Back to GetFilings.com
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED MARCH 31, 2001
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission File Number 0-14019
Ridgewood Hotels, Inc.
(Exact name of Registrant as specified in its charter)
Delaware 58-1656330
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
1106 Highway 124
Hoschton, Georgia 30548
----------------- -----
(Address of principal executive officers) (Zip Code)
Registrant's telephone number, including area code (770) 867-9830
Securities registered pursuant to Section 12(b) of the Act: None Securities
registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes _X_ No__
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. _X_
Aggregate market value of voting stock held by non-affiliates on June 30, 2001 -
$452,000; common shares outstanding on June 30, 2001 - 2,513,480 shares
(1) Portions of the Registrant's Annual Report to Shareholders for the twelve
months ended March 31, 2001 (the "2001 Annual Report to Shareholders") are
incorporated by reference in Parts I and II of this Report.
1
PART I
Item 1. Business
General
Ridgewood Hotels, Inc. (the "Company") is primarily engaged in the hotel
management business. The Company currently manages thirteen mid to luxury hotels
containing 2,413 rooms located in three states, including the Chateau Elan
Winery & Resort in Braselton, Georgia ("Chateau Elan Georgia"). The Company also
has an ownership interest in one hotel and owns undeveloped land that it holds
for sale.
Fountainhead Transactions
Fountainhead Development Corp. ("Fountainhead") is primarily engaged in the
business of developing, owning and operating luxury resort properties, including
Chateau Elan Georgia and St. Andrews Bay ("St. Andrews") in Scotland. In January
2000, the Company entered into a management agreement ("Management Agreement")
with Fountainhead to perform management services at Chateau Elan Georgia for
five years. Chateau Elan Georgia is a 306-room luxury resort located in
Braselton, Georgia, which includes an inn, conference center, winery and luxury
amenities such as a spa and golf club. In consideration for the Management
Agreement, the Company issued to Fountainhead 1,000,000 shares of its common
stock ("Fountainhead Shares"). The determined market value of the management
contract was $2,000,000 at the time of the transaction. Pursuant to the
Management Agreement, the Company will receive a base management fee equal to 2%
of the gross revenues of the properties being managed, plus an annual incentive
management fee to be determined each year based on the profitability of the
properties being managed during that year.
Also in January 2000, Fountainhead purchased 650,000 shares of common stock
from N. Russell Walden (a principal stockholder and then President of the
Company). Fountainhead also purchased 450,000 shares of the Company's
convertible preferred stock from ADT Security Services, Inc. ("ADT"). After
these transactions, Fountainhead has beneficial ownership of approximately 78%
of the Company.
As a result of the Fountainhead transaction, the Board of Directors was
expanded from three directors to seven directors, with the four vacancies filled
by Fountainhead designees. In addition, Mr. Walden resigned as President and was
replaced by Henk Evers, who previously served as the President and Chief
Executive Officer of Fountainhead and general manager of Chateau Elan Georgia.
The Company continues to seek new hotel management opportunities, including
possible opportunities to manage other properties being developed by
Fountainhead. In addition to Chateau Elan Georgia, the Company manages
Fountainhead's Chateau Elan Sebring ("Chateau Elan Sebring"), which is located
in Sebring, Florida. The Company has also received a development fee for
providing development services for
2
Fountainhead's St. Andrews resort. St. Andrews is a 209-room luxury resort that
has been under development and opened on June 14, 2001. The Company anticipates
entering into a management contract to manage St. Andrews. While the Company
intends to seek management opportunities with other Fountainhead properties,
Fountainhead has no obligation to enter into further management relationships
with the Company, and there can be no assurance that the Company will manage any
Fountainhead properties, including St. Andrews, in the future. For the fiscal
year ended March 31, 2001, the combined management and development fees for
these Fountainhead hotels were approximately $1,123,000 representing 44% of the
total management fee revenue for the year ended March 31, 2001. The Company's
management may, under appropriate circumstances, seek to acquire ownership
interests in hotels to be managed by the Company.
Management Agreements
In addition to the two management agreements with Fountainhead properties,
the Company presently manages eleven other hotel properties pursuant to
management agreements that generally provide the Company with a fee calculated
as a percentage of gross revenues of the hotel property and generally include an
incentive management fee based on a percentage of gross revenues exceeding a
negotiated amount. The contract terms governing management fees vary depending
on the size and location of the hotel and other factors relative to such hotel
property. The hotel properties currently managed by the Company are located in
Georgia, Florida and Kentucky, and are generally affiliated with nationally
recognized hospitality franchises including Holiday Inn and Ramada. Under the
terms of franchise agreements with respect to certain properties, the Company is
required to comply with standards established by the franchisers, including
property upgrades and renovations. Under the terms of the management agreements,
the owners of the hotels are responsible for all operating expenses, including
property upgrades and renovations. The hotel properties managed by the Company
are primarily full service properties that offer food and beverage services and
meeting and banquet facilities. The Company's current management agreements
generally have initial terms of one to eight years. Currently the Company has
several agreements that may be terminated with sixty days' notice.
During the twelve months ended March 31, 2001, the Company entered into
seven new management agreements. During the same period, property owners
terminated ten management agreements.
Ownership Interests
During the year ending March 31, 2001, the Company had ownership interests
in two hotel properties, a Ramada hotel in Longwood, Florida (the "Longwood
Hotel") and a Holiday Inn hotel in Louisville, Kentucky (the "Louisville
Hotel").
In May 2000, the Company sold the Longwood Hotel for $5,350,000. The
Company received net proceeds from the sale of approximately $1,310,000 and a
3
$250,000 note receivable. The $250,000 note was paid in full in 2001. The
Company also entered into a management agreement in connection with the sale.
The agreement was terminated prior to March 31, 2001.
The Louisville Hotel is owned by RW Louisville Hotel Associates, LLC
("Associates"), a Delaware limited liability company. As of March 31, 2001, the
Company, through its wholly-owned subsidiaries, was the manager of and had a
minority ownership interest in Associates. In April 2001, the Company through
its wholly-owned subsidiaries, acquired 100% of the membership interests in
Associates as further described below. The membership interests are pledged as
security for a $3,623,690 loan made by Louisville Hotel, LLC (the "LLC"). The
membership interests are also subject to an option pursuant to which the LLC has
the right to acquire the membership interests for a nominal value. Pursuant to
the terms of the loan, all revenues (including proceeds from sale or
refinancing) of Associates (after payment of expenses including a management fee
to the Company) are required to be paid to the LLC until principal and interest
on the loan are paid in full.
On September 30, 1999, the Company, which already owned a 10% interest in
the LLC, acquired an additional interest in the LLC for $2,500,000. As a result
of the transaction, the Company has an 80% economic interest in the LLC. The
$2,500,000 consideration included $124,000 in cash, the transfer of the
Company's 10% ownership interest in a hotel property in Houston, Texas and
promissory notes in the aggregate amount of $1,933,000 (the "Louisville Notes")
secured by the Company's membership interest in the LLC and the Company's
undeveloped land in Longwood, Florida and Phoenix, Arizona. The Louisville Notes
are non-recourse to the Company. The Company also entered into a new management
agreement with the Louisville Hotel pursuant to which the Company manages the
Louisville Hotel in return for a management fee equal to 3% of gross revenues
plus incentive fees for above budget revenues.
With 80% ownership, the Company is the Managing Member of the LLC.
Louisville Hotel, L.P. ("Louisville LP") has the remaining 20% ownership in the
LLC. Pursuant to the LLC's Operating Agreement dated as of May 1998, as amended
on September 30, 1999 (the "Operating Agreement"), the Company has the right at
any time to purchase the remaining 20% interest in the LLC (the "Purchase
Option"). The Operating Agreement provides that the purchase price for
Louisville's interest is equal to the sum of (a) Louisville's total capital
contributions to the LLC ($3,061,000), plus (b) any accrued but unpaid preferred
return on such capital contributions, plus (c) the residual value of the
remaining interest (the amount that would be distributed to Louisville LP if the
LLC sold the Louisville Hotel for its fair market value and distributed the
proceeds to the members pursuant to the Operating Agreement) (the "Option
Price"). Under the terms of the Operating Agreement, the Company is required, no
later than September 30, 2002, to purchase Louisville LP's remaining interest in
the LLC for the Option Price.
