes, golf cart leases, equipment
rental and maintenance, clubhouse repairs and upkeep, insurance, utilities,
chemicals, seed and fertilizers, water, supplies and other miscellaneous costs
incurred in the operation of a golf course.
General and administrative expenses include management and
administrative compensation, related payroll taxes and benefits, professional
fees, including legal and accounting and other consultants, telephone,
utilities, insurance, other taxes, allowance for doubtful accounts receivable,
fixed asset valuation adjustments, travel, meals and entertainment and office
expenses, including rents.
Interest expense increased from $656,248 during the year ended
December 31, 1995 to $2,316,301 during the year ended December 31, 1996. This
$1,660,053 increase was primarily due to $1,400,000 of interest expense related
to the discount on convertible debentures, $202,845 related to the 6%
contractual interest on the debentures, $180,249 related to both a one-time
interest adjustment in 1995 and a loan refinancing in 1995 for the St. James
property, and $93,857 related to Curtis Park being open for a full year in
1996, offset by $158,155 from the reduction in debt from the disposition of
previously owned courses. In addition, the prime rate decreased to 8.25% at
December 31, 1996 versus 8.65% at December 31, 1995.
The loss on equity investment in subsidiaries increased from
$637,074 during the year ended December 31, 1995 to $966,579 during the year
ended December 31, 1996. This $329,505 increase results primarily from a
writedown of the Company's investment in the Gauntlet at Laurel Valley and the
Gauntlet at Myrtle West subsidiaries due to a redetermination of the net
realizable value of the Company's ownership interests in those properties
including a $150,000 reserve affiliated with ongoing litigation regarding the
Gauntlet at Myrtle West stock guarantee. See Item 1.c. "The Company's Golf
Courses" and Item 3. "Legal Proceedings."
Interest and other income increased from $3,403 during the year
ended December 31, 1995 to $659,266 during the year ended December 31, 1996.
This $655,863 increase resulted primarily from a gain of $580,000 in proceeds
received from a settlement of claims in connection with a former disposition of
securities held by the Company's foreign subsidiary.
The provision for income taxes of $110,000 is a result of foreign
income taxes due as a result of the $580,000 gain from the former disposition
of securities mentioned above.
25
<PAGE> 26
(C) EXTRAORDINARY LOSS ITEM
During the year ended December 31, 1995, the Company incurred an
extraordinary loss of $4,130,000 in connection with the disposition of three
previously owned golf courses. No extraordinary gains or losses were incurred
in 1996.
(D) NET LOSS
For the year ended December 31, 1996, the Company had a net loss
of $8,625,732, including the write down of goodwill as detailed above, compared
to the net loss of $10,293,535 at December 31, 1995. This $1,667,803 decrease
is a result of the items explained above.
(E) INFLATION
Inflation has not had a material effect on the Company's
operations during the years ended December 31, 1996 and 1995.
26
<PAGE> 27
LIQUIDITY AND CAPITAL RESOURCES
Historically, golf fees, membership fees and dues, pro shop sales,
food and beverage sales and management and design fees have been the principal
source of funds to pay the operating expenses of the Company. To fund
acquisitions and capital improvements, the Company is reliant upon long-term
borrowing and equity financing.
Deficiency in Working Capital
The Company had a deficit in working capital in the amount of
$404,785 as of December 31, 1996, compared to a working capital deficit of
$725,929 as of December 31, 1995. The improvement in working capital
deficiency was primarily attributable to the effects of proceeds from the
issuance of common stock in 1996 pursuant to Regulations S resulting in
increased cash and lower short-term liabilities offset by a loss from
operations, a cash purchase of long-term assets, a paydown of long-term debt,
and a reclassification of receivables from short-term at December 31, 1995 to
long-term at December 31, 1996. The availability of cash and short-term
investments as of December 31, 1996 was $845,991.
The Company is currently in the process of negotiating a business
combination with an entity with sufficient capital to fund the Company's
working capital deficiency. If such negotiations are consummated, Management
believes that the Company will have access to the capital resources necessary to
continue to meet its current debt obligations, fund capital improvements and
expand and develop its business. There is no assurance that such business
combination will be completed and the inability to complete such merger or
obtain other financing would have a material adverse effect on the Company.
Since this plan outlined above has not been consummated, the Company's Report
of Independent Auditors includes an explanatory paragraph with a going concern
uncertainty.
The Company has taken measures to maintain controls on operating
costs in 1997 as part of a continuing effort to become profitable. Management
intends to take further steps to improve the Company's liquidity and reduce
debt, both short and long term.
During March 1996, the Company issued $5,500,000 of 6% convertible
debentures under an exemption offered by Regulation S of the Securities Act of
1933. These debentures mature on March 1, 1998, unless converted into Common
Stock. As of February 28, 1997 there were two debentures outstanding with
principal balances of $1,228,602 and $1,269,995. One debenture allows for the
Company's Common Stock to be converted at a discount of 15% to its then-market
value. The other debenture may be converted at a discount ranging from 25% to
35% depending on the market price of the stock. Some of the terms of the
currently outstanding debentures have been amended from the terms of the
original debentures issued during March 1996. See Exhibits 10.48, 10.49, 10.54
and 10.55 for the debentures and letter agreements which amended their terms.
A large portion of the proceeds of the debenture have been used to
pay down existing short-term obligations, purchase the remaining outstanding
shares in The Gauntlet at Curtis Park, Inc., pay down the second mortgage loan
on The Gauntlet at Curtis Park, Inc., purchase land and license rights at the
World Golf Village in St. Johns County, Florida, and provide for other working
capital needs.
27
<PAGE> 28
Total debt increased from $8,781,122 at December 31, 1995 to
$10,073,122 at December 31, 1996. Of this $1,292,000 increase, $3,465,738 was
attributed to the Regulation S stock issuance offset by $1,555,469 resulting
from the paydown of related party debt and $618,269 from the paydown of debt to
non-related parties.
The Company has no formal current commitments for capital
expenditures for owned courses currently in operation. Management anticipates,
however, that during the next twelve-month period, the Company will expend
approximately $50,000 for golf course improvements and maintenance equipment.
The Company intends to seek financing for these capital expenditures from
outside financing sources, although there is no assurance that such financing
will be available or, if available, will be on terms acceptable to the Company.
During the year ended December 31, 1996, the Company's
shareholders' equity decreased from $7,721,670 to $1,843,291. This $5,878,379
decrease was primarily a result of the $8,625,732 net loss offset by $2,496,785
from the issuance of 6,350,564 common shares in connection with the convertible
debentures and a $191,617 translation gain on foreign currency during the
period.
Proceeds from Developer's Resident Lot Sales
By agreement with the developer of the residential real estate
development contiguous to the Gauntlet at St. James golf course constructed by
the Company, initial membership fees are paid to the Company by the developer
on behalf of the purchasing resident upon the closing of each lot sale pursuant
to negotiated or assumed agreements. Through June 19, 1995, GSJ was required
by its secured lender to apply all such fees to reduce its bank debt upon each
payment thereof. After the June 1995 refinancing of the first mortgage loan,
the bank agreed to permit GSJ to retain the resident membership fees rather
than apply them against the outstanding loan balance. During the years ended
December 31, 1996 and 1995, 96 and 138 lots were sold respectively by the
developer at St. James, the proceeds of which increased cash by $480,000 in
1996 and increased cash by $325,000 and reduced the bank debt by $365,000 in
1995. As of February 28, 1997, the Company estimates that there are 180 future
residential lots yet to be sold, each of which when sold would generate a
$5,000 resident membership fee under the agreement at St. James. See Item 1.c.
"The Company's Golf Courses". Although lot sales have continued to close
subsequent to February 28, 1997, there can be no assurance as to whether any
additional lot sales will continue or, if they do occur, over what period of
time the membership fees paid at closing will be received by the Company.
Warrant Exercises
As of December 31, 1996, warrants to purchase 2,188,000 shares of
the Company's Common Stock were outstanding. These warrants have exercise
prices ranging from $1.00 to $3.25 per share; 100,000 warrants expire September
28, 1998; 238,000 warrants expire November 17, 1998; 50,000 warrants expire
December 5, 1998; 150,000 warrants expire June 30, 1999; 1,400,000 warrants
expire June 30, 2000, and 250,000 warrants expire September 28, 2000.
During 1995, the holders of warrants to purchase 1,082,001 shares
of the Common Stock exercised their warrants, for which the Company received
proceeds of $1,514,802. No warrants were exercised in 1996.
28
<PAGE> 29
ITEM 7. FINANCIAL STATEMENTS
Index to Financial Statements
<TABLE>
<CAPTION>
Page
----------
<S> <C>
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Consolidated Balance Sheet as of December 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Consolidated Statements of Operations for the years ended December 31, 1996 and December 31, 1995 . . . . . . . . . 33
Consolidated Statements of Shareholders' Equity for the years ended
December 31, 1996 and December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Consolidated Statements of Cash Flows for the years ended December 31, 1996 and 1995 . . . . . . . . . . . . . . . 35
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
</TABLE>
29
<PAGE> 30
Report of Independent Auditors
Board of Directors and Shareholders
Brassie Golf Corporation
We have audited the accompanying consolidated balance sheet of Brassie Golf
Corporation and subsidiaries as of December 31, 1996 and the related
consolidated statements of operations, shareholders' equity and cash flows for
the years ended December 31, 1996 and 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
As discussed in Note 10 to the financial statements, the Company changed its
method of accounting for two previously majority-owned subsidiaries.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Brassie Golf Corporation and subsidiaries at December 31, 1996 and the
consolidated results of its operations and its cash flows for the years ended
December 31, 1996 and 1995, in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As more fully described in Note 1,
the Company has incurred recurring operating losses and has a working capital
deficiency. These conditions raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note 1. The financial statements do not include
any adjustments to reflect the possible future effects on the recoverability
and classification of assets or the amounts and classification of liabilities
that may result from the outcome of this uncertainty.
ERNST & YOUNG LLP
Raleigh, North Carolina
March 11, 1997
30
<PAGE> 31
Brassie Golf Corporation
Consolidated Balance Sheet
December 31, 1996
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash $ 806,079
Marketable equity securities 39,912
Trade accounts receivable, net of allowance for doubtful accounts
of $437,400 in 1996 488,281
Inventories 133,365
Prepaid expenses and other current assets 135,114
-----------
Total current assets 1,602,751
Property and equipment at cost:
Land and land improvements 5,315,154
Depreciable golf course improvements 2,283,898
Buildings 3,079,086
Furniture, machinery and equipment 1,313,314
-----------
11,991,452
Less accumulated depreciation and amortization 1,596,816
-----------
10,394,636
Equity investment in subsidiaries 150,000
Long-term accounts receivable from related party 456,937
Intangible assets, net of accumulated amortization of $563,200 868,500
Goodwill, net of accumulated amortization of $482,900 626,245
-----------
Total assets $14,099,069
===========
</TABLE>
31
<PAGE> 32
<TABLE>
<S> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 773,798
Accrued interest payable 217,274
Income tax payable 197,712
Current portion of long-term debt 684,154
Current portion of long-term debt - related parties 100,000
Current maturities of capital lease obligations 34,598
------------
Total current liabilities 2,007,536
Accrued discount on convertible debentures 882,188
Long-term debt, less current portion 7,984,832
Long-term debt, less current portion - related parties 1,193,895
Long-term capital lease obligations, less current portion 75,643
Minority interest payable 111,684
Shareholders' equity:
Preferred Stock, $.001 par value; 1,000,000 shares authorized;
375,000 shares issued and outstanding of Junior Convertible
Preferred Stock 375
Common Stock, $.001 par value; 50,000,000 shares authorized;
24,078,630 shares issued and outstanding 24,079
Additional paid-in capital 24,406,435
Accumulated deficit (22,519,314)
Unrealized loss on investments (237)
Foreign currency translation adjustment (68,047)
------------
Total shareholders' equity 1,843,291
------------
Total liabilities and shareholders' equity $ 14,099,069
============
</TABLE>
See accompanying notes.
32
<PAGE> 33
Brassie Golf Corporation
Consolidated Statements of Operations
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1996 1995
------------ ------------
(Restated)
<S> <C> <C>
Operating revenues:
Golf revenues $ 1,878,273 $ 2,555,799
Food and beverage revenues 508,911 743,835
Proshop revenues 277,188 356,016
Membership sales and dues 294,594 533,464
Resident membership fees 480,000 690,000
Management and design fees 1,785,818 1,211,240
Other 7,118 15,484
----------- ------------
Total operating revenues 5,231,902 6,105,838
Operating expenses:
Golf course operations 1,328,564 2,009,231
Cost of food and beverage sales 203,660 299,448
Cost of proshop sales 173,812 214,419
Marketing expense 216,254 210,695
Management and design expenses 1,553,821 910,925
General and administrative expenses 2,487,003 2,278,493
Depreciation and amortization expense 1,042,891 1,012,574
Write down of goodwill 4,050,000 4,000,000
----------- ------------
Total operating expenses 11,056,005 10,935,785
----------- ------------
Operating loss (5,824,103) (4,829,947)
Other income (expense):
Interest expense - contractual (916,301) (656,248)
Interest expense - discount on convertible debentures (1,400,000) -
Loss on equity investment in subsidiaries (966,579) (637,074)
Interest and other income 659,266 3,403
----------- ------------
Loss before minority interest and extraordinary item (8,447,717) (6,119,866)
Minority interest expense (68,015) (43,669)
----------- ------------
Loss before extraordinary item and taxes (8,515,732) (6,163,535)
Extraordinary loss (Note 9) - (4,130,000)
Provision for income taxes (110,000) -
----------- ------------
Net loss $(8,625,732) $(10,293,535)
=========== ============
Loss per share before extraordinary item and taxes $ (.43) $ (.40)
Extraordinary loss per share - (.26)
----------- ------------
Net loss per share $ (.43) $ (.66)
=========== ============
Weighted average number of shares outstanding 20,005,900 15,570,900
=========== ============
</TABLE>
See accompanying notes.
33
<PAGE> 34
Brassie Golf Corporation
Consolidated Statements of Shareholders' Equity
<TABLE>
<CAPTION>
FOREIGN
ADDITIONAL CURRENCY
COMMON STOCK PREFERRED STOCK PAID-IN ACCUMULATED TRANSLATION
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT ADJUSTMENT
----------- ------- -------- -------- ------------------ -------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994 as
restated 13,545,065 $13,545 - $ - $10,495,162 $ (3,600,047) $(358,711)
Net loss as restated - - - - - (10,293,535) -
Exercise of Common Stock warrants 1,082,001 1,082 - - 1,513,720 - -
Issuance of stock in connection
with Summit merger:
Common 1,875,000 1,875 - - 3,748,125 - -
Preferred - - 375,000 375 3,749,625 - -
Issuance of Common Stock in a
private offering 1,301,000 1,301 - - 2,600,699 - -
Retirement of Common Stock (125,000) (125) - - (249,875) - -
Unrealized loss on investments - - - - - - -
Translation of foreign currency
financial statements - - - - - - 99,047
---------- ------ ------- --- ---------- ----------- ---------
Balance at December 31, 1995 as
restated 17,678,066 17,678 375,000 375 21,857,456 (13,893,582) (259,664)
Net loss - - - - - (8,625,732) -
Issuance of Common Stock in
connection with conversion of
convertible debenture 6,350,564 6,351 - - 2,490,434 - -
Issuance of Common Stock in lieu
of compensation 50,000 50 - - 58,545 - -
Unrealized gain on investments - - - - - - -
Translation of foreign currency
financial statements - - - - - - 191,617
Balance at December 31, 1996 24,078,630 $24,079 375,000 $375 $24,406,435 $(22,519,314) $ (68,047)
========== ======= ======== ======== ============ ============ ========
<CAPTION>
UNREALIZED
GAIN (LOSS) ON
INVESTMENTS TOTAL
------------------ ------------
<S> <C> <C>
Balance at December 31, 1994 as
restated $ 5,534 $ 6,555,483
Net loss as restated - (10,293,535)
Exercise of Common Stock warrants - 1,514,802
Issuance of stock in connection
with Summit merger:
Common - 3,750,000
Preferred - 3,750,000
Issuance of Common Stock in a
private offering - 2,602,000
Retirement of Common Stock - (250,000)
Unrealized loss on investments (6,127) (6,127)
Translation of foreign currency
financial statements - 99,047
Balance at December 31, 1995 as
restated (593) 7,721,670
Net loss - (8,625,732)
Issuance of Common Stock in
connection with conversion of
convertible debenture - 2,496,785
Issuance of Common Stock in lieu
of compensation - 58,595
Unrealized gain on investments 356 356
Translation of foreign currency
financial statements - 191,617
Balance at December 31, 1996 $ (237) $ 1,843,291
=========== ===========
</TABLE>
34
<PAGE> 35
Brassie Golf Corporation
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1996 1995
------------ -------------
(Restated)
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $(8,625,732) $(10,293,535)
Adjustments to reconcile net loss to net used in
operating activities:
Extraordinary loss - 4,130,000
Loss of minority-owned equity investee 966,579 637,074
Depreciation 535,293 624,414
Amortization 507,598 388,160
Writedown of goodwill 4,050,000 4,000,000
Bad debt expense 65,000 2,184
Loss on sale of fixed assets - (31,966)
Gain (loss) on sale of investments 182 (207)
Trade accounts receivable 66,826 (213,323)
Accounts receivable from related parties 107,258 (400,411)
Inventory and other current assets (55,202) (33,175)
Accounts payable and accrued expenses (368,480) (97,224)
Accrued interest payable 1,024,133 39,049
Income tax payable 197,712 -
----------- ------------
Net cash used in operating activities (1,528,833) (1,248,960)
INVESTING ACTIVITIES
Payments for loan and organization costs (571,293) (492,554)
Purchases of property and equipment, net (698,630) (1,365,810)
Acquisitions of businesses, net of cash acquired - (311,793)
Additional investments in subsidiaries (486,770) -
----------- ------------
Net cash used in investing activities (1,756,693) (2,170,157)
FINANCING ACTIVITIES
Additions to long-term borrowings 5,480,388 2,480,173
Payments on long-term borrowings and capital leases (4,836,509) (4,177,729)
Issuance of common stock 2,555,380 3,866,802
Proceeds on loans from officers and shareholders 648,121 540,000
----------- ------------
Net cash provided by financing activities 3,847,380 2,709,246
Effect of foreign currency exchange rate changes on cash 191,617 99,047
----------- ------------
Increase (decrease) in cash 753,471 (610,824)
Cash at beginning of year 52,608 663,432
----------- ------------
Cash at end of year $ 806,079 $ 52,608
=========== ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest $ 938,071 $ 1,464,713
=========== ============
</TABLE>
See accompanying notes.
35
<PAGE> 36
Brassie Golf Corporation
Notes to Consolidated Financial Statements
December 31, 1996
1. BUSINESS OF THE COMPANY, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING
POLICIES
Brassie Golf Corporation ("the Company"), together with its predecessors and
subsidiaries, has been engaged since 1988 in the design, acquisition,
development and management of private, semi-private and daily-fee (i.e.,
"public") golf courses primarily located in the United States.
As of December 31, 1996, the Company has a net working capital deficiency of
$404,785. The Company is not generating sufficient revenues from its
operations to fund its activities and therefore is dependent on additional
financing from external sources. Such factors raise substantial doubt about
the Company's ability to continue as a going concern. The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty. Management is in the process of negotiating a
business combination with another entity. If such negotiations are consumated,
management believes that the Company will have access to the capital resources
necessary to continue to meet its current debt obligation, fund capital
improvements and expand and develop its business. There is no assurance that
such business combination will be completed and the inability to complete such
business combination or obtain other financing would have a material adverse
effect on the Company.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
all wholly and majority-owned subsidiaries. All material intercompany accounts
and transactions are eliminated in consolidation. The subsidiaries and related
percentage of ownership by the Company are as follows:
<TABLE>
<CAPTION>
COMPANY NAME ABBREVIATION OWNERSHIP PERCENTAGE
- ------------ ------------ --------------------
<S> <C> <C>
The Gauntlet at St. James, Inc. St. James 80%
The Gauntlet at Curtis Park, Inc. Curtis Park 100%
Brassie Golf Management Services, Inc. BGMS 100%
Summit Golf Corporation Summit 100%
Hale Irwin Golf Services, Inc. HIGSI 100%
Brassie Construction Management
Services, Inc. BCMS 100%
Amalgamated Equity Golf (a British
Columbia Corporation) Amalgamated 100%
Divot Properties WGV, Inc. Properties 100%
</TABLE>
36
<PAGE> 37
Brassie Golf Corporation
Notes to Consolidated Financial Statements (continued)
1. BUSINESS OF THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Minority interest represents the 20% interest in the St. James golf course
owned by a related entity.
The Company's 30% investments in The Gauntlet at Laurel Valley, Inc., a golf
course located in Greenville, S.C., and The Gauntlet at Myrtle West, Inc., a
golf course located in Myrtle Beach, S.C., are accounted for using the equity
method. See Note 10 "Change in Reporting Entity".
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost. Costs relating to the acquisition
and development of golf courses, including the cost of real estate, related
legal fees, construction costs, interest, and other direct costs associated
with the development of the golf courses are capitalized as part of the cost of
the course. Depreciable golf course improvements are comprised primarily of
irrigation systems, cart paths, bridges, and other land improvements.
Depreciation on property and equipment begins when the assets are placed into
service and is charged to operations over the estimated useful lives of the
assets (5 to 20 years), utilizing the straight-line method for financial
reporting purposes and accelerated methods for tax purposes. Construction in
progress relates to construction that is underway but not yet complete. All
other costs, except for organizational and loan costs, are charged to expense
as incurred.
INTANGIBLE ASSETS
Intangible assets consist primarily of organization costs and loan costs.
Costs incurred in organizing the Company are capitalized at cost and amortized
using the straight-line method over sixty months. Costs incurred in obtaining
long-term debt obligations are capitalized at cost and amortized over the lives
of the respective loans. Significant additions to capitalized loan costs
during 1996 resulted primarily from costs incurred to obtain financing on more
favorable financing terms.
37
<PAGE> 38
Brassie Golf Corporation
Notes to Consolidated Financial Statements (continued)
1. BUSINESS OF THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
GOODWILL
The Company has classified as goodwill the cost in excess of the fair value of
the net assets, including tax attributes of Summit, which was acquired through
a purchase transaction (see Note 8, "Acquisitions and Golf Course
Developments", for further discussion). Goodwill is being amortized on a
straight-line basis over 20 years. Amortization charged to continuing
operations amounted to $255,226 and $227,641 in 1996 and 1995, respectively.
The Company initially records goodwill at its cost and amortizes the cost over
the estimated useful life of the asset. At the end of each accounting period,
the Company reviews the carrying value of the goodwill for possible impairment.
The Company's policy for the valuation of goodwill is to calculate the
undiscounted projected future cash flows of Summit expected to be generated
over the life of the goodwill. This amount is then compared to the carrying
value of the goodwill to determine if the asset is impaired. Based on Summit's
cash flows and assumptions reflected in internal operating plans and strategies
during 1995, it was determined that a goodwill write down of $4,000,000 in 1995
was necessary to properly record goodwill at its net realizable value.
In October 1996, the Company recorded a goodwill writedown of an additional
$4,050,000, leaving a remaining balance of $626,245, net of accumulated
amortization, at December 31, 1996 which reflects estimated future discounted
cash flows. During 1996, goodwill was determined to be impaired because of the
current financial condition of the Company which has limited the Company's
ability to generate new mangement contracts. Moreover, anticipated future cash
flows of the Company indicate that the recoverability of the asset is not
reasonably assured.
The writedowns of goodwill are included in the accompanying statements of
operations for the years ended December 31, 1996 and 1995.
38
<PAGE> 39
Brassie Golf Corporation
Notes to Consolidated Financial Statements (continued)
1. BUSINESS OF THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
MARKETABLE EQUITY SECURITIES
The Company's marketable equity securities are classified as available-for-sale
and are carried at fair value at December 31, 1996. The ending balance of
shareholders' equity has been increased by $356 during 1996 and decreased by
$6,127 during 1995 to reflect the net unrealized holding gain or loss on
securities classified as available-for-sale. Net realized gain or loss on
investments for each period is presented in the consolidated statements of
operations.
The Company maintains cash and short-term investments with various financial
institutions. These financial institutions are located in different areas of
the U.S. and Canada, and Company policy is designed to limit exposure to any
one institution. The Company performs periodic evaluations of the relative
credit standing of those financial institutions that are considered in the
Company's investment strategy.
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------------------------------------------------------------------
<S> <C> <C> <C> <C>
December 31, 1996:
Available for sale
securities $40,149 $ - $237 $39,912
December 31, 1995:
Available for sale
securities $40,331 $ - $593 $39,738
</TABLE>
INVENTORIES
Inventories are stated at the lower of cost or market as determined using the
specific identification method.
Inventory at December 31, 1996 consists of:
<TABLE>
<S> <C>
Proshop merchandise $100,897
Maintenance inventory 14,091
Food and beverage inventory 18,377
--------
$133,365
========
</TABLE>
39
<PAGE> 40
Brassie Golf Corporation
Notes to Consolidated Financial Statements (continued)
1. BUSINESS OF THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REVENUES
Revenues of the Company include daily golf fees, proshop merchandise sales and
food and beverage sales. Golf fees include revenue generated from green fees,
cart fees and range fees. Revenues also include sales of memberships and
annual dues charged to members.
Golf fees, proshop merchandise sales and food and beverage sales are recognized
when received. Annual membership dues are recognized and earned ratably over a
twelve- month period. Membership dues collected in advance are deferred as
"unearned income" and recognized over the period of prepayment. Membership
fees that are non-refundable are recognized by the Company when received.
As part of an agreement with the developer who is developing the residential
lots in the immediate area of the St. James golf course, the developer pays St.
James a $5,000 resident membership fee for each of the residential lots sold.
At December 31, 1996, 180 lots remain unsold in the St. James development. At
such time as St. James has at least 485 active resident members, its by-laws
provide that its members have an option to purchase the golf course and certain
related facilities at fair market value.
STOCK BASED COMPENSATION
Prior to January 1, 1996, the Company accounted for its stock option plans in
accordance with the provisions of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25"), and related
interpretations. Pursuant to APB 25, compensation expense is recorded only to
the extent that the current market price of the underlying stock exceeded the
exercise price on the date of grant. On January 1, 1996, the company adopted
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123"), which requires companies to (i)
recognize as expense the fair value of all stock-based awards on the date of
grant, or (ii) continue to apply the provisions of APB 25 and provide pro forma
net income and pro forma earnings per share disclosures for employee stock
option grants made in 1995 and future years as if the fair-value-based method
defined in SFAS 123 had been applied. The Company has elected to continue to
apply the provisions of APB 25 and provide the pro forma disclosure provisions
of SFAS 123 (See Note 7).
40
<PAGE> 41
Brassie Golf Corporation
Notes to Consolidated Financial Statements (continued)
1. BUSINESS OF THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ADVERTISING EXPENSE
Statement of Position 93-7 "Reporting on Advertising Costs" was implemented by
the Company during the year ended December 31, 1995. The cost of advertising
is expensed as incurred. The Company incurred $216,000 and $211,000 in
advertising costs during the years ended December 31, 1996 and 1995,
respectively.
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
CONCENTRATION OF CREDIT RISK
The Company's primary financial instrument subject to potential concentration
of credit risk is trade accounts receivable which are unsecured. The Company
provides an allowance for doubtful accounts based on its analysis of
potentially uncollectible accounts. The Company's trade receivable arise
principally from its golf course management operations which are geographically
dispersed primarily in the southeastern U.S. As of December 31, 1996, the
Company had no significant concentrations of credit risk with any individual
customers.
