<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 1O-KSB
X Annual report pursuant to Section 13 or 15(d) of the Securities
- --- Exchange Act of 1934 For the Fiscal Year Ended: December 31, 1998
Commission File No. 0-27160
CALL NOW, INC.
- --------------------------------------------------------------------------------
(Exact name of small business issuer in its charter)
Florida 65-0337175
- -------------------------- ---------------------------------
(State of Incorporation) (IRS Employer Identification No.)
10803 Gulfdale, Suite 222
San Antonio, TX 78216-3634
- ---------------------------------------- -----------------------------------
(Address of principal executive offices) (zip code)
Issuer's Telephone No. (210) 349-4141
----------------------------
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
Check 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 past 12
months (or 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 No X
--- ---
Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10- KSB or any amendment to
this Form 10-KSB. X
---
State issuer's revenues for twelve months ended December 31, 1998: $7,622,184.
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The aggregate market value of the voting stock held by non-affiliates of the
Registrant based upon the average bid and asked prices of such stock, at June
30, 1999 was $6,076,217.
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 8,495,444 shares of common stock, as
of June 30, 1999.
Documents
Incorporated by Reference
NONE
Transitional Small Business Disclosure Format: No
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Item 1. Description of Business.
History and Developments During the last Three Years
Call Now, Inc. (the "Company") was organized under the laws of the
State of Florida on September 24, 1990 under the name Rad San, Inc. It changed
its name to Phone One International, Inc. in January 1994 and to Call Now, Inc.
in December 1994.
Our primary operations are the management of Retama Park Racetrack in
Selma, Texas, a suburb of San Antonio, through our 80% owned subsidiary. Under
the Management Agreement, we are reimbursed for the expenses of operating the
track from revenues generated at the track.
On July 15, 1996, Andice Development Co. (a wholly-owned subsidiary of
Call Now, Inc.) acquired 118 acres of development property in Williamson County,
Texas for a purchase price of $2,363,060. Under the terms of the purchase, we
paid $589,310 and executed a seven year, 9% note in the amount of $1,770,000.
The note requires us to make semi-annual principal and interest payments of
$85,721 commencing on January 15, 1997 and ending July 15, 2003, at which time,
the entire remaining balance of $1,655,056 is due and payable. We are still
formulating our plans for this property.
In August 1996 we decided to exit the long distance telephone business
due to the competitive environment and its inability to develop its business to
the point of profitability. The business was sold to Alan Niederhoffer, formerly
our Vice President and President of our ARN subsidiary for 100,000 shares of our
common stock owned by Niederhoffer and assumption of substantially all of the
liabilities of ARN.
On September 29, 1996 we acquired $52,274,000 of $54,040,000, 8.75%,
term bonds of the Retama Development Corporation Special Facilities Revenue
Bonds, Series 1993 for a purchase price of $10,300,000. The bonds are secured by
a first mortgage on the Retama Park Horse Racing facility. In a simultaneous
closing, we sold 50% of the bonds to a broker/dealer for a down payment of
$1,740,000 and future payments of $1,950,000. The broker/dealer also agreed to
pay $7,600 for stock purchase options granting the right to acquire 760,000
shares of Call Now, Inc. common stock at a purchase price of $2.60 per share.
In November 1996 we purchased from Retama Partners, Ltd. the principal
amount of $39,275,000 of a Retama Development Corporation Series A note and
$500,000 of a Retama Development Corporation Series 1993B note. We issued
385,700 shares of our common stock in exchange for such notes. These notes were
secured by a second lien on the Retama Park Racetrack facilities, including real
and personal property.
On March 26, 1997, we participated in the defeasance of the RDC bonds
and notes held by it, and received $3,640,000, 7% Series 1997 A Bonds (the "A
Bonds") and $45,200,000, 8% Series 1997 B Bonds (the "B Bonds") as part of the
defeasance. As part of the transaction, we
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collected a $850,000 receivable from the broker/dealer. We subsequently acquired
the balance of the A Bonds and B Bonds.
On December 1, 1997 our 80% owned subsidiary, Retama Entertainment
Group, Inc. obtained a management agreement to operate and manage the Retama
Park Racetrack. Our then President, Bryan P. Brown, relocated to Texas to
personally supervise such activities. The management agreement extends to
November 1, 2000 subject to certain extension rights, and provides monthly
management fee of $15,000 plus a variable fee equal to 25% of profits in excess
of $1,000,000.
In February 1998, we entered into a loan agreement with Compressent
Corporation in which the Company was obligated to lend, on or before July 31,
1998, upon the request of Compressent's Board of Directors, up to $10,000,000.
Amounts loaned were to be due one year from the date of the loan and would bear
interest at 15% a year. In addition, we were to receive a $400,000 commitment
fee at the time of the first loan advance. In connection with the loan
agreement, we would receive warrants to acquire 500,000 shares of the
Compressent's common stock at $6.25 per share.
In addition, we agreed to exchange $3,500,000 face amount of its
investment in RDC, Series A Bonds for 56,000 shares of Compressent, 7.5%
cumulative convertible preferred stock, which would be convertible into 560,000
shares of Compressent's common stock, and an option to acquire 500,000 shares of
Compressent common stock for $6.25 per share.
On May 20, 1998, the Company and Compressent terminated the loan
agreement before any loan was made thereunder. In addition, the parties
rescinded the preferred stock and warrant purchase by each party returning to
the other the securities originally exchanged. However, Compressent, upon the
original receipt of the RDC bonds borrowed approximately $2,000,000, pledging
the bonds as collateral. In this connection, upon termination of the agreement,
the Company assumed the approximate $2,000,000 loan.
In July 1998, we agreed to purchase three thoroughbred racetracks,
Louisiana Downs in Louisiana, Remington Park in Oklahoma and Thistledown in
Ohio. The Company deposited $2,000,000 as a down payment. We terminated the
Agreement during the inspection period and obtained the return of our down
payment.
In July 1998, we sold $3,500,000 face amount of its RDC, Series A Bonds
for $2,150,000, subject to certain repurchase rights.
In May 1999, we entered into an agreement with two unaffiliated trusts,
Global Trust and Hemisphere Trust, under which we exchanged $43,462,500 of the
Series B RDC Bonds for $2,000,000 of Series A RDC Bonds and the payment of the
Compressent debt assumed by the Company. After the next conversion date of
Series B Bonds into Series A Bonds, the parties will adjust their ownership of
the Bonds so that the Company owns 50% of the total Class A and B Bonds and
Global and Hemisphere own 25% each of such Bonds. Global and Hemisphere also
agreed to contribute up to $300,000 of the cost to repair the infield lake at
the Retama Park
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Racetrack which we have agreed to repair and one-half of the annual salary and
bonus of the chief executive officer of the track, currently Bryan Brown, a
director of the Company. A copy of the Agreement with Global and Hemisphere is
filed as an exhibit herein.
Employees
The Company has about 210 full-time employees, including 4 executive
employees. This includes the employees of Retama Entertainment Group, Inc.
Item 2. Description of Property.
We lease 864 square feet of office space in Miami, Florida for
$1,224.75 per month on a month-to-month basis.
Item 3. Legal Proceedings.
On December 15, 1998, we were served as Defendants in a civil case
brought by Retama Development Corporation in the 224th Judicial District of
Bexar County, Texas District Court. The suit alleges that the Registrant's
Chairman interfered with Plaintiff's management contract with a third party by
instructing a representative of the management company to engage a contractor to
undertake repairs on a lake owned by Plaintiff, and such conduct constituted a
breach of duty of good faith and fair dealing and fraudulently and negligently
misrepresented the expertise of the contractor. The action seeks the sum of
$600,000 in damages and lost profits resulting from the "failed lake" which is
alleged to have caused the reduction in attendance at the Retama Park Racetrack,
and also seeks exemplary damages.
In May, 1999, we entered into a settlement agreement under which we
agreed to repair the lake.
Item 4. Submission of Matters to a Vote of Securities Holders.
None.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.
The Company's Common Stock trades on the over-the-counter market under
the symbol CNOW. The following sets forth the range of high and low bid
quotations for the periods indicated as reported by National Quotation Bureau,
Inc. Such quotations reflect prices between dealers, without retail mark-up,
markdown or commission and may not represent actual transactions.
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<TABLE>
<CAPTION>
High bid Low bid
-------- -------
<S> <C> <C>
January 1, 1997 through March 31, 1997 $4.625 $1.875
April 1, 1997 through June 30, 1997 3.125 2.0625
July 1, 1997 through September 30, 1997 3.875 1.75
October 1, 1997 through December 31, 1997 3.5625 1.00
January 1, 1998 through March 31, 1998 1.875 1.3125
April 1, 1998 through June 30, 1998 4. 1.625
July 1, 1998 through September 30, 1998 3.4375 1.375
October 1, 1998 through December 31, 1998 1.625 .875
</TABLE>
The Company paid a dividend of one share of Compressent Corporation
common stock for each ten shares of Company common stock to its stockholders of
record on March 12, 1996. The Company has not established a policy of payment of
regular dividends on its common stock. There are no restrictions on the payment
of dividends. As of June 30, 1998 there were approximately 401 registered
holders of record of the Company's common stock.
Item 6. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Year Ended December 31, 1998 compared to 1997
Results of Operations:
a. Revenues and Other Income
The Company's income for the year ended December 31, 1998 was
$7,622,184 compared to $3,069,042 for the year ended December 31, 1997. The
increase in income for the current year is primarily attributable to the
operations of Retama Park Racetrack. Interest income for the year ended December
31, 1998 was $52,946 compared to $754,029 for the year ended December 31, 1997
due to disposal of bonds during the year and collections of notes receivable.