4
Associates is a licensee under a franchise agreement with Holiday Inn (the
"Franchise Agreement"). The Company has guaranteed Associates' obligations under
the Franchise Agreement. In the event that the Franchise Agreement is terminated
as a result of a breach of the Franchise Agreement by Associates, Associates may
be subject to liquidated damages under the Franchise Agreement equal to
approximately 36 times the monthly franchise fees payable pursuant to the
Franchise Agreement. The current monthly franchise fees are approximately
$41,000 which would result in liquidated damages of approximately $1,500,000.
In conjunction with the Franchise Agreement, Associates is subject to a
Property Improvement Plan ("the Plan"). Under the Plan, Associates is required
to make certain improvements to the hotel by December 31, 2002, with certain
interim milestones. The Company estimates that the total required improvements
will cost approximately $1,858,000. As of March 31, 2001, the Louisville Hotel
has spent approximately $330,000 on improvements and has approximately $348,000
in escrow to spend on improvements. The Company has not determined whether
Associates will be able to fund the remainder of the Plan. If Associates is
unable to fund the remainder of the Plan, the Company may be required to
complete the Plan pursuant to the Company's guaranty of the Franchise Agreement.
In March 2001 and 2000, the Company recognized writedowns of $2,000,000 and
$1,200,000, respectively, on its investment in the LLC. The March 2000 writedown
was due to the anticipated shortfall of the company's return of equity as a
result of the decreased operating performance of the Hotel. In March 2001, in
light of the deterioration of market conditions affecting the hotel industry
during the fourth quarter and subsequent to year-end and due to a further
decrease in the operating performance of the Hotel, management of the Company
concluded that their economic ownership interest had been totally impaired. The
carrying value of the investment in the LLC on the Company's books is $0 as of
March 31, 2001.
In April 2001, Ridgewood Georgia, Inc., a Georgia corporation ("Ridgewood
Georgia") and a wholly-owned subsidiary of the Company entered into that certain
Assignment and Assumption Agreement (the "Assignment Agreement") with RW Hotel
Investment Associates, L.L.C., a Delaware limited liability company
("Transferee") pursuant to which Transferee assigned to Ridgewood Georgia,
Transferee's 99% membership interest in RW Louisville Hotel Investors, L.L.C., a
Delaware limited liability company ("RW Hotel Investors"). As a result,
Ridgewood Georgia, which previously owned the remaining 1% membership interest
in RW Hotel Investors, owns 100% of the membership interests in RW Hotel
Investors (the "Membership Interests").
RW Hotel Investors, in turn, owns 99% of Associates, which owns the Hotel.
The remaining 1% interest in Associates is owned by RW Hurstbourne Hotel, Inc.,
a Delaware corporation and a wholly-owned subsidiary of the Company. Therefore,
as a
5
result of the Assignment Agreement, the Company became the indirect owner of
100% of the membership interests of Associates.
Competition and Seasonality
The hotel business is highly competitive. The demand for accommodations and
the resulting cash flow vary seasonally. Levels of demand are dependent upon
many factors, including general and local economic conditions and changes in the
number of leisure and business related travelers. The hotels managed by the
Company compete with other hotels on various bases including room prices,
quality, service, location and amenities. An increase in the number of
competitive hotel properties in a particular area could have an adverse effect
on the revenues of a Company-managed hotel in the same area that would reduce
the fees paid to the Company with respect to such property.
Undeveloped Land
The Company also owns six parcels of undeveloped land for sale, two of
which are located in Florida, and one each in Georgia, Texas, Ohio and Arizona.
The parcel located in Phoenix, Arizona and the parcel located in Longwood,
Florida are pledged as security for the Company's obligations under the
Louisville Notes and the LLC Operating Agreement. The Company has no plans to
develop these properties. The Company intends to sell the properties at such
time as the Company is able to negotiate sales on terms acceptable to the
Company. During the twelve month period ending March 31, 2001, the Company sold
two parcels of undeveloped land for a gain of approximately $19,000. There can
be no assurance that the Company will be able to sell its undeveloped land on
terms favorable to the Company. These undeveloped properties are more fully
described on pages 27 to 29 of the 2001 Annual Report to Shareholders and on
Schedule III, Real Estate and Accumulated Depreciation included therein.
Principal Office/Employees
The Company was incorporated under the laws of the State of Delaware on
October 29, 1985. In January 1997, the Company changed its name from Ridgewood
Properties, Inc. to Ridgewood Hotels, Inc. Prior to December 31, 1985, the
Company operated under the name CMEI, Inc.
The Company's principal office is located at 1106 Highway 124, Hoschton,
Georgia 30548 (telephone number (770) 867-9830). As of March 31, 2001, the
Company employed approximately 1,080 persons, of which 933 were located at the
hotels owned by third parties and managed by the Company, 135 were located at
the Louisville Hotel and 12 were located at its principal office. Payroll costs
associated with employees located at hotels are funded by the owners of such
hotels. The Company considers its relations with employees to be good.
6
Item 2. Properties
The Company does not own any real property material to conducting the
administrative aspects of its business operations. Its principal office in
Hoschton, Georgia is a month-to-month lease and consists of approximately 2,400
square feet. The space has been leased at market rates and is owned by one of
the Company's directors.
As of March 31, 2001, the Company had ownership interest in one operating
property as follows:
Name of Hotel Location # of Rooms Ownership Interest
------------- -------- ---------- ------------------
Holiday Inn Louisville, KY 267 (a)
(a) As of March 31, 2001, the Company had a 2% ownership interest in this
hotel as a member of Associates, the entity that owns the Hotel. The
Hotel serves as collateral for a $17,791,000 term loan with a
commercial lender. Through its ownership in the LLC, the Company has
an 80% economic interest in the Hotel. Subsequent to March 31, 2001,
the Company, through its subsidiaries, acquired the remaining
membership interest in Associates. The LLC has an option to acquire
the membership interests in Associates for nominal value.
The Company also owns six undeveloped properties for sale, two of which are
located in Florida, one in Georgia and one each in Texas, Ohio and Arizona. The
Company does not expect to develop these properties. These properties are more
fully described in Note 2 to the Company's consolidated financial statements set
forth in the 2001 Annual Report on pages 26 to 28 and in Schedule III, Real
Estate and Accumulated Depreciation, set forth.
Item 3. Legal Proceedings
On May 2, 1995 a complaint was filed in the Court of Chancery of the State
of Delaware (New Castle County) entitled William N. Strassburger v. Michael M.
Earley, Luther A. Henderson, John C. Stiska, N. Russell Walden, and Triton
Group, Ltd., defendants, and Ridgewood Hotels, Inc., nominal defendant, C.A. No.
14267 (the "Complaint"). The plaintiff is an individual shareholder of the
Company who purports to file the Complaint individually, representatively on
behalf of all similarly situated shareholders, and derivatively on behalf of the
Company. The Complaint challenges the actions of the Company and its directors
in consummating the Company's August 1994 repurchases of its common stock held
by Triton Group, Ltd. and Hesperus Partners Ltd. in five counts, denominated
Waste of Corporate Assets, Breach of Duty of Loyalty to Ridgewood, Breach of
Duty of Good Faith, Intentional Misconduct, and Breach of Duty of Loyalty and
Good Faith to Class. On July 5, 1995, the Company filed a timely answer
generally denying the material allegations of the complaint and asserting
several affirmative defenses. Discovery has been concluded, and on March 19,
1998, the Court dismissed all class claims, with only the derivative claims
remaining for trial. The case was tried by Vice Chancellor Jacobs during the
period February 1 through February 3, 1999.