FOREIGN AND DOMESTIC OPERATIONS
Net income from the Company's foreign subsidiary (Amalgamated) was
approximately $339,000 and $176,000 for the years ended December 31, 1996 and
1995, respectively. Net loss from domestic operations was approximately
$8,965,000 and $10,470,000, respectively, for the same periods.
TRANSLATION OF FOREIGN CURRENCIES
Foreign currency transactions and financial statements of Amalgamated are
translated from the local currency, Canadian dollars, into U. S. dollars at the
current exchange rates except for revenues, costs and expenses which are
translated at average exchange rates. Adjustments resulting from translations
of financial statements are reflected as a separate component of shareholders'
equity.
41
<PAGE> 42
Brassie Golf Corporation
Notes to Consolidated Financial Statements (continued)
1. BUSINESS OF THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NET LOSS PER SHARE
Net loss per share has been computed based on the weighted average number of
shares of common stock outstanding during the period presented in accordance
with APB No. 15. Stock options, warrants and the six percent convertible
debentures are considered anti-dilutive and therefore have not been included in
the computation.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In 1996, the Company adopted FASB Statement No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,
which requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. Statement No. 121 also addresses the accounting for
long-lived assets that are expected to be disposed of.
2. LONG-TERM DEBT
Long-term debt with financial institutions and other third parties at December
31, 1996 consists of the following:
<TABLE>
<S> <C>
Golf course development loan to St. James from bank, payable in
monthly principal installments of $16,319, plus interest beginning
August 1, 1995, with the remaining principal balance and unpaid
interest due July 1, 2002; collateralized by land and land
improvements. Interest is payable at prime (8.25% at December 31,
1996) plus 1.0%. $2,090,813
Golf course development loan to Curtis Park from bank, payable in
monthly principal payments of $31,875, April through November 1996
through 2000, with remaining principal balance and unpaid interest
due on December 31, 2000; collateralized by leasehold interest in
land and land improvements. Interest is payable monthly at prime
(8.25% at December 31, 1996) plus 1.0%. 2,309,497
Unsecured convertible 6% debentures due March 1, 1998, unless
converted into common stock, interest payable quarterly and
incrementally based upon conversions with the balance due, if any,
at maturity. 3,465,738
Unsecured operating term loan from bank, with interest at 10.75%,
payable in monthly installments of $16,723, which includes
principal and interest, through January 1999. 373,378
Other notes payable 429,560
----------
8,668,986
Less current portion 684,154
----------
$7,984,832
==========
</TABLE>
42
<PAGE> 43
Brassie Golf Corporation
Notes to Consolidated Financial Statements (continued)
2. LONG-TERM DEBT (CONTINUED)
During March 1996, the Company issued $5.5 million in six percent convertible
debentures to finance the operations of the Company. During 1996, the holders
of the debentures converted $2,034,262 of the debt into 6,350,564 shares which
equated to $2,496,785 in equity after offsetting financing fees. Through March
1, 1998, the six percent debentures are convertible into shares of common stock
and allow the common stock to be converted at discounts ranging from 15%-35% of
its current market value. The Company recorded $1.4 million in interest expense
during 1996 to reflect the discounts upon conversion of the Company's common
stock.
Long-term debt with related parties at December 31, 1996 consists of the
following:
<TABLE>
<S> <C>
Loan payable to a related party, principal due June 30, 2001,
collateralized by a leasehold interest in land and land
improvements; subordinated to bank loan, with interest accruing at
9.5%, payable quarterly. $ 469,000
Loan payable to a shareholder of St. James, payable in annual
principal payments of $100,000 beginning October 1996 with the
remaining principal balance and unpaid interest due on October
2000, collateralized by land and improvements and various
equipment, subordinated to bank loan, with interest accruing at
prime, adjusted annually (8.25% at December 31, 1996), plus 2%,
payable quarterly. 811,828
Other notes payable 13,067
----------
1,293,895
Less current portion 100,000
----------
$1,193,895
==========
</TABLE>
43
<PAGE> 44
Brassie Golf Corporation
Notes to Consolidated Financial Statements (continued)
2. LONG-TERM DEBT (CONTINUED)
Principal maturities of all the indebtedness detailed above during each of the
following five years and thereafter are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31
-----------
<S> <C>
1997 84,154
1998 73,309
1999 21,384
2000 50,559
2001 and thereafter 33,475
-----------
$ 9,962,881
===========
</TABLE>
Total contractual interest expense for the years ended December 31, 1996 and
1995 was approximately $916,000 and $656,000, respectively. Approximately $0
and $127,000 of interest costs were capitalized for the years ended December
31, 1996 and 1995, respectively, as part of the construction cost of the
Company's property and equipment. The Company is required under the terms of
the loan agreements to maintain minimum levels of tangible net worth and meet
various financial ratio requirements. The Company is in compliance with these
requirements at December 31, 1996.
The Company estimates that the fair value of notes payable approximates the
carrying value based upon its effective current borrowing rate for debt with
similar terms and remaining maturities. Disclosure about fair value of
financial instruments is based upon information available to management as of
December 31, 1996. Although management is not aware of any factors that would
significantly affect the fair value of these amounts, such amounts have not
been comprehensively revalued for purposes of these financial statements since
that date.
44
<PAGE> 45
Brassie Golf Corporation
Notes to Consolidated Financial Statements (continued)
3. LEASES
The Company leases certain golf carts used in the daily operations of its golf
courses under capital leases which are included in machinery and equipment.
Leased equipment under capital leases included in furniture, machinery and
equipment consists of the following at December 31, 1996:
<TABLE>
<S> <C>
Equipment $144,382
Less accumulated amortization 30,502
--------
$113,880
========
</TABLE>
The accumulated amortization with respect to these capitalized leases is
included in "accumulated depreciation and amortization" in the accompanying
balance sheet. Amortization expense is included in depreciation and
amortization expense in the accompanying statement of operations.
Future minimum lease payments, by year and in the aggregate, under capital
leases, consist of the following at December 31, 1996:
<TABLE>
<S> <C>
1997 $ 43,115
1998 43,115
1999 39,523
--------
Total minimum lease payments 125,753
Amounts representing interest 15,512
--------
110,241
Less current portion 34,598
--------
$ 75,643
========
</TABLE>
The Company also rents certain facilities, land and equipment under operating
leases which expire at various times through 2027. Total rent expense for the
Company was approximately $207,500 and $107,000, for the years ended December
31, 1996 and 1995, respectively.
Future minimum lease payments, by year and in the aggregate, under operating
leases consist of the following at December 31, 1996:
<TABLE>
<S> <C>
1997 $ 206,990
1998 189,652
1999 201,368
2000 183,390
2001 and Thereafter 688,221
----------
$1,469,621
==========
</TABLE>
45
<PAGE> 46
Brassie Golf Corporation
Notes to Consolidated Financial Statements (continued)
4. RELATED PARTY TRANSACTIONS
The Company had accounts receivable from related parties of $456,937 at
December 31, 1996. The Company does not expect payment of these receivables
within the next twelve months; accordingly, the amounts are classified as
long-term assets.
The Company also provided management services to related parties resulting in
approximately $190,000 and $231,000 in management fee revenue for the years
ended December 31, 1996 and 1995, respectively.
5. INCOME TAXES
Under Financial Accounting Standards Board Statement No. 109, "Accounting for
Income Taxes," the liability method is used in accounting for income taxes.
Under this method, deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse.
Deferred income taxes reflect the net effects of temporary differences between
the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes. Significant components of the
Company's deferred tax liabilities and assets as of December 31, 1996 are as
follows:
<TABLE>
<S> <C>
Deferred tax liabilities:
Tax over book depreciation $ 41,000
Tax over book amortization 8,000
-----------
$ 49,000
===========
Deferred tax assets:
Net operating loss carryforwards $ 3,149,000
Bad debt allowance 175,000
Other 4,700
-----------
Total deferred tax assets 3,328,700
Valuation allowance for deferred tax assets (3,279,700)
-----------
Net deferred tax assets 49,000
===========
Net deferred taxes $ -
===========
</TABLE>
At December 31, 1996 the Company has a net operating loss carryforward of
$7,900,000 which will begin to expire in the year 2007.
46
<PAGE> 47
Brassie Golf Corporation
Notes to Consolidated Financial Statements (continued)
5. INCOME TAXES (CONTINUED)
The reconciliation of income tax attributable to continuing operations computed
at the U.S. federal statutory tax rates to income tax expense is:
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Income tax benefit at U. S. statutory rate $(2,895,000) $(2,095,000)
Amortization and write-off of goodwill 1,722,000 92,000
State tax benefit, net (492,000) (370,000)
Equity income 326,000 -
Interest expense for which no tax benefit was
provided 648,000 -
Other items 438,300 106,000
Change in valuation allowance 252,700 2,267,000
Foreign tax 110,000 -
----------- -----------
Tax expense $ 110,000 $ -
=========== ===========
</TABLE>
6. SHAREHOLDERS' EQUITY
On June 30, 1995, the Company issued 375,000 shares of preferred stock, having
a stated value of $10.00 and par value of $.001, as partial consideration for
the capitalized Summit merger (see Note 8, "Acquisitions and Golf Course
Developments"). The preferred stock has been designated Junior Non-Cumulative
Convertible Preferred Stock ("Junior Preferred Stock"), with the following
provisions: 1) each share of Junior Preferred Stock is convertible into five
shares of common stock, or 1,875,000 common shares in the aggregate, par value
$.001; 2) the Junior Preferred Stock is convertible at the option of the
holder at any time for five years from closing of the Summit merger; 3) the
Junior Preferred Stock is redeemable at the option of the Company at any time
after (a) the Company's common stock trades at a price of $5.00 or higher for
30 consecutive trading days as quoted on the NASDAQ system; or (b) issuance of
additional Company common stock in excess of 25% of the shares then issued and
outstanding, i.e., from a merger of the Company, a public offering of its
common stock under a Registration under the Securities Act of 1933 or an
additional private placement offering through an underwriter; 4) the Junior
Preferred Stock is subordinate to future senior preferred shares that the
Company may later issue; 5) the Junior Preferred Stock shall not pay dividends
unless the Company fails to redeem the shares in accordance with the above
provisions, at which time the dividend will be paid at a rate of 5% from that
date; 6) the Junior Preferred Stock will have no voting rights on matters that
can be voted by the common
47
<PAGE> 48
Brassie Golf Corporation
Notes to Consolidated Financial Statements (continued)
6. SHAREHOLDERS' EQUITY (CONTINUED)
stock and voting rights will exist only as to preferences, rights, powers,
priority or ranking of the Junior Preferred Stock; and 7) in the event of any
liquidation, dissolution or winding up of the affairs of the Company, whether
voluntary or involuntary, after payment of the debts and other liabilities of
the Company, the holder of each share of Junior Preferred Stock then
outstanding shall be entitled to be paid out of any of the assets or surplus
funds of the Company (prior to and in preference to any distribution to the
common shareholders), an amount equal to $10.00 per share with respect to any
such share of Junior Preferred Stock. If assets of the Company are not
sufficient to satisfy the $10.00 per share distributions, then the assets of
the Company shall be distributed ratably to the Junior Preferred shareholders
in proportion to their respective distributive amounts.
As of December 31, 1996, warrants to purchase 2,188,000 shares of the Company's
common stock were outstanding. These warrants have exercise prices ranging
from $1.00 to $3.25 per share; 100,000 warrants expire September 28, 1998
(exercise price equals $2.40 per share); 238,000 warrants expire November 17,
1998 (exercise price equals $2.40 per share); 50,000 warrants expire December
5, 1998; (exercise price equals $1.00 per share); 150,000 warrants expire June
30, 1999 (exercise price equals $2.00 per share); 1,400,000 warrants expire
June 30, 2000 (exercise prices range from $2.40 to $3.25 per share), and
250,000 warrants expire September 28, 2000 (exercise price equals $2.40 per
share).
7. STOCK OPTIONS
On June 3, 1994, the Board of Directors and the stockholders of the Company
adopted the Brassie Golf Corporation 1994 Stock Option and Restricted Stock
Purchase Plan (the "Stock Option Plan") as an incentive for key employees. The
purchase price for any Stock Awards and the exercise price for any Options may
not be less than the fair market value for the common stock on the date of
grant. Unless otherwise agreed between the grantee and the Company, the Stock
Awards and Options expire 90 days after termination of the grantee's
relationship with the Company. At a meeting of the Option Committee on June
30, 1995, and subject to regulatory approval and the consent of the HIGSI
grantee's, the Stock Awards and Options previously granted and outstanding were
repriced at $2.00 (the market trading price of the stock on the date of
repricing) and the period for their exercise was extended to five years from
their June 3, 1994 grant. Concurrently, the Option Committee granted further
Options and Stock Awards exercisable for five years from June 30, 1995 at an
exercise price of $2.00 to certain employees, directors and officers of the
Company and its subsidiaries. No options were issued during the year ended
December 31, 1996.
48
<PAGE> 49
Brassie Golf Corporation
Notes to Consolidated Financial Statements (continued)
7. STOCK OPTIONS (CONTINUED)
Pro forma information regarding net loss and loss per share is required by
Statement 123, which also requires that the information be determined as if the
Company has accounted for its employee stock options granted subsequent to
December 31, 1994 under the fair value method of that Statement. The fair
value for these options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions for 1995 and 1996: risk-free interest rate of 5.93%, a dividend
yield of 0%; volatility factors of the expected market price of the Company's
common stock of .892 and a weighted-average expected life of the option of 5
years.
The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The Company's pro
forma information follows:
<TABLE>
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
Net loss as reported $ (8,625,732) $(10,293,535)
Pro forma net loss $(10,056,500) $(11,724,323)
Net loss per share as reported $(.43) $ (.66)
Pro forma net loss per share $(.50) $ (.75)
</TABLE>
49
<PAGE> 50
Brassie Golf Corporation
Notes to Consolidated Financial Statements (continued)
7. STOCK OPTIONS (CONTINUED)
Options Outstanding, Common Stock
<TABLE>
SHARES OPTIONS OUTSTANDING
--------------------------
AVAILABLE NUMBER PRICE
FOR GRANT OF SHARES PER SHARE
--------- --------- --------------
<S> <C> <C> <C>
Balances at December 31, 1994 1,100,000 400,000 $3.80
Options granted (986,750) 986,750 2.00
Options canceled 104,225 (104,225) -
Options exercised - - -
--------- --------- --------------
Balances at December 31, 1995 217,475 1,282,525 $2.00 to $3.80
Options granted - - -
Options canceled 47,000 (47,000) -
Options exercised - - -
--------- --------- --------------
Balances at December 31, 1996 264,475 1,235,525 $2.00 to $3.80
========= ========= ==============
</TABLE>
8. ACQUISITIONS AND GOLF COURSE DEVELOPMENTS
Three golf courses were acquired by the Company in a single transaction during
April 1994, and were transferred back to the previous owners during May 1995.
The operating results of these three facilities are included only from the date
of acquisition through the date of disposition in May 1995. See Note 9 "Merger
and Disposition of Assets".
On June 30, 1995, the Company acquired, in exchange for 1,875,000 newly issued
shares of the Company's Common Stock, all the issued and outstanding shares of
Summit Golf Corporation ("Summit"), a company engaged in the management of
golf properties, through the completion of an Agreement of Merger and
Reorganization (the "Merger Agreement"). Consideration paid by the Company was
comprised of 375,000 shares of newly issued Junior Preferred Stock, with a par
value of $.001 per share (each share has a stated value of $10.00 and is
convertible into five shares of Common Stock), 500,000 five-year warrants
exercisable at $2.50 per share for the first three years and $3.25 per share
for the next two years, a $275,854 cash payment and issuance of notes payable
for $224,146. The Company has accounted for this transaction as a purchase.
The operating results of Summit are included in the consolidated operations of
the Company from the date of acquisition.
50
<PAGE> 51
Brassie Golf Corporation
Notes to Consolidated Financial Statements (continued)
8. ACQUISITIONS AND GOLF COURSE DEVELOPMENTS (CONTINUED)
The following unaudited pro forma summary of consolidated results of operations
has been prepared as if the Summit acquisition had occurred on January 1, 1995.
For the year ended December 31, 1996, all operating results of Summit are
included in the consolidated operations of the Company for the full year.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995
-----------------
(In thousands, except
per share amount)
<S> <C>
Net revenues $ 6,451
Net loss before extraordinary item (6,345)
Extraordinary loss (4,130)
Net loss (10,475)
Loss per share before extraordinary item (.41)
Extraordinary loss per share (.27)
Net loss per common share (.68)
</TABLE>
These pro forma results do not purport to be indicative of the results that
would have actually been obtained if the respective businesses had been
acquired as of January 1, 1995 or of results which may occur in the future.
9. MERGER AND DISPOSITION OF ASSETS
During the year ended December 31, 1995, the Company disposed of three golf
courses and substantially all the assets and liabilities of the related three
100% owned subsidiaries, The Gauntlet of Wedgefield, Inc., The Gauntlet at
Palisades, Inc. and The Gauntlet at NorthShore, Inc. The courses were acquired
in April 1994. The Company asserted that misrepresentations were made by the
sellers of the courses. After litigation was initiated by both the Company and
the sellers, the Company entered into a settlement agreement in May 1995
effectively rescinding the transaction. The Company incurred an extraordinary
loss of approximately $4.1 million in connection with the disposition and write
off of these courses. The operating results of these golf courses were
included in the consolidated statements of operations of the Company from the
date of acquisition through the date of disposition.
51
<PAGE> 52
Brassie Golf Corporation
Notes to Consolidated Financial Statements (continued)
10. CHANGE IN REPORTING ENTITY
In 1995, the Company consolidated two 75% owned subsidiaries, The Gauntlet at
Laurel Valley and The Gauntlet at Myrtle West in accordance with Financial
Accounting Standards Board Statement 94. In 1996, the Company transferred 45%
of the ownership interest in the subsidiaries to the minority shareholder to
comply with a mandatory injunction issued by the 13th Circuit Court of
Hillsborough County of Florida. Accordingly, the financial statements for 1995
have been restated to reflect the Company's ownership in the subsidiaries under
the equity method of accounting. The change in reporting entity decreased 1995
net loss and 1995 accumulated deficit by $212,357. Net loss per share in 1995
decreased by $.01 per share. In 1996, the Company recognized a loss of
$310,888 on the transference of the interest in the subsidiaries. The
Company's interest in the net losses of these entities is recorded at 75% up
until the date of transference and at 30% thereafter. The amount of
consolidated accumulated deficit attributable to these entities is $2,405,084
at December 31, 1996.
Due to the recurring operating losses and working capital deficiencies of the
entities, the Company assessed the net realizable value of the investments at
December 31, 1996. Based on the Company's assessment, an additional write-down
of $655,691 was recorded to reflect the net realizable value of these
investments. The write-down is included in the loss on equity investment in
subsidiaries line item on the Company's 1996 statement of operations.
11. CONTINGENCIES
The Company, in the ordinary course of business, is the subject of, or party
to, various pending or threatened claims and litigation. In the opinion of
management, settlement of such claims and litigation will not have a material
effect on the Company's operations or financial position.
12. SUBSEQUENT EVENT
During the period from January 1, 1996 through March 11, 1997, the holders of
the six percent convertible debentures (discussed in Note 2) converted
$1,070,910 of the outstanding debt of $3,465,738 at December 31, 1996 into
4,368,123 shares of common stock which resulted in recording $1,315,678 in
additional equity.
52
<PAGE> 53
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
NONE
53
<PAGE> 54
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The Directors and Executive Officers of the Company and their ages for
the fiscal year ended December 31, 1996 were:
<TABLE>
<CAPTION>
Name Age Position(s) with the Company
- ---- --- ----------------------------
<S> <C> <C>
Gordon D. Ewart (1)(2)(3)(4) 55 Director and Chairman of the Board
Robert G. Atkinson (2)(3)(4) 56 Director, Vice Chairman of the Board
William E. Horne 42 Director, President and Chief Executive
(1)(2)(3)(4) Officer of the Company
Thomas K. Richardson 43 Director, Senior Vice President Operations,
(1)(4) Secretary, and Chief Operating Officer of the Company
Lance McNeill 41 Director, Senior Vice President Acquisitions and
(1) Development
</TABLE>
_______________________________________
(1) Member of Executive Committee
(2) Member of Audit Committee
(3) Member of the Compensation Committee
(4) Member of the Option Plan Committee
54
<PAGE> 55
All Directors hold office until the next Annual Meeting of
Shareholders of the Company or until their successors have been duly elected
and qualified. Each of the current Directors was elected at the Annual Meeting
of Shareholders on June 30, 1995. Each Executive Officer of the Company will
serve until the first meeting of the Board of Directors following the next
Annual Meeting or until the Board otherwise directs.
BUSINESS HISTORY
Gordon D. Ewart, a Director of the Company since November 19, 1991, is
a co-founder of the Company. Mr. Ewart is also a founder of the two
predecessor corporations which are now two of the Company's operating
subsidiaries. He was President of the Company from November 12, 1991 to
October 16, 1992, at which point he became Chairman of the Board and its Chief
Executive Officer, which latter position he held until July 11, 1995. Since
1987 and prior to joining the Company, Mr. Ewart was co-founder of three
merchant banks based in Toronto, Canada and Bermuda: Resources Capital
International Ltd., Paramount Funding Corp. and Grafco Ltd., which firms were
utilized as investment vehicles to finance Canadian industrial and natural
resource companies. Mr. Ewart is also a director of Global (GMPC) Holdings,
Inc. (formerly New Total Group, Inc.), a Canadian public company.
Robert G. Atkinson, a Director, has also been its Vice Chairman since
July 28, 1993. Mr. Atkinson was previously a director and the President of
Equity Preservation Corp. from November 1992 to July 28, 1993. (Equity
Amalgamated was a wholly-owned subsidiary of the Company in July, 1993 as
described in Item 1.a. above.) Since October 1991, he has been Chairman of
BridgeBank Partners, Inc., a Vancouver, B.C. capital group organized to make
equity investments in middle market companies. Prior to forming BridgeBank
Partners, Mr. Atkinson was President & CEO of Loewen Ondaatje McCutcheon Inc.
(June 1987 to October 1991), a Canadian investment dealer specializing in
financing growth companies. Mr. Atkinson is a director of six Canadian public
companies, Trimin Enterprises, Ltd., Profco Resources Ltd., Global (GMPC)
Holdings, Inc., (formerly New Total Group, Inc.), A & E Capital Funding, Inc.,
H. J. Forest Products Inc. and Spur Ventures Inc.
William E. Horne has been a Director of the Company since June 30,
1995 and its President and CEO since July 11, 1995. As a pioneer in the club
management business, he brings to the Company over a decade of professional
property management and operations experience in the golf, service and
hospitality industries. Beginning in 1981 with the formation of Horne
Management Inc. (later known as Club Operations and Property Management Inc.
("COPM"), he developed and managed clubs and resorts throughout the United
States and abroad. Prior to COPM, he was a Managing Partner at Steak & Ale,
where he had responsibility for eight restaurants in the Southeast region. He
received a B.A. in Business Management from Florida State University in 1975.
Thomas K. Richardson has been a Director of the Company since June 30,
1995 and its Senior Vice President of Operations and Chief Operating Officer
since July 11, 1995. Having spent seven years with Marriott and three years
with Stouffer Hotels and Resorts, he joined Mr. Horne in 1983 as a partner in
several development projects, including a private downtown business club, a
small luxury hotel and a gourmet restaurant in Tallahassee, Florida.
Subsequently, he became the minority partner in COPM in 1984. As COPM's
Executive Vice President and Chief Operating Officer, he was responsible for
all new club development work, long range planning, and the day to day
administration of the company. Mr. Richardson has a B.S. degree from Florida
State University majoring in Hotel/Restaurant Administration. On February 1,
1996, Mr. Richardson became the Secretary of the Company. Mr. Richardson has
resigned from all executive offices of the Company effective April 15, 1997.
55
<PAGE> 56
Lance McNeill is currently President of McNeill Development Company,
with more than seventeen years of experience as a principal directly involved
in the planning, permitting, financing, development, construction, marketing,
and management of resort, golf, and residential real estate properties in
various markets in the southeastern United States. Mr. McNeill has been a
Director of the Company since June 30, 1995 and its Senior Vice President of
Acquisitions and Development since July 11, 1995. Mr. McNeill has developed
and participated in the development of several golf course and residential
properties in central Florida and on Florida's Gulf Coast. He was a co-founder
and shareholder of American Resorts, Inc., which developed the first interval
ownership resort properties in Hilton Head, South Carolina. The Company was
sold to the Marriott Corporation in 1986.
Family Relationships. No family relationships exist between the
current Directors, Executive Officers and any person nominated or chosen by the
Company to become a Director or Executive Officer.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Based solely on a review of Forms 3, 4 and 5 furnished to the Company
under Rule 16a-3(e) promulgated under the Exchange Act with respect to 1996,
the Company is not aware of any Director or officer of the Company who failed
to file on a timely basis, as disclosed in such forms, reports required by
Section 16(a) of the Exchange Act during 1995 except for the gifts made in 1996
by Lance McNeill of the following shares to which Mr. McNeill disclaims
beneficial ownership: 2,000 shares of Common Stock on January 18, 1996, and
30,500 shares of Common Stock on March 20, 1996. Except as disclosed in Item
11. "Security Ownership of Certain Beneficial Owners and Management" to this
Report, the Company is not aware of any beneficial owner of 10% or more of the
outstanding shares of the Common Stock which is the only security of the
Company registered under Section 12 of the Exchange Act.
ITEM 10. EXECUTIVE COMPENSATION
The Company's directors have heretofore served without compensation
for their services as directors, but have been reimbursed for expenses incurred
in connection with their duties. It is anticipated that directors will
continue to serve without compensation (other than reimbursement of expenses).
The Company had no standard arrangements or policies for compensation
of its executives. The Board of Directors will, from time to time, determine
the compensation of its senior management in accordance with the prevailing
financial condition of the Company as the Board shall determine and provide
other incentives to promote successful management of the Company's business.
Effective February 1, 1996, the Company's officers elected to indefinitely
defer between 12 to 25% of their compensation due to the financial condition of
the Company at that time. These deferrals remain in place as of February 28,
1997 and are recorded as a liability of $96,133 on the accompanying
Consolidated Balance Sheet at December 31, 1996. There were no bonus, stock
option or other incentive plans in effect for any level of management as of the
end of the last year except for the Company's Stock Option Plan more fully
described below and in Notes 1 and 7 of the accompanying Consolidated Financial
Statements.
The tables set forth below provide certain information as to
compensation (including perquisites and other personal benefits) awarded to,
earned by or paid to, and warrants and options to purchase shares of the
Company's Common Stock issued to, the Chief Executive Officer and other highly
paid executive officers of the Company during the last two fiscal years.
Except as set forth below, neither the Chief Executive Officer, nor any
executive officer whose annual salary exceeded $100,000 received any bonus or
other annual compensation or any long-term compensation during the last two
fiscal years.
56
<PAGE> 57
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term
------------------- Compensation
Awards
--------------
#Stock Options
Name and Principal Position Year (1) Salary Bonus and Warrants
--------------------------- -------- ------ ----- --------------
<S> <C> <C> <C> <C>
William E. Horne, President 1996 240,610 - -
and Chief Executive Officer 1995 156,689 (3) - 100,000 (2)
Thomas K. Richardson, Sr. Vice 1996 147,083 - -
President and Chief Operating 1995 93,098 (3) - -
Officer
Lance McNeill, Sr. Vice President 1996 131,104 - -
Acquisitions and Development 1995 90,365 (3) - -
Hale Irwin, President of Hale Irwin 1996 138,919 - -
Golf Services 1995 26,348 - -
Gary Nacht, Exec. Vice President 1996 61,230 - -
and Chief Financial Officer 1995 207,154 25,000 150,000 (2)
</TABLE>
_______________________
(1) The years 1996 and 1995 are twelve-month periods ended December 31, 1996
and 1995.
