-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Vq6ZMHk6zbuAU7UWQrxQ0nzAuGgShvTswLLebMlIinozZTZbGHj3zyRnIs0hqKtp SeurPQb0Cl9yC+KFr+Zulg== 0000783728-96-000004.txt : 19960117 0000783728-96-000004.hdr.sgml : 19960117 ACCESSION NUMBER: 0000783728-96-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19951130 FILED AS OF DATE: 19960116 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: RIDGEWOOD PROPERTIES INC CENTRAL INDEX KEY: 0000783728 STANDARD INDUSTRIAL CLASSIFICATION: LAND SUBDIVIDERS & DEVELOPERS (NO CEMETERIES) [6552] IRS NUMBER: 581656330 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-14019 FILM NUMBER: 96503559 BUSINESS ADDRESS: STREET 1: 2859 PACES FERRY RD STE 700 CITY: ATLANTA STATE: GA ZIP: 30339 BUSINESS PHONE: 4044343670 MAIL ADDRESS: STREET 1: 2859 PACES FERRY ROAD STREET 2: SUITE 700 CITY: ATLANTA STATE: GA ZIP: 30339 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended November 30, 1995 OR [ ] 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 Properties, 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.) 2859 Paces Ferry Road, Suite 700 Atlanta, Georgia 30339 - ------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (404) 434-3670 ---------------------------------------------------- (Registrant's telephone number, including area code) N/A ---------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) 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 _____ Common stock, par value $.01 per share - 963,480 shares outstanding at November 30, 1995. PART I. FINANCIAL INFORMATION ------------------------------ ITEM 1. FINANCIAL STATEMENTS ----------------------------- RIDGEWOOD PROPERTIES, INC. AND SUBSIDIARIES ------------------------------------------- CONSOLIDATED BALANCE SHEETS --------------------------- NOVEMBER 30, 1995 AND AUGUST 31, 1995 ------------------------------------- ($000'S omitted, except per share data) ---------------------------------------

RIDGEWOOD PROPERTIES, INC. AND SUBSIDIARIES ------------------------------------------- CONSOLIDATED BALANCE SHEETS --------------------------- NOVEMBER 30, 1995 AND AUGUST 31, 1995 ------------------------------------- ($000's omitted, except per share data) ---------------------------------------

RIDGEWOOD PROPERTIES, INC. AND SUBSIDIARIES ------------------------------------------- STATEMENTS OF CONSOLIDATED LOSS ------------------------------- FOR THE THREE MONTHS ENDED NOVEMBER 30, 1995 AND NOVEMBER 30, 1994 ------------------------------------------------------------------ ($000's omitted, except per share data) ---------------------------------------

RIDGEWOOD PROPERTIES, INC. AND SUBSIDIARIES ------------------------------------------- CONSOLIDATED STATEMENT OF CASH FLOWS ------------------------------------ FOR THE THREE MONTHS ENDED NOVEMBER 30, 1995 AND NOVEMBER 30, 1994 ------------------------------------------------------------------ Decrease in Cash and Cash Equivalents ------------------------------------- ($000's Omitted) ----------------

RIDGEWOOD PROPERTIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOVEMBER 30, 1995 AND NOVEMBER 30, 1994 (Unaudited) 1. GENERAL: Ridgewood Properties, Inc. (the "Company") is primarily engaged in the business of acquiring, developing, operating and selling real estate property in the Southeast and "Sunbelt" areas. Additionally, the Company, through its investment in a limited partnership, is engaged in acquiring and managing hotel properties in the Southeast. Currently, the Company's only operating property is the hotel in Longwood, Florida. All of the Company's other properties are land properties held for sale, and no additional development is currently anticipated for the land. The Company was incorporated under the laws of the State of Delaware on October 29, 1985. Prior to December 31, 1985, the Company operated under the name CMEI, Inc. The Company's common stock is currently listed in the broker-dealer "Pink Sheets" and trades in the over-the-counter market. In December 1995, the Company purchased a hotel management company by issuing 125,000 shares of the Company's common stock. Of the Company's issued and outstanding shares of common stock (before the issuance of shares related to the purchase described above), approximately 42% of the common stock is owned by the Company's President, N. Russell Walden. After issuance of the shares related to the purchase of the hotel management company, approximately 37% of the common stock is owned by the Company's President. All of the Company's issued and outstanding shares of preferred stock are owned by Triton Group, Ltd. The accompanying financial statements of the Company present the historical cost basis amount of assets, liabilities and shareholders' investment of the real estate business for the periods presented. The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries and its joint venture investments after the elimination of all intercompany amounts. 2. BASIS OF PRESENTATION: The accompanying consolidated financial statements have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, which are necessary to present fairly the financial position, results of operations and changes in cash flow for the interim periods covered by this report. Although certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, management believes that the disclosures are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's annual report for the fiscal year ended August 31, 1995. The results of operations for the three months ended November 30, 1995 are not necessarily indicative of the results to be expected for the fiscal year ending August 31, 1996. The Company is currently generating net operating loss carryforwards for both book and tax purposes which may be used to offset future taxable income. In September 1993, the Company adopted SFAS 109. The adoption of SFAS 109 did not have a material effect on the Company's consolidated financial position or results of operations. For the purpose of the Statement of Cash Flows, cash includes cash equivalents which are highly liquid investments with maturity of three months or less. 3. ALLOWANCE FOR POSSIBLE LOSSES: No additional allowance for possible losses was necessary for the three months ended November 30, 1995. The allowance for possible losses increased by $50,000 for the three months ended November 30, 1994. The additional reserve was to reflect the net realizable value on a residential lot in Atlanta, Georgia. 4. COMMITMENTS AND CONTINGENCIES: In August 1991, each executive officer was offered a Post-Employment Consulting Agreement (the "Consulting Agreement(s)") whereby the officer agrees that if he or she is terminated by the Company for other than good cause, the officer will be available for consulting at a rate equal to their annual compensation immediately prior to termination. All officers have chosen to enter into Consulting Agreements. In addition, one other employee was offered and has chosen to enter into a one year Consulting Agreement. The executive, upon termination, agrees to sign an unconditional release of all claims and liability in exchange for a one year (two employees) or two year (two employees) consulting fee arrangement, depending upon the years of service as an officer or the designation as a senior executive officer. 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. EARLY, LUTHER A. HENDERSON, JOHN C. STISKA, N. RUSSELL WALDEN, AND TRITON GROUP, LTD., DEFENDANTS, AND RIDGEWOOD PROPERTIES, 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 repurchase 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. The Complaint seeks (a) permission of the court to proceed as a class action with respect to one count; (b) rescission of the repurchase of Triton's Ridgewood common stock, together with recovery (to Ridgewood) of the approximately $8 million in cash and the shares of the preferred stock received by Triton in the repurchase, or in the alternative, unspecified restitution or damages to Ridgewood resulting from the Triton repurchase; (c) unspecified restitution or damages to Ridgewood resulting from the Hesperus repurchase; (d) unspecified damages to Ridgewood resulting from the alleged breaches of the defendants' duties of loyalty and good faith and their alleged intentional misconduct; (e) unspecified damages for any separate injury allegedly suffered by members of the purported class; and (f) the plaintiff's costs and expenses of this litigation, including attorneys' fees. The Company has answered the Complaint, denying all allegations of wrongdoing either on its part or that of its directors. The Company's management believes the claims made in the Complaint are without merit, and that the shareholders of Ridgewood benefited from the challenged transactions. Management intends to vigorously contest this matter. As more fully described in Note 7, the Company is required to fund certain capital contributions to RW Hotel Partners, L.P. as the partnership acquires hotels. 5. SHAREHOLDERS' INVESTMENT: Loss Per Common Share -- Loss per common share is calculated based upon the weighted average number of shares outstanding of approximately 963,000 for the three months ended November 30, 1995 and 1994. Stock Option Plan -- On March 30, 1993, the Company granted options to purchase 378,000 shares of common stock at a price of $1.83 per share to its key employees and one director under the Ridgewood Properties, Inc. Stock Option Plan (the "Plan"). The options will vest over a four year period in 25% increments. All options expire ten years from the date of grant, unless earlier on account of death, disability, termination of employment, or for other reasons outlined in the Plan. As of November 30, 1995, approximately 284,000 options are currently exercisable. On January 28, 1994, the Company granted options to purchase 375,000 and 75,000 shares of common stock at a price of $1.00 per share to its President and Chief Financial Officer, respectively, under the Plan. The options are exercisable immediately and expire on January 31, 1997. On January 4, 1995, the shareholders of the Company approved an increase in the number of authorized shares reserved for the Company's stock option plan from 900,000 to 1,200,000. 