1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 1)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2)
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14(a)-12
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
------------------------------------------------------------
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NOT APPLICABLE
------------------------------------------------------------
(NAME OF PERSON(S) FILING PROXY STATEMENT IF OTHER THAN REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11:
-------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------
5) Total fee paid:
-------------------------------------------------------------------
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or Schedule and the date of its filing.
1) Amount Previously Paid:
-------------------------------------------------------------------
2) Filing Party:
-------------------------------------------------------------------
3) Date Filed:
-------------------------------------------------------------------
Notes:
The following documents filed by the Company with the Commission (File No.
1-13362) are incorporated into this Proxy Statement by reference and copies of
such documents will accompany this Proxy Statement when mailed in definitive
form to the Company's shareholders: (1) the Company's Annual Report on Form
10-KSB for the year ended December 31, 1997; and (2) the Company's Quarterly
Report on Form 10-QSB for the quarter ended March 31, 1998.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
2
Revised Preliminary Copy for the Information of the
Securities and Exchange Commission Only
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
822 Boylston Street, Suite 300, Chestnut Hill, MA 02167
(617) 266-3600 * FAX (617) 731-7734
July __, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders
of Senior Tour Players Development, Inc. (the "Company") to be held on Friday,
July 24, 1998 at 10:00 a.m., local time, at The Harvard Club, 374 Commonwealth
Avenue, Boston, Massachusetts. A notice of the Special Meeting, a Proxy
Statement and proxy card containing information about the matters to be acted
upon are enclosed. Also enclosed are copies of the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1997, and Quarterly Report on Form
10-QSB for the quarter ended March 31, 1998, which contain financial statements
and other information with respect to the Company and its shareholders. The
terms and conditions of the proposed merger described below (the "Merger") and
other important information are set forth in the accompanying Proxy Statement,
which you are urged to read carefully.
At the Special Meeting, shareholders will be asked to consider and vote
upon the proposed approval of the Agreement and Plan of Merger dated as of May
6, 1998 (the "Merger Agreement") among the Company, Golf Club Partners L.L.C.
("GCP"), and a wholly-owned subsidiary of GCP. GCP is a privately held Oklahoma
limited liability company which has no affiliation with the Company or its
management. The Merger Agreement provides that, prior to the Merger, the Company
will sell or otherwise dispose of all of the Company's assets other than The
Badlands Golf Club in Las Vegas, Nevada ("The Badlands") and certain related
assets (collectively, the "Acquired Assets"), and that the Company will pay or
otherwise discharge all of its liabilities except for certain liabilities
relating to The Badlands (collectively, the "Assumed Liabilities") and the
mortgage debt to NationsCredit on The Badlands (the "NationsCredit Loans"). GCP
will then acquire the Company through the Merger (and, in so doing, GCP will
become the beneficial owner of The Badlands) in exchange for a cash payment (the
"Merger Consideration") equal to (i) $26.0 million, (ii) less the sum of (A) the
then outstanding balance and certain prepayment penalties on the NationsCredit
Loans, (B) any costs and expenses relating to the Merger payable by the Company,
and (C) any of the Company's liabilities not included as Assumed Liabilities and
not paid by the Company prior to the Merger, (iii) plus the proceeds received by
the Company after the date of the Merger Agreement from the exercise of the
Company's stock options, (iv) plus or minus, as the case may be, an adjustment
relating to the working capital of The Badlands at the time of the Merger. The
surviving corporation of the Merger will be a wholly-owned subsidiary of GCP,
and the rights of the Company's shareholders will thereafter consist solely of
their rights to receive their portion of the Merger Consideration (the "Merger
Consideration Per Share").
Depending upon the outcome of certain future events and adjustments
which are described in the Proxy Statement, the Company now estimates that the
Merger Consideration Per Share will be approximately [$3.25] to [$3.45] per
share of Common Stock. Such estimate is, however, subject to
1
3
change in light of the outcome of those future events and adjustments as
described in the Proxy Statement. Therefore, there is no assurance as to the
amount of the Merger Consideration Per Share which will ultimately be available
for distribution to the Company's shareholders.
Your Board of Directors has carefully reviewed and considered the terms
and conditions of the Merger. In addition, the Board of Directors has received
the opinion of the Company's financial advisor, Stonebridge Associates, LLC,
that, as of the date the opinion was rendered (May 6, 1998), the Merger
Consideration Per Share to be received by the holders of the Company's Common
Stock pursuant to the Merger is fair to such shareholders from a financial point
of view. On the basis described in the enclosed Proxy Statement, on May 6, 1998
Stonebridge Associates, LLC estimated that the Merger Consideration Per Share
could vary between $3.06 and $3.49.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE MERGER
AGREEMENT.
Your vote is important. Whether or not you plan to attend the Special
Meeting, please complete, sign and date the accompanying proxy card and return
it in the enclosed postage-paid envelope. Approval of the Merger Agreement
requires the affirmative vote of holders of a majority of the outstanding shares
of the Company's Common Stock. If you attend the Special Meeting, you may revoke
such proxy and vote in person if you wish, even if you have previously returned
your proxy card. Your prompt cooperation will be greatly appreciated.
Very truly yours,
Stanton V. Abrams
President and Chief Executive Officer
2
4
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
822 BOYLSTON STREET
CHESTNUT HILL, MA 02167
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 24, 1998
A Special Meeting of Shareholders (the "Special Meeting") of Senior
Tour Players Development, Inc. (the "Company") will be held at The Harvard Club,
374 Commonwealth Avenue, Boston, Massachusetts, on Friday, July 24, 1998 at
10:00 a.m. (Boston time) for the following purposes:
1. To consider and act upon the proposed approval of the
Agreement and Plan of Merger dated as of May 6, 1998 (the
"Merger Agreement") among the Company, Golf Club Partners
L.L.C. ("GCP"), and STPD Acquisition Company, a wholly-owned
subsidiary of GCP, which provides for the merger of STPD
Acquisition Company with and into the Company.
2. To transact such other business as may properly come before
the Special Meeting or any adjournment thereof.
Approval of the Merger Agreement requires the affirmative vote of the
holders of a majority of the outstanding shares of the Company's Common Stock.
The Company's Board of Directors has fixed June 30, 1998 as the record date (the
"Record Date") for the Special Meeting. Only holders of record of the Company's
Common Stock as of the close of business on the Record Date will be entitled to
notice of and to vote at the Special Meeting and any adjournment thereof.
Whether or not you plan to attend the Special Meeting, please date, sign and
return the enclosed proxy card in the return envelope furnished for your
convenience. No postage is required if mailed within the United States.
A complete list of shareholders of record entitled to vote at the
Special Meeting will be open and available for examination by any shareholder
during ordinary business hours at the Company's offices at 822 Boylston Street,
Suite 300, Chestnut Hill, Massachusetts, and at the time and place of the
Special Meeting. If you attend the Special Meeting and prefer to vote in person,
you can revoke your proxy.
Shareholders who comply with the requirements of Nevada Revised
Statutes Sections 92A.300 through 92A.500 will be entitled, if the Merger is
consummated, to seek an appraisal of their shares. See "THE MERGER --
Dissenters' Rights" in the accompanying Proxy Statement.
By the Order of the Board of Directors
Stanton V. Abrams
President and Chief Executive Officer
July , 1998
5
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 24, 1998
This Proxy Statement is furnished to the shareholders of Senior Tour
Players Development, Inc., a Nevada corporation (the "Company"), in connection
with the solicitation of proxies by the Company's Board of Directors (the "Board
of Directors") from the holders of shares of the Company's common stock, $.001
par value ("Common Stock"), for use at a Special Meeting of Shareholders (the
"Special Meeting") to be held at 10:00 a.m., local time, on Friday, July 24,
1998 at The Harvard Club, 374 Commonwealth Avenue, Boston, Massachusetts and at
any adjournment thereof. This Proxy Statement and the accompanying form of proxy
are first being mailed to shareholders on or about July , 1998.
At the Special Meeting, shareholders will consider and vote upon the
proposed approval of the Agreement and Plan of Merger dated as of May 6, 1998
(the "Merger Agreement") among the Company, Golf Club Partners L.L.C. ("GCP"),
and a wholly-owned subsidiary of GCP named STPD Acquisition Company ("Acquiror
Sub"). The Merger Agreement provides that, prior to the Merger, the Company will
sell or otherwise dispose of all of the Company's assets other than The Badlands
Golf Club in Las Vegas, Nevada ("The Badlands") and certain related assets
(collectively, the "Acquired Assets"), and that the Company will pay or
otherwise discharge all of its liabilities except for certain liabilities
relating to The Badlands (collectively, the "Assumed Liabilities") and the
mortgage debt to NationsCredit on The Badlands (the "NationsCredit Loans"). GCP
will then acquire the Company through the Merger (and, in so doing, GCP will
become the beneficial owner of The Badlands) in exchange for a cash payment
equal to (i) $26.0 million, (ii) less the sum of (A) the then outstanding
balance and certain prepayment penalties on the NationsCredit Loans, (B) any
costs and expenses relating to the Merger payable by the Company, and (C) any of
the Company's liabilities not included as Assumed Liabilities and not paid by
the Company prior to the Merger, (iii) plus the proceeds received by the Company
after the date of the Merger Agreement from the exercise of the Company's stock
options, (iv) plus or minus, as the case may be, an adjustment relating to the
working capital of The Badlands at the time of the Merger. The surviving
corporation will be a wholly-owned subsidiary of GCP, and the rights of the
Company's shareholders will thereafter consist solely of their rights to receive
their portion of the Merger Consideration (the "Merger Consideration Per
Share").
Depending upon the outcome of certain future events and adjustments
which are described in this Proxy Statement, the Company now estimates that the
Merger Consideration Per Share will be approximately [$3.25] to [$3.45] per
share of Common Stock. Such estimate is, however, subject to change in light of
the outcome of those future events and adjustments as described in this Proxy
Statement. Therefore, there is no assurance as to the amount of the Merger
Consideration Per Share which will ultimately be available for distribution to
the Company's shareholders.
The Board of Directors knows of no additional matters that will be
presented for consideration at the Special Meeting. Execution of a proxy,
however, confers on the designated proxy holders discretionary authority to vote
the shares of Common Stock covered thereby in accordance with their best
judgment on such other business, if any, that may properly come before the
Special Meeting or any adjournment thereof.
NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROXY
STATEMENT IN CONNECTION WITH THE SOLICITATION OF PROXIES AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OTHER PERSON. ALL
i
6
INFORMATION IN THIS PROXY STATEMENT RELATING TO THE COMPANY HAS BEEN SUPPLIED BY
THE COMPANY, AND ALL INFORMATION IN THIS PROXY STATEMENT RELATING TO GCP AND ITS
AFFILIATES HAS BEEN SUPPLIED BY GCP.
THIS PROXY STATEMENT CONTAINS "FORWARD-LOOKING STATEMENTS" AS DEFINED
IN THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995, WHICH ARE GENERALLY
PRECEDED BY SUCH TERMS AS "MAY," "ESTIMATE," OR "ANTICIPATE." SUCH STATEMENTS
ARE SUBJECT TO NUMEROUS UNCERTAINTIES AND RISKS, ONLY CERTAIN OF WHICH ARE
DESCRIBED IN THIS PROXY STATEMENT. ACCORDINGLY, SUCH FORWARD-LOOKING STATEMENTS
MAY ULTIMATELY PROVE TO BE NOT ACCURATE, AND THE COMPANY UNDERTAKES NO
OBLIGATION TO RELEASE ANY REVISIONS TO SUCH STATEMENTS TO REFLECT EVENTS OR
CIRCUMSTANCES ARISING AFTER THE DATE HEREOF.
AVAILABLE INFORMATION
The Company is subject to the information reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission") (File No. 1-13362).
Such reports, proxy statements and other information can be inspected and copied
at the Public Reference Room of the Commission, 450 Fifth Street, NW, Washington
D.C. 10549 and at the Commission's regional offices at 7 World Trade Center,
Suite 1300, New York, New York 10048, and at 500 West Madison Street, Suite
1400, Chicago, Illinois 60661; and copies of such material can be obtained from
the Public Reference Section of the Commission, Washington DC 20549, at
prescribed rates. The Commission also maintains a Web Site that contains
reports, proxy statements and other information regarding issuers, including the
Company, that file electronically with the Commission. The address of such site
is http://www.sec.gov. Reports, proxy statements and other information
concerning the Company may also be inspected at, and obtained from the offices
of the National Association of Securities Dealers, Inc., 1735 K Street, N.W.,
Washington D.C. 20002.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by the Company with the
Commission are incorporated into this Proxy Statement by reference and copies of
such documents accompany this Proxy Statement: (1) the Company's Annual Report
on Form 10-KSB for the year ended December 31, 1997; and (2) the Company's
Quarterly Report on Form 10-QSB for the quarter ended March 31, 1998.
All documents filed by the Company with the Commission pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date
hereof and of which copies are distributed to the Company's shareholders prior
to the Special Meeting (or any adjournment thereof) shall be deemed to be
incorporated by reference into this Proxy Statement and to be a part hereof from
the date of filing such documents. Any statement contained in a document
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Proxy Statement to the extent that a statement contained
herein or in any other subsequently filed document which also is or is deemed to
be incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Proxy Statement.
ii
7
TABLE OF CONTENTS
SUMMARY........................................................................1
THE SPECIAL MEETING............................................................7
General...............................................................7
Matters to be Considered at the Special Meeting.......................7
Voting at the Special Meeting; Record Date; Required Vote............7
Proxies...............................................................8
CERTAIN CONSIDERATIONS RELATING
TO THE MERGER..................................................................9
Background of the Merger..............................................9
Reasons for the Merger; Recommendation
of the Company's Board of Directors................................12
Financial Advisor; Fairness Opinion..................................13
Interests of Certain Persons in the Merger...........................20
Treatment of Options and Warrants....................................22
Risks of Non-Consummation............................................22
Expenses of the Merger...............................................23
THE MERGER....................................................................23
Form of Merger.......................................................24
Merger Consideration.................................................24
Estimate of Merger Consideration Per Share...........................25
Shareholder Meeting..................................................28
Effective Time of the Merger.........................................29
Procedures for Exchange of Certificates..............................29
Financing Arrangements by GCP........................................30
Regulatory Matters...................................................31
Dissenters' Rights...................................................31
The Merger Agreement.................................................33
Merger Consideration Per Share..............................33
Escrow Arrangements.........................................33
Stock Options and Warrants..................................33
Representations and Warranties..............................34
Certain Covenants...........................................34
Conditions to the Merger....................................36
Termination.................................................36
Director and Officer Liability Insurance....................37
Termination Fee and Expenses................................37
Amendment; Waiver...........................................38
Payments to Dissenting Shareholders.........................38
Accounting Treatment.................................................38
iii
8
CERTAIN FEDERAL INCOME TAX CONSEQUENCES.......................................38
DESCRIPTION OF THE COMPANY....................................................39
Information Incorporated by Reference................................39
Recent Developments..................................................39
PRICE RANGE OF COMMON STOCK...................................................43
PAYMENTS TO SHAREHOLDERS......................................................44
EXPERTS.......................................................................45
OTHER MATTERS.................................................................45
Deadline for Shareholder Proposals...................................45
Other Matters at Special Meeting.....................................46
ANNEXES
Annex I - Merger Agreement
Annex II - Stonebridge Opinion
Annex III - Nevada Revised Statutes Sections 92A.300 to 92A.500
iv
9
SUMMARY
The following is a summary of certain information contained elsewhere
in this Proxy Statement. This summary is qualified in its entirety by the more
detailed information contained, or incorporated by reference, in this Proxy
Statement and the Annexes hereto. Shareholders are urged to read this Proxy
Statement and the Annexes hereto in their entirety. Unless otherwise defined
herein, capitalized terms used in this summary have the respective meanings
ascribed to them elsewhere in this Proxy Statement.
THE PARTIES
Senior Tour Players Development, Inc. (the "Company") develops,
acquires, operates and manages public, semi-private, and resort golf courses and
golf practice facilities. The most significant of such properties is The
Badlands Golf Club in Las Vegas, Nevada (the "Badlands"), which represented
approximately 91% of the Company's total assets as of December 31, 1997, and
from which the Company derived approximately 96% of its total revenues during
the year ended December 31, 1997. The Company was incorporated under Nevada law
on April 6, 1994. The Company's executive offices are located at 822 Boylston
Street, Suite 300, Chestnut Hill, Massachusetts 02167, and its telephone number
is (617) 266-3600.
Golf Club Partners L.L.C. ("GCP") and its principals acquire, develop,
operate, manage and lease public and private golf courses, golf clubs and golf
practice facilities. GCP was formed as a limited liability company under
Oklahoma law on September 3, 1997. GCP's executive offices are located at 6303
Waterford Boulevard, Suite 225, Oklahoma City, Oklahoma 73118, and its telephone
number is (405) 848-5636. GCP has no affiliation with the Company or its
management, and GCP now owns no shares of the Company's Common Stock.
STPD Acquisition Company ("Acquiror Sub") was recently organized by GCP
for the purpose of effecting the Merger as described below. Acquiror Sub's
executive offices are located at 6303 Waterford Boulevard, Suite 225, Oklahoma
City, Oklahoma 73118, and its telephone number is (405) 848-5636. GCP and
Acquiror Sub are sometimes collectively referred to below as the "Purchaser."
THE SPECIAL MEETING
TIME, DATE AND PLACE
The Special Meeting will be held at 10:00 a.m., local time, on Friday,
July 24, 1998, at The Harvard Club, 374 Commonwealth Avenue, Boston,
Massachusetts. See "THE SPECIAL MEETING--General."
RECORD DATE, SHARES ENTITLED TO VOTE
Shareholders of the Company at the close of business on June 30, 1998
(the "Record Date") are entitled to notice of and to vote at the Special Meeting
and any adjournment thereof. On that date, the outstanding voting securities of
the Company consisted of [4,235,859] shares of common stock, $.001 par value
("Common Stock"). Each share of Common Stock is entitled to one vote. All such
shares will
1
10
vote together as a single class on the matters expected to be acted on at the
Special Meeting. See "THE SPECIAL MEETING--Voting at the Special Meeting; Record
Date; Required Vote."
PURPOSES OF THE SPECIAL MEETING
The purposes of the Special Meeting are: (1) to consider and vote upon
the proposed approval of the Agreement and Plan of Merger dated as of May 6,
1998 (the "Merger Agreement") among the Company, GCP and Acquiror Sub, which
provides for the merger (the "Merger") of Acquiror Sub with and into the
Company; and (2) to transact any other business as may properly come before the
Special Meeting or any adjournment thereof.
VOTE REQUIRED
Under applicable provisions of the Nevada Revised Statutes (the "NRS")
and the Company's Articles of Incorporation, approval of the Merger Agreement
will require the affirmative vote of the holders of a majority of the shares of
the Company's Common Stock outstanding and entitled to vote. In determining
whether approval of the Merger Agreement has received the requisite number of
affirmative votes, abstentions and broker non-votes will therefore have the same
effect as a vote against the Merger Agreement. The presence, in person or by
properly executed proxy, of the holders of a majority of the outstanding shares
of the Company's Common Stock is necessary to constitute a quorum at the Special
Meeting. Approval of the Merger Agreement by the requisite vote of the Company's
shareholders is a condition to the consummation of the Merger. See "THE SPECIAL
MEETING--Voting at the Special Meeting; Record Date; Required Vote."
As of the Record Date, the Company's executive officers and directors
had the right to vote approximately [38]% of the outstanding shares of Common
Stock entitled to vote at the Special Meeting. Each of the executive officers
and directors has advised the Company that he intends to vote all of such shares
in favor of the approval of the Merger. As of the Record Date, GCP owned no
shares of the Company's Common Stock.
PROCEDURE FOR EXCHANGE OF CERTIFICATES
Promptly after the consummation of the Merger, American Stock Transfer
& Trust Company (the "Exchange Agent") will mail a letter of transmittal and
instructions for surrendering stock certificates to each holder of Common Stock
for use in exchanging such holder's stock certificates for such holder's Merger
Consideration Per Share (as described below). SHAREHOLDERS SHOULD NOT RETURN
STOCK CERTIFICATES WITH THE ENCLOSED PROXY. See "THE MERGER-- Procedures for
Exchange of Certificates."
RECOMMENDATION OF THE COMPANY'S BOARD OF DIRECTORS
The Company's Board of Directors believes that the Merger is fair to,
and in the best interests of, the Company and its shareholders, and has
unanimously approved the Merger Agreement and recommends that the Company's
shareholders vote FOR the approval of the Merger Agreement. The Board of
Directors' recommendation is based upon a number of factors described in this
Proxy
2
11
Statement. See "CERTAIN CONDITIONS RELATING TO THE MERGER--Reasons for the
Merger; Recommendation of the Company's Board of Directors."
OPINION OF FINANCIAL ADVISOR
On May 6, 1998, the date on which the Company's Board of Directors
approved the final form of the Merger Agreement, Stonebridge Associates, LLC
("Stonebridge"), financial advisor to the Company in connection with the Merger,
delivered to the Board of Directors its written opinion to the effect that, as
of the date of the opinion and based upon and subject to certain matters stated
in the opinion, the Merger Consideration Per Share to be received by holders of
Common Stock in the Merger is fair, from a financial point of view, to such
shareholders. The opinion of Stonebridge does not address any other aspects of
the Merger or any related transactions and does not constitute a recommendation
to any shareholder as to whether such shareholder should vote in favor of
approval of the Merger Agreement. A copy of that opinion is attached to this
Proxy Statement as Annex II. The opinion sets forth the assumptions made,
matters considered, the scope and limitations of the review undertaken and
procedures followed by Stonebridge, and should be read carefully in its
entirety. See "CERTAIN CONSIDERATIONS RELATING TO THE MERGER--Financial Advisor;
Fairness Opinion."
THE MERGER
FORM OF MERGER
Pursuant to the Merger Agreement, Acquiror Sub will merge with and into
the Company, and the surviving corporation of the Merger (the "Surviving
Corporation") will be a wholly-owned subsidiary of GCP. See "THE MERGER--Form of
Merger."
UPON CONSUMMATION OF THE MERGER, THE SHARES OF COMMON STOCK WILL,
EXCEPT AS DESCRIBED BELOW UNDER "DISSENTERS' RIGHTS," BE CONVERTED INTO THE
RIGHT TO RECEIVE THE MERGER CONSIDERATION PER SHARE (AS DESCRIBED BELOW), AND
THE COMPANY'S SHAREHOLDERS WILL HAVE NO OWNERSHIP INTEREST IN OR CONTROL OVER
EITHER THE COMPANY OR GCP. IN ADDITION, THE COMMON STOCK WILL NO LONGER BE
QUOTED IN THE NASDAQ SMALL-CAP MARKET OR TRADED ON THE BOSTON STOCK EXCHANGE.
THE EFFECTIVE TIME
The Merger will become effective on the date and at the time on which
certificates of merger are filed with the Secretaries of State of Nevada and
Oklahoma (the "Effective Time"). Pursuant to the Merger Agreement, the filing of
the certificates of merger will be made as promptly as practicable after
satisfaction or, if permissible, waiver of the conditions to the Merger provided
that the Merger Agreement has not been terminated in accordance with its terms.
See "THE MERGER--Effective Time of the Merger" and "--The Merger
Agreement--Termination."
3
12
CONSIDERATION TO BE RECEIVED IN THE MERGER
The Merger Agreement provides that, prior to the Merger, the Company
will sell or otherwise dispose of all of the Company's assets other than The
Badlands and certain related assets (collectively, the "Acquired Assets"), and
that the Company will pay or otherwise discharge all of its liabilities except
for certain liabilities relating to The Badlands (collectively, the "Assumed
Liabilities") and the mortgage debt to NationsCredit on The Badlands (the
"NationsCredit Loans"). GCP will then acquire the Company through the Merger
(and thereby become the beneficial owner of The Badlands) in exchange for a cash
payment (the "Merger Consideration") equal to (i) $26.0 million, (ii) less the
sum of (A) the then outstanding balance and certain prepayment penalties on the
NationsCredit Loans, (B) any costs and expenses relating to the Merger payable
by the Company, and (C) any of the Company's liabilities not included as Assumed
Liabilities and not paid prior to the Effective Time, (iii) plus the proceeds
received by the Company after the date of the Merger Agreement from the exercise
of the Company's outstanding stock options, (iv) plus or minus, as the case may
be, an adjustment relating to the working capital of The Badlands at the
Effective Time.
If the net proceeds from the sale or other disposition of all of the
Company's assets other than the Acquired Assets are greater than the Company's
liabilities described in (B) and (C) above (plus any amount required to fund the
required level of working capital of The Badlands as described above), the
Company will be permitted to apply such excess to reduce the outstanding balance
on the NationsCredit Loans (which balance will be deducted from the Merger
Consideration payable by GCP upon the consummation of the Merger as described
above). If the Company is not able to discharge all of its actual and contingent
liabilities (other than the Assumed Liabilities and the NationsCredit Loans) by
the Effective Time, a portion of the Merger Consideration mutually acceptable to
GCP and the Company will be placed in reserves at the Effective Time. Any
portion of such reserves which is not ultimately required for the discharge of
such actual and contingent liabilities of the Company as of the Effective Time
(together with interest thereon while such funds are held in escrow) will be
delivered from escrow to the Exchange Agent as soon as practicable following the
Effective Time. The Surviving Corporation of the Merger will be a wholly-owned
subsidiary of GCP, and the rights of the Company's shareholders will thereafter
consist solely of their rights to receive their portion of the Merger
Consideration (the "Merger Consideration Per Share").
Depending upon the outcome of certain events and adjustments which are
described in this Proxy Statement, the Company now estimates that the Merger
Consideration Per Share will be approximately [$3.25] to [$3.45] per share of
Common Stock. Such estimate is, however, subject to change in light of the
outcome of those future events and adjustments as described in this Proxy
Statement. Therefore, there is no assurance as to the amount of the Merger
Consideration Per Share which will ultimately be available for distribution to
the Company's shareholders. See "THE MERGER--The Merger Agreement--Estimate of
Merger Consideration Per Share."
TREATMENT OF OPTIONS AND WARRANTS
As of the Record Date, the Company had outstanding (i) stock options
for a total of [575,016] shares of Common Stock (of which [124,794] shares were
then vested) with an average exercise price of approximately [$1.19] per share,
(ii) warrants (which were then fully vested) for a total of 1,753,200
4
13
shares of Common Stock with an exercise price of $5.50 per share, and (iii) an
underwriter's warrant (which was then fully vested) for 160,000 shares of Common
Stock with an exercise price of $7.25 per share and 160,000 warrants with an
exercise price of $0.15 per warrant. Under the terms of the Merger Agreement,
the stock option agreements for the Company's outstanding stock options, and the
agreements relating to the Company's outstanding warrants and underwriter's
warrant, the holders of such outstanding stock options and warrants (to the
extent vested as of the Effective Time) will be entitled to receive a cash
payment (if any) from the Merger Consideration equal to the excess of (i) the
portion of the Merger Consideration which such holders would be entitled to
receive had they exercised such stock options and warrants immediately prior to
the Effective Time, over (ii) the exercise price of such stock options and
warrants. The Merger will not result in the acceleration of any vesting under
the Company's outstanding stock options and, to the extent that options are not
vested as of the Effective Time, such options will expire as of the Effective
Time. The Company now anticipates that, since the Merger Consideration Per Share
will be less than the exercise price of the warrants and the underwriter's
warrant, the Merger will result in the holders of the warrants and underwriter's
warrant having no right to payment from the Merger Consideration. See "CERTAIN
CONSIDERATIONS RELATING TO THE MERGER - Treatment of Options and Warrants" and
"THE MERGER - The Merger Agreement Stock Options and Warrants."
CONDITIONS TO THE MERGER
The obligations of the Company and GCP to consummate the Merger are
subject to various conditions, including obtaining requisite shareholder
approval and other conditions customary to transactions of this nature. As of
the date of this Proxy Statement, the Company anticipates that such conditions
will likely be satisfied by or promptly after the date of the Special Meeting
and that the Merger will be effected promptly following such meeting. See "THE
MERGER--The Merger Agreement--Conditions to the Merger."
NO SOLICITATION OF ACQUISITION PROPOSALS
Pursuant to the Merger Agreement, the Company and its representatives
are prohibited from encouraging or seeking acquisition proposals from persons or
entities other than GCP, or furnishing any non-public information to any such
person relating to such an acquisition proposal. If the Company receives an
unsolicited acquisition proposal or information request, the Company can provide
information to and negotiate with the person making such proposal or request, if
the Company's Board of Directors determines in good faith and based, as to legal
matters, upon the advice of outside counsel that failing to do so would be a
breach of its fiduciary duties. The Merger Agreement further provides that if
the Company's Board of Directors determines in good faith based, as to legal
matters, upon the advice of outside legal counsel that it would breach its
fiduciary duties to shareholders by not accepting an unsolicited proposal and
entering into a definitive agreement with respect thereto (a "Competing
Transaction"), the Company has the option to terminate the Merger Agreement by
paying to GCP an amount equal to (a) GCP's expenses incurred in connection with
the Merger, up to a maximum of $110,000, plus (b) fifty percent (50%) of the
difference between the Merger Consideration and the consideration received in a
Competing Transaction, provided that the sum of (a) and (b) above will in no
event be less than (i) $500,000 if the Competing Transaction is consummated
within 120 days of the termination of the Merger Agreement, or (ii) $300,000 if
the Competing Transaction is not
5
14
consummated within 120 days of the termination of the Merger Agreement. See "THE
MERGER--The Merger--No Solicitation of Acquisition Proposals" and "--Termination
Fee and Expenses."
TERMINATION
The Merger Agreement may be terminated in certain circumstances (at any
time prior to consummation, whether before or after approval and adoption of the
Merger Agreement by the shareholders of the Company), including the following:
(i) by the Company pursuant to the provisions described above regarding
unsolicited proposals; (ii) by mutual written agreement of the Company and GCP;
or (iii) by either the Company or GCP (a) if there has been a material breach of
any representation, warranty, covenant or agreement of the other party set forth
in the Merger Agreement, (b) if any required approval of the Company's
shareholders is not obtained, (c) if any decree, permanent injunction, judgment,
order or other action by any court of competent jurisdiction or any governmental
entity preventing or prohibiting consummation of the Merger shall have become
final and nonappealable, or (d) at any time after August 31, 1998, if the Merger
has not been consummated on or before such date and such failure to consummate
is not caused by a breach of the Merger Agreement by the party electing to
terminate the Merger Agreement. See "THE MERGER--The Merger Agreement--
Termination." In some circumstances, such a termination will require the Company
to pay GCP a termination fee and reimburse GCP for its expenses. See "THE
MERGER--The Merger Agreement--Termination Fee and Expenses."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In consideration of the recommendation of the Company's Board of
Directors with respect to the Merger, the Company's shareholders should be aware
that the Company's executive officers and directors have certain interests in
the Merger that may present them with actual or apparent conflicts of interest
in connection with the Merger. These include, among others, the right to receive
cash payments from the Merger Consideration in exchange for their shares of
Common Stock and their stock options which are vested as of the Effective Time,
rights to certain payments under the Company's 1998 Key Employee Bonus Plan, and
provisions in the Merger Agreement relating to continuation of the Company's
director and officer liability insurance following the consummation of the
Merger. The benefits to be received by the Company's executive officers and
directors pursuant to the foregoing arrangements are described in this Proxy
Statement under "CERTAIN CONSIDERATIONS RELATING TO THE MERGER--Interests of
Certain Persons in the Merger."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The conversion of Common Stock into the right to receive cash
consideration in the Merger will be a taxable transaction for federal income tax
purposes and may also be a taxable transaction for state, local, foreign and
other tax purposes. Each of the Company's shareholders will therefore generally
recognize gain or loss at the Effective Time equal to the difference between (i)
the sum of such shareholder's Merger Consideration Per Share to be received in
exchange for such shareholder's shares of Common Stock; and (ii) such
shareholder's tax basis in such shares. Shareholders are urged to consult their
own tax advisors as to the particular tax consequences to them resulting from
the Merger,
6
15
including the applicability and effect of federal, state, local, foreign and
other tax laws. See "CERTAIN FEDERAL INCOME TAX CONSEQUENCES."
DISSENTERS' RIGHTS
Under Nevada law, shareholders who vote against or abstain from voting
in favor of the Merger and file a demand for appraisal no later than the date of
the shareholder vote on the Merger have the right to obtain cash payment for the
"fair market value" of their shares of Common Stock (excluding any element of
value arising from the accomplishment or expectation of the Merger). In order to
exercise such rights, a shareholder must comply with all the procedural
requirements of Nevada Revised Statutes Sections 92A.300 to 92A.500, a
description of which is provided below under the heading "THE
MERGER--Dissenters' Rights" and the full text of which are attached to this
Proxy Statement as Annex III. Such "fair market value" would be determined in
judicial proceedings, the result of which cannot be predicted. Failure to take
any of the steps required under such Sections of the NRS may result in loss of
such statutory appraisal rights. See "THE MERGER--Dissenters' Rights" and Annex
III to this Proxy Statement.
THE SPECIAL MEETING
GENERAL
This Proxy Statement is furnished to the holders of shares of the
Company's Common Stock in connection with the solicitation of proxies by the
Board of Directors for use at the Special Meeting of Shareholders to be held at
10:00 a.m. local time, on Friday, July 24, 1998, at The Harvard Club, 374
Commonwealth Avenue, Boston, Massachusetts, and at any adjournment thereof.
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
At the Special Meeting, shareholders will be asked to consider and vote
upon the proposed approval of the Merger Agreement, which provides for the
Merger of Acquiror Sub with and into the Company. The Surviving Corporation of
the Merger will be a wholly-owned subsidiary of GCP, and the rights of the
Company shareholders will thereafter consist solely of their rights to receive
their Merger Consideration Per Share.
THE COMPANY'S BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND RECOMMENDS THAT THE COMPANY'S SHAREHOLDERS VOTE FOR THE APPROVAL
OF THE MERGER AGREEMENT.
VOTING AT THE SPECIAL MEETING; RECORD DATE; REQUIRED VOTE
The Board of Directors has fixed the close of business on June 30, 1998
as the Record Date for the Special Meeting and any adjournment thereof. Only
shareholders of record on such date will be entitled to notice of and to vote at
the Special Meeting. On the Record Date, the outstanding voting securities of
the Company consisted of [4,235,859] shares of Common Stock held by
approximately 70 holders of record (including record holders for the benefit of
other investors). Each share of Common
7
16
Stock (except if held by the Company) is entitled to one vote. All such shares
will vote together as a single class on the matters expected to be acted on at
the Special Meeting.
Approval of the Merger Agreement will require the affirmative vote of
the holders of a majority of the shares of the Company's Common Stock
outstanding and entitled to vote. Obtaining such vote is a condition to
consummation of the Merger. If an executed proxy card is returned and the
shareholder has abstained from voting on any matter, the shares represented by
such proxy will be considered present at the meeting for purposes of determining
a quorum and for purposes of calculating the vote, but will not be considered to
have been voted in favor of such matter. If an executed proxy card is returned
by a broker holding shares of Common Stock in street name which indicates that
the broker does not have discretionary authority as to certain shares to vote on
any matter, such shares will be considered present at the meeting for purposes
of determining a quorum and for purposes of calculating the vote, but will not
be voted with respect to such matter. Because approval of the Merger Agreement
requires the affirmative vote of a majority of all shares of the Company's
Common Stock outstanding and entitled to vote at the Special Meeting,
abstentions and "broker non-votes" will therefore have the same effect as a vote
against the Merger.