7
On January 24, 2000, the Court rendered its Opinion. The Court found in
favor of the plaintiff and against three of the four individual
director-defendants (Messrs. Walden, Stiska and Earley). The Court held that the
repurchase transactions being challenged were unlawful under Delaware law, for
two primary reasons: (1) the transactions were entered into for the improper
purpose of entrenching Mr. Walden in his then-current position of President and
Director, and thus constituted an unlawful self-dealing transaction; and (2) the
use of the Company's assets to repurchase its common stock held by Triton Group,
Ltd. and Hesperus Partners Ltd. was not demonstrated to the Court's satisfaction
to be "entirely fair" to the minority shareholders under the entire fairness
doctrine as enunciated under Delaware law. Having found that the challenged
transactions were unlawful, the Court determined that further proceedings would
be necessary to identify the precise form that the final decree in this case
should take. Although the Court's opinion contemplates further proceedings, no
further hearing date has yet been scheduled to address the remaining remedy
issues.
On May 15, 2000, the plaintiff filed a Memorandum in Support of Judgment
After Trial requesting that the Court enter an order rescinding the Company's
issuance of preferred stock in connection with repurchase transactions and
requesting that the Court enter a judgment for damages against Messrs. Stiska,
Earley and Walden. The Company and the defendants filed written responses to
plaintiff's memorandum in August 2000.
In November 2000, the Court entered an Order Partially Implementing
Decisions and Scheduling Proceedings on Rescissory Damages (the "November 2000
Order"). The November 2000 Order, among other things, orders the rescission of
the Company's outstanding preferred stock and the issuance of 1,350,000 shares
of the Company's common stock in return therefor, but the rescission of the
preferred stock is stayed subject to the Court's entry of a final order on the
remaining issues. The November 2000 Order also provides that the Court must
determine (i) if defendant Triton will be required to return to the Company
$1,162,000 in dividends previously paid on the preferred stock and whether
interest will be required to be paid on such dividends and (ii) the amount of
rescissory damages, if any, that defendants Walden, Stiska and Earley should be
required to pay to the Company and whether such damages are subject to
pre-judgment interest from September 1, 1994. The November 2000 Order requires
the parties to provide additional evidence and briefs to the Court with respect
to the damages issues. Since November 2000, the parties have conducted
additional discovery with respect to the remedy issues. To date, no additional
briefs have been filed and no further hearing has been scheduled.
As a derivative action, the Company does not believe that the ultimate
outcome of the litigation will result in a material adverse effect on its
financial condition. However, the Company may be required to pay plaintiff's
attorneys' fees. In addition, while the Company had been advancing the legal
fees and expenses of the director-defendants prior to the Opinion, the Company
believes that it is not required to advance legal fees and expenses to the
director-defendants who were found to be liable to the Company. However, Mr.
Walden has asserted that he has the right to the continued advancement of
8
his legal fees and expenses under the Company's Certificate of Incorporation (as
amended), subject to an undertaking to pay such advances back if required under
Delaware law. Mr. Walden, through his counsel, has threatened to file a
complaint against the Company seeking to compel the advancement of such fees and
expenses and the Company is currently attempting to resolve the dispute with Mr.
Walden regarding the advancement of his fees and expenses. If the Company is
required to advance such fees and expenses, and the defendants are required to
repay such advances in the future, the defendants' financial ability to make
such repayment is not known to the Company.
On March 15, 2001, the Company filed a complaint in Fulton County State
Court entitled Ridgewood Hotels, Inc. v. Excelsior Hospitality, LLC, Fulton
County State Court, Civil Action File No. 01-VS-015898A. The Company seeks
amounts due under a management agreement pursuant to which Ridgewood was to
manage a hotel property owned by defendant Excelsior. The Company believes that
Excelsior wrongfully terminated and otherwise breached the management agreement
and seeks damages in the total amount of approximately $310,000, together with
attorneys' fees.
On April 27, 2001, Excelsior filed its Answer, denying the material
allegations in the Complaint. Excelsior also filed a Counterclaim against the
Company arising out of the same management agreement, claiming that the Company
mismanaged the hotel, acted in bad faith, and otherwise failed to perform under
the management agreement. Excelsior seeks compensatory damages in excess of
$900,000, together with punitive damages and attorneys' fees. The Company
intends to prosecute its claim and to vigorously defend against the
counterclaims.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during the
fourth quarter of the Company's fiscal year ended March 31, 2001.
9
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Information regarding the market for the Company's common stock, the
Company's dividend policy and the approximate number of holders of the common
stock at March 31, 2001 is included under the caption "Market for Registrant's
Common Equity and Related Stockholder Matters" on page 1 of the 2001 Annual
Report to Shareholders and is incorporated herein by reference. The Company made
no sales of unregistered equity securities of the Company in the twelve months
ended March 31, 2001.
Item 6. Selected Financial Data
A summary of selected financial data for the Company for the fiscal year
ended March 31, 2001, the seven months ended March 31, 2000 and the fiscal years
ended August 31, 1996 through 1999 is included under the caption entitled
"Selected Financial Data" on page 2 of the 2001 Annual Report to Shareholders
and is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Information regarding the Company's financial condition, changes in
financial condition and results of operations is included under the caption
entitled "Management's Discussion and Analysis of Financial Condition and
Results of Operations" on pages 5 through 14 of the 2001 Annual Report to
Shareholders and is incorporated herein by reference.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The Company has no material exposure to the market risks covered by this
Item.
Item 8. Financial Statements
The Company's consolidated financial statements and notes thereto, which
are included on pages 15 through 50 of the 2001 Annual Report to Shareholders
under the following captions listed below, are incorporated herein by reference.
Consolidated Balance Sheets at March 31, 2001 and 2000.
Consolidated Statements of Operations for the year ended March 31, 2001,
for the seven months ended March 31, 2000 and 1999 (unaudited) and for the
years ended August 31, 1999 and 1998.
10
Consolidated Statements of Shareholders' Investment for the year ended
March 31, 2001, for the seven months ended March 31, 2000 and for the years
ended August 31, 1999 and 1998.
Consolidated Statements of Cash Flows for the year ended March 31, 2001,
for the seven months ended March 31, 2000 and 1999 (unaudited) and for the
years ended August 31, 1999 and 1998.
Notes to Consolidated Financial Statements.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
(a) Previous Independent Accountants
(i) On March 28, 2000, the Company dismissed PricewaterhouseCoopers
LLP as its independent accountants.
(ii) The reports of PricewaterhouseCoopers LLP on the financial
statements for the fiscal years ended August 31, 1998 and August
31, 1999 contained no adverse opinion or disclaimer of opinion
and were not qualified or modified as to uncertainty, audit scope
or accounting principle.
(iii) The members of the Company's Board of Directors were consulted
and approved the decision to change independent accountants.
(iv) In connection with its audits for the fiscal years ended August
31, 1998 and August 31, 1999 and through March 28, 2000, there
have been no disagreements with PricewaterhouseCoopers LLP on any
matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements,
if not resolved to the satisfaction of PricewaterhouseCoopers
LLP, would have caused them to make reference thereto in their
report on the financial statements for such years.
(v) During the fiscal years ended August 31, 1998 and August 31, 1999
and through March 28, 2000, there have been no reportable events
(as defined in Regulation S-K Item 304(a)(1)(v)) with
PricewaterhouseCoopers LLP.
(vi) PricewaterhouseCoopers LLP furnished the Company with a letter
addressed to the SEC stating that it agrees with the above
statements. A copy of such letter, dated March 31, 2000, is filed
as an Exhibit 16 to the Company's Current Report on Form 8-K
filed on March 31, 2000.
11
(b) New Independent Accountants
(i) The Company engaged Arthur Andersen LLP as its new independent
accountants as of March 28, 2000. During the two most recent
fiscal years prior to retaining Arthur Andersen, LLP and through
March 28, 2000, the Company had not consulted with Arthur
Andersen LLP regarding (1) the application of accounting
principles to a specific transaction, either completed or
proposed, or the type of audit opinion that might be rendered; or
(2) the matter of a disagreement or reportable event with the
former auditor (as described in Regulation S-K Item 304(a)(2)).
12
PART III
Item 10. Directors and Executive Officers
Set forth below are the names, ages (as of March 31, 2001), positions and
offices held and a brief description of the business experience during the past
five years of the directors and executive officers of the Company.