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b. Expenses
Cost and Other Expenses of Revenues
Expense for the year ended December 31,1998 was $12,196,163 compared to
$2,258,040 for the year ended December 31,1997. The increase in expenses was
attributable to expenses incurred to operate the racetrack, increased interest
expense, loss on sale of bonds, loss on financing transaction, lake repairs and
increased general and administrative expense.
Income Tax
We received an income tax benefit of $1,247,637 for fiscal 1998 due to
our net loss for the year, compared to income tax expense of $291,112 in fiscal
1997 when we had taxable income.
Liquidity and Capital Resources:
During the year ended December 31,1998, the Company's operating
activities used cash of $2,242,902 compared to $4,772,737 used for the year
ended December 31,1997.
We have investments in Retama Development Corporation Bonds. The fair
market value of the securities at December 31, 1999 was $5,654,929. We have
applied for and received a $1,871,787 income tax refund.
Barron Chase executed a note payable to the Company in the amount of
$750,000 bearing interest at 12% per annum. The note pays the Company $7,500.00
per month which the Company utilizes as working capital. Such arrangement
terminates on August 15, 1999.
Based on the above information, management of the Company believes that
it has adequate financial resources to fund its operations for the current
fiscal year.
The Company has been advised by the Securities and Exchange Commission
that it may be considered an investment company and therefore subject to certain
provisions of the Investment Company Act of 1940. The Company does not believe
it is an investment company and has taken the following actions:
1. On July 15, 1996 the Company acquired 118.34 acres of land for
development for $2,363,060. Such land is located in Williamson County, Texas.
The Company executed a purchase money mortgage in connection with the purchase
which is payable in semi-annual installments of $85,721 beginning on January 15,
1997, including interest at 9% with the entire unpaid balance of $1,655,056 due
on July 15, 2003. The Company paid $593,060 at closing from its working capital.
The land is currently vacant and a survey is in progress to determine the best
use of the property.
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2. The Company disposed of most of its shares of Intermedia
Communications, Inc. in 1996, which it received in December 1994 in connection
with the disposition of Phone One, Inc. It currently owns less than 200 of such
shares.
3. In August 1996 the Company disposed of its remaining long
distance telephone business for 100,000 shares of the Company's common stock,
plus assumption by Buyer of certain liabilities of the Company. The business was
sold to a former employee and officer of the Company.
4. In September and October 1996 the Company acquired certain
secured bonds issued by Retama Development Corporation of Selma, Texas. The
bonds are secured by a lien on real estate which includes the Retama Park
Racetrack in suburban San Antonio, Texas.
5. The balance of the Company's holdings in Compressent were
registered by Compressent in its recent registration statement on Form S-1. In
November 1997, the Company disposed of 76,000 of such shares.
6. On December 1, 1997, the Company's 80% owned subsidiary,
Retama Entertainment Group, Inc., was engaged as the manager of the Retama Park
Racetrack effective January 1, 1998.
In the event the Company is deemed to be an investment company, the
Company may become subject to certain restrictions relating to the Company's
activities, including restrictions on the nature of its investments and the
issuance of securities. In addition, the Investment Company Act imposes certain
requirements on companies deemed to be within its regulatory scope, including
registration as an investment company, adoption of a specific form of corporate
structure and compliance with certain burdensome reporting, record keeping,
voting, proxy, disclosure and other rules and regulations. In the event of
characterization of the Company as an investment company, the failure of the
Company to satisfy regulatory requirements, whether on a timely basis or at all,
would, under certain circumstances have a materially adverse effect on the
Company.
Year 2000 Computer Problem:
The Company has addressed the concerns of potential Year 2000 computing
problems, both internally and with external parties and believes that
significant additional costs will not be incurred because of this circumstance.
The Company has performed an evaluation of its computer hardware and software
and has determined that recent enhancements and upgrades have brought its
systems significantly into compliance with the Year 2000 phenomenon and that
existing support agreements are adequate to cope with any remaining issues.
Based upon equipment evaluations and analysis by consulting parties, management
does not believe that significant operational equipment modifications are
necessary.
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Item 7. Financial Statements.
Index to Consolidated Financial Statements
Report of Independent Certified Public Accountants
Consolidated Financial Statements:
Consolidated Balance Sheet, December 31, 1998
Consolidated Statements of Income, years ended
December 31, 1998 and 1997
Consolidated Statements of Changes in Stockholders'
Equity, years ended December 31, 1998 and 1997
Consolidated Statements of Cash Flows, years ended
December 31, 1998 and 1997
Notes to Consolidated Financial Statements
Item 8. Changes In and Disagreements With Accountants on
Accounting and Financial Disclosures.
BDO Seidman, LLP ("BDO Seidman"), declined, effective June 1,
1999, to be engaged to audit our financial statements for the
fiscal year ended December 31, 1998.
BDO Seidman's report on our financial statements for the two
most recent fiscal years ended December 31, 1997 did not
contain an adverse opinion or a disclaimer of opinion, and was
not qualified or modified as to uncertainty, audit scope or
accounting principles.
As of December 31, 1997 and during our two most recent fiscal
years ended December 31, 1997 and the subsequent periods
preceding the resignation of BDO Seidman, there were no
disagreements with BDO Seidman on matters of accounting
principles or practices, financial statement disclosure or
auditing scope or procedure, which disagreements, if not
resolved to the satisfaction of BDO Seidman, would have caused
BDO Seidman to make reference to the subject matter of the
disagreements in connection with its reports.
We appointed the firm of Clyde Bailey P.C. in San Antonio,
Texas as the new principal audit firm for the year ended
December 31, 1998.
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PART III
Item 9. Directors, Executive Officers, Promoters and Corporate
Persons; Compliance With Section 16(a) of the Exchange Act.
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
---------------- --- --------
<S> <C> <C>
William M. Allen 72 Chairman and Director
Robert C. Buffkin 67 President and Director
Bryan P. Brown 37 Director
James D. Grainger, CPA 67 Vice President - Finance
Susan Lurvey 34 Secretary
</TABLE>
William M. Allen was President from June 1992 to 1997 and a director
from June 1992 and Chairman from February 1997. He has been managing partner of
Black Chip Stables from 1982 to date and President of Doric, Inc. from 1985
until its merger with the Company in 1994. He has served as President of Kamm
Corporation from 1985 to date and President of Kamm Life from 1985 to date. He
was Chairman and CEO of Academy Insurance Group from 1975 to 1984.
Bryan P. Brown has served as director since 1997. He was President from
1997 to December 1998. He was previously President of Riverwood, a master
planned golf course community in Port Charlotte, Florida. He served as Treasurer
of the Mariner Group, Inc. and Assistant Vice President of First Union National
Bank and First Republic Bank. He also serves as CEO of the Company's 80% owned
subsidiary, Retama Entertainment Group, Inc.
James D. Grainger was elected Vice President - Finance in 1998. He has
been a certified public accountant since 1964 and maintains an outside
accounting practice. He served as Chief Financial Officer from 1996 to 1997.
Susan Lurvey has been the Secretary since June 1992. She has served as
administrative assistant to Mr. Allen since 1987.
Robert C. Buffkin has been a business consultant specializing in
associations and insurance since 1974. He was elected as a director in 1996 and
President in December 1998.
Bryan P. Brown is William M. Allen's son-in-law.
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Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who beneficially own more than 10% of a registered class
of the Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission and are required to
furnish copies to the Company. To the best of the Company's knowledge, all
reports required to be filed were timely filed in fiscal year ended 1997.
Item 10. Executive Compensation.
Summary Compensation Table
<TABLE>
<CAPTION>
Name and Other Annual
Principal Position Year Salary Bonus Compensation
- ------------------ ---- ------ ----- ------------
<S> <C> <C> <C> <C>
William M. Allen 1998 $240,000 -0- -0-
Chairman, Chief 1997 $240,000 -0- -0-
Executive Officer 1996 $240,000 -0- -0-
Bryan P. Brown, 1998 $150,000 -0- -0-
President of Retama Entertainment 1997 $150,000 -0- -0-
</TABLE>
There are no long term compensation or other compensation plans.
Director Compensation
Non-officer directors are entitled to a fee of $2,000 for attendance at
meetings of the Board of Directors, plus reimbursement for reasonable travel
expenses.
Stock Options
In 1997 the Company granted its directors and officers five year stock
options as follows:
<TABLE>
<CAPTION>
Name No. Of Options Exercise Price
---- -------------- --------------
<S> <C> <C>
William M. Allen 300,000 $4.00
Bryan P. Brown 200,000 $2.34
Robert C. Buffkin 10,000 $2.34
</TABLE>
No options were granted to officers and directors in 1998.
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The following table summarizes all stock option activities during the
year ended December 31, 1998:
<TABLE>
<CAPTION>
Stock Weighted average
Options exercise price per share
------- ------------------------
<S> <C> <C>
Outstanding as of December 31, 1997 530,000 $3.27
Granted during year 10,000 3.00
Expired or canceled -0- --
Exercised -0- --
Outstanding at December 31, 1998 540,000 $3.26
</TABLE>
Item 11. Security Ownership of Certain Beneficial Owners and
Management.
The following table sets forth, as of June 30, 1999, the beneficial
ownership of the Company's Common Stock by (i) the only persons who own of
record or are known to own, beneficially, more than 5% of the Company's Common
Stock; (ii) each director and executive officer of the Company; and (iii) all
directors and officers as a group.
<TABLE>
<CAPTION>
Percent of
Number of Outstanding
Name Shares Common Stock
- ---- --------- ------------
<S> <C> <C>
William M. Allen 3,646,000 (1)(2) 42.5%
Robert C. Buffkin 21,000 (2) *
Susan Lurvey 20,000 *
Bryan P. Brown 245,000 (2) 2.6%
James D. Grainger, CPA 46,630 *
Officers and Directors
as a group (5 Persons) 3,978,630 (2) 46.3%
</TABLE>
(1) Includes 890,000 shares owned by William M. Allen's wife as to which he
disclaims any beneficial interest.