As of the Record Date, the Company's executive officers and directors
had the right to vote approximately [38]% of the outstanding shares of Common
Stock. Each of the executive officers and directors has advised the Company that
he intends to vote all of such shares in favor of the approval of the Merger
Agreement. As of the Record Date, GCP owned no shares of Common Stock.
PROXIES
This Proxy Statement is furnished to holders of Common Stock in
connection with the solicitation of proxies by the Board of Directors for use at
the Special Meeting. The presence, in person or by properly executed proxy, of
the holders of a majority of the outstanding shares of the Company's Common
Stock is necessary to constitute a quorum at the Special Meeting. All shares of
Common Stock which are entitled to vote and are represented at the Special
Meeting by properly executed proxies received prior to or at the Special
Meeting, and not duly revoked, will be voted at the Special Meeting in
accordance with the instructions indicated on such proxies. If no instructions
are indicated on a properly executed proxy, such proxy will be voted FOR the
approval of the Merger Agreement.
If any other matters are properly presented for consideration at the
Special Meeting, including, among other things, consideration of a motion to
adjourn the Special Meeting to another time and/or place (including, without
limitation, for the purpose of soliciting additional proxies), the persons named
in the enclosed form of proxy and acting thereunder will have discretion to vote
on such matters in accordance with their best judgment. The Company has no
knowledge of any matters to be presented at the Special Meeting other than those
matters described herein.
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before it is voted. Proxies may be revoked by (i)
filing with the American Stock Transfer & Trust Company ("AST"), the transfer
agent of the Company, at or before the taking of the vote at the Special
Meeting, a written notice of revocation bearing a later date than the proxy,
(ii) duly executing a later-dated proxy relating to the same shares and
delivering it to AST at or before the taking of the vote at the
8
17
Special Meeting, or (iii) attending the Special Meeting and voting in person.
Attendance at the Special Meeting will not in and of itself constitute a
revocation of a proxy. In addition, shareholders whose shares of Common Stock
are not registered in their own name will need additional documentation from the
record holders of such shares to vote personally at the Special Meeting. Any
written notice of revocation or subsequent proxy should be sent so as to be
delivered to American Stock Transfer & Trust Company, 40 Wall Street, 46th
Floor, New York, New York 10005, Attention: Proxy Department, at or before the
taking of the vote at the Special Meeting.
If a quorum is not present at the time of the Special Meeting, or if
fewer shares are likely to be voted in favor of approval of the Merger Agreement
than the number required for approval, the Special Meeting may be adjourned,
with or without a vote of shareholders, for the purpose of obtaining additional
proxies or votes or for any other purpose. If the Company proposes to adjourn
the Special Meeting by a vote of the shareholders, the persons named in the
enclosed proxy card will vote all shares for which they have voting authority in
favor of such adjournment. At any subsequent reconvened session of the Special
Meeting, all proxies will be voted in the same manner as such proxies would have
been voted at the original session of Special Meeting (except for any proxies
which have theretofore effectively been revoked or withdrawn), notwithstanding
that they may have been effectively voted on the same or any other matter at a
previous session of the meeting.
Proxies are being solicited by and on behalf of the Board of Directors.
All expenses of this solicitation, including the cost of preparing this Proxy
Statement, will be borne by the Company. Such expenses are expected not to
exceed $75,000. In addition to solicitation by the use of the mails, proxies may
be solicited by directors, officers and employees of the Company in person or by
telephone, fax or other means of communication. Such directors, officers and
employees will not be additionally compensated, but may be reimbursed for
reasonable out-of-pocket expenses in connection with such solicitation. The
Company has also retained American Stock Transfer & Trust Company ("AST") to
solicit proxies. Pursuant to its contract with AST, the Company will pay AST
fees and expense reimbursements of approximately $10,000 in connection with the
solicitation of proxies. Arrangements will also be made with custodians,
nominees and fiduciaries for the forwarding of proxy solicitation materials to
beneficial owners of shares held of record by such persons, and the Company may
reimburse such custodians, nominees and fiduciaries for reasonable expenses
incurred in connection therewith.
CERTAIN CONSIDERATIONS RELATING TO THE MERGER
BACKGROUND OF THE MERGER
Since the Company was formed in 1994, the Company's business plan has
focused on the development, acquisition, operation and management of public,
semi-private, and resort golf courses and golf practice facilities. As of
December 31, 1997, the Company owned and operated the 27-hole The Badlands Golf
Club in Las Vegas, Nevada ("The Badlands"), and held a minority equity interest
in and managed the Las Vegas International Golf Center in Las Vegas. The Company
also then had a management contract for New England Country Club in Bellingham,
Massachusetts, a minority equity interest in Golftown Practice Center in Saugus,
Massachusetts, and certain development rights relating
9
18
to the proposed development of a golf course at the Stonebridge Ranch in
McKinney, Texas. In January 1998, the Company entered into an additional
management agreement to manage a new municipal golf facility in North Hempstead,
New York. See "Description of Business" and "Properties" in Items 1 and 2 of the
Company's Annual Report on Form 10-KSB for the year ended December 31, 1997
which accompanies this Proxy Statement and is incorporated herein by reference.
Despite the Company's continued efforts to diversify its business
through the development, acquisition and management of multiple golf courses and
golf practice facilities, the major portion of its business has to date involved
the development and subsequent ownership and operation of The Badlands, which
represented approximately 91% of the Company's total assets at December 31, 1997
and approximately 96% of the Company's total revenues for the year then ended.
The Company has increasingly come to the conclusion that its relatively small
size and financial resources place it at a competitive disadvantage as compared
to companies with greater financial resources in competing for attractive
development, acquisition and management opportunities. In addition, some of the
Company's competitors with greater financial resources are organized as Real
Estate Investment Trusts ("REITS") which have tax advantages and lower costs of
capital as compared to the Company. The Company's competitive disadvantage is
further impacted by the added costs and disclosure obligations to which the
Company is subject because its Common Stock is publicly held, since the
Company's principal competitors are either large companies (some of which are
also publicly held but which are able to allocate their increased overhead costs
over multiple facilities) or private companies which do not have such added
costs and disclosure obligations. As a result, the Company has in recent months
explored various options to the business plan which the Company has pursued
since its formation.
As part of its ongoing activities with regard to potential transactions
involving golf courses and golf practice facilities, the Company has from time
to time engaged in preliminary discussions with various parties relating to the
possible sale or other transactions involving The Badlands and its other assets.
During November 1997, the Company received a preliminary offer from an
unaffiliated party with respect to a possible purchase of The Badlands by an
affiliate of that party for $24.0 million (from which would be deducted the
mortgage debt and certain other liabilities relating to The Badlands). Although
the Company conducted extensive preliminary discussions with that party and,
following execution of a confidentiality agreement, allowed that party to
conduct due diligence, no letter of intent or other mutually acceptable written
understanding was signed.
On January 30, 1998, the Company received a preliminary proposal from
American Golf Corporation ("AGC"), which is the lessee of five golf courses now
owned or under development by GCP or by other entities controlled by the
principals of GCP, under which a lessor/owner who would lease The Badlands to
AGC would purchase The Badlands for a purchase price equal to $25.0 million
(from which would be deducted the NationsCredit Loans and certain other
liabilities related to The Badlands). Following execution of a confidentiality
agreement, the Company allowed AGC and GCP (as AGC's designee) to conduct due
diligence on The Badlands and on the other assets and liabilities of the
Company. Since a sale by the Company of The Badlands would result in the Company
incurring significant capital gains taxes based upon the difference between the
purchase price and the Company's tax basis in The Badlands, the Company inquired
whether GCP would be interested in acquiring the Company through a cash merger.
AGC and GCP responded on February 11, 1998 that GCP would be interested in such
a merger provided that, prior to the merger, the Company would dispose of all of
its
10
19
assets and liabilities other than The Badlands. Further discussions ensued,
which resulted in a subsequent preliminary offer letter dated February 25, 1998.
The February 25 letter clarified that it was GCP which was offering to acquire
the Company by cash merger and increased the offered price from $25.0 million to
$26.0 million (subject to the deductions described above) provided that certain
other terms of the original preliminary offer were modified.
While the foregoing discussions with AGC and GCP were in process, the
Company also received a revised preliminary offer from the party referred to
above which had originally expressed interest in acquiring The Badlands. Under
that revised preliminary offer, an affiliate of that party would, subject to
various contingencies and other terms, either acquire the Company by merger or
purchase The Badlands, with the basic price under either transaction being $25.0
million (from which would be deducted the NationsCredit Loans and certain other
liabilities associated with The Badlands). The Company also received certain
other preliminary offers for The Badlands from other unrelated parties, all of
which the Company rejected because the price offered was less attractive to the
Company than the preliminary offers from GCP and the other party referred to
above, and because of concerns about the ability of the parties involved in such
other offers to be able to satisfy the financing contingencies to which those
offers were subject.
In light of the ongoing discussions described above, the Company's
Board of Directors decided at a meeting held on March 2 that the Company should
engage a financial advisor to assist the Company with regard to a potential
asset sale or merger transaction, and the Board then appointed a special
committee of Messrs. Abrams, Bernstein and Stanzler to interview and engage such
an advisor. After interviewing several potential firms, the committee selected
Stonebridge Associates, LLC ("Stonebridge") to act as the financial advisor to
the Company in connection with such potential transactions. On March 5, the
Board confirmed the appointment of Stonebridge, and an engagement letter dated
March 5 was then signed between Stonebridge and the Company. On March 6, 1998,
the Company issued a press release announcing that it had received a proposal
from an outside party to purchase The Badlands and that it had engaged an
investment banking firm to assist the Company in evaluating that proposal and to
assess additional alternatives. On being advised that the Company had appointed
a financial advisor, the party referred to above which had originally made a
preliminary offer to purchase The Badlands advised the Company that it was not
interested in being involved in a competitive bidding process.
The Company then held further discussions with AGC and GCP, as well as
with three other parties which the Company identified as being qualified and
potentially interested in a transaction with the Company similar to that which
had been proposed by GCP. Each of those other parties advised the Company that
they were not then interested in pursuing discussions with the Company about a
potential acquisition of either the Company or of The Badlands on terms which
the Company deemed attractive.
At a meeting held on March 25, the Company's Board of Directors
authorized the Company's management and Stonebridge to negotiate the final terms
of a letter of intent with GCP and also considered potential alternatives for
the Company's proposed disposition of all of its assets and liabilities, other
than The Badlands and liabilities relating to The Badlands, as would be required
under the offer which had been received from GCP. Assisted by their respective
counsel and by Stonebridge, the Company and GCP then prepared a summary of
indicative terms setting forth the basic terms of the
11
20
proposed Merger, which summary was signed by the Company, GCP and AGC on
April 1. The Company also provided to GCP and its counsel further information
about the Company, and the proposed form of the Merger Agreement was negotiated
and prepared.
The Company's Board of Directors held a meeting on April 20 at which
Stonebridge delivered to the Board a fairness opinion which is described below
under "Financial Advisor; Fairness Opinion." The Board then approved the Merger
Agreement substantially in the form presented to the meeting, subject to further
modifications. The management personnel of the Company and GCP then held further
negotiations to resolve certain then open issues with respect to the Merger
Agreement (including, in particular, the level of working capital for The
Badlands which would be required as part of the Merger), and GCP presented to
the Company copies of initial forms of its financing commitments relating to the
Merger. See "THE MERGER -Financing Arrangements by GCP." After resolution of
those further negotiations and delivery of modified forms of those financial
commitments, the final form of the Merger Agreement was prepared.
On May 6, 1998, Stonebridge presented to the Company's Board the final
form of its fairness opinion as described below under "Financial Advisor;
Fairness Opinion," and the Company's Board of Directors then approved the final
form of the Merger Agreement. On May 7, GCP deposited into escrow the $500,000
payment required under the Merger Agreement (see "THE MERGER - The Merger
Agreement - Escrow Arrangements"), and the Company and GCP signed the Merger
Agreement late in the afternoon on May 7. Promptly after the signing but
subsequent to the close of trading in the Company's Common Stock on May 7, the
Company issued a press release describing the signing of the Merger Agreement.
REASONS FOR THE MERGER; RECOMMENDATION OF THE COMPANY'S BOARD OF DIRECTORS
The Company's Board of Directors has unanimously approved the Merger
Agreement and believes that the Merger is fair to, and in the best interests of,
the Company's shareholders. The Board of Directors recommends that shareholders
vote FOR approval of the Merger Agreement. Each of the Company's directors has
advised the Company that he intends to vote all his shares of Common Stock in
favor of the Merger Agreement.
In reaching its decision, the Company's Board of Directors has
considered a number of factors including, without limitation, the following:
l. Based primarily upon the increasing competition which the Company is
facing from larger and better capitalized companies, the Board of Directors
believes that the Company's shareholders will be better served by winding up the
Company's affairs through the Merger (which will result in a significant cash
payment to the shareholders), rather than by continuing to operate the Company
in accordance with its original business plan. See "CERTAIN CONSIDERATIONS
RELATING TO THE MERGER Background of the Merger."
2. Although the amount of the Merger Consideration Per Share will be
determined by the outcome of certain future events and adjustments as described
in this Proxy Statement, the Company now estimates, based upon the information
available to the Company as of the date of this Proxy
12
21
Statement, that the Merger Consideration Per Share will be approximately [$3.25]
to [$3.45] per share of Common Stock. As described below under "Financial
Advisor; Fairness Opinion" and elsewhere in this Proxy Statement under "PRICE
RANGE OF COMMON STOCK," such range represents a significant premium over the
price ranges at which the Common Stock has traded in recent periods. The Board
of Directors believes that, if the Merger is not consummated, the market price
of the Common Stock may decline to the significantly lower price ranges at which
the Common Stock has traded at various periods prior to the end of 1997.
3. As described below under "Financial Advisor; Fairness Opinion," the
Board has received the opinion of Stonebridge, the Company's financial advisor,
that as of the date the opinion was rendered (May 6, 1998) the Merger
Consideration Per Share is fair to the Company's shareholders from a financial
point of view.
4. The terms of the Merger Agreement contain relatively few
contingencies as compared to other agreements for similar transactions. In
particular, GCP's obligation under the Merger Agreement to consummate the Merger
is not conditioned upon the completion by GCP of any financing arrangements.
See "THE MERGER - Financing Arrangements by GCP."
5. As described under "CERTAIN FEDERAL INCOME TAX CONSIDERATIONS," the
conversion of the Company's Common Stock into a right to receive cash
consideration in the Merger will be a taxable transaction for federal income tax
purposes, and the Company's shareholders will therefore generally realize either
a taxable gain or loss depending upon their respective tax basis in their
shares. However, the cash consideration to be received by the shareholders will
not be further reduced by the amount of the capital gains taxes that the Company
itself would realize if, instead of participating in the Merger, the Company
were to sell The Badlands in an asset sale for cash either to GCP or to another
purchaser.
In view of the variety of factors considered by the Company's Board of
Directors, the Board did not find it practicable to quantify or otherwise
attempt to assign relative weights to the specific factors considered in making
its determination. Consequently, the Board did not quantify the assumptions and
results of its analysis in reaching its determination that the Merger is fair
to, and in the best interests of, the Company's shareholders.
FINANCIAL ADVISOR; FAIRNESS OPINION
Pursuant to the engagement letter dated March 5, 1998 entered into
between the Company and Stonebridge, Stonebridge agreed to act as the Company's
financial advisor with respect to the preliminary offers which the Company had
previously received from two parties as described above in "Background of the
Merger" to acquire either the Company or certain of its assets (the
"Transaction"). Stonebridge is independent of the Company and GCP, and will not
receive any compensation from either the Company or GCP in connection with the
Merger except as described below under "Financial Arrangements." Should the
Company enter into a definitive agreement with a prospective acquirer relating
to the Transaction, Stonebridge agreed to undertake an analysis to determine the
fairness to the Company's shareholders, from a financial point of view, of the
consideration exchanged in the proposed Transaction and render a written opinion
to the Company's Board of Directors as to such fairness.
13
22
Stonebridge is a private investment banking firm that specializes in
providing a broad range of corporate finance services to middle market and
emerging growth companies. Its primary areas of focus include mergers and
acquisitions, divestitures and private placements of debt and equity securities,
as well as related corporate finance advisory services such as fairness
opinions, valuations and restructurings and recapitalizations. The firm is based
in Boston, Massachusetts.
At the April 20, 1998 meeting of the Company's Board of Directors at
which the preliminary form of the Merger Agreement was approved, Stonebridge
rendered its written opinion to the Company's Board of Directors, based on
various considerations and assumptions discussed below and Stonebridge's general
knowledge of the mergers and acquisitions market, that as of such date, the
Merger Consideration Per Share to be received by the holders of the Common Stock
in the Merger was fair, from a financial point of view, to the shareholders of
the Company. On May 6, 1998, Stonebridge rendered a revised written opinion (the
"Fairness Opinion") which updated the original opinion in light of the changes
to the Merger Agreement which had been made between April 20 and May 6, and the
Fairness Opinion was therefore available to the Company's directors when they
approved the final form of the Merger Agreement on May 6. THE FULL TEXT OF THE
FAIRNESS OPINION WHICH SETS FORTH THE PROCEDURES FOLLOWED, ASSUMPTIONS MADE,
MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN, IS INCLUDED AS
ANNEX II TO THIS PROXY STATEMENT AND IS INCORPORATED HEREIN BY REFERENCE. THE
SHAREHOLDERS ARE URGED TO READ THE FAIRNESS OPINION CAREFULLY IN ITS ENTIRETY.
THE FAIRNESS OPINION IS DIRECTED ONLY TO THE FAIRNESS TO THE COMPANY'S
SHAREHOLDERS OF THE MERGER CONSIDERATION PER SHARE FROM A FINANCIAL POINT OF
VIEW AND HAS BEEN PROVIDED FOR THE INFORMATION OF THE BOARD OF DIRECTORS ONLY IN
CONNECTION WITH ITS EVALUATION OF THE MERGER, DOES NOT ADDRESS ANY OTHER ASPECTS
OF THE MERGER OR ANY RELATED TRANSACTIONS, AND DOES NOT CONSTITUTE A
RECOMMENDATION TO ANY SHAREHOLDER OF THE COMPANY AS TO HOW SUCH SHAREHOLDER
SHOULD VOTE AT THE SPECIAL MEETING. THE SUMMARY OF THE OPINION OF STONEBRIDGE
SET FORTH IN THIS PROXY STATEMENT IS A DESCRIPTION OF THE MATERIAL ASPECTS OF
THE OPINION AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF
SUCH OPINION INCLUDED IN ANNEX II.
Stonebridge, as part of its investment banking services, is regularly
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, private placements, corporate restructurings, and
valuations for estate, corporate, and other purposes. In rendering the Fairness
Opinion, Stonebridge took into account its assessment of general economic,
market, financial and other conditions, as well as its experience in connection
with similar transactions and securities evaluation generally. The Fairness
Opinion was necessarily based upon conditions as they existed and could be
evaluated as of the date of the opinion. Stonebridge was not engaged to solicit,
and did not solicit, potential purchasers for the Company, and did not consider
specific alternative transactions involving the Company. For the purposes of
rendering its opinion, Stonebridge assumed that the Merger will be consummated
on the terms set forth in the draft Merger Agreement reviewed by Stonebridge
without waiver or amendment.
In connection with rendering the Fairness Opinion, Stonebridge reviewed
and examined, among other items, the following: (i) a draft dated May 6, 1998 of
the Merger Agreement; (ii) certain publicly available information concerning the
Company, including its Annual Reports on Form 10-KSB of the Company for each of
the fiscal years in the three year period ended December 31, 1997 and proxy
statements for each of the fiscal years in the two year period ended December
31, 1996; (iii) unaudited
14
23
internal financial statements for the three month period ended March 31, 1998,
(iv) financial and operating information with respect to the business,
operations and prospects of the Company, The Badlands and the Las Vegas
International Golf Center, LLC; (v) the terms and conditions of other operating
and development agreements to which the Company is party; (vi) certain internal
business plans and financial forecasts prepared by management of the Company;
(vii) certain appraisals of The Badlands Golf Club and Las Vegas International
Golf Center properties; and (viii) certain publicly available information
concerning other companies in the golf industry, the trading markets for such
companies' securities and the nature and terms of certain other merger and
acquisition transactions that Stonebridge believed to be relevant to its
inquiry. During the course of its review, Stonebridge met and had discussions
with management of the Company concerning the alternatives for the sale or other
disposition of the assets of the Company that will not be acquired by GCP in the
Merger. Stonebridge reviewed with management certain proposals regarding the
sale and disposition of these assets, and reviewed management's range of
estimates for the proceeds which the Company expects to receive from such sale
or disposition. Additionally, Stonebridge discussed with management their
assessment of the Company's business and operations, assets, liabilities,
present financial condition, the general condition and future prospects for the
business in which the Company is engaged and other matters which Stonebridge
believed to be relevant.
In its review and examination and in arriving at its opinion,
Stonebridge assumed and relied only upon the accuracy and completeness of the
financial and other information that was available to it from public sources or
that was provided to it by the Company or its representatives. With respect to
the financial forecasts, Stonebridge assumed that they were reasonably prepared
on the bases reflecting the best currently-available estimates and judgments of
the Company's management as to the future operating and financial performance of
the Company, and that such forecasts would be realized in the amounts and in the
time periods currently estimated by the Company's management. Stonebridge did
not make any independent evaluation or appraisal of the assets or liabilities of
the Company. Stonebridge relied upon the representations of the Company
contained in the Merger Agreement with respect to legal and other matters. The
Fairness Opinion is necessarily based upon general economic, market, financial
and other conditions as they existed and could be evaluated as of the date of
the opinion.
In connection with its opinion, Stonebridge performed a variety of
financial and comparative analyses, including those described below. The
preparation of a fairness opinion involves various determinations as to the most
appropriate and relevant methods of financial analyses and the application of
those methods to the particular circumstances, and therefore such an opinion is
not necessarily susceptible to summary description. Furthermore, in arriving at
its opinion, Stonebridge did not attribute any particular weight to any analysis
or factor considered by it, but rather made qualitative judgments as to the
significance and relevance of each analysis and factor. Accordingly, Stonebridge
believes that its analyses must be considered as a whole and that considering
any portion of such analyses and the factors considered, without considering all
analyses and factors, could create a misleading or incomplete view of the
process underlying the preparation of the Fairness Opinion. In performing its
analyses, Stonebridge made numerous assumptions with respect to industry
performance, general business and economic conditions and other matters, many of
which are beyond the control of the Company. Any estimates contained in these
analyses are not necessarily indicative of actual values or predictive of future
results or values, which may be significantly more or less favorable than such
estimates. Any
15
24
theoretical or implied values derived from these analyses are not necessarily
indicative of actual fair market values, which may be significantly more or less
favorable than as set forth therein. In addition, analyses relating to the value
of businesses do not purport to be appraisals or to reflect the prices at which
businesses may actually be sold.
The following is a brief summary of the analyses underlying the
Fairness Opinion. This summary does not purport to be a complete description of
the analyses underlying the Fairness Opinion.
Transaction Overview. Stonebridge noted that the Merger Agreement
provides that it is the intent of the parties that the only assets to vest in
the surviving corporation shall be the tangible and intangible assets related to
The Badlands, and certain other specified assets (together with The Badlands,
the "Acquired Assets") and the only liabilities to become liabilities of the
surviving corporation shall be certain specified liabilities ("Assumed
Liabilities"). The Merger Agreement further contemplates that at the effective
time of the Merger, each shareholder of the Company will be entitled to receive
in cash, for each share of the Company's Common Stock owned by such shareholder,
the Merger Consideration Per Share, which is defined in the Merger Agreement to
mean: (A) an amount equal to: (i) $26,000,000; (ii) less: (a) the principal
balance outstanding, accrued interest and prepayment penalties due on the
Company's NationsCredit loans at the time of the closing of the Merger (subject
to certain specified limitations); (b) any costs and expenses relating to the
Merger payable by the Company; and (c) the amount of the liabilities of the
Company not included as Assumed Liabilities and not paid by the Company prior to
the effective time of the Merger; (iii) plus the proceeds, if any, received by
the Company from the exercise of Company Stock Options, as defined in the Merger
Agreement, prior to the closing of the Merger; (iv) plus or minus, as the case
may be, the adjustment required to cause the Target Net Current Asset Position
(as defined in the Merger Agreement) to have been achieved; (B) divided by the
number of shares of the Company's Common Stock outstanding immediately prior to
the effective time of the Merger (or then subject to outstanding vested stock
options or warrants having an exercise price less than the Merger Consideration
Per Share). The Merger Agreement further provides that the Company shall use all
proceeds from the sale and disposition of assets which are not Acquired Assets
to pay the liabilities of the Company not included as Assumed Liabilities and to
reduce the Company's indebtedness under the NationsCredit loans. Any excess is
added to the calculation of the Merger Consideration Per Share.
Merger Consideration Per Share Analysis. Stonebridge reviewed with the
Company's management the terms of the following transactions related to the
Merger as presented by management to Stonebridge, and assumed that these
transactions would be effected prior to or coincident with the closing of the
Merger: (i) divestiture of the Company's ownership interest in the Las Vegas
International Golf Center ("LVIGC"); (ii) assignment of the Company's rights and
obligations under a management contract for the Harbor Links Golf Course in
North Hempstead, New York; (iii) divestiture of the Company's ownership interest
in Golftown, Inc. in Saugus, Massachusetts; and (iv) reimbursement of Company
expenses related to the proposed Stonebridge Ranch development. Based upon
information and projections supplied by the Company's management, Stonebridge
also made assumptions concerning the Company's expenses in connection with the
Merger; certain severance payments; the Company's net working capital position
at the Merger closing; and the Company's operating cash flow from March 31, 1998
to July 15, 1998. After considering the foregoing and taking into account that
the
16
25
final financial terms and provisions could vary from those presented,
Stonebridge estimated that the Merger Consideration Per Share could vary between
$3.06 and $3.49.
Stock Trading History. Stonebridge reviewed the trading history for the
Company's Common Stock in terms of both price and trading volume for the three
year period preceding March 6, 1998, the day that the Company announced that it
was considering a proposal regarding the potential sale of The Badlands as well
as evaluating other strategic alternatives (the "Announcement Date").
Stonebridge observed that the Company's stock price ranged from a high of $5.50
per share in September 1995 to a low of $1.56 per share in December 1997. Over
this three year time period, average daily trading volume was approximately
8,890 shares. Stonebridge also observed that in the thirty day period prior to
the Announcement Date, the Company's stock price increased from $2.03 to $2.88
per share, and average daily trading volume increased to approximately 46,414
shares, which was more than four times the approximate average daily trading
volume of 10,113 shares for the 52 week period preceding the Announcement Date.
Stonebridge also compared the Company's stock price history over the
three year period preceding the Announcement Date to the performance of a number
of equity indices including: (i) the S&P 500 Index; (ii) the S&P 600 Small Cap
Index, and (iii) a peer group comprised of several public companies in the golf
facility development and management business believed by Stonebridge to be
comparable to the Company, specifically Brassie Golf Corporation, Family Golf
Centers, Inc., Golden Bear Golf, Inc., MetroGolf, Inc. and Worldwide Golf
Resources, Inc. (the "Peer Group"). Stonebridge noted that over the three year
period preceding the Announcement Date, the Company's stock price had increased
by 4.5 percent, while the S&P 500 Index had increased by 113.2 percent, the S&P
600 SmallCap Index had increased by 97.1 percent, and the Peer Group index had
increased by 27.4 percent. Stonebridge further noted that the Company (i) had a
lower market float than any of the Peer Group companies; (ii) had a lower
average monthly trading volume over the past twelve months than any of the Peer
Group companies; (iii) had institutional ownership of less than 1% of its
outstanding shares, and (iv) did not have any known institutional research
analyst coverage.
Premiums Paid Analysis. Stonebridge noted that its estimated range of
$3.06 to $3.49 for the Merger Consideration Per Share represented a 6.4 percent
to 21.4 percent premium over the Company's closing stock price of $2.88 on March
5, 1998 (one day prior to the Announcement Date) and a 50.6 percent to 71.8
percent premium over the Company's stock price of $2.03 on February 4, 1998 (30
days prior to Announcement Date).
As a comparison, Stonebridge reviewed and analyzed public information
on 38 acquisition transactions in the leisure and entertainment industry
completed or announced between January 1, 1997 and May 1, 1998 to determine the
relative premiums paid in these transactions over the target companies' stock
price one day and thirty days prior to the announcement of the transaction. For
these transactions, the mean and median premiums paid relative to the stock
price one day prior to the announcement were 23.0 percent and 18.8 percent,
respectively. Stonebridge also noted that the mean and median premiums paid
relative to the stock price 30 days prior to announcement in these acquisitions
were 33.3 percent and 27.4 percent, respectively. Stonebridge also examined
acquisition transactions involving public companies with market capitalizations
under $25 million. Of the 51 transactions that occurred between May 1, 1997 and
May 1, 1998, Stonebridge observed that the mean
17
26
and median premiums paid over the target's stock price one day prior to the
announcement were 18.6 percent and 20.0 percent, respectively. The mean and
median premiums paid over the target's stock price thirty days prior to the
announcement were 32.4 percent and 25.1 percent, respectively.
Comparable Transaction Analysis. Stonebridge examined and analyzed the
key financial parameters of publicly-announced golf industry acquisition
transactions during the period from January 1995 to May 1998. Of the 68
transactions examined, eight transactions involved acquired companies that
operated golf properties and related businesses. Of the acquired companies in
these eight transactions, three reported revenue, operating income, net income
and book value information from which market multiples could be determined based
on the market capitalizations of the acquired companies. Stonebridge then
applied the mean and median multiples of revenue and book value to calculate an
implied equity value for the Company, excluding operating income and net income
multiples because the Company was not profitable on a trailing twelve-month
basis. The mean and median multiples for these three acquired companies were 3.6
times and 4.4 times revenue, respectively, and 6.4 times and 1.9 times book
value, respectively. Applying these multiples to the Company's 1997 reported
results suggested an implied equity valuation range for the Company of $8.2
million to $12.8 million or $1.83 to $2.85 per share on a fully diluted basis.
In considering these results, Stonebridge noted the relatively small number of
companies used in this particular analysis.
The remaining 60 transactions involved the acquisition of 88 specific
golf course properties. Stonebridge noted that while these transactions do not
represent corporate level comparative information for the Company, they offer
meaningful comparative information for The Badlands. Of the 60 golf course
transactions, six disclosed the revenue information for the acquired golf
courses from which revenue multiples could be derived. The mean and median
revenue multiples of these six transactions were 4.8 times and 4.6 times,
respectively. Applying these multiples to the revenue reported by The Badlands'
operations in 1997 suggested an implied total valuation for The Badlands of
$17.3 million and $18.0 million, respectively. In considering these implied
valuations, Stonebridge also noted that The Badlands expanded its operations in
September 1997, opening an additional nine holes to create a total of 27 holes.
Stonebridge also analyzed the 44 golf course transactions which
disclosed information regarding total consideration to derive a comparative
valuation measure of consideration paid per hole. Stonebridge noted that only
two of the 44 transactions paid a higher consideration per hole than the
approximate $963,000 consideration per hole ($26.0 million for 27 holes)
contemplated in the Badlands transaction. Stonebridge then selected the seven
largest value transactions in which individual golf properties were purchased
for over $10 million in consideration, and noted that the mean and median
consideration-per-hole paid for these seven properties were $815,000 and
$594,000, respectively. Applying these mean and median multiples to The
Badlands' 27 holes suggested an implied total valuation for The Badlands of
$22.0 million and $16.0 million, respectively.
As supplemental information, Stonebridge noted that a 1996 property
appraisal estimated the market value of The Badlands' leasehold estate to be
$20.5 million as of August 23, 1996. This appraisal was based on the initial 18
hole operations as of that date and the anticipated completion of the third nine
holes by April 1997.
18
27
Comparable Public Company Analysis. Stonebridge reviewed and compared
selected historical and current operating and financial data of the Company to
the corresponding data of the Peer Group. Stonebridge compared certain financial
and operating parameters of these companies including revenue and revenue
growth, operating income, net income, book value, operating margins, net income
margins, market capitalization, and total capitalization. Based on reported
financial results for the twelve month period ended December 31, 1997,
Stonebridge also derived multiples of revenue, operating income, net income, and
book value for each company in the Peer Group based on each company's closing
stock price as of May 5, 1998 (with the exception of MetroGolf, Inc. which was
acquired on February 28, 1998 by Family Golf Centers, Inc.) However, because
four of the five companies in the Peer Group reported unprofitable operations in
1997, operating income and net income multiples could not be calculated.
Over the last three fiscal years, the Company's calculated annual
revenue growth rate of 61 percent was higher than that of three of the companies
in the Peer Group, but lower than the Peer Group's mean revenue growth rate of
84 percent. In 1997, the Company recorded an operating income margin of -12.5
percent, which was higher than that of three companies in the Peer Group, and
higher than the Peer Group's mean operating margin of -37.1 percent and median
operating margin of -55.1 percent. Over the last three years the Company has
reported annual net losses. In 1997, the Company's net income margin of -31.7
percent was higher than that of three companies in the Peer Group as well as
higher than the Peer Group's mean of -68.0 percent, and the Peer Group's median
of -88.5 percent.
Stonebridge calculated that the Peer Group's mean and median revenue
multiples for the twelve month period ended December 31, 1997 were 4.40 and 4.46
times, respectively. Applying these multiples to the Company's 1997 results
suggested an implied equity valuation range for the Company of between $12.9
million and $13.2 million, or $2.88 to $2.95 per share. The mean and median
multiples of book value for the Peer Group were 1.95 and 2.07 times,
respectively, suggesting an implied equity valuation range for the Company of
$8.6 million to $9.2 million, or $1.92 to $2.05 per share on a fully diluted
basis.
Although Stonebridge used a comparable company analysis as one method
of determining the implied value of the Company, Stonebridge believes that
because of inherent differences between financial and operating characteristics
among the companies in the Peer Group, a purely quantitative comparative
analysis of such companies by itself is not particularly meaningful. In
Stonebridge's judgment, an appropriate use of a comparable company analysis in
this instance necessarily involves a qualitative assessment of the different
financial and operating characteristics of the companies comprising the Peer
Group.
Discounted Cash Flow Analysis. To derive a theoretical valuation of the
Company's equity value based on its future business opportunities, Stonebridge
performed a discounted cash flow (DCF) analysis based upon the Company
management's pro forma financial projections over a five year period for The
Badlands and estimates provided by management concerning the future prospects of
the other business activities of the Company. To estimate the total net present
value of the Company, before giving effect to its capital structure, Stonebridge
discounted to present value the projected stream of after-tax cash flows and the
Terminal Value (defined as the estimated future sale value) of the Company's
business as reflected in the projections. For this analysis, Stonebridge applied
discount rates
19
28
ranging from 19 percent to 21 percent, which were selected based on a weighted
average cost of capital analysis of the Company. To calculate Terminal Value,
Stonebridge employed multiples of 4.0 to 5.0 times projected revenue in 2002,
which were based on a review of the results of the comparable transaction and
Peer Group analyses. This DCF analysis suggested an implied equity valuation
range of $10.7 million to $16.5 million for the Company, or $2.39 to $3.68 per
share on a fully diluted basis.