Stacey H. Davis (age 38) has served as a director of the Company since
February 23, 2001. Ms. Davis is currently the President and Chief Executive
Officer of the Fannie Mae Foundation. Prior to her appointment as President and
Chief Executive Officer with the Fannie Mae Foundation, Ms. Davis served as vice
president for Housing and Community Development in the Fannie Mae Foundation's
Southeastern Regional Office. She was also a public finance investment banker
for five years in New York and Atlanta. While in Atlanta, she served as
treasurer and chair of the Finance Committee for the Fulton-Dekalb Hospital
Authority, and on the Atlanta Urban League, Research Atlanta, and the Herndon
Foundation Boards. She currently serves on the Policy Advisory Board of the
Joint Center for Housing Studies at Harvard University, Woman's in Street
Village, Woman's Policy Inc., the Museum of African Art and the Washington
Ballet.
Henk H. Evers (age 42) has served as President and Chief Operating Officer
of the Company since January 11, 2000 and as a director of the Company since
February 3, 2000. Since January 1999, Mr. Evers has served as the Chief
Executive Officer of Fountainhead Development Corp., Inc. ("Fountainhead"). From
November 1994 until January 1999, Mr. Evers was the General Manager of the
Chateau Elan Winery and Resort, where he was in charge of developing the Chateau
Elan brand name and properties in Georgia, California, Florida and Scotland.
Prior to that, Mr. Evers was a member of the executive committee for various
Marriott International properties for approximately 13 years.
Luther A. Henderson (age 80) has been a director of the Company since its
formation in 1985. From 1983 to 1985, Mr. Henderson served as a director of
CMEI, Inc., the Company's predecessor. From 1980 to 1993, Mr. Henderson served
as a director of Pier 1 Imports Inc., a commercial retailer. Mr. Henderson is
also a member of the Board of Directors of Beeba's Creations, Inc. and is
President of Pirvest, Inc.
Sheldon E. Misher (age 60) has served as Secretary of the Company since
January 11, 2000 and as a director of the Company since February 3, 2000. Since
May 1999, Mr. Misher has been associated with Commonwealth Associates, a venture
capital and merchant banking firm located in New York, New York. From 1969 to
1999, Mr. Misher practiced law with the firm of Bacher, Tally, Polevoy & Misher,
located in New York, New York, where he was most recently a Senior Partner.
Donald E. Panoz (age 65) has served as Chief Executive Officer of the
Company since January 11, 2000 and as Chairman of the Board since February 3,
2000. In 1986, Mr. Panoz founded Fountainhead and has served as its Chairman
since inception. Since
13
July 1999, Mr. Panoz has served as the Chairman of Elan Motor Sports
Technologies, Inc., an auto racing design, development and manufacturing company
located in Braselton, Georgia. Since 1997, Mr. Panoz has served as the Chairman
of Panoz Motor Sports, a race car manufacturer and competitor that he founded.
Since 1996, Mr. Panoz has served as the Chairman and Chief Executive Officer of
L'Auberge International Hospitality Company, a hotel and resort management
company that he co-founded with Nancy C. Panoz. From 1969 until 1996, Mr. Panoz
served as the Chairman and Chief Executive Officer of Elan Corporation plc, a
leading worldwide pharmaceutical research and development company located near
Dublin, Ireland that he co-founded with Nancy C. Panoz. Since 1992, Mr. Panoz
has been a director of Warner Chilcott plc, a publicly traded pharmaceutical
company headquartered in Dublin, Ireland, and served as its Chairman from 1995
to 1998. Since 1981, Mr. Panoz has served as the Chairman and Chief Executive
Officer of Chateau Elan Winery and Resort, a 422-room inn, conference center and
winery located approximately 40 miles northeast of Atlanta, Georgia. Mr. Panoz
also serves on the Board of Directors of the Georgia Chamber of Commerce. Mr.
Panoz is married to Nancy C. Panoz.
Nancy C. Panoz (age 64) has served as Vice Chairman of the Board of
Directors of the Company since February 3, 2000. Since 1996, Mrs. Panoz has also
served as the Vice Chairman of L'Auberge International Hospitality Company, a
company that she co-founded with her husband. In 1989, Mrs. Panoz became
President of the Chateau Elan Winery and Resort that she founded with Donald E.
Panoz in 1981. In 1985, Mrs. Panoz founded Elan Natural Waters, Inc., a company
that owns and operates a mineral water bottling plant in Blairsville, Georgia,
and has served as its President and Chairman since inception. In 1985, Mrs.
Panoz founded Nanco Holdings, Inc., an investment and real estate holding
company. In 1969, Mrs. Panoz co-founded Elan Corporation with Donald E. Panoz,
and served as Elan's Managing Director from 1977 to 1983 and its Vice Chairman
from 1983 to 1995. Mrs. Panoz currently serves on the board of directors of
numerous non-profit organizations, including the Atlanta Convention and Visitors
Bureau, the Georgia Chamber of Commerce and the Gwinnett Foundation, Inc. Mrs.
Panoz is married to Donald E. Panoz.
Anthony Mastandrea (age 35) is a director of the Company. Since December
1998, Mr. Mastandrea has been the Chief Financial Officer and a director of
Fountainhead Holdings, Ltd. From May 1994 until November 1998, Mr. Mastandrea
was the Controller for Fountainhead Development Corp., Inc. Prior to joining
Fountainhead Development Corp., Inc., Mr. Mastandrea was a manager with KPMG
Peat Marwick in Atlanta, Georgia and is a Certified Public Accountant.
With the exception of Donald E. Panoz and Nancy C. Panoz, there are no
family relationships among any of the executive officers or directors of the
Company. Executive officers of the Company are elected or appointed by the Board
and hold office until their successors are elected or until death, resignation
or removal.
14
Item 11. Executive Compensation
Compensation of Non-Employee Directors
During fiscal year ending March 31, 2001, directors who were not officers
of the Company received a retainer of $13,200 plus $800 for each Board meeting
attended. All directors were reimbursed for expenses incurred in connection with
attending Board and committee meetings.
On June 13, 2000, the Company issued non-qualified stock options to
purchase up to 25,000 shares of common stock at an exercise price of $2.25 per
share to Mr. Misher in connection with his serving as a director and Secretary
of the Company.
Executive Compensation
The following Summary Compensation Table sets forth the compensation for
the past three fiscal years awarded or paid by the Company to all individuals
serving as Chief Executive Officer or President of the Company at any time
during the fiscal year ended March 31, 2001.
Summary Compensation Table
Annual Compensation
Name and Fiscal
Principal Position Year Salary
Henk H. Evers 2001(2) $205,000
President 2000(1) 75,000
Donald E. Panoz 2001(2) 0
Chief Executive Officer 2000(1) 0
- ---------------
(1) Information shown is for the seven month period ending March 31, 2000. Mr.
Evers was appointed as President and Chief Operating Officer effective
January 11, 2000. At the Company's request, Fountainhead paid Mr. Evers'
salary for the
15
period ending March 31, 2000 as an advance to the Company. The Company
accrued $75,000 in expenses relating to the advanced compensation for the
period ending March 31, 2000. Mr. Panoz was appointed Chief Executive
Officer of the Company on January 11, 2000. Mr. Panoz received no
compensation for serving as Chief Executive Officer of the Company for the
period ending March 31, 2000.
(2) Information shown is for the fiscal year ending March 31, 2001. The Company
has accrued $221,000 in expenses relating to the advanced compensation and
benefits for the year ended March 31, 2001. Mr. Panoz received no
compensation for serving as Chief Executive Officer of the Company during
the fiscal year ended March 31, 2001. The accrued expenses represent Mr.
Evers' salary of $305,000 and the cost of his and benefits of $16,000, less
$71,000 allocated to Chateau Elan Georgia in return for services Mr. Evers
provided to Chateau Elan Georgia from September, 2000 through March 31,
2001 and $29,000 allocated to Fountainhead in return for services Mr. Evers
provided to Fountainhead during the fiscal year ended March 31, 2001.
(3) The amounts shown in this column consist of Company matching contributions
on behalf of the named person under the Ridgewood Hotels Employee Savings
Plan.
On July 1, 2000, the Company issued stock options to purchase up to 90,000
shares of common stock at an exercise price of $2.00 per share to Mr. Evers in
connection with his serving as President of the Company. The options vest over a
four year period at the rate of 25% per year.
