<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-KSB
(Mark One)
[ X ] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
[ ] Transition report under Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required)
For the transitional period from _____________ to ____________
Commission File No. 1-13362
---------
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
-------------------------------------
(Name of Small Business Issuer as specified in its charter)
Nevada 04-3226365
- --------------------------------------------------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification Number)
incorporation or organization)
822 Boylston Street, Suite 300, Chestnut Hill, MA 02167
-------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(617) 266-3600
--------------
(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Exchange Act:
Name of each exchange on
Title of Each Class which registered
- --------------------------------------------------------------------
Common Stock, $.001 par value Boston Stock Exchange
Redeemable Warrants to
Purchase Common Stock Boston Stock Exchange
-1-
<PAGE> 2
Securities registered under Section 12(g) of the Exchange Act:
None
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the issuer 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 contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB [ ].
The registrant had total operating revenues of $5,376,947 and interest income of
$6,502 for its most recent fiscal year ended December 31, 1997.
The aggregate market value of the voting stock held by non-affiliates of the
registrant based upon the average bid and asked prices of such stock, as of
March 20, 1998, based on the closing price for the stock on such date as
reported on the NASDAQ Small-Cap Market of $2.9375 was $6,811,402. Shares of
Common Stock held by each officer and director and by each person who owns 5% or
more of the outstanding Common Stock have been excluded in that such persons may
be deemed to be affiliates. This determination of affiliate status is not
necessarily a conclusive determination for other purposes.
As of March 20, 1998 there were 3,751,169 outstanding shares of Common
Stock, $.001 par value.
DOCUMENTS INCORPORATED BY REFERENCE
Not Applicable
Transitional Small Business Issuer Format (check one):
Yes No x
- ------- -------
-2-
<PAGE> 3
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
- ------- ------------------------
Background
----------
Senior Tour Players Development, Inc. ( the "Company") was organized as
a Nevada corporation on April 6, 1994 for the purpose of developing or acquiring
and then operating public, semiprivate, resort and private golf courses and golf
practice facilities throughout the United States. The Company may also acquire
interests in, or participate in the marketing of, golf course residential
communities.
On November 16, 1994, the Company completed an initial public offering
of 1,600,000 shares of common stock and 1,600,000 redeemable common stock
purchase warrants in a firm-commitment underwriting managed by Dickinson & Co.
On December 28, 1994, the underwriter exercised its over-allotment option for
the purchase of an additional 153,200 redeemable common stock purchase warrants.
The offering, including the exercise of the over-allotment, raised net proceeds
of $6,572,249 (gross proceeds of $8,175,320 less underwriting discounts,
commissions and other expenses of $1,603,071).
On November 30, 1994, following the Company's initial public offering,
the Company commenced construction of its initial golf course development
project, The Badlands Golf Club located in Las Vegas, Nevada. The course was
designed by Johnny Miller Design, Ltd. in consultation with Chi Chi Rodriguez.
The course is situated in the middle of a mixed use development located
approximately ten miles from the Las Vegas strip at which approximately 1,200
single family residential units have been built and sold, and an additional
3,000 residential units, a 1.2 million square foot regional mall and destination
resort hotel-casino are being planned. The Company does not have any economic
interest in this development. The course is located on approximately 253 acres
which the Company has leased from the developer of the residential community.
See "Item 2. Description of Property."
Recent Activity
---------------
Harbor Links Golf Course - North Hempstead, New York
- ----------------------------------------------------
Effective January 27, 1998, the Company entered into a Golf Facilities
Management Agreement (the Management Agreement) with the Town of North Hempstead
in New York (the Town). The Town is constructing a new municipal golf facility
in the Town of North Hempstead, New York which will include an 18-hole golf
course, a 9-hole executive golf course, driving range, clubhouse, maintenance
building, practice and learning center, parking lot and related golf facilities,
five athletic fields, the surrounding cliff areas, and at the discretion of the
Town, a miniature golf course, collectively referred to as the "Facility." The
Company is engaged to manage the Facility for the Town including but not limited
to marketing, maintaining the 18-hole golf course, 9-hole executive course,
driving range, clubhouse and possibly a future miniature golf course. The
Company is required to provide the Town with a performance bond at the Town's
expense (with respect to the premiums) in an amount not less than $1,000,000,
which secures the operational and other responsibilities of the Company and an
initial capital contribution to the Facility of $1,000,000 under the Agreement.
The Company is entitled to receive a return of the initial capital contribution
in five equal annual installments of $200,000 payable on March 1 of each year
commencing March 1, 2001. The Company is also entitled to receive interest
-3-
<PAGE> 4
on the outstanding portion of such initial capital contribution, which has not
been returned to the Company at an interest rate equal to the lessor of 2% above
the prime rate as reported by the Federal Reserve Bank or the actual interest
rate paid by the Company on financing obtained to fund the initial capital
contribution to the facility. Payment of such interest shall be made quarterly
in arrears commencing March 1, 1999. In consideration for the management
services to be provided by the Company, the Town is required to compensate the
Company a base amount of $125,000 per annum and actual out-of-pocket costs,
commencing 60 days prior to the opening of the facility, which is anticipated in
the Summer of 1998. The base amount shall increase by $25,000 every three years
starting in 1999 and additional incentive management fee payable starting in
1999 equal to 10% of the base amount, if the gross revenue for the immediately
preceding calendar year exceeds a specified threshold amount for the preceding
calendar year. The agreement, which has a ten year term expiring on December 31,
2007, can be terminated yearly by the Town upon 30 days written notice to the
Company.
Forest Lakes Golf Club - Sarasota, Florida
- ------------------------------------------
On December 17, 1996 the Company consummated the sale of Forest Lakes.
The sale was structured as a sale of substantially all of the assets of Forest
Lakes Limited Partnership. The buyer was BST Associates, an Illinois general
partnership. The cash contract purchase price was $4,000,000 payable in full at
closing. Broker commissions and closing costs relating to the sale totaled
$172,318 resulting in net sale proceeds to the Partnership of $3,827,682.
Included in the Company's consolidated financial statements for the year ended
December 31, 1996 is a gain on the sale of Partnership assets of approximately
$439,000. The Company received cash proceeds of approximately $149,500 in
January 1997 against its Partnership investment of $252,438.
Under the terms of the Forest Lakes Limited Partnership Agreement, the
sale of all of the Partnership's property and the conversion of all proceeds
into cash requires that the Partnership be dissolved. Accordingly, as General
Partner, the Company dissolved the Partnership in 1997, and made a distribution
of all available cash proceeds to the partners.
New England Country Club - Bellingham, Massachusetts
- ----------------------------------------------------
In February 1995, the Company entered into an agreement to manage New
England Country Club in Bellingham, Massachusetts which is a championship
18-hole golf course designed by three-time U.S. Open Champion Hale Irwin. The
management agreement is for a five year term, and can be terminated on ninety
days' notice by either party. As compensation for the Company's services, the
Company is paid 5.0% of the Club's gross revenues and is also paid a monthly
accounting fee.
The Badlands Golf Club - Las Vegas, Nevada
- ------------------------------------------
On October 14, 1995 the Company opened for public play the 18-hole
Badlands Golf Club, its initial and flagship golf course in Las Vegas, Nevada
(the "Badlands"). During 1997, the Company completed construction on an
additional nine holes at The Badlands. The Badlands Golf Club includes an
27-hole championship golf course, practice range, and 7,500 sq. ft. clubhouse
and related maintenance facilities. (See Note 9(c) of the Notes to the
Consolidated Financial Statements included in this report regarding proposed
sale of The Badlands Golf Club.)
-4-
<PAGE> 5
The Legends Golf Club - Stonebridge Ranch, McKinney, Texas
- ----------------------------------------------------------
On March 12, 1996 the Company signed a purchase and sale agreement and
related documents with Stonebridge Ranch Development Corporation, a residential
development group of the Mobil Land organization, an affiliate of Mobil
Corporation, for the proposed development of an 18-hole or 27-hole championship
golf facility located within the Stonebridge Ranch Development in McKinney,
Texas, approximately 25 miles north of Dallas. The Purchase and Sale Agreement
expired on August 15, 1997, and to date, no development has commenced. During
November, 1996, Westerra Holdings, LLC ("Westerra") purchased and succeeded to
the interest of Mobil Land in the Stonebridge Ranch development.
The Company is currently negotiating with Westerra. Under the terms of
these negotiations, the Company has agreed to assign any and all rights to the
development to Westerra. In consideration for the assignment, Westerra has
agreed to reimburse the Company's actual costs incurred to date, and to assume
certain unpaid liabilities related to the development. As of December 31, 1997,
the Company has capitalized $323,099 related to this development, which is
included in construction in progress. See Financial Statements set forth on
pages F1 through F28 hereof.
Golftown Practice Center - Saugus, Massachusetts
- ------------------------------------------------
During July 1996, the Company entered into an agreement with Golftown,
Inc., a Massachusetts corporation that owns and operates a driving range
facility located in Saugus, Massachusetts, approximately eight miles north of
Boston (the Facility). The Company has entered into an agreement to guaranty a
loan in an amount not to exceed $295,000 made to Golftown, in exchange for a 25%
equity interest in Golftown. Under the terms of the agreement with Golftown and
its lender, the Company has the opportunity to cure any default under the loan,
and in the event of a default, the Company may assume day-to-day management of
the Project and receive a management fee for such services. In addition, the
Company received a pledge of voting rights to a majority of the voting interests
of Golftown, which pledge becomes effective in the event of a default under the
loan being guaranteed by the Company. The President and majority shareholder of
Golftown is Jeffrey Abrams, who is the son of Stanton V. Abrams, President and
Chairman of the Board of Directors of Senior Tour Players Development, Inc. The
driving range opened during August, 1996.
During 1997 various capital contributions were advanced by Golftown's
stockholders and the Company invested approximately $17,500 which was not
sufficient to maintain its equity ownership resulting in a reduced ownership
interest of 21.8% at December 31, 1997. As of December 31, 1997 the Company had
written its investment down to $0 to reflect the Company's portion of the losses
incurred by Golftown.
Las Vegas International Golf Center - Las Vegas, Nevada
- -------------------------------------------------------
On December 31, 1996 the Company consummated the acquisition, and
simultaneous disposition of certain ownership interests in the Las Vegas Golf
Center, LLC, a Delaware limited liability corporation (the "LLC"), which owns a
golf practice facility located in Las Vegas, Nevada (the "Center"). The Center
is situated on approximately 42 acres of land leased from Clark County, Nevada,
located on the corner of Tropicana and Paradise Avenues, directly across the
street from the McCarran International Airport, and approximately one mile from
Las Vegas Boulevard (the "Strip"). The Center
-5-
<PAGE> 6
includes a driving range with approximately 120 tee stations on two tiers, a
golf teaching area and a 6,500 sq. ft. clubhouse. The Center opened for business
on January 17, 1997.
The Company acquired a 21.5% membership interest in the LLC from
unrelated individual shareholders of Golf Centers of America, Inc., a California
corporation, for an aggregate purchase price of $400,000 cash consideration, and
323,289 shares of the Company's common stock, $.001 par value per share ("STPD
Shares"), payable to sellers as follows:
Cash Consideration $ 20,000 paid on December 13, 1996
$180,000 paid on January 15, 1997
$200,000 payable on or before January 15, 1998
STPD Shares 161,645 shares due on or before January 15, 1997
161,644 shares due on or before January 15, 1998
See Item 3. Legal Proceedings
In addition to the 21.5% membership interest described above, the
Company also acquired a 48.5% membership interest in the LLC from unrelated
individual shareholders of Selleck Properties, Inc., a California corporation,
for an aggregate purchase price of $1,532,050 cash consideration, and 369,547
shares of the Company's Common Stock, which was issued on February 14, 1997.
All shares issued or payable in connection with these transactions are
restricted securities, as defined in Rule 144 promulgated under the Securities
Act of 1933, as amended. The Company has granted sellers of the interests the
right to demand registration of their Common Stock on a Form S-3 registration
statement or similar Form at any time after May 1, 1997. The Company received
such a request during May 1997, and filed a registration statement which became
effective in August 1997. The sellers of the 21.5% interest and 48.5% interest
have agreed, pursuant to shareholder agreements, to vote their Common Stock for
the slate of directors proposed by management of the Company through December
31, 1998 (in case of the 21.5% interest) or the first to occur of (i) June 30,
1999, or (ii) the date on which Stanton V. Abrams ceases to serve as the
President and Chief Executive Officer of the Company (in the case of the 48.5%
interest).
Immediately after the acquisition of the 48.5% membership interest, the
Company subsequently sold the 48.5% membership interest to Paul Fireman
("Fireman"), an individual investor, who beneficially owned 250,000 shares of
the outstanding Common Stock as of March 20, 1998, for cash consideration of
$2,167,953. The Company also received a $200,000 consulting fee from Fireman for
services rendered in connection with certain services rendered in connection
with structuring and implementing the transaction, as well as for arranging
certain financing for the LLC. A substantial amount of the cash received from
Fireman financed a significant portion of the total cash consideration paid by
the Company in connection with the Company's acquisition of its interest in the
LLC.
In consideration of 50,000 shares of Common Stock of the Company,
payable to Fireman, the Company received an option to buy back from Fireman a
13.5% interest in the LLC (the "Option"). The Company did not exercise the
option on or before December 31, 1997; if the Company had exercised the Option,
the price for a 13.5% LLC interest would have been $900,000. If the Company
exercises the Option after December 31, 1997 but on or before December 31, 1998,
the price for a 13.5% LLC interest
-6-
<PAGE> 7
shall be $1,075,000. If the Company exercises the Option after December 31, 1998
but on or before December 31, 1999, the purchase price for a 13.5% LLC interest
shall be $1,350,000. In 1997, the Company wrote off the carrying value of the
Option because it has no intent to exercise.
Additionally, in consideration of certain consulting services and
modification of existing contractual rights relating to the acquisition of the
Company's 21.5% membership interest in the LLC and the financing of the golf
practice facility owned and operated by the LLC, the Company issued in May 1997
to the Ranchito Company, LLC (Ranchito), 50,000 shares of Common Stock of the
Company. Ranchito is the owner of the remaining 30% membership interest in the
LLC which was not acquired on December 31, 1996.
The Company has been designated the Managing Member of the LLC, and is
responsible for the day-to-day management, marketing, and operation of the
Center. The Company receives a management fee equal to 5% of gross revenues
generated by the LLC, and is reimbursed for certain accounting and out-of-pocket
expenses.
Brad Faxon Golf Center - Cranston, Rhode Island
- -----------------------------------------------
During 1997, the Company was unsuccessful in its attempts to negotiate
a lease with the landowner of the proposed site of a family golf and recreation
center in Cranston, Rhode Island. Accordingly, the Company has halted all
engineering, legal and permitting costs associated with this development. As of
December 31, 1997, all costs incurred to date, associated with this proposed
development have been expensed. (See Item 6 - Results of Operations.)
Business Strategy
-----------------
Effective March 16, 1998, the Company announced that it has received a
proposal from an outside party to purchase The Badlands Golf Club, in Las Vegas,
Nevada, and that it has engaged an investment banking firm to assist the Company
in evaluating this proposal, and to assess additional alternatives. Accordingly,
the Company's current business strategy is to concentrate the Company's efforts
on evaluating this potential sale transaction. Furthermore, in light of this
potential sale transaction the Company has temporarily suspended the pursuit of
any new development deals, and will concentrate its efforts on its existing
owned and managed properties (see Item 2 Properties), and will consider other
alternative strategies as events unfold.
Employees
- ---------
As of March 20, 1998, the Company had 85 full time employees, including
five assigned to the Company's headquarters in Boston, Massachusetts, 67 at The
Badlands Golf Club in Las Vegas, Nevada, and 13 assigned to the Las Vegas
International Golf Center. The Company intends to maintain a streamlined
business organization by continuing to manage the Company with the minimum
number of salaried executive employees possible.
Government Regulation
- ---------------------
Development and operation of golf course facilities and golf practice
centers are subject to a variety of land use, zoning, and licensing regulations
at the state and local level, as well as
-7-
<PAGE> 8
environmental regulations at the federal and state level. The Company believes
it is currently in material compliance with all such applicable laws, rules and
regulations. The sanctions for failure to comply with such laws, rules and
regulations include denial of the right to conduct business, significant fines
and/or penalties, as well as the costs for remediation of environmental
problems. Additionally, a change in such laws, rules or regulations could
adversely affect the Company's business.
The Company is subject to the Fair Labor Standards Act and various
state laws governing such matters as minimum wage requirements, overtime and
other working conditions and citizenship requirements. In addition, at the
Company's courses where alcoholic beverages are served, the Company will be
subject to certain state "dram-shop" laws, which provide a person injured by an
intoxicated individual the right to recover damages from an establishment that
wrongfully served alcoholic beverages to the intoxicated individual.
ITEM 2. PROPERTIES.
- ------- -----------
THE BADLANDS GOLF CLUB. The Badlands is located in Las Vegas, Nevada
and is 100% owned by The Badlands Golf Club, Inc., a wholly owned corporate
subsidiary of the Company. This 27-hole championship golf course, includes a
driving range, clubhouse, and maintenance facilities. The initial 18 holes was
completed and opened for play on October 14, 1995. The clubhouse and maintenance
facilities were completed in September, 1996. The additional nine holes was
completed and opened for public play on September 25, 1997. The approximately
253 acres of land on which the course is situated is leased under two land
leases expiring in July, 2045. Both leases contain four extension options of ten
years each. The property is subject to a first mortgage in favor of
NationsCredit. The Badlands has a full liquor license.
LAS VEGAS INTERNATIONAL GOLF CENTER. The Golf Center is a state-of-the
art golf practice center located in downtown Las Vegas, at the corner of
Paradise and Tropicana Avenues, across the street from the Thomas and Mack
Center at the University of Las Vegas Nevada, and also across the street from
the entrance to McCarran International Airport. The Center has 120 tee stations,
46 natural grass tees and 74 artificial turf fees, 24 of which are on a second
tier. The range is fully lighted, and is presently operating 24-hours per day.
Approximately 50 of the tees are shaded and equipped with cooling misters for
use during the desert summer season, and many are equipped with heaters for
24-hour use during the cooler months. The Center's landing area for the range is
over 300 yards long and 200 yards wide, and features eight target greens. The
Center also has a 10,000 sq. ft. putting green and a short game practice area
with practice greens, sand traps, and a chipping area. There is presently a
6,500 sq.. ft clubhouse which contains a food & beverage snack area, golf
school, control desk, and administrative offices. The Golf Center has entered
into a long-term lease agreement with Pro Golf of America for a retail golf
store containing approximately 20,000 sq. ft., which was constructed as an
addition to the existing clubhouse. The retail store is expected to open in the
Spring of 1998. The cost of construction was funded in part through proceeds of
a construction loan provided by US Bank of Nevada, and in part through cash
equity provided by the lessee, Pro Golf of America. The Center is owned by Las
Vegas Golf Center, LLC, a Delaware Limited Liability Company (the "LLC"), in
which the Company holds a 21.5% ownership interest. The Company is responsible
for the management, marketing, and day-to-day operation of the Center under a
management agreement with the LLC.
GOLFTOWN. Golftown is a driving range complex located on Route 1 in
Saugus, Massachusetts, approximately 8 miles North of Boston. The facility is
operated by its majority stockholder, Golftown,
-8-
<PAGE> 9
Inc., a Massachusetts corporation. The Company owns a 21.8% ownership interest
in the property. Golftown encompasses 50 lighted tee areas on two levels, two
practice greens, two sand bunkers, and a chipping area. Golftown opened during
August 1996.
NEW ENGLAND COUNTRY CLUB. The New England Country Club is an 18-hole
championship golf course designed by Hale Irwin and located in Bellingham,
Massachusetts. The Club is managed by the Company under a 5-year management
agreement which commenced March 1, 1995, and is cancelable by either party on 90
days' notice. Under the Agreement, as amended in 1996, the Company receives 5.0%
of gross revenues, plus a monthly fee for accounting services.
HARBOR LINKS GOLF COURSE - NORTH HEMPSTEAD, NEW YORK. The Harbor Links
Golf Course is a newly constructed 18 hole golf course, 9-hole executive golf
course, driving range, clubhouse, maintenance building, practice and learning
center, five athletic fields and related golf facilities (the "Facility"). The
Facility is managed by the Company under a ten year management agreement which
commenced in January 1998. Under the agreement the Company receives a base
compensation of $125,000 per annum commencing 60 days prior to the opening of
the facility, which is anticipated to be in the summer of 1998. The base amount
shall increase $25,000 every three years starting 1999.
HEADQUARTERS OFFICES. The Company maintains its corporate headquarters
at 822 Boylston Street, Suite 300, Chestnut Hill, Massachusetts in premises
leased through March 31, 2003. Annual rental payments are $30,000 commencing
April 1, 1998, and increase 4% per year through the term of the lease. In
addition, the Company is responsible for a share of real estate taxes increases
over the base year (1997) amount, up to a maximum of 9% in any year.
Each of the properties owned or controlled by the Company is covered by
appropriate property and liability insurance, and at insurance levels deemed
appropriate by management. Coverage at all properties include property and
liability, automotive, and workers compensation, and at projects with
construction in process, builders risk insurance. The Company also maintains
Officers and Directors Liability coverage in the amount of $5,000,000.
ITEM 3. LEGAL PROCEEDINGS.
- ------- ------------------
On March 3, 1998, the Company brought an action in the United States
District Court for the District of Nevada against unrelated individual
shareholders of Golf Centers of America, Inc., a California corporation, (the
"Sellers") seeking damages and declaratory relief and alleging breach of
contract, fraud and misrepresentation and breach of warranty under the terms of
an agreement dated November 29, 1996 between the Sellers and the Company by
which the Company purchased the Seller's membership interests in Las Vegas Golf
Center, LLC. The Company expects the Sellers to defend the Complaint with
counterclaims seeking to require the Company to make a payment due under the
Agreement in the amount of $200,000 and to deliver certain shares of stock of
the Company, which were due to be issued by January 15, 1998. See Item 1.
Description of Business - Las Vegas International Golf Center, Las Vegas,
Nevada.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS.
- ------- ------------------------------------------------------
No matters were submitted during the fourth quarter of the fiscal year
covered by this report to a vote of security holders, whether through the
solicitation of proxies or otherwise.
-9-
<PAGE> 10
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
- ------- ----------------------------------------------------------------------
The Company's Common Stock has been traded on the Boston Stock
Exchange ("BSE") under the symbol SEN and on the National Association of
Securities Dealers Automated Quotation System Small-Cap Market (the "NASDAQ
Small-Cap Market") under the symbol SRTR since November 16, 1994. Prior to that
time, there was no public market for the Company's Common Stock. The table below
presents the range of high and low closing prices for the Company's Common Stock
by quarter since November 16, 1994 (the date of the Company's initial public
offering) through December 31, 1997:
1994 High Low
---- ---- ---
4th Quarter (Beginning Nov. 16, 1994)............ $5.00 $2.25
1995
----
First Quarter.................................... $3.25 $1.8125
Second Quarter................................... $4.50 $2.00
Third Quarter.................................... $5.50 $3.75
Fourth Quarter................................... $5.125 $3.00
1996
----
First Quarter.................................... $3.75 $3.00
Second Quarter................................... $4.6875 $3.125
Third Quarter.................................... $3.75 $2.375
Fourth Quarter................................... $2.75 $1.9375
1997
----
First Quarter.................................... $2.625 $1.6875
Second Quarter................................... $2.8125 $1.625
Third Quarter.................................... $2.0625 $1.75
Fourth Quarter................................... $2.5625 $1.50
As of March 20, 1998, the Company had in excess of 1,000 stockholders
of record.
The Company has paid no cash dividends since its inception on April 6,
1994. The Company currently intends to retain future earnings, if any, to invest
in new development and acquisition opportunities and, therefore, does not
anticipate paying any cash dividends for the foreseeable future. Any future
payment of dividends will be determined by the Company's Board of Directors and
will depend on the Company's financial condition, results of operations and
other factors deemed relevant by its Board of Directors.