(2) Stock options to purchase shares of the Company's Common Stock were issued
on June 30, 1995 with an exercise price of $2.00 (the fair value of the
Common Stock on such date) and an expiration date of June 30, 2000. The
options contain provisions for adjustments to the exercise price in the
event of reorganizations, stock splits, dividends and other matters
affecting the original value of the options.
(3) Represents the period beginning June 30, 1995 through the end of year.
Except for the Company's Stock Option Plan described later in this
Item 10, there were no Option/SAR grants or long-term incentive plan awards in
1996 and 1995. There are no other plans pursuant to which cash or non-cash
compensation was paid or distributed during 1996 and 1995 or pursuant to which
cash or non-cash compensation is proposed to be paid or distributed in the
future to the executive officers of the Company in respect to 1996 except as
described above.
The Company's Stock Option Plan. On June 3, 1994, the Board of
Directors and the stockholders of the Company adopted the Brassie Golf
Corporation 1994 Stock Option and Restricted Stock Purchase Plan (the "Stock
Option Plan") as an incentive for key employees. The Stock Option Plan is to
be administered by a Compensation Committee of the Board of Directors, each
member of which is to be "disinterested" as defined in Rule 16b-3 of the
Exchange Act. Awards under the Stock Option Plan are restricted to (i) awards
of the right to purchase shares of Common Stock ("Stock Awards"), or (ii)
awards of options to purchase shares of Common Stock ("Options"). Any Options
granted under the Stock Option Plan may be incentive stock options which have
certain tax benefits and legal restrictions, or non-qualified stock options
which do not have any tax benefits and few legal restrictions. The purchase
price for any Stock Awards and the exercise price for any Options may not be
less than the fair market value for the Common Stock on the date of grant. The
Compensation Committee will determine any awards to be made under the Stock
Option Plan and the terms thereof, including any vesting and expiration
provisions. Unless otherwise agreed between the grantee and the Company, the
Stock Awards and Options expire 90 days after termination of the grantee's
relationship with the Company. Under the Stock Option Plan, options to purchase
an aggregate of 1,500,000 shares of Common Stock have been authorized, and on
January 13, 1995 a Notice of grant of such options was delivered to certain of
the employees of HIGSI which provided to such employees the right to acquire at
an exercise price of $3.80 USD per share such amounts of stock as were granted
to them individually and aggregating 250,000 Common Shares. At a meeting of
the Option Committee on June 30, 1995, and subject to the consent of the
aforesaid HIGSI grantees, the Stock Awards and Options previously granted and
57
<PAGE> 58
outstanding were repriced at $2.00 and the period for their exercise was
extended to five years from the date of their June 3, 1994 grant. Concurrently
the Option Committee granted further Options and Stock Awards exercisable for
five years from June 30, 1995 at an exercise price of $2.00 to certain
employees, directors and officers of the Company and its subsidiaries. See Note
7 - "Stock Options" in the accompanying Consolidated Financial Statements for
stock options outstanding.
There were no Option/SAR Grants to Directors or Officers during the year ended
December 31, 1996.
Aggregated Options/SAR Exercises during 1996 and Option/SAR Values at December
31, 1996
<TABLE>
<CAPTION>
Number (#) of Value (S) of
Unexercised Unexercised in-the-
Options/SARs Money Options/SARs
Shares at December 31, at December 31, 1996
Acquired Value Realized 1996 Exercisable/ Exercisable/
Name on Exercise (S) Unexercisable (1) Unexercisable
(a) (b) (c) (d) (e)
---- ---------- -------------- ----------------- -------------------
<S> <C> <C> <C> <C>
Gordon D. Ewart -0- -0- 200,000/0 -0-
William E. Horne -0- -0- 350,000/0 -0-
Robert Atkinson -0- -0- 200,000/0 -0-
Thomas K. Richardson -0- -0- 125,000/0 -0-
Lance McNeill -0- -0- 125,000/0 -0-
</TABLE>
- -----------------------
(1) All such warrants are currently exercisable.
58
<PAGE> 59
CERTAIN AGREEMENTS.
See Item 12. "Certain Relationships and Related Transactions" below
for a description of the agreements between the Company, Hale Irwin, William E.
Horne, Thomas K. Richardson, Lance McNeill and others.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of February 28, 1997, the total
number and percentage of the Company's Common Stock beneficially owned by (i)
each Director of the Company, (ii) each executive officer named in the summary
compensation table, (iii) by all Directors and Executive Officers as a group
and (iii) any person who is known by the Company to be the beneficial owner of
more than 5% of the Company's Common Stock. As of February 28, 1997, there
were 28,205,095 shares of Common Stock issued and outstanding and 375,000
shares of Preferred Stock issued and outstanding.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF POSITION(S) HELD, AMOUNT AND NATURE OF
BENEFICIAL OWNER IF ANY BENEFICIAL OWNERSHIP (7) PERCENT OF CLASS
- ------------------- ----------------- ------------------------ -----------------
<S> <C> <C> <C>
Gordon D. Ewart Director, Chairman of the 1,303,350 (1) 4.3
163 Ontario Street Board
Cobourg, Ontario
K9A 3B6
Canada
William E. Horne Director, President 2,259,867 (2) 7.4
1002 Bajada de Avila Chief Executive Officer
Tampa, FL 33613
Thomas K. Richardson Director, Senior Vice 1,035,760 (3) 3.4
8922 Eaglewatch President of Operations,
Riverview, FL 33569-4792 Chief Operating
Officer, Secretary
Lance McNeill Director, Senior Vice 953,260 (4) 3.5
2310 Collins Lane President
Lakeland, FL 33803 of Acquisitions and
Development
Robert G. Atkinson Director, 1,074,824 (5) 3.5
6036 Gleneagles Drive Vice Chairman of the Board
West Vancouver
B.C. V7W 1W2
Canada
All Directors & Executive 6,627,061 (6) 21.3
Officers as a Group
(6 persons)
</TABLE>
- ------------------
(1) Includes (i) 603,350 shares of Common Stock held by Eliga Corporation, a
North Carolina corporation, which is wholly-owned by Mr. Ewart, (ii) 500,000
shares of Common Stock held by 425674 Ontario Ltd., an Ontario corporation,
which is wholly-owned by Mr. Ewart, and (iii) currently exercisable options to
purchase 200,000 shares of Common Stock at an exercise price of $2.00 per share
which expire June 30, 2000.
(2) Includes (i) 503,617 shares of Common Stock (ii) 281,25 currently
convertible Junior Preferred Stock, each convertible into five shares of Common
Stock (iii) 250,000 currently exercisable warrants exercisable at $2.50 until
June 30, 1998 and at $3.25 until June 30, 2000, all jointly held with Charlotte
Horne, Mr. Horne's wife and 100,000 currently exercisable options exercisable at
$2.00 until June 30, 2000.
(3) Includes (i) 442,010 shares of Common Stock (ii) 93,750 currently
convertible Junior Preferred Stock each convertible into five shares of Common
Stock (iii) 125,000 currently exercisable warrants exercisable at $2.50 until
June 30, 1998 and at $3.25 until June 30, 2000, all jointly held with Kathleen
Richardson, Mr. Richardson's wife.
(4) Includes 828,260 shares of Common Stock and 125,000 currently exercisable
warrants exercisable at $2.50 until June 30, 1998 and at $3.25 until June 30,
2000.
(5) Includes 874,824 shares of Common Stock and currently exercisable options to
purchase 200,000 shares of Common Stock at an exercise price of $2.00 until June
30, 2000.
(6) Does not include shares held by Gary Nacht or Hale Irwin -- both of whom
resigned as a director during 1996.
(7)This table includes no shares of family members of the director in which the
director disclaims beneficial ownership.
59
<PAGE> 60
As a condition of the approval of its substitutional listing on the
Toronto Stock Exchange (the "TSE"), the TSE required that all officers and
directors of the Company, and all persons or companies beneficially owning
directly or indirectly shares of Common Stock exceeding ten percent of the
Common Stock outstanding, place in escrow with Montreal Trust Company of
Canada, fifty percent of the Common Stock held by them. A total of 2,598,925
shares of Common Stock previously placed in escrow were released in equal
one-third installments in 1994, 1995 and 1996 and are included in the table
above.
Other than the rights of minority shareholders in the Company's
operating subsidiaries to cause changes of control of such subsidiaries under
certain circumstances (discussed in Item 1.c.) and the Company's pledge of its
stock in certain of its subsidiaries to NationsBank in connection with the
financing of the Gauntlet at Curtis Park (discussed in Item 1.c.3.), there are
no arrangements known to the Company, including any pledge by any persons of
securities of the Company, the operation of which may at a subsequent date
result in a change in control of the Company.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On May 6, 1994, pursuant to the Reorganization with HIGSI, the Company
entered into a three-year employment agreement with each of Hale Irwin and
Richard Stahlhuth (the "Employment Agreements"). The terms of the Employment
Agreements are automatically renewed for successive one-year periods unless
written notice of termination is provided by either party not less than six
months prior to such expiration. Under the terms of the Employment Agreements,
Mr. Irwin was to serve as President of Hale Irwin Golf Design and Mr. Stahlhuth
was to serve as President of the Company. Messrs. Irwin and Stahlhuth were
each to be paid a base salary of $100,000 per annum, which would be increased,
but not decreased, by the Board of Directors of the Company and were entitled
to participate in any incentive bonus, stock option and benefit plans available
to the other executive officers of the Company. Mr. Irwin and Mr. Stahlhuth
were bound by non-competition and confidentiality covenants. The
Non-Competition covenant provided that during the term of their Employment
Agreements, they would not, except in connection with certain existing and
specified business interests, directly or indirectly own, manage, operate,
control, participate in the management or control of, or be employed by, or act
as the agent for, lend their name to or initiate any interest whatsoever in any
enterprise having to do with the design or management of golf facilities
similar to those offered by the Company within (i) the fifty states of the
United States, (ii) the United States territories and possessions, and (iii)
each foreign country, possession, or territory in which the Company may be
engaged in business. For a period of one year after termination or expiration
of their Employment Agreements for any reason, Mr. Irwin and Mr. Stahlhuth
agreed that they would not, except in connection with certain existing
specified business interests, directly or indirectly (a) own, manage, operate,
control, participate in the management or control of, or be employed by, or act
as the agent for, lend their name to or initiate, maintain or continue any
interest whatsoever in any enterprise in competition with the business of the
Company within the same geographic areas as set forth above; (b) solicit
business for services offered, sold, produced or under development by the
Company during such employment of any person, firm, corporation or other
business entity which did business with, or was a customer or account of, the
Company during such
60
<PAGE> 61
employment; or in any way divert, or attempt to divert business from the
Company or interfere with any business relationships whatsoever between any of
such entities comprising the Company or any other person; or (c) solicit, raid,
entice or induce any person who presently is, or at any time during the term of
their employment shall be, an employee of the Company to become employed by any
other person, firm or corporation or otherwise knowingly interfere with the
relations of the Company with its employees. In the event of a "change of
control" in the Company, defined therein as (A) a merger or consolidation
resulting in the stockholders of the Company owning less than 60% of the
outstanding securities of the surviving entity, (B) the sale of substantially
all of the assets of the Company, (C) approval of a plan or proposal for the
liquidation or dissolution of the Company, (D) the acquisition of 40% or more
of the Company's outstanding Common Stock by a person not currently a 10% or
greater beneficial owner of the Company's Common Stock, or (E) if a majority of
the directors of the Company were replaced, each of Mr Irwin and Mr. Stahlhuth
may terminate their Employment Agreements for "cause." In the event of
termination by Mr. Irwin of his employment for "cause," the Company loses the
right to use the names "Hale Irwin Golf Design," "Hale Irwin Management
Services" and "Hale Irwin Golf Services." See Item 1.b. Additionally, in the
event of a termination by such employee for "cause," such employee shall be
entitled to continue to receive his then base salary and benefits for a
one-year severance period.
On January 17, 1995 Mr Richard Stahlhuth resigned as a Director and
President of the Company in order to pursue his family interests and manage his
personal properties. Mr. Gary Nacht was appointed by the Board of Directors as
president pro tempore of the Company pending the closing of the agreement under
negotiation with COPM. In settling with Mr. Stahlhuth, the parties agreed to
cancel the mutual obligations in the Stahlhuth employment agreement except for
the confidentiality provisions pertaining to the Company's business and
operations. In exchange for 125,000 of the Company's shares held by Mr.
Stahlhuth, the Company assigned to Mr. Stahlhuth all of the shares of a
subsidiary whose assets included (i) Stahlhuth's employment contract; (ii)
three management contracts for golf properties wholly or in part owned by Mr.
Stahlhuth; and (iii) $302,500 in cash. At the time of closing of the
transaction at the end of August 1995, the Company's stock was trading at
approximately US$3.00 and the settlement was deemed by the Company to be an
equitable conclusion to the relationship with its retiring President. The
125,000 shares of the Company were returned to treasury and canceled.
On August 19, 1996 Mr. Hale Irwin resigned as a Director of the
Company. Mr. Irwin has informed the Company that, in order to pursue golf
course design independently, he does not intend to renew his employment
agreement which governs his employment as President of HIGSI, upon its
expiration on May 16, 1997. The Company and Mr. Irwin have reached an
agreement whereby the Company will sell HIGSI to Mr. Irwin for a combination of
Brassie stock currently held by Mr. Irwin and a portion of the earnings to be
received on design contracts that are currently in negotiation with clients as
well as a percentage of revenues on future design contracts procured by
the Company.
Messrs. Irwin and/or Stahlhuth are equity holders of Quail Greek Golf
Club, Inc., Fairways & Greens, Inc. d/b/a The Links, Lakewood Golf Club, Inc.
and Cottonwood Development Company, Inc., which are golf courses that, pursuant
to management contracts with HIGSI, paid an aggregate of approximately $52,000
and $69,000 for the years ended December 31, 1996 and 1995,
61
<PAGE> 62
respectively, in management, accounting and computer service fees. Hale Irwin
Golf Design designed the course at Quail Creek Golf Club.
On June 5, 1995, pursuant to the Summit Merger Agreement (See Item
1.a. "Business - Merger and Reorganization with Summit Golf Corporation") the
Company entered into employment agreements with each of William E. Horne and
Thomas K. Richardson (the "Employment Agreements"). The Employment Agreements
terminate upon the sooner of the effective date of a replacement agreement,
termination pursuant to the Employment Agreement or two (2) years. Severance
compensation of one year's salary is due, payable in the ordinary course of the
Company's payroll periods, if the employee is terminated without cause or the
Employment Agreements are not extended or renewed. Under the terms of the
Employment Agreements, Mr. Horne is to serve as the Company's President and its
Chief Executive Officer and Mr. Richardson is to serve as the Company's Senior
Vice President of Operations and its Chief Operating Officer. Under the
agreement, Messrs. Horne and Richardson were to receive base annual salaries of
$250,000 and $135,000, respectively. Mr. Richardson's contract was adjusted to
$150,000 per year effective April 1996. The Company may grant bonuses or
increase the compensation but may not reduce the compensation without the
employee's consent and if the employee voluntarily terminates the Employment
Agreement, no severance compensation is due. The Company's right to terminate
"for cause" arises only from those employee acts or omissions which constitute
gross negligence in the performance of his duties, his substance abuse, his
conviction of a crime involving moral turpitude or any breach of the Employment
Agreement that is not cured by him within five days from written notice from
the Company. The employee is entitled to pursue outside interests only to the
extent that such pursuits do not interfere with his duties and substantially
all his working time is to be devoted to the Company's business. As additional
compensation, Messrs. Horne and Richardson receive an automobile allowance, the
reimbursement of approved expenses, three weeks paid leave per annum and
executive level benefits including payments to supplement or replace their
salaries during periods of partial or total disability (unless such disability
endures six months in which case severance compensation is due and payable).
Messrs. Horne and Richardson are bound by non-competition covenants which are
effective upon termination howsoever caused, and which prohibit them, for a
period two years and throughout the continental United States, from (i)
engaging in any "Competitive Business" (as defined in the Employment
Agreements); (ii) soliciting the Company's clientele; and (iii) directly or
indirectly employing the Company's other employees.
On November 19, 1993, the Company entered into an oral agreement with
Allen Jefferson through Fantor Consulting, Inc. (which is wholly-owned by Mr.
Jefferson) for consulting services for a bi-weekly fee of $3,200 plus
reimbursement of expenses. Effective January 1, 1996 the aforesaid agreement
was superseded by a five year consulting agreement (the "Consulting Agreement")
between the Company and Fantor Consulting Ltd., ("Fantor") a company controlled
by Mr. Jefferson. The agreement paid Fantor $100,000 per year plus approved
expenses for his services to act as a liaison to the Pension Funds and to
perform such tasks as the Company's special projects may require. As a result
of an agreement on June 30, 1996, this contract was terminated with Fantor to
receive $100,000 as severance in accordance with the terms of the agreement.
Substantially all of this amount has been paid as of December 31, 1996 as full
and final settlement.
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<PAGE> 63
Effective May 1, 1994, the Company entered into a written agreement
with Sven Kraumanis through Harvest Consultants, Ltd. ("Harvest") which
provides for a fee of $60,000 per year, plus reimbursement of expenses,
whereby Harvest made Mr. Kraumanis available to provide the services of general
counsel. Effective February 1, 1996, the fee was by mutual agreement,
increased to $90,000 per annum. The contract was terminated in accordance with
the provisions of the contract on June 15, 1996. All amounts owed to Mr.
Kraumanis have been paid as full and final settlement.
In 1995, Gordon Ewart, a Director and the Chairman of the Company,
collateralized the Company's obligation in connection with its guarantee of the
proceeds of UA Pension Fund's disposition of its 79,010 Common Shares of the
Company. The Company reimbursed Mr. Ewart for the direct costs of this
collateralization in 1996. (See Item 1.c.3. "The Company's Golf Courses").
Lance McNeill, a Director and Senior Vice President of Acquisitions
and Development of the Company, commenced employment with the Company after the
Merger and Reorganization with Summit Golf Corporation pursuant to an oral
contract whereby Mr. McNeill is paid $150,000 per annum. Mr. McNeill devotes
substantially all his working time to the needs of the Company.
On September 13, 1996 the Company paid down an existing $1,600,000
second mortgage loan from the UA Pension Fund to The Gauntlet at Curtis Park,
Inc. by $1,131,000. The remaining loan balance was purchased and assigned to A
& E Capital Funding, Inc., a Canadian corporation of which Gordon Ewart and
Robert Atkinson are directors and shareholders.
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ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K
(a) (1) & (2) List of Financial Statements
The following consolidated financial statements of Brassie Golf
Corporation and subsidiaries are included in Item 7:
Consolidated Balance Sheet - December 31, 1996
Consolidated Statements of Operations - Years ended December 31, 1996
and 1995
Consolidated Statements of Shareholder Equity - Years ended December
31, 1996 and 1995
Consolidated Statements of Cash Flows - Years ended December 31, 1996
and 1995
Notes to Consolidated Financial Statements.
No other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are
required under the related instructions or are applicable and
therefore have been omitted.
(3) Exhibits
The exhibits listed below which are marked with a footnote reference
were filed with a prior registration statement filed under the Securities Act
or in a periodic report filed under the Exchange Act and are incorporated
herein by this reference. The exhibits listed below which are not marked with
a footnote reference are filed with this Form 10-K.
EXHIBIT INDEX
<TABLE>
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EXHIBIT/ITEM DOCUMENT/DESCRIPTION NUMBER
<S> <C> <C>
2.1 Agreement and Plan of Reorganization effective as of November 14, 1991 by and (A)
among Longview Golf Corporation (the "Company"), Eliga Corporation ("Eliga")
and Gutta Percha, Inc. ("GPI")
2.2 Arrangement Agreement dated as of March 26, 1993 between Equity Preservation (A)
Corp. ("Equity"), the Company and 440888 B.C. Ltd. and the Information
Circular distributed to shareholders in connection with the arrangement
contemplated by such Arrangement Agreement (the "Arrangement").
2.3 Final Order of the Supreme Court of British Columbia, dated May 17, 1993, (B)
relating to the fairness of the Arrangement.
</TABLE>
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<TABLE>
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<S> <C> <C>
2.4 Agreement of Purchase and Sale, dated as of December 23, 1993, by and between (B)
North Myrtle Beach Golf Club, Inc. ("MW Seller"), the Company and The Gauntlet
at Myrtle West, Inc. ("GMW"), and the material Exhibits thereto.
2.5 Purchase and Sale Agreement, dated as of April 12, 1994, between Wedgefield (B)
Limited Partnership ("Wedgefield LP"), the Company and The Gauntlet at
Wedgefield, Inc. ("GWF"), and the material Exhibits thereto.
2.6 Purchase and Sale Agreement, dated as of April 12, 1994, between Palisades (B)
Golf Partners ("Palisades GP"), the Company and The Gauntlet at Palisades,
Inc. ("GPS") and the material Exhibits thereto.
2.7 Purchase and Sale Agreement, dated as of April 12, 1994, between Northshore (B)
Golf Partners, Ltd. ("Northshore GP"), the Company and The Gauntlet at
Northshore, Inc. ("GNS") and the material Exhibits thereto.
2.8 Agreement and Plan of Reorganization. dated as of May 16, 1994, between the (B)
Company and the shareholders of Hale Irwin Golf Services, Inc., and the
material Exhibits thereto.
3.1 Certificate of Incorporation of the Company, as amended. (A)
3.2 By-laws of the Company. (A)
3.3 Amendment to the Certificate of Incorporation of the Company filed July 18, (B)
1994.
4.1 Escrow Agreement dated as of July 23, 1993 between The Toronto Stock Exchange, (A)
the Company, Montreal Trust Company of Canada and the individuals listed on
Schedule A thereto.
10.1 Shareholders Agreement between Eliga, Canadian PT Limited Partnership ("PT (A)
Partnership"), Rizzo Inc., and Longview Golf Corporation ("GSJ") dated as of
October 1, 1990.
10.2 Bylaws of Longview Country Club dated November 14, 1990. (A)
10.3 Purchase Agreement between Homer E. Wright, Jr. and GSJ dated as of September (A)
8, 1990.
10.4 Loan Agreement between NCNB National Bank of North Carolina ("NationsBank") (A)
and GSJ dated as of October 1, 1990; Promissory Note made by GSJ in favor of
NationsBank dated October 1, 1990; Deed of Trust and Security Agreement
between GSJ and NationsBank dated October 1, 1990.
10.5 Loan Agreement between GSJ and PT Partnership dated October 1, 1990; (A)
Promissory Note made by GSJ to PT Partnership dated October 1, 1990; and
Future Advance Deed of Trust, Assignment and Security Agreement made by GSJ
dated October 1, 1990.
</TABLE>
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<TABLE>
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NUMBER
<S> <C> <C>
10.6 Shareholders Agreement between Eliga, Edmonton Pipe Industry Pension Trust (A)
Fund (the "EPI Pension Fund"), EPI and Laurel Valley Golf Corporation ("GLV")
dated as of October 30, 1991.
10.7 Loan Agreement between GLV and NationsBank dated as of October 30, 1991; (A)
Promissory Note made by GLV in favor of NationsBank dated October 30, 1991;
and Mortgage of Real Property and Security Agreement between GLV and
NationsBank dated as of October 30, 1991.
10.8 Loan Agreement between GLV and the EPI Pension Fund dated as of October 30, (A)
1991; Promissory Note made by GLV to the EPI Pension Fund; and second mortgage
and Security Agreement between GLV and EPI Pension Fund dated as of October
30, 1991.
10.9 Joint Venture Agreement dated as of May 11, 1993 between Laurel Development (A)
Corporation ("LDC"), Foothills Development, Inc. ("Foothills") and Partners in
Progress X.
10.10 Loan Agreement dated as of July 6, 1993 between Amalgamated Equity Golf Corp. (A)
and Foothills.
10.11 Project Management Agreement dated June 1, 1993 between LDC and PMI. (A)
10.12 Subscription, Assignment and Assumption Agreement dated as of November 23, (A)
1993 between Amalco and Project 93 Management Ltd. ("Project 93") including
Promissory Note made by Project 93 in favor of Amalco.
10.13 Lease Agreement, as amended, between the Company and the Board of Supervisors (B)
of Stafford County, Virginia dated as of November 23, 1993.
10.14 Shareholders' Agreement between the Company, U.A Canadian Pipeline Industry (B)
National Pension Plan ("UA Pension Fund") and The Gauntlet at Curtis Park,
Inc. ("GCP") dated April 19, 1994 and Amendment thereto dated May 13, 1994.
10.15 Loan Agreement between GCP and NationsBank dated as of April 19, 1994; (B)
Promissory Note made by GCP in favor of NationsBank dated April 19, 1994; and
Credit Line Deed of Trust and Security Agreement between GCP and NationsBank
dated as of April 19, 1994.
10.16 Guaranty Agreement between the Company, NationsBank and GCP dated as of April (B)
19, 1994; Pledge Agreement between the Company and NationsBank dated as of
April 19, 1994; Amending Agreement between the Company, PT Partnership, GSJ
and NationsBank dated as of April 19, 1994 (amending GSJ Shareholders'
Agreement to permit the stock pledge); Amending Agreement between the Company,
EPI Pension Fund, GLV and NationsBank dated as of April 19, 1994 (amending GLV
Shareholders' Agreement to permit the stock pledge).
10.17 Loan Agreement between GCP and UA Pension Fund dated April 19, 1994; (B)
Promissory Note made by GCP to UA Pension Fund dated April 19, 1994; and
Second Lien Credit Line Deed of Trust and Security Agreement, dated April 19,
1994, between GCP and UA Pension Fund.
10.18 Shareholders' Agreement, dated February 25, 1994, between the Company, (B)
Edmonton Pipe Industry Pension Trust Fund ("EPI Pension Fund") and GMW.
</TABLE>
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<TABLE>
<CAPTION>
EXHIBIT/ITEM DOCUMENT/DESCRIPTION PAGE
NUMBER
<S> <C> <C>
10.19 Indemnity Agreement and Guaranty, dated December 28, 1993, MW Seller, GMW and (B)
the Company; Third Mortgage of Real Property and Security Agreement, dated
December 28, 1993 by GMW to MW Seller.
10.20 Loan Agreement, dated as of December 28, 1993, by and between GMW and (B)
NationsBank; Promissory Note made by GMW to NationsBank dated December 28,
1993; Mortgage of Real Property and Security Agreement, dated December 28,
1993, by GMW to NationsBank.
10.21 Mortgage Purchase and Subscription Agreement, effective as of February 28, (B)
1994, between the Company, EPI Pension Fund and GMW.
10.22 Loan Agreement, dated December 28, 1993, between the Company and GMW; (B)
Promissory Note made by GMW to the Company dated December 28, 1993; Second
Mortgage of Real Property and Security Agreement, dated December 28, 1993, by
GMW to the Company.
10.23 Intercreditor Agreement, dated December 28, 1993, by and among NationsBank, (B)
the Company, GMW and MW Seller; Assignment and Assumption of Intercreditor
Agreement, dated February 28, 1994, between NationsBank, the Company, EPI
Pension Fund, GMW and MW Seller.
10.24 Subordinated Convertible Note, dated as of April 12, 1994 from the Company to (B)
Warren J. Stanchina, as Trustee; Promissory Mortgage Note dated April 12, 1994
from the Company, GNS, GPS and GWF to Warren J. Stanchina, as Trustee.
10.25 Indemnity Agreement, dated April 12, 1994, between Wedgefield LP, GWF and the (B)
Company; Indemnity Agreement, dated April 12, 1994, between Palisades GP, GPS
and the Company; Indemnity Agreement, dated April 12, 1994, between Northshore
GP, GNS and the Company; Wedgefield Second Mortgage Deed and Security
Agreement dated as of April 12, 1994 by GWF in favor of Warren Stanchina, as
Trustee; Palisades Second Mortgage Deed and Security Agreement dated as of
April 12, 1994 by GPS in favor of Warren Stanchina, as Trustee; Second Deed of
Trust and Security Agreement dated as of April 12, 1994 by GNS in favor of
Warren Stanchina, as Trustee.