6. NOTES PAYABLE: In November 1989, the Company entered into a $15,000,000 Revolving Line of Credit with a commercial bank. Effective December 31, 1991, the Company's Revolving Line of Credit expired and the outstanding principal balance of $15,000,000 was converted to a term loan. In January 1992, the term loan was amended to postpone principal payments for seven months. Under the amended agreement, the interest accrued at the rate of one percent (1%) per annum above the prime rate of the lender. Under the term loan agreement, the Company was required to make interest payments on the outstanding principal balance of the note, which payments commenced on February 1, 1992, and monthly thereafter through December 1, 1996. Commencing on September 1, 1992, and thereafter on the first day of each month through December 1, 1996, the outstanding principal amount of the note shall be repaid in equal monthly payments. In June 1994, the loan agreement was amended whereby proceeds from future sales of property securing the term loan will serve to reduce the remaining monthly amortization thereby reducing the monthly payment rather than reducing the remaining principal due at the end of the term loan. On January 1, 1997, the remaining outstanding principal balance was to be payable in full. The entire loan was repaid in full in June 1995. In June 1995, the Company entered into a loan with a commercial lender to refinance the Ramada Inn in Longwood, Florida. The loan proceeds are $2,800,000. The loan is for a term of 20 years with an amortization period of 25 years, at the rate of 10.35%. Principal and interest payments are approximately $26,000 per month beginning August 1, 1995. In addition, the Company is required to make a repair escrow payment comprised of 4% of estimated revenues, as well as real estate tax and insurance escrow payments. The total amount for these items will be a payment of approximately $20,000 per month and can be adjusted annually. The escrow funds will be used as tax, insurance and repair needs arise. As of November 30, 1995, there was approximately $200,000 of escrowed funds related to this loan agreement. Also, commitment fees and loan costs of approximately $159,000 are being amortized over 20 years. The balance of this loan as of November 30, 1995 was approximately $2,796,000. Maturities of long-term debt during the Company's next five fiscal years are as follows: 1996 - $25,000; 1997 - $28,000; 1998 - $31,000; 1999 - $35,000; 2000 - $38,000. 7. INVESTMENT IN LIMITED PARTNERSHIP: On August 16, 1995, RW Hotel Partners, L.P. was organized as a limited partnership (the "Partnership") under the laws of the State of Delaware. Concurrently, the Company formed Ridgewood Hotels, Inc., a Georgia corporation ("Ridgewood Hotels") which became the sole general partner in the Partnership with RW Hotel Investments, L.L.C. ("Investor") as the limited partner. Ridgewood Hotels has a 1% base distribution percentage versus 99% for the Investor. However, distribution percentages do vary depending on certain defined preferences and priorities pursuant to the Partnership Agreement ("Agreement") which are discussed below. The partnership was formed to acquire a hotel property in Louisville, Kentucky. The terms of this partnership will serve as a guideline for other potential acquisitions with the Investor or its affiliates. The Partnership Agreement was amended and restated on September 8, 1995. Distributable Cash is defined as the net income from the property before depreciation plus any net sale proceeds and net financing proceeds less capital costs. Distributions of Distributable Cash shall be made as follows: - First, to the Investor until there has been distributed to the Investor an amount equal to a 15% cumulative internal rate of return on the Investor's investment. - Second, to Ridgewood Hotels until the aggregate amount received by Ridgewood Hotels equals the aggregate cash contributions made by Ridgewood Hotels to the Partnership (as of 8/31/95, Ridgewood Hotels contributed approximately $232,000). - Third, 12% to Ridgewood Hotels and 88% to the Investor until there has been distributed to the Investor an amount equal to a 25% cumulative internal rate of return on Investor's investment. - Fourth, 75% of the residual to the Investor and 25% to Ridgewood Hotels. A Management Agreement exists between the Partnership and the Company as Manager ("Manager") for the purpose of managing a hotel in Louisville, Kentucky. The Manager shall be entitled to the following property management fees: (1) 2.5% of the gross revenues from the hotel property. (2) 1% of the gross revenues from the hotel property as an incentive fee if distributable cash equals or exceeds 13.5% of certain aggregate acquisition costs. No management fees are payable with respect to the first 12-month period of management of this hotel. A Construction Management Agreement exists between the Partnership and the Manager for the purpose of managing future improvements to the property. The Company currently has approximately $232,000 invested in the Partnership. The Partnership purchased a hotel in Louisville, Kentucky for approximately $16,000,000. In December 1995, the Partnership purchased four hotel properties in Georgia for approximately $15,000,000. The Company's capital contribution to the Partnership in conjunction with the purchases was approximately $500,000, and the Company was reimbursed for approximately $73,000 of due diligence costs related to the hotels. See the Subsequent Events footnote below. One other hotel is under contract to be purchased by the partnership for an aggregate cost of approximately $4,000,000, and would require approximately $40,000 in additional capital contribution to the Partnership by the Company. The Company also has approximately $11,000 of due diligence costs incurred for the hotel under contract that will be reimbursed to the Company upon the closing of the hotel. These costs are reflected in Other Assets. The Company may make future capital contributions to the Partnership. Management expects to fund such capital contributions through available cash or from loans from the Partnership. Additionally, the Company may invest in other partnerships to acquire hotels in the future. 8. SUBSEQUENT EVENTS: In December 1995, the Company purchased a hotel management company by issuing 125,000 shares of the Company's common stock. The purpose of this wholly-owned subsidiary is to acquire hotel management contracts and/or interests in hotels around the country. The subsidiary is currently operating at breakeven. In conjunction with the Company's purchase of the hotel management company, two executive officers of the management company were offered a Post- Employment Consulting Agreement (the "Consulting Agreement(s)") whereby the officer agrees that if he is terminated by the Company for other than good cause, the officer will be available for consulting at a rate equal to his annual compensation immediately prior to termination. Both officers have chosen to enter into Consulting Agreements. The executive, upon termination, agrees to sign an unconditional release of all claims and liability in exchange for a one year consulting fee arrangement, depending upon the years of service as an officer or the designation as a senior executive officer. In December 1995, RW Hotel Partners, L.P. (of which one of the Company's subsidiaries is the general partner -- see Note 7) acquired four additional hotel properties in Georgia for approximately $15,000,000. The purchases required approximately $500,000 in capital contribution to the Partnership by the Company. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THREE MONTHS ENDED NOVEMBER 30, 1994 COMPARED TO THREE MONTHS ENDED NOVEMBER 30, 1993 LIQUIDITY AND CAPITAL RESOURCES -- In June 1995, the Company entered into a loan with a commercial lender to refinance the Ramada Inn in Longwood, Florida. The loan proceeds are $2,800,000. The loan is for a term of 20 years with an amortization period of 25 years, at the rate of 10.35%. Principal and interest payments are approximately $26,000 per month beginning August 1, 1995. In addition, the Company is required to make a repair escrow payment comprised of 4% of estimated revenues, as well as real estate tax and insurance escrow payments. The total amount for these items will be a payment of approximately $20,000 per month and can be adjusted annually. The escrow funds will be used as tax, insurance and repair needs arise. As of November 30, 1995, there was approximately $200,000 of escrowed funds related to this loan agreement. During the first three months of fiscal year 1996, the Company sold land in Ohio and Georgia for net proceeds of approximately $204,000 and $10,000, respectively. Also, in September 1995, the Company was refunded its entire investment of $61,000 in its joint venture for the purpose of developing a subdivision lot in Atlanta, Georgia. On August 16, 1995, RW Hotel Partners, L.P. was organized as a limited partnership (the "Partnership") under the laws of the State of Delaware. Concurrently, the Company formed Ridgewood Hotels, Inc., a Georgia corporation ("Ridgewood Hotels") which became the sole general partner in the Partnership with RW Hotel Investments, L.L.C. ("Investor") as the limited partner. Ridgewood Hotels has a 1% base