To supplement management's pro forma projections, Stonebridge created a
second set of pro forma financial projections reflecting an enhanced growth
scenario by increasing management's projected revenue growth and profitability
assumptions. The DCF analysis of this enhanced growth scenario indicated an
implied equity valuation range for the Company of $13.0 million to $19.3
million, or $2.90 to $4.31 per share on a fully diluted basis.
Other Services. In its capacity as financial advisor to the Company,
Stonebridge worked with a special committee of the Company's Board of Directors,
consisting of Messrs. Abrams, Bernstein, and Stanzler, to review and evaluate
all relevant information relating to the Transaction, including the proposals
previously received from the two parties as described above in "Background of
the Merger". Stonebridge also assisted the Company in negotiating and
structuring the final terms and conditions of the Transaction, including the
sale and transfer of any of the Company's assets which were not included in the
Transaction. Stonebridge was not engaged to solicit offers from parties other
than the two parties which had submitted proposals to Company prior to
Stonebridge's engagement.
Financial Arrangements. Pursuant to an Engagement Letter between the
Company and Stonebridge, the Company has agreed to pay Stonebridge for its
services a fee of up to $145,000. Twenty-five thousand dollars became payable
upon execution of the Merger Agreement, $25,000 was paid when Stonebridge
commenced work on the Fairness Opinion, $50,000 was paid when the Fairness
Opinion was delivered, and $45,000 will be payable if the Merger is consummated.
The $25,000 which became payable upon execution of the Merger Agreement will be
paid upon the earlier of consummation of the Merger or any termination by the
Company of its engagement with Stonebridge. In addition, the Company has agreed
to indemnify Stonebridge against certain liabilities arising out of
Stonebridge's engagement and to reimburse Stonebridge for its reasonable
out-of-pocket expenses and legal fees in connection with the engagement.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Company's Board of Directors
with respect to the Merger, the Company's shareholders should be aware that the
Company's executive officers and directors have certain interests in the Merger
which may present them with actual or apparent conflicts of interest in
connection with the Merger. The Board of Directors was aware of these matters
and considered them together with the other factors described above under
"Reasons for the Merger; Recommendation of the Company's Board of Directors."
Shares and Stock Options. The following table sets forth certain
information as of the Record Date concerning the ownership by the Company's
executive officers and directors of shares of Common Stock and vested options.
In addition to the vested options described in the following table, the
following executive officers and directors held as of the Record Date unvested
stock options for the following number of additional shares of Common Stock:
Stanton V. Abrams (349,556), and Michael J. Meluskey (66,666).
20
29
However, the Compensation Committee of the Company's Board of Directors voted
not to exercise their discretion under the existing stock option plans and
agreements to accelerate the unvested options in connection with the Merger and
the Merger does not provide for acceleration of any unvested options.
Accordingly, the Company now anticipates that the number of vested options held
by the Company's executive officers and directors as of the Effective Time will
be the same as shown in the following table provided that the Effective Time
occurs at any time during 1998. Under the Merger Agreement, the shares held by
Company's executive officers and directors will be treated in the same manner as
shares held by other shareholders, and vested stock options held by the
Company's executive officers and directors will be exchangeable for a portion of
the Merger Consideration equal to the excess of (i) the amount which such
holders would be entitled to receive had they exercised such options immediately
prior to the Effective Time, over (ii) the exercise price of such stock options.
ESTIMATED TOTAL
PAYMENT ASSUMING A
MERGER CONSIDERATION
NAME OF EXECUTIVE PER SHARE OF
OFFICER OR DIRECTOR SHARES OWNED VESTED STOCK OPTIONS [$3.35]
- ------------------- ------------ -------------------- --------------------
AVERAGE
SHARES EXERCISE PRICE
------ --------------
Stanton V. Abrams, [1,042,681](1) -- -- [$3,492,981]
President, Chief Executive
Officer, and Chairman of
the Board of Directors
Michael J. Meluskey, [208,500] -- -- [$698,475]
Treasurer, Secretary and
Director
Stanley Bernstein, Director [305,000] [20,000] [$2.14] [$1,045,950]
Arnold Mullen, Director [35,000](2) [20,000] [$2.14] [$141,450]
Robert L. Seelert, Director [23,000] -- -- [$77,050]
Alan L. Stanzler, Director [5,000] [20,000] [$2.14] [$40,950]
(1) Exclusive of 4,171 shares owned by a member of Mr. Abrams' immediate family.
(2) Includes 30,000 shares owned by a partnership of which Mr. Mullen is a
partner.
Payments under the Company's 1998 Key Employee Bonus Plan. Provided
that (i) the Effective Time of the Merger occurs by not later than September 30,
1998, (ii) they provide full and complete cooperation to the Company (as
determined by the Company's Board of Directors) to consummate the Merger as soon
as practicable, and (iii) they remain employed by the Company until the earlier
of (A) the
21
30
date on which they are discharged by the Company's Board of Directors or (B) 30
days following the closing of the Merger, two of the Company's executive
officers and directors will be entitled to receive certain payments under the
Company's 1998 Key Employee Bonus Plan within 30 days following the Effective
Time. The names and amounts of such potential payments are: Stanton V. Abrams -
$250,000, and Michael J. Meluskey - $125,000. Such payments constitute a portion
of the approximately $530,000 of total severance payment obligations which the
Company now anticipates it will incur if the Merger is consummated to all of its
employees under the Company's 1998 Key Employee Bonus Plan and other employee
benefit plans and contractual arrangements. The aggregate amount of all such
severance payment obligations arising as a result of the Merger will be treated
under the Merger Agreement as liabilities of the Company and therefore, unless
paid by the Company from other funds, will be deducted from the Merger
Consideration payable by GCP on the Effective Time. See "THE MERGER - Merger
Consideration."
Director and Officer Liability Insurance. The Merger Agreement provides
that GCP will cause the Surviving Corporation to keep in effect for the benefit
of the Company's officers and directors prior to the Merger the Company's
director and officer liability insurance as in effect prior to the Merger to the
extent the Company shall have prepaid the premium for such insurance prior to
the Effective Time. See "THE MERGER - The Merger Agreement - Director and
Officer Liability Insurance."
TREATMENT OF OPTIONS AND WARRANTS
As of the Record Date, the Company had outstanding (i) stock options
for a total of [575,016] shares of Common Stock (of which [124,794] shares were
then vested) with an average exercise price of approximately [$1.19] per share,
(ii) warrants (which were then fully vested) for a total of 1,753,200 shares
with an exercise price of $5.50 per share of Common Stock, and (iii) an
underwriter's warrant (which was then fully vested) for 160,000 shares of Common
Stock with an exercise price of $7.25 per share and 160,000 warrants with an
exercise price of $0.15 per warrant. Under the terms of the Merger Agreement,
the stock option agreements for the Company's outstanding stock options, and the
agreements relating to the Company's outstanding warrants and underwriter's
warrant, the holders of such outstanding stock options and warrants (to the
extent vested as of the Effective Time) will be entitled to receive a cash
payment (if any) from the Merger Consideration equal to the excess of (i) the
portion of the Merger Consideration which such holders would be entitled to
receive had they exercised such stock options and warrants immediately prior to
the Effective Time, over (ii) the exercise price of such stock options and
warrants. The Merger will not result in the acceleration of any vesting under
the Company's outstanding stock options and, to the extent that options are not
vested as of the Effective Time, such options will expire as of the Effective
Time. The Company now anticipates that since the Merger Consideration Per Share
will be less than the exercise price of the warrants and underwriter's warrant,
the Merger will result in the holders of the warrants and underwriter's warrant
having no right to payment from the Merger Consideration. See "THE MERGER--The
Merger Agreement-Stock Options and Warrants."
RISKS OF NON-CONSUMMATION
The obligations of the Company to consummate the Merger are subject to
a number of conditions, including approval of the Merger Agreement by the
holders of at least a majority of the outstanding shares of the Company's Common
Stock. See "THE MERGER--The Merger Agreement--Conditions to the Merger."
22
31
EXPENSES OF THE MERGER
The Merger will involve the payment of various expenses by the parties,
and the Merger Agreement generally provides that each party will bear its own
expenses in connection with the Merger. Accordingly, except to the extent that
the Company can pay such expenses from other funds, the expenses incurred by the
Company in connection with the Merger will be paid and deducted from the Merger
Consideration which would otherwise be available for distribution to the
Company's shareholders and option holders. The Company now estimates that it
will incur, commencing with the receipt of the preliminary offer from AGC on
January 30, 1998, aggregate expenses of between approximately [$477,500]and
[$527,500] for services and expenses relating to the Merger (namely, closing
adjustments of approximately [$15,000]; legal, accounting, filing, duplication
and mailing expenses of approximately [$292,500]; fees and expense
reimbursements payable to Stonebridge of approximately [$160,000];fees and
expenses of the Exchange Agent of approximately [$10,000]; and other
miscellaneous expenses of up to approximately [$50,000]. However, the actual
expenses to be incurred by the Company will not be known until shortly prior to
the Effective Time, and such actual expenses could differ significantly from
these estimates. See "THE MERGER--The Merger Agreement--Termination Fee and
Expenses."
THE MERGER
The following description of certain provisions of the Merger Agreement
and the exhibits and schedules thereto is only a summary and does not purport to
be complete. This description is qualified in its entirety by reference to the
complete text of the Merger Agreement, a conformed copy of which is attached
hereto as Annex I and incorporated herein by reference.
FORM OF MERGER
The Merger Agreement provides that, subject to the requisite approval
by the Company's shareholders and satisfaction or waiver of certain other
conditions, at the Effective Time, Acquiror Sub will be merged with and into the
Company, the separate corporate existence of Acquiror Sub will cease, and the
Company will continue as the Surviving Corporation. The Certificate of
Incorporation and By-laws of Acquiror Sub in effect at the Effective Time, as
modified by amendments approved by all parties to the Merger Agreement, will be
the Articles of Incorporation and By-laws of the Surviving Corporation, and the
directors and officers of Acquiror Sub at the Effective Time will be the
directors and officers of the Surviving Corporation. The name of the Surviving
Corporation immediately following the Merger will be "Senior Tour Players
Development, Inc."
UPON CONSUMMATION OF THE MERGER, THE SHARES OF THE COMPANY'S COMMON
STOCK WILL, EXCEPT AS DESCRIBED BELOW UNDER DISSENTERS' RIGHTS, BE CONVERTED
INTO THE RIGHT TO RECEIVE A PORTION OF THE MERGER CONSIDERATION (AS DESCRIBED
BELOW), AND THE COMPANY'S SHAREHOLDERS WILL HAVE NO OWNERSHIP IN OR CONTROL OVER
EITHER THE COMPANY OR GCP. IN ADDITION, THE COMMON STOCK WILL NO LONGER BE
QUOTED IN THE NASDAQ SMALL-CAP MARKET OR TRADED ON THE BOSTON STOCK EXCHANGE.
23
32
MERGER CONSIDERATION
The Merger Agreement provides that, prior to the Merger, the Company
will sell or otherwise dispose of all of the Company's assets other than The
Badlands and certain related assets (collectively, the "Acquired Assets"), and
that the Company will pay or otherwise discharge all of its liabilities except
for certain liabilities relating to The Badlands (the "Assumed Liabilities") and
the mortgage debt to NationsCredit on The Badlands (the "NationsCredit Loans").
GCP will then acquire the Company through the Merger in exchange for a cash
payment (the "Merger Consideration") equal to (i) $26.0 million, (ii) less the
sum of (A) the then outstanding balance and certain prepayment penalties on the
NationsCredit Loans, (B) any costs and expenses relating to the Merger payable
by the Company, and (C) any of the Company's liabilities not included as Assumed
Liabilities and not paid prior to the Effective Time, (iii) plus the proceeds
received by the Company after the date of the Merger Agreement from the exercise
of the Company's outstanding stock options, (iv) plus or minus, as the case may
be, an adjustment relating to the working capital of The Badlands at the
Effective Time. The amount of such adjustment to the Merger Consideration based
upon the working capital of The Badlands is described in detail in Section 2.6
of the Merger Agreement. That Section defines the required level of working
capital of The Badlands (excluding the deferred revenue/annual membership dues
of The Badlands) as the "Target Net Current Asset Position," and provides that
such level shall be equal to $650,000 as of the Effective Time.
If the net proceeds from the sale or other disposition of all of the
Company's assets other than the Acquired Assets are greater than the Company's
liabilities described in (B) and (C) above (plus any amount which is required to
fund the required level of working capital of The Badlands as described above),
the Merger Agreement provides that the Company will be permitted to apply such
excess to reduce the outstanding balance on the NationsCredit Loans (which
balance will be deducted from the Merger Consideration payable by GCP upon the
consummation of the Merger as described above). If the Company is not able to
discharge all of its actual and contingent liabilities (other than the Assumed
Liabilities and the NationsCredit Loans) by the Effective Time, a portion of the
Merger Consideration mutually acceptable to GCP and the Company will be placed
in reserve at the Effective Time. Any portion of such reserves which is not
ultimately required for the discharge of such actual and contingent liabilities
of the Company as of the Effective Time (together with interest thereon while
such funds are held in escrow) will be delivered from escrow to the Exchange
Agent as soon as practicable following the Effective Time.
At the Effective Time, shares of the Company's Common Stock issued and
outstanding immediately prior to the Effective Time (other than shares of Common
Stock which are held by the Company or shareholders who have duly asserted and
perfected their dissenters' rights under Nevada law) shall automatically be
converted into the right to receive, without interest, a portion of the Merger
Consideration (the "Merger Consideration Per Share") calculated by dividing the
Merger Consideration by the number of shares of Common Stock outstanding
immediately prior to the Effective Time (or then subject to outstanding vested
stock options or warrants having an exercise price less than the Merger
Consideration Per Share). Pursuant to the Merger Agreement, no transfers of
shares of Common Stock will be made on the stock transfer books of the Company
after the close of business on the day prior to the date of the Effective Time.
At the Effective Time, any share of the Company's Common Stock issued
and held in the Company's treasury immediately prior to the Effective Time
shall, by virtue of the Merger and without any action on the part of the holder
thereof, cease to be outstanding, be canceled and retired without payment
24
33
of any consideration therefor and cease to exist. Each share of capital stock of
Acquiror Sub issued and outstanding immediately prior to the Effective Time
shall automatically be converted into one share of the Surviving Corporation.
The Surviving Corporation will be a wholly-owned subsidiary of GCP.
ESTIMATE OF MERGER CONSIDERATION PER SHARE
In accordance with the provisions of the Merger Agreement described in
the preceding section, the Merger Consideration Per Share which will be
available for distribution to the Company's shareholders will be determined by
the outcome of certain future events and adjustments including, in particular
but without limitation, the following: (i) the amount of net proceeds which the
Company will receive from the sale or other disposition prior to the Effective
Time of all of its assets (other than the Acquired Assets); (ii) the amount of
the Company's aggregate expenses relating to the Merger and severance payment
obligations to the Company's employees arising as a result of the Merger; (iii)
the aggregate outstanding balance (including prepayment penalties to the extent
deductible from the Merger Consideration) on the NationsCredit Loans as of the
Effective Time; (iv) the date of the Effective Time and the results of the
Company's operations through the Effective Time; (v) the terms under which the
Company will be able to settle or otherwise resolve its current litigation (the
"White-Weber Litigation") with certain persons (the "White-Weber Group") which
involves primarily the assertion by the White-Weber Group that the Company now
owes to them an additional cash payment of $200,000 and the issuance of an
additional 161,644 shares of Common Stock; and (vi) the number of outstanding
shares of Common Stock and vested stock options as of the Effective Time.
Although the aggregate amount of the Merger Consideration will be increased by
the amount of the proceeds received by the Company after the date of the Merger
Agreement from the exercise of the Company's outstanding stock options, the
amount of such proceeds will not affect the Merger Consideration Per Share
because, to the extent that vested stock options are not exercised prior to the
Effective Time, the holders thereof will be entitled to share in the Merger
Consideration based upon the difference between the Merger Consideration Per
Share and the respective exercise prices of those vested stock options. See "The
Merger Agreement -- Stock Options and Warrants" below.
Based upon the information now available to the Company, the Company
now estimates that the Merger Consideration will be between approximately
$14,010,000 and $14,875,000, as shown in the following table:
25
34
Minimum Maximum
------- -------
Basic Merger Consideration..................................... $26,000,000 $26,000,000
Plus:
- ----
Cash proceeds from sale of Non-Acquired Assets from
March 31, 1998 to Effective Time:
Harbor Links Management Agreement.................... 25,000 25,000
Golftown stock....................................... 29,000 29,000
Las Vegas Golf Center
membership interest.............................. 200,000 200,000
Proceeds from exercise of stock options from March 31,
1998 to Effective Time................................... 870,000 870,000
Less:
- ----
Balance and prepayment penalties on NationsCredit Loans (9,247,000) (9,247,000)
as of Effective Time.....................................
Other Company liabilities as of Effective Time:
Balance on US Bank of Nevada line of credit as of (465,000) (465,000)
March 31, 1998.......................................
Other liabilities.................................... (903,000) (829,500)
Transaction expenses..................................... (527,500) (477,500)
Employee severance payments.............................. (530,000) (530,000)
Required net capital for The Badlands.................... (650,000) (650,000)
Liabilities from White-Weber Litigation.................. (791,500) (50,000)
---------- -----------
Total Merger Consideration........................... $14,010,000 $14,875,000
In preparing the above table, the Company has made numerous assumptions,
the most significant of which are as follows:
(I) The Company will sell or otherwise dispose prior to the effective time
all of the assets which it held as of March 31, 1998 (other than the acquired
assets) for aggregate net proceeds which, together with the payments which the
Company has received since March 31, 1998 and will receive through the Effective
Time from the exercise of stock options, will be sufficient to enable the
Company (A) to pay all of the Company's expenses relating to the Merger and
severance payment obligations to the Company's employees arising as a result of
the Merger) and (B) to pay approximately $116,500 of the Company's liabilities
as of the Effective Time;
(ii) the Company's aggregate expenses relating to the Merger will be
between approximately [$477,500] and [$527,500], and the Company will incur
aggregate severance payment obligations to its employees of approximately
$530,000 as a result of the Merger;
26
35
(iii) the aggregate outstanding balance (including prepayment penalties to
the extent deductible from the Merger Consolidation) on the NationsCredit Loans
as of the Effective Time will be approximately [$9,247,000];
(iv) the date of the Effective Time will be approximately [July 30,] 1998,
and the Company's current assets (other than the Acquired Assets) and cash flow
from operations through the Effective Time will not be sufficient for the
Company (A) to pay the approximately $465,000 now due to the US Bank of Nevada
and between approximately [$903,000] and [$829,500] of the Company's other
liabilities as of the Effective Time or (B) to fund the $650,000 net working
capital for The Badlands as required by Section 2.6 of the Merger Agreement,
which amounts will therefore need to be deducted from the Merger Consideration
at the Effective Time;
(v) the terms under which the Company will settle or otherwise resolve the
White-Weber Litigation cannot now be determined and therefore the Company must
now calculate the estimated range of the Merger Consideration based on two
assumptions, namely that (A) the Company will be required to incur litigation
expenses after March 31, 1998 of approximately $50,000 and to deliver to the
White-Weber Group a cash amount equal to approximately $[741,500] (which
reflects the $200,000 additional cash payment and an amount equal to [$3.35]
(the average of the estimated range of the Merger Consideration Per Share) times
the 161,644 additional shares of Common Stock which the White-Weber Group have
asserted are owed to them by the Company) and (B) the Company will be able to
settle or otherwise discharge such Litigation without liability except for the
assumed litigation expenses after March 31, 1998 as described above; and
(vi) there will be outstanding at the Effective Time a total of
[4,310,653] shares of Common Stock, which total adds to the [4,235,859] shares
outstanding on the Record Date the [124,794] vested stock options outstanding on
the Record Date (all of which are assumed to be exercised prior to the Effective
Time and their exercise price added to the Company's available cash as described
in the table above), and subtracts the 50,000 now outstanding shares which The
Ranchito Company, LLC has agreed to transfer back to the Company as partial
consideration for the transfer of the Company's membership interest in Las Vegas
Golf Center, LLC. As described in the paragraph preceding the table above, the
total amount of the Merger Consideration would be reduced if all of the vested
stock options now outstanding are not exercised prior to the Effective Time
(since the Company would not have available the proceeds of such exercise to pay
its other liabilities), but whether or not such stock options are exercised will
not affect the Merger Consideration Per Share.
Based upon the foregoing assumptions with respect to the total amount of
the Merger Consideration and the total number of shares of Common Stock
outstanding at the Effective Time, the Company now estimates that the Merger
Consideration Per Share will be approximately [$3.25] to [$3.45] per share of
Common Stock. However, as described above under "Merger Consideration," to the
extent that the Company is not able to discharge all of its actual and
contingent liabilities (other than the Assumed Liabilities and the NationsCredit
Loans) by the Effective Time, a portion of the Merger Consideration mutually
acceptable to GCP and the Company will be placed into reserves at the Effective
Time and any portion of such reserves not required for the discharge of such
actual and contingent liabilities as of the Effective Time will be delivered to
the Exchange Agent when the actual amount of such contingent liabilities has
been resolved and discharged. Accordingly, a portion of the Merger Consideration
Per Share as ultimately determined may not be available for distribution to the
Company's shareholders until after the Effective Time, at which time
27
36
the shareholders will also be entitled to receive interest on such portion while
such portion is held in such reserves. See "PAYMENTS TO SHAREHOLDERS."
In light of the information now available to the Company, the Company
believes that the assumptions described above and upon which the calculation of
the estimated Merger Consideration Per Share is based are reasonable. See, in
particular, the descriptions of (i) the Company's business, properties and
litigation and the Company's financial statements as of December 31, 1997 and
March 31, 1998 which are incorporated into this Proxy Statement by reference to
Items 1, 2, 3 and 7 of the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1997 and Items I(1) and II(1) of the Company's Quarterly
Report on Form 10-QSB for the quarter ended March 31, 1998 (copies of which
accompany this Proxy Statement), (ii) recent developments with respect to sale
or other disposition and proposed sale or other disposition prior to the
Effective Time of certain the Company's assets and liabilities as described
herein under "DESCRIPTION OF THE COMPANY- Recent Developments;" (iii) the
Company's estimated expenses relating to the Merger as described herein under
"CERTAIN CONSIDERATIONS RELATING TO THE MERGER - Expenses of the Merger;" (iv)
the Company's severance payment obligations to its employees arising as a result
of the Merger as described under "CERTAIN CONSIDERATIONS RELATING TO THE MERGER
- - Payments Under the Company's 1998 Key Employee Bonus Plan"; and (v) the
Company's outstanding shares of Common Stock and stock options as of the Record
Date as described herein under "THE SPECIAL MEETING- Voting at the Special
Meeting; Record Date; Required Vote," and "SPECIAL CONSIDERATIONS RELATING TO
THE MERGER - Treatment of Options and Warrants." However, particularly as
described in the sections referred to above, the foregoing assumptions are
subject to change in light of the outcome of future events and adjustments.
Therefore, there is no assurance as to the amount of the Merger Consideration
Per Share which will ultimately be available for distribution to the Company's
shareholders.
SHAREHOLDER MEETING
The Merger Agreement requires the Company to take all action necessary in
accordance with applicable law and its Articles of Incorporation and By-laws to
convene a meeting of its shareholders as promptly as practicable to consider and
vote upon the approval of the Merger Agreement.
The Merger Agreement provides that, subject to the fiduciary duties of the
Company's Board of Directors under applicable law and the next succeeding
sentence, the Company's Board of Directors shall recommend such approval and the
Company shall take all lawful action to solicit such approval. The Board of
Directors acting on behalf of the Company may at any time prior to the Effective
Time withdraw, modify or change any recommendation regarding the Merger, or
recommend any other offer or proposal, if the Board of Directors determines that
the failure to so withdraw, modify, or change its recommendation would cause the
Board of Directors to breach its fiduciary duties to the Company's shareholders
under applicable laws as advised in writing by outside counsel. Notwithstanding
anything contained therein to the contrary, any such withdrawal, modification or
change of recommendation shall not constitute a breach of the Merger Agreement
by the Company, but may result in the incurrence of a fee as described below in
"The Merger Agreement--Termination Fee and Expenses."
28
37
EFFECTIVE TIME OF THE MERGER
Unless otherwise mutually agreed in writing by the Company, GCP and
Acquiror Sub, the closing of the Merger (the "Closing") shall occur five
business days after the Company shall give notice to GCP that the Company has
satisfied all of the conditions to Closing which the Company is required to
satisfy in order to consummate the Merger, which satisfaction may, to the extent
required, take the form of the establishment as of the Effective Time of
reserves from the Merger Consideration in the manner described above under
"Merger Consideration." However, if GCP notifies the Company in writing of GCP's
good faith belief that one or more of the conditions to Closing the Company is
required to satisfy has not, in fact, been met, and identifies the condition and
the basis for GCP's belief, the Closing shall instead occur five business days
after the earlier of (i) the parties' agreement that all such conditions have
been satisfied, or (ii) the binding resolution of such dispute by a court or
other arbiter having jurisdiction over such matter.
The Merger will become effective on the date and at the time on which
certificates of merger are filed with the Secretaries of State of the State of
Nevada and Oklahoma (the "Effective Time"). Pursuant to the Merger Agreement,
the filing of the certificates of merger will be made as promptly as practicable
after satisfaction, or if permissible, waiver of the conditions to the Merger
and provided that the Merger Agreement has not been terminated in accordance
with its terms. See "The Merger Agreement--Conditions to the Merger." The Merger
Agreement may be terminated by either the Company or GCP if, among other
reasons, the Merger has not been consummated on or before August 31, 1998. See
"The Merger Agreement--Termination."
PROCEDURES FOR EXCHANGE OF CERTIFICATES
At the Effective Time, GCP will deposit with American Stock Transfer &
Trust Company (the "Exchange Agent"), in trust for the benefit of the holders of
shares of Common Stock and any holders of vested options or warrants who have
rights to receive payments upon consummation of the Merger, an amount of cash
equal to the Merger Consideration. As soon as practicable after the Effective
Time, the Exchange Agent will send to each record holder of Common Stock a
notice and a letter of transmittal (which will specify that delivery will be
effective, and risk of loss and title to certificates for shares of Common Stock
will pass, only upon proper delivery of such certificates to the Exchange Agent)
advising the holder of the effectiveness of the Merger and the procedure for
surrendering to the Exchange Agent the certificates for exchange into the Merger
Consideration Per Share.
SHAREHOLDERS SHOULD NOT FORWARD STOCK CERTIFICATES TO THE
EXCHANGE AGENT UNTIL THEY HAVE RECEIVED TRANSMITTAL FORMS.
SHAREHOLDERS SHOULD NOT RETURN STOCK CERTIFICATES WITH THE ENCLOSED
PROXY.
Upon surrender to the Exchange Agent of a certificate evidencing shares of
Common Stock, together with and in accordance with a duly executed letter of
transmittal, the holder of such certificate will be entitled to receive in
exchange therefor the shareholder's Merger Consideration Per Share payable under
the Merger Agreement (in the form of a check in respect of the shares of Common
Stock theretofore evidenced by such certificate or certificates so surrendered).
Upon such surrender, the Exchange Agent will, as promptly as practicable, pay
the shareholder's Merger Consideration Per Share. However, if the Company
29
38
is not able to discharge all of its actual and contingent liabilities (other
than the Assumed Liabilities and the NationsCredit Loans) by the Effective Time,
a portion of the Merger Consideration mutually acceptable to GCP and the Company
will be placed in reserves at the Effective Time. Any portion of such reserves
which is not ultimately required for the discharge of such actual and contingent
liabilities of the Company as of the Effective Time (together with interest
thereon while such funds are held in escrow) will be delivered from escrow to
the Exchange Agent as soon as practicable following the Effective Time. Any such
required escrow of a portion of the Merger Consideration would result in a delay
in the receipt by the Company's shareholders following the exchange of their
stock certificates of a corresponding portion of their Merger Consideration Per
Share. Until surrendered, each such certificate (other than certificates
representing shares held by the Company and shares as to which dissenters'
rights have been duly asserted and perfected under Nevada law), will be deemed
for all purposes to evidence only the right to receive the shareholder's Merger
Consideration Per Share. In no event will the holder of any surrendered
certificate be entitled to receive interest on the shareholder's Merger
Consideration Per Share (except for any portion thereof the payment of which is
deferred until after the Effective Time as described above).
If all or any part of a shareholder's Merger Consideration Per Share is to
be delivered to a person other than the person in whose name the certificates
surrendered in exchange therefor are registered, it will be a condition to the
payment of such consideration that the certificates so surrendered are properly
endorsed and otherwise are in proper form for transfer, that such transfer is
otherwise proper and that the person requesting such transfer pay to the
Exchange Agent any transfer or other taxes payable by reason of the foregoing or
establish to the satisfaction of the Exchange Agent that such taxes have been
paid or are not required to be paid. From and after the Effective Time, the
stock transfer books of the Company in place prior to the Effective Time will be
closed and thereafter there will be no transfers on such books (other than
transfers by, to or for the Company or GCP) of the shares of Common Stock which
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, certificates are presented to the Surviving Corporation, they
will be canceled and delivered to the Exchange Agent to be exchanged for an
appropriate Merger Consideration Per Share as provided in the Merger Agreement.
Any funds remaining with the Exchange Agent 180 days following the
Effective Time will be delivered to the Surviving Corporation, after which time
former shareholders of the Company, subject to applicable law, may look only to
the Surviving Corporation for payment of their claims for their Merger
Consideration Per Share in exchange for their shares of Common Stock. Such
former shareholders will have no greater rights against the Surviving
Corporation than may be accorded to general creditors of the Surviving
Corporation under Nevada law.
FINANCING ARRANGEMENTS BY GCP
Consummation of the Merger is not conditioned upon the completion by GCP
of any financing arrangements for obtaining the cash necessary to pay the Merger
Consideration upon consummation of the Merger. Prior to the execution of the
Merger Agreement on May 7, 1998, GCP delivered to the Company's Board of
Directors copies of the financing commitments which GCP had received under which
GCP anticipates it will receive the financing necessary for it to refinance the
NationsCredit Loans and to pay the Merger Consideration to the Exchange Agent on
the Effective Time of the Merger.
30
39
REGULATORY MATTERS
Under Section 7A of the Clayton Act (Title II of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976), as amended, and the rules and regulations
thereunder (the "HSR Act"), certain acquisition transactions may not be
consummated unless certain information has been furnished to the Antitrust
Division of the Department of Justice and the Federal Trade Commission, and
certain waiting period requirements have been satisfied. However, the
information filing and waiting period requirements of the HSR Act are applicable
only to acquisition transactions which involve parties which have assets or net
sales above certain specified amounts (which, in the case of an acquiror, are
generally total assets or net sales of more than $100,000,000). In the Merger
Agreement, GCP and Acquiror Sub have represented to the Company that they do not
have total assets or net sales of more than $100,000,000. Accordingly, both the
Company and GCP anticipate that the consummation of the Merger will not be
conditioned upon compliance with the information filing and waiting period
requirements under the HSR Act.
DISSENTERS' RIGHTS
The following discussion is not a complete statement of the law relating
to dissenters' rights and is qualified in its entirety by reference to Annex III
to this Proxy Statement. ANY HOLDER WHO WISHES TO EXERCISE STATUTORY DISSENTERS'
RIGHTS OR WHO WISHES TO PRESERVE THE RIGHT TO DO SO SHOULD REVIEW CAREFULLY THIS
DISCUSSION AND ANNEX III. FAILURE TO COMPLY STRICTLY WITH THE PROCEDURES SET
FORTH HEREIN AND IN ANNEX III WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
Shareholders of the Company will have dissenters' right with respect to
the Merger under the Nevada Revised Statutes ("NRS") Sections 92A.300 to
92A.500, and will be entitled to receive the "fair value" of their shares upon
consummation of the Merger. Under such provisions of the NRS, the "fair value"
of the shares of Common Stock will be equal to the value of the shares
immediately before the effectuation of the Merger, excluding any appreciation or
depreciation in anticipation of the Merger. Sections 92A.300 through 92A.500 of
the NRS are reprinted in their entirety as Annex III. All references in the NRS
and in this summary to a "shareholder" are to the record holder of the shares of
Common Stock as to which dissenters' rights are asserted. A person having a
beneficial interest in shares of Common Stock that are held of record in the
name of another person, such as a broker or nominee, must act promptly to cause
the record holder to follow the steps summarized below properly and in a timely
manner to perfect whatever dissenters' rights the beneficial owner may have.
Each shareholder electing to exercise his dissenters' rights and seek
payment for the fair value of his shares must deliver to the Company, before the
vote on the Merger Agreement at the Special Meeting, a written notice of his
intent to demand payment for his shares of Common Stock. Shareholders should
send this notice to Stanton V. Abrams, Senior Tour Players Development, Inc.,
822 Boylston Street, Suite 300, Chestnut Hill, MA 02167. This written notice
must be in addition to and separate from any proxy or vote against the Merger.
Voting against, abstaining from voting or failing to vote on the Merger will not
constitute a demand for dissenters' rights and payment for shares of Common
Stock within the meaning of the NRS. Any shareholder electing to demand
dissenters' rights with respect to the Merger will not be granted dissenters'
rights under the NRS if such shareholder has either voted in favor of the Merger
or consented thereto in writing (including by granting the proxy solicited by
this Proxy Statement or by
31
40
returning a signed proxy without specifying a vote against the Merger or a
direction to abstain from such vote).
If the Merger Agreement is approved at the Special Meeting, the Surviving
Corporation will send a notice within 10 days after effectuation of the Merger
to all of the shareholders who have satisfied the requirements to assert
dissenters' rights. This notice will state where the payment demand is to be
sent and where and when certificates for the shares of Common Stock must be
deposited. The Surviving Corporation will include in this notice a form for the
dissenting shareholder to complete which demands payment, a statement as to the
date of the first announcement to news media or the shareholders of the terms of
the Merger, and a requirement that the shareholder certify to the Surviving
Corporation that he acquired the shares of Common Stock before that date. In
addition, this notice will set a date by which the Surviving Corporation must
receive the completed form of payment demand from the dissenting shareholder;
the date will not be fewer than 30 days nor more than 60 days after the date of
the Surviving Corporation's notice. To obtain payment for his shares, a
dissenting shareholder must complete and return to the Surviving Corporation the
completed form of payment demand included with the Surviving Corporation's
notice and deposit his shares in accordance with the Surviving Corporation's
notice.