-10-
<PAGE> 11
During 1996, the Company issued or agreed to issue a total of 767,836
shares of Common Stock without registration under the Securities Act of 1933, as
amended (the "Securities Act"). All of such shares were issued as "restricted
securities" as defined in Rule 144 under the Securities Act. Of these shares,
742,836 were issued or agreed to be issued in connection with the Company's
acquisition of its interest in the Las Vegas Golf Center, LLC, and 25,000 were
issued under an agreement for design services being rendered at The Badlands.
During 1997, the Company issued an additional 50,000 shares of common stock in
connection with the purchase of the investment in the Las Vegas Golf Center,
LLC. (See Item 1 - Description of Business - Las Vegas International Golf
Center.) Effective as of August 21, 1997, the Company registered all 767,836 of
the restricted shares under the Securities Act for purposes of potential resale
on the NASDAQ Small-Cap Market.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.
- ------- -----------------------------------------------------------
RISK FACTORS AND CAUTIONARY STATEMENTS
This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Actual results could differ materially from those
projected, anticipated, or implicit, in the forward-looking statements as a
result of the risk factors set forth below and elsewhere in this report.
The industry in which the Company competes is highly competitive and
capital intensive. The Company's future growth and profitability will be
dependent upon future developments and / or acquisitions of additional golf
courses and golf practice facilities. The number of attractive and profitable
acquisition and development opportunities may be limited and the Company may
have to compete with other potential buyers whose financial and management
resources may be substantially larger than those of the Company. There can be no
assurance that the Company will be successful in developing or acquiring any
particular project or that any projects acquired or developed by the Company
will be profitable. Additionally, the Company will be dependent upon third-party
funding in the form of equity participation and/or debt to finance its
development and acquisition of future golf courses and golf practice facilities.
Until funding is obtained for new golf courses and golf practice facilities, the
Company may be unable to proceed with those projects.
In addition to competing with the Company at the acquisition and
development stage, competitors could also acquire and/or develop golf courses
and/or golf practice facilities in the same market as a Company facility, and
put the Company at a competitive disadvantage with respect to pricing and costs
of operation. The Company's future revenue may also be significantly dependent
on industry factors which are beyond its control such as the availability of
discretionary income for golf, a sustained level of popularity for golf, and
shifting consumer preferences.
LIQUIDITY AND CAPITAL RESOURCES
The Company believes that is has sufficient cash and committed
financing to meet its current operating needs.
At December 31, 1997, the Company had $177,174 in cash and cash
equivalents. Additionally, in January 1998, the Company qualified for $750,000
of the $1,000,000 Earnout Advance from
-11-
<PAGE> 12
NationsCredit (defined below) of which the Company has borrowed approximately
$435,000 through March 20, 1998.
On November 15, 1996, The Badlands Golf Club, Inc., a wholly owned
corporate subsidiary of the Company, entered into a loan agreement with
NationsCredit, a NationsBank company, for a construction and permanent loan in
the amount of $5,000,000. At closing, the loan provided the Company with
$4,000,000 to fund the costs of construction of an additional nine holes at The
Badlands, which was completed in September 1997.
In addition to the $4,000,000 made available at closing, the loan
provides for the availability to the Company of an additional $1,000,000 in
"Earnout Advances". In January 1998, the Company had qualified for $750,000 of
the Earnout Advance and borrowed approximately $435,000. The remaining earnout
funds will be made available to the Company over a period of thirty months
following the loan closing so long as certain operating results at The Badlands
are achieved, including minimum debt service coverage ratios, and other revenue
and cash flow criteria, as defined in the loan agreement. The construction loan
is subject to a 20-year amortization, which began on December 1, 1996 and has a
fixed interest rate of 10.95%.
It is the Company's practice to lease golf carts, turf maintenance
equipment, office equipment, and other golf equipment at its owned golf
facilities. The Company is leasing substantially all of its turf maintenance
equipment and certain other furniture, fixtures and equipment at The Badlands
Golf Club under various capital lease obligations. As of December 31, 1997 the
Company had approximately $650,000 outstanding under these capital lease
agreements. The Company has leased its golf cart fleet at The Badlands Golf Club
under an operating lease. See Notes To Consolidated Financial Statements
included in this report.
PLAN OF OPERATION.
- ------------------
The Company's plan of operation for the next twelve months with regards
to existing properties will include continued ownership and operation of the
27-hole golf facility at The Badlands Golf Club in Las Vegas (See Note 9 (c) of
the Notes to the Consolidated Financial Statements included in this report
regarding proposed sale of The Badlands Golf Club.); continued marketing and
management of the Las Vegas International Golf Center, in which the Company has
a 21.5% ownership interest, and serves as the day-to-day manager of the
facility; completion of the planned improvements and amenities at the Las Vegas
International Golf Center, including a 20,000 sq. ft. clubhouse addition which
will be leased to Pro Golf of America, Inc., for the sale of golf merchandise;
continued management of New England Country Club in Bellingham, Massachusetts
which the Company operates under a management contract which commenced in March,
1995; and the management of the newly constructed Harbor Links Golf Course in
North Hempstead, New York, scheduled to open in the Summer of 1998, which the
Company signed to a 10-year management contract commencing January 1998.
RESULTS OF OPERATIONS
- ---------------------
The Company was deemed to be a development stage company as described
in Statement of Financial Accounting Standards No. 7, Accounting and Reporting
by Development Stage Enterprises, from its inception on April 6, 1994 until the
fourth quarter of 1995 when The Badlands Golf Club commenced full operations.
Development stage status was appropriate prior to the fourth quarter of
-12-
<PAGE> 13
1995 since the Company's operations had generated an insignificant amount of
revenue since the date of inception and the Company had devoted most of its
activities and efforts to establishing the business, raising capital, financial
planning, and employee training.
YEAR ENDED DECEMBER 31, 1997 COMPARED WITH THE YEAR ENDED DECEMBER 31, 1996
- ---------------------------------------------------------------------------
NET REVENUES for the year ended December 31, 1997 totaled $5,376,947
compared to $6,697,425 for the year ended December 31, 1996, a decrease of
$1,320,478.
The major reason for the decrease, which was anticipated by management,
was due to the sale of the Forest Lakes Golf Club during December 1996, offset
by increased sales at The Badlands Golf Club. During 1996, Forest Lakes
generated revenues of $1,980,322 compared to $0 in 1997. Revenues at The
Badlands in Las Vegas, Nevada during 1997 totaled $5,186,000, versus $4,302,370
in 1996, an increase of $883,630 (or 21%).
Corporate revenues in 1997 totaled $190,947 and included management and
accounting fees related to the New England Country Club of approximately
$137,000, and Las Vegas Golf Center, LLC of approximately $53,600. During 1996
corporate revenues totaled $414,733, of which $94,032 related to the New England
Country Club management agreement, and $312,500 were nonrecurring revenues
generated form consulting and development fees related to the Las Vegas Golf
Center, LLC.
OPERATING, GENERAL AND ADMINISTRATIVE EXPENSES for the year ended
December 31, 1997 were $6,729,167 compared to $5,752,139 for the year ended
December 31, 1996, an increase of $977,028. Badlands operating expenses totaled
$4,528,072 during 1997 compared to $3,544,640 during 1996, an increase of
$983,432. The increased costs are primarily due to the increased sales volume
associated with the opening of our clubhouse in September 1996 and the
completion of the third nine holes in September of 1997. Forest Lakes expenses
during 1996 totaled $978,660 compared to $0 during 1997. Forest Lakes was sold
by the Company on December 16, 1996.
STPD corporate expenses for the year ended December 31, 1997 totaled
$2,201,095 compared to $1,228,839 during 1996, an increase of $972,256. The
majority of the increase is due to a $645,000 reserve, established in 1997, in
anticipation of a possible write down of the Company's investment in golf
facilities and related guarantees, a $72,000 charge to write off the Company's
option to purchase an additional 13.5% of the Las Vegas Golf Center, LLC,
$101,286 incurred in connection with a proposed development of golf practice
centers in Cranston, Rhode Island and $65,919 of costs associated with a
proposed driving range and golf entertainment center in Houston, Texas.
NONCASH COMPENSATION CREDIT - MANAGEMENT STOCK OPTIONS. Effective June
20, 1994, the Company entered into employee stock option agreements with certain
officers and key employees granting them options to acquire up to 1,111,111
shares of the Company's common stock for an exercise price of $1.00 per share.
During the year ended December 31, 1996 the Company recorded a non-cash
compensation credit adjustment of $1,250,000 representing an adjustment to the
reserve initially established in 1995 to account for the probable future vesting
of these options. At December 31, 1996, the Company's balance sheet reflected an
accrual of $1,250,000 including in stockholders' equity relating to the
management options. The $1,250,000 balance at December 31, 1996 was calculated
based on the market price of the
-13-
<PAGE> 14
Company's common stock on December 31, 1996 ($2.125), less the exercise price of
$1.00 per share, multiplied by the number of shares subject to the options
(1,111,111).
At December 31, 1996, 555,555 (representing 50%) of the management
options issued in 1994 vested, as the Company achieved certain financial
benchmarks called for under the option agreements for the year ended December
31, 1996. On March 19, 1997 a vote was adopted by the Company's Compensation
Committee, and then ratified by the Board of Directors, to amend the option
agreements in order to delete the financial benchmarks as described in the
option agreements. The Board voted to accept the option holders' delay of 10% of
their vested option shares and to replace the benchmarks with an extended
vesting schedule, based on continuing employment with the Company. Under the
revised vesting schedule, 40% or 444,445 of the options vested December 31,
1996, and 60% or 666,666 vested pro rata on December 31, 1997, 1998 and 1999. At
the time these options are exercised, the proceeds will be credited to the
capital accounts. Except as described below, this change will result in no
further charges or credits against earnings related to these management stock
options. During 1997 one of the officers, who had been granted a total of 55,555
options, resigned. As of December 31, 1997, a total of 22,222 (or 40%) of the
officer's options had vested. Accordingly, during 1997, the Company recorded a
$37,500 noncash compensation credit to reverse the compensation expense related
to the unvested options.
During 1997 and 1996, the Company also recorded a noncash compensation
charge of $4,242, and $29,688, respectively, relating to the stock options
granted to an executive officer of the Company during 1996. See Note 5 (g) of
Notes to Consolidated Financial Statements.
INTEREST EXPENSE totaled $827,738 for the year ended December 31, 1997
compared to $785,607 during the year ended December 31, 1996, an increase of
$42,131. Forest Lakes interest totaled $313,022 in 1996 versus $0 in 1997.
Interest expense relating to The Badlands totaled $827,738 during 1997 versus
$472,585 during 1996. Interest at The Badlands relates to a first mortgage of
the golf course; a working capital line of credit; an obligation incurred in
connection with the purchase of water rights; and interest on capital leases
relating to turf maintenance equipment, furniture, fixtures, and other
equipment. The Company also incurred and capitalized approximately $147,000 of
interest relating to construction of the additional nine holes at The Badlands
which was completed in September of 1997. See Notes 3 and 4 to the Consolidated
Financial Statements included herein.
INTEREST INCOME totaled $6,502 during the year ended December 31, 1997
compared to $18,151 in 1996.
EQUITY IN LOSSES OF UNCONSOLIDATED AFFILIATES. On December 31, 1996 the
Company purchased and retained a minority 21.5% ownership interest in the Las
Vegas Golf Center (the "Center"), a golf practice center located in Las Vegas,
Nevada. The Center opened for business on January 17, 1997. The Company accounts
for its ownership interest in the Center under the equity method. Under this
method, the original investment in the Center was recorded at cost and is
adjusted periodically to recognize the Company's share of earnings or losses
after the date of acquisition. For the year ended December 31, 1997, the Company
recorded a $190,331 loss representing the Company's pro rata share in the
Center's startup operations. See Note 2(b) to Consolidated Financial Statements
included herein. At December 31, 1997 the Company had capitalized $1,057,242
related to this investment, which is carried as Investment in Golf Facilities on
the balance sheet included with the Consolidated Financial Statements included
herein. See Item 3 - Legal Proceedings
-14-
<PAGE> 15
Also in 1997 the Company invested $17,646 in Golftown, Inc., a golf
driving range facility in Saugus, Massachusetts, in which the Company has a
21.8% ownership interest. As of December 31, 1997, the Company had written its
investment down to zero to reflect the Company's portion of the loss incurred by
Golftown.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
- ------- --------------------------------------------
The information required by this item is incorporated by reference to
the Financial Statements set forth on pages F-1 through F-28 hereof.
RISK FACTORS AND CAUTIONARY STATEMENTS
When used in this Form 10-KSB and in future filings by the Company with
the Securities and Exchange Commission, in the Company's press releases,
quarterly newsletters and broker conference calls, and in oral statements made
with the approval of an authorized executive officer, the words or phrases "will
likely result", "are expected to", "will continue", "is anticipated",
"estimate", "project", and similar expressions are intended to identify
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such statements are subject to certain risks and
uncertainties, including those discussed under the caption "Risk Factors and
Cautionary Statements" at the beginning of Item 2 of this report. These risks
and uncertainties could cause actual results to differ materially from
historical results and those results and events anticipated or projected.
The Company wishes to caution readers not to place undue reliance on
any such forward-looking statements, which speak only as of the date made. The
Company also wishes to advise readers that the factors contained in this report
could affect the Company's financial performance and could cause the Company's
actual results and financial position to differ materially from any opinions or
statements expressed with respect to future periods in any current statements.
The Company will not undertake and specifically declines any obligation
to publicly release the results of any revisions which may be made to any
forward-looking statements to reflect events or circumstances after the date of
such statements or to reflect the occurrence of anticipated or unanticipated
events.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------- ---------------------------------------------------------------
FINANCIAL DISCLOSURE.
---------------------
Not applicable.
-15-
<PAGE> 16
PART III
--------
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS:
- ------- -------------------------------------------------------------
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
--------------------------------------------------
The current directors, executive officers and significant employees of
the Company are as follows:
Name Age Position Class
- ---- --- -------- -----
Stanton V. Abrams 56 President, Chief Executive Officer III
and Chairman the Board of Directors
Michael J. Meluskey 35 Treasurer, Secretary, Director II
Brendan Kissane 30 Controller N/A
Stanley Bernstein 54 Director III
Arnold Mullen 51 Director III
Robert L. Seelert 55 Director II
Alan Stanzler 55 Director I
The Company currently has six directors. Messrs. Bernstein, Mullen, and
Seelert have served as independent directors since January 1995. Mr. Stanzler
has been an independent director since June 1995. All directors were reelected
at the annual stockholders' meeting on June 27, 1997. Effective with the June
27, 1997 Annual Meeting of Shareholders, the Directors of the Company were
divided into three classes, the first (Class I) are elected for a term of one
year, the second (Class II) are elected for a term of two years, and the third
(Class III) are elected for a term of three years.
The following is a brief account of the business experience of each
director and executive officer named above.
STANTON V. ABRAMS. Mr. Abrams, founder of the Company, has served as President
and Chief Executive Officer and Chairman of the Board of the Company since its
organization in April 1994. From 1977 to 1982 Mr. Abrams was involved in
developing various real estate projects from housing for the elderly to
condominium conversions. During 1982 and prior to entering the golf industry,
Mr. Abrams was Vice President of Marketing, for the A.D. Gosman Company, a real
estate development company serving New England. From 1972 to 1977 Mr. Abrams was
Vice President of Development of The Drucker Company of Boston, a real estate
development firm specializing in shopping centers and hotels. Beginning in late
1982 when the Senior PGA Tour was in its infancy, Mr. Abrams served as the
exclusive representative to many of the Senior Tour golfing professionals,
including Sam Snead, Billy Casper, Julius Boros, Bob Goalby, Bob Toski and Jerry
Barber to establish a relationship with a golf course which would serve as their
home base and practice site as they prepared for the emerging Senior PGA Tour.
From 1983 to May 15, 1994, Mr. Abrams was president of Senior Tour Players,
Inc., a golf
-16-
<PAGE> 17
real estate investment and marketing company which he founded, and of which he
remains the sole owner, whose focus has been on Senior Professional Golfers and
the marketing potential associated with their name recognition and popularity.
Mr. Abrams, a former two-time Rhode Island State Amateur Champion, with a
background in golf, real estate, and law has been instrumental in the promotion,
management and acquisition of numerous golf projects both nationally and
internationally. Mr. Abrams holds a B.A. degree, cum laude from Harvard College
and a J.D. degree from the University of Pennsylvania Law School. He attended
Harvard Graduate School of Design's selected courses in golf course design.
MICHAEL J. MELUSKEY. Mr. Meluskey has served as Treasurer and Secretary and
Director of the Company since its organization in April 1994. From 1986 to the
present, Mr. Meluskey has been closely involved in all aspects of the operations
of Senior Tour Players, Inc., currently as President. His responsibilities have
included identifying golf course acquisitions, managing STP-owned courses,
financial budgeting and planning, and serving as tournament director for
STP-organized events. He holds a B.S. degree in accounting, cum laude, from
Northeastern University.
BRENDAN KISSANE. Mr. Kissane has served as the Company's Controller since June
1997. From May 1996 through June 1997, Mr. Kissane was an Audit Manager with the
accounting firm of Leonard Mulherin & Greene P.C. where he specialized in
privately held businesses and initial public offerings. Prior to that Mr.
Kissane was an In-Charge Auditor for ITT Sheraton Corporation, in the Internal
Audit Department. From 1990 to May 1995 Mr. Kissane was with the accounting firm
of Ranalli & Company where he was employed as a Senior Auditor. Mr. Kissane
holds a B.S. in Accounting from Bentley College.
STANLEY BERNSTEIN. Mr. Bernstein, a Director of the Company since January 1995,
has been Chairman of the Board and Chief Executive Officer of the Biltrite
Corporation since 1985. He is also Chairman of the Board of Alliance
International Group, Inc. and a director of K-Swiss, Inc. Mr. Bernstein holds an
A.B. from Brown University and a J.D. from the University of Pennsylvania Law
School.
ARNOLD MULLEN. Mr. Mullen, a Director of the Company since January 1995, is the
Chief Executive Officer of PFP Associates, a private investment and financial
management firm. He has been a financial consultant and business advisor since
1973. Mr. Mullen, a CPA, began his career 25 years ago with Arthur Andersen &
Co., specializing in taxation. He was an assistant professor of accounting and
holds a BBA degree and an MBA degree from the University of Wisconsin at
Milwaukee.
ROBERT L. SEELERT. Mr. Seelert, a Director of the Company since January 1995,
has been Chief Executive Officer of Cordiant plc, an advertising and marketing
communications firm, since July 1995. Mr. Seelert was a private investor from
February 1994 to July 1995, President and Chief Executive Officer of Kayser-Roth
Corporation, a legwear company from May 1991 to February 1994. He is also a
director of Cordiant plc and the Stride Rite Corporation. Mr. Seelert holds a
B.A. degree from Harvard College and an M.B.A. degree from the Harvard Business
School.
ALAN STANZLER. Mr. Stanzler, a Director of the Company since June 1995, is an
attorney at law and a member of the firm of Davis, Malm & D'Agostine, P.C.
Boston, Massachusetts. Mr. Stanzler holds an A.B. degree from Brown University
and a J.D. degree from Harvard Law School.
-17-
<PAGE> 18
Stanton V. Abrams failed on one occasion with respect to fiscal 1997 to
make a timely report on Form 4 of a sale of the Company's Common Stock. Mr.
Abrams subsequently filed a Form 4 reporting such transaction.
ITEM 10. EXECUTIVE COMPENSATION.
- -------- -----------------------
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid by the Company for
the years ended December 31, 1997, 1996, and 1995, to the Chief Executive
Officer and to each of the individuals who served as an executive officer during
such period.
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
-------------------------- Awards (1)
Name & Principal Position Year Salary ($) Bonus ($) Stock Options (#)
- ------------------------- ---- ---------- --------- -----------------
<S> <C> <C> <C> <C>
Stanton V. Abrams
Chairman, Chief Executive 1995 $196,007 --- ---
Officer and President 1996 $212,308 --- ---
1997 $212,132 --- ---
Lawrence P. Butler (2)
Chief Financial Officer 1995 $ 66,154 $15,000 ---
1996 $106,629 --- 120,000(2)
1997 $ 78,888 --- ---
Richard B. Rogers (3)
Senior Vice President 1995 $54,999 --- ---
1996 $99,423 --- 30,000(3)
1997(3) $53,953 --- ---
Michael J. Meluskey
Treasurer & Secretary 1995 $59,538 $10,000 ---
1996 $78,654 --- 10,000
1997 $75,750 --- ---
Brendan Kissane
Controller 1997(4) $31,731 --- ---
</TABLE>
(1) In addition to the option awards presented in the table, at its
inception in 1994 the Company issued 568,413, 35,000 and 106,500
restricted shares of the Company's Common Stock to Stanton V. Abrams,
Richard B. Rogers, and Michael J. Meluskey, respectively. At that time,
there was no market for the Company's Common Stock. Such shares in each
case had a value at December 31, 1997 (based on the closing price of
$2.0625 for such shares as reported on the NASDAQ Small-Cap Market on
December 31, 1997) of $1,172,352 (Mr. Abrams), $72,188 (Mr. Rogers),
and $219,656 (Mr. Meluskey), respectively.
(2) Mr. Butler, who had joined the Company on March 6, 1995, resigned from
the Company in June 1997. Accordingly, 91,428 of the options granted to
Mr. Butler in 1996 terminated.
-18-
<PAGE> 19
(3) Mr. Rogers resigned from the Company in May 1997. As a result, 33,333
of the 55,555 options granted to Mr. Rogers in 1994, and the 30,000
options granted in 1996 terminated.
(4) Mr. Kissane joined the Company in June 1997.
OPTION GRANTS, OPTION EXERCISES AND FISCAL YEAR-END VALUES
No stock options were granted during 1997 to any executive officers of
the Company. No executive officers exercised options during 1997. The following
table sets forth, for each of the executive officers named in the Summary
Compensation Table above, the year-end value of unexercised options:
Number of Value of Unexercised
Unexercised Options In-The-Money Options
Name at Year-End (1) at Year-end(1)(2)(3)(4)(5)(6)
---- --------------- -----------------------------
Stanton V. Abrams 873,890 $928,508
Richard B. Rogers 22,222 $ 23,611
Michael J. Meluskey 176,666 $177,083
Lawrence P. Butler 28,572 $ 30,358
(1) At December 31, 1997 675,128 options in the above table was currently
exercisable.
(2) Based on the closing price for the underlying Common Stock on the NASDAQ
Small-Cap Market on December 31, 1997 ($2.0625) minus the exercise price of the
in-the-money options (in each case $1.00 per share), multiplied by the number of
underlying shares. See Note 5 of Notes to Consolidated Financial Statements and
Item 6. Management's Discussion and Analysis or Plan of Operation - Noncash
Compensation Charges and Credits.
(3) Does not include the value of 60,000 out-of-the money stock options issued
during December, 1996.
(4) For each of the named individuals, the in-the-money options vest and become
exercisable in the following amounts :
Shares Vested Shares Vested Shares Vested
Option Holder at 12/31/97 at 12/31/98 at 12/31/99
-----------------------------------------------------------------------
Stanton V Abrams 524,334 174,778 174,778
Michael J Meluskey 100,000 33,333 33,333
Richard B Rogers 22,222 --- ---
Lawrence P Butler 28,572 --- ---
(5) During May 1997, Mr. Rogers resigned from the Company resulting in the
termination of (i) 33,333 of the 55,555 in-the-money options granted in 1994,
and (ii) the entire 30,000 out-of-the-money options granted in 1996.
(6) During June 1997, Mr. Butler resigned from the Company resulting in the
termination of (i) 71,428 of the 100,000 in-the-money options granted in 1996,
and (ii) the entire 20,000 out-of-the-money options granted in 1996.
-19-
<PAGE> 20
LONG-TERM INCENTIVE PLAN AWARDS
The Company's stock option plan was adopted by the Board of Directors
and stockholders of the Company as of June 20, 1994 as an incentive for officers
and other key employees. The stock option plan will be administered by the
Independent Directors. The Independent Directors will have sole discretion to
determine employees eligible for grants of options and all terms of the options.