distribution percentage versus 99% for the Investor. However, distribution percentages do vary depending on certain defined preferences and priorities pursuant to the Partnership Agreement ("Agreement") which are discussed below. The partnership was formed to acquire a hotel property in Louisville, Kentucky. The terms of this partnership will serve as a guideline for other potential acquisitions with the Investor or its affiliates. The Partnership Agreement was amended and restated on September 8, 1995. Distributable Cash is defined as the net income from the property before depreciation plus any net sale proceeds and net financing proceeds less capital costs. Distributions of Distributable Cash shall be made as follows: - First, to the Investor until there has been distributed to the Investor an amount equal to a 15% cumulative internal rate of return on the Investor's investment. - Second, to Ridgewood Hotels until the aggregate amount received by Ridgewood Hotels equals the aggregate cash contributions made by Ridgewood Hotels to the Partnership (as of 8/31/95, Ridgewood Hotels contributed approximately $232,000). - Third, 12% to Ridgewood Hotels and 88% to the Investor until there ha been distributed to the Investor an amount equal to a 25% cumulative internal rate of return on Investor's investment. - Fourth, 75% of the residual to the Investor and 25% to Ridgewood Hotels. A Management Agreement exists between the Partnership and the Company as Manager ("Manager") for the purpose of managing a hotel in Louisville, Kentucky. The Manager shall be entitled to the following property management fees: (1) 2.5% of the gross revenues from the hotel property. (2) 1% of the gross revenues from the hotel property as an incentive fee if distributable cash equals or exceeds 13.5% of certain aggregate acquisition costs. No management fees are payable with respect to the first 12-month period of management of this hotel. A Construction Management Agreement exists between the Partnership and the Manager for the purpose of managing future improvements to the property. The Company currently has approximately $232,000 invested in the Partnership. The Partnership purchased a hotel in Louisville, Kentucky for approximately $16,000,000. In December 1995, the Partnership purchased four hotel properties in Georgia for approximately $15,000,000. The Company's capital contribution to the Partnership in conjunction with the purchases was approximately $500,000, and the Company was reimbursed for approximately $73,000 of due diligence costs related to the hotels. One other hotel is under contract to be purchased by the partnership for an aggregate cost of approximately $4,000,000, and would require approximately $40,000 in additional capital contribution to the Partnership by the Company. The Company also has approximately $11,000 of due diligence costs incurred for the hotel under contract that will be reimbursed to the Company upon the closing of the hotel. The Company may make future capital contributions to the Partnership. Management expects to fund such capital contributions through available cash or from loans from the Partnership. Additionally, the Company may invest in other partnerships to acquire hotels in the future. Since the Company is not currently generating sufficient operating cash to cover overhead and debt service, the Company must continue to sell real estate, seek alternative financing or otherwise recapitalize the Company. The Company also intends to aggressively pursue the acquisition of hotels and hotel management contracts which would provide additional cash flow. RESULTS OF OPERATIONS -- The Company had gains from real estate sales of $55,000 for the three months ended November 30, 1995. During the three months ended November 30, 1994, the Company did not sell any real estate. Gains or losses on sales are dependent upon the specific assets sold in a particular period and the terms of each sale. Operating revenues from real estate properties decreased approximately $236,000, or 31%, for the three months ended November 30, 1995, compared to the three months ended November 30, 1994. The decrease was primarily a result of the sale of the Company's weekly rental hotel in Orlando, Florida during fiscal year 1995. Approximately $74,000 of the decrease was also attributed to the Company's hotel in Longwood, Florida. Revenues from hotel management increased approximately $58,000 for the three months ended November 30, 1995 compared to the three months ended November 30, 1994 due to the acquisition of a hotel management company. In turn, expenses of hotel management increased approximately $44,000 for the three months ended November 30, 1995 compared to the three months ended November 30, 1994. Operating expenses during the three months ended November 30, 1995 decreased $189,000, or 26%, compared to the three months ended November 30, 1994 due primarily to the sale of the Company's weekly rental hotel in Florida. Expenses decreased by approximately $17,000 at the Company's remaining hotel in Florida for the three months ended November 30, 1995 compared to the three months ended November 30, 1994. No provision for possible losses was necessary for the three months ended November 30, 1995. The provision of $50,000 for possible losses in fiscal year 1995 pertains to a land parcel in Atlanta, Georgia which has been sold. Interest expense decreased approximately $31,000 for the three months ended November 30, 1995 compared to the three months ended November 30, 1994 due to the decrease in outstanding debt. Interest expense during the first three months of fiscal year 1996 and 1995 reflects no capitalized interest. General, administration and other expenses decreased approximately $47,000, or 14%, for the three months ended November 30, 1995 compared to the three months ended November 30, 1994 as a result of reduced overhead due to a smaller business entity. Due to the Company's aggressive movement into the business of acquiring, developing, operating and selling hotel properties throughout the country, the Company incurred business development costs of $40,000 during the first three months of fiscal year 1996. PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K: A. Exhibits: 10 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 27 Financial Data Schedule B. Reports on Form 8-K: No reports on Form 8-K were filed during the the three months ended November 30, 1995. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. RIDGEWOOD PROPERTIES, INC. By: /s/ N. R. Walden__________ N. Russell Walden President By: /s/ Karen S. Hughes_______ Karen S. Hughes Vice President, Chief Accounting Officer Date: January 12, 1996 EX-10 2 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 AGREEMENT AND PLAN OF MERGER THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is dated as of December 7, 1995, between and among Ridgewood Properties, Inc. ("Purchaser"), a Delaware corporation; Ridgewood Acquisition Corp. ("Merger Sub"), a Georgia corporation; Wesley Hotel Group, Inc. (the "Company"), a Georgia corporation; Wayne McAteer ("McAteer"), an individual resident of the State of Georgia, and Samuel King ("King") (collectively with McAteer, the "Shareholders" and, each individually, a "Shareholder"), an individual resident of the State of Georgia. W I T N E S S E T H: WHEREAS, McAteer owns 800 shares of the Company's common stock, par value $1.00 per share ("Company Stock"); and WHEREAS, King owns 200 shares of Company Stock; and WHEREAS, the Company Stock owned by the Shareholders constitutes 100% of the issued and outstanding shares of Company Stock; and WHEREAS, Purchaser owns all of the outstanding capital stock of Merger Sub; and WHEREAS, the respective Boards of Directors of Purchaser, Merger Sub and the Company have approved this Agreement and the transactions contemplated hereby in accordance with the require- ments of applicable law and the Articles or Certificate of Incorporation and the Bylaws of such party; and WHEREAS, Purchaser, as the sole shareholder of Merger Sub, has approved this Agreement and the transactions contemplated hereby pursuant to action taken by written consent in accordance with the requirements of applicable law and the Articles of Incor- poration and Bylaws of each of Merger Sub and Purchaser; and WHEREAS, the Shareholders of the Company have approved this Agreement, and the transactions contemplated hereby pursuant to action taken by unanimous written consent in accordance with the requirements of applicable law and the Articles of Incorporation and the Bylaws of the Company; and WHEREAS, pursuant to Section 368 of the Internal Revenue Code of 1986, as amended, Purchaser desires to acquire by merger of Merger Sub into the Company the business of the Company upon the terms and conditions set forth below; NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the parties hereto hereby agree as follows: ARTICLE I THE MERGER SECTION 1.1 The Surviving Corporation. Subject to the terms and conditions of this Agreement and the Georgia Business Corporation Code (the "GBCC"), at the Effective Time (as herein- after defined), Merger Sub shall be merged with and into the Company (the "Merger"), and the separate corporate existence of Merger Sub shall cease. The Company shall be the surviving corporation in the Merger (hereinafter sometimes called the "Surviving Corporation") and shall continue its corporate existence under the laws of the State of Georgia. SECTION 1.2 Articles of Incorporation. The Articles of Incorporation of the Surviving Corporation shall be amended and restated at and as of the Effective Time to read as did the Articles of Incorporation of Merger Sub immediately prior to the Effective Time (except that the name of the Surviving Corporation will