10.26 Assumption Agreement, dated April 28, 1994, between BancFlorida, a Federal (B)
Savings Bank ("BancFlorida"), GWF and GPS; Mortgage, Security Agreement, and
Assignment of Rents, dated April 21, 1989, by Wedgefield LP in favor of
BancFlorida; Mortgage Note, dated April 21, 1989, from Wedgefield LP to
BancFlorida.
10.27 Assumption Agreement, dated April 28, 1994, between BancFlorida, GPS and GWF; (B)
Mortgage, Security Agreement, and Assignment of Rents, dated December 8, 1989,
by Palisades GP in favor of BancFlorida; Mortgage Note, dated December 8,
1989, from Palisades GP to BancFlorida.
10.28 Agreement Relating to Construction, Maintenance and Operation of Golf Course (B)
and Country Club, dated October 18, 1989, between Palisades Golf Club Limited
Partnership and Canam Palisades, Ltd.
</TABLE>
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<TABLE>
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EXHIBIT/ITEM DOCUMENT/DESCRIPTION PAGE
NUMBER
<S> <C> <C>
10.29 Promissory Note, dated April 12, 1994, from GAS to Hermann Flachsmann; Deed of (B)
Trust, Security Agreement, Financing Statement, and Assignment of Rental dated
April 12, 1994 by GAS to Wolfgang Dueren, as Trustee.
10.30 Cooperation Agreement Relating to the Sale of Residential Property and (B)
Operation of a Golf Course and Country Club, dated April 12, 1994, by and
between Northshore LP and GAS.
10.31 Brassie Golf Corporation 1994 Stock Option and Restricted Stock Purchase Plan. (B)
10.32 Exclusive Personal Service Contract between the Company and Dye, Inc. dated (C)
March 3, 1993.
10.33 Loan Agreement, dated as of April 24, 1991, between Eliga and the Company and (D)
Promissory Note dated September 15, 1991 in the amount of $780,000.
10.34 Employment Agreement, dated as of May 16, 1994, between the Company and (B)
Richard J. Stahlhuth; Employment Agreement, dated as of May 16, 1994, between
the Company and Hale S. Irwin.
10.35 Employment Agreement, dated as of June 30, 1994, between the Company and Gary (B)
A. Nacht.
10.36 Warrant Agreement, dated March 15, 1994, between the Company and The Travers (B)
Financial Corporation; Warrant Agreement, dated March 15, 1994, between the
Company and Theo Kraumanis.
10.37 Form of Warrant Agreement between the Company and the signatories thereto (E)
dated July 28, 1993.
10.38 Form of Warrant Agreement between the Company and the signatories thereto (F)
dated March 29, 1993.
10.39 Form of Warrant Issued to the Summit Shareholders dated June 30, 1995. (G)
10.40 Form of Warrant and Registration Rights Agreement Issued to Financial Advisor (G)
dated June 30, 1995.
10.41 1995 GSJ Partnership Loan Agreement and Promissory Note dated June 19, 1995. (G)
10.42 GSJ Loan Agreement with Canadian PT Limited Partnership, 1995 GSJ Deed of (G)
Trust and Security Agreement and Promissory Note dated October 1, 1995.
10.43 1995 Deed of Trust and Security Agreement, Promissory Note and 1995 GSJ (G)
NationsBank Loan Agreement dated June 19, 1995.
10.44 Amended and Restated GCP Promissory Note, First Amendment to GCP Loan (G)
Agreement, First Amendment to Credit Line Deed of Trust and Security Agreement
and Restatement of Guaranty Agreement dated May 5, 1995.
10.45 Office Lease between Breckenridge VIII Investment Corporation, Lessor, and (G)
Brassie Golf Corporation, Lessee, dated June 22, 1995.
10.46 Consulting Agreement between the Company and Fantor Consulting Ltd. (Allen (G)
Jefferson) dated January 1, 1996.
</TABLE>
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<TABLE>
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EXHIBIT/ITEM DOCUMENT/DESCRIPTION PAGE
NUMBER
<S> <C> <C>
10.47 Agreement in Principle dated February 21, 1996 between the Company, Gordon (H)
Ewart, the Company's four golf course subsidiaries and the Company's three
pension fund partners.
10.48 Form of $5.5 million 6% Convertible Debenture issued by the Company on March (I)
19, 1997.
10.49 Form of Letter Agreement dated September 6, 1996 Amending Terms of Company's (J)
$5.5 million 6% Convertible Debenture.
10.50 Sale of Certain Note Secured by Junior Security dated November 14, 1996
between UA Pension Fund, A & E Capital Funding, Inc., GCP, and the Company
selling and assigning the second mortgage loan on the Gauntlet at Curtis Park
from UA Pension Fund to A & E Capital.
10.51 Agreement for Sale and Purchase dated June 25, 1996 between Divot Development
Corporation and SJH Partnership, Ltd. concerning Southeast Parcel 2 of the St.
Johns Development.
10.52 Amendment to Agreement for Sale and Purchase dated December 11, 1996 between
SJH Partnership, Ltd. and Divot Properties WGV, Inc. concerning Southeast
Parcel 2 of the St. Johns Development.
10.53 Assignment and Assumption of Purchase Agreement dated December 11, 1996
between Divot Development Corporation and Divot Properties WGV, Inc.
concerning Southeast Parcel 2 of the St. Johns Development.
10.54 Letter Agreement dated January 31, 1997 between Flurina Development S.A. and
the Company amending the terms of the Company's Convertible Debenture held by
Flurina.
10.55 Letter Agreement dated February 5, 1997 between Pyramid Investments, LLC and
the Company amending the terms of the Company's Convertible Debenture held by
Pyramid.
10.56 Letter Agreement dated January 29, 1997 between Infinity Investors Ltd. and
the Company concerning converting a portion of the Infinity debenture and the
payoff of the Infinity debenture.
10.57 Assignment of Debenture dated February 5, 1997 between Infinity Investors Ltd.
and Pyramid Investments, LLC assigning to Pyramid the Company's debenture held
by Infinity.
10.58 Form of Warrant issued to Infinity Investors Ltd. dated January 31, 1997.
10.59 Form of Warrant Agreement between the Company and Pyramid Investments, LLC
dated February 5, 1997.
21.1 Subsidiaries of the Company. (B)
27 Financial Data Schedule (For SEC Use Only)
- -------------------------------------------
</TABLE>
(A) Incorporated by reference from the Company's Form 10, file No.
0-23056, filed on December 13, 1993.
(B) Incorporated by reference from the Company's Form 10, file
No. 0-24812, filed on September 15, 1994.
(C) Incorporated by reference from the Company's Form 10, file
No. 0-23056, filed on December 13, 1993 (Exhibit 10.14 thereto).
69
<PAGE> 70
(D) Incorporated by reference from the Company's Form 10, file No.
0-23056, filed on December 13, 1993 (Exhibit 10.15 thereto).
(E) Incorporated by reference from the Company's Form 10, file No.
0-23056, filed on December 13, 1993 (Exhibit 10.16 thereto).
(F) Incorporated by reference from the Company's Form 10, file No.
0-23056, filed on December 13, 1993 (Exhibit 10.17 thereto).
(G) Incorporated by reference from the Company's Form 10-K, file No.
0-24812 filed on April 15, 1996.
(H) Incorporated by reference from the Company's Form 8-K, file No.
0-24812 filed on August 30, 1996.
(I) Incorporated by reference from the Company's Form 10-QSB, file
No. 0-24812 filed on May 15, 1996.
(J) Incorporated by reference from the Company's Form 10-QSB, file
No. 0-24812 filed on October 30, 1996.
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(b) Reports on Form 8-K
The Company did not file any Current Report on Form 8-K,
during the last quarter of 1996.
71
<PAGE> 72
SIGNATURES
In accordance with Sections 13 or 15(d) of the Exchange Act,
the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BRASSIE GOLF CORPORATION
By: /s/ Steve Tucker
-----------------------------------
Principal Financial and Accounting
Officer
Dated: April 14, 1997
In accordance with the Exchange Act, this report has been
signed below by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ Steve Tucker Principal Financial April 14, 1997
- ---------------------------------- and Accounting Officer
Steve Tucker
/s/ Gordon D. Ewart Director April 14, 1997
- -------------------------------
Gordon D. Ewart
/s/ Robert G. Atkinson Director April 14, 1997
- ------------------------------
Robert G. Atkinson
/s/ William E. Horne Director April 14, 1997
- -------------------------------
William E. Horne
/s/ Thomas K. Richardson Director April 14, 1997
- ---------------------------
Thomas K. Richardson
/s/ Lance McNeill Director April 14, 1997
- ------------------------------
Lance McNeill
</TABLE>
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SIGNATURES
In accordance with Sections 13 or 15(d) of the Exchange Act,
the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BRASSIE GOLF CORPORATION
By: /s/ William E. Horne
---------------------------------
President (Principal Executive
Officer)
Dated: April 14, 1997
In accordance with the Exchange Act, this report has been
signed below by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ Gordon D. Ewart Director April 14, 1997
- ----------------------------------
Gordon D. Ewart
/s/ Robert G. Atkinson Director April 14, 1997
- ----------------------------------
Robert G. Atkinson
/s/ Lance McNeill Director April 14, 1997
- -----------------------------------
Lance McNeill
/s/ Thomas K. Richardson Director April 14, 1997
- ------------------------------
Thomas K. Richardson
/s/ Steve Tucker Controller (Principal Financial April 14, 1997
- ------------------------------------- and Accounting Officer)
Steve Tucker
</TABLE>
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SIGNATURES
In accordance with Sections 13 or 15(d) of the Exchange Act,
the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
74
<PAGE> 1
EXHIBIT 10.50
SALE OF A CERTAIN NOTE SECURED BY JUNIOR SECURITY
THIS AGREEMENT is made effective this the 14th day of November, 1996 by
and between the U.A. CANADIAN PIPELINE INDUSTRY NATIONAL PENSION PLAN, a
Registered Canadian Pension Trust with its business address in Surrey, British
Columbia, Canada ("Pension Plan"), A&E CAPITAL FUNDING, INC., a Canadian
corporation with its principal place of business in Ontario, Canada ("A&E"),
and THE GAUNTLET AT CURTIS PARK, INC., a Virginia corporation with its
principal place of business in Stafford County, Virginia ("Gauntlet"), and
BRASSIE GOLF CORPORATION, a Delaware Corporation ("Brassie"), all of which
collectively shall be referred to as "the Parties", or individually as a
"Party", and
WHEREAS, NATIONSBANK, N.A., a national banking association existing under
the laws of the United States, with offices in Shallotte, North Carolina and
elsewhere ("Nationsbank"), Pension Plan and Gauntlet entered into certain
construction financing arrangements, which included, but which were not
necessarily limited to:
1. A loan agreement between Nationsbank and Gauntlet effective on
April 19, 1994 for Nationsbank to loan Gauntlet the principal sum of TWO
MILLION TWO HUNDRED THOUSAND UNITED STATES DOLLARS ($2,200,000.00)
evidenced by a Promissory Note, which Note was secured by, among other
things, a First Lien Credit Line Deed of Trust and Security Agreement in
favor of Nationsbank as beneficiary; a Collateral Assignment of Rents,
Leases and Profits; an Assignment of Developers Rights; and an Assignment
of Contract Rights and Permits, all of which were effective on April 19,
1994; and
2. A loan agreement between Pension Plan and Gauntlet effective on
April 19, 1994 for Pension Plan to loan Gauntlet the principal sum of ONE
MILLION SIX HUNDRED THOUSAND UNITED STATES DOLLARS ($1,600,000.00) (the
"Loan") evidenced by the Loan Agreement and a Promissory Note dated April
19, 1994 ("Pension Plan Note") secured by;
A Second Lien Credit Line Deed of Trust and Security Agreement in
favor of the Pension Plan, effective on April 19, 1994 and recorded
in Book 1026, Page 235 of the Office of the Clerk of the Circuit
Court of Stafford County, Virginia; a Collateral Assignment of
Rents, Leases and Profits effective on April 19, 1994 and recorded
in Book 1026, Page 272 of the aforesaid registry; an Assignment of
Developer's Rights; and an Assignment of Contract Rights and
Permits (the "Junior Security"), all of which were effective as of
April 19, 1994; and
<PAGE> 2
3. The purchase of an equity interest in Gauntlet by Pension
Plan; and
4. An Intercreditor Agreement between Nationsbank, Gauntlet and
Pension Plan effective on April 19, 1994 by which the parties
agreed, inter alia, that the secured obligations of Gauntlet to
Nationsbank were to be senior and primary to the secured
obligations of Gauntlet to Pension Plan, and that the secured
obligations of Gauntlet to Pension Plan were to be junior and
subordinate to the secured obligations of Gauntlet to Nationsbank;
and
WHEREAS, with the consent of Pension Plan, Nationsbank made a
further loan to Gauntlet on May 5th, 1995, and as an integral part of
this transaction, Nationsbank, Pension Plan, Gauntlet, and Robert S.
Janney, as Trustee of the Second Lien Credit Line Deed of Trust and
Security Agreement in favor of the Pension Plan (the "Trustee"), modified
the Intercreditor Agreement by entering into a Subordination Agreement of
even date expressly subordinating the junior security interests of
Pension Plan in the property of Gauntlet to the senior security interests
of Nationsbank in the property of Gauntlet; and
WHEREAS, during September, 1996, pursuant to the provisions of the
Pension Plan Note and pursuant to a Memorandum of Agreement Effective
June 17, 1996, Brassie paid, or caused to be paid, to the Trustee, on
account of Gauntlet, a sum sufficient to pay all accrued interest and all
other charges properly chargeable to Gauntlet and to reduce the principal
sum of the Pension Plan Note to FOUR HUNDRED SIXTY-NINE THOUSAND UNITED
STATES DOLLARS ($469,000.00), said payment to be accounted for as a
capital contribution to Gauntlet by its shareholder, Brassie, and,
additionally, Pension Plan and Brassie agreed that Brassie would, and
did, pay Pension Plan the sum of FIFTY THOUSAND UNITED STATES DOLLARS
($50,000.00) as payment in full by Brassie for Pension Plan's equity
interest in Gauntlet; and
WHEREAS, A&E entered into an agreement with Brassie and Gauntlet to
purchase the Pension Plan Note for the sum of FOUR HUNDRED SIXTY-NINE
THOUSAND UNITED STATES DOLLARS ($469,000.00), and pursuant thereto, A&E
has tendered such sum to Pension Plan and Pension Plan has agreed to
transfer the Pension Plan Note and the Junior Security to A&E; and
WHEREAS, Brassie, having purchased Pension Plan's equity interest
in Gauntlet, is entitled to delivery of the stock certificates
representing Pension Plan's equity interest in Gauntlet upon the closing
of the various agreements herein recited,
NOW, THEREFORE, for and in consideration of the promises and of the
mutual agreements, representations, warranties, covenants and conditions
hereinafter set forth, the parties hereto agree as
2
<PAGE> 3
follows:
SECTION ONE: CONVEYANCE OF THE PENSION PLAN NOTE.
-------------------------------------------------
A. In consideration for the funds received from A&E, the adequacy and
receipt of which is hereby acknowledged, and at the express request of Brassie
and Gauntlet herein made, Pension Plan hereby conveys to A&E all of its right,
title, and interest in the Promissory Note of Gauntlet to Pension Plan dated
April 19, 1994 (the "Pension Plan Note").
B. A&E acknowledges and agrees that the conveyance of the Pension Plan
Note by Pension Plan to A&E is without recourse.
C. Pension Plan agrees to endorse the Pension Plan Note prior to its
delivery to A&E with language to the effect of "Pay to the order of A&E CAPITAL
FUNDING, INC., a Canadian corporation, without recourse and subject to the
terms and conditions of a certain Agreement effective November 14, 1996, the
terms of which are incorporated herein as if fully set out."
SECTION TWO: THE ASSIGNMENT OF THE JUNIOR SECURITY.
---------------------------------------------------
In consideration for the funds received from A&E, the adequacy and
receipt of which are hereby acknowledged, and at the request of Brassie,
Pension Plan and Gauntlet hereby assign to A&E all of its right, title, and
interest in the Junior Security. Pension Plan and Gauntlet shall, upon request
of A&E, execute such other and further documents as may be reasonably necessary
or desirable with respect to the security interests of A&E in the properties
and interests in property constituting the Junior Security.
SECTION THREE: TRANSFER OF GAUNTLET STOCK BY PENSION PLAN
---------------------------------------------------------
Upon the execution of this Agreement, Pension Plan shall, subject to the
terms and conditions set forth in this Agreement, deliver to Brassie
certificates evidencing and representing all of Pension Plan's capital stock of
Gauntlet free and clear of all liens, pledges, and encumbrances of every kind,
character, and description whatsoever, save and except such rights which
Nationsbank may have with respect to the stock pursuant to agreements with
Gauntlet and/or Brassie.
SECTION FOUR: INTERCREDITOR AND SUBORDINATION AGREEMENTS
--------------------------------------------------------
A&E acknowledges and assumes all of Pension Plan's rights, duties and
obligations under the Intercreditor Agreement entered into on April 19, 1994
and under the Subordination Agreement of May 5, 1995, which Agreements shall in
all respects bind A&E as if A&E were an original signatory thereto. The
parties agree that Nationsbank is an intended third-party beneficiary of this
Section
3
<PAGE> 4
of this Agreement.
SECTION FIVE: REPRESENTATIONS AND WARRANTIES OF THE PARTIES
-----------------------------------------------------------
Each party to this Agreement hereby warrants the following
representations as to itself, but does not warrant that these representations
are true and correct as to any other party:
A. The Parties are duly organized, validly existing and in good
standing under the laws of their respective jurisdictions, and each has the
power to own its property and conduct its business in the manner in which such
business is now being conducted.
B. The execution and delivery of this Agreement and the performance of
the transactions contemplated hereby have been duly authorized and approved
under each of the partys' governing documents. The Parties each have full
power to enter into and perform this Agreement and the transactions
contemplated hereby, and this Agreement constitutes a valid and binding
agreement of each of the Parties enforceable in accordance with its terms.
C. The execution, delivery and performance of this Agreement and the
consummation of the transactions herein contemplated do not and will not result
in a violation of any provision of the governing documents of any of the
parties, or of any agreement, indenture, mortgage, deed of trust or other
instrument to which any of the Parties is a signatory, or by which any Party is
bound or of any law, rule, regulation, judgment, order or decree, save and
except agreements to which Nationsbank is a signatory unless Nationsbank
consents to these transactions by means of a separate agreement. All consents
by third parties, including the consent of Nationsbank, required to prevent or
eliminate every such conflict, breach, default, lien and encumbrance shall have
been validly obtained before the execution of this Agreement and such consents,
if any, shall be in full force and effect and valid and sufficient for such
purpose at the time of the execution of this Agreement.
D. Pension Plan, A&E and Gauntlet warrant that no defaults exist under
the terms of the Pension Plan Note or the Junior Security, nor do any
circumstances exist which with the giving of notice or the passage of time
would constitute such a default.
SECTION SIX: CONSENTS
---------------------
Each of the Parties consents to the transactions set forth in this
Agreement.
SECTION SEVEN: NOTICE
---------------------
Any notice, request, instruction, or other documents to be given
hereunder to any Party shall be in writing and delivered
4
<PAGE> 5
personally or sent by Registered Mail or Certified United States Mail postage
prepaid, by a nationally recognized overnight private courier service, or by
telegram, to the address set forth below. Any Party may change its address for
purposes of this paragraph by giving notice of such change of address to the
other party in the manner herein provided for giving notice.
U.A. CANADIAN PIPELINE INDUSTRY NATIONAL PENSION PLAN
Suite 316, 1959 - 152nd Street
Surrey, British Columbia, Canada V4A 9E3
with a copy to:
---------------
Robert S. Janney, Esquire Janney & Janney
12 South Court Street
Luray, Virginia 22635
A&E CAPITAL FUNDING, INC.,
Suite 403 90 Eglington Avenue East
Toronto, Ontario, Canada 4MP2Y3
THE GAUNTLET AT CURTIS PARK, INC.,
Attn: David C. Crowell, Esquire
Brassie Golf Corporation
5806-A Breckenridge Parkway
Tampa, Florida 33610
SECTION EIGHT: MISCELLANEOUS
----------------------------
A. Subject to the terms and conditions hereof, this Agreement shall be
binding upon and inure to the benefit of the Parties hereto and their
respective successors and assigns.
B. This instrument contains the entire agreement between the Parties
hereto with respect to the transaction contemplated hereby and shall not be
changed or terminated except by written amendment signed by the Parties hereto.
C. This Agreement is being delivered and is intended to be performed
in the Commonwealth of Virginia and shall be governed by and construed and
enforced in accordance with the laws of Virginia.
D. This Agreement may be signed in counterparts by the respective
Parties hereto, and a combination of such counterparts containing the
signatures of all of the Parties hereto shall constitute and be construed as
one integrated Agreement, as if all the Parties had executed and acknowledged
the same copy of the Agreement.
5
<PAGE> 6
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
U.A. CANADIAN PIPELINE INDUSTRY NATIONAL
PENSION PLAN,
a Registered Canadian Pension Trust
By: /s/ George Meservier
-------------------------------------
(Title): Chairman, Board of Trustees
---------------------------------
Attest:
--------------------------------
(Title):
-------------------------------
A&E CAPITAL FUNDING, INC.,
a Canadian Corporation
By: /s/ Robert Ewart
-------------------------------------
(Title): President
---------------------------------
Attest:
--------------------------------
(Title):
-------------------------------
THE GAUNTLET AT CURTIS PARK, INC.,
a Virginia Corporation
By: /s/ Thomas K. Richardson
-------------------------------------
(Title): President
---------------------------------
Attest:
--------------------------------
(Title):
-------------------------------
6
<PAGE> 7
BRASSIE GOLF CORPORATION,
a Delaware Corporation
By: /s/ William E. Horne
-------------------------------------
(Title): President/CEO
---------------------------------
Attest:
--------------------------------
(Title):
-------------------------------
PROVINCE OF BRITISH COLUMBIA )
) To-wit:
CANADA )
The foregoing Agreement was acknowledged before me this _______ day of
__________________, 1997, by _______________________ as
________________________ of U.A. CANADIAN PIPELINE INDUSTRY NATIONAL PENSION
PLAN, a Registered Canadian Pension Trust, on behalf of said Trust.
My commission expires: ________________________________.
__________________________________________
Notary Public
PROVINCE OF ONTARIO )
) To-wit:
CANADA )
The foregoing Agreement was acknowledged before me this _______ day of
__________________, 1997, by _______________________ as
________________________ of A&E CAPITAL FUNDING, INC., a Canadian Corporation,
on behalf of said Corporation.
My commission expires: ________________________________.
__________________________________________
Notary Public
7
<PAGE> 8
STATE OF )
) To-wit:
C_________ OF ________________)
The foregoing Agreement was acknowledged before me this _______ day of
__________________, 1997, by _______________________ as
________________________ of THE GAUNTLET AT CURTIS PARK, INC., a Virginia
Corporation, on behalf of said Corporation.
My commission expires: ________________________________.
__________________________________________
Notary Public
STATE OF FLORIDA )
) To-wit:
C_________ OF ________________)
The foregoing Agreement was acknowledged before me this _______ day of
__________________, 1997, by _______________________ as
________________________ of BRASSIE GOLF CORPORATION, a Delaware Corporation,
on behalf of said Corporation.
My commission expires: ________________________________.
__________________________________________
Notary Public
8
<PAGE> 1
EXHIBIT 10.51
AGREEMENT FOR SALE AND PURCHASE
BY AND BETWEEN
SJH PARTNERSHIP, LTD.
AND
DIVOT DEVELOPMENT CORPORATION
SOUTHEAST PARCEL 2
<PAGE> 2
AGREEMENT FOR SALE AND PURCHASE
[SOUTHEAST PARCEL 2/DIVOT]
THIS AGREEMENT made this ____ day of _______________, 199__ (the
"Effective Date"), by and between SJH PARTNERSHIP, LTD., a Florida limited
partnership ("Seller") and DIVOT DEVELOPMENT CORPORATION, a Florida corporation
("Buyer").
In consideration of the mutual undertakings of the parties set forth
in this Agreement and of other valuable considerations, the receipt and
sufficiency of which the parties acknowledge, the parties hereby agree as
follows:
1. GENERAL OUTLINE OF TRANSACTION.
1.1 Outline of Transaction. Seller is the fee simple owner of
those certain parcels of land in St. Johns County, Florida, referenced as the
"Interchange Southeast Parcel" and "Interchange Northwest Parcel" in that
certain Development of Regional Impact order approved by St. Johns County
Resolution No. 91-130 as modified by Resolution No. 91-183 as further modified
through the date hereof (the "Saint Johns DRI"). Buyer intends to purchase the
real property generally described on Exhibit A (the "Property") consisting of
approximately 4.25 acres for the development of (i) a 15,000 square foot
laundry service establishment catering to commerce and industry, specifically
excluding retail sales activities, and (ii) a storage yard for mobile modular
office containers (the "Project") with associated parking, utility and
landscaping improvements, as more particularly described and depicted on the
preliminary site plan and improvement description attached hereto as Exhibit B
("Site Plan"). Seller's current land plan for the overall development of the
Interchange Southeast Parcel is attached hereto as Exhibit C ("Real Estate
Map"). The Real Estate Map is preliminary in nature and is subject to
modification from time to time in the sole discretion of Seller. Under the
terms of this Agreement, Seller and Buyer desire to (i) provide for the terms
of the purchase and sale of the Property, and (ii) provide for certain
continuing obligations of the parties with respect to construction and
operation of the Project and related infrastructure improvements within the
Interchange Southeast Parcel.
1.2 Definitions.
1.2.1 Access Easement shall have the meaning set forth
in Section 2.8 hereof.
1.2.2 Access Road shall mean and refer to that certain
main arterial access entry road providing access to the Property from
International Golf Parkway as more particularly described in the Site Plan.
1.2.3 Association shall have the meaning set forth in
Section 10.6 hereof.
<PAGE> 3
1.2.4 Association Covenants shall have the meaning set
forth in Section 10.6 hereof.
1.2.5 Closing or Closing Date shall have the meaning set
forth in Section 2.7 hereof.
1.2.6 Closing Notice shall have the meaning set forth in
Section 2.7 hereof.
1.2.7 Deposit shall have the meaning set forth in
Section 2.1 hereof.
1.2.8 Development Criteria shall mean and refer to the
Development, Architectural and Construction Criteria attached hereto as
Exhibit D.
1.2.9 Effective Date shall have the meaning set forth in
the introductory paragraph.
1.2.10 Escrow Agent shall have the meaning set forth in
Section 2.10 hereof.
1.2.11 Force Majeure shall mean acts of God, earthquakes,
blizzards, tornadoes, hurricanes, fire, flood, malicious mischief,
insurrection, riots, strikes, lockouts, boycotts, picketing, labor
disturbances, public enemy, war (declared or undeclared), landslides,
explosions, epidemics, compliance with any order, ruling, injunction or decree
by any court, tribunal or judicial authority of competent jurisdiction,
inability to obtain materials or supplies after the exercise of all reasonable
efforts, and any other similar circumstances beyond the reasonable control of
the party responsible for such performance.
1.2.12 Hazardous Wastes shall be as variously defined
under the Resource Conservation and Recovery Act of 1976, as amended in 1984;
(42 U.S.C. Sec. 6901 et seq.); the Comprehensive Environmental Response
Compensation and Liability Act of 1980, as amended in 1986; (42 U.S.C. Sec.