Within thirty (30) days after the Surviving Corporation receives the
demand for payment, the Surviving Corporation will pay each dissenter who has
complied with the applicable provisions of the NRS the amount the Surviving
Corporation estimates to be the fair value of the dissenter's shares plus
accrued interest. The Surviving Corporation will also send to the dissenting
shareholder along with such payment the following items: (i) the Company's
balance sheet for the year ended December 31, 1997; (ii) a statement of income
for that year; (ii) a statement of changes in the shareholders' equity for that
year; (iv) the latest interim financial statements; (v) a statement of the
Surviving Corporation's estimate of the fair value of the shares; (vi) an
explanation of how interest was calculated; (vii) a statement of the dissenter's
right to demand payment under the applicable provisions of the NRS; and (viii) a
copy of Sections 92A.300 through 92A.500 of the NRS. The NRS provide that the
Surviving Corporation may elect to withhold payment from a dissenter, unless the
shareholder was the beneficial holder of the shares before the date set forth in
the Surviving Corporation's notice to dissenting shareholders. To the extent the
Surviving Corporation elects to withhold payment, the Surviving Corporation must
estimate the fair value of the shares of Common Stock owned by the dissenting
shareholder plus accrued interest and will offer this amount to each dissenter.
The Surviving Corporation must also give the dissenter an explanation of how the
Surviving Corporation calculated the interest and a statement of the dissenter's
right to demand payment.
A dissenting shareholder may reject the Surviving Corporation's offer and
supply his own estimate of the fair value of his shares of Common Stock plus
interest and demand payment for such amount less any amount he received from the
Surviving Corporation. A dissenting shareholder will waive his dissenter's right
to demand payment if he fails to notify the Surviving Corporation of his
dissatisfaction with the Surviving Corporation's offer within 30 days after the
Surviving Corporation has made or offered payment for his shares.
If a demand for payment remains unsettled, the Surviving Corporation may
commence a judicial proceeding in the district court of the county in which the
Surviving Corporation's registered office is located 60 days after receiving the
payment demand and petition the court to determine the fair value of the shares
of Common Stock and accrued interest owned by the dissenting shareholder. If the
Surviving
32
41
Corporation does not commence a proceeding, the Surviving Corporation is
obligated to pay the dissenting shareholders the amounts demanded by them. The
Surviving Corporation will make all dissenting shareholders parties to the
proceeding. Each dissenter made a party to the suit is entitled to judgment for
either of the following: (a) the amount, if any, by which the court finds the
fair value of the dissenter's shares plus interest exceeds the amount paid by
the Surviving Corporation or (b) the fair value, plus interest, of the
dissenter's after-acquired shares for which the Surviving Corporation elected to
withhold payment. The court will assess court costs against the Surviving
Corporation except to the extent the court finds the dissenters acted
arbitrarily, vexatiously or not in good faith.
THE MERGER AGREEMENT
The following is a summary of certain terms of the Merger Agreement, a
conformed copy of which is attached as Annex I to this Proxy Statement and is
incorporated herein by reference. Such summary is qualified in its entirety by
reference to the Merger Agreement. Shareholders are urged to read the Merger
Agreement carefully.
Merger Consideration Per Share. At the Effective Time each outstanding
share of Common Stock, other than shares as to which dissenters' rights have
been duly asserted and perfected under Nevada law and shares held by the
Company, will be automatically converted into the right to receive the Merger
Consideration Per Share calculated as described above under "Merger
Consideration" and "Estimate of Merger Consideration Per Share."
Escrow Arrangements. In accordance with Section 1.8 of the Merger
Agreement, GCP deposited in escrow on May 7, 1998 with Coastal Banc ssb of
Houston, Texas, an aggregate of $500,000 (which amount includes $250,000 which
was advanced at GCP's request by its anticipated primary mortgage lender).
Section 1.8 of the Merger Agreement provides that, if the Merger Agreement is
terminated by the Company due to a material default by GCP or Acquiror Sub, the
escrowed funds, along with any interest earned thereon, shall be paid to the
Company. If the Merger Agreement is terminated for any other reason, the
escrowed funds, along with any interest earned thereon, shall be paid to GCP.
Upon closing of the transactions provided for in the Merger Agreement, the
escrowed funds shall, at GCP's election, either be applied to pay a portion of
the Merger Consideration or be refunded to GCP.
Stock Options and Warrants. As of the Record Date, the Company had
outstanding (i) stock options for a total of [575,016] shares of Common Stock
(of which [124,794] shares were then vested), with an average exercise price of
approximately [$1.19] per share, (ii) warrants (which were then fully vested)
for a total of 1,753,200 shares of Common Stock with an exercise price of $5.50
per share, and (iii) an underwriter's warrant (which was then fully vested) for
160,000 shares of Common Stock with an exercise price of $7.25 per share and
160,000 warrants with an exercise price of $0.15 per warrant. Under the terms of
the Merger Agreement, the stock option agreements for the Company's outstanding
stock options, and the agreements relating to the Company's outstanding warrants
and the underwriter's warrant, the holders of such outstanding stock options and
warrants (to the extent vested as of the Effective Time) will be entitled to
receive from the Merger Consideration a cash payment (if any) equal to the
excess of (i) the portion of the Merger Consideration which such holders would
be entitled to receive had they exercised such stock options and warrants
immediately prior to the Effective Time, over (ii) the exercise price of such
stock options and warrants. The Merger will not result in the acceleration of
any vesting under the Company's
33
42
outstanding stock options and, to the extent that options are not vested as of
the Effective Time, such options will expire as of the Effective Time.
Representations and Warranties. The Merger Agreement contains various
representations and warranties of each of the Company and GCP and Acquiror Sub.
These include, among other things, representations and warranties of the Company
as to (i) its organization and good standing, (ii) its authority relative to the
execution and delivery of, and performance of its obligations under, the Merger
Agreement, (iii) its capitalization, (iv) the identity and ownership of its
subsidiaries, (v) the absence of conflicts between the Merger Agreement and the
Company's Articles of Incorporation and By-laws, applicable law and the
contracts of the Company, (vi) the conformity to applicable accounting standards
of its financial statements and the accuracy of its filings with the SEC and
regulatory authorities, (vii) the absence of undisclosed liabilities in and
changes with respect to its financial statements in its filing with the SEC,
(viii) the payment of taxes, (iv) the absence of pending or threatened material
litigation or other actions, (x) compliance with laws, (xi) employee benefit
plans, (xii) its properties, licenses and permits, (xiii) certain environmental
matters, (xiv) intellectual property rights, (xv) insurance, (xvi) the absence
of certain changes in the Company's financial condition and operations since
December 31, 1997, and (xvii) certain matters specific to The Badlands.
The representations and warranties of GCP and Acquiror Sub include, among
other things, those as to (i) GCP's and Acquiror Sub's organization and good
standing, (ii) their authority relative to the execution and delivery of, and
performance of their obligations under, the Merger Agreement, (iii) the absence
of conflicts between the Merger Agreement and GCP's and Acquiror Sub's Operating
Agreement or Certificate of Incorporation and by-laws (as the case may be),
applicable law and the contracts of GCP and Acquiror Sub, and (iv) the level of
total assets and net sales of Acquirer and Acquiror Sub, which is relevant to
certain provisions of the Hart-Scott-Rodino Act as described above under
"Regulatory Matters."
Certain Covenants. Pursuant to the Merger Agreement, each of the
Company and GCP has made various customary covenants for transactions of this
type, including, among others, that each party will use all commercially
reasonable efforts to take or cause to be taken all actions necessary or
desirable to obtain all approvals and consents required to consummate the
Merger.
Pursuant to the Merger Agreement, the Company has covenanted, among other
things, with respect to the following matters.
Conduct of Business Pending the Merger. The Company has agreed to (a)
operate its business in the ordinary course of business and consistent with its
past practice and to use reasonable efforts to preserve intact its business
organization and assets, maintain its rights and franchises, retain the services
of its respective officers and key employees and maintain the relationships with
its respective key customers and suppliers; (b) confer with GCP at its
reasonable request to report operational matters of a material nature and to
report the general status of the ongoing operations of the business of the
Company and its Subsidiaries; and (c) maintain compliance with all permits,
laws, rules, regulations and orders applicable to the Company and its
Subsidiaries. The Company has further agreed that, from the date of the Merger
Agreement through the Effective Time, it will not: (a) increase the compensation
payable to any director, officer or employee of the Company or any of its
Subsidiaries, other than increases in salary or wages payable or to become
payable in the ordinary course of business and consistent with the policies
currently
34
43
in effect; (b) grant any severance or termination pay to, or enter into any
severance agreement with, any director or officer (other than as previously
approved by the Company's Board of Directors); (c) enter into or amend any
employment agreement with any director or officer that would extend beyond the
Effective Time except on an at-will basis; or (d) establish, adopt, enter into
or amend any Employee Benefit Plan, except as may be required to comply with
applicable law; (e) declare or pay any dividend on, or make any other
distribution in respect of, outstanding shares of capital stock; (f) (i) redeem,
purchase or otherwise acquire any shares of its or any of its Subsidiaries'
capital stock or any securities or obligations convertible into or exchangeable
for any shares of its or its Subsidiaries' capital stock, or any options,
warrants or conversion or other rights to acquire any shares of its or its
Subsidiaries capital stock; (ii) effect any reorganization or recapitalization;
or (iii) split, combine or reclassify any of its or its Subsidiaries' capital
stock; (g) issue, deliver, award, grant or sell, or authorize the issuance,
delivery, award, grant or sale (including the grant of any security interests,
liens, claims, pledges, limitations on voting rights, charges or other
encumbrances) of, any shares of any class of its or its Subsidiaries' capital
stock, any securities convertible into or exercisable or exchangeable for any
such shares, or any rights, warrants or options to acquire any such shares
(except for the issuance of shares upon the exercise of options or warrants in
accordance with their terms), or amend or otherwise modify the terms of any such
rights, warrants or options the effect of which shall be to make such terms more
favorable to the holders thereof, except as contemplated by the Merger
Agreement; (h) acquire or agree to acquire, by merging or consolidating with, by
purchasing an equity interest in or a portion of the assets of, or by any other
manner, any business or any corporation, partnership, association or other
business organization or division thereof, or otherwise acquire or agree to
acquire any assets of any other Person (other than the purchase of assets from
suppliers or vendors in the ordinary course of business and consistent with the
Company's past practice); (i) sell, lease, exchange, mortgage, pledge, transfer
or otherwise dispose of, or agree to sell, lease, exchange, mortgage, pledge,
transfer or otherwise dispose of, any amount of any of its or its Subsidiaries'
assets, except for dispositions in the ordinary course of business and
consistent with the Company's past practice and except for dispositions of the
Non-Acquired Assets as contemplated in the Merger Agreement; (j) adopt any
amendments to its Articles of Incorporation or Bylaws; (k) (i) change any of its
methods of accounting in effect at December 31, 1997 or (ii) make or rescind any
express or deemed election relating to taxes, settle or compromise any claim,
action, suit, litigation, proceeding, arbitration, investigation, audit or
controversy relating to taxes, or change any of its methods of reporting income
or deductions for federal income tax purposes from those employed in the
preparation of the federal income tax returns for the taxable year ending
December 31, 1997, except in either case as may be required by law, the IRS, or
GAAP, or in the ordinary course of business consistent with past practice; (l)
incur any obligation for borrowed money or purchase money indebtedness, whether
or not evidenced by a note, bond, debenture or similar instrument, except as
approved by GCP in advance; or (m) agree, in writing or otherwise, to do any of
the foregoing.
No Solicitation of Acquisition Proposals. The Company has agreed that
neither it nor its Subsidiaries and their respective officers, directors,
employees, agents and advisors will enter into or continue any discussions or
negotiations with any third parties with respect to any Acquisition Proposal (as
defined below). The Company may furnish information and access, in each case
only in response to requests that were not solicited by the Company (or any
officer, director, employee, agent or advisor on its behalf) after the date of
the Merger Agreement, to any corporation, partnership, person or other entity or
group (each, a "Potential Acquiror") pursuant to confidentiality agreements, and
may participate in discussions and negotiate with a Potential Acquiror
concerning any merger, sale of assets, sale of shares of capital stock or
similar transaction involving the Company or any Subsidiary or division of the
Company, but only if such
35
44
Potential Acquiror has submitted a written proposal to the Board of Directors
relating to any such transaction, and the Board of Directors determines in good
faith, after consultation with outside legal counsel, that the failure to
provide such information or access or to engage in such discussions or
negotiations would be materially inconsistent with its fiduciary duties to the
Company's shareholders under the Nevada Law. The Company has agreed to notify
GCP immediately if any such request or proposal, or any inquiry or contact by
any third party with respect thereto, is made and to keep GCP apprised of all
developments that could reasonably be expected to culminate in the Board
withdrawing, modifying or amending its recommendation of the Merger and the
other transactions contemplated by the Merger Agreement. The term "Acquisition
Proposal" means any proposal or offer for a merger, consolidation or similar
combination (other than the Merger contemplated by the Merger Agreement)
involving the Company or any Subsidiary and any third party, or any proposal or
offer to acquire a significant equity interest in the Company, or a significant
portion of the assets of the Company, by a third party.
Conditions to the Merger. The representative obligations of each party to
effect the Merger are subject to the satisfaction, at or prior to the Closing
Date, of the following conditions: (a) the Merger Agreement and the Merger shall
have been approved by the holders of a majority of the outstanding shares of the
Company's Common Stock outstanding and entitled to vote; (b) there shall not
have been instituted and there shall not be pending or threatened any action,
proceeding order or decree by a governmental entity (i) imposing or seeking to
impose limitations on the ability of GCP to acquire or hold or to exercise full
rights of ownership of any securities of the Company or any of its Subsidiaries
or the Acquired Assets; (ii) imposing or seeking to impose limitations on the
ability of GCP or the Acquiror Sub to combine and operate the business and
assets of the Company with GCP or any of its Subsidiaries or other operations;
or (iii) imposing or seeking to impose other sanctions, damages or liabilities
arising out of the Merger on GCP, Acquiror Sub, the Company or any of their
officers, directors or members; (c) the Company, GCP and the Acquiror Sub shall
have obtained all third party consents and consents, waivers, approvals and
authorizations required to be obtained from any governmental entity prior to
consummation of the transactions contemplated in the Merger Agreement (other
than the filing and recordation of Merger documents in accordance with the
Nevada Law and the Oklahoma Law); (d) each of the representations and warranties
of the Company on the one hand, and of GCP and the Acquiror Sub on the other
hand, made in the Merger Agreement shall be true and correct in all material
respects when made and as of the Effective Time; (f) the information contained
in the Merger Agreement (as may be updated by either party) taken as a whole,
shall not have materially adversely changed as of the Effective Time; (g) the
Company on the one hand, and GCP and Acquiror Sub on the other hand, shall each
have received from the other party a favorable opinion of counsel as to due
organization, approval of the Merger Agreement, noncontravention of laws and
other matters customarily opined to in connection with transactions similar to
the Merger; and (h) the Company shall have sold, transferred or otherwise
disposed of all of its assets other than the Acquired Assets.
Termination. The Merger Agreement may be terminated in certain
circumstances (at any time prior to the Effective Time, whether before or after
approval of the Merger by the Company's shareholders), including the
following:(a) by mutual written consent of GCP and the Company; (b) by either
GCP or the Company in the event the conditions to such party's (the "Nonfailing
Party's") obligations under the Merger Agreement shall not have been met or
waived by the Nonfailing Party on or prior to August 31, 1998, but only if the
party terminating has not caused the condition giving rise to termination to be
unsatisfied through its own action or inaction; (c) by either GCP or the Company
if any decree, permanent injunction, judgment,
36
45
order or other action by any court of competent jurisdiction or any governmental
entity preventing or prohibiting consummation of the Merger shall have become
final and nonappealable; (d) by GCP if the Board of Directors of the Company (i)
withdraws, modifies or changes in a manner materially adverse to GCP its
recommendation of the Merger Agreement or shall have resolved to do any of the
foregoing, or (ii) shall have recommended to the shareholders of the Company any
Alternative Transaction; (e) by the Company if, in the exercise of its judgment
as to its fiduciary duties to its shareholders as imposed by applicable law and,
after consultation with and receipt of advice from outside legal counsel, the
Company's Board of Directors determines that such termination is required
pursuant to the fiduciary duty provisions of applicable law by reason of any
Alternative Transaction being made or proposed; (f) by either GCP or the
Company, if any new information provided by the other party contains disclosures
of any fact or condition which makes untrue, or shows to have been untrue, any
representation or warranty by such other party in the Merger Agreement, unless
concurrently with the delivery of such new information, such other party
represents and warrants that the disclosed fact or condition can and will be
corrected at such party's expense prior to the Effective Time; or (g) by either
GCP or the Company, at any time after the Shareholders Meeting, in the event the
Merger Agreement and the Merger are not approved by the requisite vote of the
shareholders of the Company in accordance with the Nevada Law and the Articles
of Incorporation and Bylaws of the Company.
Director and Officer Liability Insurance. GCP and Acquiror Sub have agreed
to cause the Survivor Corporation to maintain the Company's director and officer
liability insurance as in effect prior to the Merger, to the extent the Company
shall have prepaid the premium for such insurance prior to the Effective Time.
Termination Fee and Expenses. The Merger Agreement provides that, except
as specifically provided below, each party will bear its own expenses in
connection with the Merger Agreement and the transactions contemplated thereby.
Pursuant to the Merger Agreement, the Company and its representatives are
prohibited from encouraging or seeking acquisition proposals or furnishing any
non-public information to any person relating to an acquisition proposal. If the
Company receives an unsolicited acquisition proposal or information request, the
Company can provide information to and negotiate with the person making such
proposal or request, if the Company's Board of Directors determines in good
faith and based, as to legal matters, upon the advice of counsel that failing to
do so would be a breach of its fiduciary duties. The Merger Agreement further
provides that if the Company's Board of Directors determines in good faith
based, as to legal matters, upon the advice of outside legal counsel that it
would breach its fiduciary duties to shareholders by not accepting an
unsolicited proposal and entering into a definitive agreement with respect
thereto (a "Competing Transaction"), the Company has the option to terminate the
Merger Agreement by paying to GCP an amount equal to (a) GCP's expenses incurred
in connection with the Merger, up to a maximum of $110,000, plus (b) fifty
percent (50%) of the difference between the Merger Consideration and the
consideration to be received in a Competing Transaction, provided that the sum
of (a) and (b) above will be no less than (i) $500,000 if the Competing
Transaction is consummated within 120 days of the termination of the Merger
Agreement, or (ii) $300,000 if the Competing Transaction is not consummated
within 120 days of the termination of the Merger Agreement.
37
46
Amendment; Waiver. The Merger Agreement provides that it may be modified
or amended by the parties at any time prior to the Effective Time by written
agreement executed and delivered by duly authorized officers of the respective
parties. Amendments may be made to the Merger Agreement without shareholder
approval before or after the Special Meeting, provided that, after the approval
of the Merger Agreement by the Company's shareholders, no amendment that would
reduce the amount or change the type of consideration into which each share of
the Company's Common Stock shall be converted pursuant to the Merger Agreement
upon consummation of the Merger may be made without further approval of the
Company's shareholders. In addition, the conditions to each of the parties'
obligations to consummate the Merger may be waived by such party in whole or in
part to the extent permitted by applicable law.
Payments to Dissenting Shareholders. For a discussion of the provisions of
the Merger Agreement relating to dissenting shareholders' rights, see
"Dissenters' Rights" above.
ACCOUNTING TREATMENT
It is anticipated that the Merger will be accounted for and treated by the
Surviving Corporation as a purchase business combination transaction.
Accordingly, the assets and liabilities of the Company will be recorded at their
fair values as of the Effective Time.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes certain federal income tax
considerations which the Company anticipates will result from the Merger. It is
a summary of existing law and Treasury Regulations only, and it is not intended
as a substitute for careful tax planning. No rulings from the Internal Revenue
Service ("IRS") or opinions of counsel will be obtained with respect to any of
the federal income tax consequences discussed herein, and thus there can be no
assurance that the IRS will agree with the conclusions set forth below.
Subsequent proposed, temporary or final Treasury Regulations may adopt different
positions. Moreover, the legal authorities on which the discussion is based may
be changed at any time. Any such changes may be retroactively applied and could
modify the federal income tax consequences that result from the Merger.
The federal income tax consequences to any particular shareholder may be
affected by matters not discussed below. For example, certain types of holders
(including holders who acquired shares of Common Stock pursuant to the exercise
of stock options, holders who may be subject to the alternative minimum tax,
individuals who are not citizens or residents of the United States, foreign
corporations, insurance companies, tax-exempt organizations and regulated
investment companies) may be subject to special rules not addressed herein.
THE DISCUSSION SET FORTH BELOW IS INCLUDED FOR GENERAL INFORMATION ONLY.
SHAREHOLDERS SHOULD CONSULT THEIR TAX ADVISORS TO DETERMINE THEIR PARTICULAR TAX
CONSEQUENCES RESULTING FROM THE MERGER, INCLUDING THE APPLICABILITY AND EFFECT
OF FEDERAL, STATE, LOCAL AND FOREIGN AND OTHER TAX LAWS.
38
47
The conversion of the Common Stock into the right to receive cash
consideration in the Merger will be a taxable transaction for federal income tax
purposes and may also be a taxable transaction for state, local or other tax
purposes. A holder of shares of Common Stock will recognize gain or loss at the
Effective Time equal to the difference between (i) the sum of the shareholder's
Merger Consideration Per Share and (ii) such shareholder's tax basis in the
holder's shares of Common Stock. Recognized gain or loss will be capital gain or
loss, assuming the shares of Common Stock are held as a capital asset, and will
be long-term capital gain or loss if such shares of Common Stock were held for
more than one year and short-term capital gain or loss if such shares of Common
Stock were held for one year or less. Such gain or loss must be calculated
separately for each block of shares of Common Stock (e.g. shares acquired at the
same price in a single transaction) held by the holder.
At the time the Exchange Agent notifies each of the Company's shareholders
of the right to exchange such shareholder's stock certificates for such
shareholder's portion of the Merger Consideration, the Exchange Agent will
require each shareholder to provide a certificate with respect to such
stockholder's tax identification number. Backup withholding at the rate of 20%
would apply with respect to each shareholder's right to receive a portion of the
Merger Consideration, unless the shareholder (i) is a corporation or comes
within certain other exempt categories and, when required, demonstrates this
fact or (ii) provides a correct taxpayer identification number, certifies as to
no loss of exemption from backup withholding and otherwise complies with
applicable requirements of the backup withholding rules. A shareholder who does
not provide the Exchange Agent with his or her correct taxpayer identification
number may also be subject to penalties imposed by the IRS. Any amount withheld
under these rules would be creditable against the shareholder's federal income
tax liability.
DESCRIPTION OF THE COMPANY
INFORMATION INCORPORATED BY REFERENCE
As described above under "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE," the following documents previously filed with the Securities and
Exchange Commission are incorporated into this Proxy Statement by reference and
copies of such documents accompany this Proxy Statement: (1) the Company's
Annual Report on Form 10-KSB for the year ended December 31, 1997; and (2) the
Company's Quarterly Report on Form 10-QSB for the quarter ended March 31, 1998.
For a description of the Company's business, properties and legal
proceedings, see Items 1, 2 and 3 of such Annual Report on Form 10-KSB and Item
II(1) of such Quarterly Report on Form 10-QSB. For a description of management's
discussion of the Company's liquidity and capital resources, plan of operations
and results of operations, see Item 6 of such Annual Report on Form 10-KSB and
Item I(2) of such Quarterly Report on Form 10-QSB. For the Company's financial
statements for the years ended December 31, 1997 and 1996 and for the quarter
ended March 31, 1998, see Item 7 of such Annual Report on Form 10-KSB and Item
I(1) of such Quarterly Report on Form 10-QSB.
RECENT DEVELOPMENTS
As of December 31, 1997, the Company's assets other than The Badlands (the
"Non-Acquired Assets") represented approximately 9% of the Company's total
assets, and the Company derived
39
48
approximately 4% of its total revenues from the Non-Acquired Assets during the
year ended December 31, 1997. The Merger Agreement requires that, prior to the
Merger, the Company will sell or otherwise dispose of all of the Company's
Non-Acquired Assets, and that the Company will pay or otherwise discharge all of
its liabilities (the "Non-Assumed Liabilities") except for certain liabilities
relating to The Badlands (the "Assumed Liabilities") and the mortgage debt to
NationsCredit on The Badlands (the "NationsCredit Loans"). As described herein
under "THE MERGER- Merger Consideration," if the Company is not able to
discharge all of its actual and contingent Non-Assumed Liabilities by the
Effective Time, a portion of the Merger Consideration mutually acceptable to GCP
and the Company will be placed in reserves at the Effective Time, and any
portion of such reserves which is not ultimately required for the discharge of
such actual and contingent Non-Assumed Liabilities of the Company as of the
Effective Time (together with interest thereon while such funds are held in
escrow) will be delivered from escrow to the Exchange Agent as soon as
practicable following the Effective Time.
Primarily because of the provisions of the Merger Agreement described in
the preceding paragraph, the Company has, since January 1, 1998, taken the
following actions with respect to its Non-Acquired Assets and Non-Assumed
Liabilities (which are organized for this purpose in the same order in which
those Non-Acquired Assets and related Non-Assumed Liabilities appear in Items 1,
2 and 3 of the Company's Annual Report on Form 10-KSB and Item II(1) of the
Company's Quarterly Report on Form 10-QSB for the quarter ended March 31, 1998,
copies of which accompany this Proxy Statement). Except as described below, all
of such actions have involved parties which are not affiliated with the Company
or its management.
Harbor Links Golf Course - North Hempstead, New York
Effective June 1, 1998, the Company assigned its Golf Facilities
Management Agreement (the "Management Agreement") with the Town of North
Hempstead (the "Town") to Arnold Palmer Harbor Links, L.L.C. ("APHL") in
consideration of the payment by APHL to the Company of $25,000 in cash and the
agreement by APHL with the Company and the Town to make a $1,000,000 capital
contribution to the golf facility (the "Facility") which is to be managed under
the Management Agreement. Under the Management Agreement, the Company had agreed
to provide future management services to the Facility and to make the specified
capital contribution to the Facility. In order to discharge prior to the
Effective Time the Company's obligations under the Management Agreement, the
Company originally negotiated with Arnold Palmer Golf Management LLC ("Palmer")
the funding of the $1,000,000 capital contribution, but Palmer was willing to
agree to fund only $500,000 of the capital contribution required under the
Management Agreement. Accordingly, Palmer agreed with the Town to provide
$500,000 of such capital contribution, and Stanton V. Abrams, the Company's
President, agreed with the Town to provide the remaining $500,000 which Palmer
was not willing to provide. This arrangement was formalized through (i) the
formation of APHL as a joint venture between Palmer and Mr. Abrams, with Palmer
contributing $525,000 to APHL on July 1, 1998 (of which $25,000 was paid by APHL
to the Company as described above), and Mr. Abrams agreeing to contribute
$500,000 to APHL by not later than August 1, 1998, and (ii) the assignment by
the Company of the Management Agreement to APHL with the written consent of the
Town to such assignment and to the other terms summarized above. Under the terms
of such consent, the Company will remain severally liable to fund the $500,000
portion of the capital contribution which has not yet been funded until Mr.
Abrams funds such amount in accordance with his agreement with the Town and the
Company. Mr. Abrams plans to
40
49
fund such amount by having the Company pay such amount through a deduction of
$500,000 from the Merger Consideration, all of which will then be deducted from
the portion of the Merger Consideration which Mr. Abrams will be entitled to
receive in exchange for his outstanding shares of the Company's Common Stock. In
the future, as the two members of APHL, Palmer and Mr. Abrams will each be
entitled to receive from the Facility a portion of the management fees under the
Management Agreement (as assigned) and a return of their respective capital
contributions to APHL in five equal yearly installments beginning in 2001, with
interest on the portion of their respective capital contributions which have not
been returned at an interest rate equal to 2% above the prime rate as reported
by the Federal Reserve Bank of St. Louis.
New England Country Club - Bellingham, Massachusetts
The owner of the New England Country Club (the "NECC") advised the Company
that such owner desired to have the NECC managed after the Merger by the same
persons who, as employees of the Company, were involved in such management prior
to the Merger. If such an arrangement were not practicable, the owner advised
the Company that such owner intended to exercise its right under the management
agreement to terminate the agreement effective as of December 31, 1998.
Accordingly, the Company has arranged for the management agreement for the NECC
to be assigned as of the Effective Time without penalty or other payment to
Senior Tour Players, Inc., a company wholly-owned by Stanton V. Abrams, the
Company's President. As of the Effective Time, the Company will no longer have
any obligations or rights under such management agreement.
The Legends Golf Club - Stonebridge Ranch, McKinney, Texas
On March 23, 1998, the Company assigned to Westerra Holdings, LLC
("Westerra") all of the Company's development rights with respect to the
Stonebridge Ranch project in McKinney, Texas. In consideration of such
assignment, Westerra reimbursed the Company in full for the $323,099 of
development costs which the Company had previously capitalized in connection
with such development. The written development documents with Westerra had
previously terminated on August 15, 1997.
Golftown Practice Center - Saugus, Massachusetts
On May 26, 1998, the Company sold its 21.8% equity ownership of Golftown,
Inc. ("Golftown") to David A. Deutsch, who is the brother-in-law of Stanton V.
Abrams, the Company's President. In consideration of such transfer, Mr. Deutsch
paid to the Company approximately $29,000 in cash (which represented the
investment which the Company had previously made in Golftown and costs and
advances made by this Company on behalf of Golftown), and Mr. Deutsch had
previously arranged for the Company to be released from the Company's guarantee
of up to $295,000 of Golftown's debt to a local financial institution through
the provision by Mr. Deutsch of a similar personal guarantee of such debt.
41
50
Las Vegas International Golf Center - Las Vegas, Nevada
On June 23, 1998, the Company entered into an agreement with The Ranchito
Company, LLC ("Ranchito") which provides for the Company to assign its 21.5%
membership interest and rights as manager of Las Vegas Golf Center, LLC (the
"LLC") to Ranchito. Ranchito is now one of the two members of the LLC other than
the Company, and Ranchito now owns in that capacity a 30% membership interest in
the LLC. In consideration of such assignment, Ranchito has agreed to (i) pay
$200,000 in cash to the Company, (ii) arrange for the Company to be released
from the Company's joint and several guarantee of up to $4,000,000 of the LLC's
indebtedness to US Bank of Nevada, and (iii) return to the Company the 50,000
shares of the Company's Common Stock which the Company had issued to Ranchito in
December 1996 in connection with the Company's acquisition of its interest in
the LLC. In addition, if the LLC (or its assets) is acquired within six months
after the date of the agreement between the Company and Ranchito for aggregate
net proceeds in excess of $1,750,000 (after payment of all outstanding
liabilities of the LLC and transaction expenses), Ranchito will pay additional
consideration to the Company equal to 21.5% of such excess. The agreement
between the Company and Ranchito provides that the closing thereunder shall take
place 14 days after the execution of the agreement unless the parties agree
otherwise.
Headquarters Offices
The Company has arranged for the Company to be discharged as of the
Effective Time from the Company's obligations under the lease to its corporate
headquarters at 822 Boylston Street, Chestnut Hill, Massachusetts, and the
related leases for various office equipment and one motor vehicle without
payment of any significant amount by the Company. In the case of the lease to
the headquarters office, such lease will be assigned in accordance with its
terms to Senior Tour Players, Inc., a company wholly-owned by Stanton V. Abrams,
the Company's President.
Legal Proceedings
As described in Item 3 of the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1997 and Item II(1) of the Company's Quarterly
Report on Form 10-QSB for the quarter ended March 31, 1998 (copies of which
accompany this Proxy Statement), the Company is currently a party to two
lawsuits (the "White-Weber Litigation") with certain persons (the "White-Weber
Group") which involve primarily the assertion by the White-Weber Group that the
Company now owes to them an additional cash payment of $200,000 and the issuance
of an additional 161,644 shares of Common Stock. The White-Weber Litigation is
now in the discovery stage. The Company believes that it has valid claims
against the White-Weber Group which offset the claims of such Group for an
additional $200,000 cash payment and an additional 161,644 shares of the
Company's Common Stock, and that the other claims which have been made against
the Company in the White-Weber Litigation are without merit. However, the
Company can not now predict the ultimate outcome of the White-Weber Litigation
and therefore now estimates that the Company's liabilities for litigation
expenses and for any payments to the White-Weber Group to settle or otherwise
discharge such litigation could result in a reduction of the Merger
Consideration Per Share of between $.01 and $.19 per share of the Company's
Common Stock.
42
51
Impact of Recent Developments on the Merger
Based upon the events described above, the Company now anticipates that,
prior to the Effective Time, it will sell or otherwise dispose of all of its
Non-Acquired Assets and pay or otherwise discharge all of its Non-Assumed
Liabilities, except to the extent that certain of such Non-Assumed Liabilities
may need to be paid through deductions to the Merger Consideration as described
herein under "THE MERGER - Estimate of Merger Consideration Per Share." However,
as also described in that Section, a reserve from the Merger Consideration may
need to be established at the Effective Time with respect to the White-Weber
Litigation, or for contingent liabilities not itemized above. As described
herein under "PAYMENTS TO SHAREHOLDERS," the establishment of any such reserves
from the Merger Consideration would delay the delivery to the Company's
shareholders of a portion of their respective Merger Consideration Per Share.
PRICE RANGE OF COMMON STOCK
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 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 offering) through July __,1998:
1994 High Low
- ---- ---- ---
4th Quarter (Beginning November 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
43
52
Second Quarter....................................... $ 2.8125 $ 1.625
Third Quarter........................................ $ 2.0625 $ 1.75
Fourth Quarter....................................... $ 2.5625 $ 1.50
1998
- ----
First Quarter........................................ $ 3.375 $1.9375
Second Quarter....................................... $ 4.125 $2.625
Third Quarter (through July [__], 1998).............. $ [ ] $[ ]
On March 5, 1998, the day prior to the Company's press release that it had
received a proposal to purchase The Badlands and that it had engaged an
investment banking firm to assist the Company in evaluating the proposal and to
assess additional alternatives, the closing price of the Common Stock on the
NASDAQ Small-Cap Market was $2.875. At the close of trading on May 7, 1998,
which occurred prior to the Company's press release on that day that it had
entered into the Merger Agreement, the closing price of the Common Stock on the
NASDAQ Small-Cap Market was $2.9375. On July __, 1998, which is the latest
practicable date prior to the mailing of this Proxy Statement, the closing price
of the Common Stock on the NASDAQ Small-Cap Market was $___________.
The Company has paid no cash dividends on its Common Stock since its
inception on April 6, 1994.
PAYMENTS TO SHAREHOLDERS
In order to receive the Merger Consideration Per Share to which
shareholders will be entitled as a result of the Merger, each shareholder will
be required to surrender the certificates evidencing the shares of the Company's
Common Stock to the Exchange Agent. Promptly after the Effective Time, the
Exchange Agent will mail or make available to each shareholder a notice and
letter of transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the shares of Common Stock shall pass, only upon
proper delivery of the shares to the Exchange Agent) advising such shareholder
of the effectiveness of the Merger and the procedures to be used in effecting
the surrender of shares for payment therefor. Shareholders should surrender
shares only with a letter of transmittal. PLEASE DO NOT SEND SHARES WITH THE
ENCLOSED PROXY.