(2) Includes stock options held as follows: William M. Allen - 300,000
shares, Bryan P. Brown - 200,000 shares, Robert C. Buffkin - 10,000
shares.
*Less than 2%.
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Item 12. Certain Relationships and Related Transactions.
Consulting fees aggregating approximately $46,000 and $384,000 were
paid to certain shareholders of the Company in 1998 and 1997, respectively.
In December 1996 the Company loaned Bryan P. Brown $92,838 with
interest at 8%. The loan was due January 7, 1999 and was extended to January
2000.
We leased office space from our Chairman, William M. Allen, for $17,500
in 1998 and $30,000 in 1997. Such arrangement terminated in July 1998.
PART IV
Item 13. Exhibits and Reports on Form 8-K.
(a) Certain exhibits listed below are incorporated by reference to
previously filed registration statements and reports as indicated in the
"Incorporated by Reference Note" column and notes below.
<TABLE>
<CAPTION>
Incorporated by
Exhibit No. Reference Note Description
- ----------- --------------- -----------
<S> <C> <C>
3(a) A Articles of Incorporation of the Registrant
3(b) B. C, D. E Articles of Amendment to Articles of
Incorporation
3(c) F By-Laws of the Registrant
8.2 G Agreement of Purchase and Sale dated
May 12, 1994 relating to purchase of long
distance telephone business of ARN
Communications Corporation
8.3 H Employment Agreement of Alan R.
Niederhoffer
8.4 I Agreement dated February 21, 1994 and
Amendment dated February 28, 1994
relating to acquisition of certain assets
of Telecommunication Services, Inc.
</TABLE>
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<TABLE>
<S> <C> <C>
8.5 J Acquisition Agreement relating to sale of
Phone One, Inc. subsidiary
8.6 K Letter Agreement with Raymond Beahn
8.7 L Agreement with Barron Chase Securities,
Inc.
8.8 M Agreement with Howe, Solomon & Hall
Financial, Inc. dated 10/17/96 covering
purchase of Retama Development Corp.
bonds
8.9 N Agreement with Retama Park Association,
Inc., Retama Partners, Ltd. and Retama Park
Management Co. L.C. relating to purchase
of certain Retama Development Corp. notes.
8.10 O Agreement to purchase certain real estate in
Texas.
8.11 P Agreement to sell assets of ARN
Communication Corp.
8.12 Q Management Agreement for Retama Park
Racetrack.
</TABLE>
Incorporation by Reference Notes:
<TABLE>
<CAPTION>
Note Incorporation by Reference
- ---- --------------------------
<S> <C>
A Incorporated by Reference to Exhibit 1.1 to Registration
Statement No. 33-37608 on Form S-18
B Incorporated by Reference to Exhibit A to Form 8-K dated
December 8, 1992
C Incorporated by Reference to Exhibit 1.2 to Form 10-KSB for
six months ended December 31, 1993
D Incorporated by Reference to Exhibit 1.3 to Form 10-KSB for
six months ended December 31, 1993
</TABLE>
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<TABLE>
<S> <C>
E Incorporated by Reference to Exhibit C to Form 8-K filed
December 14, 1994
F Incorporated by Reference to Exhibit 3.2 to Registration
Statement No. 33-37608 on Form S-18
G Incorporated by Reference to Exhibit 1 to Form 8-K
dated May 27, 1994
H Incorporated by Reference to Exhibit 2 to Form 8-K
dated May 27, 1994
I Incorporated by Reference to Exhibit 1 to Form 8-K
dated May 9, 1994
J Incorporated by Reference to Exhibit A to Form 8-K filed
December 14, 1994
K Incorporated by Reference to Exhibit 8.8 of Form 10-KSB for
year ended December 31, 1996
L Incorporated by reference to Exhibit 8.9 of Form 10-KSB for
year ended December 31, 1996
M Incorporated by reference to Exhibit A of Form 8-K filed
November 21, 1996
N Incorporated by reference to Exhibit B of Form 8-K filed
November 21, 1996
O Incorporated by reference to Exhibit C of Form 8-K filed
November 21, 1996
P Incorporated by reference to Exhibit D of Form 8-K filed
November 21, 1996
Q Incorporated by reference to Exhibit 8.12 of Form 10-KSB for
year ended December 31, 1997.
</TABLE>
The following exhibits are filed herewith:
8.13 Agreement with Global Trust and Hemisphere Trust dated May 27, 1999.
8.14 Agreement for Construction Services between Retama Development
Corporation and William M. Allen.
27. Financial Data Schedule.
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
CALL NOW, INC.
July 14, 1999 By: /s/ Robert Buffkin
----------------------------
Robert Buffkin,
President
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities as of
July 14, 1999.
/s/ William M.Allen July 14, 1999
- -----------------------------------------
William M. Allen, Chairman and
Director (Principal Executive Officer)
/s/ Robert C. Buffkin July 14, 1999
- -----------------------------------------
Robert C. Buffkin, President and Director
/s/ Bryan P. Brown July 14, 1999
- -----------------------------------------
Bryan P. Brown, Director
/s/ James D. Grainger, CPA July 14, 1999
- -----------------------------------------
James D. Grainger, Vice President -
Finance (Principal Accounting Officer)
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CLYDE BAILEY P.C.
- --------------------------------------------------------------------------------
CERTIFIED PUBLIC ACCOUNTANTS
10935 WURZBACH #203
SAN ANTONIO, TEXAS 78230
(210) 699-1287(OFC.)
(888) 699-1287 - (210) 691-2911 (fax)
Member:
American Institute of CPA's
Texas Society of CPA's
Report of Independent Certified Public Accountant
To the Board of Directors and Shareholders
Call Now Inc.
10803 Gulfdale #222
San Antonio, Texas 78216
We have audited the accompanying consolidated balance sheet of Call Now Inc. and
subsidiaries (Company) as of December 31 1998 and the related consolidated
statements of operations, changes in stockholders' equity, and of cash flows for
the year ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these statements based on our audit. The financial statements of the
Company, as of December 31, 1997, were audited by other auditors whose report
dated July 10, 1998 expressed an unqualified opinion on those statements.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion. On May
25, 1999 an agreement was signed between the Company and two trusts known as the
Global Trust and the Hemisphere Trust to sell 50% of the Company's investment in
the Retama Development Corporation Special Facilities Revenue Bonds. This
subsequent event is further explained in Note 17 in the notes to financial
statements.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of the Company and
subsidiaries as of December 31 1998, and the consolidated results of their
operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
Clyde Bailey
Certified Public Accountant
June 28, 1999
<PAGE> 18
CALL NOW, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
A S S E T S
-----------
<S> <C> <C>
Current Assets
Cash And Cash Equivalents $ 545,222
Accounts Receivable 48,999
Income Tax Refund Claim 1,871,787
Marketable Securities, At Market Value
Pledged 3,500,000
Unrestricted 2,160,781
Note Receivable 750,000
Other 31,794
-----------
Total Current Assets $ 8,908,583
Furniture And Equipment (Less Accumulated
Depreciation of $23,258) 9,941
Land 2,369,075
Long-Term Notes and Loan Receivables 945,838
Deferred Tax Assets 182,108
Other 211,694
-----------
Total Assets $12,627,239
===========
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements F2
<PAGE> 19
CALL NOW, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
L I A B I L I T I E S A N D S T O C K H O L D E R S' E Q U I T Y
---------------------------------------------------------------------
<S> <C> <C>
Current Liabilities
Accounts Payable $ 51,349
Notes Payable 2,000,000
Current Portion of Mortgage Payable 14,806
Accrued Expenses 802,660
Accrued Expenses - Other 325,000
------------
Total Current Liabilities $ 3,193,815
Non-Current Liabilities
Mortgage Payable, less current maturity 1,729,221
------------
Total Liabilities 4,923,036
------------
Commitment and Contingencies 0
Minority Interest in Consolidated Subsidiary 19,632
------------
Stockholders' Equity
Preferred stock, no par, shares authorized 800,000 shares 0
none outstanding
Common Stock, no par shares authorized 50,000,000, 6,205,778
8,585,444 shares issued and 8,495,444 shares outstanding
Retained Earnings 1,921,984
Less subscriptions notes receivable for 115,000 shares of common stock (230,000)
Accumlulated other comprehensive loss (7,141)
Treasury stock, at cost (206,050)
------------
Total Stockholders' Equity 7,684,571
------------
Total Liabilities and Stockholders' Equity 12,627,239
============
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements F3
<PAGE> 20
CALL NOW, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended December 31
1998 1997
---- ----
<S> <C> <C>
Income
Race Track Operating Income $ 5,039,712 $ --
Management Fees 180,000 --
Concert Fees 198,340 --
Miscellaneous 1,186 5,135
----------- -----------
Total Income 5,419,238 5,135
----------- -----------
Costs and Expenses
Salaries and Wages 4,558,177 593,347
Payroll Taxes and Benefits 837,280 50,434
Legal & Professional 401,815 260,506
Consulting Fees 96,450 436,209
Litigation Settlement 94,563 0
General and Administrative 919,617 611,831
Concert Costs 151,515 --
Interest 409,247 288,918
Depreciation and Amortization 3,745 16,795
----------- -----------
Total Cost and Expenses 7,472,409 2,258,040
----------- -----------
Income (Loss) from continuing operations before (2,053,171) (2,252,905)
other income and expenses, income taxes, and
minority interest
Other Income and Expenses (2,520,808) 3,063,907
----------- -----------
(Loss) before income taxes and (4,573,979) 811,002
minority interest
Income Tax Benefit (Expenses) 1,247,637 (291,112)
----------- -----------
Income (Loss) before minority interest (3,326,342) 519,890
Minority Interest (19,432) --
----------- -----------
Net Income (Loss) $(3,345,774) $ 519,890
=========== ===========
Earnings Per Share - Basic and Diluted:
Net Income (0.39) 0.06
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements F4
<PAGE> 21
CALL NOW, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