9601 et seq.); the Federal Toxic Substances Control Act; (15 U.S.C. Sec. 2601
et seq.) ; the Clean Air Act; (42 U.S.C. Sec. 7401 et seq.); the Pollutant
Spill Prevention and Control Act; (F.S. Chapter 376 et seq.); and the Florida
Air and Water Pollution Control Act; (F.S. Chapter 403 et seq.) together with
all rules, regulations, orders and the like, including state and local
government rules, regulations and orders, applicable to the same.
1.2.13 Infrastructure Improvements shall have the meaning
as defined in Section 9.3 hereof.
1.2.14 Interchange Southeast Parcel shall have the
meaning as defined in Section 1.1 hereof.
2
<PAGE> 4
1.2.15 License Agreement shall mean and refer to that
certain agreement to be entered into between Buyer and Seller attached hereto
as Exhibit E.
1.2.16 Permitted Exceptions shall have the meaning set
forth in Section 2.2 hereof.
1.2.17 Project shall have the meaning as set forth in
Section 1.1 hereof.
1.2.18 Property shall have the meaning as defined in
Section 1.1 hereof.
1.2.19 PUD shall mean that certain Planned Unit Development
Ordinance for the Interchange Southeast Parcel issued by the St. Johns County
Commission, Ordinance Number 91-36, as the same may be modified from time to
time.
1.2.20 Saint Johns DRI shall have the meaning set forth in
Section 1.1 hereof, as the same may be modified from time to time.
1.2.21 Site Plan shall have the meaning set forth in
Section 1.1 hereof.
1.2.22 Surface Water Permits shall mean Army Corps of
Engineers Permit No. 199100108 (IPGS) and St. Johns River Water Management
District Permits, No. 4-109-01206, No. 4-109-0122 and No. 12-109-0036, as the
same may be modified from time to time.
1.2.23 WGV shall mean and refer to the World Golf Village,
Inc., a not-for-profit corporation, its successors and assigns.
1.2.24 World Golf Village Hall of Fame shall mean that
certain International Golf Museum to be constructed by WGV on the Interchange
Northwest Parcel to have the PGA Tour Hall of Fame, the LPGA Hall of Fame, the
PGA World Golf Hall of Fame and additional associated facilities.
2. SALE AND CONVEYANCE.
2.1 Purchase Price and Property to be Conveyed. Under the terms
of this Agreement, Seller hereby agrees to sell and convey to Buyer and Buyer
agrees to purchase the Property from Seller for a purchase price of Three
Dollars ($3.00) per gross square foot of the Property, as evidenced by the
Survey referenced in paragraph 2.4 below (the "Purchase Price"). This Purchase
Price shall be paid in cash at Closing. An amount equal to Fifty-Five Thousand
Five Hundred and Thirty Nine Dollars ($55,539.00) has been delivered to Escrow
Agent upon execution hereof as an earnest money deposit. The deposit referenced
herein together with interest earned thereon is hereinafter referred to as the
"Deposit." At Closing, the Deposit shall be credited against the Purchase
Price. All payments when due
3
<PAGE> 5
shall be made by cash, cashier's check, wire transfer of immediately available
federal funds, or other good funds. In the event payment is made by wire
transfer, sums shall be deemed paid by Buyer when receipt of the wire transfer
is acknowledged by a financial institution designated by Seller as the
recipient and Seller's or Escrow Agent's account is credited. In conjunction
with and as part of the purchase and sale of the Property, Seller shall also
convey to Buyer certain easements as more specifically provided for in this
Agreement.
2.2 Permitted Exceptions. The Property shall be conveyed to Buyer
free and clear of any and all liens, encumbrances, covenants, restrictions,
reservations, rights of way and easements except those expressly set forth on
Exhibit F attached hereto and made a part hereof and certain agreements,
covenants and restrictions affecting the Property as described in this
Agreement (the "Permitted Exceptions").
2.3 Evidence of Title. Within ten (10) days of the Effective Date,
Buyer shall cause to be prepared a commitment for an owner's policy of title
insurance in favor of Buyer setting forth the state of title to the Property.
Such commitment shall provide for the issuance of a title policy by Pappas
Metcalf & Jenks, P.A., as agents for Commonwealth Land Title Insurance Company,
or other title company selected by Seller, in standard ALTA Owner's Title
Insurance Form, as used in the State of Florida, insuring fee simple title of
Buyer to the Property and the Access Easement as provided for in Section 2.8.1
below, in the amount of the Purchase Price (the "Commitment") . Buyer shall
advance the costs of the Commitment insuring an amount of One Thousand Dollars
($1,000.00) which shall be endorsed prior to Closing to insure the amount of
the Purchase Price. All costs of the Commitment and the title policy shall be
paid by Seller at Closing.
2.4 Survey. Not later than expiration of the Feasibility Period,
Buyer shall provide to Seller a boundary survey of the Property prepared by a
licensed Florida land surveyor showing the correct legal metes and bounds
description of the Property and its dimensions specified to the nearest 1/100
of an acre and by total square footage (the "Survey"). The Property will be
generally as described on Exhibit A and will consist of a parcel of land of not
less than four and one-quarter (4.25) acres. The Survey shall contain a
certificate certified to Buyer stating that it meets the minimum requirements
for survey as required by Florida law, locates all easements or improvements
then located upon the Property, as evidenced by the Commitment, and includes
designation of the flood plain area affecting the Property, if any. Provided
that Seller shall have approved the cost of the Survey, Seller shall reimburse
Buyer, at closing, for any costs advanced by Buyer to obtain the Survey or
shall pay any accrued but unpaid expense thereof.
4
<PAGE> 6
2.5 Defects. In the event that the Commitment or any endorsement
thereto issued prior to Closing or the Survey evidences title defects or
exceptions (other than the standard printed exceptions appearing in the
Commitment which shall be removed at Closing) which are not Permitted
Exceptions, Buyer shall give Seller written notice of such fact within ten (10)
days of receipt by Buyer of the Commitment or Survey which evidences such
defect. If Buyer does not provide timely notice of such exceptions, to Seller,
all exceptions shall be deemed approved by Buyer and the Closing shall proceed
without diminution in the Purchase Price. If Buyer provides timely notice of
any defects, Seller shall have the right, but not the obligation, to cure any
such defects identified in Buyer's notice. Seller will advise Buyer within ten
(10) days of receipt of the notice as to its intent to cure. If Seller elects
to cure, it shall have a period of sixty (60) days to eliminate such defects
and the Closing Date shall automatically be extended by a like period of time.
In the event Seller does not elect to eliminate such defects, Buyer shall have
the right to terminate this Agreement and receive a refund of the Deposit and
all parties shall be relieved of any obligations set forth herein or Buyer may
waive any such defects and agree to accept the condition of title to the
Property as set forth in the Commitment and on the Survey and proceed to
Closing without diminution in the Purchase Price.
2.6 Environmental Audit. Not later than expiration of the
Feasibility Period, Buyer shall cause to be prepared by Law Engineering and
Associates, Inc., a Phase I Environmental Audit evidencing the Property is not
contaminated by Hazardous Waste (the "Environmental Audit") . In the event the
Environmental Audit evidences the Property is contaminated, Buyer shall give
Seller written notice of such fact within ten (10) days of receipt by Buyer of
the Environmental Audit. If Buyer does not provide timely notice of such
contamination to Seller, the condition of the Property as evidence by the
Environmental Audit shall be deemed approved by Buyer and the Closing shall
proceed without diminution in the Purchase Price. If the Buyer provides timely
notice of any contamination, Seller shall have the right, but not the
obligation, to cure or remove any contamination identified in Buyer's notice.
Seller will advise Buyer within ten (10) days of receipt of the notice as to
its intent to cure. If Seller elects to cure, it shall have a period of sixty
(60) days to eliminate such contamination and the Closing Date shall
automatically be extended by a like period of time. In the event Seller does
not elect to eliminate such contamination, Buyer shall have the right to
terminate this Agreement and receive a refund of the Deposit and all parties
shall be relieved of any obligations set forth herein or Buyer may waive any
such contamination and agree to accept the condition of the Property as set
forth in the Environmental Audit and proceed to Closing without diminution in
the Purchase Price. Provided that Seller shall have approved the cost of the
Environmental Audit, Seller shall reimburse Buyer, at closing, for any costs
advanced by
5
<PAGE> 7
Buyer to obtain the Environmental Audit or shall pay any accrued but unpaid
expense thereof.
2.7 Closing Date. The Closing of this transaction shall take place
not later than one hundred and twenty (120) days after Seller's delivery of
written notice to Buyer that WGV has commenced construction of the World Golf
Village Hall of Fame and that Seller has closed those transactions to allow for
construction of (i) the World Golf Village Golf Course with Scratch Golf
Company, (ii) the World Golf Village Resort Hotel with John Q. Hammons Hotels
Two, L.P., (iii) timeshare villas with Vistana WGV, Ltd. and (iv) the Hall of
Fame with WGV, all constituting part of the World Golf Village project within
the Saint Johns DRI (the "Closing Notice") (hereinafter referred to as
"Closing" or "Closing Date") . The Closing shall take place in the offices of
Pappas Metcalf & Jenks, Professional Association, 200 West Forsyth Street,
Suite 1400, Jacksonville, Florida 32202, or at such other place within St.
Johns County or Duval County as may be selected by Seller and Buyer. For
purposes of the Closing Notice, commencement of construction shall be evidenced
by land clearing or earth moving activities by or at the direction of WGV. If
the Closing Notice has not been delivered on or before September 30, 1996 (the
"Closing Notice Date"), Buyer shall be entitled, at its option, to terminate
this Agreement by providing written notice to Seller not later than September
30, 1996, and the Deposit shall be returned to Buyer. If the Closing Notice has
not been delivered on or before November 15, 1996, this Agreement shall be
automatically terminated and the Deposit shall be refunded to Buyer, unless
both parties shall execute an amendment to this Agreement extending the Closing
Notice Date.
2.8 Documents to be Delivered at Closing. At Closing, Seller
shall deliver to Buyer the following documents fully executed by Seller:
2.8.1 (i) Special Warranty Deed conveying to Buyer fee
simple title to the Property in the form and content of Exhibit G, subject only
to the Permitted Exceptions; and (ii) Access Easement in the form and content
of Exhibit H ("Access Easement") attached hereto.
2.8.2 Affidavit of Seller in form reasonably
satisfactory to the title insurer for elimination of mechanics lien exceptions
and parties in possession exceptions from any mortgagee title binder obtained
by Buyer.
2.8.3 A certificate executed by the officers of Seller
certifying that all representations and warranties contained herein are true
and correct as of the Closing Date.
2.8.4 License Agreement and Memorandum of Agreement in
form and content attached as Exhibits E and J, respectively.
6
<PAGE> 8
2.8.5 Assignment of development rights under the Saint
Johns DRI as provided for in Section 10.3 below.
2.8.6 A copy of the Letter of Credit as defined in
Section 8.3 below.
At Closing, Buyer shall deliver to Seller the following documents:
2.8.7 A copy of all insurance coverage relating to the
Property and operations on the Property and other items to be delivered by
Buyer on or before Closing.
2.8.8 A certificate executed by Buyer certifying that
all representations and warranties contained herein are true and correct as of
the Closing Date.
2.8.9 Evidence acceptable to Seller's attorney that
Buyer, if other than a natural person, is validly formed, in good standing and
is authorized to perform its obligations under this Agreement.
2.9 Adjustments, Prorations, Costs of Transactions. The following
items shall be prorated or apportioned by the parties as of the Closing Date:
2.9.1 Real estate taxes taking into consideration any
discounts for early payment. Taxes shall be prorated based upon the estimated
amount of taxes for the year of Closing applicable to the Property.
2.9.2 Utility charges and any special assessments or
charges imposed against the Property by governmental authorities having
jurisdiction thereof.
2.9.3 Association assessments due and payable to the
Association, as described in Section 10.6 below, for the month of Closing, if
any.
2.9.4 Seller shall pay for (i) the cost of documentary
stamp taxes on the deed of conveyance; (ii) Seller's attorneys' fees; (iii)
recording fees; (iv) the Commitment prepared in accordance with Section 2.3;
(v) the Survey prepared in accordance with Section 2.4; and (vi) the
Environmental Audit, provided this transaction closes. If this transaction
does not close for any reason other than Seller's default, all costs of the
Commitment, the Survey and the Environmental Audit incurred by Buyer shall be
its sole expense. Buyer shall pay for (i) Buyer's attorneys' fees and (ii) all
costs of any related transactions between Buyer and third parties, including
financing costs.
7
<PAGE> 9
2.10 Escrow Agreement. The Deposit shall be deposited with Pappas
Metcalf & Jenks, P.A. ("Escrow Agent") in an interest bearing account. Interest
earned on the Deposit shall be paid (i) to Seller if the transaction
contemplated herein does not close and such failure is due to a default by
Buyer under this Agreement, or (ii) to Buyer in all other events. Escrow Agent
shall at all times be authorized to disburse the Deposit together with interest
accrued thereon in accordance with written instructions executed by both Buyer
and Seller. In the event that Escrow Agent shall receive a written claim of
default by either Buyer or Seller against the other, then Escrow Agent shall
not release the Deposit from escrow unless and until Escrow Agent shall have
received joint written instructions from Seller and Buyer as to the proper
disbursement of the Deposit with interest thereon or Escrow Agent has received
direction from a court of competent jurisdiction as to the proper party
entitled to receipt of the Deposit and interest accrued thereon. Escrow Agent
shall be authorized to file an action in interpleader to determine the proper
party entitled to the Deposit and the defaulting party as determined by such
proceeding shall indemnify and hold harmless Escrow Agent from all costs and
expenses including legal fees associated with such proceeding. Escrow Agent may
act in reliance upon any writing or instrument or signature which it in good
faith believes to be genuine, and may assume that any person purporting to give
any writing, notice, advice or instruction in connection with the provisions
hereof has been duly authorized to do so. Escrow Agent shall not be liable in
any manner for the sufficiency or correctness as to form, manner and execution
or validity of any instrument deposited in this escrow nor as to the identity,
authority or right of any persons executing the same; and its duties hereunder
shall be limited to the safekeeping of the Deposit, interest accrued
thereon, and for the disposition of same in accordance with this Agreement.
Escrow Agent hereby executes this Agreement for the sole and exclusive purpose
of evidencing its agreement to the provisions of this Section 2.10. Buyer
acknowledges that Escrow Agent is also the firm representing Seller in this
transaction and Buyer consents to Escrow Agent's continued representation of
Seller in any litigation arising under this Agreement.
3. REPRESENTATIONS.
Each party represents to the other that all of the representations
made by it in this Section 3 and Sections 7.1 and 8.1 will be true at the
Closing Date to all intents and purposes as if they were made at that time and
shall survive the Closing.
Seller represents to Buyer that:
3.1 Partnership Standing. Seller is a limited partnership
organized and in good standing under the laws of the State of Florida.
8
<PAGE> 10
3.2 Partnership Authority. Seller's execution and delivery of
this Agreement to Buyer and its sale of the Property provided for herein have
been authorized by Seller, in accordance with applicable law and that all other
actions required to be taken to authorize execution of this Agreement and
Seller's performance of all obligations undertaken by it under its terms have
been duly and regularly taken, subject to the provisions of Section 7 below.
3.3 Documents Delivered. To the best of Seller's knowledge, all
documents delivered to Buyer as required under the terms of this Agreement
constitute true and correct copies of the original instruments and, except as
set forth in this Agreement, to the best of its knowledge Seller knows of no
amendment, modification or other change to said documents.
3.4 No Condemnation or Litigation. To Seller's knowledge, there
are no condemnation proceedings or other litigation either pending or
threatened, against the Property which would have a material and adverse impact
upon the construction of the Project upon the Property, other than claims
related to bond validation proceedings, St. Johns County vs. State of Florida,
et al., Case No. CA95-928, as to which the Supreme Court of Florida, on appeal,
has affirmed the order validating such bonds issued by the Circuit Court, which
threatened claims have not occurred subsequent to the Supreme Court
affirmation.
3.5 No Violations - Interchange Tract. Seller has received no
notice of any actual, threatened or contemplated suits, actions or proceedings
with respect to all or part of the Interchange Tract (i) for condemnation or
(ii) alleging any violation of any applicable law or regulation.
3.6 No Hazardous Wastes. To Seller's knowledge, no hazardous
wastes have been discharged, released, disposed of or allowed to escape on or
under the Property and to the actual knowledge of SJH Partnership, no
investigation, administrative order, consent order or agreement, litigation or
settlement with respect to hazardous wastes is proposed, threatened,
anticipated or in existence with respect to the Property.
3.7 No Violations of Permits. The Surface Water Permits, the CUP
permit, the Saint Johns PUD and the Saint Johns DRI are in full force and
effect and there have been no modifications or violations of any of the terms
or conditions thereof which would adversely affect or delay the development or
operation of any component part of the Property. The Saint Johns PUD and Saint
Johns DRI expressly allow construction of the Project subject to compliance
with the terms and conditions thereof and compliance with all other applicable
laws and regulations including, but not limited to, the requirement to obtain
Final Development Plan approval, Construction, Plan Approval and a building
permit. To Seller's knowledge, there are no terms and conditions of the
Surface Water Permits, St. Johns
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PUD or Saint Johns DRI or any other outstanding permits relating to the
Property that would prohibit or render impossible construction of the Project
within the Saint Johns DRI.
3.8 No Liens. To Seller's knowledge, without investigation, there
are no liens imposed by the County against the Property which would be due and
payable after the Closing Date, except as specifically contemplated under the
terms of this Agreement, taxes for the year of conveyance and as shown in the
Permitted Exceptions or the Commitment.
3.9 Rights of Acquisition. No other person, firm, corporation or
other entity has any right or option to acquire the Property or any portion
thereof or an interest therein, except as set forth in the Permitted
Exceptions.
3.10 Parties in Possession. There are no parties in possession of
any portion of the Property, whether as lessees or tenants at sufferance.
Buyer represents to Seller that:
3.11 Corporate Standing. Buyer is a corporation organized and in
good standing under the laws of the State of Florida and is qualified to do
business in the State of Florida.
3.12 Corporate Authority. Buyer's execution and delivery of this
Agreement to Seller and its purchase of the Property provided for herein have
been authorized by Buyer, in accordance with applicable law, and that all other
actions required to be taken to authorize execution of this Agreement and
Buyer's performance of all obligations undertaken by it under its terms have
been duly and regularly taken.
3.13 No Actions. There are no actions, suits or proceedings pending
or to the knowledge of Buyer threatened against or affecting Buyer, which would
impede or otherwise impair its ability to perform its obligations under this
Agreement.
4. BUYER'S EXAMINATIONS. Buyer and its agents, at their own risk and
expense, at any time prior to Closing, shall have the right and privilege to
enter upon any portion of the Property to inspect, examine, survey and
otherwise perform or conduct such tests, inspections, studies or other
evaluations as Buyer may deem necessary in conjunction with Buyer's acquisition
of the Property including, but not limited to, an engineering feasibility study
which may include topographic surveys, core borings, soil test pits and load
bearing tests, as may be required by Buyer to determine the physical
characteristics of the substrata of the Property. In addition, Buyer shall make
such examinations of Seller's plans for future development (residential,
commercial, recreational and otherwise) , the zoning, permitting and all
governmental approvals,
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utility supply and all other matters required for Buyer's development plans for
the Property as Buyer deems necessary. Following Buyer's inspection of the
Property, Buyer shall restore the Property to its original condition and shall
indemnify and hold Seller harmless from and against any and all claims, costs,
expenses and damages to persons and/or property incurred by, through or out of
the exercise of such privilege. Buyer's indemnity set forth herein shall
survive the closing of this transaction or the termination of this Agreement.
In entering into this Agreement, Buyer shall not rely upon any oral or written
representations, warranties or statements, whether express or implied, made by
Seller or any agent, employee or representative of Seller or by any broker or
any other person representing or purporting to represent Seller with regard to
the Property or any matters affecting the Property which are not expressly set
forth in this Agreement. Seller is not the agent of WGV and has no authority to
bind WGV. Buyer will make such examination of matters relating to WGV and the
World Golf Village Hall of Fame prior to Closing as Buyer deems necessary.
Buyer agrees that prior to Closing, Buyer shall notify Seller of its intent to
consult with any governmental authority concerning permits or other
governmental approvals applicable to the Property or the Saint Johns DRI and
provide Seller an opportunity to participate in any such consultation on or
before 5:00 P.M. on June 21, 1996 (the "Feasibility Period"), Buyer shall
deliver written notice to Seller of Buyer's election to either (i) terminate
this Agreement for any reason which Buyer, in its sole discretion, deems
appropriate (the "Termination Notice"), or (ii) proceed under the terms of this
Agreement (the "Notice to Proceed"). Upon delivery of the Termination Notice to
Seller, this Agreement will be null and void and the parties hereto will have
no further rights or obligations hereunder except as set forth in this Section
4. Upon such termination, the Deposit shall be returned to Buyer by Escrow
Agent. Upon delivery of the Notice to Proceed to Seller, the contingency
provided for in this paragraph shall be deemed satisfied. If Buyer fails to
deliver either of the Termination Notice or the Notice to Proceed (together
with the amount of any additional Deposit then due) by 5:00 P.M. on the last
day of the Feasibility Period, this Agreement shall be automatically terminated
and the Deposit shall be refunded by Escrow Agent to Buyer.
5. ACKNOWLEDGMENTS OF BUYER. Buyer acknowledges that:
5.1 Condition of Property. Buyer is relying solely upon its
investigations and inspections made during the Feasibility Period in purchasing
the Property and those representations and warranties set forth herein and
agrees that it will accept the Property '!as is," subject to reasonable use,
wear, tear and natural deterioration between the date of this Agreement and the
Closing Date without any reduction in the Purchase Price for any change in such
position by reason thereof.
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5.2 Development Criteria. Buyer has an obligation to construct
and develop the Project in compliance with the Development Criteria and such
obligation constitutes a material inducement to Seller to enter into this
transaction with Buyer. The Development Criteria shall constitute covenants
running with title to the Property and shall be binding upon the successors and
assigns of the parties to this Agreement.
5.3 County Approvals. Buyer shall, at its own cost and expense,
be responsible for submission of all materials and applications pertaining to
construction of the Project to St. Johns County and any other governmental
authorities, including application for final development plan approval and
building permits and payment of all fees and charges imposed by any such
authorities in connection with such permits and approvals including, but not
limited to, impact fees.
5.4 Exculpation. Seller's review and approval of any plans and
specifications does not constitute Seller's representation that the same are in
compliance with any applicable building or zoning codes, nor do such approvals
constitute Seller's approval of Buyer's construction standards or technique.
The purpose of Seller's approval is to ensure that such improvements are of an
appearance and quality compatible with the development plan for the Saint Johns
DRI and are developed in compliance with the terms of this Agreement. In
connection with all reviews, acceptances, inspections, or approvals by Seller
contemplated under this Section, Seller shall not be liable to Buyer or to any
other person on account of any claim, liability, damage or expense suffered or
incurred by or threatened against Buyer or such other person and arising out
of, or in any way related to, the subject matter of any such reviews,
acceptances, inspections or approvals, whether given, granted or withheld by
Seller.
5.5 PUD/DRI. The Property is subject to the Saint Johns DRI and
PUD and other state and federal land use regulations generally applicable to
the development of real estate.
5.6 Utilities. All utility connection fees, tap-in fees and other
charges for utility service to the Property, the cost of construction of all
on-site and off-site utility lines and any improvements necessary to connect
into existing lines within the Interchange Southeast Parcel and other
contributions in aid of construction as may be required by any utility company
to service the Property shall be installed by Buyer or shall be the financial
responsibility of Buyer at its sole cost and expense, except as shall
constitute part of the Infrastructure Improvements as defined in Section 9.3.
to be constructed by Seller.
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6. OBLIGATIONS OF BUYER AND SELLER PRIOR TO CLOSING.
6.1 Preliminary Plans. On or before thirty (30) days prior to
Closing, Buyer shall cause to be prepared and delivered to Seller, at Buyer's
expense, for Seller's review and approval, the preliminary plans and
specifications for the Project (the "Preliminary Plans"). The Preliminary Plans
shall comply with the Development Criteria and the Site Plan and shall include:
6.1.1 A detailed site plan depicting the location of all
improvements to be constructed upon the Property including, but not limited to
the location of all buildings, roads, drives, lakes, canals, drainage
structures, parking areas, traffic circulation within the Project and the point
of connection to the arterial road system; and
6.1.2 A preliminary landscaping plan.
6.1.3 Preliminary elevations showing building style,
roof pitch and including material samples and colors.
6.2 Seller's Approvals. Seller shall promptly review all plans,
documents and other items required to be delivered to Seller pursuant to this
Agreement for Seller's approval whether prior to or subsequent to Closing and
shall notify Buyer in writing of Seller's approval or disapproval within
fifteen (15) days from receipt of such items by Seller unless another time
period is specifically provided for herein. To the extent Seller shall
disapprove any items submitted for approval, its reasons for such disapproval
shall be provided in writing coincident with notice.
7. CONDITIONS OF SELLER'S OBLIGATIONS TO CLOSE THIS TRANSACTION. In
addition to the rights of termination of Buyer and Seller set forth in Sections
2.5, 2.7 and 4 above, in the event any of the following conditions shall not be
met at Closing, Seller may, at its option, terminate this Agreement or Seller
may, at its option, waive such condition and proceed to Closing. In the event
this Agreement terminates as a result of failure of conditions set forth in
Sections 7.1, 7.2 or 7.3, and Seller shall be in compliance with the terms and
conditions of this Agreement, the Deposit shall be delivered to Seller.
7.1 Buyer's Representations. Buyer shall certify to Seller at
Closing that all representations and warranties made under this Agreement are
true and correct as of the Closing Date.
7.2 Complete Performance. At Closing, or at such time prior to
Closing as may be specified herein, Buyer shall have performed,, all
obligations of Buyer under this Agreement to be performed prior to Closing.
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7.3 Preliminary Plan Approval. Seller shall have approved the
Preliminary Plans submitted by Buyer in accordance with Section 6.1.
8. CONDITIONS OF BUYER'S OBLIGATIONS TO CLOSE THIS TRANSACTION. In
addition to the rights of termination of Buyer and Seller set forth in Sections
2.5, 2.7 and 4 above, in the event any of the following conditions shall not be
met at Closing, Buyer may, at its option, terminate this Agreement and the
Deposit shall be refunded to Buyer, or as to the conditions set forth in
Sections 3, 8.1, 8.2, 8.3, 8.4 and 8.5, Buyer may (i) waive such conditions and
proceed to Closing, without diminution in the Purchase Price, or (ii) extend
the time frame for such conditions to be satisfied.
8.1 Seller's Representations. Seller shall certify to Buyer at
Closing that all representations and warranties made under this Agreement are
true and correct as of the Closing.
8.2 Complete Performance. Seller shall have performed all
obligations of Seller provided for herein to be performed prior to Closing.
8.3 World Golf Village Golf Course Conveyance Agreement. Seller
shall have closed on the conveyance of the World Golf Village Golf Course under
the terms of the World Golf Village Golf Course Conveyance Agreement which
provides for (i) completion of construction of the World Golf Village Golf
Course not later than February 1, 1998, and (ii) delivery of a Letter of Credit
in the amount of Four Million Dollars ($4,000,000.00) to secure completion
of construction of the World Golf Village Golf Course (the "Letter of Credit").
8.4 Permitted Exceptions. Buyer acknowledges that certain of the
permitted exceptions are currently under negotiation with other affected
parties. To the extent that the terms of the permitted exceptions shall be
modified at any time prior to closing, the Seller shall provide Buyer with
written notice of such modifications as soon as reasonably practicable. Buyer
shall have fifteen (15) days from the date of such notice to review such
modifications; and to the extent any such modifications shall materially and
adversely affect (in the exercise of Buyer's reasonable discretion) Buyer's
development of the project, Buyer shall have the right to terminate this
Agreement upon written notice to Seller prior to the expiration of such fifteen
(15) day period.