Upon surrender of a shareholder's stock certificates, the Exchange Agent
will, as promptly as practicable, pay the shareholder's Merger Consideration Per
Share. However, if the Company is not able by the Effective Time to discharge
(including through deductions to the Merger Consideration to the extent
required) all of its actual and contingent liabilities (other than the Assumed
Liabilities and the NationsCredit Loans), a portion of the Merger Consideration
mutually acceptable to GCP and the Company will be placed in reserves at the
Effective Time. Any portion of such reserves which is not ultimately required
for the discharge of such actual and contingent liabilities of the Company as of
the Effective Time (together with interest thereon while such funds are held in
escrow) will be delivered from escrow to the Exchange Agent as soon as
practicable following the Effective Time. Any such
44
53
required escrow of a portion of the Merger Consideration would result in a delay
in the receipt by the Company's shareholders following the exchange of their
stock certificates of a corresponding portion of their Merger Consideration Per
Share. See "THE MERGER - Consideration to be Received in the Merger."
If payment of the shareholder's Merger Consideration Per Share is to be
made to a person other than a person in whose name the shares are registered, it
shall be a condition of payment that the shares so surrendered shall be properly
endorsed or otherwise be in proper form for transfer and that the person
requesting such payment shall pay any transfer or other taxes required by reason
of the payment to a person other than the registered holder of the shares or
shall establish to the satisfaction of the Surviving Corporation that such tax
either has been paid or is not applicable.
Until surrendered and exchanged in accordance with the Merger Agreement,
after the Effective Time each share of the Company's Common Stock shall
represent only the right to receive the shareholder's Merger Consideration Per
Share. At the close of business on the day prior to the date of the Effective
Time, the Company's stock transfer books shall be closed and no further
transfers shall be made. If thereafter any shares are presented for transfer,
such shares shall be canceled and exchanged for the shareholder's portion of the
Merger Consideration Per Share; provided, however, that after 180 days following
the Effective Time, holders of certificates formerly representing the Company's
Common Stock will be entitled to look exclusively to the Surviving Corporation
and only as general creditors thereof with respect to the Merger Consideration
Per Share payable upon surrender of such certificates formerly representing
Common Stock.
EXPERTS
The audited financial statements of the Company which are incorporated by
reference into this Proxy Statement by reference to the Company's Annual Report
on Form 10-KSB for the year ended December 31, 1997, to the extent and for the
periods indicated in their report, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in accounting and auditing in giving such reports. Representatives of
Arthur Andersen LLP are expected to be present at the Special Meeting. Those
representatives will have an opportunity to make statements if they so desire
and will be available to respond to appropriate questions.
OTHER MATTERS
DEADLINE FOR SHAREHOLDER PROPOSALS
If the Merger is consummated, the Company will not hold an Annual Meeting
during 1998. If the Merger is not consummated for any reason, the Company
anticipates that it will hold a Special Meeting during October 1998 in lieu of
the 1998 Annual Meeting. Any proposals of shareholders for consideration at such
Special Meeting of Shareholders must be received on or before August 31, 1998
for inclusion in the proxy materials relating to that meeting. Any such
proposals must adhere to the requirements of the Securities Exchange Act of 1934
and should be sent to Stanton V. Abrams, President
45
54
and Chief Executive Officer, Senior Tour Players Development, Inc., 822 Boylston
Street, Suite 300, Chestnut Hill, Massachusetts 02167.
OTHER MATTERS AT SPECIAL MEETING
There is no matter other than those described above, so far as is known to
the Company's management at the date of this Proxy Statement, to be acted on at
the Special Meeting. However, if any other matters properly come up for action
at said meeting or any adjournments thereof, the persons named in the enclosed
form of proxy shall, in accordance with the terms of the proxy, have authority
in their discretion to vote shares represented by proxies received by them in
accordance with their best judgment in the interests of the Company and its
shareholders.
46
55
ANNEX I
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER dated as of May 6, 1998 (the
"Agreement"), is made and entered into among GOLF CLUB PARTNERS L.L.C., an
Oklahoma limited liability company ("Acquiror"), STPD ACQUISITION COMPANY, an
Oklahoma corporation and a wholly-owned subsidiary of Acquiror ("Acquiror Sub"),
and SENIOR TOUR PLAYERS DEVELOPMENT, INC., a Nevada corporation (the "Company").
RECITALS
The respective Boards of Directors of Acquiror Sub and the Company, and the
managers of Acquiror, have determined that it is advisable and in the best
interests of the respective corporations and limited liability company and their
respective shareholders and members that Acquiror Sub be merged with and into
the Company in accordance with the applicable statutes under the laws of the
State of Nevada regarding for-profit corporations (the "Nevada Law"), the
Oklahoma General Corporation Act (the "Oklahoma Law") and the terms of this
Agreement, pursuant to which the Company will be the surviving corporation and
will become wholly-owned by Acquiror (the "Merger").
AGREEMENTS
In consideration of the representations, warranties, covenants and
agreements set forth in this Agreement, the parties agree:
ARTICLE I
THE MERGER
1.1 THE MERGER. Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the Oklahoma Law and the Nevada Law, at
the Effective Time (as defined in Section 1.2 below), Acquiror Sub shall be
merged with and into the Company. As a result of the Merger, the separate
corporate existence of Acquiror Sub shall cease and the Company shall continue
as the surviving corporation of the Merger (the "Surviving Corporation").
Acquiror Sub and the Company are sometimes collectively referred to in this
Agreement as the "Constituent Corporations."
1.2 EFFECTIVE TIME. As promptly as practicable after the satisfaction or
waiver of the conditions set forth in Article VII, the parties shall cause the
Merger to be consummated by filing Articles or Certificates of Merger (the
"Certificates of Merger") with the Secretaries of State of the States of Nevada
and Oklahoma in such form as is required by, and executed in accordance with,
the relevant provisions of the Nevada Law and the Oklahoma Law, and shall take
all such further actions as may be required by law to make the Merger effective
upon the filing of the Certificates of Merger (the date and time of such
effectiveness being the "Effective Time").
1.3 EFFECT OF THE MERGER. At the Effective Time, the consequences of the
Merger shall be as provided in the applicable Nevada Law and Oklahoma Law.
Without limiting the generality of, and subject to the provisions of, the Nevada
Law and the Oklahoma Law, at the Effective Time, except as otherwise provided in
this Agreement, all the property, interests, assets, rights, privileges,
immunities, powers and franchises of Acquiror Sub and the Company shall vest in
the
56
Surviving Corporation, and all debts, liabilities, duties and obligations of
Acquiror Sub and the Company shall become the debts, liabilities, duties and
obligations of the Surviving Corporation; PROVIDED, HOWEVER, that it is the
intent of the parties that this transaction be structured so as to assure, and
the effect of the Merger shall be, that the only assets to vest in the Surviving
Corporation shall be those tangible and intangible assets (including current
assets consistent with historical operating practices) related to The Badlands
Golf Club located in Las Vegas, Nevada, and those assets listed on Schedule 1.3
(collectively, the "Acquired Assets"), and the only liabilities to become
liabilities of the Surviving Corporation shall be those liabilities listed on
Schedule 1.3 hereto (the "Assumed Liabilities"). It is understood by the parties
that the Acquired Assets shall be deemed to include cash of the Company to the
extent (and only to the extent) the inclusion of such cash is necessary to cause
the Company to satisfy its obligation to deliver to Acquiror current assets, net
of current liabilities, equal to the Target Net Current Asset Position, as
required by and described at Sections 2.6 and 6.7 below.
1.4 CERTIFICATE OF INCORPORATION; BYLAWS. At the Effective Time, the
Certificate of Incorporation, as modified by amendments approved by all parties
hereto, which amendments shall become effective only at the Effective Time, and
the Bylaws of Acquiror Sub shall be the Articles of Incorporation and the Bylaws
of the Surviving Corporation. The name of the Surviving Corporation shall,
immediately following the Merger, be "Senior Tour Players Development, Inc."
1.5 DIRECTORS AND OFFICERS. The directors of Acquiror Sub immediately
prior to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Articles of
Incorporation and Bylaws of the Surviving Corporation, and the officers of
Acquiror Sub immediately prior to the Effective Time shall be the initial
officers of the Surviving Corporation, in each case until their respective
successors are duly elected or appointed and qualified.
1.6 TAKING NECESSARY ACTION; FURTHER ACTION. Acquiror, Acquiror Sub and
the Company, respectively, shall each use its reasonable efforts to take all
such actions as may be necessary or appropriate to effectuate the Merger under
the Nevada Law and the Oklahoma Law at the time specified in Section 1.2. If, at
any time after the Effective Time, any further action is necessary or desirable
to carry out the purposes of this Agreement and to vest the Surviving
Corporation with full right, title and possession to those properties,
interests, assets, rights, privileges, immunities, powers and franchises of
either of the Constituent Corporations to which it is entitled, the officers of
the Surviving Corporation are fully authorized in the name of each Constituent
Corporation or otherwise to take, and shall take, all such lawful and necessary
action.
1.7 THE CLOSING. Unless this Agreement shall have been terminated pursuant
to Article VIII, and subject to the fulfillment or waiver of the conditions set
forth in Article VII, the closing of the transactions contemplated by this
Agreement (the "Closing") will take place at the offices of Hartzog Conger &
Cason, 1600 Bank of Oklahoma Plaza, 201 Robert S. Kerr Avenue, Oklahoma City,
Oklahoma 73102, or at such other place as the parties hereto shall mutually
agree, and will be effective at the Effective Time. Unless otherwise mutually
agreed by all of the parties hereto in writing, the Closing shall occur five (5)
business days after the Company shall give notice to Acquiror that the Company
has satisfied all of the conditions to Closing which the Company is required to
satisfy in order to consummate the Merger, which satisfaction may, to the extent
required, take the form of the establishment as of the Effective Time of
reserves from the Merger
2
57
Consideration in the manner described in Section 6.7 hereof. Notwithstanding the
foregoing, in the event Acquiror notifies the Company in writing of the
Acquiror's good faith belief that one or more of the conditions to Closing the
Company is required to satisfy has not, in fact, been met, and identifies the
condition and the basis for Acquiror's belief, the Closing shall instead occur
five (5) business days after the earlier of (i) the parties' agreement that all
such conditions have been satisfied; or (ii) the binding resolution of such
dispute by a court or other arbiter having jurisdiction over such matter.
1.8 ESCROW DEPOSIT. Upon execution of this Agreement by all parties,
Acquiror shall deposit with Coastal Banc ssb (the "Escrow Agent") the sum of
Five Hundred Thousand Dollars ($500,000) (the "Escrowed Funds") to be held in
escrow in accordance with this Section 1.8. If this Agreement is terminated by
the Company due to a material default by Acquiror or Acquiror Sub under this
Agreement, then the Escrowed Funds, along with any interest earned thereon,
shall be paid to the Company. If this Agreement is terminated for any other
reason, the Escrowed Funds, along with any interest earned thereon, shall be
paid to the Acquiror. Upon closing of the transactions provided for in this
Agreement, the Escrowed Funds shall, at Acquiror's election, either (i) be
applied to pay a portion of the Purchase Price, as defined in Section 2.1(a)
below, or (ii) be refunded to Acquiror.
ARTICLE II
CONVERSION OF SECURITIES
2.1 CONVERSION OF SECURITIES. At the Effective Time, by virtue of the
Merger and without any further action on the part of Acquiror, Acquiror Sub, the
Company, the Surviving Corporation or the holders of any of the following
securities:
(a) each share of the common stock, $0.001 par value, of the Company
("Company Common Stock") issued and outstanding immediately prior to the
Effective Time (other than (i) shares of Company Common Stock owned by
Acquiror, Acquiror Sub or the Company or any direct or indirect subsidiary
of Acquiror, Acquiror Sub or the Company and (ii) any Dissenting Shares (as
defined in Section 2.2)) shall be canceled and extinguished and be
converted into and become a right to receive a cash payment in an amount
equal to the Merger Consideration Per Share, as defined below. For purposes
of this Agreement, the terms "Merger Consideration" and/or "Purchase Price"
shall, in the aggregate, mean (i) Twenty-Six Million Dollars ($26,000,000)
to be paid by Acquiror hereunder, (ii) LESS (A) the principal balance
outstanding, accrued interest and prepayment penalties due on the Company's
NationsCredit loans at the time of Closing (as limited in the next
sentence) and (B) any costs and expenses relating to the Merger payable by
the Company, and (C) the amount of liabilities of the Company not included
as Assumed Liabilities and not paid by the Company prior to the Effective
Time, (iii) PLUS the proceeds, if any, received by the Company from the
exercise of Company Stock Options, as defined in Section 2.4, prior to
Closing; (iv) PLUS or MINUS, as the case may be, the adjustment required by
Section 2.6 to cause the Target Net Current Asset Position to have been
achieved. Notwithstanding the foregoing, Acquiror shall be responsible for
the portion of the NationsCredit
3
58
prepayment penalty equal to the EXCESS OF (a) any prepayment penalty that
would result from paying the NationsCredit loans in full at Closing OVER
(b) the amount of such prepayment penalty that would result if the
prepayment were, instead, to occur on the earliest possible date on which
prepayment is permitted under the terms of the NationsCredit loans. For
purposes of this Agreement, the term "Merger Consideration Per Share" shall
mean an amount equal to the Merger Consideration divided by the sum of (a)
the number of shares of Company Common Stock outstanding immediately prior
to the Effective Time, plus (b) the number of shares of Company Common
Stock then subject to outstanding vested stock options or warrants having
an exercise price less than the Merger Consideration Per Share. The Merger
Consideration Per Share shall be subject to equitable adjustment in the
event of any stock split, stock dividend, reverse stock split or other
change in the number of shares of Company Common Stock outstanding; it is
the intent of the parties that the total amount to be paid by Acquiror by
deposit with the Exchange Agent, as defined in Section 2.3, before any
adjustments provided for herein, shall be Twenty-Six Million Dollars
($26,000,000.00), and shall in no event exceed such amount;
(b) each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time and owned by Acquiror, Acquiror Sub
or the Company or any direct or indirect subsidiary of Acquiror, Acquiror
Sub or the Company shall be canceled and extinguished and no payment shall
be made with respect thereto; and
(c) each share of common stock, $.01 par value, of Acquiror Sub issued
and outstanding immediately prior to the Effective Time shall be converted
into one fully paid and nonassessable share of common stock, $0.001 par
value, of the Surviving Corporation ("Surviving Corporation Common Stock").
2.2 DISSENTING SHARES.
(a) Notwithstanding anything in this Agreement to the contrary, if NRS
92A.300 to 92A.500, inclusive, of the Nevada Law is applicable to the
Merger, shares of Company Common Stock that are issued and outstanding
immediately prior to the Effective Time and which are held by shareholders
who have not voted such shares in favor of the Merger, and who have
delivered, as required by the Nevada Law, a written objection to the Merger
in the manner provided in NRS 92A.420 and/or NRS 92A.440 of the Nevada Law
and who, as of the Effective Time, have not effectively withdrawn or lost
such right to dissenters' rights ("Dissenting Shares") shall not be
converted into or represent a right to receive the Merger Consideration
pursuant to Section 2.1, but the holders thereof shall be entitled only to
such rights as are granted by NRS 92A.460 of the Nevada Law. Each holder of
Dissenting Shares who becomes entitled to payment for such shares pursuant
to NRS 92A.460 of the Nevada Law shall receive payment therefor from the
Surviving Corporation in accordance with NRS 92A.460 of the Nevada Law;
provided, however, that if any such holder of Dissenting Shares shall have
effectively withdrawn such holder's demand for appraisal of such shares or
lost such
4
59
holder's right to appraisal and payment of such shares under NRS 92A.460 of
the Nevada Law, such holder or holders (as the case may be) shall forfeit
the right to appraisal of such shares and each such share shall thereupon
be deemed, as of the Effective Time, to have been canceled, extinguished
and converted into and represent the right to receive payment from the
Surviving Corporation of the Merger Consideration Per Share as provided in
Section 2.1.
(b) The Company shall give Acquiror (i) prompt notice of any written
demand for fair value, any withdrawal of a demand for fair value and any
other instrument served on or received by the Company, and (ii) the
opportunity to direct all negotiations and proceedings with respect to
demands for fair value under NRS 92A.460 of the Nevada Law. The Company
shall not, except with the prior written consent of Acquiror, voluntarily
make any payment with respect to any demand for fair value or offer to
settle or settle any such demand.
2.3 EXCHANGE OF CERTIFICATES.
(a) Prior to the Effective Time, Acquiror shall designate a bank or
trust company (the "Exchange Agent") to act as exchange agent in effecting
the exchange of the Merger Consideration for certificates representing
shares of Company Common Stock entitled to payment pursuant to Section 2.1
(the "Certificates"). At the Effective Time, Acquiror shall deposit, or
cause to be deposited, with the Exchange Agent an amount equal to the
aggregate Merger Consideration (assuming there are no Dissenting Shares). A
portion of such deposit shall, unless the parties otherwise agree, be made
via the Escrow Agent's transfer of the Escrowed Funds to the Exchange
Agent, with the remainder being deposited directly by Acquiror or its
designee. The deposit will consist of cash sufficient in the aggregate for
the Exchange Agent to make full payment of the Merger Consideration Per
Share to the holders of all of the outstanding shares of Company Common
Stock. In no event shall Acquiror be required to deposit (either directly
or from the Escrowed Funds) more than the sum of Twenty-Six Million Dollars
($26,000,000.00). The Exchange Agent shall hold such sums in escrow for the
purposes set forth herein.
(b) Promptly after the Effective Time, but in no event more than four
(4) business days after the Effective Time, the Exchange Agent shall mail
to each record holder of Certificates a letter of transmittal and
instructions for use in surrendering Certificates and receiving the
applicable Merger Consideration Per Share therefor, and explaining that the
risk of loss and title to the Certificates shall pass only upon proper
delivery of the Certificates to the Exchange Agent. The form of the
transmittal letter shall have been prepared by Acquiror, subject to the
approval of the Company, prior to the Effective Time. Upon the surrender of
each Certificate, together with such letter of transmittal duly executed
and completed in accordance with the instructions thereto, the holder of
such Certificate shall be entitled to receive in exchange therefor an
amount equal to the applicable Merger Consideration Per Share multiplied by
the number of shares of Company Common Stock represented by such
Certificate, and such Certificate shall be canceled. Until
5
60
so surrendered and exchanged, each such Certificate shall represent solely
the right to receive an amount equal to the Merger Consideration Per Share
multiplied by the number of shares of Company Common Stock represented by
such Certificate. No interest shall be paid or accrued on the Merger
Consideration Per Share upon the surrender of the Certificates.
If any amount of Merger Consideration is to be paid to a person other
than the person in whose name the Certificate surrendered in exchange
therefor is registered, it shall be a condition to such exchange that (i)
the Certificate so surrendered shall be properly endorsed or shall
otherwise be in proper form for transfer and (ii) the person requesting
such exchange shall pay to the Exchange Agent any transfer or other similar
taxes required by reason of the payment of such portion of the Merger
Consideration to a person other than the registered holder of the
Certificate surrendered, or such person shall establish to the satisfaction
of the Exchange Agent that such tax has been paid or is not applicable.
Notwithstanding the foregoing, neither the Exchange Agent nor any party
hereto shall be liable to a holder of shares of Company Common Stock for
any amount of Merger Consideration delivered to a public official pursuant
to applicable abandoned property, escheat and similar laws.
(c) Promptly following the date which is 180 days after the Effective
Time, the Exchange Agent's duties shall terminate and any portion of the
Merger Consideration not disbursed pursuant to Section 2.1(b) shall be
released to the Surviving Corporation. Thereafter, each holder of a
Certificate may surrender Certificates to the Surviving Corporation and
(subject to applicable abandoned property, escheat and similar laws)
receive in exchange therefor an amount equal to the Merger Consideration
Per Share multiplied by the number of shares of Company Common Stock
represented by such Certificate, without interest thereon, but shall have
no greater rights against the Surviving Corporation than may be accorded to
general creditors of the Surviving Corporation.
(d) Acquiror may cause the Exchange Agent to invest the funds held by
it in such short-term, United States Government insured investments as
Acquiror shall from time to time direct; provided, however, that the terms
and conditions of any such investment shall be such as will permit the
Exchange Agent to make prompt payment of the Merger Consideration when
necessary. Acquiror may cause the Exchange Agent to pay over to the
Surviving Corporation any net earnings with respect to the investments, and
Acquiror will replace promptly any portion of the funds held by the
Exchange Agent which the Exchange Agent loses through investments.
(e) The Company shall pay all charges and expenses of the Exchange
Agent.
(f) After the Effective Time, there shall be no transfers on the stock
transfer books of the Surviving Corporation of any shares of Company Common
Stock. If, after the Effective Time, Certificates are presented to the
Surviving
6
61
Corporation or the Exchange Agent, they shall be canceled and exchanged for
the Merger Consideration Per Share, as provided in this Article II, subject
to applicable law in the case of Dissenting Shares.
(g) The Merger Consideration Per Share shall be net to each holder of
Certificates in cash, subject to reduction only for (i) any applicable
federal back-up withholding or stock transfer taxes payable by such holder,
and (ii) any charges of the Exchange Agent, to the extent not previously
paid by the Company pursuant to Section 2.3(e) above.
2.4 COMPANY STOCK OPTIONS. At the Effective Time, each outstanding option
to purchase shares of Company Common Stock (a "Company Stock Option") issued
pursuant to the Company's stock option plans described on Schedule 3.3(a)
(together, the "Company Stock Plans") shall be exercised by the holder or
canceled and extinguished as set forth in the following sentence. Any holder of
outstanding Company Stock Options or warrants of the Company as of the Effective
Time (to the extent vested as of the Effective Time) will be entitled to receive
from the Merger Consideration a payment equal to the difference between the
exercise price of such Company Stock Options and warrants and the portion of the
Merger Consideration which such holders would be entitled to receive had they
exercised such Company Stock Options and warrants immediately prior to the
Effective Time. Such Company Stock Options and warrants will, as of the
Effective Time, and thereafter, represent only the right to receive payment as
set forth in the preceding sentence. To the extent any Company Stock Options and
warrants of the Company are not vested as of the Effective Time or the exercise
price thereunder exceeds the Merger Consideration which the holder thereof would
be entitled to receive had such options or warrants been exercised immediately
prior to the Effective Time, such options and warrants will, as of the Effective
Time, be converted into the right to receive no further payment, consistent with
the terms of such options and warrants. Consistent with Section 6.7 below,
Acquiror shall not succeed to any liability relative to any options or warrants
described herein. Any proceeds from the exercise of Company Stock Options
following the date of this Agreement and before the Effective Time shall be
transferred to the Exchange Agent and disbursed to the shareholders of the
Company as an added component of the Merger Consideration.
2.5 PROCEEDS FROM DISPOSITION OF CERTAIN COMPANY ASSETS. The Company shall
use all cash (net of amounts transferred to Acquiror as set forth in Schedule
1.3) and proceeds received from the sale or disposition of its assets that are
not included in the Acquired Assets (the "Non-Acquired Assets") (a) to pay all
of the liabilities of the Company which are not being assumed by Acquiror
pursuant to this Agreement and which are not assumed by a third party transferee
of such assets; (b) to reduce the Company's indebtedness under the NationsCredit
loans; and (c) to the extent of any excess after payments under (a) and (b)
immediately above, to distribute to the Exchange Agent. Such net proceeds, if
any, transferred to the Exchange Agent shall be disbursed to the shareholders of
the Company as an added component of the Merger Consideration. To the extent
such proceeds are not sufficient to pay amounts due under (a) and (b), above,
such liabilities and indebtedness shall be paid out of the Merger Consideration.
2.6 ADJUSTMENTS RELATED TO TARGET NET CURRENT ASSET POSITION. At the
Effective Time, it is intended that the net current assets included within the
Acquired Assets shall, consistent with past operating practices, be sufficient
to allow the Acquiror to continue operation of the Golf Course
7
62
(as defined in Section 3.19.1) in the ordinary course of business; specifically,
the parties agree that the net current assets of the Company and the Badlands
Sub, at the Effective Time, shall equal the Target Net Current Asset Position.
For purposes of this Agreement, "Target Net Current Asset Position" shall mean
that position in which the excess of all current assets of the Company and the
Badlands Sub over all current liabilities of the Company and the Badlands Sub
(to the extent Acquiror consents to any such current liabilities in accordance
with Schedule 1.3) at the Effective Time equals Six Hundred Fifty Thousand
Dollars ($650,000), determined prior to reflecting the current liability for the
balance of "deferred revenue/annual membership dues" at the Effective Time. It
is understood that such "deferred revenue/annual membership dues" shall
constitute an item of the Assumed Liabilities to be borne by Acquiror. If the
actual net current asset balance of the Company at the Effective Time exceeds
the Target Net Current Asset Position, the Merger Consideration shall be
increased by the amount of such excess pursuant to Section 2.1(a) hereof.
Likewise, if the actual net current asset balance of the Company at the
Effective Time is less than the Target Net Current Asset Position, the Merger
Consideration shall be reduced by the amount of such deficiency pursuant to
Section 2.1(a) hereof. Acquiror and the Company shall use their mutual best
efforts to agree upon the amount of any above-described adjustment in the Merger
Consideration occurring as a result of variances between the projected actual
net current asset position and the Target Net Current Asset Position as of the
Effective Time within three (3) days prior to the Effective Time, and the amount
of such projected excess or deficiency shall be used for purposes of calculating
the Merger Consideration to be delivered by Acquiror to the Exchange Agent on
the Effective Time under Section 2.3 hereof. Within thirty (30) days following
the Effective Time, the actual amount of any such excess or deficiency shall be
determined by Acquiror and the person who served as the chief financial officer
of the Company immediately prior to the Effective Time, and the amount of such
excess or deficiency shall be credited or deducted, as appropriate, against the
reserves to be established as of the Effective Time in accordance with Section
6.7 hereof. If such former chief financial officer of the Company and the
Acquiror cannot so agree, the parties shall submit such dispute to the
accounting firm of Grant Thornton LLP, and shall agree to be bound by the
decision of such firm.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The term "Company Material Adverse Effect" as used in this Agreement shall
mean any change or effect that, individually or when taken together with all
other similar changes or effects, is materially adverse to the condition
(financial or otherwise), results of operations, businesses, properties, assets,
or liabilities of the Company and its Subsidiaries, taking into consideration
the fact that the Company's only assets and liabilities at the Effective Time
shall be as set forth in Section 1.3.
The term "Person" as used in this Agreement shall mean an individual,
corporation, limited liability company, partnership, association, trust,
unincorporated organization, other entity or group (as defined in Section 13(d)
of the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder (the AExchange Act")).
The term "Affiliate" as used in this Agreement shall mean, with respect to
any Person, a Person that directly or indirectly, through one or more
intermediaries, controls, is
8
63
controlled by, or is under common control with the first mentioned Person. The
term "control" (including the terms "controlled by" and "under common control
with") means the possession, directly or indirectly or as trustee or executor,
of the power to direct or cause the direction of the management or policies of a
Person, whether through the ownership of stock or as trustee or executor, by
contract or credit arrangement or otherwise.
The term "Subsidiary" (or its plural) as used in this Agreement with
respect to the Company, Acquiror, the Surviving Corporation or any other Person
shall mean any corporation, partnership, limited liability company, joint
venture or other legal entity of which the Company, Acquiror, the Surviving
Corporation or such other Person, as the case may be (either alone or through or
together with any other Subsidiary), owns, directly or indirectly, greater than
25% of the stock or other equity interests the holders of which are generally
entitled to vote for the election of the board of directors or other governing
body of such corporation or other legal entity.
The term "Badlands Leases" means (i) that certain 50-year land lease
covering the approximately 186 acres of land on which a portion of The Badlands
Golf Club and related facilities are situated; (ii) that certain land lease
covering the approximately 67 acres of land on which the remaining portion of
The Badlands Golf Club and related facilities are situated and which expires at
the same time as the lease described in (i), above; and (iii) all Water
Documents, as defined in Section 3.19.12 below. The Badlands Leases collectively
cover all the land needed to operate such golf course (and its 27 holes) as
presently operated.
With respect to any representation, warranty or statement of the Company in
this Agreement that is qualified by or to the Company's knowledge, such
knowledge shall be deemed to exist if, at the time as of which such
representation, warranty or statement was made, any officer or director of the
Company had knowledge of the matter to which such qualification applies.
Nothing in the schedules hereto shall be deemed adequate to disclose an
exception to a covenant, representation or warranty made herein unless the
applicable schedule expressly identifies the exception with reasonable
particularity and describes the relevant facts in reasonable detail. Without
limiting the generality of the foregoing, the mere listing (or inclusion of a
copy) of a document or other item shall not be deemed adequate to disclose an
exception to a representation or warranty made herein (unless the representation
or warranty has to do with the existence of the document or other item itself).
3.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of the Company and
its Subsidiaries is a corporation duly incorporated, validly existing and in
good standing under the laws of the jurisdiction of its incorporation, has all
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as it is now being conducted, and is duly qualified
and in good standing to do business in each jurisdiction in which the nature of
the business conducted by it or the ownership or leasing of its properties makes
such qualification necessary, except such jurisdictions, if any, where the
failure to be so qualified would not have a Company Material Adverse Effect or a
material adverse effect on the ability of the parties to consummate the
transactions contemplated by this Agreement. The Company owns 100% of the issued
and outstanding capital stock or other equity interests of The Badlands Golf
Club, Inc., which is a corporation incorporated under the laws of the State of
Nevada. A true and complete list of all the Company's other directly or
indirectly owned Subsidiaries, together with the jurisdiction
9
64
of incorporation or organization of each Subsidiary and the percentage of each
Subsidiary's outstanding capital stock or other equity interests owned by the
Company or another Subsidiary of the Company, is set forth on Schedule 3.1(b).
3.2 ARTICLES OF INCORPORATION; BYLAWS. The Company has furnished to
Acquiror complete and correct copies of the Articles of Incorporation and the
Bylaws, as amended or restated, of the Company and each of its Subsidiaries.
Neither the Company nor any Subsidiary is in violation of any of the provisions
of its Articles of Incorporation or By-Laws, as amended or restated.
3.3 CAPITALIZATION.
(a) As of the date of this Agreement, the authorized capital stock of
the Company consists of (i) 15,000,000 shares of Company Common Stock, of
which (A) 3,589,525 shares are issued and outstanding, (B) 1,627,778 shares
are reserved for issuance pursuant to the Company Stock Plans, under which
1,221,350 Company Stock Options are outstanding (of which options to
purchase 771,128 shares of Common Stock are vested), and (C) 2,073,200
shares are reserved for issuance under outstanding warrants to purchase
Common Stock, and (ii) 5,000,000 shares of preferred stock, par value $0.10
per share, of which no shares are issued or outstanding.
(b) Information as of the date of this Agreement relating to the
amounts of the authorized and issued and outstanding capital stock of each
Subsidiary is listed on Schedule 3.3(b).
(c) No shares of Company Common Stock are reserved for any purpose
other than as described in this Section 3.3. Since March 1, 1998, no shares
of Company Common Stock have been issued by the Company, except pursuant to
the exercise of outstanding Company Stock Options in accordance with their
terms. Except as contemplated by this Agreement or as described on Schedule
3.3(c), there have been no changes in the terms of any outstanding Company
Stock Options or the grant of any additional Company Stock Options since
March 1, 1998. All outstanding shares of Company Common Stock have been
duly authorized and are validly issued, fully paid and nonassessable and
are not subject to preemptive rights under the Nevada Law, the Company's
Certificate of Incorporation or Bylaws, or any agreement to which the
Company is a party. Each of the outstanding shares of capital stock of, or
other equity interests in, each of the Company's Subsidiaries has been duly
authorized and is validly issued, fully paid and nonassessable, and such
shares or other equity interests are owned by the Company free and clear of
all security interests, liens, claims, pledges, agreements, limitations on
the Company's voting rights, charges or other encumbrances of any nature
whatsoever, subject to federal and state securities laws. Except as
described in Section 3.3(a) there are no options, warrants or other rights,
agreements, arrangements or commitments to which the Company or any of its
Subsidiaries is a party of any character relating to the issued or unissued
capital stock of, or other equity interests in, the Company or any of the
Subsidiaries, or obligating the Company or any of the Subsidiaries to
grant, issue, sell or register for sale any shares of the capital stock
10
65
of, or other equity interests in, the Company or any of the Subsidiaries.
Except as set forth on Schedule 3.3(c), there are no obligations,
contingent or otherwise, of the Company or any of its Subsidiaries to (i)
repurchase, redeem or otherwise acquire any shares of Company Common Stock,
or the capital stock of, or other equity interests in, any Subsidiary of
the Company, or (ii) provide funds to, or make any investment in (in the
form of a loan, capital contribution or otherwise), or provide any
guarantee with respect to the obligations of, any Subsidiary of the
Company.
3.4 AUTHORITY; VOTE REQUIRED.
(a) The Company has the requisite corporate power and authority to
execute and deliver this Agreement, to perform its obligations under this
Agreement and to consummate the transactions contemplated by this
Agreement, subject to required shareholder approval. Except with respect to
the approval of this Agreement by the holders of Company Common Stock in
accordance with the Nevada Law and the Company's Articles of Incorporation
and Bylaws, the execution and delivery of this Agreement by the Company and
the consummation by the Company of the transactions contemplated herein
have been duly authorized by all necessary corporate action, including such
corporate action as may be required by the Nevada Law, and no other
corporate proceedings on the part of the Company are necessary to authorize
this Agreement or to consummate the transactions contemplated herein. This
Agreement has been duly executed and delivered by the Company and
constitutes the valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except to the extent that
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, receivership, moratorium and other similar laws relating to
or affecting the rights and remedies of creditors generally.
(b) The affirmative vote of the holders of at least a majority of the
outstanding shares of Company Common Stock is the only vote of the holders
of any class or series of capital stock of the Company necessary to approve
the Merger.
3.5 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by the Company do
not, and the performance of this Agreement by the Company will not: (i)
violate the Articles of Incorporation or Bylaws of the Company or any of
its Subsidiaries; (ii) subject to [a] obtaining the requisite approval of
this Agreement by the holders of at least a majority of the outstanding
shares of Company Common Stock in accordance with the Nevada Law and the
Company's Articles of Incorporation and Bylaws; [b] filing and recordation
of appropriate merger documents as required by the Nevada Law and the
Oklahoma Law; and [c] giving the notices and obtaining the consents,
approvals, authorizations or permits described on Schedule 3.5(a), violate
any laws, rules, regulations, rulings, orders, judgments or other
restrictions of any type applicable to the Company or any of its
Subsidiaries or by which any of their respective properties is bound except
as would not result in a Company
11
66
Material Adverse Effect as of the Effective Time; or (iii) except as set
forth on Schedule 3.5(a), result in any breach of or constitute a default
(or an event that with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of the Company or any of its
Subsidiaries pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease (including, but not limited to, the Badlands Leases),
license, permit, franchise or other instrument or obligation to which the
Company or any of its Subsidiaries is a party or by which the Company or
any of its Subsidiaries or any of their respective properties is bound,
except as would not result in a Company Material Adverse Effect as of the
Effective Time.