The stock option plan enables the Independent Directors to grant either
incentive or non-qualified stock options. Generally, the exercise price of
incentive stock options must be at least 100% of fair market value of the Common
Stock on the date of grant, while non-qualified stock options may have an
exercise price of nominal consideration. The stock option plan reserves an
aggregate of 350,000 shares which may be subject to options. To date, there have
been granted 195,000 options under the Plan. During 1997, three of the employees
who had been granted options under the Plan resigned from the Company, resulting
in the termination of 131,428 options.
DIRECTOR COMPENSATION
On November 10, 1996, the Board of Directors of the Company adopted,
subject to shareholder approval, the 1996 Non-Employee Director Stock Option
Plan, (the Nonemployee Plan) which was subsequently approved at the June 27,
1997 Annual Meeting of Shareholders. Under the Nonemployee Plan, options for a
maximum of 200,000 shares of common stock may be granted. On December 11, 1996,
the Compensation Committee granted stock options for the purchase of 40,000
shares of common stock to four members of the Board of Directors under the
Nonemployee Plan. The options were granted with an exercise price of $2.1875 per
share, the fair market value on the date of grant and vested immediately. On
January 1, 1997, the Compensation Committee granted stock options for the
purchase of an additional 20,000 shares of common stock to the four members of
the Board of Directors number the Nonemployee Plan. The options were granted
with an exercise price of $2.125 per share, the fair market value on the date of
the grant, and vest immediately.
Other than the stock option discussed herein, the Company's Directors
do not receive any cash compensation for service on the Board of Directors or
any committee thereof, but Directors may also be reimbursed for certain
out-of-pocket expenses incurred in connection with attendance at Board and
Committee meetings.
EMPLOYMENT CONTRACTS
The Company presently does not have any employment agreements.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
- -------- ---------------------------------------------------------------
The following table sets forth certain information known to the Company
regarding the beneficial ownership of the Common Stock of the Company as of
March 20, 1998 by: (1) each person known by the Company to be the beneficial
owner of more than 5% of its outstanding capital stock; (2) each director of the
Company; (3) each of the current executive officers of the Company named in the
Summary Compensation Table under Executive Compensation, and (4) all current
directors and executive officers of the Company as a group.
-20-
<PAGE> 21
Name and Address of Beneficially Percentage of
Beneficial Owner (1) Owned (5) Outstanding Shares (6)
-------------------- --------- ----------------------
Stanton V. Abrams (2) 1,042,681 23.16%
Stanley Bernstein 320,000 7.11%
Paul Fireman (3) 250,000 5.55%
Donald A. Weber 274,341 6.09%
Michael J. Meluskey 208,500 4.63%
Robert L. Seelert 18,000 .40%
Arnold Mullen (4) 50,000 1.11%
Alan Stanzler 20,000 .44%
All directors and
officers as a group 1,659,181 36.85%
(6 persons)
(1) Except as set forth below, each person listed has sole voting and investment
power with respect to the shares shown. The business address of each of these
individuals is 822 Boylston Street, Suite 300, Chestnut Hill, Massachusetts,
02167.
(2) Exclusive of 4,171 shares owned by member of Mr. Abrams' immediate family.
(3) Includes 30,000 shares and warrants owned by a partnership of which Mr.
Fireman is a partner.
(4) Includes 30,000 shares and warrants owned by a partnership of which Mr.
Mullen is a partner.
(5) Includes shares under management options and options granted under the
Company's stock option plan and Nonemployee Directors Stock Option Plan,
provided that such options were vested as of December 31, 1997 and exercisable
within 60 days.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- -------- ----------------------------------------------
In April 1994 the Company issued 568,413 shares to Stanton V. Abrams,
the Company's Chief Executive Officer and Chairman of the Board of Directors,
and 106,500, 35,500 and 9,585 shares, respectively, to Michael J. Meluskey,
Richard B. Rogers and JoAnn M. Parks, each of whom were then officers or
employees of the Company, in consideration of their contribution to the Company
of their respective know how as to golf course operation and management; the
Company issued 305,000 shares of Common Stock to Stanley J. Bernstein, for an
aggregate sales price of $325,000; and the Company issued 175,000 shares of
Common Stock to Paul Fireman for an aggregate sales price of $250,000. Also in
April, 1994, Mr. Abrams sold 10,000 of his shares of the Company's Common Stock
to his sister.
-21-
<PAGE> 22
Messrs. Bernstein and Fireman are beneficial owners of more than five percent
(5%) of its Common Stock.
In January 1995, the Company acquired 97% of STP's general partnership
interest in Forest Lakes Limited Partnership and STP's contract to manage Forest
Lakes Golf Club in Sarasota, Florida. See "Item 1. Description of Business.
Recent Activity."
During July 1996, the Company entered into a guaranty agreement with
Golftown, Inc., a Massachusetts corporation that owns and operates a driving
range facility located in Saugus, Massachusetts, approximately eight miles north
of Boston (the "Project"). The Company has agreed to guaranty a loan in an
amount not to exceed $295,000 made to Golftown, in exchange for a 25% equity
interest in the Project. The President and majority shareholder of Golftown is
Jeffrey Abrams, who is the son of Stanton V. Abrams, President and Chairman of
the Board of Directors of Senior Tour Players Development, Inc. The driving
range opened during August, 1996. In 1997, various capital contributions were
drawn from Golftown's shareholders, and the Company invested approximately
$17,500 which was not sufficient to maintain its equity ownership resulting in a
reduced ownership interest of 21.8% at the end of the calendar year. As of
December 31, 1997 the Company had written its investment down to $0 to reflect
the Company's portion of the loss incurred by Golftown.
(See Item 1 - Description of Business.)
During the past fiscal year, the Company paid legal fees in the
aggregate amount of $84,484 to Davis, Malm & D'Agostine, P.C., a law firm of
which Alan L. Stanzler, a director of the Company, is a member. During the
fiscal year ended December 31, 1996, the Company paid $126,130 in legal fees to
Davis, Malm & D'Agostine, P.C. It is anticipated that the Company will continue
to pay legal fees to Davis, Malm & D'Agostine, P.C. in the future.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
- -------- ---------------------------------
(a) The following documents are filed as part of this report.
1. Financial Statements.
---------------------
Description Page No.
----------- --------
Report of Independent Public Accountants F-1
Consolidated Balance Sheets as of
December 31, 1997 and 1996 F-2
Consolidated Statements of Operations for the Year Ended
December 31, 1997 and 1996 F-3
Statement of Stockholders' Equity for the Year F-4
Ended December 31, 1997 and 1996
Consolidated Statements of Cash Flows for the Year
Ended December 31, 1997 and 1996 F-5
Notes to Consolidate Financial Statements F-7
-22-
<PAGE> 23
2. EXHIBITS The exhibits appearing on the following Exhibit Index are
filed as part of, or incorporated by reference into this report (and appear at
the sequential page numbers indicated).
EXHIBIT INDEX
-------------
Exhibit Page No.
- ------- --------
3.1 Articles of Incorporation*
3.2 By-laws*
4.1 Common Stock Certificate**
4.2 Pages from Articles of Incorporation (and by-laws)
defining rights of holders of Common Stock*
4.3 Form of Underwriters Warrant Agreement**
4.4 Warrant Agreement**
4.5 Master Agreement Among Underwriters**
4.6 Master Selected Dealers Agreement**
10.1 Peccole Ranch Ground Lease*
10.2 Water Rights Agreement*
10.9 Form of Management Stock Option Agreement**
10.10 1994 Stock Option Plan*
10.12 Amendment to Peccole Ranch Ground Lease***
10.15 Management Agreement for New England Country Club***
10.19 Loan Agreement with Greyrock Capital Group, Inc. ****
10.20 Promissory Note (in favor of Greyrock Capital Group, Inc) ****
10.21 Management Agreement for The Badlands Golf Club****
10.23 Purchase and Sale Agreement for Stonebridge
Ranch Development ****
10.24 Purchase Agreement - Las Vegas Golf Center *****
10.25 First Amended And Restated Limited Liability Company
Agreement of Las Vegas Golf Center, LLC *****
10.26 Las Vegas Golf Center, L.L.C. Membership
Interests Purchase and Sale *****
10.27 Letter of Understanding - Membership Interest
Purchase & Purchase Option Agreement *****
10.28 Management Agreement for Harbor Links Golf
Course, North Hempstead, New York
10.29 Guarantee of Loan to Las Vegas Golf Center, L.L.C. *******
21 List of subsidiaries of Registrant ****
23.1 Consent of Independent Public Accountants *******
* Previously filed as an exhibit to Registrant's Registration
Statement on Form SB-2 (No. 33-81934) and hereby incorporated
by this reference.
** Previously filed as an exhibit to Registrant's Registration
Statement on Form SB-2 (No. 33-13362) and hereby incorporated
by this reference.
*** Previously filed as an exhibit to Registrant's Form 10-KSB for
the year ended December 31, 1994 and hereby incorporated by
this reference.
-23-
<PAGE> 24
**** Previously filed as an exhibit to Registrant's Form 10-KSB for
the year ended December 31, 1995 and hereby incorporated by
this reference.
***** Previously filed as a simiarly numbered exhibit to
Registrant's Amendment #1 to it report on Form 8-K dated March
20, 1997 and hereby incorporated by this reference.
****** Previously filed a similarly numbered exhibit to Registrant's
Form 10-KSB for year ended December 31, 1996, and hereby
incorporated by this reference.
******* Filed herewith.
(b) No report on Form 8-K was filed during the last quarter of the
period covered by this report.
-24-
<PAGE> 25
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
Date: March 30, 1998 By: /s/ Stanton V. Abrams
------------------------------------
Stanton V. Abrams, President,
Chief Executive Officer and Director
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.
/s/ Stanton V. Abrams
- ----------------------------- President, Chief Executive March 30, 1998
Stanton V. Abrams Officer and Director
/s/ Brendan Kissane
- ----------------------------- Controller March 30, 1998
Brendan Kissane (Principal Accounting Officer)
/s/ Michael J. Meluskey
- ----------------------------- Treasurer (Principal March 30, 1998
Michael J. Meluskey Financial Officer) and Director
/s/ Stanley Bernstein
- ----------------------------- Director March 30, 1998
Stanley Bernstein
- ----------------------------- Director
Arnold Mullen
- ----------------------------- Director
Robert Seelert
/s/ Alan Stanzler
- ----------------------------- Director March 30, 1998
Alan Stanzler
-25-
<PAGE> 26
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1997 AND 1996
TOGETHER WITH AUDITORS' REPORT
<PAGE> 27
INDEX
PAGE
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS F-1
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1997 AND 1996 F-2
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED
DECEMBER 31, 1997 AND 1996 F-3
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED
DECEMBER 31, 1997 AND 1996 F-4
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED
DECEMBER 31, 1997 AND 1996 F-5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-7
<PAGE> 28
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Senior Tour Players Development, Inc.:
We have audited the accompanying consolidated balance sheets of Senior Tour
Players Development, Inc. (a Nevada corporation) and subsidiary as of December
31, 1997 and 1996, and the related consolidated statements of operations,
stockholders' equity and cash flows for the years then ended. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Senior Tour Players
Development, Inc. and subsidiary as of December 31, 1997 and 1996, and the
results of its operations and its cash flows for the years then ended, in
conformity with generally accepted accounting principles.
Boston, Massachusetts
February 27, 1998 (except with respect to
the matter discussed in Note 9(b) and
Note 9(c) as to which the dates are
March 3, 1998 and March 6, 1998,
respectively)
F-1
<PAGE> 29
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS--DECEMBER 31, 1997 AND 1996
ASSETS
<TABLE>
<CAPTION>
1997 1996
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 177,174 $ 1,585,611
Interest and other receivables 169,086 1,313,151
Inventories 189,651 140,976
Prepaid expenses and other current assets 43,512 59,608
------------- -------------
Total current assets 579,423 3,099,346
------------- -------------
PROPERTY AND EQUIPMENT:
Property and equipment, net of accumulated depreciation (Note 1(e)) 14,351,321 10,373,925
Construction in progress 323,580 546,609
------------- -------------
Property and equipment, net 14,674,901 10,920,534
------------- -------------
RESTRICTED CASH 22,925 20,942
------------- -------------
WATER RIGHTS (Note 3) 1,051,992 1,051,992
------------- -------------
INVESTMENT IN GOLF FACILITIES 1,057,242 1,029,075
------------- -------------
OTHER ASSETS 262,178 389,956
------------- -------------
$ 17,648,661 $ 16,511,845
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 1,556,682 $ 1,032,705
Current portion of long-term debt 890,310 1,711,745
Current portion of obligation under water rights agreement 85,186 77,915
Deferred revenue 174,219 174,928
------------- -------------
Total current liabilities 2,706,397 2,997,293
------------- -------------
LONG-TERM LIABILITIES:
Obligation under water rights agreement 784,307 869,493
Other long-term liabilities 645,000 200,000
Long-term debt 8,996,982 5,269,705
------------- -------------
Total long-term liabilities 10,426,289 6,339,198
------------- -------------
MINORITY INTEREST - 349,946
------------- -------------
COMMITMENTS AND CONTINGENCIES (Note 7)
STOCKHOLDERS' EQUITY:
Preferred stock, $.10 par value-
Authorized--5,000,000 shares
Common stock, $.001 par value-
Authorized--15,000,000 shares
Issued and outstanding--3,751,169 and 3,701,169 shares 3,751 3,701
at December 31, 1997 and 1996, respectively (Note 1(j))
Additional paid-in capital 8,949,973 8,962,843
Management stock options 1,212,500 1,250,000
Deferred compensation - (89,062)
Accumulated deficit (5,650,249) (3,302,074)
------------- -------------
Total stockholders' equity 4,515,975 6,825,408
------------- -------------
$ 17,648,661 $ 16,511,845
============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-2
<PAGE> 30
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
NET REVENUES $ 5,376,947 $ 6,697,425
COSTS AND EXPENSES:
Operating, general and administrative expenses 6,729,167 5,752,139
Noncash compensation credit (33,258) (1,220,312)
------------ ------------
Operating (loss) income (1,318,962) 2,165,598
INTEREST INCOME 6,502 18,151
INTEREST EXPENSE (827,738) (785,607)
------------ ------------
(Loss) income before equity in losses from unconsolidated affiliates and (2,140,198) 1,398,142
minority interest
EQUITY IN LOSSES OF UNCONSOLIDATED AFFILIATES (207,977) -
MINORITY INTEREST IN PARTNERSHIP'S NET INCOME - (349,946)
------------ ------------
Net (loss) income $ (2,348,175) $ 1,048,196
============ ============
NET (LOSS) INCOME PER COMMON AND COMMON EQUIVALENT SHARE:
Basic $ (0.63) $ 0.36
============ ============
Diluted $ (0.63) $ 0.28
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING:
Basic 3,734,046 2,937,834
============ ============
Diluted 3,734,046 3,681,661
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 31
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
AND SUBSIDIARY
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
NUMBER OF $.001 PAR PAID-IN MANAGEMENT DEFERRED ACCUMULATED STOCKHOLDERS'
SHARES VALUE CAPITAL OPTIONS COMPENSATION DEFICIT EQUITY
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1995 2,933,333 $ 2,933 $ 7,545,040 $ 2,500,000 $ - $(4,350,270) $ 5,697,703
Noncash compensation credit - - - (1,250,000) - - (1,250,000)
Deferred compensation related to - - 118,750 - (118,750) - -
issuance of stock options
Amortization of deferred compensation - - - - 29,688 - 29,688
Issuance of common stock 767,836 768 1,299,053 - - - 1,299,821
Net income - - - - - 1,048,196 1,048,196
----------- -------- ----------- ----------- --------- ----------- -----------
BALANCE, DECEMBER 31, 1996 3,701,169 3,701 8,962,843 1,250,000 (89,062) (3,302,074) 6,825,408
Noncash compensation credit - - - (37,500) - - (37,500)
from cancellation of unvested
management options
Amortization of deferred compensation - - - - 4,242 - 4,242
Reduction of deferred compensation - - (84,820) - 84,820 - -
upon termination of employment
Issuance of common stock 50,000 50 71,950 - - - 72,000
Net loss - - - - - (2,348,175) (2,348,175)
----------- -------- ----------- ----------- --------- ----------- -----------
BALANCE, DECEMBER 31, 1997 3,751,169 $ 3,751 $ 8,949,973 $ 1,212,500 $ - $(5,650,249) $ 4,515,975
=========== ======== =========== =========== ========= =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 32
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net (loss) income $(2,348,175) $ 1,048,196
Adjustments to reconcile net (loss) income to net cash provided
by (used in) operating activities-
Depreciation and amortization 505,445 654,500
Write-off of Las Vegas Golf Center, LLC purchase option 72,000 --
Noncash compensation credit (33,258) (1,220,312)
Distribution of minority interest in Partnership's net income (349,946) --
Equity in losses of unconsolidated affiliates 207,977 --
Gain on sale of Forest Lakes Limited Partnership -- (788,946)
Minority interest in Partnership's net income -- 349,946
Net proceeds from sale of Forest Lakes Limited Partnership -- 499,577
Gain on sale of fixed assets -- (6,761)
Changes in assets and liabilities-
Interest and other receivables 1,126,419 (1,215,491)
Inventories (48,675) (77,724)
Prepaid expenses and other current assets 16,096 36,613
Accounts payable and accrued expenses 968,977 92,432
Deferred revenue (709) 153,527
----------- -----------
Net cash provided by (used in) operating activities 116,151 (474,443)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment, net (3,891,973) (2,250,507)
Golf course development costs capitalized in construction in progress (46,750) (546,609)
Increase in restricted cash (1,983) (8,377)
Increase in other assets (2,511) (91,058)
Proceeds from sale of fixed assets -- 47,500
Investments in unconsolidated affiliate (146,498) --
Cash paid for interest in the Las Vegas Golf Center, LLC -- (1,639,247)
Proceeds from sale of interest in the Las Vegas Golf Center, LLC -- 2,167,993
----------- -----------
Net cash used in investing activities (4,089,715) (2,320,305)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 4,384,885 3,221,555
Repayment of long-term debt (1,819,758) (314,580)
----------- -----------
Net cash provided by financing activities 2,565,127 2,906,975
----------- -----------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (1,408,437) 112,227
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,585,611 1,473,384
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 177,174 $ 1,585,611
=========== ===========
</TABLE>
F-5
<PAGE> 33
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
(Continued)
<TABLE>
<CAPTION>
1997 1996
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS:
<S> <C> <C>
Deferred compensation related to issuance of stock options $ -- $ 118,750
=========== ===========
Equipment acquired under capital lease $ 262,800 $ 25,876
=========== ===========
Common stock issued for services $ -- $ 50,000
=========== ===========
Common stock issued for Las Vegas Golf Center, LLC purchase option $ -- $ 72,000
=========== ===========
Lapse of deferred compensation upon termination of employment $ 84,820 $ --
=========== ===========
Inconnection with the sale of Forest Lakes Limited Partnership in fiscal
1996 (see Note 2), the following noncash transaction occurred-
Book value of assets sold $ -- $ 3,038,736
Payment of partnership liabilities -- (3,328,105)
----------- -----------
Investment -- (289,369)
Net proceeds from sale of Forest Lakes Limited Partnership -- (499,577)
----------- -----------
Gross gain on sale of Forest Lakes Limited Partnership -- (788,946)
Minority interest -- 349,946
----------- -----------
Gain on sale of Forest Lakes Limited Partnership $ -- $ (439,000)
=========== ===========
In connection with the acquisition of the 21.5% and 48.5% interests in the
Las Vegas Golf Center, LLC in fiscal 1996 (see Note 2), the following noncash
transaction occurred-
Fair value of assets acquired $ (72,000) $(3,197,068)
Common stock issued 72,000 1,177,821
Consideration payable -- 380,000
----------- -----------
Cash paid for interest in the Las Vegas Golf Center, LLC $ -- $(1,639,247)
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for-
Interest (net of capitalized interest of $144,913 and $128,971, respectively) $ 793,288 $ 738,446
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 34
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
(1) OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
Senior Tour Players Development, Inc. and subsidiary (the Company) was
organized as a Nevada corporation on April 6, 1994 for the purposes of
developing, acquiring, and managing semiprivate, private and public golf
courses and golf practice facilities throughout the United States. The
Company also provides golf course management services and marketing
services for golf course residential development projects.
The accompanying consolidated financial statements include the accounts
of the Company and its wholly owned subsidiary, The Badlands Golf Club,
Inc. (The Badlands), which was established in 1995, and is located in Las
Vegas, Nevada. For the period from January 1995 through December 16, 1996
(the ownership period), the Company owned a majority (53.5%) interest in
the Forest Lakes Limited Partnership (Forest Lakes). Accordingly, the
financial information presented herein includes the revenue and expense
of Forest Lakes during the ownership period. The Company sold its
interest in Forest Lakes on December 16, 1996 (Note 2(a)). All
significant intercompany transactions and balances have been eliminated
in consolidation. See Note 9-- Subsequent Events.
The accompanying consolidated financial statements reflect the
application of certain accounting policies described in this note and
elsewhere in the accompanying notes to consolidated financial statements.
(a) Management Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
(b) Concentrations of Risk
Statement of Financial Accounting Standards (SFAS) No. 105,
Disclosure of Information About Financial Instruments with
Off-Balance-Sheet Risk and Financial Instruments with
Concentrations of Credit Risk, requires disclosure of any
significant off-balance-sheet and credit risk concentrations. The
Company has no significant off-balance-sheet concentration of
credit risk, such as foreign exchange contracts, options contracts
or other foreign hedging arrangements, except for the loan
guarantee discussed in Note 7(b) of commitment and contingencies.
F-7
<PAGE> 35
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
(Continued)
(c) Cash and Cash Equivalents
The Company considers all highly liquid debt instruments purchased
with an original maturity of three months or less to be cash
equivalents.
(d) Inventories
Inventories are stated at the lower of cost or market, and consist
of food and beverage, golf equipment, clothing and accessories,
all sold at retail.
(e) Property, Equipment and Depreciation
Property and equipment are stated at cost. Depreciation is
computed using the straight-line method over the estimated useful
lives of the assets. Interest costs, during the construction
period, on borrowings used to finance construction of facilities
are included in the cost of the constructed facilities.
Property, equipment and accumulated depreciation consist of the
following at December 31, 1997 and 1996:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL
1997 1996 LIVES
<S> <C> <C> <C>
Land improvements $11,406,045 $ 7,308,935 15-40 years
Buildings 2,634,228 2,632,228 31.5 years
Golf carts and equipment 835,357 527,175 3-15 years
Furniture, fixtures and equipment 192,433 180,461 5-7 years
Office and computer equipment 119,939 114,651 5 years
Leasehold improvements 12,559 12,559 3 years
----------- -----------
15,200,561 10,776,009
Less--Accumulated depreciation 849,240 402,084
----------- -----------
$14,351,321 $10,373,925
=========== ===========
</TABLE>
F-8
<PAGE> 36
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
(Continued)
(f) Construction in Progress
At December 31, 1997, construction in progress consisted of
design, construction and other costs incurred in connection with
the design, engineering and planning costs incurred in connection
with the Company's planned golf course development project in
McKinney, Texas (see Note 2(b)).
(g) Other Assets
Other assets consist of the following at December 31, 1997 and
1996:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Deferred debt financing costs, net of accumulated amortization $ 172,828 $ 224,036
of $84,510 and $33,043, respectively
Organization costs, net of accumulated amortization of $22,175 11,943 18,765
and $15,353, respectively
Las Vegas Golf Center, LLC purchase option - 72,000
Deposits 75,503 73,513
Other 1,904 1,642
---------- ----------
$ 262,178 $ 389,956
========== ==========
</TABLE>
Deferred financing costs consist of costs incurred in connection
with the Badlands financing agreements (see Note 3(c)), which are
being amortized over the five-year initial term of the loans.
Organization costs at December 31, 1997 and 1996, consist of legal
and other costs incurred in connection with the organization of
the Company. These costs are being amortized using the
straight-line method over five years.