8.5 Engineer's Certificate. Seller shall have delivered to Buyer
a certificate in the form attached hereto certifying an estimated date of
completion of the Infrastructure Improvements, which date shall be not more
than two hundred and seventy (270) days from the Closing Date.
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9. CONSTRUCTION.
9.1 Final Plan and Specification Approval. Not later than fifteen
(15) days prior to the commencement of any construction upon the Property,
Buyer shall cause to be prepared and delivered to Seller a copy of all working
drawings, plans and specifications and material samples for the construction of
the Project, and all parking, landscaping, lighting, signage, utility lines and
related amenity improvements and equipment to be located upon the Property as
part of the Project. Such plans and specifications and material samples
submitted by Buyer shall be in strict compliance with the Final Development
Plan, as defined in Section 9.9 hereof, for the Property approved by Seller,
the Preliminary Plans approved by Seller, the Development Criteria and the Site
Plan. Approval by Seller shall not be arbitrarily withheld but disapproval may
be based upon purely aesthetic grounds determined in the reasonable discretion
of Seller. The working drawings, plans and specifications, materials and signs
described herein and approved by Seller are referred to as the "Plans and
Specifications." Upon Seller's approval of the Plans and Specifications, Buyer
shall reassign to Seller the right to develop that number of units equal to the
difference between the Project description and the units included in the Plans
and Specifications, in the form and content of the Assignment as described in
Section 10.3 hereof.
9.2 Buyer Utility Installation and Other On-and Off-Site
Improvements. Buyer shall, at Buyer's expense, construe underground electric
tie-in and local line from the Property; (ii) underground telephone tie-in and
local line from the Property; (iii) curb-cut and access from the Property onto
the Access Road; and (iv) any other utilities to be installed to service the
improvements or contributions in aid of construction required by any utility
company to be constructed by Buyer as a condition to such service, all of which
shall be constructed at the connection points within the development as
depicted on the approved Preliminary Plan, except as may be constructed by
Seller as part of the Infrastructure Improvements.
9.3 Offsite Infrastructure. Seller shall be responsible for (i)
construction of the Access Road into the Interchange Southeast Parcel providing
pedestrian and vehicular ingress and egress to the point as shown on the Site
Plan ("Road Connection Point") and (ii) construction of the master drainage
system located outside the boundaries of the Property in accordance with the
Surface Water Permits (collectively the "Infrastructure Improvements"). Seller
may determine the date of commencement of construction of the Infrastructure
Improvements, providing that the timing of such commencement shall be
coordinated with Buyer so that the Infrastructure Improvements shall be
completed not later than two hundred and seventy (270) days after the Closing
Date, subject only to Force Majeure. Buyer acknowledges that the electric,
telephone and water and sewer lines necessary to service the Property are
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installed by independent utility companies. Seller is not responsible for the
installation of any utility improvements constructed by such utility companies
or for the availability of service from utility companies to the Property.
9.4 Mechanic's Liens. Buyer and Seller shall comply in all
respects with the Florida Mechanics Lien Law to ensure that no mechanics lien
is imposed upon property of any other party during the course of construction.
Any mechanics lien affecting property owned by another shall immediately be
bonded off by the responsible party.
9.5 Insurance. Buyer, from and after having commenced construction
activities, shall be responsible to maintain, during the progress of any work
on the Property, insurance written by companies of recognized standing
qualified to do business in Florida, as follows:
9.5.1 General comprehensive public liability insurance
for bodily injury, death or property damage, with minimum limits of Three
Million Dollars ($3,000,000.00) for bodily injury or death for any one
occurrence or accident, and One Million Dollars ($1,000,000.00) for property
damage for any one occurrence or accident;
9.5.2 Workers Compensation in complete compliance with
all federal and state laws;
9.5.3 Comprehensive automobile liability (owned, non-
owned, hired), which coverage shall be not less that Five Hundred Thousand
Dollars ($500,000.00);
9.5.4 Builders, risk insurance insuring against all loss
or damage to the work by reason of any hazard; and
9.5.5 Certificates of such insurance coverage shall be
furnished to Seller before commencement of any construction activity. These
certificates shall provide that the insurer shall give thirty (30) days written
notice to Seller prior to change or cancellation of any policy. All policies of
insurance shall contain a waiver of subrogation of any rights against Seller,
its employees, agents, servants and representatives, as related to any or all
losses, expenses, demands, claims or suits caused or occasioned by, attributed
to, arising out of or incident to any negligence or misfeasance on the part of
Seller, its employees, agents, servants or representatives. Seller shall be
named as an, additional insured under each policy carried pursuant to this
Section 9.5 with coverage extended for all risks protected against by such
policy. Each such policy carried shall be primary, whether or not the other
party has other collectable insurance. Certificates of such insurance shall be
delivered to Seller prior to commencement of any construction.
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9.6 Indemnity. In consideration of One Hundred Dollars ($100.00)
paid by Seller to Buyer, receipt and sufficiency of which is hereby
acknowledged, Buyer agrees to hold harmless and indemnify Seller, its agents
and employees, against all damages, claims, liabilities, losses or related
expenses, including reasonable attorneys' fees, that may arise from:
9.6.1 Any personal injury or property damage not covered
by the insurance described in Section 9.5 above in connection with construction
activities upon the Property, except resulting from the actions of Seller or
agents of Seller; and
9.6.2 Any mechanics or materialmen liens filed against
the property of another in connection with construction activities, including
liens for materials delivered to the construction site.
9.7 Permit Compliance. The parties acknowledge that the
improvements to be constructed upon the Property are subject to certain
conditions and requirements contained in the Saint Johns DRI, PUD and Surface
Water Permits, as the same may be modified from time to time. Buyer and Seller
shall comply with all applicable provisions of the Saint Johns DRI, PUD and
Surface Water Permits, and shall hold harmless and indemnify the other from any
violations thereof by the indemnifying party.
9.8 Coordination. The parties acknowledge that construction
efforts will be undertaken simultaneously by several parties upon the Property,
the World Golf Village and other portions of the Saint Johns DRI. Buyer agrees
that it will use all reasonable efforts to coordinate construction activity so
as to minimize interference with the work of other parties during the course of
construction. Seller and Buyer agree to consult on a regular basis as to the
timing of their respective construction activities and as related to the World
Golf Village so as to allow for maximum coordination and efficiency in the
progress of each of their work. All contractors providing construction services
to the Property shall be required to comply with the Construction Rules and
Regulations attached as Exhibit I.
any modifications thereto. Provided that such Final Development Plan shall
comply with all terms and provisions of this Agreement, Seller's approval shall
not be unreasonably withheld.
9.9 Final Development Plan. Prior to submission of any Final
Development Plan for the Property as defined in the St. Johns County Zoning
Code to St. Johns County for approval, Buyer shall first obtain Seller's
approval of such Final Development Plan and any modifications thereto.
Provided that such Final Development Plan shall comply with all terms and
provisions of this Agreement, Seller's approval shall not be unreasonably
withheld.
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9.10 Compliance with Drainage Plan. Upon completion of the
improvements constricted upon the Property, Buyer shall cause all drainage
areas within the Property to be brought to the elevation shown for drainage
improvements as part of the Surface Water Permits. Buyer shall provide to
Seller, upon completion of
9.11 Plat of Access Road. Not later than ninety (90) days after the
Closing Date, subject to Force Majeure, Seller shall, at its expense, obtain an
approved preliminary plat of the Access Road and shall post such performance
security with the County with respect to such plat as may be required by the
County as a condition to issuance of building permits for construction of the
Project.
9.12 Buyer's Indemnification. Buyer covenants and agrees to
defend, indemnify and save harmless seller from and against (i) any and all
liability, claims, damages, injury, actions or causes of action at law, in
equity or administrative proceedings whatsoever resulting from the operation,
conduct and use of the Property, including any such claims, damage, injury or
action at law or equity or administrative proceeding resulting from the
ownership, use, operation or existence of the laundry facilities on the
Property and (ii) the impairment or diminution in value or other interference
caused by pollution arising out of or in the course of Buyer's business
including, but not limited to, cost and expense of operations designed to
remove, neutralize or clean up any substance which is released or which escapes
and which causes environmental impairment, or could cause an environmental
impairment if not removed, neutralized or cleaned up, to the extent that such
cost and expense has been incurred by Seller or for which Seller may become
liable, including cost and expenses of defending any suit against Buyer,
including the appeal therefrom, as well as Seller's reasonable attorneys, fees
connected therewith.
10. EASEMENTS AND RESTRICTIONS AFFECTING SELLER'S ADJACENT PROPERTY AND
THE PROPERTY.
10.1 Access to Property. Seller shall grant to Buyer and its
tenants, for the benefit of the Property, a permanent, nonexclusive easement
for ingress and egress over and upon a portion of the Access Road for the
benefit of Buyer, its business invitees and suppliers. The form and content of
the easement to be granted to Buyer is attached hereto as Exhibit H.
10.2 Continuing Architectural Approvals. Seller and the
Association(s) shall have a continuing right to approve the construction of any
improvements upon the Property as reserved to Seller under the Special Warranty
Deed and as provided for in the Association Covenants described in Section 10.6
below.
10.3 Use Restrictions and DRI Allocation of Development Rights.
Buyer shall continuously use the Property solely for the development of (i) a
15,000 square foot laundry service establishment catering
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to commerce and industry, but specifically excluding retail sales activities,
and (ii) a storage yard for mobile modular office containers. At Closing,
Seller shall assign to Buyer development rights in the industrial category of
development under the Saint Johns DRI.
10.4 Easements Reserved by Seller. Seller shall reserve certain
easements over and upon the Property for the benefit of the Interchange
Southeast Parcel and other lands within the Saints Johns DRI as follows:
10.4.1 Non-exclusive perpetual easements for drainage
which shall also provide for Buyer's right to drain the Property in and through
the drainage system constructed by Seller in accordance with the Surface Water
Permits, as provided for in the Special Warranty Deed.
10.4.2 Non-exclusive perpetual easements for the benefit
of Seller and/or utility companies designated by Seller to service the Property
and for the installation of sewer, water, telephone, electricity and CATV
service, all as provided for in the Special Warranty Deed.
10.5 Additional Covenants and Restrictions. The Property shall be
conveyed to Buyer subject to certain additional covenants and restrictions
regarding use and operation of the Project, as more specifically set forth in
the Exhibits to this Agreement. The rights reserved to Seller and the
obligations of Buyer under the terms of this Agreement shall be evidenced in
the Special Warranty Deed and Memorandum of Agreement to be executed at
Closing.
10.6 Association Covenants. Prior to Closing, the Property shall
be subjected to Declaration of Covenants for a property owners, association
("Association") within the Saint Johns DRI (the "Association Covenants")
attached hereto as Exhibit K. The Association Covenants shall provide for
normal and customary covenants and assessments for commercial property owners'
association including architectural review and assessments for maintenance of
drainage and other common area improvements and-common services. Seller shall
have the right, in its sole discretion, to modify the Association Covenants;
provided, however, Seller shall not be permitted to make any modifications that
are material and adverse to Buyer without Buyer's prior written consent. Prior
to recording any covenants and restrictions upon the Property, Buyer shall
deliver to Seller a copy of the proposed covenants, articles of incorporation
and bylaws of the governing association for Seller's approval for consistency
with the Association Covenants, Saint Johns DRI, PUD, surface water permits and
the Development Criteria.
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11. REMEDIES FOR DEFAULT.
11.1 Remedies of Seller. In the event that Seller performs all
obligations provided for in this Agreement and (i) Buyer fails to close this
transaction in accordance with the terms hereof or (ii) in the event Buyer
shall default in any obligations of Buyer under the terms of this Agreement,
this Agreement may be terminated by Seller and Seller shall be entitled to
retain the Deposit as agreed upon and liquidated damages for Buyer's default,
recognizing that actual damages are incapable of ascertainment. Buyer and
Seller acknowledge that this constitutes a reasonable payment to Seller as a
result of Buyer's default and does not constitute a penalty.
11.2 Remedies of Buyer. In the event that Buyer performs all
obligations provided for herein and Seller fails to close this transaction as
contemplated under the terms of this Agreement, then in such event Buyer shall
have the remedy of specific performance or shall be entitled to terminate this
Agreement and receive a refund of the Deposit and pursue a cause of action for
actual damages, but specifically excluding any right or claim to consequential
damages, loss of profits or loss of benefit of bargain damages.
11.3 Remedies Subsequent to Closing. The parties shall each have
all remedies provided at law and in equity as to defaults in each of their
obligations to be performed subsequent to Closing.
12. MISCELLANEOUS.
12.1 Notices. Any notice, demand, consent, authorization, request,
approval or other communication (collectively, "Notice") that any party is
required, or may desire, to give to or make upon the other party pursuant to
this Agreement shall be effective and valid only if in writing, signed by the
parties giving such Notice, and delivered personally to the other parties or
sent by express 24-hour guaranteed courier or delivery service, by facsimile
transmission or by registered or certified mail of the United States Postal
Service, postage prepaid and return receipt requested, addressed to the other
parties as follows (or to such other place as any party may by Notice to the
others specify):
TO SELLER:
SJH Partnership, Ltd.
c/o St. Johns Harbour, Inc.
3797 New Getwell Road
Memphis, TN 38118
Attention: Louis Baioni
cc: William H. Stubblefield, Esquire
Telephone: (901) 369-1500
Facsimile: (901) 369-1629
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WITH COPY TO:
M. Lynn Pappas, Esquire
Pappas Metcalf & Jenks, P.A.
200 West Forsyth Street, Suite 1400
Jacksonville, FL 32202-4327
Telephone: (904) 353-1980
Facsimile: (904) 353-5217
WITH COPY TO:
Davidson Development, Inc.
2395 International Golf Parkway
St. Augustine, FL 32095-8427
Attention: James E. Davidson, Jr.
Telephone: (904) 826-4443
Facsimile: (904) 826-3226
TO BUYER:
Divot Development Corporation
442 West Kennedy Boulevard, Suite 200
Tampa, FL 33608
Attention: Joseph R. Cellura
Telephone: (813) 251-1441
Facsimile: (813) 251-8665
WITH COPY:
Fred S. Ridley, Esquire
Annis, Mitchell, Cockey, Edwards, Roehn
One Tampa City Center, Suite 2100
P.O. Box 3433
Tampa, FL 33601
Telephone: (813) 229-3321
Facsimile: (813) 223-9067
Notices shall be deemed given when received, except that if delivery
is not accepted, Notice shall be deemed given on the date of such
non-acceptance.
12.2 Brokerage. Seller and Buyer represent to each other that
neither has dealt with any broker, middle man or agent in connection with this
transaction other than Davidson Realty, Inc. and SJH Realty, Inc. Seller and
Buyer agree to indemnify and hold one another harmless from and against all
liabilities and expenses in connection with any claims for commission,
compensation or otherwise for the bringing about of this transaction or the
consummation thereof, which can be-made against the other by any person, firm
or corporation as the result of any acts of the other party.
12.3 Condemnation. If at any time prior to Closing, any proceedings
shall be commenced or consummated for the taking of the Property or material
part of the Property for public or quasi-public
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use pursuant to the power of eminent domain, either party may, by written
Notice to the other within thirty (30) days of notice of such taking, elect to
terminate this Agreement, the Deposit shall be returned to Buyer and all
parties shall be relieved of all further obligations hereunder. Unless this
Agreement is terminated as provided above, it shall remain in full force and
effect and Seller shall assign and transfer to Buyer any interest in any awards
made with respect to the Property. If at any time prior to Closing, any
proceedings shall be commenced or consummated for the taking of an immaterial
portion of the Property for public or quasi-public use pursuant to the power of
eminent domain, neither party shall have the right to cancel this Agreement and
it shall remain in full force and effect. For purposes of this Section, a
material part of the Property shall be an amount of land area equal to 500
square feet.
12.4 Attorney's Fees. In the event of litigation arising pursuant
to the provisions of this Agreement, the prevailing party shall be entitled to
collect reasonable attorneys' fees from the non-prevailing party and costs and
expenses of such litigation, whether at the trial level or on appeal.
12.5 Effect of this Agreement. This Agreement constitutes the
complete agreement between the parties with respect to its subject matter; and
all antecedent or contemporaneous negotiations, undertakings, representations,
warranties, inducements and obligations are merged into this Agreement and
superseded by its delivery, except as may be evidenced by separate agreement
between the parties. Any express indemnities contained in this Agreement
survive the Closing, as do the parties, covenants of further assurances and
obligations of the parties to be performed subsequent to the Closing Date. No
provision of this Agreement may be waived unless such waiver is set forth in
writing and signed by the party to be charged; and this Agreement otherwise may
be modified or amended only by a written instrument signed by Buyer and Seller.
12.6 Assignment. Seller acknowledges and agrees that Buyer's
financial condition and business reputation constitute a significant inducement
for Seller's willingness to enter into this Agreement. As a result, Buyer
agrees that it will not convey, assign, encumber or otherwise transfer any
interest in its rights contained in this Agreement prior to Closing to any
party without Seller's prior written consent which may be granted or withheld
at Seller's sole discretion.
12.7 Interpretation. This Agreement will be interpreted,
construed, applied and enforced according to the laws of the State of Florida.
If all or any portion of the provisions of this Agreement shall be declared
invalid by laws applicable thereto, such invalid portion shall be ineffective
and unenforceable without invalidating the remaining provisions of this
Agreement. All captions and headings appearing are for convenience only and
shall not be considered in construing or giving effect to the provisions
22
<PAGE> 24
hereof. Time is of the essence with respect to all provisions of this
Agreement. If any date for performance under this Agreement shall fall on a
weekend or national holiday, the date for performance shall be the next
business day.
12.8 Risk of Loss. All risk of loss to the Property prior to
Closing shall be borne by Seller.
12.9 No Joint or Partnership. This Agreement is not intended nor
shall it be construed to create a joint venture or partnership between the
parties and neither party shall constitute the agent of the other for any
purpose.
12.10 No Third Party Beneficiaries. This contract constitutes an
agreement between Seller and Buyer as to all provisions contained herein.
Notwithstanding anything contained herein to the contrary, this Agreement is
not intended nor shall it be construed to create any rights or remedies as to
third parties, including but not limited to, WGV. No party shall constitute a
third party beneficiary to the terms of this Agreement.
12.11 Acceptance. In the event this Agreement is not executed by
Seller or Buyer within five (5) days of the date first executed, this Agreement
shall thereafter be null and void and neither party shall have any liability or
obligation hereunder.
12.12 Press Releases. Buyer shall not make any press releases or
other media dissemination of information relating to the transactions
contemplated herein without the prior approval of Seller.
12.13 Drafting. This Agreement and all Exhibits hereto have been
negotiated at arm, s length by Seller and Buyer, and the parties mutually agree
that for the purpose of creating the terms" of this Agreement, or said
Exhibits, neither party shall be deemed responsible for the drafting thereof.
12.14 Recitals and Exhibits. All recitals and all Exhibits referred to
in this Agreement are incorporated herein by reference and shall be deemed part
of this Agreement for all purposes as if set forth at length herein.
12.15 Counterparts. This Agreement may be executed by the parties
hereto individually or in combination in one or more counterparts, each of
which shall be an original, and all of which shall constitute one and the same
instrument.
12.16 Confidentiality. Except as required in the normal conduct of
the business of the parties to this Agreement or by law, Buyer, without the
prior written approval of Seller, shall not, at any time during the term of
this Agreement or thereafter, divulge to any person, other than its attorneys,
accountants, employees,
23
<PAGE> 25
professional advisors and WGV, any information concerning the terms and
provisions of this Agreement, except as may be evidenced in the public records
of St. Johns County, Florida.
12.17 Estoppel Certificates. Upon the written request of any parties
hereto, the other party shall execute and deliver a certificate certifying that
there are no known defaults on the part of any party to this Agreement or any
Exhibits hereto, or if there are such defaults specifying the particulars of
such default and certifying that there are no setoffs or defenses to the
enforcement of the terms of this Agreement, or if there are, specifying the
particulars of such setoffs or defenses which shall be binding upon the parties
executing such estoppel. Upon request of any institutional lender, Seller
agrees to provide to such lender a copy of any written Notice of default
provided to Buyer under the terms of this Agreement at the address provided for
in such request.
IN WITNESS WHEREOF, the undersigned have set their hands and seals as
of the date first above written.
SELLER:
SJH PARTNERSHIP, LTD., a Florida
limited partnership
BY: SJ MEMPHIS, LTD., a Florida
limited partnership, its general partner
By: ST. JOHNS HARBOUR, a Florida
corporation, its general
partner
By: s/s Louis Baioni
-------------------------
Louis Baioni
Its President
[CORPORATE SEAL]
BUYER:
DIVOT DEVELOPMENT CORPORATION, a
Florida corporation
By: s/s Joseph R. Cellura
----------------------------------
(Print Name) JOSEPH R. CELLURA
Its: Director CEO
(CORPORATE SEAL)
24
<PAGE> 26
ESCROW AGENT:
PAPPAS METCALF & JENKS, P.A.
By: /s/ M. Lynn Pappas
-----------------------------
(Print Name): M. Lynn Pappas
Its: Vice President
25
<PAGE> 27
List of Exhibits
A. Property
B. Site Plan
C. Real Estate Map
D. Development Criteria
E. License Agreement
F. Permitted Exceptions
G. Special Warranty Deed
H. Access Easement
I. Construction Rules and Regulations
J. Memorandum of Agreement
K. Southeast Association Covenants
L. Engineer's Certificate
26
<PAGE> 28
EXHIBIT A
WORLD GOLF
VILLAGE
27
<PAGE> 1
Exhibit 10.52
AMENDMENT TO AGREEMENT FOR SALE AND PURCHASE
THIS AMENDMENT TO AGREEMENT FOR SALE AND PURCHASE is made as of this
___ day of December, 1996 by and between SJH PARTNERSHIP, LTD., a Florida
limited partnership ("Seller") and DIVOT PROPERTIES WGV, INC., a Florida
corporation ("Buyer").
WHEREAS, Seller and Divot Development Corporation entered into that
certain Agreement for Sale and Purchase (Southeast Parcel 2) dated June 25,
1996, as assigned to DIVOT PROPERTIES WGV, INC. by Assignment and Assumption of
Purchase Agreement dated December_______, 1996, (the "Agreement") under which
terms Seller has agreed to sell and convey to Buyer and Buyer has agreed to
purchase the Property as such term is defined in the Agreement. The parties
desire to enter into the certain modifications to the terms and provisions of
the Agreement.
NOW THEREFORE, in consideration of Ten and No/100 Dollars ($10.00) and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:
1. Section 10.3 is hereby amended to read as follows:
Buyer shall continuously use the Property solely for the
development of (i) a 30,000 square foot laundry service or
establishment catering to commerce and industry, but
specifically excluding retail sales activities, and (ii) a
storage yard for mobile modular office containers. At Closing,
Seller shall assign to Buyer development rights to the
industrial category of development under the Saint Johns DRI.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
SELLER
SJH PARTNERSHIP, LTD., a Florida limited
partnership
By: SJ MEMPHIS, LTD., a Florida limited
partnership, its general partner
By: ST. JOHNS BARBOUR, INC., a Florida
corporation, its general partner
By: /s/ James E. Davidson, Jr.
--------------------------------
Vice President
Development Administration
[CORPORATE SEAL]
<PAGE> 2
BUYER
DIVOT PROPERTIES WGV, INC., a Florida
corporation
By: /s/ Joseph R. Cellura
-----------------------------------
Joseph R. Cellura
Its Vice President
[CORPORATE SEAL]
2
<PAGE> 1
Exhibit 10.53
ASSIGNMENT AND ASSUMPTION OF PURCHASE AGREEMENT
[SOUTHEAST PARCEL 2]
This Assignment and Assumption of Purchase Agreement (the
"Assignment") is made this ______ day of December, 1996, by DIVOT DEVELOPMENT
CORPORATION, a Florida corporation ("Assignor"), to DIVOT PROPERTIES WGV, INC.,
a Florida corporation ("Assignee").
R E C I T A L S:
A. Assignor, as Buyer, and SJH Partnership, Ltd., a Florida limited
partnership, as Seller, entered into that certain Agreement for Sale and
Purchase dated June 25, 1996, for the real property located in St. Johns
County, Florida, more particularly described on Exhibit "A" attached hereto and
made a part hereof, (the "Purchase Agreement").
B. Assignor desires to assign its rights and obligations under the
Purchase Agreement to Assignee, and Assignee desires to accept such rights and
assume such obligations, effective as of this date.
NOW THEREFORE, for and in consideration of the sum of Ten and No/100
Dollars ($10.00) and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by Assignor, Assignor hereby
assigns, conveys and sets over unto Assignee all of Assignor's right, title and
interest as Buyer under, in and to the Purchase Agreement, and Assignee in
consideration of such assignment hereby assumes and agrees to perform all of
Assignor's obligations under the Purchase Agreement so as to in all respects
constitute the Buyer thereunder.
IN WITNESS WHEREOF, Assignor and Assignee have caused this Assignment
to be executed in their respective names as of the date first above written.
Signed, sealed and ASSIGNOR:
delivered in the
presence of: DIVOT DEVELOPMENT CORPORATION,
a Florida corporation
By: /s/ Joseph R. Cellura
- ------------------------------ --------------------------------------
JOSEPH R. CELLURA
- ------------------------------ Its: Vice President
(Print Name)
- ------------------------------
[CORPORATE SEAL]
- ------------------------------
(Print Name)
<PAGE> 2
ASSIGNEE:
DIVOT PROPERTIES WGV, INC., a Florida
corporation
By: /s/ Joseph R. Cellura
- ------------------------------ --------------------------------------
JOSEPH R. CELLURA
- ------------------------------ Its: Vice President
(Print Name)
- ------------------------------
[CORPORATE SEAL]
- ------------------------------
(Print Name)
CONSENT BY SELLER
SJH Partnership, Ltd., as Seller under the referenced Purchase
Agreement, hereby joins in the execution of this assignment solely for the
purpose of evidencing its consent to the assignment by assignor to assignee of
the Purchase Agreement and the assumption by assignee of assignors obligations
thereunder.
Signed, sealed and SJH PARTNERSHIP, LTD., a Florida
delivered in the limited partnership
presence of
By: SJ MEMPHIS, LTD., a Florida limited
partnership, its general partner
By: ST. JOHNS BARBOUR, INC., a
Florida corporation, its
general partner
By: /s/ James E. Davidson, Jr.
-------------------------------
Vice President
Development Administration
[CORPORATE SEAL]
2
<PAGE> 1
EXHIBIT 10.54
January 31, 1997
Flurina Development S.A.
SOREQ, Inc.
Attn: Mr. Sheldon Salcman
North York, Ontario
Canada M3K 1Z3
Re: Letter Agreement Concerning Amendments to the of Flurina Debenture
Dear Flurina:
This letter serves as an agreement regarding amendments to the Convertible
Debenture issued by Brassie to Flurina ("Debenture"). If the terms and
conditions as set forth in this letter Agreement are acceptable, please confirm
such acceptance by dating and executing the enclosed copy of this letter as
indicated below.
Current Conversion
------------------
Brassie will immediately convert the Conversion Request dated January 3, 1997
for the amount of $100,000 and the Conversion Request dated January 21, 1997
for the amount of $50,000.
Amendments to Debenture
-----------------------
Except as described in this Letter Agreement, the terms and provisions of the
Flurina Subscription Agreement and the Debenture, as amended by the September
6, 1996 Letter Agreement between Brassie and Flurina, are ratified and
confirmed, and shall continue in full force and effect including, without
limitation, all covenants and obligations of Brassie and Flurina thereunder.
It is the intent of Brassie and Flurina that the debenture terms contained in
this Letter Agreement shall be read together with the Debenture. In the event
a debenture term contained in this Letter Agreement conflicts with a term of
the Debenture, the term contained in this Letter Agreement shall prevail.
Capitalized terms contained herein, and not defined herein, shall have the same
meaning as such terms in the Debenture.