remain unchanged). SECTION 1.3 Bylaws. The Bylaws of the Surviving Corporation shall be amended and restated at and as of the Effective Time to read as did the Bylaws of Merger Sub immediately prior to the Effective Time (except that the name of the Surviving Corporation will remain unchanged). SECTION 1.4 Directors. The directors of Merger Sub immediately prior to the Effective Time shall become the directors of the Surviving Corporation, such directors to hold office from the Effective Time until their respective successors are duly elected and qualified. SECTION 1.5 Officers. The officers of the Surviving Corporation shall consist of McAteer (as President), King (as Vice President), and such other officers as shall be duly elected and qualified, such officers to hold office from the Effective Time until their respective successors are duly elected and qualified. SECTION 1.6 Effective Time. If all the conditions set forth herein shall have been fulfilled or waived in accordance with the terms hereof and this Agreement shall not have been terminated in accordance with Article V hereof, the parties hereto shall cause a Certificate of Merger meeting the requirements of the GBCC (the "Merger Certificate") to be properly executed and filed on the Closing Date (as hereinafter defined) with the Secretary of State of the State of Georgia. The Merger shall become effective as of the time of filing of the properly executed Merger Certificate. The date and time when the Merger becomes effective is herein referred to as the "Effective Time". SECTION 1.7 Conversion of the Shares. As of the Effective Time, by virtue of the Merger and without any action on the part of any holder thereof: (a) Company Stock. Each share of Company Stock issued and outstanding immediately prior to the Effective Time shall be converted into one hundred twenty-five (125) shares of common stock, par value $.01 per share, of Purchaser ("Purchaser Stock") (the ratio of 125 shares of Purchaser Stock to one share of Company Stock is referred to herein as the "Conversion Ratio"); provided, however, that the Conversion Ratio shall be subject to adjustment in the event of any stock split, stock dividend, reverse stock split, or other change in the number of shares of Company Stock outstanding. (b) Merger Sub Stock. Each share of capital stock, par value $.01 per share, of Merger Sub that is issued and outstanding immediately prior to the Effective Time shall be converted into one share of the Company Stock. (c) Treasury Stock. Each share of common stock issued and outstanding immediately prior to the Effective Time that is then held in the treasury of the Company shall be cancelled and retired, without any conversion thereof or payment of any consideration therefor. (d) Warrants, Stock Options, etc. Each warrant, stock option or other right, if any, to purchase shares of Company Stock issued and outstanding immediately prior to the Effective Time shall be cancelled (whether or not such warrant, option or other right is then exercisable) and all rights in respect thereof shall cease to exist, without any conversion thereof or payment of any consideration therefor. SECTION 1.8 Exchange of Shares. (a) Exchange. At the Closing, subject to the terms and conditions hereof, upon surrender by each Shareholder of all certi- ficates that immediately prior to the Effective Time represented shares of Company Stock held by such Shareholder ("Certificates"), Purchaser shall deliver to such Shareholder one or more certifi- cates as requested by such Shareholder (properly issued, executed and countersigned, as appropriate) representing the aggregate number of shares of Purchaser Stock to which such Shareholder shall have become entitled pursuant to the provisions of Section 1.7 hereof. From the Effective Time until surrender in accordance with the provisions of this Section 1.8 each Certificate shall represent for all purposes only the right to receive the consideration pro- vided for herein. (b) No Transfers after Effective Time. After the Effective Time, there shall be no transfers on the stock transfer books of Surviving Corporation of the shares of Company Stock that were outstanding immediately prior to the Effective Time. SECTION 1.9 Adjustment Event. (a) Adjustment Event. In the event of any change in Purchaser Stock between the date of this Agreement and the Effec- tive Time by reason of any stock dividend, stock split, stock issuance without consideration, subdivision, reclassification, recapitalization, combination, exchange of shares or the like (an "Adjustment Event"), the Conversion Ratio shall be appropriately adjusted so that each Shareholder shall receive the same propor- tionate amount of outstanding Purchaser Stock that such Shareholder would have been entitled to receive if the Effective Time had been immediately prior to such Adjustment Event. SECTION 1.10 Closing. (a) Closing. The Merger shall be consummated (the "Closing") on the second business day following the day on which the last of the conditions (other than those conditions which by their terms are to occur only at the Closing) set forth in Article I hereof shall have been satisfied or, if permissible, waived (the "Closing Date"), at the offices of Purchaser or Purchaser's counsel in Atlanta, Georgia, or at such other place and time and/or on such other date as the parties may hereafter agree in writing. (b) Deliveries. At the Closing, the Shareholder shall execute and deliver to Purchaser the Certificates, duly endorsed in blank, or with separate notarized stock powers attached thereto and signed in blank, free and clear of all liens, security interests, claims, restrictions, and any other encumbrances whatsoever, in exchange for the delivery by Purchaser of certificates to the Shareholders representing Purchaser Stock as set forth in Sections 1.7, 1.8 and 1.9 hereof. (c) Corporate Matters. At the Closing, the Shareholders will deliver to Purchaser the written resignations of all of the directors and officers of the Company, effective as of the Closing, except for the officers described in Section 1.5, and shall cause to be made available to the successor directors and officers all minute books, stock record books, books of account, corporate seals, contracts and other documents, instruments and papers be- longing to the Company and shall cause full possession and control of all of the assets of the Company and of all other things and matters pertaining to the operation of its business to be trans- ferred and delivered to the directors and officers of the Surviving Corporation. At the Closing, the Shareholders shall also deliver to Purchaser, and Purchaser shall deliver to the Shareholders, the certificates, opinions and other instruments and documents referred to herein. SECTION 1.11 Additional Conditions to Purchaser's Obligations. In addition to the conditions in Section 1.10 hereof, the obligation of Purchaser to consummate the Merger shall be subject to satisfaction or waiver by Purchaser of the following conditions prior to or on the Closing Date: (a) Representations and Warranties. The representations and warranties of the Shareholders and the Company, as set forth in Section 2.1 hereof, shall be true and correct on the Closing Date as if made at such date. (b) Performance of Obligations. The Shareholders and the Company shall have performed in all material respects all of their respective obligations hereunder to be performed by them on or prior to the Closing Date. (c) Certificates. Purchaser shall have been furnished with a certificate signed by the President of the Company, and certificates signed by the Shareholders, each dated the Closing Date, certifying to the fulfillment of the conditions specified in clauses (a) and (b) of this Section 1.11. (d) Litigation. There shall not have been instituted by any governmental, regulatory or administrative agency or instrumen- tality, nor shall there be pending, any action or proceeding before any court or governmental regulatory or administrative agency or instrumentality which challenges the legality or validity of the transactions contemplated hereby. (e) Resolutions. Purchaser shall have received a certified copy of resolutions duly adopted by the Board of Directors of the Company and the Shareholders approving this Agreement and the Merger. (f) Consents. All consents, authorizations, orders and approvals of (or filings or registrations with) any governmental commission, board or other regulatory body required in connection with the Company's and the Shareholders' respective execution, delivery and performance of this Agreement shall have been obtained or made, except for filing of the Merger Certificate and any docu- ments required to be filed after the Effective Time and except where the failure to have obtained or made any such consent, authorization, order, approval, filing or registration would not have a material adverse effect on the business of the Company following the Effective Time. (g) Opinion of the Company's Counsel. At Closing, Purchaser shall have received from Altman, Kritzer & Levick a written opinion dated the Closing Date in the form attached as Exhibit 1.11(g). (h) Liabilities. As of the Closing Date, the Company shall have satisfied all of its liabilities (including contingent liabilities) except for those liabilities set forth and the Company's performance of its obligations under those contracts described on Schedule 1.11(h) hereof. (i) Completion of Due Diligence. Purchaser shall have completed its due diligence examination of the Company and the results of such examination shall have been reasonably satisfactory to Purchaser. SECTION 1.12 Additional Conditions to the Company's and Shareholders' Obligations. In addition to the conditions in Section 1.10 hereof, the