(h) Net Revenues
Net revenues consists primarily of green fees, membership dues,
golf cart rental fees, golf course management and development
fees, food and beverage sales and pro shop merchandise sales.
Deferred revenues consist of prepaid membership dues, which are
recognized ratably over the term of the membership.
F-9
<PAGE> 37
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
(Continued)
(i) Net (Loss) Income per Common and Common Equivalent Share
In 1997, the Company adopted SFAS No. 128, Earnings per Share,
effective December 15, 1997. SFAS No. 128 establishes standards
for computing and presenting earning per share and applies to
entities with publicly held common stock or potential common
stock. The Company has applied the provisions of SFAS No. 128
retroactively to all periods presented. The dilutive effect of
potential common shares in 1997, consisting of outstanding stock
options is determined using the treasury method and the
if-converted method, respectively, in accordance with SFAS No.
128. Diluted weighted average shares outstanding for 1997 and 1996
exclude the potential common shares from stock options because to
do so would have been antidilutive for the years presented.
Calculations of basic, dilutive and pro forma diluted net (loss)
income per common share and potential common share are as follows:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Net (loss) income $ (2,348,175) $ 1,048,196
============ ============
Weighted average common shares outstanding 3,734,046 2,937,834
Potential common shares related to stock options -- 743,827
------------ ------------
Diluted weighted average shares 3,734,046 3,681,661
============ ============
Basic net (loss) income per common share $ (0.63) $ 0.36
============ ============
Diluted net (loss) income per share and
potential common share $ (0.63) $ 0.28
============ ============
</TABLE>
(j) Common Stock
Shares issued and outstanding at December 31, 1997 include 161,644
shares to be issued in January 1998 in accordance with the
Company's purchase of the 21.5% interest in the Las Vegas Golf
Center, LLC, a Delaware limited liability company (the LLC),
during 1996 (see Note 2(c)). However, the issuance of these shares
has been delayed pending the outcome of legal action brought by
the Company against the prior owners of the LLC (see Note 9(b)).
F-10
<PAGE> 38
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
(Continued)
(k) Recently Issued Accounting Standards
The Financial Accounting Standards Board (FASB) issued SFAS No.
130, Reporting Comprehensive Income, and is required to be adopted
by the Company no later than fiscal year 1998. This statement
establishes standards for reporting and display of comprehensive
income and its components in a full set of general purpose
financial statements. Comprehensive income is the total of net
income and all other nonowner changes in equity. The Company plans
to adopt this statement in the first quarter of fiscal year 1998.
The FASB issued SFAS No. 131, Disclosures About Segments of an
Enterprise and Related Information, which is required to be
adopted by the Company no later than fiscal year 1998. This
statement introduces a new model for segment reporting, called the
"management approach." The management approach is based on the way
that the chief operating decision maker organizes segments within
a company for making operating decisions and assessing
performance. Reportable segments can be based upon any manner in
which management disaggregates the Company. Such segments could
include products and services, geography, legal structure and
management structure. The Company plans to adopt this statement in
the first quarter of 1998.
(2) ACQUISITIONS AND SALES
(a) Sale of Forest Lakes Partnership Interest
In January 1995, the Company acquired a combined 53.5% interest in
Forest Lakes.
On December 16, 1996, the Company sold its interest in Forest
Lakes. The sale was structured as a sale of substantially all of
the assets of Forest Lakes Limited Partnership. The buyer was BST
Associates, an Illinois general partnership. The cash purchase
price was $4,000,000 paid at closing. Broker commissions and
direct costs relating to the sale totaled $172,318 and proceeds
allocated to retire Partnership liabilities totaled $3,328,105,
resulting in net sale proceeds to the Partnership of $499,577.
Under the terms of the Forest Lakes Limited Partnership Agreement,
the sale of all of the Partnership's property and the conversion
of all proceeds into cash requires that the Partnership be
dissolved. Accordingly, as General Partner, the Company dissolved
the Partnership and caused a distribution of all available cash
proceeds to the partners during 1997.
F-11
<PAGE> 39
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
(Continued)
(b) Proposed Golf Course Development--McKinney, Texas
During March 1996, the Company signed a purchase and sale
agreement and related documents for the proposed development of an
18-hole championship golf facility (the Property) located within
the Stonebridge Ranch Development in McKinney, Texas,
approximately 25 miles north of Dallas.
In November 1996, the original property owner of Stonebridge Ranch
Development sold their interest in the entire development. The
Company is currently negotiating with the new owners to assign the
Company's rights to develop the property to the new owners. In
consideration, the new owners agree to reimburse the Company's
actual costs incurred to date and to assume certain unpaid
liabilities related to this development. As of December 31, 1997,
the Company has capitalized approximately $323,100 related to this
development, which is included in construction in process.
(c) Purchase and Sale of Investment in Las Vegas Golf Center, LLC
On December 31, 1996, the Company acquired a 21.5% interest and a
48.5% interest, and subsequently sold the 48.5% interest in 1997,
in the Las Vegas Golf Center (the Center), a golf practice
facility located in Las Vegas, Nevada. The Center is situated on
approximately 42 acres of land leased from Clark County, Nevada.
The Center is owned by the LLC. The Center includes a driving
range with approximately 120 tee stations on two tiers, a golf
school teaching area and a 6,500 sq. ft. clubhouse. The Center
opened for business on January 17, 1997.
The Company acquired a 21.5% interest in the LLC from unrelated
individual shareholders of Golf Centers of America, Inc., a
California corporation, for an aggregate purchase price of
$400,000 cash consideration, and 323,289 shares of the Company's
common stock, $.001 par value per share (STPD Shares), payable as
follows:
<TABLE>
<CAPTION>
<S> <C>
Cash Consideration $20,000 paid on December 13, 1996
$180,000 paid on January 15, 1997
$200,000 payable on or before January 15, 1998
STPD Shares 161,645 shares issued on January 15, 1997
161,644 shares to be issued on or before January 15, 1998
</TABLE>
F-12
<PAGE> 40
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
(Continued)
As of December 31, 1997 and 1996, the Company has capitalized
$1,057,242 and $1,029,075 related to this investment, which is
included in investment in golf facilities on the accompanying
balance sheet as of December 31, 1997 and 1996.
The Company also acquired an additional 48.5% interest in the LLC
from unrelated individual shareholders of Selleck Properties,
Inc., a California corporation, for an aggregate purchase price of
$1,532,050 cash consideration, and 369,547 shares of the Company's
common stock, $.001 par value per share.
All of the shares issued or payable in connection with these
transactions are restricted securities, as defined in Rule 144
promulgated under the Securities Act of 1933, as amended. Because
the STPD Shares are restricted, the Company obtained an
independent appraisal valuing the STPD Shares at a discount from
their traded fair value at the transaction date. The Company has
used a 20% discount in recording the value of the STPD Shares
issued. The Company has granted the sellers of the interests the
right to demand registration of their common stock on a Form S-3
registration statement or similar form at any time after May 1,
1997. The Company received this request during May 1997 and filed
a registration statement that became effective in August 1997. The
sellers of the 21.5% interest and 48.5% interest have agreed,
pursuant to shareholder agreements, to vote their common stock for
the slate of directors proposed by management of the Company
through December 31, 1998 (in the case of the 21.5% interest) or
the first to occur of (i) June 30, 1999, or (ii) the date on which
Stanton V. Abrams ceases to serve as the President and Chief
Executive Officer of the Company (in the case of the 48.5%
interest).
Immediately following the acquisition of the 48.5% interests, the
Company sold a 48.5% interest in the LLC to Paul Fireman, an
individual investor and Company stockholder, for cash
consideration of $2,167,953. In addition, the Company received a
$200,000 consulting fee from Fireman in consideration of certain
services rendered in connection with the structuring and
implementation of the transaction, as well as for arranging
certain financing for the LLC. This fee has been included in
revenue in the accompanying consolidated statement of operations
for the year ended December 31, 1996. See Note 8(b)--Related Party
Transactions.
In consideration of 50,000 shares of common stock of the Company,
$.001 par value per share, the Company shall have the option to
purchase from Paul Fireman a 13.5% interest in the LLC (the
Option). The Company did not exercise the Option on or before
December 31, 1997. If the Company had exercised the option, the
price for a 13.5% LLC interest would have been $900,000. If the
Company exercises the Option after December 31, 1997 but on or
before December 31, 1998, the price for a 13.5% LLC interest shall
be $1,075,000. If the Company exercises the Option after December
31, 1998 but on or before December 31, 1999, the price for
F-13
<PAGE> 41
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
(Continued)
a 13.5% LLC interest shall be $1,350,000. In 1997, the Company
wrote off the carrying values of the option because it has no
intent to exercise.
Additionally, in consideration of certain consulting services and
modification of existing contractual rights relating to the
acquisition of the Company's 21.5% membership interest in the LLC
and the financing of the golf practice facility owned and operated
by the LLC, the Company issued in May 1997 to the Ranchito
Company, LLC (Ranchito), 50,000 shares of common stock of the
Company. Ranchito is the owner of the remaining 30% membership
interest in the LLC that was not acquired on December 31, 1996.
The Company has been designated the Managing Member of the LLC,
and shall be responsible for the day-to-day management, marketing
and operation of the Center. The Company shall receive a
management fee equal to 5% of gross revenues generated by the LLC
as compensation under the terms of the management agreement and
shall also be reimbursed for certain accounting and out-of-pocket
expenses. The Company has also agreed to provide accounting
services to the LLC at $1,200 per month. During 1997, the Company
recognized approximately $35,600 of management fees and
approximately $18,000 of accounting fees from the LLC (see Note
7(b)).
(3) GOLF COURSE DEVELOPMENT COSTS
In connection with the original eighteen whole facility at the Badlands
Golf Club, which was completed in October 1995, and the additional nine
holes, which were completed in September, 1997, the Company has entered
into the following significant contracts and agreements:
(a) Badlands Land Lease Agreement
The Company leases 186 acres of land in Las Vegas, Nevada, for a
term of 50 years, expiring in July 2045. The lease agreement
contains four 10-year options to extend the term of the lease
based on certain terms, as defined. The lease requires minimum
rental payments of $240,000 per annum, commencing July 1, 1995,
with an increase every three years based on the increase in the
Consumer Price Index.
During June 1996, the Company leased an additional 67 acres
abutting The Badlands, which was used to develop an additional
nine holes that was completed in September 1997. The term of the
lease will be co-terminous with the existing lease, expiring in
July 2045, with four 10-year extension options. The lease requires
minimum rental payments of $120,000 per annum,
F-14
<PAGE> 42
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
(Continued)
commencing on October 1, 1997 with an increase every three years
based on the increase in the Consumer Price Index.
Both leases contain a contingent rental clause requiring the
Company to pay an amount equal to the amount by which 6% of annual
gross receipts, as defined, at The Badlands exceeds the minimum
annual rental of $360,000. The lease also requires the Company to
pay real estate taxes, assessments and other charges in connection
with the leased property. Total rent expense related to the land
agreements were $324,248 and $240,000 for the years ended December
31, 1997 and 1996, respectively.
Minimum payments required under The Badlands two land lease
agreements are as follows:
<TABLE>
<CAPTION>
18 HOLES 9 HOLES TOTAL
Year ended December 31,
<S> <C> <C> <C>
1998 $ 240,000 $ 120,000 $ 360,000
1999 240,000 120,000 360,000
2000 240,000 120,000 360,000
2001 240,000 120,000 360,000
2002 240,000 120,000 360,000
Thereafter 10,200,000 5,100,000 15,300,000
------------ ----------- ------------
Total $ 11,400,000 $ 5,700,000 $ 17,100,000
============ =========== ============
</TABLE>
(b) Water Rights Agreement
The Company has purchased 399 acre-feet of water rights under a
water rights agreement (the Agreement) for use at The Badlands.
The Agreement requires the Company to pay $13,300 per month
commencing on July 1, 1995 and continuing for 10 years through
July 2005. The obligation under the water rights agreement has
been capitalized in the accompanying consolidated balance sheets.
The capitalized water rights will not be amortized since the asset
has an indefinite and indeterminable life span and is transferable
by the Company subject to certain restrictions in the Agreement.
F-15
<PAGE> 43
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
(Continued)
As of December 31, 1997, future minimum payments under the water
rights agreement are as follows:
<TABLE>
<CAPTION>
Year ended December 31,
<S> <C>
1998 $ 159,600
1999 159,600
2000 159,600
2001 159,600
2002 159,600
Thereafter 399,000
----------
Total obligation under the water rights agreement 1,197,000
Less--Amount representing interest calculated at the
Company's incremental borrowing rate 327,507
----------
Present value of minimum payments 869,493
Less--Current obligation 85,186
Long-term obligation $ 784,307
==========
</TABLE>
(c) Construction and Term Loan Agreements
In December 1995, the Company entered into a $6,700,000 loan
agreement (the loan) with NationsCredit. At the closing, the loan
provided the Company with $3,384,000, which was used to (i) pay
off the then outstanding Badlands construction loan; (ii) return
approximately $1,200,000 in cash to the Company; and (iii) provide
$1,616,000 to complete construction of The Badlands clubhouse and
other structures. In November 1996, the loan was modified to run
concurrently with the construction loan discussed below. Under the
modification agreement, the lender has capped the borrowings at
approximately $5,000,000. The loan is subject to a 20-year
amortization, which began on December 1, 1996 and has a fixed
interest rate of 10.78%.
In November 1996, the Company entered into a $5,000,000
construction and permanent loan agreement (the construction loan)
with NationsCredit for development of an additional nine holes at
The Badlands. The construction loan provided for up to $4,000,000
for construction and other indirect costs associated with the
development of the additional nine holes at The Badlands, and also
provides for the availability of up to $1,000,000 in Earnout
Advances. In
F-16
<PAGE> 44
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
(Continued)
January 1998, the Company had qualified for $750,000 of the
Earnout Advance and borrowed approximately $435,000. The remaining
earnout funds will be made available to the Company over a period
of thirty months following the loan closing so long as certain
operating results at The Badlands are achieved, including minimum
debt service coverage ratios and other revenue and cash flow
criteria, as defined in the loan agreement. The construction loan
is subject to a 20-year amortization, which began on December 1,
1996 and has a fixed interest rate of 10.95%.
The loan term for each of the NationsCredit loans is five years
with the remaining principal due at maturity on December 1, 2001;
however, the Company may extend the term of each loan for an
additional five years upon payment of an extension fee of .5% of
the outstanding balance due and assuming the Company meets certain
terms and conditions, as defined in the agreements. Borrowings are
collateralized by a Deed of Trust and a security interest in
substantially all assets of The Badlands. Each loan is
cross-collateralized and cross-defaulted with the other.
(4) LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Mortgage note payable to NationsCredit, secured by The Badlands
(see Note 3(c)), interest is at 10.78%, with principal and interest
of approximately $47,800 due monthly, with the balance due at
maturity on December 1, 2001 $ 4,875,067 $ 4,807,188
Construction note payable to NationsCredit, secured by The Badlands
(see Note 3(c)), interest is at 10.95%, with principal and interest
of approximately $48,250 due monthly, with the balance due at
maturity on December 1, 2001 3,859,012 205,364
Capital lease obligation for turf maintenance and other equipment,
principal and interest payments of approximately $12,660 due
monthly, final maturity date of September 30, 1999 239,787 356,729
Capital lease obligation for furniture, fixtures and other
equipment, principal and interest payments of approximately $3,995
due monthly, final maturity date of January 1, 2002 156,050 188,093
</TABLE>
F-17
<PAGE> 45
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
(Continued)
<TABLE>
<CAPTION>
<S> <C> <C>
Capital lease obligation for equipment principal and interest
payments of approximately $1,040 due monthly, final maturity date
of June 13, 2001 $ 39,227 $ -
Capital lease obligation for equipment principal and interest
payments of approximately $130 due monthly, final maturity date of
May 31, 2002 5,434 -
Capital lease obligation for turf maintenance and other equipment
principal and interest payments of approximately $4,460 due
monthly, final maturity date of June 1, 2002 192,793 -
Capital lease obligation for telephone equipment, principal and
interest payments of approximately $595 due monthly, final maturity
date of September 11, 2001 19,922 $ 24,318
Unsecured line of credit, with interest at the prime rate (8.5% at
December 31, 1997) plus 1.5%, final maturity date of October 31,
1998 500,000 1,399,758
----------- -----------
Total debt 9,887,292 6,981,450
Less--Current portion 890,310 1,711,745
----------- -----------
Total long-term debt $ 8,996,982 $ 5,269,705
=========== ===========
</TABLE>
On October 1, 1997, the Company entered into a credit agreement with a
commercial bank for an unsecured line of credit of $500,000, expiring
October 31, 1998. Borrowings under the agreement bear interest at the
prime rate plus 1.5%.
F-18
<PAGE> 46
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
(Continued)
Future maturities of long-term debt as of December 31, 1997 are as
follows:
NOTES CAPITAL
PAYABLE LEASES TOTAL
1998 $ 681,136 $ 209,174 $ 890,310
1999 198,104 201,299 399,403
2000 223,056 102,611 325,667
2001 8,131,783 109,519 8,241,302
2002 - 30,610 30,610
----------- ----------- -----------
Total $ 9,234,079 $ 653,213 $ 9,887,292
=========== =========== ===========
(5) STOCKHOLDERS' EQUITY
(a) Common Stock
In November 1994, the Company sold 1,600,000 shares of common
stock and warrants at a price of $5.00 per common share and $.10
per warrant through an initial public offering. Each warrant
entitles the holder to purchase one share of the Company's common
stock at an exercise price of $5.50, subject to adjustment, at any
time until November 16, 1999, at which time the warrants expire.
The warrants are subject to redemption by the Company at a
redemption price of $5.10 per warrant on 30 days' written notice,
provided the average of the closing bid prices of the common stock
of the Company equals or exceeds $8.00 for 20 consecutive trading
days preceding the notice of redemption.
During 1996, the Company issued 742,836 shares of common stock in
connection with the purchase and sale of investment in the Las
Vegas Golf Center, LLC (LVGC) discussed in Note 2(c). In addition,
the Company issued 25,000 shares to Johnny Miller Design, Ltd. for
design services rendered at The Badlands.
During 1997, the Company issued an additional 50,000 shares of
common stock in connection with the purchase of the investment in
the LVGC, discussed in Note 2(c).
F-19
<PAGE> 47
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
(Continued)
(b) Underwriter's Warrants
In connection with the Company's initial public offering in
November 1994, the Company issued 160,000 warrants to the
underwriter (the Underwriter's Warrants). Each Underwriter's
Warrant entitles the Underwriter to purchase one share of common
stock for $7.25 and one warrant for $.15.
(c) Overallotment Option
In addition to the Underwriter's Warrants, the Company granted an
overallotment option (the Overallotment Option) to the
Underwriter. The Overallotment Option entitled the Underwriter to
purchase additional shares of common stock and/or additional
warrants at the public offering price less the underwriting
discounts and commissions, as defined. In December 1994, the
Underwriter exercised its option and purchased 153,200 warrants
for $13,351 net of discounts and commissions.
(d) Preferred Stock
The Company is authorized to issue 5,000,000 shares of preferred
stock with such designations, voting and other rights and
preferences as may be determined from time to time by the Board of
Directors.
(e) Stock Option Plans
On June 20, 1994, the Company adopted the 1994 Employee Stock
Option Plan (the Employee Plan) that provides for the granting of
nonqualified and incentive stock options, as defined by the
Internal Revenue Code, to key employees at prices determined by
the Compensation Committee of the Board of Directors. Under the
Employee Plan, options for a maximum of 350,000 shares of common
stock may be granted over a period not to exceed 10 years. At
December 31, 1997, 195,000 options have been granted under this
plan. During 1997, three of the employees who had been granted
options under the plan resigned from the Company, resulting in the
termination of 131,428 options. For the remaining options granted
under the Employee Plan, 35,000 options had an exercise price of
$2.1875 per share, the fair market value on the date of grant and
vest in five annual equal installments beginning in December 1997.
At December 31, 1997, 7,000 of these options had vested. The terms
of the other remaining 28,572 options issued under the Employee
Plan are detailed in Note 5(g).
F-20
<PAGE> 48
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
(Continued)
On November 10, 1996, the Board of Directors of the Company
adopted, subject to shareholder approval, the 1996 Non-Employee
Director Stock Option Plan (the Nonemployee Plan) which was
subsequently ratified by the shareholders. Under the Nonemployee
Plan, options for a maximum of 200,000 shares of common stock may
be granted. On December 11, 1996, the Compensation Committee
granted stock options for the purchase of 40,000 shares of common
stock to four members of the Board of Directors under the
Nonemployee Plan. The options were granted with an exercise price
of $2.1875 per share, the fair market value on the date of grant
and vested immediately. On January 1, 1997, the Compensation
Committee granted stock options for the purchase of an additional
20,000 shares of common stock to the four members of the Board of
Directors under the Nonemployee Plan. The options were granted
with an exercise price of $2.125 per share, the fair market value
on the date of grant, and vested immediately.
(f) Stock Option Agreements--Management Options
Effective June 20, 1994, the Company entered into employee stock
option agreements with certain officers and key employees granting
them options to acquire up to 1,111,111 shares of the Company's
common stock for an exercise price of $1.00 per share. Under these
agreements, each employee's options vest and become exercisable
based on the Company achieving certain financial benchmarks, as
defined. The options must be exercised by December 31, 2004.
During the fourth quarter of 1995, in accordance with Accounting
Principles Board (APB) Opinion No. 25, Accounting for Stock Issued
to Employees, the Company recorded a noncash compensation charge
for $2,500,000 based on its estimate of the value related to the
probable future vesting of stock options granted to these
individuals. The noncash compensation charge at December 31, 1995
was calculated based on the market price of the Company's common
stock on December 31, 1995 ($3.25), less the exercise price of
$1.00 per share, multiplied by the number of shares subject to the
options (1,111,111).
During the year ended December 31, 1996, the Company recorded a
noncash compensation credit of $1,250,000. The adjustment
reflected a decrease in the market price of the Company's common
stock of $1.125 per share from the closing price on December 31,
1995 ($3.25) compared to the closing price on December 31, 1996
($2.125).
At December 31, 1996, the Company's balance sheet reflected an
accrual of $1,250,000 included in stockholders' equity relating to
the management options. The $1,250,000 balance at December 31,
1996 was calculated based on the market price of the Company's
common stock on December 31, 1996 ($2.125), less the exercise
price of $1.00 per share, multiplied by the number of shares
subject to the options (1,111,111).
F-21
<PAGE> 49
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
(Continued)
At December 31, 1996, 555,555 (representing 50%) of the management
stock options vested, as the Company achieved the financial
benchmarks called for under the option agreements for the year
ended December 31, 1996. On March 19, 1997, a vote was adopted by
the Company's Compensation Committee, and then ratified by the
Board of Directors, to amend the option agreements in order to
delete the Benchmarks, as described in the option agreements. The
Board voted to accept the optionholders' delay of 10% of their
vested option shares and to replace the Benchmarks with an
extended vesting schedule, based on continued employment by the
Company. Under the revised vesting schedule, 40% or 444,445 of the
options vested as of December 31, 1996, and the remaining 666,666
options will vest pro rata on December 31, 1997, 1998 and 1999. At
the time these options are exercised the proceeds will be credited
to the additional paid-in capital account. Except under the
circumstances described below, this change will result in no
further charges or credits against earnings related to the
management options. During 1997, one of the officers, who had been
granted a total of 55,555 options, resigned. As of December 31,
1997, a total of 22,222 (or 40%) of the officer's options had
vested. Accordingly, during the year ended December 31 1997, the
Company recorded a $37,500 noncash compensation credit to reverse
the compensation expense related to the unvested options.