Aggregated Stock Option Exercises in Fiscal Year 2001 and Fiscal Year-End Option
Values
During the fiscal year ending March 31, 2001, no officers named in the
Summary Compensation Table exercised any options. In connection with his
resignation as President and Chief Executive Officer on January 11, 2000 and the
execution of a Consulting Agreement between Mr. Walden and the Company
(described below), Mr. Walden agreed to the cancellation of 150,000 options to
purchase common stock of the Company. The Company paid Mr. Walden $25,000 as
consideration for his cancellation of the options. Mr. Walden currently has no
unexercised options.
Employment and Termination Agreements
Mr. Walden, the Company's former President and Chief Executive Officer, was
a party to a Post-Employment Consulting Agreement with the Company, dated
September 4, 1991 and amended as of August 13, 1998 (the "Employment
Agreement"), until such agreement was terminated effective January 11, 2000.
16
On January 11, 2000, Mr. Walden entered into a Consulting Agreement with
the Company (the "Consulting Agreement"). Pursuant to the terms of the
Consulting Agreement, Mr. Walden served as a consultant to the Company for a
period of six months, for which he received a payment of $50,000. The Company
also agreed to provide Mr. Walden with health insurance benefits substantially
similar to those offered to employees of the Company for a period of three
years. In the Consulting Agreement, Mr. Walden released all claims against the
Company except with respect to such health insurance benefits and compensation
and terminated his Employment Agreement and participation in the Company's
Supplemental Retirement and Death Benefit Plan (as described below). Mr. Walden
also agreed to the cancellation of 150,000 options to purchase common stock of
the Company, for which the Company agreed to pay him $25,000.
Supplemental Retirement and Death Benefit Plan
The Ridgewood Hotels, Inc. Supplemental Retirement and Death Benefit Plan
(the "SERP") was adopted, effective January 1, 1987, to provide supplemental
retirement benefits for selected employees of the Company. As of March 31, 2001
no employees of the Company were participating in the SERP.
Mr. Walden was the sole participant in the SERP until January 11, 2000,
when he was replaced as an officer of the Company. He subsequently entered into
a Consulting Agreement with the Company in which he agreed to a full termination
of his rights and benefits under the SERP. In connection therewith, the Company
agreed to pay Mr. Walden $55,000 per year for a period of 15 years beginning at
the age of 65 in accordance with the terms and conditions of the SERP. Such
annual payment represented a decrease in the amount of benefit to which Mr.
Walden would otherwise have been entitled under the SERP.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information as of June 30, 2001 regarding
the beneficial ownership of the capital stock of the Company by (i) each person
who is currently a director of the Company; (ii) each person who is a nominee
for election as a director of the Company; (iii) each executive officer of the
Company named in the Summary Compensation table included elsewhere herein; (iv)
each beneficial owner of more than 5% of the common stock and preferred stock of
the Company; and (v) all directors and executive officers as a group.
17
Class of No. of Shares
Name and Address of Shares Bene- Beneficially Percentage
Beneficial Owner (1) ficially Owned Owned of Class
-------------------- -------------- ----- --------
Fountainhead Development Corp., Inc. Common Stock 3,000,000 (2) 77.7%
1394 Broadway Avenue Series A
Braselton, GA 30157 Preferred Stock 450,000 (3) 100.0%
Donald E. Panoz + Common Stock 3,000,000 (4)(5) 77.7%
Series A
Preferred Stock 450,000 (3)(5) 100.0%
Nancy C. Panoz + Common Stock 3,000,000 (4)(5) 77.7%
Series A
Preferred Stock 450,000 (3)(5) 100.0%
Sheldon E. Misher + Common Stock 25,000 (6) 1%
Henk H. Evers + ++ Common Stock 0 0%
Stacey H. Davis + Common Stock 0 0%
Anthony Mestandrea + Common Stock 0 0%
Luther A. Henderson +
5608 Malvey Avenue, Suite 104-A
Ft. Worth, TX 76107 Common Stock 58,800 (7) 2.3%
All executive officers and directors Common Stock 3,083,800 (5)(8) 79.8%
as a group (7 persons) Series A
Preferred Stock 450,000 (3)(5) 100.0%
- ---------------
+ Director of the Company
++ Executive Officer
(1) Unless otherwise indicated, the mailing address of each beneficial owner is
1106 Highway 124, Hoschton, Georgia 30548. Information as to the beneficial
ownership of common stock has either been furnished to the Company by or on
behalf of the indicated persons or is taken from reports on file with the
Securities and Exchange Commission.
(2) Includes (i) 1,350,000 shares of common stock that may be received upon the
conversion of the preferred shares.
(3) Fountainhead acquired the preferred stock from ADT Security Services, Inc.
("ADT"). Under the terms of the stock purchase agreement with respect to
the shares, Fountainhead may be required to return the shares to ADT in the
event that ADT is required by court order, in litigation pending in the
Court of Chancery in Delaware involving ADT (see "Legal Proceedings"), to
return the preferred stock to the Company. If, as a result of the return of
the preferred stock, ADT receives common stock, Fountainhead has agreed to
acquire such shares from ADT.
18
(4) Includes (i) 1,350,000 shares of common stock that may be received upon the
conversion of the preferred shares held by Fountainhead, (ii) 1,650,000
shares of common stock held by Fountainhead, and (iii) 65,000 shares of
common stock underlying an option granted to Fountainhead by Mr. Walden
that is immediately exercisable.
(5) Mr. and Mrs. Panoz, who are husband and wife, are directors and
collectively may be deemed to beneficially own all of the voting stock of
Fountainhead Holdings, Ltd. ("Holdings"), which in turn owns all of the
voting stock of Fountainhead. Although they may be deemed to meet the
definition of beneficial ownership with respect to the voting stock of
Holdings, they have no economic interest in such voting stock. Because
these shares of the Company are held of record by Fountainhead, each of Mr.
and Mrs. Panoz may be deemed to be a beneficial owner of all such shares.
(6) Represents 25,000 shares of common stock underlying options that are
currently exercisable.
(7) Includes 18,000 shares of common stock underlying options that are
currently exercisable.
(8) Includes (i) 1,350,000 shares of common stock that may be received upon the
conversion of the preferred shares held by Fountainhead; and (ii) 43,000
shares of common stock underlying options that are currently exercisable.
Item 13. Certain Relationships and Related Transactions
On January 10, 2000, the Company entered into the Management Agreement with
Fountainhead, pursuant to which Fountainhead retained the Company to perform
management services at Chateau Elan Winery and Resort, one of Fountainhead's
properties, for a period of five years. In consideration of Fountainhead's
agreement to enter into the Management Agreement and a payment of $10,000 by
Fountainhead to the Company, the Company issued to Fountainhead 1,000,000 shares
of common stock. The determined market value of the management contract was
$2,000,000 at the time of the transaction. In the Management Agreement,
Fountainhead agreed to pay the Company a base management fee equal to 2% of the
gross revenues of the properties being managed, plus an annual incentive
management fee to be determined each year based on the profitability of the
properties being managed during that year.
The Management Agreement has a term of five years, but is terminable upon
the transfer by Fountainhead of all or a material portion of the properties
covered by the management agreement. If the management agreement is terminated
upon such a transfer or upon the occurrence of an event of default by
Fountainhead, Fountainhead shall pay to the Company a portion of the projected
fees owed to the Company under the Agreement, with adjustments based on the term
of the management agreement remaining. In such
19
event, Fountainhead may elect to surrender to the Company shares of common stock
in lieu of a cash payment.
The Company also manages one other Fountainhead hotel in Sebring, Florida
and received a development fee with respect to Fountainhead's resort under
development in St. Andrews, Scotland. The resort opened on June 14, 2001. The
Company anticipates receiving a management contract to manage the resort but
there are no assurances that it will receive a contract. See further discussion
below.