obligation of the Company and the Shareholders to consummate the Merger shall be subject to the satisfaction or waiver by them of the following conditions prior to or on the Closing Date: (a) Representations and Warranties. The representations and warranties of Purchaser and Merger Sub, as set forth in Section 2.2 hereof, shall be true and correct on the Closing Date as if made at such date. (b) Performance of Obligations. Purchaser and Merger Sub shall have performed in all material respects all of their respec- tive obligations hereunder to be performed by them on or prior to the Closing Date. (c) Certificates. The Shareholders shall have been furnished with certificates signed by the President of each of Purchaser and Merger Sub, each dated the Closing Date, certifying to the fulfillment of the conditions specified in clauses (a) and (b) of this Section 1.12. (d) Litigation. There shall not have been instituted by any governmental regulatory or administrative agency or instru- mentality, nor shall there be pending, any action or proceeding before any court or governmental regulatory or administrative agency or instrumentality that challenges the legality or validity of the transactions contemplated hereby. (e) Resolutions. The Shareholders shall have received a certified copy of resolutions duly adopted by the Board of Directors of Purchaser and the Board of Directors and shareholders of Merger Sub approving this Agreement and all of the transactions contemplated hereby. (f) Other Agreements. Purchaser shall have executed and delivered the agreements set forth in Section 1.13 hereof. (g) Consents. All consents, authorizations, orders and approvals of (or filings or registrations with) any governmental commission, board or other regulatory body acquired in connection with the Purchaser's and the Merger Sub's execution, delivery and performance of this Agreement shall have been obtained or made, except for filing of the Merger Certificate and any documents required to be filed after the Effective Time except where the failure to have obtained or made any such consent, authorization, order, approval, filing or registration would not have a material adverse effect on the business of the Purchaser or Merger Sub following the Effective Time. (h) Opinion of Purchaser's Counsel. The Shareholders shall have received a written opinion from Rogers & Hardin dated the Closing Date in the form attached as Exhibit 1.12(h). SECTION 1.13 Other Agreements. Purchaser and the Shareholders agree that at the Closing: (a) Post-Employment Consulting Agreements. (i) Purchaser and McAteer shall execute and deliver a post-employment consulting agreement substantially in the form attached hereto as Exhibit 1.13(a)(i). (ii) Purchaser and King shall execute and deliver a post-employment consulting agreement substantially in the form attached hereto Exhibit 1.13(a)(ii). (b) Registration Rights Agreement. Purchaser and the Shareholders shall execute and deliver a registration rights agree- ment substantially in the form attached hereto as Exhibit 1.13(b). ARTICLE II REPRESENTATIONS AND WARRANTIES SECTION 2.1 Representations and Warranties by Shareholders and the Company. The Shareholders and the Company jointly and severally represent and warrant to Purchaser as follows: (a) Ownership of Shares. Each Shareholder is the record and beneficial owner of the shares of the Company Stock attributed to such Shareholder on Schedule 2.1(a) hereof and, at the Closing, will own all such shares free and clear of any liens, claims, options, charges, encumbrances or rights of others. (b) Consents. Subject to the filing and recordation of the Merger Certificate, each Shareholder and the Company may enter into this Agreement and perform his obligations under this Agreement without the necessity of obtaining any consent from anyone, including any governmental authority. (c) Organization and Qualification. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Georgia. The Company has all requisite corporate power and corporate authority to own or lease and operate its properties and assets and to carry on its business as, and in the places where, such properties and assets are now owned or leased and operated and such business is now being con- ducted. Attached hereto as Schedule 2.1(c)(i) is a true and complete copy of the Articles of Incorporation and Bylaws of the Company, as amended. The Company is duly qualified as a foreign corporation to do business, and is in good standing, in each jurisdiction, other than California, in which the failure to be so qualified would have a material adverse effect on the assets, liabilities, results of operations, financial condition, business or prospects of the Company. The Company is currently undertaking to qualify as a foreign corporation authorized to transact business within the State of California. Schedule 2.1(c)(ii) contains a true and correct list of the jurisdictions in which the Company is qualified to do business as a foreign corporation. The Company has delivered to Purchaser for inspection its respective minute books and stock records. Except as set forth in Schedule 2.1(c)(iii), the Company has no subsidiaries. Each of the subsidiaries set forth on Schedule 2.1(c)(iii) is a corporation duly incorporated, validly existing and in good standing under the laws of the state of its incorporation and has all requisite corporate power and authority to own or lease and operate its properties and assets and to carry on its business as, and in the places where, such properties and assets are now owned or leased and operated and such business is now being conducted. For purposes of this Section, the term "subsidiary" shall mean any corporation or other business entity of which the Company owns a majority of the outstanding voting securities entitled to vote for the election of directors or an equivalent equity interest. (d) Continuity of Interest. There is no plan or intention by the Shareholders to sell, exchange or otherwise dispose of a number of shares of Purchaser Stock received in the Merger that would reduce the Shareholders' ownership of the Purchaser Stock received in the Merger to a number of shares having a value, as of the Effective Time, of less than fifty percent (50%) of the value of all of the formerly outstanding Company Stock as of the Effec- tive Time. (e) Capitalization of the Company. The authorized capital stock of the Company consists of 10,000 shares of Company Stock of which 1,000 shares are validly issued and outstanding, all of which are fully paid and nonassessable and free of preemptive rights. Except as set forth on Schedule 2.1(e), there are no outstanding options, warrants, convertible securities or other rights, agree- ments, arrangements or commitments obligating the Company or any Shareholder to issue or sell any shares of capital stock of the Company. Except as contemplated under Article II hereof, no dividends shall have been declared prior to Closing with respect to any shares of capital stock of the Company which shall not have been paid prior to Closing. (f) Authority Relative to Agreement; Non-Contravention. The Company and the Shareholders have all requisite power and authority to enter into this Agreement and to perform their respective obligations hereunder. The execution and delivery of this Agreement by the Company and the Shareholders and the per- formance by the Company and the Shareholders of its obligations hereunder and the consummation of the Merger and the other trans- actions provided for herein have been duly and validly authorized by all necessary action on the part of the Company and the Share- holders. This Agreement has been duly executed and delivered by the Company and the Shareholders and (i) constitutes the valid and binding obligation of the Company and the Shareholders, enforceable against the Company and the Shareholders in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance or other laws relating to or affecting the enforcement of creditors' rights or the collection of debtors' obligations in general or by general equitable principles, and (ii) does not (A) conflict with any provision of the Articles of Incorporation or Bylaws of the Company or (B) to the Shareholders' knowledge, result in any violation of or default under, or permit the acceleration of any obligation under, any mortgage, indenture, lease, agreement or other instrument, permit, concession, grant, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regula- tion applicable to the Company or the Shareholders or their respec- tive assets and properties or any agreement or understanding between any administrative or regulatory authority or any rules or regulations of any trade association or organization of which the Company or the Shareholders are members, if such conflict, viola- tion, default or acceleration would have a material adverse effect on the assets, liabilities, results of operations or financial condition, business or prospects of the Company taken as a whole. (g) Financial Statements. Attached to Schedule 2.1(g)(i) are true, correct and complete copies of (i) the balance sheets of the Company as of December 31, 1994 (the "Latest Year-End Balance Sheet") and 1993, and the related statements of income, stock- holders' equity, and cash flows for the years then ended, together with the report thereon of [accountant]. Also attached to Schedule 2.1(g) is a true, complete and correct copy of the unaudited balance sheet of the Company at November 30, 1995 and the related unaudited statement of income and retained earnings for the period from the Latest Year-End Balance Sheet Date to November 30, 1995. All of the foregoing financial statements (the "Financial State- ments") were prepared in accordance with generally accepted