The following is a summary of all stock option activity during the
two years ended December 31, 1997:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER OF OPTION OPTION
SHARES PRICE PRICE
<S> <C> <C> <C>
Outstanding, December 31, 1995 1,111,111 $1.00 $ 1.00
Granted 235,000 1.00-2.19 1.68
--------- ------------- -------
Outstanding, December 31, 1996 1,346,111 $ 1.00-2.19 $ 1.12
Granted 20,000 2.125 2.125
Terminated (164,761) 1.00-2.19 1.43
--------- ------------- -------
Outstanding, December 31, 1997 1,201,350 $ 1.00-2.19 $ 1.09
========= ============= =======
Exercisable, December 31, 1997 751,128 $ 1.00-2.19 $ 1.10
========= ============= =======
</TABLE>
In October 1995, the FASB issued SFAS No. 123, Accounting for
Stock-Based Compensation, which requires the measurement of the
fair value of stock options or warrants to be included in
F-22
<PAGE> 50
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
(Continued)
the statement of income or disclosed in the notes to the financial
statements. The Company has determined that it will continue to
account for stock-based compensation for employees under APB
Opinion No. 25 and elect the disclosure only alternative under
SFAS No. 123 for options granted in 1997 and 1996 using the
Black-Scholes option pricing model prescribed by SFAS No. 123.
Based on the use of the Black-Scholes option pricing model,
options granted in 1997 with an exercise price of $2.125 had a
fair value of $1.77. The weighted average assumptions are as
follows:
1997 1996
Risk-free interest rate 6.45% 6.2%
Expected dividend yield - -
Expected lives 7 years 7 years
Expected volatility 94.0% 63.5%
Had compensation cost for these plans been determined consistent
with SFAS No. 123, the Company's net (loss) income and net (loss)
income per share would have been (increased) reduced to the
following pro forma amounts:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C> <C>
Net (loss) income As reported $ (2,348,175) $ 1,048,196
Pro forma (2,414,906) 974,284
Net (loss) income per share As reported $ (0.63) $ 0.28
Pro forma (0.65) 0.26
</TABLE>
Because the method prescribed by SFAS No. 123 has not been applied
to options granted prior to January 1, 1995, the resulting pro
forma compensation cost may not be representative of that to be
expected in future years.
(g) Deferred Compensation
Effective December 11, 1996, the Company granted stock options to
an officer of the Company granting options to acquire up to
100,000 shares of the Company's common stock for an exercise price
of $1.00 per share. Under the stock option agreement, the options
vest pro rata over seven years beginning March 5, 1995.
F-23
<PAGE> 51
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
(Continued)
At December 31, 1996, the Company recorded a charge to deferred
compensation and a corresponding credit to additional paid-in
capital in the amount of $89,062, net of amortization, which
represents the difference between the market price of the
Company's common stock on December 11, 1996, the date of the
option grant ($2.1875) and the exercise price of $1.00 per share,
multiplied by the number of shares subject to the option
(100,000). During 1997, the officer resigned from the Company,
resulting in no future vesting of these options. As of December
31, 1997, a total of 28,572 shares had vested. Accordingly, for
the years ended December 31, 1997 and 1996, the Company recorded a
noncash compensation charge of $4,242 and $29,668, respectively
with a corresponding reduction of deferred compensation to reflect
the pro rata recognition of expense for the 24-month period
beginning March 1995 and ending March 1997.
(6) INCOME TAXES
At December 31, 1997, the Company had a net operating loss carryforward
available for federal tax purposes of approximately $3,300,000 with
expiration dates beginning in 2009.
The deferred tax asset consists of the following components at December
31, 1997 and 1996:
1997 1996
Net operating loss carryforwards $ 1,143,000 $ 458,000
Timing differences 26,000 250,000
----------- ----------
1,169,000 708,000
Valuation allowance (1,169,000) (708,000)
----------- ----------
$ - $ -
=========== ==========
Net operating loss carryforwards may be limited in the event of certain
changes in ownership interests of significant stockholders.
A full valuation allowance has been provided due to the uncertainty
surrounding the realization of the deferred tax asset.
F-24
<PAGE> 52
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
(Continued)
(7) COMMITMENTS AND CONTINGENCIES
(a) Operating Leases
The Company has entered into various leases for office space,
office and golf equipment, golf carts and telephone systems all
under noncancelable operating leases that expire at various dates
through September 2005. Rent expense under these leases was
approximately $543,000 and $472,000 in 1997 and 1996,
respectively. Approximate future minimum lease payments for all
operating leases as of December 31, 1997 are as follows:
1998 $ 223,000
1999 217,000
2000 146,000
2001 111,000
2002 56,000
Thereafter 10,000
-----------
Total $ 763,000
===========
(b) Loan Guarantee--Las Vegas Golf Center, LLC
During 1997, the LLC, an affiliate of the Company (see Note 2(c)),
entered into a $4,000,000 construction and permanent loan
agreement (the Agreement) with US Bank of Nevada, for the purpose
of paying certain costs incurred in constructing a golf driving
range located in Las Vegas, Nevada. Under the terms of the
Agreement, the loan is collateralized against substantially all of
the assets of the LLC and the personal guarantees of the Company
and Lod Cook, joint and severally, and Paul Fireman limited to
$1,500,000.
(8) RELATED PARTY TRANSACTIONS
(a) Golftown Driving Range
During July 1996, the Company entered into an agreement with
Golftown, Inc. (Golftown), a Massachusetts corporation, which is
the owner and operator of a driving range facility (the Facility)
in Saugus, Massachusetts. The Company has agreed to guaranty a
loan in an amount of $295,000 made to Golftown, in exchange for a
25% equity interest in Golftown. Under the terms of the agreement
with Golftown and its lender, the Company has the opportunity to
cure any default under the loan, and in the event of a default,
the Company may assume day-to-day
F-25
<PAGE> 53
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
(Continued)
management of the Facility and receive a management fee for such
services in addition to its 25% interest in Facility profits. In
addition, the Company has entered into an agreement for a pledge
of voting rights to a majority of the voting interest of Golftown,
which pledge becomes effective in the event of a default under the
loan being guaranteed by the Company. The President and majority
stockholder of Golftown, Inc. is Jeffrey Abrams, the son of
Stanton V. Abrams, the President and Chairman of the Board of
Directors of Senior Tour Players Development, Inc. The driving
range opened to the general public during August 1996. In 1997,
various capital contributions were drawn from Golftown's
stockholders and the Company invested approximately $17,500 which
was not sufficient to maintain its equity ownership resulting in a
reduced ownership interest of 21.8% at the end of the calendar
year. As of December 31, 1997, the Company had written down its
investment to zero to reflect the Company's portion of the loss
incurred by Golftown.
(b) Las Vegas Golf Center, LLC
During December 1996, the Company acquired, and simultaneously
sold, a 48.5% interest in the LLC to Paul Fireman, a significant
shareholder of the Company, who owned 205,000 shares of the
outstanding common stock of the Company at December 31, 1996. In
consideration of 50,000 shares of the common stock of the Company
issued to Mr. Fireman, the Company retained an option to
repurchase up to a maximum 13.5% interest in the LLC (see Note
2(c)). In addition, the Company entered into a consulting
agreement with Mr. Fireman for services rendered in connection
with the structuring and implementation of the transaction, as
well as for arranging certain financing for the LLC. Included in
net revenues of the Company for 1996 is $200,000 related to this
consulting agreement. Included in equity in losses of
unconsolidated affiliate for the Company for 1997 is the Company's
share of the LLC's 1997 loss ($190,331). In addition, the Company
wrote off the carrying values of the option.
(9) SUBSEQUENT EVENTS
(a) Management Agreement--Harbor Links Golf Course of North Hempstead,
New York
Effective January 27, 1998, the Company entered into a Golf
Facilities Management Agreement (the Management Agreement) with
the Town of North Hempstead in New York (the Town). The Town is
constructing a new municipal golf facility in the Town of
Hempstead, New York which will include an 18-hole golf course, a
9-hole executive golf course, driving range, clubhouse,
maintenance building, practice and learning center, parking lot
and related golf facilities, five athletic fields, the surrounding
cliff areas and at the discretion of the Town, a miniature golf
course, collectively referred to as the "Facility." The Company is
engaged to manage the
F-26
<PAGE> 54
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
(Continued)
Facility for the Town including but not limited to marketing,
maintaining the golf course, clubhouse and golf facilities. The
Company is required to provide the Town a performance bond at the
Town's expense (with respect to the premiums) in an amount not
less than $1,000,000, which secures the operational and other
responsibilities of the Company and an initial capital
contribution to the Facility of $1,000,000 on July 1, 1998 (or
such later date as the Town shall, in its sole discretion, decide
and so notify the Company) under the Agreement. The Company is
entitled to receive a return of the initial capital contribution
in five equal annual installments of $200,000 payable on March 1
of each year commencing March 1, 2001. The Company is also
entitled to receive interest on the outstanding portion of such
initial capital contribution, which has not been returned to the
Company at an interest rate equal to the lesser of 2% above the
prime rate as reported by the Federal Reserve Bank or the actual
interest rate paid by the Company on financing obtained to fund
the initial capital contribution to the facility. Payment of such
interest shall be made quarterly in arrears commencing March 1,
1999. In consideration for the management services to be provided
by the Company, the Town is required to compensate the Company a
base amount of $125,000 per annum including actual out-of-pocket
costs commencing 60 days prior to the opening of the Facility,
which is anticipated in the summer of 1998. The base amount shall
increase by $25,000 every three years starting in 1999 and
additional incentive management fee payable starting in 1999 equal
to 10% of the base amount, if the gross revenue for the
immediately preceding calendar year exceeds a specified threshold
amount for the preceding calendar year. The agreement, which has a
10-year term, expiring on December 31, 2007, can be terminated
yearly by the Town upon 30 days' notice to the Company.
(b) Pending Litigation
On March 3, 1998, the Company brought an action against unrelated
individual shareholders of Golf Centers of America, Inc., a
California corporation (the Sellers), seeking damages and
declaratory relief and alleging breach of contract, fraud and
misrepresentation and breach of warranty under the terms of an
agreement dated November 29, 1996, between the Sellers and the
Company by which the Company purchased the Sellers' membership
interest in the LLC (see Note 2(c)). The Company expects the
Sellers to defend the Complaint with counterclaims seeking to
require the Company to make a payment due under the Agreement in
the amount of approximately $200,000 (see Note 2(c)) and to
deliver certain shares of stock of the Company which were due to
be issued by January 15, 1998 (see Note 1(j)).
F-27
<PAGE> 55
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
(Continued)
(c) Proposal to Purchase The Badlands Golf Club
On March 6, 1998, the Company announced that it has received a
proposal from an outside party to purchase The Badlands, and that
it has engaged an investment banking firm to assist the Company in
evaluating this proposal, and to assess additional strategic
alternatives. Accordingly, the Company's current business strategy
is to concentrate its efforts on evaluating this potential sale
transaction and has temporarily suspended the pursuit of any new
development deals and will concentrate its efforts on its existing
owned and managed properties. There can be no assurance that any
transaction will be agreed or consummated as a result of the other
party pursuing this purchase proposal.
F-28
<PAGE> 1
EXHIBIT 10.28
THE TOWN OF NORTH HEMPSTEAD, NEW YORK
GOLF FACILITIES MANAGEMENT AGREEMENT
------------------------------------
This Golf Facilities Management Agreement (the "Agreement"), made as of
January 1, 1998 by and between SENIOR TOUR PLAYERS DEVELOPMENT, INC., a Nevada
corporation (the "Manager") and the TOWN OF NORTH HEMPSTEAD, a municipal
corporation of the State of New York (the "Town").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Town is constructing a new municipal golf facility in the Town
of North Hempstead, New York which will include an 18-hole golf course, to be
known as Harbor Links, a 9-hole executive golf course, driving range, clubhouse,
maintenance building, practice/learning center, parking lot and related golf
facilities, five athletic fields, the surrounding cliff areas and, at the
discretion of the Town, a miniature golf course, collectively hereinafter
referred to as the "Facility"; and
WHEREAS, the Manager is engaged in the business of marketing, maintaining
and managing golf courses, golf clubs and golf facilities; and
WHEREAS, in accordance with the terms and conditions set forth in this
Agreement, the Town desires to retain the Manager and the Manager desires to
assume management responsibility and provide its professional services for all
golf facilities at the Facility;
NOW, THEREFORE, in consideration of the covenants and agreements of each of
the parties hereinafter set forth, it is mutually agreed as follows:
1. DESCRIPTION OF FACILITY. For purposes of this Agreement, the term
"Facility" shall be deemed to refer to and shall consist of the real estate,
buildings, improvements and personal property at the Town's Harbor Links
facility as described in Exhibit A hereto.
2. APPOINTMENT OF MANAGER. The Town hereby appoints the Manager and the
Manager hereby accepts the appointment as manager of the Facility, subject to
the provisions hereof.
3. EFFECTIVE DATE. The Effective Date of this Agreement shall be January
27, 1998.
4. TERM.
(a) The term of the Agreement shall commence on the Effective Date and
shall terminate on December 31, 2007, unless extended or sooner terminated
as provided hereinafter.
-1-
<PAGE> 2
(b) The Town shall have the right to renew this Agreement on
substantially identical terms and conditions, with fee increases similar to
those provided for in the initial Agreement, for an additional period of
five (5) years upon giving written notice thereof to the Manager not less
than 120 days prior to the termination of this Agreement.
5. GENERAL OPERATIONAL RESPONSIBILITIES OF MANAGER. Commencing with the
Effective Date and continuing until the termination of this Agreement, the
Manager shall have full authority and responsibility, subject to the direction
of the Town, the written policies of the Town and budgets approved by the Town,
to conduct, supervise, and manage day-to-day maintenance and operation of the
Facility; PROVIDED, HOWEVER, that all of the Manager's direct costs with respect
to discharging its responsibilities under this Agreement shall be reimbursed by
the Town as provided herein. The general operational responsibilities of the
Manager hereunder shall include, but not be limited to, the following:
(a) During the period prior to opening of the 18-hole course the
Manager shall advise the Town on operational factors to be considered in
the planning and design of those Club facilities not yet under construction
or completed as of the Effective Date. The Manager shall work with the Town
and other members of the Town's development team (E.G., architects and
engineers) to ensure that operational factors are addressed in a timely and
proper manner during the development process, so that the Town's funds
available for construction of the golf course facilities are properly
directed and allocated.
(b) The Manager shall be responsible for preparing for the Town's
approval a marketing plan for the Facility during the pre-opening phase.
The Manager also shall be responsible for implementing this plan in
cooperation with the Town, consistent with budgets and schedules approved
by the Town.
(c) The Manager shall be responsible for cooperating with First Golf,
as the interim manager of the Facility, in implementing the establishment
and maintenance of the golf courses during the pre-opening phase,
consistent with plans, budgets and standards reasonably approved by the
Town.
(d) The Manager shall prepare for Town approval, annual budgets and
annual business plans, in accordance with Section 6 below, covering the
first year (full or partial) of operation and each subsequent year during
the term of this Agreement.
(e) As a component of the Annual Plan (as defined below), the Manager
shall create and implement annual marketing plans for each golf course
(I.E., the 9-hole and the 18-hole), including public relations,
advertising, promotional and membership sales components, supported by
detailed budgets and recommendations for materials, media and promotional
events.
-2-
<PAGE> 3
(f) The Manager shall establish quality standards at the Facility,
which shall be reasonably acceptable to the Town, and provide for the
training of employees to meet these standards.
(g) The Manager shall supervise, in a commercially reasonable manner,
the maintenance of the Facility grounds (including, without limitation, the
surrounding cliffs), associated landscaping, clubhouse and all other
facilities, consistent with the "Minimum Facility Maintenance Standards"
attached to this Agreement as EXHIBIT B.
(h) The Manager shall prepare and provide to the Town for its approval
no later than 60 days after the Effective Date a statement of policies and
procedures with respect to the Manager's responsibilities hereunder.
(i) The Manager shall supervise, in a commercially reasonable manner,
the management of the food and beverage service, including the creation of
menus and the establishment of food and beverage prices, and use its best
efforts to obtain in the name of the Town a liquor license and all other
licenses and permits necessary.
(j) The Manager shall supervise management of, play on, and general
operation of, the Facility in accordance with an Operation and Management
Plan submitted to the Town for its reasonable approval within 30 days of
the Effective Date; PROVIDED, HOWEVER, that the Town shall have the right
to review the Manager's assignment of golf tee times to determine the
fairness and availability of such assignments; and PROVIDED FURTHER that
the Town shall supervise play on, and general operation of, the five
athletic fields with respect to which the Manager's responsibilities shall
be limited to maintenance and repair.
(k) The Manager shall manage the Facility in a commercially reasonable
manner which would make the Facility comparable with other similar first
class golf facilities in the vicinity of where the Facility is located.
(l) The Manager shall work with the Town Board, Town Supervisor,
staff, the advisory committee referred to in Section 47 hereof, and
community organizations to generate the best possible publicity for the
Facility, and generate positive impacts on the Town as a result of the
development and operation of the Facility.
(m) The Manager shall ensure that the pro shop at the Facility carries
sufficient products and inventory to satisfy generally the needs of players
utilizing the Facility.
(n) The Manager shall conduct physical inventories on a regular basis
as reasonably required by the Town.
(o) The Manager shall establish and administer, for all maintenance
equipment, a preventative maintenance program which is designed to keep all
equipment
-3-
<PAGE> 4
in clean, safe and good operating condition for its useful life. Such
maintenance shall be performed no less frequently than recommended by the
manufacturer of the equipment. Equipment records shall be retained on site
and shall be subject to inspection by the Town during normal business
hours.
(p) The Manager shall develop, revise, and implement food and beverage
concepts, policies and procedures; PROVIDED, HOWEVER, such concepts,
policies and procedures shall not materially deviate from those established
under the then current annual Budget unless such deviation is approved by
the Town.
(q) If requested by the Town the Manager shall negotiate and arrange
for all leases, licenses and concessions for the pro shop and any other
commercial space.
(r) Subject to Section 31 hereof, the Manager shall apply for, and
attempt to obtain and maintain in the name of the Town or the Manager, as
required by the Town or applicable law, all licenses and permits required
of the Town or the Manager in connection with the management and operation
of the Facility at no cost to the Manager.
(s) The Manager shall institute and defend, utilizing legal counsel
selected by the Town, any and all legal actions or proceedings reasonably
necessary or proper in connection with the routine operation of the
Facility, including actions or proceedings to collect accounts receivable
or to cancel or terminate any lease, license or concession agreement for
the breach thereof or default thereunder by any tenant, licensee or
concessionaire, and take appropriate steps to protect and/or litigate to
final decision in any appropriate court or other forum, any violation,
order, rule or regulation directly related to the operation of the
Facility.
(t) The Manager shall negotiate and submit to the Town for its
consideration and approval arrangements for the acceptance of payments by
credit card by patrons of the Facility.
(u) The Manager shall cooperate with the Town in integrating the
Manager's financial software into the Town's financial software programs.
(v) The Manager shall provide to the Town an initial capital
contribution of $1,000,000 on July 1, 1998 (or such later date as the Town
shall, in its sole discretion, decide and so notify the Manager).
(w) The Manager shall assist the Town in obtaining equipment and
supplies for the Facility at prices as favorable as those for similar
equipment and supplies obtained by the Manager at its other golf
facilities.
-4-
<PAGE> 5
6. ANNUAL BUDGET AND BUSINESS PLAN.
(a) On or before the Effective Date and by August 1 of each year
commencing August 1, 1998, the Manager shall submit to the Town, for the
Town's approval, a proposed annual business plan (the "Annual Plan") and
operating budget (the "Budget") prepared on a format approved by the Town.
For calendar year 1998 the Budget shall be based upon, and consistent with,
the financial projections submitted by the Manager to the Town dated
December 6, 1997 and December 9, 1997. If requested by the Town, the
Manager shall provide the Town with the data and information utilized in
preparing the Annual Plan and Budget or any revisions thereto. In the event
the 9-hole golf course at the Facility opens prior to the 18-hole golf
course, the Manager shall submit to the Town for its approval, not later
than 30 days prior to the opening of the 9-hole golf course, a revised
Budget indicating that operation of the 9-hole golf course will not
generate additional expenses in excess of revenues attributable to such
operation.
(b) The Annual Plan shall describe the Manager's major management
goals and intended actions for the ensuing year in reasonable detail so as
to enable the Town to evaluate the Manager's intended conduct of the
affairs of the Facility during that period.
(c) In general, the Budget shall include such details regarding
revenues and operating and capital expenditures for the upcoming Budget
period as the Town shall reasonably request. Without limiting the
foregoing, the Budget shall set forth the Manager's reasonable estimates
of:
(i) gross revenues consisting of all membership dues, green fees,
cart rental fees, proceeds of sales of inventory, supplies, beverages
or food, facility use revenues (excluding fees charged for use of
athletic fields), driving range receipts, miniature golf receipts, and
any other income of any kind derived from any source at the Facility
over which the Manager has any responsibility, without reduction for
costs of goods sold or other expenses ("Gross Revenues");
(ii) all costs and expenses directly related to the operation of
the Facility including (without limitation) employee and independent
contractor costs, repair and maintenance expenses, costs of inventory
and supplies, utility costs, administrative and general costs,
marketing costs, insurance and management fees hereunder;
(iii) a budget of the Manager's recommended renewals, revisions,
rebuilding, replacements, substitutions or improvements to the
Facility for the Budget period which are of a capital nature,
including estimates for the cost of designs, plans and specifications,
materials, labor (including installation), storage, consultants,
travel, overhead and freight, and estimates of any additional gross
-5-
<PAGE> 6
revenues or expense savings which can reasonably be expected to result
therefrom; and
(iv) any other matter deemed appropriate by the Manager or
reasonably requested by the Town.
(d) The Budget shall not provide for reserves for the payment of
contingencies unless such reserves are determined to be necessary by the
Town in its sole discretion.
(e) No portion of the Manager's general or administrative costs,
overhead or similar costs which may be indirectly related to the operation
of the Facility and which are attributable to activities performed outside
the premises of the Facility shall be included in the Budget or otherwise
reimbursable by the Town unless expressly otherwise agreed to by the Town
in its sole discretion.
7. APPROVAL OF BUSINESS PLAN AND BUDGET.
(a) The Town shall approve, at its sole discretion, the Annual Plan
and all major policy decisions with respect to the Facility subsequent to
consideration thereof by the advisory committee referred to in Section 47
hereof.
(b) The Town shall approve, at its sole discretion, the Budget in
accordance with the Town's regular budget calendar for the upcoming Budget
period. Without limiting the foregoing, all fees or prices proposed by the
Manager to be charged to customers or other users of the Facility shall be
subject to the approval of the Town which approval may be subsequently
revoked at any time upon 14 days notice to the Manager.
8. IMPLEMENTATION OF BUDGET. The Manager shall use its best efforts to
operate the Facility in accordance with the then current Budget and to achieve
the results projected in such Budget. If at any time during any Budget period
the Manager reasonably believes that the Gross Revenues or operating expenses
may vary adversely by more than five percent (5%) from the originally budgeted
amount, then such variance shall be immediately reported to the Town together
with a description in reasonable detail explaining the reasons for such variance
and corrective measures recommended by the Manager.
9. NATURE OF MANAGER'S BUDGET. The Town acknowledges that the projections
contained in each proposed Budget are subject to and may be affected by changes
in financial, economic and other conditions and circumstances beyond the
Manager's reasonable control. The Town further acknowledges that each proposed
Budget is solely a planning tool used in pursuit of the objective of maximizing
the financial performance of the Facility. Subject to the indemnity provisions
of Section 29 hereof, the Manager in no event shall be liable based upon a
variance between actual results and expenditures and the estimate of the
projected results and expenditures for the period covered by any such Budget due
solely to such changes, conditions
-6-
<PAGE> 7
or circumstances and not attributable to any gross negligence, willful
misconduct or knowing violation of law on the part of the Manager.
10. GROSS REVENUES.
(a) The Town may establish in the name of the Town such bank or other
deposit and checking accounts as the Town in its sole discretion determines
are necessary for the efficient operation of the Facility and control of
the flow of funds received and disbursed in connection with such operation,
or, at the Town's sole discretion, may use existing Town accounts for such
purpose (in any case, generally referred to herein as the "Facility
Account").
(b) The Manager shall deposit in the Facility Account all Gross
Revenues from the operation of the Facility within a 24-hour period and
shall be responsible for the safekeeping, storage and transportation of
such receipts until they are delivered to a bonded courier, if any, or
deposited to such account.