At the request of the Company, since January 11, 2000, Fountainhead has
paid the salary of the Company's President as an advance to the Company. The
Company accrued $296,000 in expenses relating to the advanced compensation and
benefits. In March 2001, the Company reduced the advanced compensation liability
for the Company's President by $90,000 by netting accrued development fees owed
to the Company by Fountainhead for managing their resort in St. Andrews against
this liability. After reducing the advanced compensation by $90,000, there is
$206,000 of accrued liability remaining at March 31, 2001.
Effective September, 2000, the Company's President has assumed certain
responsibilities previously handled by the general manager of Chateau Elan
Georgia and Chateau Elan Georgia has agreed to assume $125,000 of the
President's annual salary of $305,000. In addition, the Company's President is
performing certain services for Fountainhead (in addition to the services for
which the Company received a development fee) and, while he continues to perform
such services, Fountainhead has agreed to assume $50,000 of the President's
annual salary. For the fiscal year ended March 31, 2001, the portion of the
President's salary charged to Chateau Elan Georgia and Fountainhead was $71,000
and $29,000, respectively.
In the normal course of its business of managing hotels, the Company may
incur various expenses on behalf of Fountainhead or its subsidiaries that the
Company pays and is reimbursed by Fountainhead for these expenditures. As of
March 31, 2001, Fountainhead owed the Company approximately $402,000 for such
unpaid management fees and expenses.
The Company has an agreement with Chateau Elan Georgia pursuant to which
Chateau Elan Georgia's Human Resource Director serves part-time as the Company's
Human Resource Director in return for which the Company is responsible for a
portion of his salary. For the year ending March 31, 2001, the Company incurred
charges of approximately $40,000 representing approximately 30% of his salary.
Chateau Elan Georgia deducts the Company's portion of the salary from the
monthly management fees Chateau Elan Georgia owed to the Company.
The Company leases its office space for $1,850 per month from Nanco Co.,
which is owned by one of the Company's directors. The lease terms are
month-to-month and at market rates for comparable space.
20
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a)(1) The following financial statements, together with the applicable
reports of independent public accountants, are set forth on pages 15 through 52
of the 2001 Annual Report to Shareholders and are incorporated by reference at
Item 8 herein.
Reports of Independent Public Accountants.
Consolidated Balance Sheets at March 31, 2001 and 2000.
Consolidated Statements of Operations for the year ended March 31, 2001,
the seven months ended March 31, 2000 and 1999 (unaudited) and for the
years ended August 31, 1999 and 1998.
Consolidated Statements of Shareholders' Investment for the year ended
March 31, 2001, for the seven months ended March 31, 2000 and for the years
ended August 31, 1999 and 1998.
Consolidated Statements of Cash Flows for the year ended March 31, 2001,
for the seven months ended March 31, 2000 and 1999 (unaudited) and for the
years ended August 31, 1999 and 1998.
Notes to Consolidated Financial Statements.
(a)(2) The following financial statement schedule, together with the
applicable report of independent public accountants, are filed as a part of this
Report:
Page Number(s)
In Form 10-K
Reports of Independent Public Accountants
on Financial Statement Schedule S-1 thru S-2
III - Real Estate and Accumulated Depreciation -
March 31, 2001 S-3 thru S-5
All other schedules are omitted because they are not applicable or because the
required information is given in the financial statements or notes thereto set
forth on pages 15 through 50 of the 2001 Annual Report to Shareholders
incorporated herein by reference.
(a)(3) The exhibits filed herewith or incorporated by reference herein are
set forth on the Exhibit Index on pages E-1 through E-9 hereof.
21
No reports on Form 8-K were filed during the fourth quarter of the
Company's fiscal year ended March 31, 2001.
22
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
RIDGEWOOD HOTELS, INC.
By: /s/ Henk H. Evers
----------------------------------
Henk H. Evers,
President, Chief Operating Officer
Dated: July 16, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated:
/s/ Peter M. Conboy /s/ Anthony Mastandrea
- ------------------------------- ------------------------------------
Peter M. Conboy Anthony Mastandrea, Director
Director of Finance and Accounting
/s/ Sheldon E. Misher
- ------------------------------- ------------------------------------
Stacey H. Davis, Director Sheldon E. Misher, Director
/s/ Henk H. Evers /s/ Donald E. Panoz
- ------------------------------- ------------------------------------
Henk H. Evers, President, Chief Donald E. Panoz, Director
Operating Officer and Director
/s/ Nancy C. Panoz
- ------------------------------- ------------------------------------
Luther A. Henderson, Director Nancy C. Panoz, Director
Dated: July 16, 2001
23
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To Ridgewood Hotels, Inc.:
We have audited in accordance with auditing standards generally accepted in the
United States the consolidated financial statements included in RIDGEWOOD
HOTELS, INC.'s annual report to shareholders incorporated by reference in this
Form 10-K, and have issued our report thereon dated July 10, 2001. Our audits
were made for the purpose of forming an opinion on those statements taken as a
whole. The financial statement schedule listed in Item 14(a) of this Form 10-K
is the responsibility of the Company's management, is presented for the purpose
of complying with the Securities and Exchange Commission's rules and is not part
of the basic financial statements. This schedule as it relates to the
information as of March 31, 2001 and for the fiscal year ended March 31, 2001
and the seven months ended March 31, 2000 has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
July 10, 2001
S-1
Report of Independent Accountants on
Financial Statement Schedule
November 17, 1999
To the Board of Directors of Ridgewood Hotels, Inc.
Our audits of the consolidated financial statements referred to in our report
dated November 17, 1999 appearing in the 1999 Annual Report to Shareholders of
Ridgewood Hotels, Inc. (which report and consolidated financial statements are
incorporated by reference in this Annual Report on Form 10-K) also included an
audit of the Financial Statement Schedule listed in Item 14(a) of this Schedule
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.
PRICEWATERHOUSECOOPERSLLP
Atlanta, Georgia
S-2
SCHEDULE III
Page 1 of 3
RIDGEWOOD HOTELS, INC. AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
MARCH 31, 2001
(000's Omitted)
Cost Capitalized Gross Amount at Which
Initial Cost Subsequent to Carried at March 31, 2001
to Company Acquisition (A)(B)(D)
-------------------------- -------------------------- ----------------------------------------
Building Building Accumu-
Encum- and and lated Date of
brances Improve- Improve- Carrying Improve- Deprecia- Construc- Date
Description (E) Land ments ments Costs Land ments Total tion (C) tion Acquired
- -------------- ----------- --------- --------- ---------- -------- ------ -------- -------- ------- -------- ---------
Land-
Georgia $ -- $ 58 $ -- $ -- $ -- $ 35 $ -- $ 35 $ -- -- Dec-75
Texas -- 5,338 -- 2 -- 3,582 2 3,584 -- -- Dec-85
Florida 1,933,000 516 -- 10 -- 225 10 235 -- -- Mar-85
Florida -- -- -- -- -- -- -- -- -- -- Jul-88
Arizona 1,933,000 978 -- 110 -- 445 110 555 -- -- Mar-85
Ohio -- 1,006 -- 180 -- 67 79 146 -- -- Dec-77
---------- --------- ------- ------- ------- ------- ------ -------- ------
TOTAL $1,933,000 $ 7,896 $ -- $ 302 $ -- $ 4,354 $ 201 $ 4,555 $ --
========== ========= ======= ======= ======= ======= ====== ======== ======
S-3
SCHEDULE III
Page 2 of 3
(A) Except as discussed in Note 1 to the "Notes to Consolidated Financial
Statements," real estate owned is carried at the lower of cost or fair
value less costs to sell. At March 31, 2001, the amount of the
allowance for possible losses was approximately $3,155,000, which
related to land held for sale.
(B) Reconciliation of real estate properties (000's omitted):
For the
Year For the Seven
Ended Months Ended For the Year Ended
3/31/01 3/31/00 8/31/99 8/31/98
------- -------------- ------- -------
Balance,
Beginning $8,086 $8,300 $8,735 $9,553
of period
Additions
During the
Period:
Acquisitions -- -- -- --
Capitalized -- 13 65 88
Costs
Deductions
during
the
period:
Real estate
sold or
assets
retired
(on which
financing
was pro-
vided by
the
Company
in
certain
cases) 3,531 227 500 906
------ ------ ------ ------
Balance,
end of
period $4,555 $8,086 $8,300 $8,753
====== ====== ====== ======
S-4
SCHEDULE III
Page 3 of 3
(C) Operating properties and any related improvements are being
depreciated by the "straight line" method over the estimated useful
lives of such assets, which are generally 30 years for buildings and 5
years for furniture and fixtures.