Brassie and Flurina hereby amend the terms of the Debenture as follows:
1. Conversion Price. The discount used to calculate the Conversion Price
-----------------
will increase, from its current 25%, 1% for each $0.10 increase in the
five-day average Market Price of the stock over $1.00 up to a maximum
discount of 35%.
2. Conversion Limitation. During the 180 days immediately following the
----------------------
date hereof Flurina's right to convert the remaining balance of the
Debenture shall be limited. During
<PAGE> 2
Flurina
April 11, 1997
Page 2
2. Conversion Limitation. (continued)
----------------------
each 30-day period of the 180 days, the principal amount that may be
converted will vary depending on the Conversion Price. The following
is a summary of the conversion limits:
Conversion Principal amount that may be
Price converted during each 30-day period
----- ----------------------------------------
$0.0 - $1.00 $ 75,000
$1.01 - $1.25 $100,000
$1.26 - $1.50 $200,000
$1.51 or greater Unlimited
Notwithstanding the above limits, after 90 days Flurina may convert an
amount that, together with the amounts converted during Day 1 through
Day 90, equals $600,000.
3. Automatic Conversion. In addition to Brassie's automatic conversion
---------------------
rights contained in the Debenture and Letter Agreement dated September
5, 1996, for a period of 30 days from the date hereof, Brassie shall
have the right to require Flurina to convert a portion of the
Debenture into 500,000 shares @ Ninety percent (90%) of the Market
Price ("Additional Automatic Conversion Price"). However, in no event
shall Flurina be required by this Term #4 to convert a portion of the
Debenture greater than an amount equal to the lesser of (i) $200,000
or (ii) that portion of the Debenture required to yield 500,000 shares
@ the Additional Automatic Conversion Price. Brassie shall purchase
or cause to be purchased from Flurina, at the Market Price and
consistent with the terms of paragraph 5 of the Letter Agreement dated
September 6, 1996 between Brassie and Flurina, any shares issued to
Flurina as a result of Brassie exercising its automatic conversion
rights set forth in this Term #4.
4. Conversion Price Ceiling. Notwithstanding any provision to the
-------------------------
contrary contained herein or in the Flurina Debenture, the Conversion
Price shall not exceed $1.50.
<PAGE> 3
Flurina
April 11, 1997
Page 3
Treatment of Other Debentures
-----------------------------
Brassie hereby confirms that the other debentures issued by Brassie as part of
the same $5,500,000 debenture issuance by which the Debenture was issued to
Flurina are currently in the process of being redeemed.
Facsimile Signatures and Counterparts
-------------------------------------
Facsimile signatures may be sufficient proof of the parties' execution and
consent hereto and this instrument may be executed in counterparts, which taken
together, shall be deemed to be one and the same instrument.
Sincerely,
BRASSIE GOLF CORPORATION
/s/ Lance McNeill
- ------------------------
Lance McNeill
Vice President
ACKNOWLEDGED AND AGREED TO:
FLURINA DEVELOPMENT S.A
By: /s/ Sheldon Salcman
-----------------------------------
Name: Sheldon Salcman
---------------------------------
Title: Authorized Signatory
--------------------------------
Date: January 31, 1997
---------------------------------
<PAGE> 1
EXHIBIT 10.55
February 5, 1997
Pyramid Investments, LLC
Butterfield House
Bank of Butterfield
Fort Street
Grand Cayman, Cayman Islands
Re: Letter Agreement Amending Offshore Debenture Securities Subscription
Agreements and Convertible Debentures Issued Thereunder
Dear Pyramid Investments, LLC:
Reference is hereby made to that certain offshore Debenture Securities
Subscription Agreement dated March 18, 1996 (the "Infinity Subscription
Agreement") by and between Brassie Golf Corporation ("Brassie") and Infinity
Investors Ltd. ("Infinity"), pursuant to which Brassie issued to Infinity a
Debenture in the original principal amount of $1,250,000 convertible into shares
of common stock ("Common Stock") of Brassie (the "Pre-Combination Infinity
Debenture"). Reference is also hereby made to that certain offshore Debenture
Securities Subscription Agreement dated March 18, 1996 (the "Conservative Growth
Subscription Agreement") by and between Brassie and Conservative Growth Advisors
Limited ("Conservative Growth"), pursuant to which Brassie issued to
Conservative Growth a Debenture in the original principal amount of $1,250,000
convertible into shares of Common Stock (the "Conservative Growth Debenture").
On June 20, 1996, in full compliance with the terms of the Conservative Growth
Subscription Agreement and Infinity Subscription Agreement, Infinity acquired
the Conservative Growth Debenture and the principal balance and accrued interest
of the Conservative Growth Debenture were combined with the Pre-Combination
Infinity Debenture, (the resulting combined debenture being referred to herein
as the "Infinity Debenture"). Reference is further hereby made to that certain
Letter Agreement dated September 5, 1996 by and between Brassie and Infinity
which, among other things, amended the Infinity Debenture. ("September 5, 1996
Letter Agreement").
Reference is also hereby made to that certain Assignment (the "Assignment")
dated [ ] by and between Infinity and Pyramid Investments LLC ("Pyramid")
whereby, in full compliance with the Infinity Subscription Agreement and the
Infinity Debenture, Infinity assigned to Pyramid all of its rights and interests
in and from the Infinity Subscription Agreement and the Infinity Debenture
(hereinafter such subscription agreement held by Pyramid shall be referred to as
the "Subscription Agreement" and such debenture held by Pyramid shall be
referred to as the "Debenture").
<PAGE> 2
Pyramid Investments, LCC
February 5, 1997
Page 2
Amendments to Debenture
-----------------------
Except as described in this Letter Agreement, the terms and provisions of the
Subscription Agreement and the Debenture, as amended by the September 5, 1996
Letter Agreement, are ratified and confirmed, and shall continue in full force
and effect including, without limitation, all covenants and obligations of
Brassie and Pyramid thereunder. It is the intent of Brassie and Pyramid that the
debenture terms contained in this Letter Agreement shall be read together with
the Debenture. In the event a debenture term contained in this Letter Agreement
conflicts with a term of the Debenture, the term contained in this Letter
Agreement shall prevail. Capitalized terms contained herein, and not defined
herein, shall have the same meaning as such terms in the Debenture.
Brassie and Pyramid hereby amend the terms of the Debenture as follows:
1. Effective Date. The amended terms to the Debenture contained herein
---------------
shall be effective as of the date of this Letter Agreement.
2. Principal Amount. The principal amount of the Debenture shall be
-----------------
$1,269,995. This amount equals the principal balance plus accrued
interest due on the Infinity Debenture on the date of the Assignment.
3. Interest Rate. Interest on the principal amount outstanding shall be
--------------
eight percent (8%) per annum.
4. Market Price. The Market Price shall be the lesser of (A) Two US
-------------
Dollars (USD $2.00) or (B) the average closing bid price, as reported
by NASDAQ, of Brassie Common Stock for the (i) two (2) NASDAQ trading
days immediately preceding the date of the applicable conversion notice
and (ii) the date of the conversion notice or if such date is not a
NASDAQ trading day, the date of the first NASDAQ trading day following
the date of the conversion notice.
5. Conversion Price. The Conversion Price for each share of Common Stock
-----------------
shall equal 85% of the Market Price of the Common Stock.
6. Restricted Conversion Period. After 90 days from the date of the
-----------------------------
Assignment, Pyramid may convert into Brassie Common Stock an amount of
the principal balance of the Debenture
<PAGE> 3
Pyramid Investments, LCC
February 5, 1997
Page 3
6. Restricted Conversion Period. (continued)
-----------------------------
equal to 50% of the principal balance of the Debenture as of the date of
the Assignment minus the amount of principal balance paid off as a result
of Pyramid exercising its Debenture Payoff Option pursuant to term #5
below. After 180 days from the date of the Assignment, Pyramid may
convert the remaining outstanding principal balance of the Debenture into
Brassie Common Stock.
7. Debenture Payoff Option.
------------------------
Between the 16th day and the 60th day following the date of this Letter
Agreement Brassie shall have the option to payoff, and Pyramid shall have
the option to require Brassie to payoff, a portion of the principal
balance not to exceed $500,000 plus accrued interest on said portion.
Between the 61st and 120th day following the date of this Letter
Agreement Brassie shall have the option to redeem payoff, and Pyramid
shall have the option to require Brassie to payoff, a portion of the
principal balance not to exceed $500,000 plus accrued interest on said
portion.
Between the 121st day and the 180th day following the date of this Letter
Agreement Brassie shall have the option to redeem payoff, and Pyramid
shall have the option to require Brassie to payoff a portion of the
principal balance not to exceed $275,000.
The options shall be deemed exercised when the exercising party delivers,
via mail, courier, or facsimile, to the non-exercising party written
notice of the exercising party's intent to exercise such option including
the principal amount to be paid off.
Upon the exercise of an option by either party, Brassie shall have thirty
(30) days in which to deliver the requested funds to Pyramid Investments,
LLC, Butterfield House, Bank of Butterfield, Fort Street, Grand Cayman,
Cayman Islands.
The options are not cumulative and each option shall expire at the
conclusion of its term.
If Pyramid exercises an option to pay off, the Warrants as described
hereinafter and shares of Brassie common stock received as a result of
the Warrants shall be treated as follows: (i) the unexercised portion of
each of the five Warrants shall be reduced at a rate of 0.1575 shares for
each dollar of the Debenture principal amount that is paid off, and (ii)
Pyramid shall return to Brassie, at no cost to Brassie and free of any
encumbrance, at a rate of 0.1575 shares for each dollar of the Debenture
principal amount that is paid off, a portion of any shares received by
Pyramid as a result of exercising any of the Warrants.
<PAGE> 4
Pyramid Investments, LCC
February 5, 1997
Page 4
7. Debenture Payoff Option. (continued)
------------------------
If Brassie exercises an option to pay off, Pyramid may retain all the
warrants attributable prorata to the portion of the Debenture balance
being paid off.
8. Termination of Converted Share Purchase Option. The purchase option, as
-----------------------------------------------
set forth in paragraph 5 of the September 5, 1996 Letter Agreement, which
grants to Brassie from Infinity the right to purchase any New Shares
issued upon conversion of the Debenture is hereby terminated.
Warrants
--------
Upon the execution of the Assignment Brassie hereby agrees to execute and
deliver five (5) separate Warrants granting Pyramid the right to acquire 400,000
shares of Brassie common stock for each Warrant in the forms appended hereto
(with respective exercise prices of $0.75, $1.00, $1.25, $1.50 and $1.75). Such
Warrants shall be delivered via overnight courier to Pyramid.
Content of Infinity Debenture and Letter Agreement
--------------------------------------------------
Brassie hereby warrants that the Infinity Debenture and September 5, 1996 Letter
Agreement both referred to herein are identical in all material ways (excluding
individualized portions such as holder name, address, and principal balance) to
the Debenture ("Lake Debenture") currently issued by Brassie to Lake Management
LLC ("Lake") and the Letter Agreement dated September 6, 1996 between Brassie
and Lake ("Lake Letter Agreement"). If for any reason the Infinity Debenture and
the September 5, 1996 Letter Agreement are not identical in all material ways to
the Lake Debenture and Lake Letter Agreement, Brassie shall execute and deliver
such further documents and do such acts and things as Pyramid may reasonably
request in order to effectuate the warrants and assurances contained in this
paragraph.
Further Assurances
------------------
Brassie and Pyramid hereby each agree that, at any time and from time to time,
it shall execute and deliver such further documents and do such further acts and
things as the requesting party may reasonably request in order to fully effect
the purposes of this Letter Agreement.
(Signatures of next page)
<PAGE> 5
Pyramid Investments, LCC
February 5, 1997
Page 5
Sincerely,
BRASSIE GOLF CORPORATION
By: /s/ Lance McNeill
------------------------------
Name: Lance McNeill
----------------------------
Title: Vice President
---------------------------
ACKNOWLEDGED AND AGREED TO:
PYRAMID INVESTMENTS LLC
/s/ Erwin Di Kau
- -----------------------------------------
By: Erwin Di Kau
--------------------------------------
Name: Field Secretaries (Cayman) Limited
------------------------------------
Title: Secretary
-----------------------------------
Dated:
-----------------------------------
/s/ N. Brooks
- -----------------------------------------
By: Niall Brooks
--------------------------------------
Name: Field Secretaries (Cayman) Limited
------------------------------------
Title: Secretary
-----------------------------------
Dated:
-----------------------------------
<PAGE> 1
EXHIBIT 10.56
INFINITY INVESTORS LIMITED
27 WELLINGTON ROAD
CORK, IRELAND
JANUARY 29, 1997
Brassie Golf Corporation
5806-A Breckenridge Parkway
Tampa, Florida 33610
Fax: 813/621-5769
Attn: Mr. Lance McNeill
Re: Letter Agreement Concerning Redemption of Convertible
Debentures and Issuance of Warrants
Gentlemen:
Reference is hereby made to that certain Offshore Debenture Securities
Subscription Agreement dated March 18, 1996 (the "Infinity Subscription
Agreement") by and between Brassie Golf Corporation ("Brassie") and Infinity
Investors Limited ("Infinity"), pursuant to which Brassie issued to Infinity a
Debenture in the original principal amount of $1,250,000 convertible into shares
of common stock ("Common Stock") of Brassie (the "Infinity Debenture").
Reference is further hereby made to that certain Offshore Debenture Securities
Subscription Agreement dated March 18, 1996 (the "Conservative Growth
Subscription Agreement") by and between Brassie and Conservative Growth Advisors
Limited ("Conservative Growth"), pursuant to which Brassie issued to
Conservative Growth a Debenture in the original principal amount of $1,250,000
convertible into shares of Common Stock (the "Conservative Growth Debenture").
On June 20, 1996, in full compliance with the terms of the Conservative Growth
Subscription Agreement and Infinity Subscription Agreement, Infinity acquired
and is now the holder of the Conservative Growth Debenture (the Infinity
Debenture and Conservative Growth Debenture being collectively referred to
herein as the "Debentures"). The terms of the Infinity Subscription Agreement,
Conservative Growth Subscription Agreement and the Debentures were amended by
letter agreement dated September 5, 1996 between Infinity and Brassie (the
"Amendment Letter").
On December 19, 1996, Infinity delivered a Notice of Conversion
pursuant to the terms of the Debentures for $279,034 aggregate principal amount
of the Debentures (the "Conversion Notice"). Brassie failed to honor the
Conversion Notice, and Brassie and Infinity desire to set forth herein their
agreement in settlement thereof as follows:
1. All agreements herein shall be deemed to have occurred
simultaneously.
2. Brassie will arrange for the purchase by a purchase option assignee
of the shares of Common Stock subject to the Conversion Notice (plus accrued and
unpaid interest) for a price
<PAGE> 2
Brassie Golf Corporation
January 29, 1997
Page 2
of $364,242.59 (the "Conversion Amount"). The Conversion Amount shall be paid by
wire transfer to Infinity's account as set forth in Section 3 below. Infinity
and Brassie agree that as of the date hereof, $1,241,226 in principal of the
Debentures remains due and owing, together with $28,769.24 of accrued and unpaid
interest thereon (collectively, the "Debenture Balance").
3. Brassie hereby agrees that either Brassie or a third party shall
purchase the Debentures in consideration for the payment to Infinity of the
Debenture Balance, such payment to be made as of the date hereof by wire
transfer to the following account:
Citibank, N.A.
ABA 021 000 089
Credit: Bear Sterns
Account No. 09253186
Further Credit: Infinity Investors Limited
Account No. 102-05092
In addition, contemporaneous with the delivery of such sum, Brassie shall pay to
Infinity by wire transfer to the same account the sum of $7,500, representing
reimbursement (the "Expense Reimbursement") to Infinity for reasonable costs and
expenses of counsel associated with the disputes and lawsuit described in the
Amendment Letter. The sum of the Conversion Amount, the Debenture Balance and
the Expense Reimbursement being referred to as the "Payment Amount".
4. Brassie hereby agrees to execute and deliver as of the date hereof
four (4) separate Warrants granting Infinity the right to acquire 250,000 shares
of Common Stock of Brassie for each Warrant in the forms appended hereto (with
respective exercise prices of $0.75, $1.00, $1.25 and $1.50). Such Warrants
shall be delivered via Federal Express courier to Infinity, c/o the following
account:
Trident Trust Company (Cayman) Limited
One Capital Plaza
Grand Cayman
Cayman Island, BWI
Attention: Gwen McLoughlin
5. Brassie currently holds the Debentures for Infinity. Upon delivery
from Infinity of written confirmation that it has received (i) the wire transfer
of the Payment Amount and (ii) the originally executed Warrants (the "Escrow
Termination Instruction Letter"), (i) Infinity shall execute an assignment
without recourse of all its rights and interests in the Debentures
("Assignment") to an assignee to be named by Brassie and deliver the same to
Brassie, and (ii) Brassie shall be entitled to retain the Debentures or transfer
the same pursuant to the Assignment.
<PAGE> 3
Brassie Golf Corporation
January 29, 1997
Page 3
To evidence your agreement with the foregoing, please countersign this
Letter Agreement in the space provided below. This Letter Agreement may be
executed in one or more counterparts and by facsimile signature.
Very truly yours,
INFINITY INVESTORS LIMITED
By: /s/ J. A. Loughran
------------------------------
Title: Director
----------------------------
ACKNOWLEDGED AND AGREED TO:
BRASSIE GOLF CORPORATION
By: /s/ Thomas K. Richardson
---------------------------------
Title: Secretary/Vice President
------------------------------
Dated: Feb 5, 1997
------------------------------
<PAGE> 1
EXHIBIT 10.57
ASSIGNMENT OF DEBENTURE
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of
which are hereby acknowledged, INFINITY INVESTORS LIMITED, a Nevis West Indies
corporation ("Assignor") hereby assigns without recourse to PYRAMID INVESTMENTS
LLC, a liability company duly organized and validly existing under the laws of
Nevis West Indies ("Assignee") that certain Debenture No. 4 dated February 5,
1997 issued by BRASSIE GOLF CORPORATION, a Delaware corporation (the
"Debenture").
Assignor represents and warrants that it has not transferred,
assigned, pledged or hypothecated the Debenture.
The Assignment may be executed in one or more counterparts and by
facsimile signature.
[Signature page follows]
<PAGE> 2
IN WITNESS WHEREOF, Assignor has executed and delivered this
Assignment to Assignee as of this ____ day of February, 1997.
ASSIGNOR
INFINITY INVESTORS LIMITED
By: /s/ J. A. Loughran
-----------------------------------
Name: J. A. Loughran
---------------------------------
Title: Director
--------------------------------
ACKNOWLEDGED AND ACCEPTED
this ____ day of February, 1997
ASSIGNEE
/s/ Erwin Di Kau
- --------------------------------------------------------
By: Erwin Di Kau
-----------------------------------------------------
Name: Field Secretaries (Cayman) Limited as Secretary of
---------------------------------------------------
Title: Pyramid Investments, LLC
--------------------------------------------------
/s/ Niall Brooks
- --------------------------------------------------------
By: Niall Brooks
-----------------------------------------------------
Name: Field Secretaries (Cayman) Limited as Secretary of
---------------------------------------------------
Title: Pyramid Investments, LLC
--------------------------------------------------
<PAGE> 1
EXHIBIT 10.58
THIS WARRANT HAS BEEN OFFERED AND SOLD OUTSIDE OF THE UNITED STATES IN A
TRANSACTION UNDER REGULATION S PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT. THIS WARRANT MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED
IN THE UNITED STATES OR TO U.S. PERSONS (AS SUCH TERM IS DEFINED IN REGULATION
S) UNLESS THE WARRANT IS REGISTERED UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAWS, OR SUCH OFFERS, SALES AND TRANSFERS ARE MADE PURSUANT TO
AVAILABLE EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS.
BRASSIE GOLF CORPORATION
COMMON STOCK PURCHASE WARRANT
<TABLE>
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
No. 1
Number of Common Shares: 250,000 Holder: Infinity Investors
Limited
Purchase Price: $0.75 per share 27 Wellington
Road
Expiration Date: January 24, 2000 Cork, Ireland
For identification only. The governing terms of this Warrant are set forth below.
- ------------------------------------------------------------------------------------------------
</TABLE>
Brassie Golf Corporation, a Delaware corporation (the "Company"), hereby
certifies that, for value received, Infinity Investors Limited, or assigns, is
entitled, subject to the terms set forth below, to purchase from the Company at
any time or from time to time after the date hereof and prior to the third
anniversary hereof (the "Exercise Period"), at the Purchase Price hereinafter
set forth, 250,000 shares of the fully paid and nonassessable Common Stock of
the Company. The number and character of such shares of Common Stock and
the Purchase Price are subject to adjustment as provided herein.
The purchase price per share of Common Stock issuable upon exercise of
this Warrant (the "Purchase Price") shall initially be $0.75; provided, however,
that the Purchase Price shall be adjusted from time to time as provided in
Section 5, below.
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
(a) The term "Company" shall include Brassie Golf
Corporation, and any corporation that shall succeed or assume the
obligations of the Company hereunder.
COMMON STOCK PURCHASE WARRANT - Page 1
(Brassie Golf Corporation - No. 1)
<PAGE> 2
(b) the term "Common Stock" includes (a) the Company's common
stock, par value $.001 per share, (b) any other capital stock of any
class or classes (however designated) of the Company, authorized on or
after the date hereof, the holders of which shall have the right,
without limitation as to amount, either to all or to a share of the
balance of current dividends and liquidating dividends after the
payment of dividends and distributions on any shares entitled to
preference, and the holders of which shall ordinarily, in the absence
of contingencies, be entitled to vote for the election of a majority of
directors of the Company (even though the right so to vote has been
suspended by the happening of such a contingency) and (c) any other
securities into which or for which any of the securities described in
(a) or (b) may be converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets or otherwise.
(c) The term "Other Securities" refers to any stock (other than
Common Stock) and other securities of the Company or any other person
(corporate or otherwise) that the holder of this Warrant at any time
shall be entitled to receive, or shall have received, on the exercise
of this Warrant, in lieu of or in addition to Common Stock, or that at
any time shall be issuable or shall have been issued in exchange for
or in replacement of Common Stock or Other Securities pursuant to
Section 4 or otherwise.
1. EXERCISE OF WARRANT.
1.1 METHOD OF EXERCISE. This Warrant may be exercised in whole
or in part (but not as to a fractional share of Common Stock),
at any time and from time to time during the Exercise Period, by the
holder hereof by surrender of this Warrant, with the form of
subscription at the end hereof duly executed by such holder, to the
Company at its principal office, accompanied by payment of the Purchase
Price multiplied by the number of shares of Common Stock for which this
Warrant is being exercised (the "Exercise Price"). Payment of the
Exercise Price shall be made by certified check or official bank draft
payable to the order of the Company or by wire transfer to the account
of the Company. If the amount of the payment received by the Company
is less than the Exercise Price, the holder will be notified of the
deficiency and shall make payment in that amount within five (5)
business days. In the event the payment exceeds the Exercise Price,
the Company will refund the excess to the holder within five (5)
business days of receipt. Upon exercise, the holder shall be entitled
to receive, promptly after payment in full, one or more certificates,
issued in the holder's name or in such name or names as the holder may
direct, subject to the limitations on transfer contained herein, for the
number of shares of Common Stock so purchased. The shares so
purchased shall be deemed to be issued as of the close of business on
the date on which this Warrant shall have been exercised (the "Exercise
Date").
1.2 REGULATION S RESTRICTIONS. Exercise of this Warrant and
acceptance of shares of Common Stock upon such exercise shall constitute an
agreement by the holder not to offer or sell such shares in the United States,
to a U.S. Person (as such term is
COMMON STOCK PURCHASE WARRANT - Page 2
(Brassie Golf Corporation - No. 1)
<PAGE> 3
defined in Regulation S promulgated under the Securities Act of 1933, as
amended ("Regulation S")) or for the account or benefit of a U.S.
Person during the period commencing on the date on which it exercises
the Warrant and ending on the day following any applicable restrictive
period under Regulation S. At the time this Warrant is exercised, the
Company may require the holder to state in the notice of exercise such
reasonable representations concerning the holder as are necessary or
appropriate to assure compliance by the holder with Regulation S. The
certificates representing the shares of common stock issued upon
exercise of this Warrant shall bear solely the following legend:
"The shares of Common Stock of Brassie Golf Corporation
represented hereby have been pursuant to Regulation S,
promulgated under the United States Securities Act of
1933, as amended (the "Act") and have not been registered
under the Act or any applicable state securities laws.
These shares may not be offered or sold within the United
States or to or for the account of a "U.S. Person" as that
term is defined in Regulation S during the period commencing
on the date of issuance hereof and ending [ADD THEN APPLICABLE
RESTRICTED PERIOD FOR NONAFFILIATES] days thereafter."
1.3 COMPANY ACKNOWLEDGMENT. The Company will, at the time of
the exercise of this Warrant, upon the request of the holder
hereof, acknowledge in writing its continuing obligation to afford to
such holder any rights to which such holder shall continue to be
entitled after such exercise in accordance with the provisions of this
Warrant. If the holder shall fail to make any such request, such
failure shall not affect the continuing obligation of the Company to
afford to such holder any such rights.
1.4 LIMITATION ON EXERCISE. Notwithstanding the rights of the
holder to exercise all or a portion of this Warrant as described herein,
such exercise rights shall be limited, solely to the extent required,
from time to time, such that in no instance shall the maximum number of
shares of Common Stock which the Holder may receive in respect
of any exercise of all or a portion of this Warrant exceed, at any one
time, an amount equal to the remainder of (i) 4.99% of the then issued
and outstanding shares of Common Stock of the Company following such
exercise, minus (ii) the number of shares of Common Stock of the Company
then owned (beneficially or of record) by the holder (the "Limitation on
Conversion"); provided, however, the Limitation on Conversion shall not
apply, and shall be of no further force and effect following the
occurrence of any event of default of the Company hereunder and for
which the holder hereof has provided written notice thereof and which is
not cured within the applicable time period specified in such written
notice.
2. DELIVERY OF STOCK CERTIFICATES, ETC., ON EXERCISE. As soon as
practicable after the exercise of this Warrant, and in any event, within five
(5) business days thereafter, the Company at its expense (including the payment
by it of any applicable issue, stamp or transfer taxes) will cause to be issued
in the name of and delivered to the holder thereof, or, to the extent
permissible
COMMON STOCK PURCHASE WARRANT - Page 3
(Brassie Golf Corporation - No. 1)
<PAGE> 4
hereunder, to such other person as such holder may direct, a certificate or
certificates for the number of fully paid and nonassessable shares of Common
Stock (or Other Securities) to which such holder shall be entitled on such
exercise, plus, in lieu of any fractional share to which such holder would
otherwise be entitled, cash equal to such fraction multiplied by the then
applicable Purchase Price, together with any other stock or other securities
and property (including cash, where applicable) to which such holder is
entitled upon such exercise pursuant to Section 1 or otherwise.
The Company covenants that upon the expiration of the applicable
restrictive period relating to the shares of Common Stock underlying this
Warrant, if any, it will use its best lawful efforts to issue or cause the
transfer agent of the Company to issue one or more certificates representing
such shares of Common Stock (or Other Securities) without any restrictive
legend such that such shares shall be freely tradable, subject only to
compliance with Federal and state securities laws. The Company acknowledges
that "best lawful efforts" as used herein shall, among other things, require
the Company to cooperate with the holder hereof in obtaining an opinion of
counsel reasonably satisfactory to the holder regarding certain Federal
securities law implications in connection with removing the restrictive legend
on the shares of Common Stock issuable upon exercise of this Warrant.