Subscription
Common Stock Treasury Stock Notes Receivable Unrealized
------------------------------------------------------------------------- Holding
Shares Amount Shares Amount Shares Amount Gain(Loss)
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance December 31, 1996 7,519,400 $ 3,259,965 0 $ -- 250,000 $ (200,000) $ 593,897
Reclassification of unrealized holding
gain due to adoption of FASB 130 (593,897)
Comprehensive (Loss):
Net Income (Loss)
Unrealized (Loss) on securities
Total Comprehensive Income (Loss)
Common Stock issued in Exchange 760,000 2,185,000
for Marketable Securities
Purchase of Treasury Stock 90,000 (206,050)
Common Stock Bonus 14,544 30,000
Collection of Stock Subscription Notes (250,000) 200,000
Receivable for Services Rendered
Exercise of Stock Options for Notes 115,000 230,000 115,000 (230,000)
Receivable
--------------------------------------------------------------------------------------
Balance December 31, 1997 8,408,944 5,704,965 90,000 (206,050) 115,000 (230,000) --
Comprehensive (Loss):
Net Income (Loss)
Unrealized (Loss) on securities
Less: Reclassification adjustment for
loss included in net loss
Total Comprehensive Income (Loss)
Issue of common stock in connection 150,000 431,250
with financing transaction
Litigation settlement 26,500 69,563
Balance, December 31, 1998 8,585,444 $ 6,205,778 90,000 $ (206,050) 115,000 $ (230,000) --
======================================================================================
<CAPTION>
Accumulated
Other
Comprehensive Retained
Income (Loss) Earnings Total
---------------------------------------
<S> <C> <C> <C>
Balance December 31, 1996 $ -- $ 4,747,868 $ 8,401,730
Reclassification of unrealized holding
gain due to adoption of FASB 130 593,897
Comprehensive (Loss):
Net Income (Loss) 519,890 519,890
Unrealized (Loss) on securities (325,337) (325,337)
-----------
Total Comprehensive Income (Loss) 194,553
Common Stock issued in Exchange 2,185,000
for Marketable Securities
Purchase of Treasury Stock (206,050)
Common Stock Bonus 30,000
Collection of Stock Subscription Notes 200,000
Receivable for Services Rendered
---------------------------------------
Balance December 31, 1997 268,560 5,267,758 10,805,233
Comprehensive (Loss):
Net Income (Loss) (3,345,774) (3,345,774)
Unrealized (Loss) on securities (875,701)
Less: Reclassification adjustment for
loss included in net loss 600,000 (275,701)
--------- -----------
Total Comprehensive Income (Loss) (3,621,475)
Issue of common stock in connection 431,250
with financing transaction
Litigation settlement 69,563
Balance, December 31, 1998 $ (7,141) $ 1,921,984 $ 7,684,571
=======================================
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements F5
<PAGE> 22
CALL NOW, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31
1998 1997
---- ----
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income (Loss) $(3,345,774) $ 519,890
----------- -----------
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and Amortization 3,745 16,795
Income Tax Refund Claim (1,871,787) --
Issuance of common stock for litigation settlement 69,563 --
Gain on Bond Defeasance (2,150,000) (1,703,086)
Financing transaction loss 2,431,250 --
Furniture and equipment charged off -- 24,100
Issuance of common stock for bonuses & services -- 30,000
Stock subscription receivable for services rendered -- 200,000
Loss(Gain) on sale of marketable securities 2,305,740 (606,792)
Changes in assets and liabilities:
(Increase) Decrease in Assets:
Accounts Receivable (48,999)
Deferred Tax Asset 624,194 (801,950)
Other Current Assets 19,965 (417,727)
Other Assets (96,599) 2,380
Increase (Decrease) in Liabilities:
Accounts Payable (2,228) (484,967)
Accrued Expenses 799,240 215,508
Income Tax Payable (1,000,844) (1,766,888)
Minority Interest 19,632 --
----------- -----------
Total Adjustments 1,102,872 (5,292,627)
----------- -----------
Net Cash (used for) Operating Activities (2,242,902) (4,772,737)
----------- -----------
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements F6
<PAGE> 23
CALL NOW, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31
1998 1997
---- ----
<S> <C> <C>
Cash flows from Investing Activities:
Proceeds from the sale of marketable securities 2,168,999 748,669
Proceeds from the sale of treasury bills 1,305,055 --
Capital Expenditures (2,347) (2,250)
Purchase of marketable securities -- (2,512,024)
Proceeds from bond defeasance -- 3,853,086
Investment in land -- (6,015)
Notes and Loans Receivable:
Advances (1,450,000) (753,000)
Collections 600,000 1,097,591
----------- -----------
Net Cash provided by Investing Activities 2,621,707 2,426,057
----------- -----------
Cash flows from Financing Activities
Proceeds from Loans 2,000,000 1,075,000
Issue of Stock for Financing Transaction 431,250 --
Financing Transaction Loss (2,431,250) 0
Payment of Long Term Debt (13,557) (12,416)
Purchase of Treasury Stock -- (206,050)
----------- -----------
Net Cash (used for) provided by Financing Activities (13,557) 856,534
----------- -----------
Net Increase (Decrease) in Cash 365,248 (1,490,146)
Cash Balance, Begin of Year 179,974 1,670,120
----------- -----------
Cash Balance, End of Year $ 545,222 $ 179,974
=========== ===========
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements F7
<PAGE> 24
CALL NOW, INC
AND SUBSIDIARIES
SUMMARY OF ACCOUNTING POLICIES
NATURE OF BUSINESS
After exiting the long distance telephone business in 1996, the Company
has redeployed its assets primarily in acquiring $93,925,000 face amount bonds
and notes secured by a lien on the Retama Park Horse Racing Facility
("Facility") in suburban San Antonio, Texas, and into real estate by the
acquisition of 118 acres of land in Williamson County, Texas which it may
develop. In addition, the Company entered into a contract to manage the Facility
commencing January 1998.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts
of Call Now, Inc. and it's wholly owned subsidiaries Andice Development Co., ARN
Communications Corp., National Communication Inc., and Retama Entertainment
Group Inc. (Collectively "the Company"). Investments in which the Company does
not have a majority voting or financial controlling interest are accounted for
under the equity method of accounting unless its ownership constitutes less than
a 20% interest in such entity for which such investment would then be included
in the consolidated financial statements on the cost method. All significant
inter-company transactions and balances have been eliminated in consolidation.
MARKETABLE SECURITIES
In accordance with Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," (SFAS 115),
the Company classifies its investment portfolio according to the provisions of
SFAS 115 as either held to maturity, trading, or available for sale. At December
31, 1998, the Company classified its investment portfolio as available for sale
and held to maturity. Securities available for sale are carried at fair value
with unrealized gains and losses included in stockholders' equity.
Gain or losses from the sale or redemption of the investments are
determined using the specific identification method.
INCOME TAXES
The Company accounts for income taxes pursuant to the provisions of the
Financial Accounting Standards Board Statement No. 109, "Accounting for Income
Taxes", which requires an asset and liability approach to calculating deferred
income taxes. The asset and liability approach requires the recognition of
deferred tax liabilities and assets for the expected future tax consequences of
temporary differences between the carrying amounts and the tax basis of assets
and liabilities.
EARNINGS PER COMMON SHARE
Effective December 31, 1997, the Company adopted Financial Accounting
Standards (SFAS) No. 128, "Earnings Per Share," which simplifies the computation
of earnings per share requiring the restatement of all prior periods.
F8
<PAGE> 25
CALL NOW, INC
AND SUBSIDIARIES
SUMMARY OF ACCOUNTING POLICIES
Basic earnings per share are computed on the basis of the weighted
average number of common shares outstanding during each year.
Diluted earnings per share are computed on the basis of the weighted
average number of common shares and dilutive securities outstanding. Dilutive
securities having an anti-dilutive effect on diluted earnings per share are
excluded from the calculation.
UNINSURED CASH BALANCES
The Company maintains its cash balances at several financial
institutions. Accounts at the institutions are secured by the Federal Deposit
Insurance Corporation up to $100,000. Periodically, balances may exceed this
amount. At December 31, 1998, uninsured balances aggregated $311,309.
CONCENTRATION OF CREDIT RISK/ECONOMIC DEPENDENCY
The Company's current business involves two ventures, which are
interest rate sensitive. First is ownership of tax-exempt bonds partially
collateralized by a first mortgage on the Retama Park Horse Racing Facility near
San Antonio, Texas. The second is ownership of development property in
Williamson County, Texas (near Austin, Texas). Both ventures are dependent on
continued low interest rates and economic prosperity in the Austin and San
Antonio metropolitan area.
PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepting accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure on contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
YEAR 2000 CONCERNS
The Company has addressed the concerns of potential year 2000 computing
problems, both internally and with external parties and believes that
significant additional costs will not be incurred because of this circumstance.
The Company has performed an evaluation of its computer hardware and software
and has determined that recent enhancements and upgrades have brought
F9
<PAGE> 26
CALL NOW, INC
AND SUBSIDIARIES
SUMMARY OF ACCOUNTING POLICIES
it's systems significantly into compliance with the year 2000 phenomenon and
that existing support agreements are adequate to cope with any remaining issues.