accounting principles ("GAAP") and, subject to any qualifications set forth in the applicable notes and schedules, to the Share- holders' knowledge present fairly the financial position and results of operations of the Company at the dates and for the periods covered thereby. To the Shareholders' knowledge, the Company has no liability or obligation of any nature whatsoever, whether accrued, absolute, contingent or otherwise, other than (x) current liabilities and obligations which are recurring in nature and not overdue on their terms, (y) liabilities and obligations reflected and adequately provided for on the latest Balance Sheet and (z) liabilities and obligations arising in the ordinary course of business of the Company since the date of the Latest Year-End Balance Sheet. Schedule 2.1(g)(iii) sets forth a true and complete list of each loss contingency of the Company exceeding $5,000, if it is "probable" (within the meaning of SFAS 5) that future events will confirm the loss or impairment of an asset or the incurrence of a liability. (h) Books of Account; Returns and Reports; Taxes. To the Shareholders' knowledge, the books of account of the Company fairly reflect (i) all transactions relating to the Company and (ii) all items of income and expense, assets and liabilities and accruals relating to the Company. The Company has not engaged in any transaction, maintained any bank account or used any corporate funds except for transactions, bank accounts and funds which have been and are reflected in the normally maintained books and records of the Company. For taxable years beginning on and after May 1, 1988, the Company has continuously been (and currently is) an "S" corporation within the meaning of Section 1361 of the Code and the equivalent provisions of all applicable state income tax statutes. To the Shareholders' knowledge, the Company has duly filed all federal, state, local and foreign tax returns required to be filed by it through the last date hereof and has duly paid or made adequate provision for the payment of all taxes which are due and payable for taxable years ending on or before the date immediately preceding the Closing Date. To the Shareholders' knowledge, the liability for taxes reflected in the Latest Year-End Balance Sheet (excluding any reserve for deferred taxes or portion thereof which is attributable to differences between the timing of income or deductions for tax and financial accounting purposes) is sufficient for the payment of all accrued but unpaid taxes, whether or not disputed, for the period then ended and for all years and periods ended prior thereto. All deficiencies asserted as a result of any examinations conducted by the IRS or any other taxing authority prior to the date hereof have been paid, fully settled or ade- quately provided for in the Latest Year-End Balance Sheet. There are no pending claims asserted for taxes of the Company or out- standing agreements or waivers extending the statutory period of limitation applicable to any tax return of the Company for any period. The Company has made all estimated income tax deposits through the date hereof and all other required tax payments or deposits and has complied for all prior periods in all material respects with the tax withholding provisions of all applicable federal, state, local, foreign and other laws. The Company has made available to Purchaser true, complete and correct copies of its federal income tax returns for the last three (3) taxable years and made available such other tax returns as have been requested by Purchaser. (i) No Default or Litigation. (i) The business of the Company is being conducted in compliance with, and the Company has made (or has caused to be made) all material filings required by, the laws, orders, regulations, policies and guidelines of all applicable govern- mental entities (including, without limitation, applicable laws, orders and regulations relating to labor relations or environmental protection). (ii) The Company is not in default under the terms of any outstanding contract, agreement, lease or other commitment and there does not currently exist under any such contract, agreement, lease or commitment any condition or event that, with notice or lapse of time or both, would constitute a default. (iii) Except as set forth on Schedule 2.1(i)(iii), there are no actions at law, suits in equity, administrative proceedings or claims pending or threatened against or affect- ing the Company or its assets or properties. (iv) The Company has not received written notice that it has been charged by any governmental entity with any viola- tion of any applicable law, order or regulation and the Company is not threatened by any governmental entity with a charge of any violation of, any applicable law, order or regulation. (v) The Company is not subject to any judgment, order, writ, injunction, decree or award of any court, arbitrator or governmental department, agency, board, bureau or instrumen- tality issued or entered in a proceeding to which the Company is or was a party which is binding upon the Company. (vi) Neither the Company nor the Shareholders are aware of any issue that, if discovered upon audit by any governmental or accounting agency, would have a material adverse effect on the assets, liabilities, results of operations, financial condition, business or prospects of the Company. (j) Licenses, Permits and Authorizations. The Company has validly and legally obtained and duly holds all material approvals, licenses or other permits of all governmental or regulatory agencies, whether federal, state or local, which are required for the operation of its business as it is presently being conducted. (k) Labor Controversies. Except for that certain Collective Bargaining Agreement identified in Schedule 3.9 (the "Union Agreement"), the Company is not a party to any collective bargaining agreement with respect to any of its employees. Except as set forth in Schedule 2.1(k), there are no labor controversies presently pending or, to the best of the Company's and the Shareholders' knowledge, threatened against the Company. (l) Employee Benefit Plans. (i) Except as required under the Union Agreement, neither the Company nor any Affiliate contributes to any multi- employer pension plan as defined in Section 3(37) of the Employment Retirement Income Security Act of 1974 ("ERISA"). Except as set forth on Schedule 2.1(l) or under the Union Agreement: (a) There is no "employee welfare benefit plan" (as defined in Section 3(l) of ERISA maintained by the Company or any corporate or other trade or business under common control of the Company (hereinafter, an "Affiliate"), within the meaning of Section 414 of the Internal Revenue Code of 1986, as amended (the "Code"), or to which the Company or any Affiliate thereof contributes or is required to contribute (such plans being hereinafter collectively referred to as "Employee Welfare Benefit Plans") for employees or for former employees of the Company. (b) There is no "employee pension benefit plan" (as defined in Section 3(2) of ERISA) maintained by the Company or any Affiliate, and there is no such plan to which the Company or any Affiliate contributes, is required to contribute or has contributed (such employee benefit plans being hereinafter collectively referred to as the "Employee Pension Benefit Plans"). Neither the Company nor or any Affiliate maintains or contributes to any pension plan (including any multi-employer pension plan as defined in Section 3(37) of ERISA) which is subject to the provision of Part 3 of Title I or Title IV of ERISA. (c) Neither the Company nor any Affiliate maintains any tax-qualified plans within the meaning of Section 401 of the Code. (d) Neither the Company nor any Affiliate is a party to or obligated under any agreement, plan, contract or other arrangement pursuant to which the Company or any Affiliate or Purchaser is or might be required to make payments that would not be deductible or capitalizable for federal income tax purposes by reason of the application of Section 280G of the Code. Further, the consummation of the transactions contemplated by this Agreement will not by their occurrence result in any employee becoming entitled to severance payments from the Company or any Affiliate. (e) The Company and all Affiliates have complied with the requirements of Section 162(k) of the Code regarding continuation of health care coverage under any group health plans. (f) Except as contemplated in Article III hereof, there are no material liabilities (in excess of $5,000 individually or $50,000 in the aggregate), absolute or contingent, of the Company, or of any employee, officer, director or any person which may have indemnity rights or contribution rights or other recourse against the Company with respect thereto, to any employee benefit plan, pro- gram, practice, arrangement, agreement or understanding, whether written or oral, except for liabilities which have been fully accrued on the most recent Financial Statements. (ii) Neither the Company nor any Affiliate currently has any liability to make any withdrawal liability payment to any pension or welfare benefit plan that is a "multiemployer plan" within the meaning of Section 400(a)(3) of ERISA (a "Multiemployer Plan"). Neither the Company nor any Affiliate is delinquent in making contributions required to be paid to any Multiemployer Plan. There is no pending dispute between the Company or any Affiliate and any Multiemployer Plan concerning payment of contributions or withdrawal liability payment. (iii) Neither the Company nor any Affiliate (a) has incurred (or has experienced any event that will, within the ensuing twelve months, result in) a withdrawal, either complete or partial (as defined in Section 4203 or 4205 of