3. ADJUSTMENT FOR DIVIDENDS IN OTHER STOCK PROPERTY, ETC.;
RECLASSIFICATION, ETC. In case at any time or from time to time, the holders
of Common Stock (or Other Securities) shall have received, or (on or after the
record date fixed for the determination of shareholders eligible to receive)
shall have become entitled to receive, without payment therefor,
(a) other or additional stock or other securities or
property (other than cash) by way of dividend, or
(b) any cash (excluding cash dividends payable solely out
of earnings or earned surplus of the Company), or
(c) other or additional stock or other securities or
property (including cash) by way of spin-off, split-up,
reclassification, recapitalization, combination of shares or similar
corporate rearrangement,
other than additional shares of Common Stock (or Other Securities) issued as a
stock dividend or in a stock split (adjustments in respect of which are
provided for in Section 5), then and in each such case the holder of this
Warrant, on the exercise hereof as provided in Section 1, shall be entitled to
receive the amount of stock and other securities and property (including cash
in the cases referred to in subdivisions (b) and (c) of this Section 3) that
such holder would hold on the date of such exercise if on the date hereof it
had been the holder of record of the number of shares of Common Stock called
for on the face of this Warrant and had thereafter, during the period from the
date hereof to and including the date of such exercise, retained such shares
and all such other or additional stock and other securities and property
(including cash in the cases referred to
COMMON STOCK PURCHASE WARRANT - Page 4
(Brassie Golf Corporation - No. 1)
<PAGE> 5
in subdivisions (b) and (c) of this Section 3) receivable by him as aforesaid
during such period, giving effect to all adjustments called for during such
period by Sections 4 and 5.
4. ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER, ETC.
4.1 REORGANIZATION, ETC. In case at any time or from time to
time, the Company shall (a) effect a reorganization, (b) consolidate
with or merge into any other person, or (c) transfer all or
substantially all of its properties or assets to any other person under
any plan or arrangement contemplating the dissolution of the Company,
then, in each such case, the holder of this Warrant, on the exercise
hereof as provided in Section 1 at any time after the consummation of
such reorganization, consolidation or merger or the effective date of
such dissolution, as the case may be, shall receive, in lieu of the
Common Stock (or Other Securities) issuable on such exercise prior to
such consummation or such effective date, the stock and other
securities and property (including cash) to which such holder would have
been entitled upon such consummation or in connection with such
dissolution, as the case may be, if such holder had so exercised this
Warrant, immediately prior thereto, all subject to further adjustment
thereafter as provided in Sections 3 and 5.
4.2 CONTINUATION OF TERMS. Upon any reorganization,
consolidation, merger or transfer (and any dissolution following any transfer)
referred to in this Section 4, this Warrant shall continue in full force and
effect and the terms hereof shall be applicable to the shares of stock and
other securities and property receivable on the exercise of this Warrant after
the consummation of such reorganization, consolidation or merger or the
effective date of dissolution following any such transfer, as the case may be,
and shall be binding upon the issuer of any such stock or other securities,
including, in the case of any such transfer, the person acquiring all or
substantially all of the properties or assets of the Company, whether or not
such person shall have expressly assumed the terms of this Warrant as provided
in Section 6.
5. ADJUSTMENT FOR EXTRAORDINARY EVENTS. In the event that the Company
shall (i) issue additional shares of the Common Stock as a dividend or
other distributiion on outstanding Common Stock, (ii) subdivide its outstanding
shares of Common Stock, or (iii) combine its outstanding shares of the Common
Stock into a smaller number of shares of the Common Stock, then, in each such
event, the Purchase Price shall, simultaneously with the happening of such
event, be adjusted by multiplying the then Purchase Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such event and the denominator of which shall be the
number of shares of Common Stock outstanding immediately after such event, and
the product so obtained shall thereafter be the Purchase Price then in effect.
The Purchase Price, as so adjusted, shall be readjusted in the same manner upon
the happening of any successive event or events described herein in this
Section 5. The holder of this Warrant shall thereafter, on the exercise hereof
as provided in Section 1, be entitled to receive that number of shares of
Common Stock determined by multiplying the number of shares of Common Stock
that would otherwise (but for the provisions of this Section 5) be issuable on
such exercise by a fraction of which (i) the numerator is the Purchase Price
that would otherwise (but
COMMON STOCK PURCHASE WARRANT - Page 5
(Brassie Golf Corporation - No. 1)
<PAGE> 6
for the provisions of this Section 5) be in effect, and (ii) the denominator is
the Purchase Price in effect on the date of such exercise.
6. ADJUSTMENTS TO CONVERSION PRICE FOR DILUTING ISSUES.
6.1 SPECIAL DEFINITIONS. For purposes of this Section 6, the
following definitions shall apply:
(a) "Option" shall mean rights, options or warrants to
subscribe for, purchase or otherwise acquire either Common Stock
or Convertible Securities.
(b) "Convertible Securities" shall mean any evidences of
indebtedness, shares of preferred stock or other securities
directly or indirectly convertible into or exchangeable for
Common Stock.
(c) "Additional Shares of Common Stock" shall mean all
shares of Common Stock issued by the Company after the first day
of the Exercise Period, other than shares of Common Stock issued
or issuable to officers, employees or directors of the Company or
any subsidiary of the Company, pursuant to a stock purchase or
option plan or other employee stock bonus arrangement
(collectively, the "Plans") approved by the Board of Directors and
shareholders of the Company.
6.2 ISSUANCE OF ADDITIONAL SHARES. In the event the Company
shall issue Additional Shares of Common Stock (pursuant to an Option or
otherwise) without consideration or for a consideration per share less than the
applicable Exercise Price in effect on the date of and immediately prior to
such issue, then and in such event, such Exercise Price shall be reduced,
concurrently with such issue, to a price (calculated to the nearest cent)
determined by multiplying such Exercise Price by a fraction, the numerator of
which shall be (i) the number of shares of Common Stock outstanding immediately
prior to such issue plus (ii) the number of shares of Common Stock which the
aggregate consideration received or deemed to have been received by the Company
for the total number of Additional Shares of Common Stock so issued would
purchase at such Exercise Price, and the denominator of which shall be (i) the
number of shares of Common Stock outstanding immediately prior to such issue
plus (ii) the number of Additional Shares of Common Stock so issued or deemed
to be issued. For the purposes of the foregoing calculation, the number of
shares of Common Stock deemed to be outstanding immediately prior to the
issuance of any securities described in either clause of the preceding sentence
shall be the sum of (i) the total number of shares of Common Stock issued and
outstanding at such time, plus (ii) the total number of shares of Common Stock
issuable upon conversion in full of all Convertible Securities issued and
outstanding at such time, plus (iii) the total number of shares of Common Stock
issuable upon conversion in full of all Convertible Securities issuable upon
exercise of Options for Convertible Securities issued and outstanding such time.
COMMON STOCK PURCHASE WARRANT - Page 6
(Brassie Golf Corporation - No. 1)
<PAGE> 7
7. NO IMPAIRMENT. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the holder of this
Warrant against impairment. Without limiting the generality of the foregoing,
the Company (a) will not increase the par value of any shares of stock
receivable on the exercise of this Warrant above the amount payable therefor on
such exercise, (b) will take all such action as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and
nonassessable shares of stock on the exercise of this Warrant, and (c) will not
transfer all or substantially all of its properties and assets to any other
person (corporate or otherwise), or consolidate with or merge into any other
person or permit any such person to consolidate with or merge into the Company
(if the Company is not the surviving person), unless such other person shall
expressly assume in writing and will be bound by all the terms of this Warrant.
8. ACCOUNTANTS' CERTIFICATE AS TO ADJUSTMENTS. In each case of any
adjustment or readjustment in the shares of Common Stock (or Other Securities)
issuable on the exercise of this Warrant, the Company will promptly compute such
adjustment or readjustment in accordance with the terms of this Warrant and
prepare a certificate setting forth such adjustment or readjustment and showing
in detail the facts upon which such adjustment or readjustment is based,
including a statement of (a) the consideration received or receivable by the
Company for any additional shares of Common Stock (or Other Securities) issued
or sold or deemed to have been issued or sold, (b) the number of shares of
Common Stock (or Other Securities) outstanding or deemed to be outstanding, and
(c) the Purchase Price and the number of shares of Common Stock to be received
upon exercise of this Warrant, in effect immediately prior to such issue or
sale and as adjusted and readjusted as provided in this Warrant. The Company
will forthwith mail a copy of each such certificate to the holder of this
Warrant, and will, on the written request at any time of the holder of this
Warrant, furnish to such holder a like certificate setting forth the Purchase
Price at the time in effect and showing how it was calculated.
9. NOTICES OF RECORD DATE, ETC. In the event of
(a) any taking by the Company of a record of the holders
of any class or securities for the purpose of determining the
holders thereof who are entitled to receive any dividend or other
distribution, or any right to subscribe for, purchase or otherwise
acquire any shares of stock of any class or any other securities
or property, or to receive any other right, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of
the Company or any transfer of all or substantially all the assets
of the Company to or consolidation or merger of the Company with
or into any other person, or
COMMON STOCK PURCHASE WARRANT - Page 7
(Brassie Golf Corporation - No. 1)
<PAGE> 8
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
Then and in each such event the Company will mail or cause to be mailed to the
holder of this Warrant a notice specifying (i) the date on which any such
record is to be taken for the purpose of such dividend, distribution or right,
and stating the amount and character of such dividend, distribution or right,
and (ii) the date on which any such reorganization, reclassication,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding-up is to take place, and the time, if any, as of which the holders of
record of Common Stock (or Other Securities) shall be entitled to exchange
their shares of Common Stock (or Other Securities) for securities or other
property deliverable on such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding-up. Such notice shall be mailed at least 20 days prior to the date
specified in such notice on which any action is to be taken.
10. RESERVATION OF STOCK, ETC., ISSUABLE ON EXERCISE OF WARRANT. The
Company will at all times reserve and keep available, solely for issuance and
delivery on the exercise of this Warrant, all shares of Common Stock (or Other
Securities) from time to time issuable on the exercise of this Warrant.
11. EXCHANGE OF WARRANT. On surrender for exchange of this Warrant,
properly endorsed, to the Company, the Company at its expense will issue and
deliver to or on the order of the holder thereof a new Warrant of like tenor,
in the name of such holder or as such holder (on payment by such holder of any
applicable transfer taxes) may direct, calling in the aggregate on the face or
faces thereof for the number shares of Common Stock called for on the face of
the Warrant so surrendered.
12. REPLACEMENT OF WARRANT. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of this Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.
13. REMEDIES. The Company stipulates that the remedies at law of the
holder of this Warrant in the event of any default or threatened default by the
Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate, and that such terms may be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
14. NEGOTIABILITY, ETC. This Warrant is issued upon the following
terms, to all of which each holder or owner hereof by the taking hereof
consents and agrees:
(a) title to this Warrant may be transferred by endorsement
(by the holder hereof executing the form of assignment at the end
hereof) and delivery in
COMMON STOCK PURCHASE WARRANT - Page 8
(Brassie Golf Corporation - No. 1)
<PAGE> 9
the same manner as in the case of a negotiable instrument
transferable by endorsement and delivery;
(b) any person in possession of this Warrant properly
endorsed is authorized to represent himself as absolute owner
hereof and is empowered to transfer absolute title hereto by
endorsement and delivery hereof to a bona fide purchaser hereof
for value; each prior taker or owner waives and renounces all of
his equities or rights in this Warrant in favor of each such bona
fide purchaser, and each such bona fide purchaser shall acquire
absolute title hereto and to all rights represented hereby;
(c) until this Warrant is transferred on the books of the
Company, the Company may treat the registered holder hereof as the
absolute owner hereof for all purposes, notwithstanding any notice
to the contrary; and
(d) notwithstanding the foregoing, this Warrant may not
be sold, transferred or assigned except pursuant to an effective
registration statement under the Securities Act of 1933, as
amended or, pursuant to an applicable exemption therefrom or in
accordance with Regulation S promulgated under such Act.
15. REGISTRATION RIGHTS. If, and only if, at any time prior to the
third anniversary of this Warrant, Regulation S promulgated under the
Securities Act is rescinded or modified so as to preclude the holder of this
Warrant from reselling in the United States public securities markets the
shares of Common Stock to be received from the Company upon exercise of all or
a portion of this Warrant following the 120th day after such exercise (the
"Restricted Period"), and/or, if, for any other reason, the Company refuses to
issue such shares of Common Stock as required pursuant to this Warrant bearing
solely the legend substantially as set forth in Section 1.2 hereof, and/or the
Company refuses to reissue such shares of Common Stock bearing no restrictive
legend following the expiration of the Restricted Period, then the Company
hereby undertakes, upon written demand of the holder of this Warrant, to (i)
file a Registration Statement to register the shares of Common Stock to be
issued upon exercise of this Warrant with the Securities and Exchange
Commission within the later to occur of (I) July 31, 1997 and (II) forty five
(45) New York Stock Exchange trading days of receipt of such demand and (ii)
use its best lawful efforts to cause such Registration Statement to be declared
effective and continuously maintained for a period of two (2) years.
Notwithstanding the foregoing, the Company shall not be required to file any
such Registration Statement if the maximum number of shares of Common
Stock of the Company to be covered by such Registration Statement is less than
200,000 (taking into account any similar demands from the holder under
additional Warrants of the Company issued at the same general time as this
Warrant). In lieu of filing such Registration Statement, the Company may, at
its option, exercisable within five (5) business days of the receipt of the
holder's written demand described herein, repurchase this Warrant from the
holder for the Redemption Price. The Redemption Price shall mean an amount
equal to the product of (i) the remaining number of shares of Common Stock
issuable upon exercise in full of this Warrant and (ii) the difference between
(A) the Fair Market Value of such shares (as hereafter defined), and (B) the
Purchase
COMMON STOCK PURCHASE WARRANT - Page 9
(Brassie Golf Corporation - No. 1)
<PAGE> 10
Price which would be payable to the Company upon issuance of such shares. the
Fair Market Value of such shares shall mean the average of the closing bid price
of the Company's Common Stock as reported by Bloomberg, L.P. over a five (5)
trading day period ending the day immediately prior to the date of the
holder's notice requesting the Company file a Registration Statement as
described herein.
16. NOTICES, ETC. All notices and other communications from the
Company to the holder of this Warrant shall be mailed by first class registered
or certified mail, postage prepaid, at such address as may have been furnished
to the Company in writing by such holder or, until any such holder furnishes to
the Company an address, then to, and at the address of, the last holder of this
Warrant who has so furnished an address to the Company.
17. MISCELLANEOUS. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or
termination is sought. This Warrant shall be construed and enforced in
accordance with and governed by the internal laws of the State of Delaware.
The headings in this Warrant are for purposes of reference only, and shall not
limit or otherwise affect any of the terms hereof. This Warrant is being
executed as an instrument under seal. The invalidity or unenforceability of
any provision hereof shall in no way affect the validity or of enforceability
of any other provision.
[Signature page follows]
COMMON STOCK PURCHASE WARRANT - Page 10
(Brassy Golf Corporation - No. 1)
<PAGE> 11
DATED AS OF JANUARY 31, 1997.
BRASSIE GOLF CORPORATION
By: /s/ Thomas K. Richardson
--------------------------------
Name: Thomas K. Richardson
------------------------------
Title: Secretary
-----------------------------
[Corporate Seal]
Attest:
By: /s/ David C. Crowell
-----------------------------
Secretary General Counsel
COMMON STOCK PURCHASE WARRANT - Page 11
(Brassie Golf Corporation - No. 1)
<PAGE> 1
EXHIBIT 10.59
WARRANT AGREEMENT
WARRANT AGREEMENT dated as of February 5, 1997 between BRASSIE GOLF CORPORATION,
a Delaware corporation (the "Company"), and PYRAMID INVESTMENTS LLC (hereinafter
referred to as the "Holder").
W I T N E S S E T H:
WHEREAS, the Company proposes to issue to the Holder (or its permitted assigns)
a warrant (the "Warrant") to purchase up to 400,000 shares of common stock of
the Company ("Common Stock") (one share of Common Stock is hereinafter referred
------
to as a "Security" and more than one share of Common Stock is hereinafter
referred to collectively as the "Securities"); and
WHEREAS, the Warrant will be issued on the date hereof by the Company to the
Holder pursuant to a Letter Agreement dated February 5, 1997 between the Company
and the Holder.
NOW, THEREFORE, in consideration of the premises, the agreements herein set
forth and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. Definitions. All terms not specifically defined in the Warrant
Certificate shall have the meanings ascribed to them in this Agreement.
2. Grant. The Holder is hereby granted the right to purchase up to 400,000
Securities at any time during the period commencing at 9:00 A.M.,
Eastern Standard Time on February 5, 1997 (the "Effective Date") and
ending on February 4, 2000.
3. Exercise Price.
3.1 Initial Exercise Price. The initial exercise price per security (the
"Initial Exercise Price) (subject to adjustment as provided in Section
9 hereof) shall be $1.25 (U.S.) per Security.
3.2 Adjusted Exercise Price. The adjusted exercise price shall be the price
which shall result from time to time from any and all adjustments to
the Exercise Price in accordance with the provisions of Section 9
hereof (the "Adjusted Exercise Price").
3.3 Exercise Price. The term "Exercise Price" herein shall mean the Initial
Exercise Price or the Adjusted Exercise price, depending upon the
context.
4. Termination. This Agreement shall terminate at 5:00 P.M., Eastern
Standard Time on February 4, 2000.
5. Warrant Certificates. The warrant certificates (the "Warrant
Certificates") delivered and to be delivered pursuant to this Agreement
shall be in the form set forth in Exhibit A, attached
<PAGE> 2
hereto and made a part hereof, with such appropriate insertions,
omissions, substitutions, and other variations as required or permitted
by this Agreement.
6. Exercise of Warrant.
6.1 Initial Exercise Price. The Warrant initially is exercisable at the
Initial Exercise Price (subject to adjustment as provided in Section 9
hereof) per Security multiplied by the number of Securities being
purchased (the "Purchase Price") payable in cash as set forth in
Section 6.1.1.
6.1.1 Cash Exercise. Payment shall be made in United States Dollars by wire
transfer of immediately available funds or certified or official bank
check in New York Clearing House funds.
6.2 Surrender of Warrant Certificate. Upon surrender of a Warrant
Certificate, together with payment of the Purchase price for the
Securities purchased, at the Company's principal office at 5806 A
Breckenridge Parkway, Tampa, Florida the registered holder of a Warrant
Certificate ("Holder" or "Holders") shall be entitled to receive a
certificate or certificates for the Securities so purchased. The
purchase rights represented by each Warrant Certificate are exercisable
at the option of the Holder thereof, in whole or in part (but not as to
fractional Securities). In case of the purchase of less than all the
Securities purchasable under any Warrant Certificate, the Company shall
cancel said Warrant Certificate upon the surrender thereof and shall
execute and deliver a new Warrant Certificate of like tenor for the
balance of the Securities purchasable thereunder.
7. Issuance of Certificates. Upon the exercise of the Warrant, the
issuance of certificates for shares of Common Stock or other
securities, properties or rights underlying the Warrant, the issuance
of certificates for shares of Common Stock shall be made forthwith (and
in any event within five (5) business days thereafter) without charge
to the Holder thereof including, without limitation, any tax which may
be payable in respect of the issuance thereof, and such certificates
shall (subject to the provisions of Section 8 hereof) be issued in the
name of, or in such names as may be directed by, the Holder thereof;
provided, that the Company shall not be required to pay any tax which
may be payable in respect of any transfer involved in the issuance and
delivery of any such certificates in a name other than that of the
Holder and the Company shall not be required to issue or deliver such
certificates unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of such tax
or shall have established to the satisfaction of the Company that such
tax has been paid.
8. Regulation S Restrictions. Exercise of this Warrant and acceptance of
shares of Common Stock upon such exercise shall constitute an agreement
by the holder not to offer or sell such shares in the United States, to
a U.S. Person (as such term is defined in Regulation S promulgated
under the Securities Act of 1933, as amended ("Regulation S") or for
the account or benefit of a U.S. Person during the period commencing on
the date on which it exercises the Warrant and ending on the day
following any applicable restrictive period under
2
<PAGE> 3
Regulation S. At the time this Warrant is exercised, the Company may
require the holder to state in the notice of exercise such reasonable
representations concerning the holder as are necessary or appropriate
to assure compliance by the holder with Regulation S. The certificates
representing the shares of Common Stock issued upon exercise of this
Warrant shall bear solely the following legend:
"The shares of Common Stock of Brassie Golf Corporation
represented hereby have been issued pursuant to Regulation S,
promulgated under the United States Securities Act of 1933, as
amended (the "Act") and have not been registered under the Act
or any applicable state securities laws. These shares may not
be offered or sold within the United States or to or for the
account of a "U.S. Person" as that term is defined in
Regulation S during the period commencing on the date of
issuance hereof and ending [add then Applicable Restricted
Period for nonaffiliates] days thereafter."
9. Adjustments to Exercise Price and Number of Securities. The rights
evidenced by the Warrant are to purchase common stock of the company as
it was constituted on February 5, 1997 ("Common Stock"). If there
shall, prior to the exercise of any of the rights evidenced by the
Warrant, be any reorganization of the authorized capital of the Company
by way of consolidation, merger, sub-division, amalgamation,
stock-split, reverse stock-split, or otherwise, or the payment of any
stock dividends, then there shall automatically be an adjustment in
either or both the number of shares of the Company which may be
purchased pursuant to the Warrant or the price at which such shares may
be purchased pursuant to the Warrant or the price at which such shares
may be purchased, by corresponding amounts, so that the rights
evidenced by the Warrant shall thereafter be as reasonably as possible
equivalent to those originally granted by the Warrant. The Company
shall have the sole and exclusive power to make adjustments as it
considers necessary and desirable.
10. Exchange and Replacement of Warrant Certificates. Each Warrant
Certificate is exchangeable without expense, upon the surrender thereof
by the registered Holder at the principal executive office of the
Company, for a new Warrant Certificate of like tenor and date
representing in the aggregate the right to purchase the same number of
Securities in such denominations as shall be designated by the Holder
thereof at the time of such surrender.
Upon receipt by the Company of evidence reasonable satisfactory to it
of the loss, theft, destruction or mutilation of any Warrant
Certificate, and, in case of loss, theft or destruction, of indemnity
or security reasonable satisfactory to it, and reimbursement to the
Company of all reasonable expenses incidental thereto, and upon
surrender and cancellation of the Warrants, if mutilated, the Company
will make and deliver a new Warrant Certificate of like tenor, in lieu
thereof.
3
<PAGE> 4
11. Elimination of Fractional Interests. The Company shall not be required
to issue certificates representing fractions of shares of Common Stock
upon the exercise of the Warrants, nor shall it be required to issue
scrip or pay cash in lieu of fractional interests, it being the intent
of the parties that all fractional interests shall be eliminated by
rounding any fraction up to the nearest whole number of shares of
Common Stock or other securities, properties or rights.
12. Reservation of Securities. During the term of this Agreement, (i) the
Company shall at all times reserve and keep available out of its
authorized shares of Common Stock, solely for the purpose of issuance
upon the exercise of the Warrant such number of shares of Common Stock
as shall be issuable upon the exercise thereof and (ii) the Company
covenants and agrees that, upon exercise of the Warrant and payment of
the Exercise Price therefor, all shares of Common Stock and other
securities issuable upon such exercise shall be duly and validly
issued, fully paid, non-assessable and not subject to the preemptive or
similar rights of any stockholder.
13. Notices to Warrant Holder. Nothing contained in this Agreement shall be
construed as conferring upon the Holder the right to vote or to consent
or to receive notice as a stockholder in respect of any meetings of
stockholders for the election of directors or any other matter, or as
having any rights whatsoever as a stockholder of the Company. If,
however, at any time prior to the expiration of the Warrant or their
exercise, any of the following events shall occur:
(a) the Company shall take a record of the holders of its shares
of Common Stock for the purpose of entitling them to receive a
dividend or distribution payable otherwise than in cash, or a
cash dividend or distribution payable otherwise than out of
current or retained earnings, as indicated by the accounting
treatment of such dividend or distribution on the books of the
Company; or
(b) the Company shall offer to all the holders of its Common Stock
any additional shares of capital stock of the Company or
securities convertible into or exchangeable for shares of
capital stock of the Company, or any option, right or warrant
to subscribe therefor; or
(c) a dissolution, liquidation or winding up of the Company (other
than in connection with a consolidation or merger) or a sale
of all or substantially all of its property, assets and
business as an entirety shall be proposed;
then, in any one or more of said events, the Company shall give written
notice of such event at lease ten (10) days prior to the date fixed as
a record date or the date of closing the transfer books for the
determination of the stockholders entitled to such dividend,
distribution, convertible or exchangeable securities or subscription
rights, or entitled to vote on such proposed dissolution, liquidation,
winding up or sale. Such notice shall specify such record date or the
date of closing the transfer books, as the case may be. Failure to give
such notice
4
<PAGE> 5
or any defect therein shall not affect the validity of any action taken
in connection with the declaration or payment of any such dividend, or
the issuance of any convertible or exchangeable securities, or
subscription rights, options or warrants, or any proposed dissolution,
liquidation, winding up or sale.
14. Notices. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly
made when delivered, or mailed by registered or certified mail, return
receipt requested:
(a) If to the registered Holder of the Warrant, to the address of
such Holder as shown on the books of the Company; or
(b) If the Company, to the address referred to in Section 6 hereof
or to such other address as the Company may designate by
notice to the Holder.
15. Supplements and Amendments. This Agreement may not be amended except in
writing signed by the Company and the Holder.
16. Successors. All the covenants and provisions of this Agreement shall be
binding upon and inure to the benefit of the Company, the Holder and
their respective successors and permitted assigns hereunder.
17. Governing Law. This Agreement and each Warrant Certificate issued
hereunder shall be deemed to be a contract made under the laws of the
State of Delaware and for all purposes shall be construed in accordance
with the laws of said State without giving effect to the rules of said
State governing the conflicts of laws.
18. Benefits of This Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company
and the Holder(s) of the warrant Certificates or Securities any legal
or equitable right, remedy or claim under this Agreement; and this
Agreement shall be for the sole and exclusive benefit of the Company
and the Holder(s) of the Warrant Certificates or Securities.
19. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and such shall together constitute but one
and the same instrument.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed, as of the date and year first above written.
BRASSIE GOLF CORPORATION
By: /s/ Lance McNeill
----------------------------------
Title: Vice President
----------------------------
Field Secretaries (Cayman) Limited
as Secretary of
PYRAMID INVESTMENTS LLC
By: /s/ Erwin Di Kau
----------------------------------
Name: Erwin Di Kau
--------------------------------
Title: Manager Mutual Funds
-------------------------------
Field Secretaries (Cayman) Limited
as Secretary of
PYRAMID INVESTMENTS LLC
By: /s/ Kelly Ireland
----------------------------------
Name: Kelly Ireland
--------------------------------
Title: Assistant Manager Mutual Funds
-------------------------------
6
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BRASSIE GOLF
CORPORATION CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FORM 10-KSB DECEMBER 31, 1996
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 806,079
<SECURITIES> 39,912
<RECEIVABLES> 925,681
<ALLOWANCES> (437,400)
<INVENTORY> 133,365
<CURRENT-ASSETS> 1,602,751
<PP&E> 11,991,452
<DEPRECIATION> 1,596,816
<TOTAL-ASSETS> 14,099,069
<CURRENT-LIABILITIES> 2,007,536
<BONDS> 0
0
375
<COMMON> 24,079
<OTHER-SE> 1,818,837
<TOTAL-LIABILITY-AND-EQUITY> 14,099,069
<SALES> 786,099
<TOTAL-REVENUES> 5,231,902
<CGS> 377,472
<TOTAL-COSTS> 11,056,005
<OTHER-EXPENSES> 307,313
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,316,301
<INCOME-PRETAX> (8,515,732)
<INCOME-TAX> 110,000
<INCOME-CONTINUING> (8,625,732)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,625,732)
<EPS-PRIMARY> (.43)
<EPS-DILUTED> (.43)
</TABLE>