(c) In no event shall amounts deposited in any accounts established
under this Agreement be co-mingled with any other funds of the Manager.
(d) Any amounts on deposit at any time in the Facility Account may be
withdrawn by the Town and deposited in any general municipal fund or other
Town account and applied to any purpose, whether related to the Facility or
not, as the Town so determines in its sole discretion.
(e) The Manager shall establish and maintain an internal control
structure reasonably acceptable to the Town regarding cash receipts,
charges, disbursements and Town assets to provide reasonable assurance that
Town assets are safeguarded against loss from unauthorized use or
disposition. In addition, the Manager shall agree to implement any
reasonable internal control recommendation that may develop from future
audits if determined by the Town to be in the Town's best interest.
11. EXPENSES.
(a) The Facility operating expenses and capital expenditures, in each
case as approved by the Town or expressly authorized to be incurred by the
Manager hereunder, are the responsibility of the Town to be paid or
reimbursed pursuant to this Section 11.
(b) No working capital reserve shall be funded by the Town.
(c) The Manager shall implement the approved Budget and shall be
authorized, without the need for further approval by the Town, to incur the
specified operating expenditures provided for in the Budget in accordance
with Sections 11(d) and
-7-
<PAGE> 8
(e) below. No deviation from the Budget with respect to the payment of
expenses by the Manager shall be permitted, without the prior consent of
the Town, except as follows:
(i) the Manager may reallocate up to five percent (5%) of any
amount budgeted with respect to any operating expense item in the
Budget to another operating expense item budgeted therein provided
that the aggregate expenditures in the Budget are unaffected;
(ii) unbudgeted minor expenditures unforeseen at the time of
preparation of the Budget, and reasonably deemed necessary by the
Manager, may be made without the Town's authorization except that the
aggregate amount of such unbudgeted expenditures cannot exceed $5,000
per year; and
(iii) the Manager may incur expenses which, in the Manager's
reasonable judgment, are necessary due to an emergency requiring
immediate action for the protection of the Facility or persons at the
Facility so long as the aggregate amount of such expenditures does not
exceed 5% of the total amount of operating expenditures set forth in
the approved Budget then in effect.
(d) Purchases of Supplies and Equipment.
(i) The Manager shall, to the greatest extent feasible, arrange
for all purchases of supplies and equipment for the Facility in the
name of the Town and through the Town's purchasing process. To the
extent that the equipment and/or supplies are provided for in the
Budget or are otherwise permitted pursuant to Section 11(c) hereof,
the Town shall take such actions as are necessary to obtain such
supplies and equipment in a reasonably timely manner, and shall be
responsible for payment to the vendors on all such purchases.
(ii) Where exigent circumstances require the immediate
procurement of certain supplies or equipment which are permitted
expenditures pursuant to Section 11(c) hereof, or with respect to the
purchase of supplies and equipment in an amount less than $200, the
Manager shall have the authority to make such purchases directly from
the vendor, and to request reimbursement from the Town for the same.
Such purchases shall be made, wherever possible, using the Town's tax
exempt number which shall be provided to the Manager. The Manager
shall request reimbursement for all such purchases on a monthly basis
and the Town shall be obligated to provide reimbursement within 14
days of receipt of a properly documented request.
(e) The Manager shall be responsible for payment of personnel expenses
incurred pursuant to Sections 11(c) and 20 hereof, subject to the Town's
obligation to reimburse the Manager for the same pursuant hereto. Seven
days prior to each date on which it pays its personnel, the Manager shall
submit to the Town a claim form for the
-8-
<PAGE> 9
payroll expenses it will incur on its next payroll date, with a breakdown
of amounts for each employee and all other information as shall reasonably
be requested by the Town. On the date on which the Manager pays its
personnel, the Town shall make a wire transfer into the Manager's payroll
account or such other account as the Manager shall designate in order to
reimburse the Manager for its personnel expenses. The Manager agrees that
it shall not pay its personnel more frequently than bi-weekly.
(f) Capital expenditures shall be governed by Section 17 of this
Agreement.
(g) With respect to expenditures provided for in the Budget or
otherwise permitted pursuant to Section 11(c) hereof, but not covered by
Sections 11(d), (e) or (f) hereof, the Manager shall be responsible for
payment of such expenditures and shall be reimbursed within 14 days of its
submittal of a claim to the Town following payment. Notwithstanding
anything to the contrary, the Town shall have the right to request that all
utilities be established in the name of the Town, with payment for the same
made directly by the Town to the appropriate supplier.
(h) The Town may, but shall not be required to, withdraw funds from
the Facility Account for the reimbursement or prompt payment when due of
all operating expenses, management fees and all other amounts properly
payable in accordance with the Budget then in effect or otherwise permitted
under the terms of this Agreement. To the extent such items are not paid
from amounts on deposit in the Facility Account, the Town shall use other
Town funds or accounts to meet its obligations to pay or reimburse expenses
under Section 11 hereof.
12. BOOKS AND RECORDS.
(a) With the approval of the Town, the Manager shall establish and
supervise an appropriate accounting and cost control system for Facility
operations to be maintained at the Town's expense. Charts of accounts and
all accounting systems shall be maintained in accordance with ordinary
accounting procedures and generally accepted accounting principles. Such
records shall be subject to examination and photocopying by the Town, its
authorized agents, attorneys and accountants, at the Town's expense, during
normal business hours at the Facility, and the Manager agrees to make such
records available for these purposes. The Manager shall also provide to the
Town any other information, relevant to the management or operation of the
Facility, which the Town reasonably requests and which is in the Manager's
possession or control.
(b) Upon termination of this Agreement for any reason, all source
documents, work papers, financial statements relating to past periods, and
other supporting documents shall be and remain the property of the Town.
Any on-site equipment or systems purchased by the Town, such as cash
registers, software or computers, also shall be and remain property of the
Town. Upon termination of this Agreement, the Manager shall transfer all
policies and procedures manuals to the Town.
-9-
<PAGE> 10
13. FINANCIAL REPORTS.
(a) As soon as possible, but in no event later than 10 days after the
end of each month, the Manager shall deliver to the Town unaudited
financial reports, in such form as the Town requires, for the Facility for
such month which shall include a profit and loss statement comparing actual
results to both the current Budget and the previous year's actual results,
for both the current month and fiscal year to date, on a line item basis.
Within 75 days after the end of each fiscal year, the Manager shall deliver
to the Town an audited profit and loss statement, in such form as the Town
requires, for the Facility for such fiscal year. The cost of providing such
audited profit and loss statement shall be included in the Budget and shall
be paid from the Gross Revenues of the Facility. Such audits shall be
conducted by auditors selected by the Town.
(b) The Manager shall provide to the Town each year audited annual
financial statements, in such form as the Town requires, for the Manager
within 90 days following the close of the Manager's fiscal year.
14. FEES AND CHARGES. Subject to the approval of the Town, the Manager
shall establish, maintain, revise and administer the overall charge structure of
the Facility, including, without limitation, membership fees, greens fees, golf
cart rental fees, food or beverage charges of any kind, pro shop inventory
prices, and prices, charges or fees for any other products, facilities or
services available at the Facility. The Town specifically retains the right to
revoke its approval of any such fees, prices or charges, on not less than 14
days notice to the Manager.
15. LIQUOR LICENSE. The Town shall make every reasonable effort to assist
the Manager in securing for the Facility a liquor license that will permit the
Facility to offer patrons alcoholic beverages in conjunction with their use and
enjoyment of the Facility. The license shall permit the Manager to serve
alcoholic beverages in the normal course of business and to carry out reasonable
management and marketing activities associated with the serving of alcoholic
beverages at a golf facility. The Manager shall comply with all local, county,
state and federal laws and regulations governing the serving of alcoholic
beverages, and shall properly direct all Facility personnel in this regard
through policies, posting of notices and supervision. The liquor license shall
be obtained at the Town's expense and shall remain the property of the Town.
16. REPAIRS AND MAINTENANCE. Within the approved budgetary limitations and
in accordance with the Budget and Section 11 of this Agreement, the Manager
shall arrange for the making or installing, at the Town's expense and in the
name of the Town, of such alterations, repairs, decorations, or replacements of
furnishings or equipment to the Facility as the Manager or the Town deems
reasonable or necessary.
-10-
<PAGE> 11
17. CAPITAL EXPENDITURES.
(a) The Town shall from time to time, at its sole cost and expense,
make such alterations, additions, improvements, repairs and replacements in
or to the Facility as may be necessary to comply with the terms of any debt
or applicable laws and regulations, or to maintain the existing standards
of Club facilities on the date of this Agreement, and the same shall be
made with as little hindrance or disruption as possible to the operation of
the Facility.
(b) The Budget submitted to the Town for its approval each year shall
include the Manager's recommendations for any Facility capital
expenditures. To the extent such capital expenditures are included in the
final Budget as approved by the Town, the Town shall, at its sole
discretion, separately finance the approved capital expenditures through
its municipal borrowing capabilities or, subject to Section 18 hereof,
direct the Manager to arrange for financing of the capital expenditures on
behalf of the Town.
(c) If directed to do so by the Town, the Manager shall have the
responsibility and authority to cause to be purchased, constructed and
installed alterations, additions, improvements, repairs, renewals, and
replacements to the Facility which are of a capital nature.
18. COMPLIANCE WITH LAWS.
(a) The Manager shall arrange at the Town's expense for compliance in
all material and commercially reasonable respects with any federal, state
or local statutes, ordinances, laws, rules, regulations, orders and
determinations affecting or issued in connection with the Facility
(including, without limitation, all federal, state and local labor laws)
and, with the prior written consent of the Town, make arrangements for any
alterations or repairs ordered or required thereby, if not included in the
Budget. However, if any such ordered or required alterations or repairs are
not made because the Town does not give its consent after the Manager's
request therefor, then the Town shall hold the Manager harmless from any
liability that may arise solely by reason of the failure to make such
alterations or repairs.
(b) Notwithstanding any other provision of this Agreement, whenever
any approval, payment or other action is required by the Town hereunder,
such action shall only be taken following compliance by the Town with all
applicable federal, state or local statutes, ordinances, laws, rules,
regulations, orders and determinations.
19. TOWN INDEBTEDNESS. The Manager shall use its best efforts to cause the
Facility to comply with all the terms, conditions and obligations contained in
any note, loan agreement, mortgage, bond issue or other agreement executed by
the Town which relates to the Facility. The Town shall provide the Manager with
true and correct copies of any such note, loan agreement, mortgage, bond issue
or other agreement.
-11-
<PAGE> 12
20. STAFF.
(a) The Manager shall hire, train, promote, discharge, and supervise
the work of the executive staff and all employees of the Facility as is
commercially reasonable; provided, however, that the Town shall have the
right to approve, in its reasonable discretion, the superintendent, head
pro and general manager for the Facility. All persons employed by the
Manager for such purposes shall be deemed employees of the Manager and not
the Town, PROVIDED, HOWEVER, that all of the Manager's cost and expense
related to such persons shall be reimbursed by the Town in accordance with
Section 11 hereof as an item included in the Budget. The Manager shall hire
and employ such personnel at such wages or salaries, and on such terms and
conditions, as are standard at the time in the employment market for such
persons in the geographical area where the Facility is located and are
consistent with the Budget. The Manager shall pay all of the salaries,
wages, payroll taxes and benefits due and owing to and/or on account of
such persons (and the Town shall reimburse the Manager pursuant to Section
11(e) hereof). The Manager shall deduct from such employees' salaries all
required taxes, charges and assessments and shall make and file such
reports as may be required by the federal, state and local government
agencies. All personnel shall be employees of the Manager, (or, at the
Manager's option, a qualified employee leasing company acceptable to the
Town).
(b) The Manager shall be responsible for compliance with all
applicable laws, regulations and tax requirements relative to payroll,
employment and other matters affecting operation of the Facility including,
without limitation, Sections 220, 220-D, 220-E, 222, 230, 231 and 232 of
the New York State Labor Law.
(c) The Manager shall provide such other qualified personnel as shall
be deemed necessary for the successful operation and maintenance of the
Club facilities and the successful marketing and management of the golf
program, membership program, and other business activities at the facility.
The Town shall approve the number and compensation of personnel through the
Annual Plan and Budget.
(d) At the written request of the Town, the Manager shall replace any
manager or employee who, in the opinion of the Town, is not performing
satisfactorily. The Manager shall use commercially reasonable efforts to
replace such individuals within 14 days of receiving such a request.
21. HIRING BY TOWN. The Town is expressly permitted to hire the Manager's
superintendent, club pro, general manager or any other employee of the Manager
working at the Facility following termination of this Agreement for any reason
other than a Town Event of Default.
-12-
<PAGE> 13
22. INSURANCE.
(a) The Manager shall maintain the following types of insurance, in
its own name, with any insurance carrier that is authorized to do business
in the State of New York:
(i) Workers' Compensation and Employer's Liability;
(ii) Comprehensive General Public Liability, on an occurrence
basis, naming the Town and the Solid Waste Management Authority as an
additional insured, in the amount of at least one million dollars per
occurrence; and
(iii) Comprehensive Automobile Liability, on an occurrence basis,
naming the Town and the Solid Waste Management Authority as an
additional insured, in the amount of at least one million dollars per
occurrence.
Any incremental cost to the Manager caused directly by the coverage of the
Facility under the above policies shall be reimbursed by the Town to the
Manager as part of the Budget.
(b) In addition, the Manager shall secure and maintain, in the name of
the Town and subject to the Town's approval, the following types and
amounts of insurance for the term of this Agreement, with the cost thereof
to be included in the Budget:
(i) Employee Dishonesty Policy/Bond, in an amount sufficient to
cover the largest dollar amount of which any one employee may have
possession or control;
(ii) Business Interruption Insurance, in an amount sufficient to
cover the anticipated Gross Revenues in any one fiscal year;
(iii) insurance protection against loss of Gross Revenues by
reason of burglary, larceny, embezzlement, robbery or other causes;
and
(iv) any other insurance which the Town is required by law to
provide.
(c) The Manager shall furnish to the Town certificates of the required
insurance within 30 days of the Effective Date of this Agreement and
thereafter shall furnish new certificates 30 days prior to the expiration
date of the previous certificates.
(d) Any independent contractor arranged by the Manager shall be
required to provide the same insurance coverage as provided in (a)(i),
(ii), and (iii) above, naming the Town and the Solid Waste Management
Authority as additional insureds. Certificates
-13-
<PAGE> 14
of insurance shall be provided to the Town before the contractor is allowed
to begin work at the Facility.
(e) All insurance coverage and bonding required to be provided by the
provisions of this Agreement shall be placed with or through such insurance
company, broker or agency as the Town may from time to time hereafter
designate or approve by written notice to the Manager.
(f) The insurance policies required above shall contain a provision,
if available at a cost approved by the Town, to the effect that such
insurance shall not be invalidated or limited if any one or more of the
insureds thereunder waive any or all claims for recovery from the other
insureds thereunder; and, in addition to any other limitation of liability
expressly set forth in this Agreement, so long as such provision is in
effect, each of the Manager and the Town hereby waives all claims for
recovery from the other for any loss or damage insured under such policies
to the extent of any recovery collected by the Manager or the Town,
respectively, under such policies for such loss or damage.
(g) All policies shall name, as insured, the Town, the Manager, any
mortgagee of the Facility and such other parties as the Town, the Manager
or such mortgagee shall require to be named as insured and shall contain a
waiver of subrogation provision, pursuant to which the insurer waives all
expressed and implied rights of subrogation against each named insured.
23. SECURITY. The Manager shall devise, implement and maintain a program
providing security to the Facility on a 24-hour basis against vandalism,
malicious mischief, theft and other destruction or criminal activity.
24. PERFORMANCE BOND. The Manager shall provide to the Town, at the Town's
expense as an item included in the Budget, a performance bond reasonably
satisfactory to the Town, in an amount not less than $1,000,000, which secures
the operational and other responsibilities of the Manager under this Agreement.
In the preceding sentence, the term "Town's expense" refers only to the payment
of premium and does not include the posting of security or collateral, if
required, which shall be the Manager's responsibility.
25. MANAGER'S COMPENSATION
(a) The Manager's fee shall consist of the aggregate amounts set forth
in this Section 25. The Manager's fee provided for in this Section shall be
included as a line item in the Budget for each calendar year and shall be
payable in accordance with Section 11 hereof in the same manner as other
budgeted Facility operation expenses.
(b) To the extent included in the 1998 Budget or otherwise permitted
under Section 11, the Manager shall be entitled to receive reimbursement of
actual out-of-
-14-
<PAGE> 15
pocket costs for services from the Effective Date of this Agreement to the
date which is 60 days prior to scheduled opening of the Facility's 18-hole
golf course.
(c) Commencing on the date which is 60 days prior to the opening of
the Facility's 18-hole golf course, the Manager shall be entitled to
receive an annual base fee for each calendar year as follows:
1998 $125,000
1999 $150,000
2000 $150,000
2001 $150,000
2002 $175,000
2003 $175,000
2004 $175,000
2005 $200,000
2006 $200,000
2007 $200,000
The amount of such base fee shall be payable in 12 equal installments
payable on the first day of each month included in the calendar year. For
calendar year 1998, the Manager shall only be entitled to receive a
proportionate amount of the annual base fee for the portion of the year
extending from the date on which the base fee becomes payable through
December 31, 1998.
(d) Commencing with the second calendar year of operation of the
Facility under this Agreement the Manager shall be entitled to payment of
an additional incentive management fee equal to 10% of the amount, if any,
by which Gross Revenues for the immediately preceding calendar year exceeds
the below specified threshold amount for the preceding calendar year:
PRIOR YEAR
YEAR PAYABLE THRESHOLD
------------ ---------
1999 $1,600,000
2000 $4,000,000
2001 $4,250,000
2002 $4,500,000
2003 $4,750,000
2004 $5,000,000
2005 $5,150,000
2006 $5,304,500
2007 $5,463,635
-15-
<PAGE> 16
Notwithstanding any of the foregoing, in no event shall the amount of the
incentive management fee payable in a calendar year exceed an amount equal
to 20% of the annual base fee for such calendar year specified in clause
(c) above. No incentive management fee shall be paid in 1998. The incentive
management fee shall be calculated based upon Gross Revenues reflected in
the audited financial reports for the Facility referred to in Section 13(a)
hereof. The incentive management fee shall be payable in 2 equal
semi-annual payments, on June 1 and December 1 of the calendar year. For
example, if the audited financial statements for 2001 show Gross Revenues
of $4,800,000, the Manager would be entitled to receive an incentive
management fee of $30,000 payable in $15,000 installments on June 1, 2002
and December 1, 2002.
(e) The Town acknowledges that the Manager will make an initial
capital contribution to the Facility of $1,000,000 as specified in Section
5(v) hereof. The Manager shall be entitled to the payment of interest on
the outstanding portion of such initial capital contribution which has not
been returned to the Manager at an interest rate equal to the lesser of (i)
two percent (2%) above the prime rate as reported by the Federal Reserve
Bank of St. Louis in its H15 report for the week preceding each interest
payment date or (ii) the actual interest rate paid by the Manager on
financing obtained by the Manager to fund the initial capital contribution
to the Facility. Payment of such interest shall be made quarterly in
arrears on March 1, June 1, September 1 and December 1 of each year
commencing March 1, 1999. The Manager shall be entitled to a return of the
initial capital contribution in five equal annual installments of $200,000
payable on March 1 of each year commencing March 1, 2001. The obligation of
the Town to pay interest on the initial capital contribution and to return
the initial capital contribution to the Manager as provided in this clause
(e) shall constitute a portion of the Manager's compensation for its
Facility management responsibilities hereunder and shall only be payable if
this Agreement remains in force when such payments are due. Subject to
Section 33 hereof, the payment of any such amounts not yet due shall not
survive termination of this Agreement.
(f) It is intended by the Town and the Manager that the management
fees provided for in this Section be in addition to the Facility operating
expenses incurred by the Manager on behalf of or for the benefit of the
Town and for which the Town has full responsibility consistent with the
Budget and the provisions of this Agreement. The Town further covenants and
agrees to reimburse the Manager for any and all reasonable out-of pocket
expenses incurred by the Manager or the Manager's employees in connection
with the performance of the Manager's obligations hereunder, as provided in
the Budget or with the Town's prior approval, up to an initial annual
expense budget of $10,000 for calendar years 1998 and 1999 with reasonable
adjustments thereafter as may be mutually agreed to by the parties.
Reimbursable expenses shall be paid only upon presentation of vouchers
reflecting the name of the person or persons incurring the expense, the
amount and date thereof and the purpose or purposes for the expenditure.
The annual budget submitted by the Manager for approval by the Town shall
include provisions for such expense reimbursement.
-16-
<PAGE> 17
26. CASUALTY.
(a) If the Facility or any portion thereof is damaged or destroyed
during the term of this Agreement by fire, other casualty, or act of God,
the Town shall, at its sole cost and expense, repair, rebuild and replace
the Facility to substantially the same or better conditions as prior to
such damage or destruction unless the proceeds of property insurance
carried under this Agreement are insufficient to pay all of the costs of
repair and restoration. If the Town is required or elects to repair or
rebuild the Facility, the Town shall undertake such work at the Town's sole
expense within a reasonable time after the fire or other casualty, and
shall diligently proceed to complete the same as expeditiously as possible.
(b) If only a part of the Facility shall be taken or condemned in any
eminent domain, condemnation, compulsory acquisition or like proceeding by
any competent authority, and in the reasonable opinion of the Town, the
Facility can be altered, restored or repaired so as to make it a
satisfactory golfing facility of similar type and class as prior to the
taking or condemnation, the Town shall so alter, restore and replace the
Facility if the proceeds of such condemnation will be sufficient to pay for
the costs of same, the Town and the Manager agreeing to pledge so much of
their separate awards, in proportion to the amount awarded to each, as is
necessary for such purposes. Such work shall be commenced reasonably soon
after such proceeds become available and shall be diligently pursued to
completion.
(c) If at any time during the term hereof it becomes necessary, in the
Town's reasonable opinion, to cease operation of the Facility (or any
portion thereof) in order to protect the health, safety and welfare of
patrons or general public, the Manager shall at the direction of the Town
close and cease operation of all or part of the Facility as designated by
the Town. The Manager shall reopen and commence operation when the Town
deems that such may be done without jeopardy to the Facility patrons and
the general public.
(d) No fees shall be payable to the Manager under Section 25 hereof
for any period during which the Facility's 18-hole golf course is
inoperable.
27. EVENTS OF DEFAULT.
(a) With respect to the Town it shall be an event of default ("Event
of Default") hereunder:
(i) if, upon thirty (30) days' notice, the Town shall fail to
make or cause to be made any payment required to be made hereunder;
(ii) if the Town shall fail to keep, observe or perform any
material agreement, term or provision of this Agreement to be kept,
observed or
-17-
<PAGE> 18
performed by it, and such default shall continue for a period of
thirty (30) days after written notice thereof by the Manager is
received by the Town (or a longer period, in no event to exceed 90
days, if the obligation cannot be cured within 30 days so long as the
Town is diligently pursuing a cure to the reasonable satisfaction of
the Manager); or
(iii) if one or more golf holes, the clubhouse, maintenance
building, or any material service of the Facility shall be rendered
incapable of normal operation because of weather, fire or casualty,
and shall not be repaired, restored, rebuilt or replaced within twelve
(12) months after casualty.
(b) With respect to the Manager, it shall be an Event of Default
hereunder:
(i) if the Manager shall fail to maintain the Facility in
accordance with Part I of the Minimum Facility Maintenance Standards
in EXHIBIT B hereto, unless such failure is caused by reasons outside
of the reasonable control of the Manager, and such failure shall
continue for a period of 30 days after notice thereof from the Town;
(ii) if the Manager shall fail to keep, observe, or perform any
other material agreement, term or provision hereof required to be
kept, observed, or performed by it, and such failure shall continue
for a period of thirty (30) days after written notice thereof shall
have been given to the Manager by the Town (or a longer period, in no
event to exceed 90 days, if the obligation cannot be cured within 30
days so long as the Manager is diligently pursuing a cure to the
reasonable satisfaction of the Town); or
(iii) if the Manager becomes insolvent, is declared bankrupt,
voluntarily or involuntarily, becomes unable to pay its bills as they
come due, and/or becomes subject to a court supervised receivership.