Based upon equipment evaluations and analysis by consulting parties, management
does not believe that significant operational equipment modifications are
necessary.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of financial instruments including marketable
securities, notes and loans receivables, accounts payable and notes payable
approximate their fair values at December 31, 1998.
LONG-LIVED ASSETS
Statement of Financial Accounting Standards No. 121 "Accounting for
Impairment of Long-Lived Assets to be Disposed of " requires, among other
things, impairment loss of assets to be held and gains or losses from assets
that are expected to be disposed of be included as a component of income from
continuing operations before taxes on income.
STOCK BASED COMPENSATION
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock Based Compensation" SFAS No. 123 established a fair value method for
accounting for stock-based compensation plans either through recognition or
disclosure. The Company did not adopt the fair value based method but instead
discloses the effects of the calculation required by the statement.
COMPREHENSIVE INCOME
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income," establishes standards for reporting and display of
comprehensive income, its components and accumulated balances. Comprehensive
income is defined to include all changes in equity except those resulting from
investments by owners and distributions to owners. Among other disclosures, SFAS
No.130 requires that all items that are required to be recognized under current
accounting standards as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements.
F10
<PAGE> 27
CALL NOW, INC
AND SUBSIDIARIES
SUMMARY OF ACCOUNTING POLICIES
SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION
Statement of Financial Accounting Standards (SFAS) No. 131, Disclosures
about Segments of an Enterprise and Related Information, supersedes SFAS No. 14,
"Financial Reporting for Segments of a Business Enterprise." SFAS 131
establishes standards for the way that public companies report information about
operating segments in annual financial statements and requires reporting of
selected information about operating segments in interim financial statements
issued to the public. It also establishes standards for disclosures regarding
products and services, geographic areas and major customers. SFAS 131 defines
operating segments as components of a company about which separate financial
information is available that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance.
RECLASSIFICATIONS
Certain reclassifications have been made to the prior year's financial
statements in order to conform to the current presentation.
F11
<PAGE> 28
CALL NOW, INC.
AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
1. MARKETABLE SECURITIES
The carrying amounts of marketable securities as shown in the
accompanying balance sheet and their approximate market values at December 31,
1998 are as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Cost Gross Gross Market
Unrealized Unrealized Value
Gains Losses
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Available for sale:
Municipal bonds $5,654,929 $ -- $ -- $5,654,929
Corporate securities 17,301 3,218 14,667 5,852
-----------------------------------------------------------------------------------------------------------------------------
$5,672,230 $ 3,218 $ 14,667 $5,660,781
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Unrealized gains and losses on securities available for sale at
December 31, 1998 are shown net of income taxes as a component of stockholders'
equity.
2. INCOME TAX REFUND CLAIM
For Federal income tax purposes the Company had an operating loss of $
3,537,625 and a capital loss carry-back in the amount of $ 1,967,504 for the
current year. As a result, the Company has filed a Federal income tax refund
claim is the amount of $ 1,871,787. The claim was received in June 1999.
3. INVESTMENT IN BONDS
AND BOND DEFEASANCE TRANSACTION
On September 20, 1996, the Company acquired $52,274,000, 8.75% term
bonds of Retama Development Corporation ("RDC") Special Facilities Revenue
Bonds, Series 1993 for a purchase price of $10,300,000. The bonds were secured
by a first mortgage on the Retama Park Horse Racing facility.
In November 1996, the company purchased $39,275,000 principal amount of
Retama Development Corporation Series 1993A notes and $500,000 of Retama
Development Corporation Series 1993B notes for 385,700 shares of the company's
common stock valued at $337,488. The notes were secured by a lien on the Retama
Park Horse Racing facilities, including real and personal property.
Simultaneously, the company sold 50% of the bonds and notes to a
broker/dealer for an initial payment of $1,740,000 and future payments of
$1,950.000 to be paid prior to December 16, 1996. At December 31, 1996, $850,000
was uncollected.
On March 26, 1997, the Company participated in the defeasance of the
RDC bonds and notes held by it, and received cash in the amount of $3,853,086,
$3,640,000, 7% Series 1997 A Bonds and $45,200,000, 8% Series 1997 B Bonds as
part of the defeasance. The 1997 bonds were valued by an independent third party
at the same value as the carrying value of the 1993 bonds.
F12
<PAGE> 29
CALL NOW, INC.
AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
On April 7, 1997, the company acquired the balance of the RDC bonds in
exchange for 760,000 shares of the Company's common stock, 15,000 shares of
compressent Corporation ("Compressent") common stock, and $2,150,000 in cash.
The cost of the remaining bonds purchased by the Company, including acquisition
costs, was $3,187,728. At December 31, 1997 the Company's total holdings of RDC
bonds were: (a) 1997 Series A 7% bonds-$7,000,000 and (b) 1997 Series B 8%
bonds-$86,925,000.
Under the terms of the bond defeasance, after giving effect to the
purchase of the additional bonds referred to in the preceding paragraph, the
company had a gain of $3,853,086. However, the company was obligated to lend to
RDC, to fund any operating deficit (as defined) of RDC, up to $2,150,000 for a
two-year period expiring March 1999, of which $853,000 had been advanced at
December 31, 1998.
As a result of the foregoing obligation, the Company reduced the gain
on the bond defeasance by $2,150,000 in 1997, which was reflected in the balance
sheet as deferred gain from bond defeasance. In this connection, a deferred tax
asset of $801,950 in 1997 was recorded. At December 31, 1998, the Company has
loaned a total of $ 853,000 to RDC. The funding agreement expired in March 1999
and no further loans have been made. As a result, the Company reversed the
deferral of $2,150,000 to income and recorded an accompanying income tax benefit
of $ 801,950 in 1998.
4. NOTES AND LOANS
RECEIVABLE
Notes and loans receivable at December 31, 1998 comprise the following:
On August 15, 1998, the Company executed a note with a broker-dealer in
the amount of $750,000. The note bears an interest rate of 12% per annum,
payable monthly and matures August 15, 1999. The note is an approved transaction
through the National Association of Securities Dealers. The company has advised
the broker-dealer that it will not renew this agreement.
5. LAND
On July 15, 1996, the Company acquired 118 acres of development
property in Williamson County, Texas for a purchase price of $2,363,060. Under
the terms of the purchase, the Company paid $589,310 and executed a seven year,
9% note, in the approximate amount of $1,770,000 with semi-annual principal and
interest payments of $85,721 commencing January 1997 and ending July 15, 2003,
at which time the remaining $1,655,056 balance is due.
The following is a summary of annual principal payments due under this
note:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Year Amount
- --------------------------------------------------------------------------------
<S> <C>
1999 $ 14,806
2000 16,169
2001 17,657
2002 19,282
2003 1,676,112
- --------------------------------------------------------------------------------
$1,744,027
- --------------------------------------------------------------------------------
</TABLE>
F13
<PAGE> 30
CALL NOW, INC.
AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
6. STOCKHOLDERS' EQUITY
The company has authorized 800,000 shares of no par value preferred
stock. Of the 800,000 shares, 300,000 are designated Class A convertible
redeemable preferred stock (Class B) and 300,000 are designated as Class C
convertible redeemable preferred stock (Class C).
The Class A preferred stock is non-voting, redeemable at the option of
the company at a price of $5 per share plus accrued but unpaid dividends, and
convertible into five shares of common stock at the option of the holder. The
Class A preferred stockholders are entitled to receive an annual dividend of
$.30 per share. Of the 300,000 designated shares, none were outstanding at
December 31, 1998.
The Class B preferred is non-voting stock redeemable at the option of
the Company price of $100 per share plus accrued but unpaid dividends, and is
convertible into 100 shares of common stock at the option of the holder. The
class B preferred stockholders are entitled to receive an annual dividend of
$6.00 per share. Of the 7,500 designated shares, none were outstanding at
December 31, 1998.
The Class C preferred stock is non-voting, redeemable at the option of
the Company at a price of $3.00 per share plus one share of common stock at the
option of the holder. Of the 300,000 designated shares, none were outstanding at
December 31,1998.
In a prior year, the Company entered into "Consultant's Stock purchase
and Sale Agreements" (stock subscription notes receivable) with several
individuals. In exchange for providing certain advisory and/or consulting
services, the individuals were entitled to purchase 710,000 shares of the
Company's common stock at $.80 per share. The purchase price was payable in five
years, with interest at prime plus 1% per annum. All or a portion of any
compensation due by any of the individuals may be credited to the purchase price
of the stock.
During 1997, the Company authorized three of its officers and employees
to exercise options aggregating 115,000 in exchange for notes totaling $230,000.
At December 31,1998, accrued interest receivable on the subscription notes
receivable amounted to $27,184.
7. STOCK BASED COMPENSATION
At December 31, 1998, the Company has non-plan options, which are
described below. The Company applies APB Opinion 25; Accounting for stock issued
to employees, and related Interpretations in accounting for the options. Under
APB Opinion 25, because the exercise price of the company's employee stock
options equals or exceeds the market price of the underlying stock on the date
of grant, no compensation cost is recognized.
In 1995, the Company granted options to purchase 115,000 shares of its
common stock to its corporate counsel, chief financial officer and controller.
The options are excisable at $2 per share and expire three years from the date
of grant. These options were exercised during 1997.
On April 25, 1997, the Company granted a stock bonus of 14,544 shares
of its common stock to its corporate counsel, chief financial officer and
controller. In addition, on the same date, the Company granted options to
purchase 530,000 shares of the Company's common stock to its president, chief
executive officer and two members of the Company's board of directors. The
options are exercisable at prices ranging from $2.34 - $4 per share and expire
five years from the date of grant.