ERISA), from any Multiemployer Plan, or (b) has incurred a decline in con- tributions to any Multiemployer Plan such that, if the current state of contributions continues, a seventy-percent decline in contributions (as defined in Section 4205 of ERISA) will occur within the next three plan years. Neither the Company nor any Affiliate has received any notice of any failure by a Multi- employer Plan to satisfy the minimum funding requirements of Section 412 of the Code, or of any application for or receipt of a waiver of such minimum funding requirements with respect to any Multiemployer Plan. (iv) For each Multiemployer Plan (including each welfare benefit plan which, pursuant to its trust agreement, operating rules, or otherwise, imposes any post-withdrawal liability of contribution obligations upon employers with- drawing from such plan) to which the Company or an Affiliate has an obligation to contribute (or otherwise is regarded as an employer in relation to such plan within the meaning of Section 3(5) of ERISA), the Multiemployer Plan has no unfunded vested benefits for withdrawal liability purposes as of the date hereof and the Company would not be subject to withdrawal liability imposed by such Multiemployer Plan if the Company were to withdraw from the Multiemployer Plan in a complete withdrawal as of the date hereof. (m) Environmental Matters. There has been no release of a hazardous substance, as that term is defined in the Com- prehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. Section 9601(14), or any petroleum product by the Company into the environment at any property ever owned, leased, managed or used by the Company (the "Premises"), in- cluding, without limitation, any such release in the soil or groundwater underlying the Premises and, to the best knowledge of the Company and the Shareholders, there has been no such release by any other party at any of the Premises. The Company has not disposed of any material at any hazardous waste treat- ment or disposal facility and has not disposed of any hazardous substances (as defined above) at any location. The Company has not received notice of any violation of any Environmental Law nor has it been advised of any claim or liability pursuant to any Environmental Law brought by any governmental agency or private party. There are no Environmental Liabilities (as defined below) of the Company. As used in this Agreement, "Environmental Laws" means any and all federal, state, local and foreign statutes, laws, judicial decisions, regulations, ordinances, rules, judgments, orders, decrees, codes, plans, injunctions, permits, concessions, grants, franchises, licen- ses, agreements and governmental restrictions, whether now or hereafter in effect, relating to human health, the environment or to emissions, discharges or releases of pollutants, contami- nants, Hazardous Substances or wastes into the environment, including without limitation ambient air, surface water, ground water or land, or otherwise relating to the manufacture, pro- cessing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, Hazardous Substances or wastes or the clean-up or other remediation thereof. "Environmental Liabilities" with respect to any person means any and all liabilities of or relating to such person or any of its subsidiaries (including any entity which is, in whole or in part, a predecessor of such Person or any of its subsidiaries), whether vested or unvested, contingent or fixed, actual or potential, known or unknown, which (i) arise under or relate to matters covered by Environmental Laws and (ii) relate to actions occurring or conditions existing on or prior to the Closing Date. "Hazardous Substances" means any toxic, radioactive, caustic or otherwise hazardous substance, including asbestos, petroleum, its derivatives, by-products and other hydrocarbons, or any substance having any constituent elements displaying any of the foregoing characteristics, including, without limitation, any substance regulated under Environmental Laws. (n) Intellectual Property. Schedule 2.1(n) sets forth a complete and correct list of (i) each patent, patent application, trademark (whether or not registered), trademark application, trade name, service mark, copyright and proprietary intellectual property (including, without limitation, proprietary computer software, whether in object or source form, but excluding computer software routinely licensed to the public for use on personal computers) (collectively, "Intellectual Property") that is owned, used or licensed by the Company and that is material to its business and a description of whether such Intellectual Property is owned or licensed by the Company. Except as noted on Schedule 2.1(n), the Company has the right to use such Intellectual Property and the current use by the Company of such Intellectual Property does not infringe upon the rights of any other person. To the best of the Company's and the Shareholders' knowledge, no other person is infringing upon the rights of the Company in any such Intellectual Property. (o) Title to Properties; Absence of Liens and Encum- brances, Etc. The Company does not own, nor has it at any time owned, any real property. All real and personal property leased to or managed by the Company is described in Schedule 2.1(o) hereof. Except as set forth in Schedule 2.1(o), the Company has good and marketable title to all its properties and assets, real, personal and mixed, used in its business free and clear of any liens, charges, pledges, security interests or other encumbrances, except for liens with respect to (i) those items shown on Schedule 2.1(o) hereto; (ii) statutory liens arising or incurred in the ordinary course of business with respect to which the underlying obligations are not delinquent; and (iii) liens for taxes not yet due. All leases under which the Company is the lessee of any real or per- sonal property, and all contracts under which the Company is manager of any real property, are valid and binding on the lessors, or the owners, as the case may be, thereunder in accordance with their respective terms. (p) Contracts and Commitments. Except as set forth on Schedule 2.1(p) or Schedule 2.1(l) or as contemplated under Article III, the Company is not a party to or subject to any liabilities arising from: (i) any management or employment contract, special termination agreement or other contract for personal services with an officer, consultant, director, employee or other person that is not terminable by the Company on not more than one (1) month's notice without penalty; (ii) any single contract to sell goods or any single contract to purchase goods which exceeds $5,000 in price which was not incurred in the ordinary course of business; (iii) except for the Union Agreement, any agreement providing for liability for severance pay, labor contracts, or labor or personnel policies; (iv) any contract, agreement, or instrument, not reflected in the Financial Statements, evidencing or relating to any outstanding indebtedness for borrowed money or the deferred purchase price of property, or any direct or indirect guarantee of any such indebtedness or deferred purchase price; (v) except as noted under Schedule 2.1(n) or 3.9 or as contemplated under Article III, any agreement that restricts the right of the Company to engage in any line of business, solicit employees or customers or otherwise compete in any line of business; (vi) any contract, commitment, or agreement that involves (A) any single capital expenditures by the Company in excess of $5,000 which expenditure is not in the ordinary course of the Company's business or (B) except as contemplated in Article III, the disposition of any assets reflected in the Financial Statements not in the ordinary course of business consistent with past practices; (vii) except as contemplated under Article III, any contract, commitment, or agreement between (A) the Company and (B) any shareholder, officer or director (or any of their affiliates) of the Company; (viii) except for that certain Agreement of Limited Partnership of Wesley Hotel Group, Ltd. dated April 18, 1988, as amended (the "Partnership Agreement"), and that certain Certificate of Limited Partnership of Wesley Hotel Group, Ltd. dated April 18, 1988, as amended, any partnership agreement in which the Company is a partner; or (ix) except for the Partnership Agreement, any joint venture contract or arrangement or any other agreement that involves a sharing of profits. Complete and correct copies (in the case of any of the foregoing that are in writing) or descriptions (in the case of any of the foregoing that are not in writing) of each of the foregoing have been delivered to Purchaser. (q) Insurance. The Company has been and is insured with respect to its properties and the conduct of its business in such amounts and against such risks as are reasonable in relation to its business and will maintain such insurance at least through the Effective Time. The Company has heretofore provided to Purchaser a true and complete list of its current insurance coverages, including names of carriers, amounts of coverage and premiums therefor. The Company has made available to Purchaser true and complete copies of all insurance policies covering the Company, its properties, assets, employees and operations. (r) Absence of Certain Changes. (i) Since the Latest Year-End Balance Sheet Date, except as described on Schedule 2.1(r) or contemplated under Article III, there has not been (A) to the Shareholders' knowl- edge, any material adverse change in the assets, liabilities, results of operations, financial condition, business or pro- spects of the Company, (B) any damage, destruction, loss or casualty to property or assets of the Company, whether or not covered by