(c) The failure of either party to perform any material obligation
under this Agreement due to the occurrence of any of the following shall
not constitute an Event of Default hereunder:
(i) an act of God, hurricane, tornado, landslide, lightning,
earthquake, flood, fire or explosion;
(ii) an act of war, public enemy, blockade, insurrection, riot,
or restraint of government; or
(iii) the failure to obtain, or the suspension, termination or
revocation of, any permit, license or approval necessary for the
operation of the Facility in a manner contemplated by this Agreement,
PROVIDED, HOWEVER, that such failure
-18-
<PAGE> 19
to obtain, or suspension, termination or revocation is not the result
of the willful or grossly negligent action or inaction of the party
relying thereon.
28. REMEDIES UPON DEFAULT.
(a) Subject to clause (c) below, if any Event of Default by the Town
shall occur and continue for a period of 60 days, the Manager may (in
addition to any other remedy available to it in law or equity) forthwith
terminate this Agreement, and remove from the Facility all Manager
employees. In such event, the Manager shall be entitled to immediately
receive payment of all accrued unpaid amounts due to the Manager pursuant
to the terms hereof, after such amounts are ascertainable. If the amount
due and owing is undisputed and remains unpaid for a period of time in
excess of thirty (30) days from the date of determination, then, except for
amounts due under Section 25(e) (which continue to accrue interest at the
rate described therein), the amount shall accrue simple interest at the
rate of six percent (6%) per annum until paid, unless prohibited or limited
under applicable law, in which event such charges shall not exceed the
amount collectible under such law, and neither party shall have any further
obligations whatsoever under this Agreement, except pursuant to the
indemnity provisions hereof.
(b) Subject to clause (c) below, if any Event of Default by the
Manager shall occur and be continuing, the Town may, in addition to any
other remedy available to it in law or equity on account of such Event of
Default, forthwith terminate this Agreement, whereupon the Manager shall
remove the general manager and all Manager employees. In such event, the
Manager shall be entitled to receive payment of all undisputed and unpaid
amounts due the Manager pursuant to the terms hereof, after such amounts
are ascertainable. If the amount due and owing is undisputed and remains
unpaid for a period of time in excess of thirty (30) days from the date of
determination then the amount shall accrue simple interest at the rate of
six percent (6%) per annum until paid, unless prohibited or otherwise
limited under applicable law, in which event such charge(s) shall not
exceed the amount collectible under such law, and neither party shall have
any further obligations to perform under this Agreement, except pursuant to
the indemnity provisions hereof.
(c) If any Event of Default involving nonpayment of amounts due under
this Agreement is not resolved by negotiation of the parties within 60 days
("Payment Dispute") either party may require that such Payment Dispute must
be submitted for resolution in accordance with arbitration as provided in
this Section by delivering a demand for arbitration to the other party.
While any arbitration is pending under this Agreement, no Event of Default
shall be deemed to occur with respect to the nonpayment of the disputed
amount. Each arbitration instituted in accordance with this Section shall
be governed by and conducted in accordance with the following:
(i) The arbitration shall take place in North Hempstead, New York
and shall be conducted by three (3) arbitrators in accordance with the
Commercial
-19-
<PAGE> 20
Arbitration Rules of the American Arbitration Association (the "AAA")
or any successor organization. Each party shall select one arbitrator
and the two (2) arbitrators so selected shall select the third
arbitrator from the AAA's National Panel of Commercial Arbitrators who
shall act as chairperson.
(ii) The award of the arbitrators shall be final, conclusive and
binding on all parties to the arbitration. Judgement upon the award
rendered by the arbitrators may be entered in any court having
jurisdiction thereof.
(iii) In rendering an award, the arbitrators shall, if possible,
identify the party to the arbitration which is the prevailing party
(the "Prevailing Party") and the party which is the non-prevailing
party (the "Non-Prevailing Party") with respect to the Payment Dispute
in question. The reasonable costs and expenses (including legal fees)
incurred by the Prevailing Party in connection with such arbitration
shall be borne by the Non-Prevailing Party. If it is not possible for
the arbitrators to identify the Prevailing Party, the arbitrators
shall determine the proportion of costs and expenses incurred in
connection with such arbitration which are to be borne by each party.
(iv) An award rendered by the arbitrators involving the payment
of money (other than the payment of costs and expenses incurred in
connection with the arbitration) shall include interest from the Event
of Default or other breach of this Agreement at the prime rate
referred to in Section 25(e) hereof as of the date of the award,
PROVIDED, HOWEVER, that such rate shall in no event exceed the maximum
rate payable consistent with applicable State law.
(d) No right or remedy herein conferred upon or reserved to either
party hereto is intended to be exclusive of any other right or remedy, and
each and every right and remedy shall be cumulative and in addition to any
other right or remedy given hereunder, or now or hereafter legally existing
upon the occurrence of an Event of Default hereunder. The failure of either
party hereto to insist at any time upon the strict observance or
performance of any of the provisions of this Agreement or to exercise any
right or remedy as provided in this Agreement shall not impair any such
right or remedy or be construed as a waiver or relinquishment thereof with
respect to subsequent defaults. Every right and remedy given by this
Agreement to the parties hereof may be exercised from time to time and as
often as may be deemed expedient by the parties hereto, as the case may be.
29. INDEMNIFICATION. The Town and the Manager and their affiliates agree to
indemnify and save each other harmless from and against any and all claims,
losses, damages and expenses, including reasonable attorney's fees through all
appeals, arising from the Town's and the Manager's performance pursuant to this
Agreement, or arising out of any willful misconduct, gross negligence or knowing
violation of law on the part of the Town or the Manager or their respective
employees either prior to the date of this Agreement or hereafter;
-20-
<PAGE> 21
PROVIDED, HOWEVER, that one party's indemnity obligation to the other party
under this Section 29 shall not exceed the total amounts previously paid
hereunder to the party from whom the indemnity payment is requested.
30. MANAGER'S DUTIES UPON TERMINATION. Upon the expiration of the term of
this Agreement, or upon the effective date of termination of this Agreement, the
Manager shall:
(a) as expeditiously as reasonably possible and to the extent
permitted by law, surrender and assign to the Town any and all licenses,
permits and/or other governmental authorizations required for the operation
of the Facility;
(b) deliver to the Town any and all of the Town's properties and
assets within the possession of the Manager, including reservation lists,
ledgers, bank statements for the Facility Account, accounting books and
records, insurance policies, bonds and other documents, agreements, leases
and licenses required for the operation of the Facility;
(c) as expeditiously as reasonably possible, prepare and deliver to
the Town the financial reports required under this Agreement with respect
to the final fiscal year; and
(d) purchase from the Town at cost all unbroken cases of inventories
and operating supplies bearing the Manager's Proprietary Marks as defined
below, except those which are identified specifically to the Facility.
31. PROPRIETARY MARKS.
(a) During the term of this Agreement, the Facility shall at all times
be designated and known as North Hempstead Harbor Links. The Manager shall
have the right to use and market the name of the Facility in association
with one or more of the Manager's Proprietary Marks. For purposes of this
Agreement, the term "Manager's Proprietary Marks" means the Manager's
service marks bearing the name Senior Tour Players and related logos used
from time to time by the Manager for services and related products and
business activities (excluding logos directly related to the Facility) in
connection with its owned, managed, or franchised properties, together with
distinctive designs and operating procedures used by the Manager to
identify its properties and services. The Manager hereby disclaims any
ownership interest or right to use the Facility name (except for the right
to use such name in the performance of its responsibilities under this
Agreement) and the Town hereby disclaims any right or interest in the
Manager's Proprietary Marks or the good will derived therefrom.
Notwithstanding the foregoing, upon termination of this Agreement, the Town
shall have the express right to use the then existing supply of inventory
and operating supplies bearing the Manager's Propriety Marks until such
supply of inventory and operating supplies is exhausted, but shall not
reorder any additional such inventory or operator supplies.
-21-
<PAGE> 22
(b) Except for the Manager's Proprietary Marks and any promotional
activity by the Manager regarding use of the Facility as contemplated by
the Annual Plan, the Town shall retain exclusive ownership and control of
all rights pertaining to marketing, advertising or other promotional
activities with respect to any portion of the Facility.
32. ASSIGNMENT. The Manager may not directly or indirectly transfer, sell,
assign or hypothecate its interest under this Agreement or any right hereunder
to any other entity or person, without the prior written consent of the Town
which consent shall not be unreasonably withheld or delayed. The Town shall have
the right at any time to sell, assign or transfer all or a part of its right,
title and interest under this Agreement to
(a) the holder of any mortgage or deed of trust on the Facility, or
(b) any person or entity on the condition that
(i) this Agreement continues in full force and effect after such
transfer (with such amendments to the definitions contained in this
Agreement as may be reasonably necessary or appropriate),
(ii) the transferee assumes the obligations of the Town,
(iii) such transferee in the reasonable business judgment of the
Manager, has the financial capacity to perform the obligations of the
Town hereunder, is not of ill repute or is not in any other manner a
person, firm or corporation with whom or with which an association
would materially adversely affect either Facility operations or the
reputation and status of the Facility or the Manager.
33. EXTRAORDINARY RETURN OF CAPITAL CONTRIBUTION. In the event that this
Agreement is terminated due to any reason other than a Manager Event of Default
under Section 27(b)(i) or (iii) of this Agreement, the Town agrees to pay to the
Manager as a lump sum an amount equal to the unreturned portion of the Manager's
initial capital contribution to the Facility plus any accrued and unpaid
interest thereon under Section 25(e) hereof. This is not intended to be an
exclusive remedy and shall not relieve the Town of its other obligations under
this Agreement.
34. NOTICES. Any and all notices, consents, or directives by either party
intended for the other shall be sent by registered or certified mail, return
receipt requested, to the following address, unless either party shall have
designated a different address by serving written notice of change of address on
the other party by registered or certified mail:
-22-
<PAGE> 23
Town: Town of North Hempstead
220 Plandome Road
Manhasset, NY 11030
Attention: Supervisor
With a copy to: Department of Parks and Recreation
1801 Evergreen Avenue
New Hyde Park, NY 11040
Attention: Commissioner
Manager: Senior Tour Players Development, Inc.
266 Beacon Street
Boston, MA 02116
35. SALE OR TRANSFER OF CONTROL OF FACILITY. In the event of the sale or
other transfer of control over the Facility, other than to any agency that is
affiliated with or controlled by the Town, this Agreement may be (a) terminated
by the Town without any further liability, or (b) assigned by the Town to the
purchaser in accordance with Section 32 hereof.
36. TOWN TERMINATION RIGHTS.
(a) The Town shall have the right to terminate this Agreement within
30 days of its receipt of the audited financial statements referred to in
Section 13(a) hereof if the annual net cash flow to the Town hereunder for
any two consecutive calendar years after 1999 does not exceed $1,500,000
per year. For this purpose, "net cash flow" shall mean for each calendar
year the amount of Gross Revenues less Facility operating expenses
(excluding payment of debt service on the Town's outstanding bond issue
used to finance the Facility) and all fees paid to the Manager under
Section 25 hereof.
(b) The Town shall have the right to terminate this Agreement at any
time, on 30 days notice to the Manager, in consideration of payment to the
Manager (in addition to amounts otherwise payable under this Agreement) of
an amount equal to the fixed fee amount set forth in Section 25(c) for the
then current calendar year.
37. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement of the
parties hereto and cannot be changed or modified except by another agreement in
writing signed by the party sought to be charged therewith or by its duly
authorized agent.
38. EXECUTED COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed an original.
-23-
<PAGE> 24
39. CAPTIONS. The captions of various of the provisions of this Agreement
are included for convenience only, and are in no way to be construed as part of
this Agreement or as a limitation upon the scope of the particular provisions to
which they refer.
40. SUCCESSORS AND ASSIGNS. This Agreement and all the provisions hereof
shall be binding upon, and shall inure to the benefit of, the parties hereto and
their respective successors and assigns.
41. GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of New York.
42. SEVERABILITY. If any of the provisions of this Agreement shall be
construed to be illegal or invalid, such construction shall not affect the
legality or validity of any of the other provisions hereof, and the illegal or
invalid provisions hereof shall be deemed stricken and deleted from this
Agreement to the same extent as if never incorporated herein, but all other
provisions hereof shall remain in full force and effect.
43. NO THIRD PARTY BENEFICIARIES. It is the intention of the parties to
this Agreement that no third party shall have the benefit of or any rights under
any of the provisions hereof.
44. RELATIONSHIP. In the performance of its responsibilities and the
exercise of its authority under this Agreement, the Manager shall act as an
independent contractor with respect to the Town. Neither this Agreement nor any
agreements, instruments, documents or transactions contemplated hereby shall in
any respect be interpreted, deemed or construed as making the Manager an agent,
partner or joint venturer with the Town or as creating any similar relationship
or entity, and each party agrees that it will not make any contrary assertion,
contention, claim or counterclaim in any action, suit or other legal proceedings
involving the Manager or the Town.
45. RIGHT TO MAKE AGREEMENT. Each party warrants, with respect to itself,
that neither the execution of the Agreement nor the finalization of the
transactions contemplated hereby shall violate any provision of law or judgment,
writ, injunction, order or decree of any court or governmental authority having
jurisdiction over it, result in or constitute a breach or default under any
indenture, contract, other commitment or restriction to which it is a party or
by which it is bound, or require any consent, vote or approval which had not
been given or taken. Each party covenants that it has and will continue to have
throughout the term of the Agreement and any extensions thereof, the full right
to enter into the Agreement and perform its obligations hereunder.
46. PERMANENT CLUBHOUSE. The Manager acknowledges the intention of the Town
to construct a permanent clubhouse for the Facility at some time during the term
of this Agreement. The Manager shall cooperate with the Town and the persons
working on construction of the permanent clubhouse so as to minimize any adverse
affect on the operation of the Facility during
-24-
<PAGE> 25
construction. The Manager shall submit to the Town for its approval a revised
budget for the Facility during construction of the permanent clubhouse.
47. ADVISORY COMMITTEE. The Town and the Manager shall form an advisory
committee to make recommendations to the Town regarding major issues with
respect to the Facility such as, without limitation, course alterations, any
proposed action which significantly impacts the number of rounds played,
promotions or tournaments.
48. REFERENCES FOR DEFINED TERMS. The Capitalized terms used in this
Agreement are defined in the following provisions:
"AAA" is defined in Section 28(c)(i).
"Agreement" is defined in the first paragraph.
"Annual Plan" is defined in Section 6(a).
"Budget" is defined in Section 6(a).
"Effective Date" is defined in Section 3.
"Event of Default" is defined in Section 27(a).
"Facility" is defined in the first WHEREAS clause.
"Facility Account" is defined in Section 11(a).
"Gross Revenues" is defined in Section 6(c)(i).
"Manager" is defined in the first paragraph.
"Manager's Proprietary Marks" is defined in 31(a).
"Minimum Facility Maintenance Standards" refers to Exhibit B.
"Non-Prevailing Party" is defined in Section 28(c)(iii).
"Payment Dispute" is defined in Section 28(c).
"Prevailing Party" is defined in Section 28(c)(iii).
"Town" is defined in the first paragraph.
-25-
<PAGE> 26
IN WITNESS WHEREOF, the parties have caused this instrument to be executed
on the day and year first written above.
TOWN:
THE TOWN OF NORTH HEMPSTEAD
By: /s/ May Newburger
--------------------------
Title: Supervisor
--------------------
Date: 1/27/98
--------------------
MANAGER:
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
By: /s/ Stanton V. Abrams
--------------------------
Title: President
--------------------
Date: 1/27/98
--------------------
-26-
<PAGE> 27
EXHIBIT A
DESCRIPTION OF ASSETS
---------------------
o Maintenance Building
o Chemical Storage Building
o Pump Station Building
o Irrigation Pond
o Maintenance Building Parking Lot & Site Lighting
o All Gravel Maintenance Roads
o Clubhouse Building
o Driving Range
o Clubhouse Parking Lot & Site Lighting
o Clubhouse Landscaping
o Cart Storage & Fueling Facilities
o Clubhouse Entry Roadway
o 18 Hole "Harbor Links" Golf Course
o Practice Putting Green
o Cliff Areas
o 9 Hole Executive Course
o 18 Hole Miniature Golf Course
o Athletic Fields (5)
o Rain Shelters
o Hub Building
o Hub Building Parking Lot & Site Lighting
o Hub Landscaping
o All Temporary Buildings & Facilities
o All Golf Course(s) Signage
A-1
<PAGE> 28
EXHIBIT B
MINIMUM FACILITY MAINTENANCE STANDARDS
PART I. BASIC RESPONSIBILITIES
----------------------
1. The Manager shall establish written guidelines for greens, tees and
aprons, fairways, driving ranges, roughs, hazards, landscaping and
clubhouse maintenance.
2. The Manager shall establish written guidelines for clubhouse and
pro shop operations.
3. The Manager shall maintain a representative reasonably available in
person or by telephone to address issues or questions raised by the Town.
4. The Superintendent shall be Class "A".
5. The greens shall be aerated, topdressed and overseeded a minimum of
two times per calendar year.
6. The pin placement shall be changed daily.
7. The tees and aprons shall be aerated, topdressed and overseeded a
minimum of two times per year.
8. The sand in the traps shall be maintained at an 8" depth on slopes
and a 6" depth on the bottom.
9. Restrooms shall be maintained a minimum of once each day.
10. The pro shop shall not be closed for maintenance and/or cleaning
during normal business hours.
PART II. GOLF COURSE MAINTENANCE
-----------------------
A. SUPERVISION OF MAINTENANCE:
1. The Superintendent shall be Class "A" and shall be responsible for
supervising the maintenance of the course.
B-1
<PAGE> 29
B. GREENS MAINTENANCE:
1. Mowing the Greens: The greens shall be mowed daily, depending on
growth and weather, and will be maintained to an adequate playing level.
2. Watering of Greens: The crew shall water the greens as necessary to
keep the grass in optimal growing condition, weather permitting.
3. AERIFYING, TOPDRESSING AND OVERSEEDING OF GREENS:
a. The crew shall aerify the greens a minimum of two times per
year using a greens aerifier manufactured for the purpose.
b. The crew shall topdress the greens a minimum of two times per
year in conjunction with aerifying of greens. The crew will institute,
at the Manager's discretion, a light frequent top-dressing to keep
surface smooth.
c. The crew shall overseed each green a minimum of two times each
year during the aerifying/topdressing process.
4. VERTICUTTING OF GREENS: The greens shall be verticut a minimum of
four times per year, at the Manager's discretion, to control "graining" or
"thatching."
5. FERTILIZING THE GREENS: Soil samples shall be submitted to an
approved Soil and Plant Analysis lab a minimum of four times for the first
year and once annually thereafter.
6. PEST CONTROL ON GREENS: Pest control management of the greens is
considered to be a constant ongoing responsibility of the Superintendent.
7. WEED CONTROL ON GREENS: The Manager shall develop and maintain a
program for weed control on the greens. As in most northeastern courses,
bluegrass will be inevitable despite the Manager's best efforts to keep it
to a minimum.
8. OTHER GREEN REQUIREMENTS: The crew shall change the pin placements
daily and replace damaged cups immediately upon discovery.
C. MAINTENANCE OF TEES AND APRONS:
1. MOWING OF TEES AND APRONS: The crew shall mow all tee areas and
aprons around the greens not less frequently than three times per week,
weather dependent.
B-2
<PAGE> 30
2. AERIFYING AND TOPDRESSING OF TEES AND APRONS:
a. The tees shall be aerated a minimum of two times per year or
more as needed.
b. The aprons shall be aerated two times per year. Plugs shall be
chopped and returned to the apron surface, unless deemed undesirable
by the Manager.
3. VERTICUTTING OF TEES AND APRONS: Tees and aprons shall be verticut
a minimum of two times per year.
4. FERTILIZING OF TEES AND APRONS: Soil samples shall be submitted to
an approved soils and plant analysis lab a minimum of four times for the
first year and once annually thereafter.
5. WEED CONTROL ON TEES AND APRONS: The superintendent shall develop
and maintain a program for weed control on tees and aprons.
6. OVERSEEDING OF TEES AND APRONS:
a. The crew shall overseed the tees and aprons two times per year
during the aerifying process.
b. All divots on tees and aprons shall be filled with a
topdressing/seed mixture on a weekly basis.
D. MAINTENANCE OF FAIRWAYS, DRIVING RANGES, AND ROUGHS:
1. MOWING OF FAIRWAYS, DRIVING RANGES, AND ROUGHS:
a. The fairways shall be mowed twice weekly at a height of 5/8 to
3/4 inches.
b. The driving range shall be mowed once a week at a height of
one inch.
c. The roughs shall be mowed weekly.
2. AERIFYING OF FAIRWAYS/DRIVING RANGE/ROUGHS: The fairways, driving
range, and roughs shall be aerated a minimum of one time per year or as
needed, using an aerifier with a 5/8" diameter spoon and a minimum
penetration depth of three inches.
B-3
<PAGE> 31
3. VERTICAL MOWING OF FAIRWAYS/DRIVING RANGE/ROUGHS: Verticle mowing
of the fairways, driving range and roughs is not required except in
extraordinary circumstances for disease control and at the discretion of
the Manager.
4. FERTILIZATION OF FAIRWAYS/DRIVING RANGE/ROUGHS: Soil samples should
be submitted to an approved Soils and Plant Analysis lab a minimum of four
times for the first year and once annually thereafter.
5. WEED CONTROL ON FAIRWAYS/DRIVING RANGE/ROUGHS: The Manager shall
develop and maintain a program for weed control on the fairways, driving
range and roughs.
E. SAND HAZARD MAINTENANCE: The sand level in each trap shall be maintained
at an 8" depth on slopes and a 6" depth on the bottoms. Sand for the traps shall
be the same as the initial construction specifications.
F. TREES, SHRUBS, AND OTHER LANDSCAPING:
1. The Manager shall be responsible for the maintenance of all
landscaping at the course.
2. The Manager shall develop and maintain a program for weed control
of the landscaped areas.
G. MAINTENANCE OF IMPROVEMENTS, EQUIPMENT, ETC. NOT A HORTICULTURE NATURE:
1. IRRIGATION/PORTABLE WATER SYSTEM/UTILITIES/WATER:
a. The Manager shall maintain the irrigation systems on the
course as outlined below:
i. Maintenance means the cleaning, adjusting, repair and
replacement of all components of the pumping and irrigation
systems downstream of the pump control panels and the main
sprinkler control panel.
(a) The maintenance will include but not be limited to:
1. Gate Valves
2. Lateral irrigation lines
3. Automatic Valves
4. Irrigation Controllers to valves
5. Wiring from Controllers to valves
6. Controller Transformers
B-4
<PAGE> 32
7. Sprinkler Heads
8. Quick Coupler Valves
9. Main lines
10. Computer Wires
(b) The Manager shall provide all mainline repairs and
materials. All material used in repair or replacement shall
be as materials used in the original installation or a Town
approved equal or upgrade.
(c) The Manager shall develop and maintain a program
for controlling the weed and fungus control in the golf
course lakes.
ii. The Manager shall be responsible for maintenance of the
portable water system on the course.
(a) All portable water lines from the street meter(s)
to the Clubhouse, maintenance building, and to the restrooms
shall be the Manager's responsibility. This includes
backflow devices and their yearly checks.
b. All portable water lines serving water fountains, quick
couplers faucets, etc. on the course itself shall be the
responsibility of the Manager.
c. All indoor plumbing in the course restrooms and in the
maintenance building shall be the maintenance responsibility of the
Manager.
d. The Manager is responsible for keeping all water coolers and
drinking cups located on the course filled and replenished at all
times.
H. NON-HORTICULTURE MAINTENANCE RELATED TO PLAY ON THE COURSE:
1. The Manager shall be responsible for the maintenance of all tee
markers, cups, flags, ball washers, trap rakes, yardage signs, and benches
on the course.