FASB Statement 123, Accounting for Stock-Based Compensation, requires
the company to provide pro forma information regarding net income per share as
if compensation cost for the Company's options had been determined in
F14
<PAGE> 31
CALL NOW, INC.
AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
accordance with the fair value based method prescribed in FASB Statement 123.
The Company estimates the fair value of each stock option at the grant date by
using the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1998 and 1997: no dividend yield percent;
expected volatility of 46.5 and 0.1 percent; risk-free interest rates of 6.8%
and 6.0%, and with expected lives of 3.3 years and 5 years for the non-plan
options.
Under the accounting provisions of FASB Statement 123, the Company's
net income and earnings per would have been reduced to the pro forma amount
indicated below:
<TABLE>
<CAPTION>
1998 1997
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Net income
As reported $(3,345,774) $519,890
Pro forma $(3,639,142) 256.522
- -------------------------------------------------------------------------------------------
Earnings per share
As reported (.39) .06
Pro forma (.40) .03
- -------------------------------------------------------------------------------------------
</TABLE>
A Summary of the status of the Company's non-plan options as of
December 31, 1998 and 1997, and changes during the years ended on those dates
are presented below:
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
- --------------------------------------------------------------------------------------------------
Shares Weighted Shares Weighted-
average Average
Exercise Exercise
Price Price
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding at
beginning of year 530,000 $3.27 115,000 $2.00
Granted 10,000 3.00 530,000 3.27
Exercised -- -- (115,000) 2.00
Forfeited -- -- --
- --------------------------------------------------------------------------------------------------
Outstanding at the
end of year 540,000 3.26 530,000 3.27
- --------------------------------------------------------------------------------------------------
Options
exercisable at
year end 540,000 3.26 530,000 3.27
Weighted-
average fair
value of options
granted during
the year -- .80 -- .80
- --------------------------------------------------------------------------------------------------
</TABLE>
F15
<PAGE> 32
CALL NOW, INC.
AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
The following table summarizes information about non-plan options
outstanding at December 31, 1998:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
- ----------------------------------------------------------------------------------------------------
Range of Number Weighted Weighted Number Weighted
Exercise outstanding at average average exercisable at average
Prices 12/31/98 remaining exercise 12/31/98 exercise
contractual Price Price
life
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 2.34 230,000 3.3 Years 2.34 230,000 2.34
4.00 300,000 3.3 Years 4.00 300,000 4.00
3.00 10,000 5 Years 3.00 10,000 3.00
- ----------------------------------------------------------------------------------------------------
</TABLE>
8. INCOME TAXES
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
Year ended December 31, 1998 1997
- ---------------------------------------------------------------------------------
<S> <C> <C>
Current:
Federal $ (1,247,637) $ 224,657
State -0- 66,455
- ---------------------------------------------------------------------------------
$ (1,247,637) $ 291,112
- ---------------------------------------------------------------------------------
</TABLE>
Such income taxes are included in the accompanying consolidated
financial statements as follows:
<TABLE>
- ----------------------------------------------------------------------------------
<S> <C> <C>
Income from operations $ (1,247,637) $ 291,112
Extraordinary Items -- --
- ----------------------------------------------------------------------------------
$ (1,247,637) $ 291,112
- ----------------------------------------------------------------------------------
</TABLE>
The above provision has been calculated based on Federal and State
statutory rates.
9. RELATED PARTY
TRANSACTIONS
Consulting fees aggregating approximately $46,000 and $384,000 were
incurred to certain shareholders and directors of the Company in 1998 and 1997,
respectively.
The Company leased office space from its chief executive officer and
majority shareholder on a month-to-month basis. The Company incurred rental
expenses of $17,500 until July 31, 1998 and $30,000 in 1997 for the use of such
facilities.
At December 31, 1998, outstanding notes receivables from the Company's
stockholders and officers amounted to $92,838 with accrued interest in the
amount of $ 14,856.
F16
<PAGE> 33
CALL NOW, INC.
AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
10. MANAGEMENT
AGREEMENT
On October 27, 1997 the RDC'S Board Of Directors approved a management
contract granting Retama Entertaining Group, Inc., an 80% owned subsidiary of
the Company, the right to manage the operations of the Facility commencing on
January 1, 1998. The three-year agreement provides Retama Entertainment Group,
Inc., with a monthly management fee of $15,000 plus a variable fee equal to 25%
of profits in excess of $1,000,000 annually. Operations of this subsidiary began
January 1, 1998.
11. SUPPLEMENTAL
CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Year ended December 31, 1998 1997
- ------------------------------------------------------------------------------------
<S> <C> <C>
Cash paid for interest $ 216,244 $ 288,900
Cash paid for income taxes 1,027,663 2,877,000
- ------------------------------------------------------------------------------------
</TABLE>
SUPPLEMENTARY INFORMATION:
During the year ended December 31, 1998, non-cash investing and
financing activities are as follows:
1) Termination of agreement with a broker-dealer represented
by a note receivable of $1,155,000 bearing interest at 12% per
annum and a non-interest note payable of $1,155,000.
2) Issuance of 150,000 shares of the Company's common stock in
the amount of $431,250 as part of a financing transaction.
3) Issuance of 26,500 shares of the Company's common stock in
settlement of a former director's lawsuit.
During the year ended December 31, 1997, non-cash investing and
financing activities are as follows:
- 1) Purchase of $45,085,000 principal amount of RDC Series 1997
A and B Bond's for 760,000 shares of the Company's common
stock valued at $2,125,000, and the assumption of a note
payable in the amount of $200,000 and funding liability
obligation in the amount of $1,075,000.
- 2)Cancellation of a note payable in the amount of $150,000 for
15,000 shares of Compressent common stock valued at $10.00
for share.
- 3) Issuance of 115,000 shares of the Company's common stock in
exchange for subscriptions notes receivable in the amount
$230,000.
12. LITIGATION SETTLEMENT
In 1994, a former director, filed a lawsuit in Florida against the
Company seeking damages of approximately $500,000 for breach of an oral
employment agreement. On May 14, 1998, this litigation was settled. In this
connection, the Company paid $50,000 and issued 26,500 of the Company's common
stock to the former director in 1998.
F17
<PAGE> 34
CALL NOW, INC.
AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
13. CONTINGENCIES
During 1996, the Securities and Exchange Commission advised the
Company that it may be an investment company as defined by the Investment
Company Act of 1940. In the event the company is deemed to be an investment
company, the Company may become subject to certain restrictions relating to the
Company's activities, including restrictions on the nature of it's investments
and the issuance of securities. In addition, the Investment Companies Act
imposes certain requirements on companies deemed to be within it's regulatory
scope, including registration as an investment company, adoption of a specific
form of corporate stucture and compliance with certain reporting, record
keeping, voting, proxy, disclosure, and other rules and regulations. In the
event of characterization of the company as an investment company, the failure
of the company to satisfy regulatory requirements, whether on a timely basis or
at all, could, under certain circumstances have materially adverse effect on
company.
14. NOTE PAYABLE AND FINANCING TRANSACTION
In February 1998, the Company entered into a loan agreement with
Compressent Inc. (Compressent) in which the Company agreed to provide certain
financing to Compressent and to receive a commitment fee along with warrants to
acquire shares of Compressent common stock. This loan agreement was terminated
on May 20, 1998 before any loan was made and as a result, the Company did not
receive the commitment fee or warrants from Compressent.
In addition, the Company exchanged $3,500,000 face amount of its
investments in RDC Series A bonds for specific shares of Compressent's
convertible preferred stock and an option to acquire additional shares of
Compressent's common stock.
Compressent subsequently borrowed, from a third party, $2,000,000,
pledging the 3,500,000 RDC Series A bonds as collateral. In connection with a
rescission of the purchase of Compressent convertible preferred stock, the
Company received the $3,500,000 Series A RDC bonds, assumed the $2,000,000 loan,
and was to receive 2,000,000 unregistered shares of Compressent common stock.
This was subsequently reduced to 500,000 Compressent common stock shares and a
10% interest in the business venture between Compressent and a third party. In
addition, the Company agreed to issue 150,000 shares of its common stock. The
500,000 Compressent shares have not been received and are deemed worthless at
December 31, 1998. The company has recorded a loss of $2,431,250 on the
financing transaction.
F18
<PAGE> 35
CALL NOW, INC.
AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
15. EARNINGS PER SHARE
The following reconciles the components of the earnings per share (EPS)
computation:
<TABLE>
<CAPTION>
1998 1997
Earning per common Income Shares Per-Share Income Shares Per-Share
Share (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Income $(3,345,774) 8,404,804 $(.39) $ 519,890 8,090,594 $ .06
Effect of Dilative
Securities: Stock 25,510
options
- -----------------------------------------------------------------------------------------------------------------------------
Income from continuing $(3,345,774) 8,404,804 $(.39) $ 519,890 8,116,104 $ .06
operations available to
common shareholders plus
assumed conversions
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Options to purchase 540,000 shares were outstanding at December 31,
1998 were not included in the computation of diluted EPS as they would be
anti-dilutive.
16. OTHER INCOME AND EXPENSE ITEMS
The following items are shown on the consolidated statement of income
as other income and expenses items and are disclosed elsewhere in these notes:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Loss on Sale of Bonds $(1,967,504) $ --
Gain on Bond Defeasance 2,150,000 1,703,086
Gain on Disposal of Marketable Securities -- 606,792
Loss on Compressent Transaction (2,431,250) --
Interest Income 52,946 754,029
Accrued Expense - Other (325,000) --
-------------------------------
Total $(2,520,808) $3,063,907
=========== ==========
</TABLE>
F19
<PAGE> 36
CALL NOW, INC.
AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
17. SUBSEQUENT EVENTS
The Company and its CEO (William M Allen) have been sued by RDC, the
issuer of the bonds held by the Company, in connection with the repair of the
lake at Retama Park Race Track. The action seeks $600,000 in damages plus
exemplary damages. The Company had indemnified the contractor regarding matters
related to the race track. The Company has entered into a construction services
contract with the RDC to 1) dismiss the lawsuit against the Company and Mr.
Allen, and an assignment by the RDC of its claims and causes of action against
the contractor and related parties. The Company has engaged an engineering firm
to perform a study to repair the lake, and plans to engage qualified contractors
to repair the lake. The Company estimates that the total cost to repair the lake
and therefore the liability, will be somewhere around $650,000 and one-half of
that amount has been accrued in 1998. Due to the agreement detailed in the
following paragraph $325,000 is accrued at December 31, 1998.
On May 25, 1999 an agreement was signed between the Company and two
trust known as the Global Trust and the Hemisphere Trust (Trusts) to sell 50% of
the Company's investment in the Retama Development Corporation Special
Facilities Revenue Bonds.
The agreement calls for the Company to exercise an option to purchase
from ITG Fund $6,950,000 in aggregate principal amount of Retama Development
Corporation (RDC) Series 1997A bonds for a total exercise price of $4,775,000.
The agreement further provides for the Trusts to purchase these bonds from the
Company for a total price of $ 4,862,500 plus accrued interest on the Series A
bonds and to deliver to the Company $2,000,000 of the Series A bonds plus the
payment of the Compressent debt assumed by the Company, and the Company will
deliver to the Trusts $42,462,500 in the Series B bonds of RDC.
The agreement further provides for the Trusts to assume 50% of the
Company's obligation to the RDC for the repairs to the lake (not to exceed a
total of $600,000) in the aforementioned lawsuit, and to provide 50% of the
Chief Executive Officer`s compensation of the track operations.
No other material subsequent events have occurred that warrants
disclosure since the balance sheet date.
F20
<PAGE> 1
Exhibit 8.13
AGREEMENT
THIS AGREEMENT made and entered into this 27th day of May, 1999 by and
among GLOBAL TRUST ("Global") and HEMISPHERE TRUST ("Hemisphere," and together
with Global, the "Trusts"), each trusts residing at 35 Barrack Road, Third
Floor, Belize City, Belize and CALL NOW, INC., a Florida corporation with its
principal business address at 10803 Gulfdale, Suite 222, San Antonio, Texas
78216 ("Call Now").
WHEREAS, Call Now presently has an option to purchase from ITG Fund c/o
Miller Johnson Keenan ("ITG"), $6,950,000 in aggregate principal amount of
Retama Development Corporation Special Facilities Revenue Bonds for the Retama
Park Racetrack, Series 1997A (the "Series A Bonds") for a total exercise price
of $4,775,000; and
WHEREAS, Call Now presently owns $86,925,000 in aggregate principal
amount of Retama Development Corporation Special Facilities Subordinated Revenue
Bonds for the Retama Park Racetrack, Series 1997B (the "Series B Bonds," and
together with the Series A Bonds, the "Bonds").
NOW, THEREFORE, intending to be legally bound, the parties hereto agree
as follows:
1. Acquisition and Disposition of the Bonds. On May 28, 1999, each of
Global and Hemisphere will purchase from ITG $2,475,000 of the Series A Bonds
for a purchase price of $2,387,500 plus accrued interest on such Series A Bonds.
Simultaneously with that transaction, the Trusts will cause ITG to deliver to
Call Now $2,000,000 of the Series A Bonds and Call Now will deliver to each
Trust $21,731,250 of the Series B Bonds. Upon receipt of the coupon payment due
on such Series A Bonds in September 1999, Call Now shall reimburse Global and
Hemisphere for a total of $105,000 of accrued interest.
2. Allocation of Conversion Right. Upon the next conversion date for
converting Series B Bonds into Series A Bonds under the terms of the indenture
for the Bonds, Global Trust, Hemisphere Trust and Call Now will each convert
such amount of Series B Bonds such that, taking into account their existing
Series A Bond holdings, they will all hold the same amount of Series A Bonds
(50% by Global and Hemisphere and 50% by Call Now). After the conversion Global
and Hemisphere will transfer such amount of Series B Bonds to Call Now so that
Call Now owns 50% of the then outstanding Class B Bonds, Global owns 25% of such
Class B Bonds and Hemisphere owns 25% of such Bonds.
3. Condition to Close. Global's and Hemisphere's obligations to perform
this Agreement is conditioned upon and subject to their obtaining an agreement
from ITG prior to May 28, 1999 that ITG will sell and deliver the Series A Bonds
as described in Section 1 free and clear of all liens, claims and encumbrances.
4. Working Capital Assessments. The parties have agreed to contribute
certain funds to support certain expenditures related to Retama Park Racetrack
which property and operations support the Series A Bond and Series B Bonds
pursuant to the Indenture thereof. Such funds shall be supplied 25% by Global,
25% by Hemisphere and 50% by Call Now within five (5) business days after
request of Call Now as follows:
<PAGE> 2
(a) The actual cost of repair of infield lake as needed, such
funding obligation not to exceed a total of $600,000;
(b) the annual salary of Chief Executive Officer of the track
operation with such annual increases and bonus agreed to by
the parties;
(c) the actual fees and expenses incurred in revising the
Indenture for the Bonds; such obligation note to exceed the
lesser of the actual invoice submitted by Fullbright and
Jaworski, or $139,500; and
(d) Any other costs and expenses for support of the Bonds as agreed
upon by the parties.
5. Co-Sale Agreement. Each party hereby grants the other parties the
right and privilege to participate in any sale of the Series A Bonds and the
Series B Bonds in proportion to the percentage of the total of such bonds owned
by each party hereto. A party proposing to sell any such bonds shall notify the
other parties in writing of the proposed sale at least five (5) business days
before such sale, summarizing the terms and conditions of such sale.
Each party receiving such notice shall notify the party giving such notice of
proposed sale within two (2) business days after receipt of such notice, whether
it desires to participate in the sale. Failure to notify the party giving such
notice of proposed sale that it desires to participate in such sale shall
constitute an election not to participate in the sale. This Co-Sale Agreement
shall terminate ten (10) years after the date hereof.
6. Voting. In the event the holders of the Series B Bonds have the
right to vote or consent on any matters, the parties agree to vote or give
consent as Call Now shall direct with regard to matters relating to selection of
management of the racetrack, approval of operating budget of the racetrack and
other matters related to the racetrack operations and will not unreasonably
withhold or delay their votes or consents on such other matters as Call Now
shall direct, but there shall not be an increase in management fee formula
payable to the management company unless agreed upon by the parties.
7. Waiver of Reserve Fund. The parties agree to grant the issuer of the
Bonds a waiver of the Reserve Fund contribution required to be made pursuant to
Section 5.04(b) of the Indenture on July 15, 1999, but this waiver shall not
apply to subsequent Reserve Fund contributions.
8. Notice. Any notice, demand, request, consent, approval, or
communication that either party desires or is required to give to the other
party or any other person shall be in writing and either served personally or
delivered by prepaid, first-class mail. Any notice, demand, request, consent,
approval, or communication that either party desires or is required to give to
the other party shall be addressed to the other party as follows:
If to Global: To the address set forth above
with a copy to: Alan F. Wohlstetter, Esquire
Cozen & O'Conner
1900 Market Street
Philadelphia, Pennsylvania 19103
If to Hemisphere: To the address set forth above
-2-
<PAGE> 3
with a copy to: Alan F. Wohlstetter, Esquire
Cozen & O'Conner
1900 Market Street
Philadelphia, Pennsylvania 19103
If to Call Now: 10803 Gulfdale
Suite 222
San Antonio, TX 78216
with a copy to: Joel Bernstein, Esq., P.A.
11900 Biscayne Blvd.
Suite 604
Miami, Florida 33181
Either party may changes its address by notify the other party of the
change of address.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed on the date first above written.
GLOBAL TRUST
By: CitiTrust International, Inc.
By:
-------------------------------------------
Name:
Title:
HEMISPHERE TRUST
By: CitiTrust International, Inc.
By:
-------------------------------------------
Name:
Title:
CALL NOW, INC.
By:
-------------------------------------------
Name:
Title:
-3-
<PAGE> 1
EXHIBIT 8.14
AGREEMENT FOR CONSTRUCTION SERVICES
BETWEEN RETAMA DEVELOPMENT CORPORATION AS OWNER
AND CALL NOW, INC. AS CONTRACTOR AND WILLIAM ALLEN,
INDIVIDUALLY, AS THIRD PARTY BENEFICIARY
("AGREEMENT")
1.0 PURPOSE
The purpose of this Agreement is to set forth the terms and conditions
under which Contractor will effect certain repairs to the larger
infield lake ("Lake") at the Retama Park Race Track in Selma, Bexar
County, Texas ("Racetrack"). The Owner represents that it is the Owner
of the Racetrack and Lake.
2.0 CONTRACT DOCUMENTS
All work to be performed by Contractor shall be in full compliance with
the requirements set forth in the contract documents. In case of any
inconsistency between this Agreement and any other contract documents,
this Agreement shall control. The contract documents, in order of
preference, consist of the following which are attached hereto or
incorporated herein by reference:
2.1 Agreement for Construction Services.
2.2 Thompson Proposal.
2.3 Thompson Plan.
2.4 Lien Waivers.
2.5 Change Order.
2.6 Certificate of Insurance.
2.7 Performance and Payment Bond.
3.0 SCHEDULE
3.1 Thompson Proposal.
Contractor shall enter into a subcontract with Thompson
Engineering, or such other engineering firm that the
Contractor may propose and that may be approved by the Owner,
for the purpose of developing a detailed proposal on whether
there is a
<PAGE> 2
reasonable and practical method for repair of the Lake so the
Lake will retain water at a generally fixed level for an
indefinite period, and if so, provide a detailed outline of
the method of repair. This proposal may herein be referred to
as the Thompson Proposal.