(b) The execution and delivery of this Agreement by the Company do
not, and the performance of this Agreement by the Company shall not,
require any consent, approval, authorization or permit of, or filing with
or notification to, any Person or governmental entities (including, but not
limited to, the lessor under the Badlands Leases), except for the filing
and recordation of appropriate merger documents as required by the Nevada
Law and the Oklahoma Law and notification required to the National
Association of Securities Dealers, Inc., the Boston Stock Exchange and,
with respect to the proxy statement, the Securities and Exchange
Commission.
3.6 PERMITS; LEGAL COMPLIANCE. Except as set forth on Schedule 3.6, each
of the Company and its Subsidiaries is in possession of all franchises,
authorizations, licenses, approvals, permits, easements, variances, exemptions,
consents, certificates, orders and similar such rights and items necessary for
the Company or any of its Subsidiaries to own, lease and operate its properties
or to carry on its business (including, but not limited to, the operation of The
Badlands Golf Course) as it is now being conducted (the "Company Permits")
except where the failure to possess such rights would not result in a Company
Material Adverse Effect. The Company Permits are adequate for the operation of
the business of the Company and the Subsidiaries, are valid and in full force
and effect, and neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated herein will cause the termination
of, or interfere in any respect with, the Company's operation under the Company
Permits. No suspension, revocation or cancellation of any of the Company Permits
is pending or, to the knowledge of the Company, threatened. The Company and its
Subsidiaries have complied with, and neither the Company nor any of its
Subsidiaries is operating in default under or violation of (i) any law, rule,
regulation, ruling, order, judgment or other restriction applicable to the
Company or any of its Subsidiaries or by which any of their respective
properties is bound or (ii) any of the Company Permits except with respect to
any noncompliance, violation or default that would not have, in the aggregate, a
Company Material Adverse Effect.
3.7 REPORTS; FINANCIAL STATEMENTS.
(a) Since December 31, 1994, (i) the Company has filed all forms,
reports, statements and other documents required to be filed with [a] the
Securities and Exchange Commission (the "SEC") including, without
limitation, [i] all Annual Reports on Form 10-KSB; [ii] all Quarterly
Reports on Form 10-QSB; [iii] all proxy
12
67
statements relating to meetings of shareholders (whether annual or
special); [iv] all required Current Reports on Form 8-K; [v] all other
reports or registration statements; and [vi] all amendments and supplements
to all such reports and registration statements, which amendments and
supplements have been required to be filed (collectively, as amended or
supplemented, the "Company SEC Reports"), and [b] any applicable state
securities authorities; and (ii) the Company and each of its Subsidiaries
have filed all forms, reports, statements and other documents required to
be filed with any other applicable federal or state regulatory authorities
(all such forms, reports, statements and other documents in clauses (i) and
(ii) of this Section 3.7(a) being collectively referred to as the "Company
Reports"). Such Company SEC Reports and Company Reports comply with
applicable laws, rules and regulations and do not contain any untrue
statement of a material fact or omit any material fact required to be
stated therein or necessary to make the statements therein not misleading.
(b) Each of the consolidated financial statements (including, in each
case, any related notes to such statements) contained in the Company SEC
Reports (i) have been prepared in all respects in accordance with the
published rules and regulations of the SEC and generally accepted
accounting principles ("GAAP") applied on a consistent basis throughout the
periods involved (except to the extent required by changes in GAAP and as
may be indicated in the notes thereto); (ii) fairly represent in all
respects the consolidated financial position of the Company and its
Subsidiaries as of the respective dates thereof and the consolidated
results of operations and cash flows for the periods indicated (subject to
normal year-end adjustments in the case of any unaudited interim financial
statements); and (iii) are correct and complete in all material respects,
and are consistent with the books and records of the Company and its
Subsidiaries (which books and records are correct and complete in all
material respects).
(c) Except to the extent reflected on, or reserved against in, the
consolidated balance sheet of the Company and its Subsidiaries at December
31, 1997, including all notes thereto (the "Company Balance Sheet"), or as
set forth on Schedule 3.7(c), neither the Company nor any of its
Subsidiaries has any liabilities or obligations (whether accrued, absolute,
contingent or otherwise) that would be required to be reflected on, or
reserved against in, a balance sheet of the Company or in the notes
thereto, prepared in accordance with the published rules and regulations of
the SEC and GAAP, except for liabilities or obligations incurred in the
ordinary course of business since December 31, 1997 that, individually or
in the aggregate, would not have a Company Material Adverse Effect. At the
Effective Time, the Company shall have no liabilities or obligations of any
kind, other than the Assumed Liabilities.
(d) Except as set forth in Schedule 3.7(d), neither the Company nor
any of its Subsidiaries is a guarantor or otherwise liable for any
liability or obligation (including indebtedness) of any other Person. There
are no outstanding powers of attorney executed on behalf of the Company or
any of its Subsidiaries.
13
68
3.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the
Company SEC Reports (or the notes thereto) or as contemplated by this Agreement,
since December 31, 1997:
(a) each of the Company and its Subsidiaries has conducted its
business in the ordinary course and consistent with the Company's past
practice;
(b) there has not been any Company Material Adverse Effect;
(c) except as set forth on Schedule 3.8(c), neither the Company nor
any Subsidiary has made any material increase in compensation to officers
or key employees or any material increase in any (or created any new)
bonus, insurance, pension or other employee benefit plan, payment or
arrangement (including, but not limited to, the granting of stock options);
(d) neither the Company nor any Subsidiary has made any loans or
advances to any officer, director, shareholder or Affiliate of the Company
or of any Subsidiary;
(e) the Company has not entered into any other material transaction
with any of its officers, directors or employees;
(f) there has not been any change in the accounting methods or
practices followed by the Company or any Subsidiary, except as required by
GAAP;
(g) the Company has not sold, leased, transferred, assigned or
disposed of material assets, except as necessary to facilitate the
transactions described in this Agreement;
(h) no party (including but not limited to the Company and its
Subsidiaries) has accelerated, terminated, modified or canceled (prior to
the expiration of its term) any material agreement, contract, lease or
license (or series of related agreements, contracts, leases and licenses)
affecting the Company, its Subsidiaries or any of the Acquired Assets;
(i) neither the Company nor any Subsidiary has canceled, compromised,
waived, or released any right or claim (or series of related rights and
claims of a material nature;
(j) except as set forth on Schedule 3.8(j), neither the Company nor
any Subsidiary has granted any license or sublicense of any rights under or
with respect to any intangible assets;
(k) neither the Company nor any Subsidiary has experienced any damage,
destruction or loss (whether or not covered by insurance) to any material
assets; and
14
69
(l) neither the Company nor any Subsidiary has entered into any
commitment or other agreement to do any of the foregoing.
3.9 ABSENCE OF LITIGATION.
(a) Schedule 3.9(a) lists all claims, actions, suits, litigation,
arbitrations, investigations or proceedings affecting the Company or any of
its Subsidiaries, at law or in equity, which are pending or, to the
knowledge of the Company, threatened.
(b) Except as set forth on Schedule 3.9(b), neither the Company nor
any of its Subsidiaries is subject to any continuing order of, consent
decree, settlement agreement or other similar written agreement with or, to
the knowledge of the Company, investigation by, any governmental entity.
(c) To the knowledge of the Company, there is no basis for any claims,
actions, suits, litigation, or arbitration (i) that would have a Company
Material Adverse Effect, or (ii) that would impair the Company's ability or
obligation to perform fully on a timely basis any obligations which it may
have or will have under this Agreement.
(d) Schedule 3.9(d) sets forth each instance in which either the
Company or any of its Subsidiaries has been a party to any claim, action,
suit, litigation, arbitration, investigation or proceeding within the five
(5) year period preceding the Effective Time.
3.10 CONTRACTS; NO DEFAULT. Schedule 3.10 lists all material contracts and
agreements (oral or written) to which the Company or its Subsidiaries is a party
or by which the Company or its Subsidiaries or any of their respective
properties are bound related to The Badlands Golf Club. The Company has
delivered to Acquiror a correct and complete copy of each written agreement
listed or required to be listed in Schedule 3.10 (as amended to date) and a
written summary setting forth the terms and conditions of each oral agreement
referred to in Schedule 3.10. With respect to each such agreement: (i) the
agreement is legal, valid, binding, enforceable and in full force and effect
subject to the enforceability of remedies to applicable bankruptcy,
reorganization, insolvency, moratorium or similar laws affecting the enforcement
of creditors' rights generally from time to time in effect; (ii) the agreement
will continue to be legal, valid, binding, enforceable and in full force and
effect on identical terms following the consummation of the transactions
contemplated hereby subject to the enforceability of remedies to applicable
bankruptcy, reorganization, insolvency, moratorium or similar laws affecting the
enforcement of creditors' rights generally from time to time in effect; (iii) no
party is in breach or default, and no event has occurred which with notice or
lapse of time would constitute a breach or default, or permit termination,
modification or acceleration under the agreement; and (iv) no party has
repudiated any provision of the agreement. For purposes of this Section 3.10,
the Badlands Leases shall be considered material contracts or agreements to
which the Company or its Subsidiaries are parties.
15
70
3.11 EMPLOYEE BENEFIT PLANS; LABOR MATTERS.
(a) Schedule 3.11(a) lists or describes any pension, retirement,
savings, disability, medical, dental, health, life (including any
individual life insurance policy as to which the Company is the owner,
beneficiary or both), death benefit, group insurance, profit sharing,
deferred compensation, stock option, bonus incentive, vacation pay,
severance pay, "cafeteria" or "flexible benefit" plan under Section 125 of
the Internal Revenue Code of 1986 as amended (the "Code"), or other
employee benefit plan, trust, arrangement, contract, agreement, policy or
commitment, under which employees of the Company or its Subsidiaries are
entitled to participate by reason of their employment by the Company or its
Subsidiaries, (i) to which the Company or a Subsidiary is a party or a
sponsor or a fiduciary thereof or (ii) with respect to which the Company or
a Subsidiary has made payments, contributions or commitments, or has any
liability (collectively, the "Employee Benefit Plans").
(b) The Employee Benefit Plans have been operated and administered by
the Company in compliance with all applicable laws relating to employment
or labor matters, including without limitation, the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") and the Code.
(c) Each Employee Benefit Plan that is intended to be tax-qualified
under Section 401(a) of the Code has received a favorable determination
letter from the Internal Revenue Service (the "IRS") stating that such Plan
meets the requirements of the Code and that any trust or trusts associated
with the plan are exempt from taxation as provided in Section 501(a) of the
Code.
(d) The Company does not maintain any defined benefit plan covering
employees of the Company or its Subsidiaries within the meaning of Section
3(35) of ERISA.
(e) Schedule 3.11(e) sets forth a list of all written employment
agreements, employment contracts or understandings relating to employment
(other than "at-will" employment) to which the Company or any of its
Subsidiaries is a party.
(f) With respect to the Employee Benefit Plans, individually and in
the aggregate, no event has occurred, and to the knowledge of the Company,
there exists no condition or set of circumstances in connection with which
the Company could be subject to any liability or obligation that is
reasonably expected to have a Company Material Adverse Effect under ERISA,
the Code, or any other applicable law.
(g) Neither the Company nor any of its Subsidiaries is a party to any
oral or written (i) union or collective bargaining agreement or (ii)
agreement with any officer or other employee of the Company or any of its
Subsidiaries, the benefits of which are contingent, or the terms of which
are materially altered, upon the
16
71
occurrence of a change in control of the Company or any of its Subsidiaries
or any other transaction of the type contemplated by this Agreement.
(h) All amounts due or accrued for all salary, wages, bonuses,
commissions, vacation with pay or other employee benefits are reflected in
the books and records of the Company and have been paid to the respective
employee. Except as set forth in Schedule 3.11(e), each employee of the
Company and its Subsidiaries is an employee-at-will, and no employee has
any agreement as to length of notice or severance payment required to
terminate his or her employment.
(i) Schedule 3.11(i) lists all officers, directors and employees of
the Company and its Subsidiaries, whether actively at work or not (by type
or classification) and their respective rates of compensation (including
the portions thereof attributable to bonuses or other extraordinary
compensation).
3.12 TAXES. The Company has accurately prepared (or caused to be accurately
prepared) and filed (or caused to be filed) with the appropriate governmental
entities, all federal, state, municipal, and local income, franchise, excise,
real and personal property, and other tax returns and reports that are required
to be filed, and the Company is not delinquent in the payment of any taxes shown
on such returns or reports or on any assessments for any such taxes received by
it, and has otherwise complied in all respects with all legal requirements
applicable to the Company with respect to all income, sales, use, real or
personal property, excise or other taxes. The Company Balance Sheet includes
adequate reserves for the payment of all accrued but unpaid federal, state,
municipal and local taxes of the Company, including, without limitation,
interest and penalties, whether or not disputed, for all taxable periods ending
on or at any time before December 31, 1997. Except as set forth on Schedule
3.12, the Company has not executed or filed with the Internal Revenue Service
any agreement extending the period for assessment and collection of any federal
tax. The Company is not a party to any pending action or proceeding, nor, to the
knowledge of the Company, has any action or proceeding been threatened, by any
governmental entity for assessment or collection of taxes, and no claim for
assessment or collection of taxes has been asserted against the Company. No
claim has ever been made by an authority in any jurisdiction where the Company
or its Subsidiaries do not file tax returns that the Company or its Subsidiaries
is or may be subject to taxation by that jurisdiction.
Neither the Company nor any of its Subsidiaries has filed a consent under
Code [Sec.]341(f) concerning collapsible corporations. Neither the Company nor
any of its Subsidiaries has made any payments, or is obligated to make any
payments, or is a party to any agreement that under any circumstances could
obligate the Company to make any payments that will not be deductible under Code
[Sec.]280G. Neither the Company nor any of its Subsidiaries has been a United
States real property holding corporation within the meaning of Code
[Sec.]897(c)(2) during the applicable period specified in Code
[Sec.]897(c)(1)(A)(ii). The Company and its Subsidiaries have disclosed on their
federal income tax returns all positions taken therein that could give rise to a
substantial understatement of federal income taxes within the meaning of Code
[Sec.]6662. Neither the Company nor any of its Subsidiaries is a party to any
tax allocation or sharing agreement.
The unpaid taxes of the Company and its Subsidiaries (i) did not, as of
December 31, 1997, exceed the reserve for tax liability (as opposed to any
reserve for deferred taxes established to
17
72
reflect timing differences between book and tax income) set forth on the face of
the December 31, 1997 Balance Sheet (rather than in any notes thereto) and (ii)
do not exceed that reserve as adjusted for the passage of time through the
Effective Time in accordance with the past custom and practice of the Company
and its Subsidiaries in filing their tax returns.
3.13 INTELLECTUAL PROPERTY RIGHTS. The Company and each of the Subsidiaries
owns or possesses the legally enforceable right to use (in the manner and the
geographic areas in which they are currently used) all patents, patents pending,
trademarks, service marks, trade names, service names, slogans, registered
copyrights, trade secrets and other intellectual property rights it currently
uses, without any conflict or alleged conflict with the rights of others. Each
item of intellectual property related to the Acquired Assets which is owned or
used by the Company or its Subsidiaries prior to the Effective Time will be
owned or available for use by the Surviving Corporation on identical terms and
conditions immediately subsequent to the Effective Time. Neither the Company nor
any of its Subsidiaries has interfered with, infringed upon, misappropriated or
otherwise come into conflict with any intellectual property rights of third
parties, and neither the Company nor its Subsidiaries has received any charge,
complaint, claim, demand or notice alleging any such interference, infringement,
misappropriation or violation.
3.14 INSURANCE. All policies and binders of insurance for liability,
directors and officers, property and casualty, fire, liability, worker's
compensation and other customary matters held by or on behalf of the Company or
its Subsidiaries ("Insurance Policies") have been made available to Acquiror.
With respect to such Insurance Policies: (i) each policy is legal, valid,
binding, enforceable and in full force and effect; (ii) immediately following
the Effective Time, each policy will be legal, valid, binding, enforceable and
in full force and effect on identical terms following the consummation of the
transactions contemplated hereby; (iii) neither the Company, its Subsidiaries,
nor any other party to any such policy is in breach or default (including with
respect to the payment of premiums or the giving of notices), and no event has
occurred which, with notice or the lapse of time, would constitute such a breach
or default or permit termination, modification or acceleration under any such
policy; and (iv) no party to any such policy has repudiated any provision
thereof. To the Company's knowledge, such Insurance Policies are renewable upon
the expiration thereof at premiums substantially equivalent to those currently
being paid, except for changes in such premiums applicable to insureds similarly
situated. Neither the Company nor any of its Subsidiaries has failed to give any
notice of any claim under any Insurance Policy in timely fashion, nor has any
coverage for claims been denied. The Company and its Subsidiaries (or their
respective corporate successors) have been covered during the past four (4)
years (or since the date of acquisition by the Company, if less than four (4)
years) by insurance in scope and amount customary and reasonable for the
businesses in which they have engaged during such periods.
3.15 BROKERS. The Company shall be responsible for the investment banking
fees owed to Stonebridge Associates, LLC ("Stonebridge"), which has been
retained as the sole financial advisor to the Company in connection with this
transaction. No broker, finder or investment banker, other than Stonebridge, is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon any arrangements
made by or on behalf of the Company.
18
73
3.16 TITLE TO PROPERTIES.
(a) The Company has good and marketable title to all of the Acquired
Assets, including, but not limited to, all assets necessary or desirable in
order for the Company to operate The Badlands Golf Course, free and clear
of all mortgages, pledges, liens, encumbrances, deeds of trust, charges or
other security interests except for Permitted Liens. For purposes of this
Section 3.16(a), Existing Liens shall mean (i) any lien or encumbrance
created in accordance with the terms of the leases, security agreements and
other financing documents listed on Schedule 3.19.8; (ii) liens for taxes
not yet due and payable; (iii) liens imposed by law and incurred in the
ordinary course of business for obligations not yet due and payable to
landlords, carriers, warehousemen, materialmen and the like; and (iv)
unperfected purchase money security interests existing in the ordinary
course of business without the execution of a separate security agreement.
(b) Schedule 3.16(b) lists all real property owned, leased or
subleased by the Company and its Subsidiaries.
(c) With respect to each lease and sublease listed in Schedule
3.16(b), including but not limited to the Badlands Leases:
(i) the lease or sublease is legal, valid, binding, enforceable
subject to the enforceability of remedies to applicable bankruptcy,
reorganization, insolvency, moratorium or similar laws affecting the
enforcement of creditors' rights generally from time to time in
effect, and in full force and effect;
(ii) the lease or sublease will continue to be legal, valid,
binding, enforceable subject to the enforceability of remedies to
applicable bankruptcy, reorganization, insolvency, moratorium or
similar laws affecting the enforcement of creditors' rights generally
from time to time in effect, and in full force and effect on identical
terms immediately following the Effective Time;
(iii) no party to the lease or sublease is in material breach or
default, and no event has occurred which, with notice or lapse of
time, would constitute a material breach or default or permit
termination, modification, or acceleration thereunder;
(iv) no party to the lease or sublease has repudiated any
provision thereof;
(v) there are no disputes, oral agreements, or forbearance
agreements in effect as to the lease or sublease;
(vi) all facilities leased or subleased thereunder have received
all approvals of governmental authorities (including licenses
19
74
and permits) required in connection with the operation thereof and
have been operated and maintained in accordance with all applicable
laws, rules and regulations except where the failure to obtain such
approval or approvals, or to maintain in accordance with applicable
laws, rules and regulations would not result in a Company Material
Adverse Effect;
(vii) all facilities leased or subleased thereunder are supplied
with utilities and other services necessary for the operation of said
facilities;
(viii) with respect to each sublease, if any, the representations
and warranties set forth in subsections (i) through (vii) above are
true and correct with respect to the underlying lease;
(ix) neither the Company nor any of its Subsidiaries has
assigned, transferred, conveyed, mortgaged, deeded in trust, or
encumbered any interest in the leasehold or subleasehold;
(x) to the Company's knowledge, the owner of the facility leased
or subleased has good and marketable title to the parcel of real
property, free and clear of any easement, covenant, or other
restriction, except for installments of special easements not yet
delinquent and recorded easements, covenants, and other restrictions
which do not impair the current use, occupancy, or value, or the
marketability of title, of the property subject thereto; and
(xi) there are no parties (other than the Company or the Badlands
Sub) in possession of the parcel of real property.
(d) Neither the Company nor any Subsidiary is in violation of any
applicable zoning or land use ordinance or other law, regulation,
requirement or agreement relating to the operation of any properties used
in the operation of its business, and neither the Company nor any
Subsidiary has received any notice of any such violation, or the existence
of any condemnation proceeding with respect to any of its real property.
3.17 LABOR MATTERS. Except as disclosed on Schedule 3.17(a), the Company
and its Subsidiaries are in compliance in all material respects with all
applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, and are not engaged in any unfair
labor practice; (b) there is no unfair labor practice complaint against the
Company or its Subsidiaries pending before the National Labor Relations Board;
(c) there is no labor strike, dispute, slowdown, representation campaign or work
stoppage actually pending or threatened against or affecting the Company or its
Subsidiaries; and (d) no grievance or arbitration proceeding arising out of or
under collective bargaining agreements is pending and no claim therefor has been
asserted against the Company or its Subsidiaries.
20
75
3.18 PROXY STATEMENT. The definitive Proxy Statement, as defined in Section
6.1 below, and related materials will comply with the Exchange Act in all
material respects. The definitive Proxy Statement will not, at the time of
filing with the SEC, at the date it or any amendment or supplement is mailed to
the shareholders, or at the time of the shareholders meeting, contain an untrue
statement of material fact or omit a material fact necessary in order to make
the statements made therein, in light of the circumstances under which they will
be made, not misleading; provided, however, that the Company makes no
representation or warranty with respect to any information that the Acquiror
will supply for use in connection with such definitive Proxy Statement.
3.19 THE BADLANDS GOLF CLUB. Without limiting any of the other
representations or warranties made by the Company herein, the Company makes the
following representations and warranties with respect to The Badlands Golf Club
and related facilities:
3.19.1 DEFINITIONS. For purposes of this Section 3.19, the following terms
have the indicated meanings:
"Golf Course" means The Badlands Golf Club located in the City of Las
Vegas, County of Clark, State of Nevada.
"Improvements" means all existing buildings, structures and other
improvements located upon the Land, including without limitation, a
clubhouse building, a maintenance facility, a twenty-seven (27) hole golf
course with a driving range and practice areas, landscaping improvements,
man-made lakes and water retention ponds, irrigation systems, parking
facilities, and all other facilities and improvements located on the Land.
"Land" means the approximately two hundred fifty-three (253) acres of
land on which the Golf Course is located.
"Property" means the Golf Course, the Land and the Improvements.
3.19.2 IMPROVEMENTS. All Improvements were constructed or installed in
conformity with applicable laws, regulations and permits, and there are no
present violations of applicable codes. Neither the Company nor any of its
Subsidiaries has received any written notice from any governmental entity or any
other third party of the violation of any of the foregoing.
3.19.3 NO CONDITIONS AFFECTING INSURABILITY. Neither the Company nor any of
its Subsidiaries has received any written notice in the last twelve (12) months
from any insurance carrier of any defects or inadequacies in the Property that
would materially and adversely affect the insurability of the Property or the
cost of such insurance.
3.19.4 UTILITIES; ACCESS. All utilities and drainage facilities required
for the operation of the Property are installed across public property or valid
easements and are connected pursuant to valid permits, and such facilities are
adequate to service the Property as currently operated.
21
76
3.19.5 LICENSES AND EASEMENTS. The Company or The Badlands Golf Club, Inc.
has obtained all licenses, permits and approvals required from all governmental
entities having jurisdiction over the Property for the present use and operation
of the Property.
3.19.6 COMPLIANCE WITH APPLICABLE LAWS. The Land is properly zoned for its
present and intended use as a golf course and for all existing associated uses,
and the Company or The Badlands Golf Club, Inc. has received no written notices
advising it of a violation of any zoning laws, ordinances, general or specific
plans or other governmental requirements. The Company or The Badlands Golf Club,
Inc. has received no written notice of any pending proceedings to alter or
restrict the zoning or the permitted uses applicable to the Land, and the
Property and the present use and operation thereof are in compliance in all
material respects with all applicable laws and building codes.
3.19.7 ABSENCE OF CONDEMNATION PROCEEDINGS. There is no pending eminent
domain or condemnation proceeding affecting the Property or any portion thereof.
3.19.8 NO UNRECORDED ENCUMBRANCES. There are no unrecorded liens,
encumbrances, easements, options or rights of first refusal that affect the
Property except (a) any such lien or encumbrance created in accordance with the
terms of the leases, security agreements and other financing documents listed on
Schedule 3.19.8; (b) liens for taxes not yet due and payable; (c) liens imposed
by law and incurred in the ordinary course of business for obligations not yet
due and payable to landlords, carriers, warehousemen, materialmen and the like;
and (d) unperfected purchase money security interests existing in the ordinary
course of business without the execution of a separate security agreement
(collectively, (a) through (d) shall be "Existing Liens").
3.19.9 MEMBERSHIPS. Schedule 3.19.9 sets forth all material details of all
membership agreements or other arrangements relating to the Golf Course, and the
Company has provided Acquiror with access to all membership agreements and
records relating to the Golf Course.
3.19.10 PUBLIC IMPROVEMENT OBLIGATIONS. To the Company's knowledge, there
are no governmental proceedings, lawsuits, investigations, bond issuances, or
proposals for public improvements assessments or improvement agreements
affecting the Property.
3.19.11 USE OF THE GOLF COURSE. Except as disclosed in Schedule 3.19.9, the
Company has made no representations, promises or agreements to any Person,
including, without limitation, homebuilders, prospective home buyers, owners or
occupants of the land surrounding the Golf Course, regarding (i) the right to
membership in the Golf Course or the intent to operate the Golf Course as a
private or semi-private country club; (ii) the right to play golf on the Golf
Course or any other use of the Property except on the same terms and conditions
as offered to the public; (iii) the right to participate in the operation or
management of the Property; (iv) the manner in which the Golf Course will be
operated, managed, maintained or improved.
3.19.12 WATER RIGHTS. The Company has delivered to the Acquiror true,
correct and complete copies of all documents, agreements and permits (and
amendments or modifications thereto) evidencing the Company's and/or The
Badlands Golf Club, Inc.'s entitlement to a water supply adequate for the
continued operation and maintenance of the Golf Course in the same manner as the
Golf Course is currently being operated and maintained (the "Water Documents").
22
77
There are no other agreements or documents concerning the supply of water to
irrigate the Golf Course and neither the Company nor The Badlands Golf Club,
Inc. is in default under or in breach of any of the Water Documents. Neither the
Company nor The Badlands Golf Club, Inc. previously assigned or transferred any
of its rights or interests under the Water Documents.
3.20 ENVIRONMENTAL, HEALTH AND SAFETY.
(a) The Company, its Subsidiaries, and, to the Company's knowledge,
its predecessors and Affiliates have each complied in all material respects
with all Environmental, Health, and Safety Laws, and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand or
notice has been filed or commenced against any of them alleging any failure
so to comply. Without limiting the generality of the foregoing, the
Company, its Subsidiaries and, to the Company's knowledge, each of its
predecessors and Affiliates, have been in compliance in all material
respects with all of the terms and conditions of all permits, licenses, and
other authorizations which are required under, and have complied in all
respects with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables which are
contained in, all Environmental, Health, and Safety Laws.
(b) Neither the Company nor any of its Subsidiaries has any liability
(and neither the Company nor any of its Subsidiaries nor, to the knowledge
of the Company, its predecessors and Affiliates, have handled or disposed
of any substance, arranged for the disposal of any substance, exposed any
employee or other individual to any substance or condition, or owned or
operated any property or facility in any manner that could reasonably be
expected to form the basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim or demand
against the Company or its Subsidiaries giving rise to any liability) for
damage to any site, location or body of water (surface or subsurface), for
any illness of or personal injury to any employee or other individual, or
for any reason under any Environmental, Health, and Safety Law.
(c) All properties and equipment used in the businesses of the Company
and its Subsidiaries are, and within the five years preceding the date
hereof have been, free of asbestos, PCB's, methylene chloride,
trichloroethylene, 1,2-trans-dichloroethylene, dioxins, dibenzofurans and
other hazardous substances or wastes, except for small amounts the use and
the level of which does not violate any Environmental Health and Safety
Law.
(d) Neither the Company nor any of its Subsidiaries has transferred or
disposed of, or contracted for the transportation or disposal of, any
hazardous waste, hazardous substance, infectious or medical waste,
radioactive waste or sewage sludge in violation of any Environmental,
Health, and Safety Law.
(e) Neither the Company nor any of its Subsidiaries has owned, leased
or operated any real property having any underground storage tank
containing petroleum products or wastes or other hazardous substances and
regulated by 40 CFR 280 and/or other applicable federal, state or local
Laws or requirements.
23
78
(f) The Company has delivered to Acquiror true and complete copies and
results of any reports, studies, analyses, tests or monitorings possessed
or initiated by the Company or its Subsidiaries pertaining to hazardous
materials or hazardous activities in, on, or under any facility owned,
leased or operated by the Company or its Subsidiaries, or concerning
compliance by the Company or its Subsidiaries, or any other Person for
whose conduct of the Company is or may be held responsible, with
Environmental, Health, and Safety Laws.
(g) For purposes of this Section 3.20, the term "Environmental, Health
and Safety Laws" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Resource Conservation and
Recovery Act of 1976, and the Occupational Safety and Health Act of 1970,
each as amended, together with all other laws concerning pollution or
protection of the environment, public health and safety, or employee health
and safety, including laws relating to emissions, discharges, releases, or
threatened releases of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes into ambient air, surface water,
ground water, or lands or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling of pollutants, contaminants, or chemical, industrial, hazardous,
or toxic materials or wastes.
3.21 INVENTORY. The retail inventory and food and drink items sold by the
Company and its Subsidiaries are generally merchantable and fit for the purpose
for which they were procured, and no significant amount of the inventory is
obsolete, damaged or defective (with the express exception of amounts covered by
the reserve described in the following sentence). There has been created an
adequate reserve for inventory writedown on the face of the December 31, 1997
Balance Sheet as adjusted for the passage of time in accordance with the past
custom and practice of the Company and its Subsidiaries. Other than the retail
inventory goods and food and drink items sold from The Badlands Golf Club in the
ordinary course of business, neither the Company nor its Subsidiaries sells any
products which are subject to any warranties or could result in any product
liability claims against the Surviving Corporation.
3.22 NOTES AND ACCOUNTS RECEIVABLE. All notes and accounts receivable of
the Company and its Subsidiaries are reflected properly on their books and
records, are valid receivables subject to no setoffs or counterclaims, are
current and collectable, and will be collected in accordance with their terms at
their recorded amounts, subject only to the reserve for bad debt set forth on
the December 31, 1997 Balance Sheet as adjusted for the passage of time in
accordance with the past custom and practice of the Company and its
Subsidiaries.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF ACQUIROR AND ACQUIROR SUB
The term "Acquiror Material Adverse Effect" as used in this Agreement shall
mean any change or effect that, individually or when taken together with all
such other changes or effects,
24
79
is materially adverse to the condition (financial or otherwise), results of
operations business, properties, assets or liabilities of Acquiror and Acquiror
Sub, taken as a whole.
Acquiror and Acquiror Sub jointly and severally represent and warrant to
the Company that:
4.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Acquiror is a limited
liability company, and Acquiror Sub is a corporation, duly incorporated, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, and has all requisite power and authority to own, lease and
operate its properties and to carry on its business as it is now being
conducted.
4.2 AUTHORITY. Each of Acquiror and Acquiror Sub has the requisite power
and authority to execute and deliver this Agreement, to perform its obligations
hereunder, and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by Acquiror and Acquiror Sub, and the
consummation by Acquiror and Acquiror Sub of the transactions contemplated
hereby, have been duly authorized by all necessary action and no other
proceedings on the part of Acquiror or Acquiror Sub are necessary to authorize
this Agreement or to consummate the transactions contemplated by this Agreement.
This Agreement has been duly executed and delivered by Acquiror and Acquiror Sub
and constitutes a legal, valid and binding obligation of Acquiror and Acquiror
Sub enforceable against Acquiror and Acquiror Sub in accordance with its terms,
except to the extent that enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, receivership, moratorium and other
similar laws relating to or affecting the rights and remedies of creditors
generally.
4.3 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by Acquiror and
Acquiror Sub do not, and the performance of this Agreement by Acquiror and
Acquiror Sub will not, (i) with respect to Acquiror Sub, violate the
Certificate of Incorporation or Bylaws or, with respect to Acquiror,
violate its Articles of Organization or Operating Agreement, (ii) subject
to obtaining the consents, approvals, authorizations and permits of, and
making filings with or notifications to, any governmental entities pursuant
to the applicable requirements, if any, of the Securities Act, the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and the filing and recordation of appropriate merger documents as
required by the Nevada Law and the Oklahoma Law, conflict with or violate
any laws applicable to Acquiror or Acquiror Sub or by which any of their
respective properties is bound or affected.
(b) The execution and delivery of this Agreement by Acquiror and
Acquiror Sub do not, and the performance of this Agreement by Acquiror and
Acquiror Sub shall not, require any consent, approval, authorization or
permit of, or filing with or notification to, any governmental entities,
except as described in Section 4.3(a) above.
(c) Acquiror (together with any manager or 50% equity owner of
Acquiror) and Acquiror Sub (together with any director, officer or 50%
shareholder of Acquiror Sub) do not have total assets or net sales of more
than $100,000,000.
25
80
4.4 OWNERSHIP OF ACQUIROR SUB; NO PRIOR ACTIVITIES.
(a) Acquiror Sub was formed for the purpose of engaging in the
transactions contemplated by this Agreement. As of the Effective Time, all
of the outstanding capital stock of Acquiror Sub will be owned directly by
Acquiror.
ARTICLE V
COVENANTS
5.1 AFFIRMATIVE COVENANTS OF THE COMPANY. The Company covenants and agrees
that prior to the Effective Time, unless otherwise contemplated by this
Agreement or consented to in writing by Acquiror, the Company will, and will
cause each of its Subsidiaries to:
(a) operate its business in the ordinary course of business and
consistent with its past practice;
(b) use reasonable efforts to preserve intact its business
organization and assets, maintain its rights and franchises, retain the
services of its respective officers and key employees and maintain the
relationships with its respective key customers and suppliers provided,
however, the parties hereto agree that the Company shall be under no
obligation to retain non-key employees who voluntarily terminate their
employment;
(c) confer with Acquiror at its reasonable request to report
operational matters of a material nature and to report the general status
of the ongoing operations of the business of the Company and its
Subsidiaries;
(d) maintain compliance with all permits, laws, rules, regulations and
orders applicable to the Company and its Subsidiaries;
(e) from the date hereof until the Closing Date, the Company (i) will
give, and will cause each of its Subsidiaries to give, Acquiror, its
counsel, financial advisors, auditors and other authorized representatives
reasonable access to the offices, properties, books and records of the
Company and its Subsidiaries, (ii) will furnish, and will cause each
Subsidiary to furnish, to Acquiror, its counsel, financial advisors,
auditors and other authorized representatives such financial and operating
data and other information relating to the Company and the Subsidiaries as
such persons may reasonably request, and (iii) will instruct the senior
management (and, to the extent necessary to obtain reasonably required
information, other employees), counsel and financial advisors of the
Company and the Subsidiaries to cooperate in all reasonable respects with
Acquiror in its review of the continuing operations of the Company and the
Subsidiaries. From the date of this Agreement until the Effective Time,
upon reasonable request, Acquiror shall be permitted to have one or more of
its personnel or designees (expressly including American Golf Corporation
and Acquiror's independent certified public accounting firm) at the
Company's premises in connection with such review.