Reconciliation of accumulated depreciation (000's omitted):
For the Year For the Seven Months For the Year Ended
Ended 3/31/01 Ended 3/31/00 8/31/99 8/31/98
------------- -------------------- ------- -------
Balance,
Beginning $ 1,855 $ 1,781 $ 1,679 $ 1,567
of period
Additions
during the
period -- 74 130 139
Depreciation
associated
with assets
sold or retired 1,855 -- (28) (27)
------- ------- ------- -------
Balance, end
of period $-0- $ 1,855 $ 1,781 1,679
======= ======= ======= =======
(D) The aggregate cost for federal income tax purposes is approximately
$6,667,000 at March 31, 2001.
(E) These parcels of land cross-collateralize three promissory notes
totaling $1,933,000 that the Company is obligated to pay by September
30, 2002 in conjunction with the Company's ownership of a hotel in
Louisville, Kentucky.
S-5
EXHIBIT INDEX
Report on Form 10-K for the fiscal year ended March 31, 2001
Page Number
Exhibit In Manually
Number Description Signed Original
- ------ ----------- ---------------
3 (a) Certificate of Incorporation of Registrant.*
3 (b) By-Laws of Registrant.*
3 (c) Certificate of Amendment to the Certificate of Incorporation
(filed as an Exhibit to Registrant's Form 10-K for the
fiscal year ended August 31, 1987 and incorporated herein by
reference).
3 (d) Certificate of Amendment to the Certificate of Incorporation
of the Registrant (filed as an Exhibit to Registrant's Form
10-K for the fiscal year ended August 31, 1989 and
incorporated herein by reference).
3 (e) Certificate of Amendment to the Certificate of Incorporation
of Ridgewood Properties, Inc. dated May 23, 1991 (filed as
an Exhibit to Registrant's Form 10-K for the fiscal year
ended August 31, 1991 and incorporated herein by reference).
3(f) Certificate of Amendment to the Certificate of Incorporation
of Ridgewood Properties, Inc. dated March 30, 1993 (filed as
an Exhibit to Registrant's Form 10-Q for the quarter ended
February 28, 1993 and incorporated herein by reference).
3 (g) Certificate of Amendment to the Certificate of Incorporation
of Ridgewood Properties, Inc. dated January 26, 1994 (filed
as Exhibit 3 to Registrant's Form 10-Q for the quarter ended
February 28, 1994 and incorporated herein by reference).
3 (h) Certificate of Amendment to the Certificate of Incorporation
of Ridgewood Hotels, Inc. (filed as an Exhibit to
Registrant's Form 8-K on February 5, 1997, and incorporated
herein by reference).
E-1
4 (a) Stock Purchase Agreement between Ridgewood Properties, Inc.
and Triton Group Ltd., dated as of August 15, 1994 (filed as
an Exhibit to Registrant's Form 8-K on August 15, 1994, and
incorporated herein by reference).
4 (b) August 15, 1994 Press Release issued by Ridgewood
Properties, Inc. (filed as an Exhibit to Registrant's Form
8-K on August 15, 1994, and incorporated herein by
reference).
4 (c) Certificate of Designation, Preferences and Rights of Series
A Convertible Preferred Stock of the Registrant (filed as an
Exhibit to Registrant's Registration Statement on Form S-8
filed on November 8, 1994 (No. 33-866084) and incorporated
herein by reference).
4 (d) Notice of Exercise by N. Russell Walden dated January 31,
1997 (filed as an Exhibit to Registrant's Form 8-K on
February 5, 1997, and incorporated herein by reference).
4(e) Notice of Exercise by Karen S. Hughes dated January 31,
1997 (filed as an Exhibit to Registrant's Form 8-K on
February 5, 1997, and incorporated herein by reference).
4(f) Share Security Agreement between N. Russell Walden and
Ridgewood Properties, Inc. dated January 31, 1997 (filed as
an Exhibit to Registrant's Form 8-K on February 5, 1997, and
incorporated herein by reference).
4 (g) Share Security Agreement between Karen S. Hughes and
Ridgewood Properties, Inc. dated January 31, 1997 (filed as
an Exhibit to Registrant's Form 8-K on February 5, 1997, and
incorporated herein by reference).
10 (a) Employment Agreement between N. R. Walden and CMEI, Inc.,
dated March 28, 1985.*
10 (b) Bill of Sale and Assumption of Liabilities between CMEI,
Inc. and Ridgewood Properties, Inc. dated December 9, 1985.*
E-2
10 (c) Ridgewood Properties, Inc. Supplemental Retirement and Death
Benefit Plan dated January 1, 1987 (filed as an Exhibit to
Registrant's Form 10-K for the fiscal year ended August 31,
1988 and incorporated herein by reference).
10 (d) Post-Employment Consulting Agreement between N. R. Walden
and Ridgewood Properties, Inc. dated September 4, 1991
(filed as an Exhibit to Registrant's Form 10-K for the
fiscal year ended August 31, 1991 and incorporated herein by
reference).
10 (e) Post-Employment Consulting Agreement between Karen S. Hughes
and Ridgewood Properties, Inc. dated September 4, 1991
(filed as an Exhibit to Registrant's Form 10-K for the
fiscal year ended August 31, 1991 and incorporated herein by
reference).
10 (f) Post-Employment Consulting Agreement between Byron T. Cooper
and Ridgewood Properties, Inc. dated September 4, 1991
(filed as an Exhibit to Registrant's Form 10-K for the
fiscal year ended August 31, 1991 and incorporated herein by
reference).
10 (g) Post-Employment Consulting Agreement between M. M.
McCullough and Ridgewood Properties, Inc. dated September 4,
1991 (filed as an Exhibit to Registrant's Form 10-K for the
fiscal year ended August 31, 1991 and incorporated herein by
reference).
10 (h) Ridgewood Properties, Inc. Stock Option Plan dated March 30,
1993 and as amended September 14, 1993 (filed as an Exhibit
to Registrant's Form 10-Q for the quarter ended February 28,
1994, and incorporated herein by reference).
10 (i) Stock Option Agreement between Luther A. Henderson and
Ridgewood Properties, Inc. dated April 1, 1993 and as
approved on January 12, 1994 (filed as an Exhibit to
Registrant's Form 10-Q for the quarter ended February 28,
1994, and incorporated herein by reference).
E-3
10 (j) Stock Option Agreement between Karen S. Hughes and Ridgewood
Properties, Inc. dated April 1, 1993 and as approved on
January 12, 1994 (filed as an Exhibit to Registrant's Form
10-Q for the quarter ended February 28, 1994, and
incorporated herein by reference).
10 (k) Stock Option Agreement between N. R. Walden and Ridgewood
Properties, Inc. dated April 1, 1993 and as approved on
January 12, 1994 (filed as an Exhibit to Registrant's Form
10-Q for the quarter ended February 28, 1994, and
incorporated herein by reference).
10 (l) Stock Option Agreement between Karen S. Hughes and Ridgewood
Properties, Inc. dated January 31, 1994 (filed as an Exhibit
to Registrant's Form 10-Q for the quarter ended February 28,
1994, and incorporated herein by reference).
10 (m) Stock Option Agreement between N. R. Walden and Ridgewood
Properties, Inc. dated January 31, 1994 (filed as an Exhibit
to Registrant's Form 10-Q for the quarter ended February 28,
1994, and incorporated herein by reference).
10 (n) Ridgewood Properties, Inc. 1993 Stock Option Plan, as
amended on October 26, 1994 (filed as an Exhibit to
Registrant's Registration Statement on Form S-8 filed on
November 8, 1994 (No. 33-86084) and incorporated herein by
reference).
10 (o) Amended and Restated Basic Agreement between RW Hotel
Investment Partners, L.P. and Ridgewood Hotels, Inc. dated
August 14, 1995 (filed as an Exhibit to Registrant's Form
10-K for the fiscal year ended August 31, 1995, and
incorporated herein by reference).