2. The ballwashers located around the course shall be serviced daily.
3. The crew shall pick up litter throughout the course on a daily
basis.
I. RESTROOM STANDARDS:
1. During play season and dependent on weather, restrooms shall be
maintained a minimum of once per day and more often when heavy use occurs.
B-5
<PAGE> 33
2. The Manager shall be responsible for the removal of graffiti as
soon as possible after it is discovered.
J. FENCE AND CART PATHS: Repair and replace all broken or damaged fencing.
K. CLUBHOUSE/PRO SHOP STANDARD:
1. The Pro Shop staff shall be responsible for the maintenance and
cleaning of the Clubhouse/Pro Shop Area.
a. Vacuum all carpets daily.
b. Clean all ashtrays daily.
c. Empty wastebaskets and clean daily.
d. Sweep all building entrances daily.
e. Clean window glass in the doors inside and outside weekly or
more often as needed.
f. Clean all windows in the Pro Shop and office inside and
outside once every three months or more often as needed.
g. Replace lamps in light fixtures as soon as possible after
discovery.
2. All cleaning supplies, equipment maintenance items, and paper goods
shall be supplied by the Manager.
3. The Pro Shop shall not be closed for maintenance and/or cleaning
during normal business hours.
L. MAINTENANCE OF IMPROVEMENTS, EQUIPMENT, ETC. NOT RELATED TO PLAY ON THE
GOLF COURSE:
1. The crew shall be responsible for the cleanliness of the
maintenance yard area and the superintendent's office on a daily basis.
2. The crew shall be responsible for the daily litter pickup on all
paved and non-paved surfaces of the course.
3. The crew shall maintain clean edges on all roadways, parking lots,
and cart paths by monthly edging or spraying of the plant growth.
M. GENERAL PROVISIONS:
1. All maintenance and operational standards are subject in all
respects to weather and other conditions beyond the reasonable control of
the Manager.
B-6
<PAGE> 34
2. At the request of the Town, but in any event no less frequently
than once per year, the Manager, the advisory committee and representatives
of the Town shall meet to review and discuss mutually agreeable revisions
to Parts I and II of this EXHIBIT B.
B-7
<PAGE> 1
Exhibit 10.29
GUARANTEE
This GUARANTEE is made effective as of the 15th day of January, 1997,
by SENIOR TOUR PLAYERS DEVELOPMENT, INC., a Nevada corporation, and LODWRICK
COOK (collectively, the "Guarantor"), in favor of U.S. BANK OF NEVADA, a Nevada
state-chartered commercial bank (the "Lender"), and its successors and assigns.
RECITALS
A. LAS VEGAS GOLF CENTER, L.L.C., a Delaware limited liability
company (the "Borrower"), has requested Lender to lend Borrower the principal
sum of FOUR MILLION AND NO/100THS DOLLARS ($4,000,000.00) (the "Loan") for the
purpose of paying certain costs incurred in constructing a golf driving range
and related entertainment facilities on certain real property located in Clark
County, Nevada, and providing permanent financing in connection Therewith.
B. The Loan will be evidenced by a Promissory Note Secured By
Deed of Trust (the "Note"), secured by a Deed of Trust And Security Agreement
And Fixture Filing With Assignment of Rents (the "Deed of Trust") and disbursed
pursuant to a Construction/Permanent Loan Agreement (the "Loan Agreement"), each
dated of even date hereof and executed by Borrower. The Loan Agreement, Note,
Deed of Trust and any other instrument or document executed and delivered to or
for the benefit of Lender in connection with the Loan are hereinafter referred
to as the "Loan Documents".
C. The Loan shall result in a substantial benefit to each
Guarantor.
D. Lender has made or agreed to make the Loan upon the inducement
and representation that Guarantor would guarantee Borrower's obligations to
Lender under the Loan Documents and/or arising in connection with the Loan, as
provided herein.
NOW, THEREFORE, in consideration of, and in order to induce Lender to
make the Loan, Guarantor hereby agrees for the benefit of Lender, its
succcessors and assigns, as follows:
AGREEMENT
1. INDEBTEDNESS GUARANTEED. Each Guarantor hereby unconditionally
guarantees the payment, when due, of the indebtedness of Borrower to Lender or
its order evidenced by the Note or any other Loan Document and to perform any
and all obligations of Borrower under the terms of any Loan Document. Each
Guarantor acknowledges that the amount of the indebtedness guaranteed hereby may
exceed the principal amount of the Note.
1
<PAGE> 2
2. COMPLETION OF IMPROVEMENTS. If for any reason or under any
contingency (i) Borrower shall abandon construction of the Improvements (as
defined in the Loan Agreement), (ii) Borrower shall fail to complete the
Improvements within the maximum construction time and in the manner provided in,
and in accordance with the terms of, the Loan Agreement, and pay all costs
thereof, (iii) Lender takes possession of the encumbered property prior to the
completion of the Improvements by reason of any default of Borrower under any
Loan Document, or, (iv) the right of Borrower to receive any other or further
disbursements or advances under any Loan Document shall be terminated in
accordance with the terms thereof, then, in any such event, Guarantor shall
assume all responsibility for the completion of the Improvements in accordance
with the provisions of the Loan Documents and, at Guarantor's own cost and
expense (except that Guarantor shall have the right to receive the undisbursed
portion of the Loan in order to assist Guarantor in performing Guarantor's
obligations hereunder, provided that such funds shall be disbursed by Lender to
Guarantor in accordance with the provisions of the Loan Agreement), shall cause
the Improvements to be fully completed in accordance with the provisions of the
Loan Agreement and within the maximum construction time specified in the Loan
Agreement, shall pay all costs and expenses in connection with the construction
of the Improvements, and shall indemnify and hold Lender harmless from and
against any and all loss, cost, liability or expense which Lender may suffer by
reason of such event. Notwithstanding the above, Lender, at Lender's sole
option, shall have the right to complete the Improvements with such changes or
modifications in the plans and specifications therefor which Lender reasonably
deems necessary for the completion of the Improvements, and expend such sums as
Lender deems proper in order so to complete the Improvements. The amount of any
and all expenditures made by Lender shall be immediately due and payable by
Guarantor to Lender.
3. REPRESENTATIONS AND WARRANTIES. Each Guarantor hereby
represents and warrants that such Guarantor has a financial interest in the
Borrower, that the Loan extended by the Lender to the Borrower enhances that
financial interest, that this Guarantee is given in consideration of the Lender
making the Loan to the Borrower and that such Guarantor has examined or has had
the full opportunity to examine each of the Loan Documents.
4. ALTERATION OF OBLIGATIONS. In such manner, upon such terms and
at such times as Lender and Borrower deem best and without notice to Guarantor,
Lender and Borrower may alter, compromise, accelerate, extend, renew or change
the time or manner for the payment of any indebtedness or the performance of any
obligation hereby guaranteed, increase or reduce the rate of interest on the
Note, release Borrower, by acceptance of any deed in lieu of foreclosure or
otherwise, as to all or any portion of the obligations hereby guaranteed,
release, substitute or add any one or more guarantors or endorsers, accept
additional or substituted security therefor, or release or subordinate any
security therefor. No exercise or non-exercise by Lender of any right available
to Lender, no dealing by Lender with Guarantor or any other guarantor, endorser
of the note or any other person, and no change, impairment or release of all or
a portion of the obligations of Borrower under any of the Loan Documents or
suspension of any right or remedy
2
<PAGE> 3
of Lender against any person, including, without limitation, Borrower and any
other such guarantor, endorser or other person, shall in any way affect any of
the obligations of Guarantor hereunder or any security furnished by Guarantor or
give Guarantor any recourse against Lender. To the extent permitted by law, if
Lender has exculpated Borrower from personal liability in whole or in part
and/or agreed to look solely to the property covered by the Deed of Trust for
the satisfaction of Borrower's obligations under the Loan Documents, said
exculpation and agreement shall not affect the obligations of Guarantor
hereunder, since Guarantor acknowledges that its obligations hereunder are
independent of the obligations of Borrower and are to be construed as if no such
exculpation or agreement had been given to Borrower by Lender. Guarantor further
acknowledges that if any such exculpation or agreement has been given to
Borrower, Lender has done so in reliance upon the covenants of Guarantor
contained herein.
5. WAIVER. To the extent permitted by law, Guarantor hereby
waives and relinquishes all rights and remedies accorded by applicable law to
guarantors and agrees not to assert or take advantage of any such rights or
remedies, including, without limitation, (a) any right provided by NRS 40.430,
or any other statute or decision, to require Lender to proceed against Borrower
or any other person or to proceed against or exhaust any security held by Lender
at any time or to pursue ]any other remedy in Lender's power before proceeding
against Guarantor; (b) the defense of the statute of limitations in any action
hereunder or in any action for the collection of any indebtedness or the
performance of any obligation hereby guaranteed; (c) any defense that may arise
by reason of the incapacity, lack of authority, death or disability of any other
person or persons or the failure of Lender to file or enforce a claim against
the estate (in administration, bankruptcy or any other proceeding) of any other
person or persons; (d) demand, protest and notice of any kind, including,
without limitation, notice of the existence, creation or incurring of any new or
additional indebtedness or obligation or of any action or non-action on the part
of Borrower, Lender, any endorser or creditor of Borrower or Guarantor or on the
part of any other person whomsoever under this or any other instrument in
connection with any obligation or evidence of indebtedness held by Lender as
collateral or in connection with any indebtedness hereby guaranteed; (e) all
rights and defenses arising out of an election of remedies by Lender, even
though that election of remedies such as nonjudicial foreclosure with respect to
security for any obligation guaranteed hereby, has destroyed the Guarantor's
rights of subrogation and reimbursement against the principal by operation of
applicable law; (f) any defense based upon any statute or rule of law which
provides that the obligation of a surety must be neither larger in amount nor in
other respects more burdensome than that of the principal; (g) any duty on the
part of Lender to disclose to Guarantor any facts Lender may now or hereafter
know about Borrower, regardless of whether Lender has reason to believe that any
such facts materially increase the risk beyond that which Guarantor intends to
assume or has reason to believe that such facts are unknown to Guarantor or has
a reasonable opportunity to communicate such facts to Guarantor, since Guarantor
acknowledges that it is fully responsible for being and keeping informed of the
financial condition of Borrower and of all circumstances bearing on the risk of
non-payment of any indebtedness hereby guaranteed; (h) any defense arising
because of Lender's election, in any
3
<PAGE> 4
proceeding instituted under the Federal Bankruptcy Code, of the application of
Section 111l(b)(2) of the Federal Bankruptcy Code; (i) any defense based on
any borrowing or grant of a security interest under Section 364 of the Federal
Bankruptcy Code; and (j) any claim, right or remedy which any Guarantor may now
have or hereafter acquire against Borrower that arises hereunder and/or from the
performance by any Guarantor hereunder, including, without limitation, any
claim, right or remedy of Lender against Borrower or any security which Lender
now has or hereafter acquires, whether or not such claim, right or remedy arises
in equity, under contract, by statute, under common law or otherwise.
6. SUBORDINATION. To the extent permitted by law and effective
upon an Event of Default under the Loan Agreement, all existing and future
indebtedness of Borrower to Guarantor and the right of Guarantor to withdraw any
capital invested by Guarantor in Borrower is hereby subordinated to all
indebtedness hereby guaranteed and, without the prior written consent of Lender
such subordinated indebtedness or capital shall not be paid or withdrawn in
whole or in part nor will Guarantor accept any payment of or on account of any
such indebtedness or as a withdrawal of capital while this Guarantee is in
effect. At Lender's request following an Event of Default under the Loan
Agreement, Guarantor shall cause Borrower to pay to Lender all or any part of
such subordinated indebtedness and any capital which Guarantor is entitled to
withdraw. Each such payment by Borrower in violation of this Guarantee shall be
received by Guarantor in trust for Lender, and Guarantor shall cause the same to
be paid to Lender immediately upon demand by Lender on account of the
indebtedness to Lender guaranteed hereunder. No such payment shall reduce or
affect in any manner the liability of Guarantor under this Guarantee.
7. BANKRUPTCY. So long as any indebtedness shall be owing to
Lender, Guarantor shall not, without the prior written consent of Lender,
commence, or join with any other person in commencing, any bankruptcy,
reorganization, or insolvency proceeding against Borrower. The obligations of
Guarantor under this Guarantee shall not be altered, limited or affected by any
proceeding, voluntary or involuntary, involving the bankruptcy, insolvency,
receivership, reorganization, liquidation or arrangement of Borrower, or by any
defense which Borrower may have by reason of any order, decree or decision of
any court or administrative body resulting from any such proceeding.
8. CLAIMS IN BANKRUPTCY. Guarantor shall file in any bankruptcy
or other proceeding in which the filing of claims is required or permitted by
law all claims which Guarantor may have against Borrower relating to any
indebtedness of Borrower to Guarantor and will assign to Lender all rights of
Guarantor thereunder. If Guarantor does not file any such claim, Lender, as
attorney-in-fact for Guarantor, is hereby authorized to do so in the name of
Guarantor or, in Lender's discretion, to assign the claim to a nominee and to
cause proof of claim to be filed in the name of Lender's nominee. The foregoing
power of attorney is coupled with an interest and cannot be revoked. Lender or
its nominee shall have the sole right to accept or reject any plan proposed in
such proceeding and to take any other action which a party filing a claim is
entitled to do. In all
4
<PAGE> 5
such cases, whether in administration, bankruptcy or otherwise, the person or
persons authorized to pay such claim shall pay to Lender the amount payable on
such claim and, to the full extent necessary for that purpose, Guarantor hereby
assigns to Lender all of Guarantor's rights to any such payments or
distributions to which Guarantor would otherwise be entitled; provided, however,
that Guarantor's obligations hereunder shall not be deemed satisfied except to
the extent that Lender receives cash by reason of any such payment or
distribution. If Lender receives anything hereunder other than cash, the same
shall be held as collateral for amounts due under this Guarantee. If at any time
the holder of the Note is required to refund to Borrower any payments made by
Borrower under the Note because such payments have been held by a bankruptcy
court having jurisdiction over Borrower to constitute a preference under any
bankruptcy, insolvency or similar law then in effect, or for any other reason,
then in addition to Guarantor's other obligation under this Guarantee, Guarantor
shall reimburse the holder in the aggregate amount of such refund payments.
9. INTEREST AND COSTS. If Borrower or Guarantor fails to pay all
or any portion of the indebtedness hereby guaranteed upon demand by Lender, the
amount of such indebtedness shall thereafter bear interest at the rate then
applicable under the Note. Guarantor shall also pay Lender's reasonable
attorneys' fees and all costs and other expenses which Lender expends or incurs
in collecting or compromising any such indebtedness or in enforcing this
Guarantee against Guarantor, whether or not suit is filed, including, without
limitation, all such fees, costs and expenses incurred in connection with any
insolvency, bankruptcy, reorganization, arrangement or other similar proceedings
involving Guarantor which in any way affect the exercise by Lender of its rights
and remedies hereunder.
10. CUMULATIVE RIGHTS. The amount of Guarantor's liability and all
rights, powers and remedies of Lender hereunder and under any other agreement
now or at any time hereafter in force between Lender and Guarantor, including,
without limitation, any other guarantee executed by Guarantor relating to any
indebtedness of Borrower to Lender, shall be cumulative and not alternative and
such rights, powers and remedies shall be in addition to all rights, powers and
remedies given to Lender by law. This Guarantee is in addition to and exclusive
of the guarantee of any other guarantor of any indebtedness of Borrower to
Lender.
11. INDEPENDENT OBLIGATIONS. The obligations of Guarantor
hereunder are independent of the obligations of Borrower and, to the extent
permitted by law, in the event of any default hereunder, a separate action or
actions may be brought and prosecuted against Guarantor whether or not Borrower
is joined therein or a separate action or actions are brought against Borrower.
Lender may maintain successive actions for other defaults. Lender's rights
hereunder shall not be exhausted by its exercise of any of its rights or
remedies or by any such action or by any number of successive actions until and
unless all indebtedness and obligations, the payment and performance of which
are hereby guaranteed, have been paid and fully performed.
5
<PAGE> 6
12. SEVERABILITY. Should any one or more provisions of this
Guarantee be determined to be illegal or unenforceable, all other provisions
hereof shall nevertheless remain in full force and effect.
13. SUCCESSORS AND ASSIGNS. This Guarantee shall inure to the
benefit of Lender, its successors and assigns, including the assignees of any
indebtedness hereby guaranteed, and shall bind the heirs, executors,
administrators, personal representatives, successors and assigns of Guarantor.
This Guarantee may be assigned by Lender with respect to all or any portion of
the indebtedness hereby guaranteed, and when so assigned Guarantor shall be
liable to the assignees under this Guarantee without in any manner affecting the
liability of Guarantor hereunder with respect to any indebtedness retained by
Lender.
14. NOTICES. Whenever Guarantor or Lender shall desire to give or
serve any notice, demand, request or other communication with respect to this
Guarantee, each such notice shall be in writing and shall be effective only if
the same is delivered by personal service, by telefax or mailed by registered or
certified mail, postage prepaid, return receipt requested, addressed as follows:
To Lender: U.S. BANK OF NEVADA
COMMERCIAL SERVICES GROUP
2300 W. SAHARA AVENUE, SUITE 120, BOX 20
LAS VEGAS, NEVADA 891202
To Guarantor: SENIOR TOUR PLAYERS DEVELOPMENT, INC.
266 BEACON STREET
BOSTON, MASSACHUSETTS 02116
LODWRICK COOK
13849 Weddington St.
--------------------------------
Sherman Oaks, California 91401
--------------------------------
Any such notice delivered personally shall be deemed to have been
received upon delivery. Any such notice sent by telefax shall be presumed to
have been received by the addressee one (1) business day after its acceptance
for sending by an authorized carrier thereof. Any such notice sent by mail shall
be presumed to have been received by the addressee three (3) business days after
posting in the United States mail. Any party to whom any such notice is to be
sent hereunder may change its address by giving the other such parties written
notice of its new address as herein provided.
15. APPLICATION OF PAYMENTS OR RECOVERIES. With or without notice
to Guarantor, Lender, in Lender's sole discretion and at any time and from time
to time and in such manner and
6
<PAGE> 7
upon such terms as Lender deems fit, may (a) apply any or all payments or
recoveries from Borrower or from any other guarantor or endorser under any other
instrument or realized from any security, in such manner and order of priority
as Lender may determine, to any indebtedness of Borrower to Lender, whether or
not such indebtedness is guaranteed hereby or is otherwise secured or is due at
the time of such application; and (b) refund to Borrower any payment received
by Lender upon any indebtedness hereby guaranteed and payment of the amount
refunded shall be fully guaranteed hereby.
16. FINANCIAL STATEMENTS. Guarantor hereby represents and warrants
that the most recent financial statements of Borrower and Guarantor heretofore
delivered to Lender are true and correct in all material respects, have been
prepared in accordance with generally accepted accounting practices consistently
applied and fairly present the financial condition of Borrower and Guarantor as
of the respective dates thereof and for the period(s) covered thereby, and no
material adverse change has occurred in the financial condition or prospects of
Borrower or Guarantor since the respective dates thereof.
17. RIGHTS AND REMEDIES. Guarantor understands that the exercise
by Lender of certain rights and remedies contained in the Deed of Trust may
affect or eliminate Guarantor's right of subrogation against Borrower and that
Guarantor may therefore incur partially or totally nonreimbursable liability
hereunder. Nevertheless, to the extent permitted by law, Guarantor hereby
authorizes and empowers Lender, its successors, endorsees and/or assigns, to
exercise in its or their sole discretion, any rights and remedies, or any
combination thereof, which then may be available, it being the purpose and
intent of Guarantor that the obligations hereunder shall be absolute,
independent and unconditional under any and all circumstances.
18. SETOFF. Lender shall have a right of setoff against all
monies, securities and other property of Guarantor now or hereafter in the
possession of, or on deposit with, Lender, whether held in a general or special
account or deposit, or for safekeeping or otherwise. Such right is in addition
to any right of setoff Lender may have by law. All rights of setoff may be
exercised without notice or demand to Guarantor. No right of setoff shall be
deemed to have been waived by any act or conduct on the part of Lender, or by
any neglect to exercise such right of setoff, or by any delay in doing so. Every
right of setoff shall continue in full force and effect until specifically
waived or released by an instrument in writing executed by Lender.
19. MISCELLANEOUS.
(a) This Guarantee shall be governed by and construed in
accordance with the laws of the State of Nevada. Guarantor hereby consent to
the jurisdiction of any competent court within the State of Nevada and consents
to service of process by any means authorized by Nevada law in any action
brought under or arising out of this Guarantee.
7
<PAGE> 8
(b) Except as provided in any other written agreement now
or at any time hereafter in force between Lender and Guarantor, this Guarantee
shall constitute the entire agreement of Guarantor with Lender with respect to
the subject matter hereof, and no representation, understanding, promise or
condition concerning the subject matter hereof shall be binding upon Lender
unless expressed herein.
(c) The obligations of all persons signing this Guarantee
as Guarantor shall be joint and several.
(d) When the context and construction so require, all
words used in the singular herein shall be deemed to have been used in the
plural and the masculine shall include the feminine and neuter and vice versa.
The word "person" as used herein shall include any individual, company, firm,
association, partnership, corporation, trust or other legal entity of any kind
whatsoever.
(e) No provision of this Guarantee or right granted to
Lender hereunder can be waived in whole or in part nor can Guarantor be released
from Guarantor's obligations hereunder except by a writing duly executed by an
authorized officer of Lender.
(f) Until all indebtedness of Borrower to Lender has been
paid in full, Guarantor shall have no right of subrogation and hereby waives any
right to enforce any remedy which Lender now has or may hereafter have against
Borrower and any benefit of, and any right to participate in, any security now
or hereafter held by Lender.
(g) Lender need not inquire into the power of Borrower or
the authority of its partners, officers or agents acting or purporting to act on
its behalf.
(h) The headings of this Guarantee are inserted for
convenience only and shall have no effect upon the construction or
interpretation hereof.
Executed as of the date first above written.
SENIOR TOUR PLAYERS DEVELOPMENT, INC.,
A NEVADA CORPORATION,
BY: /s/ STANTON V. ABRAMS
---------------------------------------
STANTON V. ABRAMS
8
<PAGE> 9
ITS: MANAGER
/s/ LODWRICK COOK
------------------------------------
LODWRICK COOK
"GUARANTOR"
------------------------------------
STATE OF NEVADA )
)ss.
COUNTY OF CLARK )
This instrument was acknowledged before me on 15 January, 1997, by Stanton
V. Abrams, as President of Senior Tour Players Development, Inc.
/s/ Cherle Ballard
-----------------------------------
[Notary Public Seal] Cherle Ballard
Notary Public
My Commission Expires: 15 Nov. 1997
STATE OF NEVADA )
)ss.
COUNTY OF CLARK )
This instrument was acknowledged before me on 15 January, 1997, by
Lodwrick Cook
/s/ Cherle Ballard
-----------------------------------
[Notary Public Seal] Cherle Ballard
Notary Public
My Commission Expires: 15 Nov. 1997
9
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report included in this Form 10-KSB, into the Company's previously filed
Registration Statement (File No. 333-30509) on Form S-3.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
March 30, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<CASH> 177,174
<SECURITIES> 0
<RECEIVABLES> 169,086
<ALLOWANCES> 0
<INVENTORY> 189,651
<CURRENT-ASSETS> 579,423
<PP&E> 14,674,901
<DEPRECIATION> 0
<TOTAL-ASSETS> 17,648,661
<CURRENT-LIABILITIES> 2,706,397
<BONDS> 10,426,289
0
0
<COMMON> 3,751
<OTHER-SE> 4,515,975
<TOTAL-LIABILITY-AND-EQUITY> 17,648,661
<SALES> 0
<TOTAL-REVENUES> 5,376,947
<CGS> 0
<TOTAL-COSTS> 6,729,167
<OTHER-EXPENSES> 174,719
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 821,236
<INCOME-PRETAX> 2,348,175
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,348,175
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,348,175
<EPS-PRIMARY> (.63)
<EPS-DILUTED> (.63)
</TABLE>