26
81
5.2 NEGATIVE COVENANTS OF THE COMPANY. Except as contemplated by this
Agreement or consented to in writing by Acquiror, from the date of this
Agreement until the Effective Time, the Company shall not do, and shall not
permit any of its Subsidiaries to do, any of the following:
(a) except as set forth on Schedule 5.2(a): (i) increase the
compensation payable to any director, officer or employee of the Company or
any of its Subsidiaries, other than increases in salary or wages payable or
to become payable in the ordinary course of business and consistent with
the policies currently in effect; (ii) grant any severance or termination
pay to, or enter into any severance agreement with, any director or
officer; (iii) enter into or amend any employment agreement with any
director or officer that would extend beyond the Effective Time except on
an at-will basis; or (iv) establish, adopt, enter into or amend any
Employee Benefit Plan, except as may be required to comply with applicable
law;
(b) declare or pay any dividend on, or make any other distribution in
respect of, outstanding shares of capital stock;
(c) (i) redeem, purchase or otherwise acquire any shares of its or any
of its Subsidiaries' capital stock or any securities or obligations
convertible into or exchangeable for any shares of its or its Subsidiaries'
capital stock, or any options, warrants or conversion or other rights to
acquire any shares of its or its Subsidiaries capital stock; (ii) effect
any reorganization or recapitalization; or (iii) split, combine or
reclassify any of its or its Subsidiaries' capital stock;
(d) issue, deliver, award, grant or sell, or authorize the issuance,
delivery, award, grant or sale (including the grant of any security
interests, liens, claims, pledges, limitations on voting rights, charges or
other encumbrances) of, any shares of any class of its or its Subsidiaries'
capital stock, any securities convertible into or exercisable or
exchangeable for any such shares, or any rights, warrants or options to
acquire any such shares (except for the issuance of shares upon the
exercise of options or warrants in accordance with their terms), or amend
or otherwise modify the terms of any such rights, warrants or options the
effect of which shall be to make such terms more favorable to the holders
thereof, except as contemplated by this Agreement or by any matter set
forth in Schedule 3.9(a) hereto;
(e) acquire or agree to acquire, by merging or consolidating with, by
purchasing an equity interest in or a portion of the assets of, or by any
other manner, any business or any corporation, partnership, association or
other business organization or division thereof, or otherwise acquire or
agree to acquire any assets of any other Person (other than the purchase of
assets from suppliers or vendors in the ordinary course of business and
consistent with the Company's past practice);
(f) sell, lease, exchange, mortgage, pledge, transfer or otherwise
dispose of, or agree to sell, lease, exchange, mortgage, pledge, transfer
or otherwise dispose of, any amount of any of its or its Subsidiaries'
assets, except for dispositions in the ordinary course of business and
consistent with the Company's
27
82
past practice and except for dispositions of the Non-Acquired Assets as
contemplated in this Agreement;
(g) adopt any amendments to its Articles of Incorporation or Bylaws;
(h) except as set forth in Schedule 5.2(h); (i) change any of its
methods of accounting in effect at December 31, 1997 or (ii) make or
rescind any express or deemed election relating to taxes, settle or
compromise any claim, action, suit, litigation, proceeding, arbitration,
investigation, audit or controversy relating to taxes, or change any of its
methods of reporting income or deductions for federal income tax purposes
from those employed in the preparation of the federal income tax returns
for the taxable year ending December 31, 1997, except in either case as may
be required by law, the IRS, or GAAP, or in the ordinary course of business
consistent with past practice;
(i) incur any obligation for borrowed money or purchase money
indebtedness, whether or not evidenced by a note, bond, debenture or
similar instrument, except as approved by Acquiror in advance; or
(j) agree, in writing or otherwise, to do any of the foregoing.
5.3 ACQUISITION PROPOSALS. Upon execution of this Agreement, the Company
and its Subsidiaries and their respective officers, directors, employees, agents
and advisors will immediately cease any existing discussions or negotiations
with any parties conducted heretofore with respect to any Acquisition Proposal
(as hereinafter defined). The Company may, directly or indirectly, furnish
information and access, in each case ONLY in response to requests that were not
solicited by the Company (or any officer, director, employee, agent or advisor
on its behalf) after the date of this Agreement, to any corporation,
partnership, person or other entity or group (each, a "Potential Acquiror")
pursuant to confidentiality agreements, and may participate in discussions and
negotiate with a Potential Acquiror concerning any merger, sale of assets, sale
of shares of capital stock or similar transaction involving the Company or any
Subsidiary or division of the Company, but ONLY if such Potential Acquiror has
submitted a written proposal to the Board of Directors relating to any such
transaction, and the Board of Directors determines in good faith, after
consultation with outside legal counsel, that the failure to provide such
information or access or to engage in such discussions or negotiations would be
materially inconsistent with its fiduciary duties to the Company's shareholders
under the Nevada Law. The Company shall notify Acquiror immediately if any such
request or proposal, or any inquiry or contact by any Person with respect
thereto, is made and shall keep Acquiror totally apprised of all developments
that could reasonably be expected to culminate in the Board withdrawing,
modifying or amending its recommendation of the Merger and the other
transactions contemplated by this Agreement. The Company agrees not to release
any third party from, or waive any provision of, any confidentiality or
standstill agreement to which the Company is a party unless, AND ONLY IF, in the
opinion of the Board of Directors after consultation with outside legal counsel,
the failure to provide such release or waiver would be inconsistent with its
fiduciary duties to the Company's shareholders under applicable law. For
purposes of this Section 5.3, the term "Acquisition Proposal" means any proposal
or offer for a merger, consolidation or similar combination (other than the
Merger contemplated by this Agreement) involving the Company or any Subsidiary
and any Potential Acquiror, or any proposal
28
83
or offer to acquire a significant equity interest in the Company, or a
significant portion of the assets of the Company, by a Potential Acquiror.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 PROXY STATEMENT.
(a) As promptly as practicable after the execution of this Agreement,
the Company shall prepare and file with the SEC a proxy statement and a
form of proxy to be sent to the shareholders of the Company in connection
with the meeting of the Company's shareholders to consider the Merger (the
"Shareholders' Meeting") (such proxy statement, together with any
amendments or supplements thereto, in each case in the form or forms mailed
to the Company's shareholders, being referred to as the "Proxy Statement").
The Company shall provide the Acquiror with a reasonable opportunity to
review and comment upon the Proxy Statement and the Schedule 13E-3 (if
required) prior to its filing with the SEC and distribution to the
Company's shareholders, and the Acquiror shall use reasonable efforts to
provide its comments thereon as promptly as practicable after delivery of
the Proxy Statement and the Schedule 13E-3 (if required) to the Acquiror
and its legal counsel. The Company shall notify the Acquiror promptly of
the receipt of any comments of the SEC with respect to the Proxy Statement
and the Schedule 13E-3 (if required), and of any requests by the SEC for
amendments or supplements to the Proxy Statement and the Schedule 13E-3 (if
required), and will supply the Acquiror with copies of all correspondence
between the Company and its representatives, on the one hand, and the SEC
or the members of its staff, on the other hand, with respect to the Proxy
Statement and the Schedule 13E-3 (if required). The Company and Acquiror
shall each use their reasonable efforts to obtain and furnish information
required to be included in the Proxy Statement; and the Company, after
consultation with the Acquiror, shall promptly respond to the comments of
the SEC thereon and shall make any further filings (including amendments
and supplements) in connection therewith as may be necessary, proper or
advisable. The Company will mail the definitive Proxy Statement to the
shareholders as soon as reasonably practicable. The Company shall notify
the Acquiror of its intention to mail the Proxy Statement to the
shareholders of the Company at least forty-eight (48) hours prior to the
intended time of such mailing. The Proxy Statement shall include the
unanimous recommendation of the Company's Board of Directors in favor of
the Merger and approval of this Agreement, unless outside legal counsel to
the Company advise the Company's Board of Directors that the directors'
fiduciary duties under applicable law make such recommendation
inappropriate.
(b) The information included in the Proxy Statement shall not, at the
date the Proxy Statement (or any amendment thereof or supplement thereto)
is first mailed to shareholders or at the time of the Shareholders'
Meeting, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the
29
84
circumstances under which they are made, not misleading. If at any time
prior to the Shareholders' Meeting, any event or circumstance relating to
the Company or any of its Subsidiaries, or its or their respective officers
or directors, is discovered by the Company which should be set forth in a
supplement to the Proxy Statement, the Company shall promptly inform
Acquiror. All documents that the Company is responsible for filing with the
SEC in connection with the transactions contemplated herein will comply as
to form and substance in all material respects with the applicable
requirements of the Exchange Act.
(c) The Acquiror shall provide the Company with such information and
assistance in connection with the foregoing filings as the Company
reasonably may request.
(d) The Acquiror, agrees as the sole shareholder of the Acquiror Sub,
to vote in favor of the Merger and to take all actions that may be required
to approve the Merger and to effect the transactions contemplated by this
Merger Agreement on behalf of the Acquiror Sub.
(e) Each of the Parties will file (and the Company will cause each of
its Subsidiaries to file) any Notification and Report Forms and related
material that it may be required to file with the Federal Trade Commission
and the Antitrust Division of the United States Department of Justice under
the HSR Act, will use its reasonable best efforts to obtain (and the
Company will cause each of its Subsidiaries to use its reasonable best
efforts to obtain) an early termination of any applicable waiting period,
and will make (and the Company will cause each of its Subsidiaries to make)
any further filings pursuant thereto that may be necessary, proper, or
advisable.
6.2 MEETING OF SHAREHOLDERS. As promptly as practicable after the date
hereof, the Company shall take all action necessary in accordance with the
Nevada Law and its Articles of Incorporation and Bylaws to call and convene the
Shareholders' Meeting, and the Company shall consult with Acquiror in connection
therewith. The Company shall use reasonable efforts to solicit from the
shareholders of the Company proxies in favor of the Merger and shall take all
other actions necessary or advisable to secure the vote or consent of
shareholders required by the Nevada Law to approve this Agreement, including the
retention of proxy solicitation agents if requested by Acquiror, unless
otherwise required by the applicable fiduciary duties of directors or officers
of the Company.
6.3 APPROPRIATE ACTION; CONSENTS; FILINGS.
(a) Subject to the terms and conditions herein provided, the Company,
Acquiror and Acquiror Sub shall use all reasonable efforts to (i) take, or
cause to be taken, all appropriate action, and do or cause to be done, all
things necessary, proper or advisable under applicable law or otherwise to
consummate and make effective the transactions contemplated by this
Agreement as promptly as practicable; (ii) obtain from any governmental
entities any consents, licenses or orders required to be obtained by
Acquiror or the Company or any of their
30
85
respective Subsidiaries in connection with the authorization, execution and
delivery of this Agreement and the consummation of the transactions
contemplated by this Agreement, including, without limitation, the Merger;
and (iii) make all necessary notifications and filings and thereafter make
any other required submissions with respect to this Agreement and the
Merger required under [a] the Exchange Act and any other applicable federal
or state securities laws, [b] the HSR Act, and [c] any other applicable
law; provided that Acquiror and the Company shall cooperate with each other
in connection with the making of all such filings. The Company and Acquiror
shall furnish to each other all information required for any application or
other filing to be made pursuant to the rules and regulations of any
applicable law (including all information required to be included in the
Proxy Statement) in connection with the transactions contemplated by this
Agreement.
(b) (i) The Company shall give (or cause its Subsidiaries to give) any
notices to third parties, and use, and cause its Subsidiaries to use, all
reasonable efforts to obtain any third-party consents, [a] necessary to
consummate the transactions contemplated in this Agreement (which shall be
deemed to include estoppel certificates reasonably satisfactory to Acquiror
from the other parties to the Badlands Leases), [b] disclosed or required
to be disclosed in the disclosure schedules to this Agreement, or [c]
required to prevent a Company Material Adverse Effect from occurring prior
to the Effective Time.
(ii) In the event the Company shall fail to obtain any third-party
consent described in Subsection (b)(i) above, the Company shall use
reasonable efforts, and shall take any such actions reasonably requested by
the Acquiror, to minimize any adverse effect upon the Company, its
Subsidiaries and its businesses resulting, or which could reasonably be
expected to result after the Effective Time, from the failure to obtain
such consent.
(c) From the date of this Agreement until the Effective Time, the
Company shall promptly notify Acquiror in writing of any pending or, to the
knowledge of the Company, threatened action, proceeding or investigation by
any governmental entity or any other Person (i) challenging, or seeking
material damages in connection with, the Merger; (ii) alleging that the
consent of such governmental entity or Person may be required in connection
with the Merger or this Agreement; or (iii) seeking to restrain or prohibit
the consummation of the Merger or otherwise limit the right of Acquiror or
Acquiror Sub to own or operate all or any portion of the businesses or
assets of the Company or its Subsidiaries.
(d) From the date of this Agreement until the Effective Time, Acquiror
shall promptly notify the Company in writing of any pending or, to the
knowledge of Acquiror, threatened action, proceeding or investigation by
any governmental entity or any other Person (i) challenging or seeking
material damages in connection with the Merger or (ii) seeking to restrain
or prohibit the consummation of the Merger or otherwise limit the right of
Acquiror or Acquiror Sub to own or operate all or any portion of the
business or assets of the Company or its Subsidiaries.
31
86
6.4 UPDATE DISCLOSURE; BREACHES. From and after the date of this Agreement
until the Effective Time, each party shall promptly notify the other parties
hereto by written update to its disclosure schedules (an "Update Schedule") of
(a) the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which would be reasonably likely to cause any condition to the
obligations of any party to effect the Merger and the other transactions
contemplated by this Agreement not to be satisfied; (b) the failure of the
Company or Acquiror, as the case may be, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it pursuant to this
Agreement which would be reasonably likely to result in any condition to the
obligations of any party to effect the Merger and the other transactions
contemplated by this Agreement not to be satisfied; or (c) of any changes to the
information contained in its disclosure schedule (including any change to any
representations or warranties herein as to which no schedule has been created as
of the date hereof but as to which a schedule would have been required hereunder
to have been created on or before the date hereof if such change had existed on
the date hereof).
6.5 PUBLIC ANNOUNCEMENTS. The parties to this Agreement shall consult in
good faith with each other before issuing any press release or otherwise making
any public statements with respect to the Merger and shall not issue any such
press release or make any such public statement without the prior written
agreement of the other party, except as may be required by law or the
requirements of the Securities and Exchange Commission, the Boston Stock
Exchange or the National Association of Securities Dealers, Inc.
6.6 OBLIGATIONS OF ACQUIROR SUB. Acquiror shall take all action necessary
to cause Acquiror Sub to perform its obligations under this Agreement and to
consummate the Merger on the terms and conditions set forth in this Agreement.
6.7 ACQUIRED ASSETS AND ASSUMED LIABILITIES.
(a) Prior to the Effective Time, the Company shall take all actions
necessary to (i) dispose of all of its and its Subsidiaries' assets, other
than the Acquired Assets; (ii) obtain the written and unconditional release
of all liens, encumbrances, mortgages, security interests and other
restrictions against any of the Acquired Assets, other than the Assumed
Liabilities; and (iii) obtain the written and unconditional release of all
liabilities and obligations of the Company and its Subsidiaries, other than
the Assumed Liabilities. With respect to (i) above, the Company shall
either sell such assets to a third party or dispose of all of such assets
by transferring such assets to a liquidating trust, which trust shall hold
such assets until the earlier of (a) twelve (12) months after the Effective
Time or (b) until such assets have been liquidated. With respect to (iii)
above, the parties specifically intend that, after payment of the
NationsCredit loans at the time of Closing, the Surviving Corporation not
be subject to any liabilities or obligations of the Company or its
Subsidiaries, other than the Assumed Liabilities including, without
limitation, any liabilities or obligations arising out of the Company's
ownership interests in Golftown, Inc. and Las Vegas Golf Center, LLC, or
the Company's management or disposition of such ownership interests. Upon
the agreement of the parties hereto, in lieu of obtaining the releases
described in (ii)
32
87
and (iii) above, the Company shall be permitted to establish a reserve in
an amount approved by Acquiror, for purposes of providing for the payment
of the liens, encumbrances, mortgages, security interests, restrictions,
and obligations described in (ii) and (iii) above. Any portion of such
reserves which is not ultimately required for the discharge of the
Company's liabilities for which such reserves were established shall be
delivered as promptly as practicable following the Effective Time to the
Exchange Agent for delivery to the Company's shareholders and other persons
having the right to receive a portion of the Merger Consideration in the
same manner as is applicable to the major portion of the Merger
Consideration which shall be delivered by Acquiror to the Exchange Agent on
the Effective Time.
(b) Prior to the Effective Time, the Company and the Badlands Sub
shall have paid, been paid, contributed to capital, distributed or
otherwise discharged that party's respective intercompany payables and
receivables in a manner such that, immediately prior to the Effective Time,
the Company's and the Badlands Sub's aggregate cash balance equals the
amount necessary to cause the Target Net Current Asset Position, as defined
in Section 2.6, to be achieved. Except to the extent that intercompany
payables and receivables are required to be paid or otherwise discharged to
create the cash balance required by the previous sentence, all intercompany
payables and receivables on the respective books of the Company and the
Badlands Sub shall be canceled as of the Effective Time without payment or
other consideration. Also prior to the Effective Time, the Company and the
Badlands Sub shall have paid all of their current payables and accrued
expenses, except to the extent that reserves are established, by the mutual
agreement of the parties hereto, for such payment subsequent to the
Effective Time in accordance with Section 6.7(a) above.
6.8 DIRECTOR INSURANCE. Acquiror will cause the Surviving Corporation to
keep in effect the Company's Director and Officer Liability insurance as such
insurance was in effect prior to the Merger (to the extent the Company shall
have prepaid the premium for such insurance prior to the Closing).
ARTICLE VII
CLOSING CONDITIONS
7.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY UNDER THIS AGREEMENT. The
respective obligations of each party to effect the Merger and the other
transactions contemplated by this Agreement shall be subject to the satisfaction
at or prior to the Effective Time of the following conditions, any or all of
which may be waived, in whole or in part, to the extent permitted by applicable
law:
(a) SHAREHOLDER APPROVAL. This Agreement and the Merger shall have
been approved by the requisite vote of the shareholders of the Company.
(b) NO ACTION OR PROCEEDING. There shall not have been instituted and
there shall not be pending any action or proceeding by a governmental
entity, and no such action or proceeding shall have been approved by a
governmental entity with authority to institute such an action or
proceeding, before any court of competent jurisdiction or governmental
agency or regulatory or administrative body, and no order or decree shall
have been entered in any action or proceeding before
33
88
such court, agency or body of competent jurisdiction: (i) imposing or
seeking to impose limitations on the ability of Acquiror to acquire or hold
or to exercise full rights of ownership of any securities of the Company or
any of its Subsidiaries; (ii) imposing or seeking to impose limitations on
the ability of Acquiror to combine and operate the business and assets of
the Company with any of Acquiror's Subsidiaries or other operations; (iii)
imposing or seeking to impose other sanctions, damages or liabilities
arising out of the Merger on Acquiror, Acquiror Sub, the Company or any of
their officers or directors; (iv) requiring or seeking to require
divestiture by Acquiror of all or any material portion of the business,
assets or property of the Company and its Subsidiaries; or (v) restraining,
enjoining or prohibiting or seeking to restrain, enjoin or prohibit the
consummation of the Merger, in each case, with respect to clauses (i)
through (iv) above, which would or is reasonably likely to result in a
Company Material Adverse Effect at or prior to or after the Effective Time
or, with respect to clauses (i) through (v) above, which would or is
reasonably likely to subject any of their respective officers or directors
to any penalty or criminal liability. Notwithstanding the foregoing, prior
to invoking the condition set forth in this Section 7.1(b), the party
seeking to invoke it shall have used its reasonable efforts to have any
such pending or approved action or proceeding withdrawn or dismissed or
such order or decree vacated.
(c) HSR ACT. The applicable waiting period, with any extensions
thereof, under the HSR Act, if applicable, shall have expired or been
terminated.
(d) OTHER APPROVALS OR NOTICES. All other consents, waivers, approvals
and authorizations required to be obtained from, and all filings or notices
required to be made with, any governmental entity by Acquiror or the
Company or any Subsidiary prior to consummation of the transactions
contemplated in this Agreement (other than the filing and recordation of
Merger documents in accordance with the Nevada Law and the Oklahoma Law)
shall have been obtained from and made with all required governmental
entities, except for such consents, waivers, approvals or authorizations
which the failure to obtain, or such filings or notices which the failure
to make, would not have a Company Material Adverse Effect prior to or after
the Effective Time or an Acquiror Material Adverse Effect before or after
the Effective Time or be reasonably likely to subject the Company,
Acquiror, Acquiror Sub or any of their respective Subsidiaries or any of
their respective officers, directors, employees, agents or representatives
to substantial penalty or criminal liability.
7.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF ACQUIROR AND ACQUIROR SUB. The
obligations of Acquiror and Acquiror Sub to effect the Merger and the other
transactions contemplated in this Agreement are also subject to the satisfaction
at or prior to the Effective Time of the following conditions, any or all of
which may be waived, in whole or in part:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of the Company contained in this Agreement shall have been true
and correct in all material respects when made and the information
contained therein, as updated by any Update Schedule, taken as a whole,
shall not have materially
34
89
adversely changed between the date made and the Effective Time; and each of
the representations and warranties of the Company contained in this
Agreement shall be true and correct in all material respects as of the
Effective Time. Acquiror shall have received a certificate of the Chief
Executive Officer and Chief Financial Officer of the Company to that
effect.
(b) AGREEMENTS AND COVENANTS. The Company shall have performed or
complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it on or
prior to the Effective Time, except to the extent failure to perform is
caused by or is consented to by Acquiror or Acquiror Sub. Acquiror shall
have received a certificate of the Chief Executive Officer and Chief
Financial Officer of the Company to that effect.
(c) CONSENTS UNDER AGREEMENTS. The Company shall have obtained the
third-party consents described in Section 6.3(b)(i), except those for which
the failure to obtain such consents and approvals would not have a Company
Material Adverse Effect prior to or after the Effective Time or an Acquiror
Material Adverse Effect before or after the Effective Time.
(d) OPINION OF COUNSEL. The Acquiror and the Acquiror Sub shall have
received an opinion of Davis, Malm & D'Agostine, P.C. and/or Raleigh, Hunt
& McGarry, P.C., addressed to Acquiror and Acquiror Sub, dated as of the
Effective Time, and reasonably satisfactory in form and substance to
Acquiror, Acquiror Sub and its counsel, to the following effect:
(i) Each of the Company and The Badlands Golf Club, Inc. (the
"Badlands Sub") is a corporation duly organized, validly existing and
in good standing under the laws of the State of Nevada and [a] is not
the subject of a proceeding under the Nevada Law to cause its
administrative dissolution; [b] to its knowledge after inquiry, no
determination has been made by the Nevada Secretary of State that
grounds exist for such action with respect to the Company or the
Badlands Sub; [c] no filing has been made with the Nevada Secretary of
State of a decree of dissolution with respect to the Company or the
Badlands Sub; and [d] a Certificate of Dissolution of the Company or
the Badlands Sub has not been filed with the Nevada Secretary of
State. Immediately prior to the Effective Time, the Company was the
sole registered holder of record of the number of shares of stock or
equity interests in the Badlands Sub as is set forth in this Agreement
and Plan of Merger (the "Agreement"). The Company and the Badlands Sub
have the corporate power to carry on their respective businesses as
currently being conducted.
(ii) The Agreement is a legal, valid and binding obligation of
the Company [a] except as the Agreement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally;
35
90
and [b] subject to general principles of equity. The execution,
delivery and performance by the Company of the Agreement have been
duly authorized by all necessary corporate action, including the
requisite approval of the shareholders of the Company. Under the
Nevada Law and the Company's Articles of Incorporation and Bylaws, the
Company's shareholders and Board of Directors properly approved the
Merger in accordance with the terms of the Agreement. Upon filing the
Certificates of Merger as contemplated by the Agreement, the Merger
shall be effective under Nevada Law.
(iii) The execution and delivery of the Agreement and the
performance by the Company of its terms do not [a] contravene or
conflict with any provision of the Articles of Incorporation or Bylaws
of the Company; [b] violate any order, judgment or decree of any
Nevada or federal court or governmental instrumentality to which the
Company is subject and of which such counsel has knowledge; or [c] to
its knowledge, violate any applicable Nevada or federal corporate law,
rule or regulation.
(iv) The authorized capital stock of the Company consists of
15,000,000 authorized shares of Company Common Stock, par value $0.001
per share, of which 3,589,525 shares are issued and outstanding, fully
paid and nonassessable. Neither the Company nor the Badlands Sub has
outstanding any stock or securities convertible into or exchangeable
for any shares of capital stock or any preemptive rights or other
rights to subscribe for or to purchase, or any options for the
purchase of, or any agreements providing for the issuance (contingent
or otherwise) of, or any calls, commitments, rights or claims of any
other character relating to the issuance of, any capital stock or any
stock or securities convertible into or exchangeable for any capital
stock except as disclosed in the Agreement or a schedule to the
Agreement. Neither the Company nor the Badlands Sub is subject to any
obligation (contingent or otherwise) to repurchase or otherwise
acquire or retire any shares of capital stock of the Company or the
Badlands Sub.
(v) There are no preemptive rights of stockholders under the
Articles of Incorporation of the Company or as a matter of law under
the Nevada Law with respect to the Agreement or the Merger.
(vi) To the knowledge of such counsel, there is no action, suit,
investigation or proceeding pending or threatened against the Company
or the Badlands Sub or any properties or rights of the Company or the
Badlands Sub by or before any court, arbitrator or administrative or
governmental body which questions the validity of the Agreement or any
action which has been or is to be taken by the Company or the Badlands
Sub thereunder.
36
91
(e) PURCHASE PRICE. The aggregate amount to be paid by Acquiror as its
portion of the Purchase Price payable pursuant to Article II shall not be
more than Twenty-Six Million Dollars ($26,000,000.00).
(f) DIVESTITURE OF ASSETS, ETC. The Company shall have performed all
of its obligations under Section 6.7 above, and shall have provided
documentation acceptable to Acquiror in its sole discretion which evidences
the satisfactory completion of the actions described in clauses (i), (ii),
and (iii) of Section 6.7. For purposes of clarification, it is imperative
that, consistent with the intent of the parties hereto, Acquiror has
reasonable assurance that it is, as a result of the transactions provided
herein, acquiring all of the Acquired Assets, free and clear of any
liabilities, liens, encumbrances, mortgages, security interests and other
restrictions, whether contingent or fixed in nature, with the exception of
the Assumed Liabilities.
7.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligation of
the Company to effect the Merger and the other transactions contemplated in this
Agreement is also subject to the satisfaction at or prior to the Effective Time
of the following conditions, any or all of which may be waived, in whole or in
part:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of Acquiror and Acquiror Sub contained in this Agreement shall
have been true and correct in all material respects when made and the
information contained therein, as updated by any Update Schedule, taken as
a whole, shall not have materially and adversely changed between the date
made and the Effective Time; and each of the representations and warranties
of the Acquiror contained in this Agreement shall be true and correct in
all material respects as of the Effective Time. The Company shall have
received a certificate of the Managers of Acquiror to that effect.
(b) AGREEMENTS AND COVENANTS. Acquiror and Acquiror Sub shall have
performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by
each of them on or prior to the Effective Time. The Company shall have
received a certificate of the Managers of Acquiror to that effect.
(c) OPINION OF COUNSEL. The Company shall have received an opinion of
Hartzog Conger & Cason, counsel to Acquiror and Acquiror Sub, addressed to
the Company, dated as of the Effective Time, and reasonably satisfactory in
form and substance to the Company and its counsel, to the following effect:
(i) Acquiror is a limited liability company existing and in good
standing under the laws of the State of Oklahoma. Acquiror Sub is a
corporation existing and in good standing under the laws of the State
of Oklahoma. Acquiror owns, directly or indirectly, all of the capital
stock of Acquiror Sub.
37
92
(ii) The execution, delivery and performance of the Agreement has
been duly authorized by all requisite action on the part of Acquiror
and Acquiror Sub. The Agreement constitutes the legally valid and
binding obligations of Acquiror and Acquiror Sub, enforceable in
accordance with its terms, except as the enforceability against
Acquiror or Acquiror Sub of the Agreement in accordance with its terms
may be limited by bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors' rights generally.
(iii) The execution and delivery of the Agreement and the
performance by the Acquiror of its terms do not [a] contravene or
conflict with any provision of the Certificate of Incorporation or
Bylaws of the Acquiror Sub or the Articles of Organization or
Operating Agreement of the Acquiror; [b] violate any order, judgment
or decree of any Oklahoma or federal court or governmental
instrumentality to which Acquiror or Acquiror Sub is subject and of
which such counsel has knowledge; or [c] to its knowledge, violate any
applicable Oklahoma or federal corporate law, rule or regulation.
(iv) To the knowledge of such counsel, there is no action, suit,
investigation or proceeding pending or threatened against the Acquiror
or any properties or rights of Acquiror by or before any court,
arbitrator or administrative or governmental body which questions the
validity of the Agreement or any action which has been or is to be
taken by the Acquiror thereunder.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 TERMINATION. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval of this Agreement and the
Merger by the shareholders of the Company:
(a) by mutual written consent of Acquiror and the Company;
(b) by either Acquiror or the Company in the event the conditions to
such party's (the "Nonfailing Party") obligations under Article VII shall
not have been met or waived by the Nonfailing Party on or prior to August
31, 1998, but only if the party terminating has not caused the condition
giving rise to termination to be unsatisfied through its own action or
inaction;
(c) by either Acquiror or the Company if any decree, permanent
injunction, judgment, order or other action by any court of competent
jurisdiction or any governmental entity preventing or prohibiting
consummation of the Merger shall have become final and nonappealable;
38
93
(d) by Acquiror, if (i) the Proxy Statement does not include the
recommendation of the Company's Board of Directors in favor of this
Agreement and the Merger; (ii) the Board of Directors of the Company
withdraws, modifies or changes in a manner materially adverse to Acquiror
its recommendation of this Agreement or Merger or shall have resolved to do
any of the foregoing; (iii) the Board of Directors of the Company shall
have recommended to the shareholders of the Company any proposed
acquisition of the Company by any Person or any "group" (as such term is
defined under Section 13(d) of the Exchange Act) other than Acquiror and
its Affiliates by [a] merger, consolidation, share exchange, business
combination or other similar transaction, [b] purchase of all or a
substantial part of the assets of the Company and its Subsidiaries, taken
as a whole, or [c] the acquisition of more than 50% of the Company's
outstanding equity securities (a "Competing Transaction") or resolved to do
so; or (iv) a tender offer or exchange offer for 50% or more of the
outstanding shares of capital stock of the Company is commenced, the Board
of Directors of the Company, within ten (10) business days after such
tender offer or exchange offer is so commenced, either fails to recommend
against acceptance of such tender offer or exchange offer by its
shareholders or takes no position with respect to the acceptance of such
tender offer or exchange offer by its shareholders;
(e) by the Company if, in the exercise of its judgment as to its
fiduciary duties to its shareholders as imposed by applicable law and,
after consultation with and receipt of advice from outside legal counsel,
the Company's Board of Directors determines that such termination is
required pursuant to the fiduciary duty provisions of applicable law by
reason of any Competing Transaction being made or proposed;
(f) by either Acquiror or the Company, if any Update Schedule of the
other party contains disclosures of any fact or condition which makes
untrue, or shows to have been untrue, any representation or warranty by the
other party in this Agreement, unless concurrently with the delivery of the
Update Schedule, the other party represents and warrants that the disclosed
fact or condition can and will be corrected at the other party's expense
prior to the Effective Time; or
(g) by either the Acquiror or the Company, at any time after the
Shareholders Meeting, in the event this Agreement and the Merger are not
approved by the requisite vote of the shareholders of the Company in
accordance with the Nevada Law and the Articles of Incorporation and Bylaws
of the Company.
8.2 EFFECT OF TERMINATION. Subject to the remedies of the parties set
forth in Section 8.3(c), in the event of the termination of this Agreement
pursuant to Section 8.1, this Agreement shall forthwith become void and, subject
to Sections 8.3(c) and (d) there shall be no liability under this Agreement on
the part of Acquiror, Acquiror Sub or the Company or any of their respective
officers or directors and all rights and obligations of each party hereto shall
cease, and the Escrowed Funds shall be distributed as required by Section 1.8
above.
39
94
8.3 EXPENSES.
(a) Except as provided in Section 8.3(c), all Expenses incurred by the
parties shall be borne solely and entirely by the party which has incurred
the same. The Company shall pay for all Expenses related to printing,
filing and mailing the Proxy Statement and all SEC and other regulatory
filing fees incurred in connection with the Proxy Statement.
(b) "Expenses" as used in this Agreement shall include all reasonable
out-of-pocket expenses (including, without limitation, all fees and
expenses of counsel, accountants, investment bankers, experts and
consultants to a party and its Affiliates) incurred by a party or on its
behalf in connection with or related to the authorization, preparation,
negotiation, execution and performance of this Agreement, the preparation,
printing, filing and mailing of the Proxy Statement, the solicitation of
shareholder approvals and all other matters related to the Closing of the
transactions contemplated by this Agreement.
(c) The Company and Acquiror each agree that with respect to any
termination of this Agreement pursuant to Section 8.1(b) as a direct result
of a material intentional breach by a party of any of its covenants or
agreements contained in this Agreement, all remedies available to the other
party either in law or equity shall be preserved and survive the
termination of this Agreement.
(d) If all conditions to the obligations of a party at Closing
contained in Article VII of this Agreement have been satisfied (or waived
by the party entitled to waive such conditions), and the non-failing party
does not proceed with the Closing, all remedies available to the other
parties, either at law or in equity, on account of such failure to close,
including, without limitation, the right to seek specific performance of
this Agreement as well as the right to pursue a claim for damages on
account of a breach of this Agreement, shall be preserved and shall survive
any termination of this Agreement.
(e)(i) Intentionally left blank.