10 (p) Amended and Restated Limited Partnership Agreement of RW
Hotel Partners, L.P. dated September 8, 1995 (filed as an
Exhibit to Registrant's Form 10-K for the fiscal year ended
August 31, 1995, and incorporated herein by reference).
E-4
10 (q) Management Agreement (Holiday Inn Hurstbourne) between RW
Hotel Partners, L.P. and Ridgewood Properties, Inc. dated
August 16, 1995 (filed as an Exhibit to Registrant's Form
10-K for the fiscal year ended August 31, 1995, and
incorporated herein by reference).
10 (r) Mortgage, Assignment of Leases and Rents and Security
Agreement Between Bloomfield Acceptance Company, L.L.C. and
Ridgewood Orlando, Inc. dated June 30, 1995 (filed as an
Exhibit to Registrant's Form 10-K for the fiscal year ended
August 31, 1995, and incorporated herein by reference).
10 (s) Security Agreement between Ridgewood Orlando, Inc. and
Bloomfield Acceptance Company, L.L.C. dated June 30, 1995
(filed as an Exhibit to Registrant's Form 10-K for the
fiscal year ended August 31, 1995, and incorporated herein
by reference).
10 (t) Mortgage Note between Bloomfield Acceptance Company and
Ridgewood Orlando, Inc. dated June 30, 1995 (filed as an
Exhibit to Registrant's Form 10-K for the fiscal year ended
August 31, 1995, and incorporated herein by reference).
10 (u) Agreement and Plan of Merger between and among Ridgewood
Properties, Inc., Ridgewood Acquisition Corp., Wesley Hotel
Group, Inc., Wayne McAteer and Samuel King dated December 7,
1995 (filed as an Exhibit to Registrant's Form 10-Q for the
quarter ended November 30, 1995, and incorporated herein by
reference).
10 (v) Shareholders' Agreement by and between Samuel King and
Ridgewood Properties, Inc. dated December 1995 (filed as an
Exhibit to Registrant's Form 10-K for the fiscal year ended
August 31, 1996, and incorporated herein by reference).
10 (w) Warrants to Purchase Shares of Common Stock of Ridgewood
Properties, Inc. issued to Hugh Jones on December 16, 1996
(filed as an Exhibit to
E-5
Registrant's Form 10-Q for the quarter ended November 30,
1996, and incorporated herein by reference).
10 (x) Promissory Note between N. Russell Walden and Ridgewood
Properties, Inc. dated January 31, 1997 (filed as an Exhibit
to Registrant's Form 8-K on February 5, 1997 and
incorporated herein by reference).
10 (y) Promissory Note between Karen S. Hughes and Ridgewood
Properties, Inc. dated January 31, 1997 (filed as an Exhibit
to Registrant's Form 8-K on February 5, 1997 and
incorporated herein by reference).
10 (z) Operating Agreement between Houston Hotel, LLC and Ridgewood
Hotels, Inc. effective December 9, 1997 (filed as an Exhibit
to Registrant's Form 10-Q for the quarter ended May 31,
1998).
10 (aa) Operating Agreement between RW Hurstbourne Hotel, Inc. and
RW Louisville Hotel Investors, LLC effective May 13, 1998
(filed as an Exhibit to Registrant's Form 10-Q for the
quarter ended May 31, 1998).
10 (bb) Operating Agreement between Ridgewood Hotels, Inc. and
Louisville Hotel, L.P. effective June 5, 1998 (filed as an
Exhibit to Registrant's Form 10-Q for the quarter ended May
31, 1998).
10 (cc) Amendment No. 1 to Post-Employment Consulting Agreement
between Ridgewood Hotels, Inc. and N. Russell Walden dated
August 13, 1998 (filed as an Exhibit to Registrant's Form
10-K for the fiscal year ended August 31, 1998 and
incorporated herein by reference).
10 (dd) Amendment No. 1 to Post-Employment Consulting Agreement
between Ridgewood Hotels, Inc. and Byron T. Cooper dated
August 18, 1998 (filed as an Exhibit to Registrant's Form
10-K for the fiscal year ended August 31, 1998 and
incorporated herein by reference).
E-6
10 (ee) Amendment No. 1 to Post-Employment Consulting Agreement
between Ridgewood Hotels, Inc. and Karen S. Hughes dated
August 13, 1998 (filed as an Exhibit to Registrant's Form
10-K for the fiscal year ended August 31, 1998 and
incorporated herein by reference).
10 (ff) First Amendment to Operating Agreement of Louisville, LLC
dated September 30, 1999 (filed as an Exhibit to
Registrant's Form 10-K for the fiscal year ended August 31,
1999 and incorporated herein by reference).
10 (gg) Secured Promissory Note in the amount of $1,333,000 by
Ridgewood Hotels, Inc. to Louisville Hotel, L.P. dated
September 30, 1999 (filed as an Exhibit to Registrant's Form
10-K for the fiscal year ended August 31, 1999 and
incorporated herein by reference).
10 (hh) Secured Promissory Note (Arizona) in the amount of $300,000
by Ridgewood Hotels, Inc. to Louisville Hotel, L.P. dated
September 30, 1999 (filed as an Exhibit to Registrant's Form
10-K for the fiscal year ended August 31, 1999 and
incorporated herein by reference).
10 (ii) Secured Promissory Note (Florida) in the amount of $300,000
by Ridgewood Hotels, Inc. to Louisville Hotel, L.P. dated
September 30, 1999 (filed as an Exhibit to Registrant's Form
10-K for the fiscal year ended August 31, 1999 and
incorporated herein by reference).
10 (jj) Management Agreement between Fountainhead Development Corp.,
Inc., as Owner, and Ridgewood Hotels, Inc., as Manager,
dated January 10, 2000 (filed as an Exhibit to Registrant's
Form 8K on January 11, 2000 and incorporated herein by
reference).
10 (kk) Agreement between Fountainhead Development Corp., Inc. and
Ridgewood Hotels, Inc. dated January 10, 2000 (filed as an
Exhibit to Registrant's Form 8K on January 11, 2000 and
incorporated herein by reference).
E-7
10 (ll) Assignment and Assumption Agreement dated as of April, 2001
between RW Hotel Investment Associates, LLC and Ridgewood
Georgia, Inc. (filed as an Exhibit to Registrant's Form 8K
on July 2, 2001
10 (mm) Contract for the Purchase and Sale of Property dated June,
1999 between the Company, Ridgewood Orlando, Inc., Fulgent
Street Motel & Hotel, Inc. and Brokers Title, LLC (filed as
an Exhibit to Registrant's Form 8K on July 2, 2001
10 (nn) Reinstatement of and Second Amendment to Contract for the
Purchase and Sale of Property Dated January 24th, 2000.
(filed as an Exhibit to Registrant's Form 8K on July 2, 2001)
13 2001 Annual Report to Shareholders.
16 Letter to the Securities and Exchange Commission from
PricewaterhouseCoopers LLP (filed as an Exhibit to
Registrant's Form 8K on March 28, 2000).
21 Subsidiaries of Registrant.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of PricewaterhouseCoopers, LLP.
99 (a) Opinion of the Court of Chancery of the State of Delaware,
New Castle County, in Strassburger v. Early, et al., C.A.
1427 (filed as an Exhibit to Registrant's Form 8K on January
24, 2000 and incorporated herein by reference).
99 (b) Motion of Triton Defendants for a New Trial in Strassburger
v. Early, et al. (filed as an Exhibit to Registrant's Form
8K on January 24, 2000 and incorporated herein by reference).
99 (c) Motion for a New Trial of, In the Alternative, to Reopen the
Record to Allow for the Introduction of Newly Discovered
Evidence in Strassburger v. Early, et al. (filed as an
Exhibit to Registrant's Form 8K on January 24, 2000 and
incorporated herein by reference).
E-8
- ---------------
* Previously filed as an Exhibit to Registrant's Registration Statement on Form
10 filed on November 19, 1985 (Securities Exchange Act File No. 0-14019), and
incorporated herein by reference.
E-9