insurance, which property or assets are material to the operations or business of the Company, (C) except as con- templated under Article III, any declaration, setting aside or payment of any dividend or distribution (whether in cash, stock or property) in respect of the capital stock of the Company or any redemption or other acquisition by the Company of any of the capital stock of the Company or any split, combination or reclassification of shares of capital stock declared or made by the Company, or (D) to the Shareholders' knowledge, any agreement to do any of the foregoing. (ii) Except as set forth on Schedule 2.1(r), since the Latest Year-End Balance Sheet Date, there have not been, with respect to the Company (A) any material assets mortgaged, pledged or made subject to any lien, charge or other encum- brance, (B) any material liability or obligation (absolute, accrued or contingent) incurred or any material bad debt, contingency or other reserve increase suffered, except, in each such case, in the ordinary course of business and consistent with past practice, (C) any material claims, liabilities or obligations (absolute, accrued or contingent) paid, discharged or satisfied, other than the payment, discharge or satisfac- tion, in the ordinary course of business and consistent with past practice, of claims, liabilities and obligations reflected or reserved against in the Financial Statements or incurred in the ordinary course of business and consistent with past prac- tice since the date of the Latest Year-End Balance Sheet Date, (D) any material guarantees, checks, notes or accounts receiv- able written off as uncollectible, except write-offs in the ordinary course of business and consistent with past practice, (E) any material write down of the value of any asset or invest- ment on the Company's books or records, except for depreciation and amortization taken in the ordinary course of business and consistent with past practice, (F) to the Shareholders' knowl- edge, any cancellation of any material debts or waiver of any material claims or rights of substantial value, or sale, transfer or other disposition of any material properties or assets (real, personal or mixed, tangible or intangible) of su1bstantial value, except, in each such case, in transactions in the ordinary course of business and consistent with past practice and which in any event do not exceed $50,000 in the aggregate, (G) any single capital expenditure or commitment in excess of $5,000 for additions to property or equipment, or aggregate capital expenditures and commitments in excess of $50,000 (on a combined basis) for additions to property or equipment, (H) any other material transactions entered into other than in the ordinary course of business, (I) any agree- ments to do any of the foregoing, or (J) any other events, developments or conditions of any character that have had or are reasonably likely to have a material adverse effect on the assets, liabilities, results of operations, financial condi- tion, business or prospects of the Company. (s) Accounts Receivable. All accounts receivable of the Company as set forth on the Latest Year-End Balance Sheet or arising since the Latest Year-End Balance Sheet Date (i) have arisen only in the ordinary course of business consistent with past practice for goods sold and delivered or services performed and (ii) to the Shareholders' knowledge are collectible at the recorded amounts thereof (free of any, and subject to no, defenses, setoffs or counterclaims) in the ordinary course of business (without resort to litigation or assignment to a collection agency), net of (in the case of accounts receivable set forth on the Latest Year- End Balance Sheet) any allowance for doubtful accounts reflected in the Latest Year-End Balance Sheet and net of (in the case of accounts receivable arising since the Latest Year-End Balance Sheet Date) an allowance for doubtful accounts established on a basis consistent with the allowance reflected in the Latest Year-End Balance Sheet. Nothing contained in this Paragraph shall consti- tute any guarantee or assurance by the Shareholders that any such accounts receivable shall be collectible by the Company or Pur- chaser and the Shareholders shall have no liability from the Company's or Purchaser's failure or inability to collect any such accounts. (t) Accuracy of Statements. No representation or warranty made herein, and no statement, exhibit certificate or schedule furnished, or to be furnished, by the Company or the Shareholders to Purchaser pursuant hereto, or in connection with the transac- tions contemplated hereby, contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary to make the statements contained herein or therein not misleading. (u) Affiliates. For purposes of Rule 145 under the Securities Act of 1933, as amended (the "Securities Act"), there are no persons (other than the Shareholders) who are "affiliates" of the Company. (v) Qualification of Shareholders. Each Shareholder, with respect to himself and not with respect to the other Shareholders, represents and warrants that he (i) is acquiring the Purchaser Stock to be issued in the Merger for his own account and not with a view to, or for resale in connection with, any distribution thereof; (ii) understands and acknowledges that such Purchaser Stock has not been registered under the Securities Act or any state securities laws by reason of certain exemptions from the registra- tion provisions thereof which depend upon, among other things, the bona fide nature of such Shareholder's investment intent as ex- pressed herein; (iii) is able to bear the economic risk of invest- ment in such Purchaser Stock and has such knowledge and experience in financial and business matters that he is capable of evaluating the risks and merits of such Purchaser Stock; and (iv) understands and acknowledges that such Purchaser Stock will be "restricted securities" as that term is defined in Rule 144 under the Securi- ties Act and that the certificate representing such Purchaser Stock will bear a legend restricting transfer unless (A) the transfer is exempt from the registration requirements under the Securities Act and any applicable state securities law and an opinion of counsel reasonably satisfactory to Purchaser that such transfer is exempt therefrom is delivered to Purchaser or (B) the transfer is made pursuant to an effective registration statement under the Securi- ties Act and any applicable state securities law SECTION 2.2 Representations and Warranties by Purchaser. Purchaser represents and warrants to the Company and the Share- holders as follows: (a) Organization of Purchaser. Purchaser is a corporation duly incorporated and validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and corporate authority to own or lease and operate its properties and assets and to carry on its business as, and in the places where, such properties and assets are now owned or leased and operated and such business is now being conducted. Merger Sub is duly incorporated and validly existing and in good standing under the laws of the State of Georgia and has all requisite power and authority to carry on its business as such business is now, and at the time of Closing, will be conducted. Purchaser has delivered to the Company a true, correct and complete copy of the Certificate or Articles of Incorporation and Bylaws of Purchaser and Merger Sub, and all amendments thereto, as in effect on the date hereof. Purchaser is duly qualified and authorized to transact business in the State of Georgia. (b) Authority Relative to Agreements; Non-Contravention. Purchaser and Merger Sub have all requisite corporate power and corporate authority to enter into this Agreement and to perform their obligations hereunder. The execution, delivery and perfor- mance of this Agreement have been duly authorized by the Board of Directors of Purchaser and the Board of Directors and the share- holders of Merger Sub. This Agreement and has been duly executed and delivered by Purchaser and Merger Sub and (i) constitutes a valid and binding obligation of Purchaser and Merger Sub, enforce- able against Purchaser and Merger Sub in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance or other laws relating to or affecting the enforcement of creditors' rights or the collection of debtors' obligations in general or by general equitable principles, and (ii) do not (A) conflict with any pro- vision of the Articles or Certificate of Incorporation or Bylaws of Purchaser or Merger Sub or (B) result in any violation of or default under, or permit the acceleration of any obligation under, any material mortgage, indenture, lease, agreement or other instru- ment, permit, concession, grant, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation applic- able to Purchaser or Merger Sub or their respective properties or any material agreement or understanding between any administrative or regulatory authority or any rules or regulations of any trade association or organization of which Purchaser or Merger Sub is a member, if such conflict, violation, default, or acceleration would have a material adverse effect on the assets, liabilities, results of operations, financial condition, business or prospects of Pur- chaser and its subsidiaries (including Merger Sub) taken as a whole. Merger Sub has not previously conducted any business and is not a party to any material contract other than this Agreement. For purposes of this Agreement, the term "subsidiary," when used with respect to Purchaser, shall mean any corporation or other business entity of which Purchaser owns a majority of the outstand- ing securities entitled to vote for the election of directors or an equivalent equity interest. -----END PRIVACY-ENHANCED MESSAGE-----