(e)(ii) Notwithstanding anything to the contrary herein, the Company
agrees that if this Agreement is terminated pursuant to Section 8.1(d) or
8.1(e) and a Person or group (as such term is defined under Section 13(d)
of the Exchange Act) closes a transaction with the Company of the type
described in Sections 8.1(d)(iii) or 8.1(d)(iv) within one hundred twenty
(120) days after termination of this Agreement, the Company shall pay to
Acquiror the sum of (i) Acquiror's and Acquiror Sub's reasonable and
accountable out-of-pocket costs, fees and expenses incurred, paid or
payable to third parties in connection with this Agreement (provided,
however, that such costs, fees and expenses shall not exceed One Hundred
Ten Thousand Dollars ($110,000.00)), and (ii) fifty percent (50%) of the
excess of the acquisition price paid by such Person or group (as such term
is defined under Section 13(d) of the Exchange Act) over the purchase price
to be paid hereunder; provided, however, that in no event shall the sum of
(i) and (ii) above be less than Five Hundred Thousand Dollars
($500,000.00). The payment of the out-of-pocket costs, fees and
40
95
expenses described at (i) above shall be made as promptly as practicable
but in no event later than the fifteenth (15th) calendar day following
termination of this Agreement, and shall be made by wire transfer to an
account designated in writing by Acquiror, and the payment of the fifty
percent (50%) amount shall be made in the same manner as the payment of
costs, fees and expenses and as promptly as practicable but in no event
later than the closing of such transaction with such Person or group. The
Company and Acquiror each agree that the payment provided for in this
Section 8.3(e)(ii) shall be the sole and exclusive remedy of Acquiror upon
any termination of this Agreement described in Sections 8.1(d) or 8.1(e),
except as set forth in Section 8.3(e)(iii), and such remedies shall be
limited to the sum stipulated in this Section 8.3(e)(ii) regardless of the
circumstances (including willful or deliberate conduct) giving rise to such
termination.
(e)(iii) Notwithstanding anything to the contrary herein, the Company
agrees that if this Agreement is terminated pursuant to Section 8.1(d) or
8.1(e) and a Person or group (as such term is defined under Section 13(d)
of the Exchange Act) has not closed a transaction with the Company of the
type described in Sections 8.1(d)(iii) or 8.1(d)(iv) within one hundred
twenty (120) days after termination of this Agreement, the Company shall
pay to Acquiror the sum of (i) Acquiror's and Acquiror Sub's reasonable and
accountable out-of-pocket costs, fees and expenses incurred, paid or
payable to third parties in connection with this Agreement (provided,
however, that such costs, fees and expenses shall not exceed One Hundred
Ten Thousand Dollars ($110,000.00)), and (ii) fifty percent (50%) of the
excess of the acquisition price to be paid by any Person or group (as such
term is defined under Section 13(d) of the Exchange Act) who has contracted
to acquire the Company or its assets over the purchase price to be paid
hereunder; provided, however, that in no event shall the sum of (i) and
(ii) above be less than Three Hundred Thousand Dollars ($300,000.00). The
payment of the out-of-pocket costs, fees and expenses described at (i)
above shall be made as promptly as practicable but in no event later than
the fifteenth (15th) business day following termination of this Agreement,
and shall be made by wire transfer to an account designated in writing by
Acquiror, and the payment of the fifty percent (50%) amount shall be made
in the same manner as the payment of costs, fees and expenses and as
promptly as practicable but in no event later than one hundred twenty (120)
days after termination of this Agreement. The Company and Acquiror each
agree that the payment provided for in this Section 8.3(e)(iii) shall be
the sole and exclusive remedy of Acquiror upon any termination of this
Agreement described in Sections 8.1(d) or 8.1(e), except as set forth in
Section 8.3(e)(ii), and such remedies shall be limited to the sum
stipulated in this Section 8.3(e)(iii) regardless of the circumstances
(including willful or deliberate conduct) giving rise to such termination.
(e)(iv) For purposes of Sections 8.3(e)(ii) and 8.3(e)(iii) above, the
Company agrees that it shall not take any action, and shall not permit or
encourage any of its agents or third party advisors to take any action,
which is intended in any way to delay, the closing of a transaction with
any Person or group described in (e)(ii) or (e)(iii) above if the
foreseeable result of such delay would be a reduction of the termination
fee otherwise payable to Acquiror due to the applicability of Section
8.3(e)(iii) rather than Section 8.3(e)(ii). The provisions of this Section
8.3(e)(iv) shall survive the termination of this Agreement.
41
96
ARTICLE IX
GENERAL PROVISIONS
9.1 NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The respective
representations and warranties of the parties in this Agreement shall expire
with, and be terminated and extinguished upon, consummation of the Merger or
termination of this Agreement, and thereafter neither the Company, Acquiror nor
any of their respective officers, directors or employees shall have any
liability whatsoever with respect to any such representation or warranty. This
Section 9.1 shall have no effect upon any other obligation of the parties
hereto, whether to be performed before or after consummation of the Merger. In
addition, this Section 9.1 shall have no effect on the obligations of any
liquidating trust, purchaser or other Person who undertakes the obligation to
pay any liability of the Company or its Affiliates (other than the Assumed
Liabilities) in accordance with the terms of this Agreement.
9.2 NOTICES. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and may be given by any of the following methods: (i) personal
delivery; (ii) facsimile transmission; (iii) registered or certified mail,
postage pre-paid, return receipt requested; or (iv) overnight delivery service.
Notices shall be sent to the appropriate party at its address or facsimile
number given below (or at such other address or facsimile number for such party
as shall be specified by notice given hereunder);
If to Acquiror or Acquiror Sub:
Golf Club Partners L.L.C.
6303 Waterford Blvd., Suite 225
Oklahoma City, OK 73118
Attn: Elby J. Beal and David K. Hardin
Phone No.: (405) 848-5600
Fax No.: (405) 848-5627
With a copy to:
Hartzog Conger & Cason
1600 Bank of Oklahoma Plaza
201 Robert S. Kerr
Oklahoma City, OK 73102
Attn: Steven C. Davis and Armand Paliotta
Phone No.: (405) 235-7000
Fax No.: (405) 235-7329
42
97
If to the Company:
Senior Tour Players Development, Inc.
266 Beacon Street
Boston, Massachusetts 02116
Attn: Stanton V. Abrams
Phone No.: (617) 266-3600
Fax No.: (617) 266-1343
With a copy to:
Davis, Malm & D'Agostine, P.C.
One Boston Place, 37th Floor
Boston, Massachusetts 02108
Attn: Alan L. Stanzler
Phone No.: (617) 367-2500
Fax No.: (617) 523-6215
All such notices, requests, demands, waivers, and communications shall be
deemed received upon (i) actual receipt thereof by the addressee, (ii) actual
delivery thereof to the appropriate address, or (iii) in the case of a facsimile
transmission, upon transmission thereof by the sender and issuance by the
transmitting machine of a confirmation slip that the number of pages
constituting the notice have been transmitted without error.
9.3 AMENDMENT. This Agreement may be amended by the parties by action
taken by or on behalf of their respective Boards of Directors at any time prior
to the Effective Time; provided, however, that after approval of this Agreement
by the shareholders of the Company, no amendment that would reduce the amount or
change the type of consideration into which each share of Company Common Stock
shall be converted pursuant to this Agreement upon consummation of the Merger
may be made without further approval of such shareholders. This Agreement may
not be amended except by an instrument in writing signed by each of the parties
hereto.
9.4 WAIVER. At any time prior to the Effective Time, any party may (a)
extend the time for the performance of any of the obligations or other acts of
any other party, (b) waive any inaccuracies in the representations and
warranties of any other party contained in this Agreement or in any document
delivered pursuant to this Agreement, and (c) waive compliance by any other
party with any of the agreements or conditions contained in this Agreement.
Notwithstanding the foregoing, no failure or delay by either party in exercising
any right, power or privilege hereunder shall operate as a waiver thereof nor
shall any single or partial exercise thereof preclude any other or further
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law. Any such extension or waiver shall be valid if set forth in an
instrument in writing signed by a party or parties to be bound thereby.
9.5 HEADINGS. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
43
98
9.6 SEVERABILITY. If any term or other provision of this Agreement is
finally adjudicated by a court of competent jurisdiction to be invalid, illegal
or incapable of being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties shall negotiate in good
faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the extent possible.
9.7 ENTIRE AGREEMENT. This Agreement (together with the Exhibits, the
disclosure schedules to this Agreement and the other documents delivered
pursuant hereto), constitutes the entire agreement of the parties and supersedes
all prior agreements and undertakings, both written and oral, between the
parties, or any of them, with respect to the subject matter hereof. The parties
hereby acknowledge that, no party shall have the right to acquire or shall be
deemed to have acquired shares of common stock of the other party pursuant to
the Merger until the consummation thereof.
9.8 ASSIGNMENT. This Agreement shall not be assigned, whether by operation
of law or otherwise.
9.9 PARTIES IN INTEREST. This Agreement shall be binding upon and inure
solely to the benefit of and be enforceable by each party and its respective
successors, and nothing in this Agreement, express or implied, other than the
right to receive the consideration payable in the Merger pursuant to Article II,
is intended to or shall confer upon any other Person any right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement.
9.10 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Nevada.
9.11 COUNTERPARTS. This Agreement may be executed by facsimile and in one
or more counterparts, and by the different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
but all of which taken together shall constitute one and the same agreement.
9.12 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the other Party; provided,
however, that any Party may make any public disclosure it believes in good faith
is required by applicable law or any listing or trading agreement concerning its
publicly-traded securities (in which case the disclosing Party will use its
reasonable best efforts to advise the other Party prior to making the
disclosure).
9.13 CONSTRUCTION. The Parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the Parties and no presumption or burden of proof shall arise
favoring or disfavoring any Party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law
44
99
shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context otherwise requires. The word "including" shall
mean including without limitation.
"ACQUIROR" GOLF CLUB PARTNERS L.L.C., an Oklahoma
- ---------- limited liability company
By: GOLF CLUB OPERATING PARTNERS L.L.C.,
an Oklahoma limited liability company,
its Manager
By: /s/ Elby J. Beal
------------------------------------
Elby J. Beal, Manager
By: /s/ David K. Hardin
------------------------------------
David K. Hardin, Manager
By: /s/ James D. Gressett
------------------------------------
James D. Gressett, Manager
"COMPANY" SENIOR TOUR PLAYERS DEVELOPMENT, INC., a
- --------- Nevada corporation
By: /s/ Stanton V. Abrams
----------------------------------------
Name: Stanton V. Abrams
-----------------------------------
Title: President
-----------------------------------
"ACQUIROR SUB" STPD ACQUISITION COMPANY, an Oklahoma
- -------------- corporation
By: /s/ Elby J. Beal
------------------------------------
, President
-----------------------------------
45
100
ANNEX II
[LETTERHEAD: STONEBRIDGE ASSOCIATES, LLC]
May 6, 1998
The Board of Directors
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
822 Boylston Street, Suite 300
Chestnut Hill, MA 02167
Gentlemen:
We understand that Senior Tour Players Development, Inc. ("STPD" or the
"Company") proposes to enter into an Agreement and Plan of Merger by and among
the Company, Golf Club Partners LLC ("GCP"), and STPD Acquisition Company, a
wholly-owned subsidiary of GCP (the "Merger Agreement"). The Merger Agreement
provides that it is the intent of the parties that the only assets to vest in
the surviving corporation shall be the tangible and intangible assets related to
the Badlands Golf Club located in Las Vegas, Nevada ("Badlands") and certain
other specified assets (together with Badlands, the "Acquired Assets") and the
only liabilities to become liabilities of the surviving corporation shall be
certain specified liabilities ("Assumed Liabilities").
At the effective time of the Merger, each shareholder of STPD will be
entitled to receive in cash, for each share of STPD common stock owned by such
shareholder Merger Consideration Per Share, which is defined in the Merger
Agreement to mean: (A) an amount equal to: (i) $26,000,000; (ii) less: (a) the
principal balance outstanding, accrued interest and prepayment penalties due on
the Company's NationsCredit loans at the time of the closing of the Merger
(subject to certain specified limitations); (b) any costs and expenses relating
to the Merger payable by the Company; and (c) the amount of the liabilities of
the Company not included as Assumed Liabilities and not paid by the Company
prior to effective time of the Merger; (iii) plus the proceeds, if any, received
by the Company from the exercise of Company Stock Options, as defined in the
Merger Agreement, prior to the closing of the Merger; (iv) plus or minus, as the
case may be, the adjustment required to cause the Target Net Current Asset
Position (as defined in the Merger Agreement) to have been achieved; (B) divided
by the number of shares of Company common stock outstanding immediately prior to
the effective time of the Merger (or then subject to outstanding vested stock
options or warrants having an exercise price less than the Merger Consideration
Per Share). The Merger Agreement further provides that the Company shall use all
proceeds from the sale and disposition of assets which are not Acquired Assets
to pay the liabilities of the Company not included as Assumed Liabilities and to
reduce the Company's indebtedness under the NationsCredit loans. Any excess is
added to the calculation of the Merger Consideration Per Share.
In connection with the Merger, you have asked us to render our opinion, as
investment bankers, as to the fairness to the holders of the Company common
stock from
101
The Board of Directors
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
May 6, 1998
Page 2 of 4
a financial point of view of the Merger Consideration Per Share. We have not
been requested to opine as to, and our opinion has not in any manner addressed,
any other terms or provisions of the Merger or the Merger Agreement, or the
Company's underlying decision to proceed with the Merger.
As you are aware, we have acted as financial advisor to the Company's Board
of Directors in connection with the Merger and will receive a fee for our
services which include the rendering of this opinion. In addition, the Company
has agreed to indemnify us against certain liabilities arising out of providing
these services and the rendering of this opinion.
In arriving at our opinion, we have reviewed and examined, among other
items, the following: (i) a draft dated May 6, 1998 of the Merger Agreement;
(ii) certain publicly available information concerning the Company, including
its Annual Reports on Form 10-K of the Company for each of the fiscal years in
the three year period ended December 31, 1997 and proxy statements for each of
the fiscal years in the two year period ended December 31, 1996; (iii) unaudited
internal financial statements for the three month period ended March 31, 1998;
(iv) financial and operating information with respect to the business,
operations and prospects of the Company, Badlands and the Las Vegas
International Golf Center, LLC; (v) the terms and conditions of other operating
and development agreements to which the Company is party; (vi) certain internal
business plans and financial forecasts prepared by the Management of the Company
("Management"); (vii) certain appraisals of the Badlands Golf Club and Las Vegas
International Golf Center properties; (viii) certain publicly available
information concerning other companies in the golf industry, the trading markets
for such companies' securities and the nature and terms of certain other merger
and acquisition transactions we believed to be relevant to our inquiry. During
the course of our review, we met and had discussions with Management concerning
the alternatives for the sale or other disposition of the assets of the Company
not included in the Acquired Assets. We reviewed with Management certain
proposals regarding the sale and disposition of these assets, and reviewed
Management's range of estimates for the proceeds which the Company expects to
receive from such sale or disposition. Additionally, we reviewed Management's
range of estimates for (i) the costs and expenses relating to the Merger payable
by the Company and (ii) the amount of the liabilities of the Company not
included as Assumed Liabilities. We have also discussed with Management their
assessment of the Company's business and operations, assets, liabilities,
present financial condition, the general condition and future prospects for the
business in which the Company is engaged and other matters which we believed to
be relevant.
As part of our investment banking business, we are continually engaged in
the valuation of businesses and their securities in connection with mergers,
acquisitions, divestitures, leveraged buyouts and private placements of debt and
equity securities. In our review and in arriving at our opinion, we have
examined and relied upon the accuracy and completeness of all financial and
other information that was available to us from
102
The Board of Directors
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
May 6, 1998
Page 3 of 4
public sources, that was provided to us by the Company or that was otherwise
reviewed by us. We have not attempted independently to verify any such
information and have relied upon the assurances of Management that they are
unaware of any facts that would make the information provided to or reviewed by
us misleading. With respect to the estimates of: (i) the proceeds from the sale
or disposition of assets; (ii) the costs and expenses relating to the Merger
payable by the Company; and (iii) the liabilities of the Company not included in
Assumed Liabilities, we have assumed (in addition to the limitations set forth
above) that they have been reasonably prepared on the basis of the best
currently available estimates and judgments of Management and that such
estimates will be realized in the amounts and in the time period currently
estimated by Management. Likewise, we have assumed that Management's financial
and business forecasts for the Company have been reasonably prepared
incorporating Management's best, currently available judgments as to the future
operating and financial performance of the business and that said forecasts will
be realized in the amounts and in the time periods currently estimated by
Management. We have not made any independent evaluation or appraisal of the
assets or liabilities of the Company. We have relied upon the representations of
the Company contained in the Merger Agreement with respect to legal and other
matters.
In conducting our review and analysis and in arriving at our opinion
expressed herein, we have taken into account such accepted financial and
investment banking procedures and considerations as we have deemed to be
relevant, including, among others, (i) a review of the trading history of the
Company's common stock, (ii) a review of the historical and current financial
condition and operating characteristics of the Company as compared with those of
other companies we deemed comparable, (iii) a review of equity market valuation
parameters for securities of companies we deemed comparable, (iv) a review of
the nature and financial terms of certain transactions that we considered
relevant for comparison with the financial terms of the Merger, and (v) a
discounted cash flow analysis of the business of the Company. In addition, we
performed such other analyses and examinations and considered such information
and financial economic and market data as we deemed relevant.
In rendering our opinion, we have taken into account our assessment of
general economic, market, financial and other conditions, as well as our
experience in connection with similar transactions and securities evaluation
generally. Our opinion necessarily is based upon conditions as they exist and
can be evaluated on the date hereof. We were not engaged to solicit, and have
not solicited, potential purchasers for the Company. In addition, we have
assumed that the Merger Agreement in the form finally entered into will not
differ in any material respect from the draft furnished to us and that the
Merger will be consummated on the terms set forth in the Merger Agreement
without waiver or amendment of any of the terms thereof. This opinion is not
intended to be and does not constitute a recommendation to any holder of the
Company's common stock as to whether or not to vote in favor of the Merger.
103
The Board of Directors
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
May 6, 1998
Page 4 of 4
It is understood that this opinion is for the information of the Board of
Directors only in connection with its evaluation of the Merger. This opinion may
not be reproduced, disclosed, referred to, or quoted (in whole or part) in any
manner for any purpose whatsoever except with our prior written consent in each
instance or as otherwise provided in our engagement letter with the Company.
This opinion may be reproduced in full in any proxy statement mailed to
shareholders of the Company.
Based upon and subject to the foregoing, we are of the opinion, as
investment bankers, that as of the date hereof, the Merger Consideration Per
Share is fair to the Company's shareholders from a financial point of view.
Very truly yours,
/s/ Stonebridge Associates, LLC
-------------------------------
STONEBRIDGE ASSOCIATES, LLC
RAH/spo
104
ANNEX III
NEVADA REVISED STATUTES; TITLE 7. BUSINESS ASSOCIATIONS; SECURITIES;
COMMODITIES; CHAPTER 92A. MERGERS AND EXCHANGES OF INTEREST; RIGHTS OF
DISSENTING OWNERS
92A.300. Definitions.
As used in NRS 92A.300 to 92A.500, inclusive, unless the context otherwise
requires, the words and terms defined in NRS 92A.305 to 92A.335, inclusive, have
the meanings ascribed to them in those sections.
92A.305. "Beneficial stockholder" defined.
"Beneficial stockholder" means a person who is a beneficial owner of shares
held in a voting trust or by a nominee as the stockholder of record.
92A.310. "Corporate action" defined.
"Corporate action" means the action of a domestic corporation.
92A.315. "Dissenter" defined.
"Dissenter" means a stockholder who is entitled to dissent from a domestic
corporation's action under NRS 92A.380 and who exercises that right when and in
the manner required by NRS 92A.410 to 92A.480, inclusive.
92A.320. "Fair value" defined.
"Fair value," with respect to a dissenter's shares, means the value of the
shares immediately before the effectuation of the corporate action to which he
objects, excluding any appreciation or depreciation in anticipation of the
corporate action unless exclusion would be inequitable.
92A.325. "Stockholder" defined.
"Stockholder" means a stockholder of record or a beneficial stockholder of
a domestic corporation.
92A.330. "Stockholder of record" defined.
"Stockholder of record" means the person in whose name shares are
registered in the records of a domestic corporation or the beneficial owner of
shares to the extent of the rights granted by a nominee's certificate on file
with the domestic corporation.
105
92A.335. "Subject corporation" defined.
"Subject corporation" means the domestic corporation which is the issuer of
the shares held by a dissenter before the corporate action creating the
dissenter's rights becomes effective or the surviving or acquiring entity of
that issuer after the corporate action becomes effective.
92A.340. Computation of interest.
Interest payable pursuant to NRS 92A.300 to 92A.500, inclusive, must be
computed from the effective date of the action until the date of payment, at the
average rate currently paid by the entity on its principal bank loans or, if it
has no bank loans, at a rate that is fair and equitable under all of the
circumstances.
92A.350. Rights of dissenting partner of domestic limited partnership.
A partnership agreement of a domestic limited partnership or, unless
otherwise provided in the partnership agreement, an agreement of merger or
exchange, may provide that contractual rights with respect to the partnership
interest of a dissenting general or limited partner of a domestic limited
partnership are available for any class or group of partnership interests in
connection with any merger or exchange in which the domestic limited partnership
is a constituent entity.
92A.360. Rights of dissenting member of domestic limited-liability company.
The articles of organization or operating agreement of a domestic
limited-liability company or, unless otherwise provided in the articles of
organization or operating agreement, an agreement of merger or exchange, may
provide that contractual rights with respect to the interest of a dissenting
member are available in connection with any merger or exchange in which the
domestic limited-liability company is a constituent entity.
92A.370. Rights of dissenting member of domestic nonprofit corporation.
1. Except as otherwise provided in subsection 2, and unless otherwise
provided in the articles or bylaws, any member of any constituent domestic
nonprofit corporation who voted against the merger may, without prior notice,
but within 30 days after the effective date of the merger, resign from
membership and is thereby excused from all contractual obligations to the
constituent or surviving corporations which did not occur before his resignation
and is thereby entitled to those rights, if any, which would have existed if
there had been no merger and the membership had been terminated or the member
had been expelled.
2. Unless otherwise provided in its articles of incorporation or bylaws, no
member of a domestic nonprofit corporation, including, but not limited to, a
cooperative corporation, which supplies services described in chapter 704 of NRS
to its members only, and no person who is a member of a domestic nonprofit
corporation as a condition of or by reason of the ownership of an interest in
real property, may resign and dissent pursuant to subsection 1.
2
106
92A.380. Right of stockholder to dissent from certain corporate actions and to
obtain payment for shares.
1. Except as otherwise provided in NRS 92A.370 and 92A.390, a stockholder
is entitled to dissent from, and obtain payment of the fair value of his shares
in the event of any of the following corporate actions:
(a) Consummation of a plan of merger to which the domestic corporation is a
party:
(1) If approval by the stockholders is required for the merger by NRS
92A.120 to 92A.160, inclusive, or the articles of incorporation and he
is entitled to vote on the merger; or
(2) If the domestic corporation is a subsidiary and is merged with its
parent under NRS 92A.180.
(b) Consummation of a plan of exchange to which the domestic corporation is
a party as the corporation whose subject owner's interests will be
acquired, if he is entitled to vote on the plan.
(c) Any corporate action taken pursuant to a vote of the stockholders to
the event that the articles of incorporation, bylaws or a resolution of the
board of directors provides that voting or nonvoting stockholders are
entitled to dissent and obtain payment for their shares.
2. A stockholder who is entitled to dissent and obtain payment under NRS
92A.300 to 92A.500, inclusive, may not challenge the corporate action creating
his entitlement unless the action is unlawful or fraudulent with respect to him
or the domestic corporation.
92A.390. Limitations on right of dissent: Stockholders of certain classes or
series; action of stockholders not required for plan of merger.
1. There is no right of dissent with respect to a plan of merger or
exchange in favor of stockholders of any class or series which, at the record
date fixed to determine the stockholders entitled to receive notice of and to
vote at the meeting at which the plan of merger or exchange is to be acted on,
were either listed on a national securities exchange, included in the national
market system by the National Association of Securities Dealers, Inc., or held
by at least 2,000 stockholders of record, unless:
(a) The articles of incorporation of the corporation issuing the shares
provide otherwise; or
(b) The holders of the class or series are required under the plan of
merger or exchange to accept for the shares anything except:
(1) Cash, owner's interests or owner's interests and cash in lieu of
fractional owner's interests of:
(I) The surviving or acquiring entity; or
3
107
(II) Any other entity which, at the effective date of the plan of
merger or exchange, were either listed on a national securities
exchange, included in the national market system by the National
Association of Securities Dealers, Inc., or held of record by a
least 2,000 holders of owner's interests of record; or
(2) A combination of cash and owner's interests of the kind described
in sub-subparagraphs (I) and (II) of subparagraph (1) of paragraph
(b).
2. There is no right of dissent for any holders of stock of the surviving
domestic corporation if the plan of merger does not require action of the
stockholders of the surviving domestic corporation under NRS 92A.130.
92A.400. Limitations on right of dissent: Assertion as to portions only to
shares registered to stockholder; assertion by beneficial stockholder.
1. A stockholder of record may assert dissenter's rights as to fewer than
all of the shares registered in his name only if he dissents with respect to all
shares beneficially owned by any one person and notifies the subject corporation
in writing of the name and address of each person on whose behalf he asserts
dissenter's rights. The rights of a partial dissenter under this subsection are
determined as if the shares as to which he dissents and his other shares were
registered in the names of different stockholders.
2. A beneficial stockholder may assert dissenter's rights as to shares held
on his behalf only if:
(a) He submits to the subject corporation the written consent of the
stockholder of record to the dissent not later than the time the beneficial
stockholder asserts dissenter's rights; and
(b) He does so with respect to all shares of which he is the beneficial
stockholder or over which he has power to direct the vote.
92A.410. Notification of stockholders regarding right of dissent.
1. If a proposed corporate action creating dissenters' rights is submitted
to a vote at a stockholders' meeting, the notice of the meeting must state that
stockholders are or may be entitled to assert dissenters' rights under NRS
92A.300 to 92A.500, inclusive, and be accompanied by a copy of those sections.
2. If the corporate action creating dissenters' rights is taken by written
consent of the stockholders or without a vote of the stockholders, the domestic
corporation shall notify in writing all stockholders entitled to assert
dissenters' rights that the action was taken and send them the dissenter's
notice described in NRS 92A.430.
92A.420. Prerequisite to demand for payment for shares.
4
108
1. If a proposed corporate action creating dissenters' rights is submitted
to a vote at a stockholders' meeting, a stockholder who wishes to assert
dissenter's rights:
(a) Must deliver to the subject corporation, before the vote is taken,
written notice of his intent to demand payment for his shares if the
proposed action is effectuated; and
(b) Must not vote his shares in favor of the proposed action.
2. A stockholder who does not satisfy the requirements of subsection 1 is
not entitled to payment for his shares under this chapter.
92A.430. Dissenter's notice: Delivery to stockholders entitled to assert rights;
contents.
1. If a proposed corporate action creating dissenters' rights is authorized
at a stockholders' meeting, the subject corporation shall deliver a written
dissenter's notice to all stockholders who satisfied the requirements to assert
those rights.
2. The dissenter's notice must be sent no later than 10 days after the
effectuation of the corporate action, and must:
(a) State where the demand for payment must be sent and where and when
certificates, if any, for shares must be deposited;
(b) Inform the holders of shares not represented by certificates to what
extent the transfer of the shares will be restricted after the demand for
payment is received;
(c) Supply a form for demanding payment that includes the date of the first
announcement to the news media or to the stockholders of the terms of the
proposed action and requires that the person asserting dissenter's rights
certify whether or not he acquired beneficial ownership of the shares
before that date;
(d) Set a date by which the subject corporation must receive the demand for
payment, which may not be less than 30 nor more than 60 days after the date
the notice is delivered; and
(e) Be accompanied by a copy of NRS 92A.300 to 92A.500, inclusive.
92A.440. Demand for payment and deposit of certificates; retention of rights of
stockholder.
1. A stockholder to whom a dissenter's notice is sent must:
(a) Demand payment;
(b) Certify whether he acquired beneficial ownership of the shares before
the date required to be set forth in the dissenter's notice for this
certification; and
(c) Deposit his certificates, if any, in accordance with the terms of the
notice.
5
109
2. The stockholder who demands payment and deposits his certificates,
if any, before the proposed corporate action is taken retains all other rights
of a stockholder until those rights are canceled or modified by the taking of
the proposed corporate action.
3. The stockholder who does not demand payment or deposit his
certificates where required, each by the date set forth in the dissenter's
notice, is not entitled to payment for his shares under this chapter.
92A.450. Uncertificated shares: Authority to restrict transfer after demand for
payment; retention of rights of stockholder.
1. The subject corporation may restrict the transfer of shares not
represented by a certificate from the date the demand for their payment is
received.
2. The person for whom dissenter's rights are asserted as to shares not
represented by a certificate retains all other rights of a stockholder until
those rights are canceled or modified by the taking of the proposed corporate
action.
92A.460. Payment for shares: General requirements.
1. Except as otherwise provided in NRS 92A.470, within 30 days after
receipt of a demand for payment, the subject corporation shall pay each
dissenter who complied with NRS 92A.440 the amount the subject corporation
estimate to be the fair value of his shares, plus accrued interest. The
obligation of the subject corporation under this subsection may be enforced by
the district court:
(a) Of the county where the corporation's registered office is located; or
(b) At the election of any dissenter residing or having its registered
office in this state, of the county where the dissenter resides or has its
registered office. The court shall dispose of the complaint promptly.
2. The payment must be accompanied by:
(a) The subject corporation's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of payment, a statement of
income for that year, a statement of changes in the stockholders' equity
for that year and the latest available interim financial statements, if
any;
(b) A statement of the subject corporation's estimate of the fair value of
the shares;
(c) An explanation of how the interest was calculated;
(d) A statement of the dissenter's rights to demand payment under NRS
92A.480; and
(e) A copy of NRS 92A.300 to 92A.500, inclusive.
6
110
92A.470. Payment for shares: Shares acquired on or after date of dissenter's
notice.
1. A subject corporation may elect to withhold payment from a dissenter
unless he was the beneficial owner of the shares before the date set forth in
the dissenter's notice as the date of the first announcement to the news media
or to the stockholders of the terms of the proposed action.
2. To the extent the subject corporation elects to withhold payment, after
taking the proposed action, it shall estimate the fair value of the shares, plus
accrued interest, and shall offer to pay this amount to each dissenter who
agrees to accept it in full satisfaction of his demand. The subject corporation
shall send with its offer a statement of its estimate of the fair value of the
shares, an explanation of how the interest was calculated, and a statement of
the dissenters' right to demand payment pursuant to NRS 92A.480.
92A.480. Dissenter's estimate of fair value: Notification of subject
corporation; demand for payment of estimate.
1. A dissenter may notify the subject corporation in writing of his own
estimate of the fair value of his shares and the amount of interest due, and
demand payment of his estimate, less any payment pursuant to NRS 92A.460, or
reject the offer pursuant to NRS 92A.470 and demand payment of the fair value of
his shares and interest due, if he believes that the amount paid pursuant to NRS
92A.460 or offered pursuant to NRS 92A.470 is less than the fair value of his
shares or that the interest due is incorrectly calculated.
2. A dissenter waives his right to demand payment pursuant to this section
unless he notifies the subject corporation of his demand in writing within 30
days after the subject corporation made or offered payment for his shares.
92A.490. Legal proceeding to determine fair value: Duties of subject
corporation; powers of court; rights of dissenter.
1. If a demand for payment remains unsettled, the subject corporation shall
commence a proceeding within 60 days after receiving the demand and petition the
court to determine the fair value of the shares and accrued interest. If the
subject corporation does not commence the proceeding within the 60-day period,
it shall pay each dissenter whose demand remains unsettled the amount demanded.
2. A subject corporation shall commence the proceeding in the district
court of the county where its registered office is located. If the subject
corporation is a foreign entity without a resident agent in the state, it shall
commence the proceeding in the county where the registered office of the
domestic corporation merged with or whose shares were acquired by the foreign
entity was located.
3. The subject corporation shall make all dissenters, whether or not
residents of Nevada, whose demands remain unsettled, parties to the proceeding
as in an action against their shares. All parties must be served with a copy of
the petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.
7
111
4. The jurisdiction of the court in which the proceeding is commenced under
subsection 2 is plenary and exclusive. The court may appoint one or more persons
as appraisers to receive evidence and recommend a decision on the question of
fair value. The appraisers have the powers described in the order appointing
them, or any amendment thereto. The dissenters are entitled to the same
discovery rights as parties in other civil proceedings.
5. Each dissenter who is made a party to the proceeding is entitled to a
judgment:
(a) For the amount, if any, by which the court finds the fair value of his
shares, plus interest, exceeds the amount paid by the subject corporation;
or (b) For the fair value, plus accrued interest, of his after-acquired
shares for which the subject corporation elected to withhold payment
pursuant to NRS 92A.470.
92A.500. Legal proceeding to determine fair value: Assessment of costs and fees.
1. The court in a proceeding to determine fair value shall determine all of
the costs of the proceeding, including the reasonable compensation and expenses
of any appraisers appointed by the court. The court shall assess the costs
against the subject corporation, except that the court may assess costs against
all or some of the dissenters, in amounts the court finds equitable, to the
extent the court finds the dissenters acted arbitrarily, vexatiously or not in
good faith in demanding payment.
2. The court may also assess the fees and expenses of the counsel and
experts for the respective parties, in amounts the court finds equitable:
(a) Against the subject corporation and in favor of all dissenters if the
court finds the subject corporation did not substantially comply with the
requirements of NRS 92A.300 to 92A.500, inclusive; or
(b) Against either the subject corporation or a dissenter in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously or not in good faith
with respect to the rights provided by NRS 92A.300 to 92A.500, inclusive.
3. If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the subject corporation, the
court may award to those counsel reasonable fees to be paid out of the amounts
awarded to the dissenters who were benefited.
4. In a proceeding commenced pursuant to NRS 92A.460, the court may assess
the costs against the subject corporation, except that the court may assess
costs against all or some of the dissenters who are parties to the proceeding,
in amounts the court finds equitable, to the extent the court finds that such
parties did not act in good faith in instituting the proceeding.
5. This section does not preclude any party in a proceeding commenced
pursuant to NRS 92A.460 or 92A.490 from applying the provisions of N.R.C.P. 68
or NRS 17.115.
8
112
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Stanton V. Abrams, Michael J. Meluskey and Alan
L. Stanzler, and each of them acting solely, with full power of substitution, as
the true and lawful attorney-in-fact and proxy for the undersigned to vote all
shares of Common Stock of Senior Tour Players Development, Inc. (the "Company")
which the undersigned is entitled to vote at the Special Meeting of Shareholders
to be held at 10:00 a.m., local time, on Friday, July 24, 1998, at The Harvard
Club, 374 Commonwealth Avenue, Boston, Massachusetts, or any adjournment
thereof, hereby revoking any proxies heretofore given. Each such proxy is hereby
directed to vote upon the matters set forth below and, in his own discretion,
upon such other matters as may properly come before the Special Meeting.
Please mark your votes as
in this example. [X]
1. To approve the Agreement and Plan of Merger dated as of May 6, 1998 (the
"Merger Agreement") among the Company, Golf Club Partners L.L.C. ("GCP"),
and a wholly-owned subsidiary of GCP named STPD Acquisition Company
("Acquisition Sub"), which provides for the merger of Acquisition Sub with
and into the Company. The terms and conditions of the Merger Agreement are
described in the Company's Proxy Statement for the Special Meeting.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED ABOVE.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED "FOR" PROPOSAL 1.
Registered Owner:
Shares of Common Stock:
Signature:________________________________ Date:___________________________
Note: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such.
PLEASE SIGN, DATE AND RETURN THIS PROXY IN
THE ENCLOSED POSTAGE-PAID ENVELOPE.