3.2 The Contractor shall use its reasonable efforts to obtain the
Thompson Proposal on or before April 30, 1999 (the "Proposal
Delivery Date").
3.3 The Owner shall have 15 days following the Proposal Delivery
Date to approve or disapprove the Thompson Proposal. If the
Thompson Proposal is approved, the Contractor shall proceed in
accordance with Section 3.6 below. If the Thompson Proposal is
disapproved, the Owner will advise the Contractor specifically
of the specified deficiencies of the Thompson Proposal and
allow the Contractor a period of no less than 15 days to make
revisions to the Thompson Proposal and resubmit the Thompson
Proposal to the Owner. Upon resubmission, the Owner will have
15 days to once again either approve or disapprove the
Thompson Proposal as revised. If the Thompson Proposal is
approved as revised, the Contractor will proceed in accordance
with Section 3.6 below. If the Thompson Proposal is
disapproved, this Agreement shall terminate and neither party
shall have any further liability, one to the other, hereunder.
In that event, all claims, rights, and causes of action
between the parties shall be preserved to the extent they
existed on the date of this Agreement.
3.4 The Owner and the Contractor specifically acknowledge to each
other that this Agreement provides only for the Work specified
in the Thompson Plans. Owner and Contractor have negotiated
this Agreement in settlement of disputed matters and recognize
and acknowledge for the purposes of this Agreement that
Contractor has made no guaranties within the scope of the
negotiated Work that the Lake will retain water to any
specified level for any period of time.
3.5 For the purposes of this Agreement, hereinafter the term
Thompson Proposal shall mean the Thompson Proposal as approved
by the Owner.
3.6 Within 60 days following approval of the Thompson Proposal by
the Owner, the Contractor shall obtain the plans and
specifications drawn in accordance with and to implement the
Thompson Proposal (the "Thompson Plans").
3.7 Upon delivery of the Thompson Plans to Contractor, Contractor
shall have ten days to discuss the Plans with Thompson
Engineering, seek modifications as it deems appropriate, and
either approve or disapprove final Thompson Plans. If
Contractor disapproves the Thompson Plans, this Agreement
shall terminate and neither party shall have any further
liability, one to the other, hereunder. In that event, all
claims, rights, and causes of action between the parties shall
be preserved to the extent they existed on the date of this
Agreement. If the Thompson Plans are approved by Contractor,
Contractor shall delivery the Plans to Owner.
3.8 Upon receipt of the Thompson Plans (Plans Delivery Date),
Owner shall have 30 days to approve or disapprove the Thompson
Plans. If the Thompson Plans are approved, the Contractor
shall proceed in accordance with Section 3.9 below. If the
Thompson Plans are disapproved, the Owner will advise the
Contractor specifically
Page 2
<PAGE> 3
of the deficiencies of the Thompson Plans and allow the
Contractor a period of no less than 20 days to make revisions
to the Thompson Plans and resubmit the Thompson Plans to the
Owner. Upon resubmission, the Owner will have 15 days to once
again either approve or disapprove the Thompson Plans as
revised. If the Thompson Plans are approved as revised, the
Contractor shall have 10 days to approve the Thompson Plans.
If the Contractor approves the Thompson Plans, the Contractor
will proceed in accordance with Section 3.9 below. If the
Thompson Plans are disapproved by either party, this Agreement
shall terminate and neither party shall have any further
liability, one to the other, hereunder. In that event, all
claims, rights, and causes of action between the parties shall
be preserved to the extent they existed on the date of this
Agreement.
3.9 For the purposes of this Agreement, hereinafter the term
Thompson Plans shall mean the Thompson Plans as approved by
the Owner.
3.10 Within 30 days following approval of the Thompson Plans by the
Owner, the Contractor shall enter into a subcontract with
Thompson Engineering, or another engineering firm proposed by
Contractor and approved by the Owner, to construct the repairs
to the Lake in accordance with the Thompson Plans and the
other terms and provisions of this Agreement ("Work").
3.11 The Owner and the Contractor acknowledge that the Work cannot
be commenced until the end of the live racing season, on or
about October 24, 1999. The Owner shall provide notice to the
Contractor of the last live racing date in the 1999 season and
the Contractor shall use its reasonable efforts to commence
Work within 45 days following such last live racing date
("Work Commencement Date"). Subject to force majeure, the
provisions of this Agreement, and any extensions approved by
the Owner pursuant to a change order, the Contractor agrees
that it shall cause the Work to be substantially completed on
or before the estimated time for completion as set forth in
the Thompson Plans ("Estimated Date of Substantial
Completion"). The Contractor shall use its reasonable efforts
to complete dirt hauling to the Lake on or before January 15,
2000.
4.0 CONTRACTOR'S RESPONSIBILITIES
4.1 In accordance with the Schedule set forth in Section 3.0, and
in accordance within Section 2.0, and the terms and provisions
of this Agreement, the Contractor, through its subcontractor,
shall perform the Work, and provide all inspections, labor,
materials and equipment necessary to complete the Work in
accordance with the Schedule set forth in Section 3.0.
4.2 Contractor represents that it fully understands the Work
required and, except as otherwise provided in this Agreement,
the local conditions that may affect its performance.
Contractor shall use its reasonable efforts to ensure diligent
performance and coordination of the design and construction to
be furnished under this Agreement. The Contractor shall
inspect the site of the Work and fully acquaint itself with
the existing surface and (to the extent practical) subsurface
conditions and shall fully inform itself of the nature and
character of the Work. Contractor shall not be entitled to
additional time or money for conditions which the Contractor
could have reasonably discovered through its previous site
inspection hereunder. Owner
Page 3
<PAGE> 4
acknowledges that the Contractor does not guarantee that the
repairs evidenced by the Thompson Proposal and the Thompson
Plans will in fact have the results desired by the Owner. The
Owner, for itself, shall provide to the Contractor, within ten
(10) days after the execution of this Contract, all documents
or other material, in whatever form or format that may exist,
in Owner's possession, related to or revealing any surface or
subsurface conditions related to the Lake or the subsurface
under the Lake. Owner will use its reasonable efforts to
acquire for Contractor any other information as Contractor may
designate from sources under Owner's control.
4.3 Contractor shall be and remain liable to Owner for all damages
caused by the negligence of Contractor, its employees, agents,
representatives, assigns or subcontractors under this
Agreement. Owner's review, approval or acceptance of or
payment for any of the services provided under this Agreement
shall not constitute a waiver of any rights provided under
this Agreement or otherwise provided by law.
4.4 Contractor shall promptly and in logical sequence prepare,
review, approve and submit to Owner the Thompson Proposal, and
the Thompson Plans in accordance with the Schedule. The
Thompson Plan and Proposal shall be sent to: Retama
Development Corporation, c/o Retama Entertainment Group, P.O.
Box 47535, San Antonio, Texas 78265-7535 with copies sent to
each of Owner's board members and Owner's counsel, at
addresses to be provided by Owner. All documents shall be in
English or appropriate translated.
4.5 Unless otherwise provided by specific reference in the
Contract Documents, Contractor will provide and maintain a
record set of releases, permits and other authorizations
necessary for the execution and completion of the Work.
4.6 Contractor shall give all notices and comply with all laws,
ordinances, rules, regulations and lawful orders of any public
authority bearing on the performance of the Work and shall
coordinate its Work with the work of others on-site (provided
however, any future laws enacted that would delay or prohibit
the Work or any aspect thereof may be considered force
majeure). Owner shall advise of specific racing commission and
municipal codes known to them during design phase. The Owner
shall use its reasonable efforts to assure that no other
construction or work is ongoing in the area of the Lake (other
than routine landscape maintenance) that would interfere in
any way with the Work. However, Contractor recognizes and
acknowledges that Owner conducts an equestrian training center
on its premises that requires access to and use of the track
facilities. Contractor will coordinate all work at the
facility with Owner to ensure minimal interruption of track
use and training center operations. The Contractor will repair
any damage to the track caused by Contractor or its
subcontractor(s).
4.7 Contractor shall maintain at all reasonable times a
representative available to Owner with the expertise required
to administer the work of this contract and supervise its
subcontractors.
4.8 Contractor shall keep on site a set of Contract Documents
marked to show changes to date and shall provide Owner with a
set of as-built drawings as the work is completed.
Page 4
<PAGE> 5
4.9 Should Owner request any additional inspections or testing be
performed by the Contractor beyond the reasonable inspecting
and testing procedures generally used in the industry, the
additional inspection and testing shall be at the sole cost
and expense of Owner, and any delays proximately resulting
from the additional inspecting and testing, will be added to,
and will extend, the specified delivery time by an amount of
time equal to such delay.
4.9.1 If any portion of the Work is covered up prior to a
required inspection, it must be uncovered for
inspection and the uncovering and recovering shall be
at Contractor's expense.
4.9.2 If Owner or agent reasonably determines that any work
requires special inspection, testing or approval
(other than as addressed in Section 4.10), Owner will
instruct Contractor to order such special inspection,
testing or approval. If such special inspection or
testing reveals failure of the Work to comply with
the requirements of the Contract Documents,
Contractor shall bear all costs thereof, including
compensation for additional services made necessary
by such failure and loss of time; otherwise, Owner
shall bear the costs of such testing.
4.10 Any work or materials that may have been omitted in the
general description of said Project, but the implementation of
which is implied or necessary to the Project's completion, in
accordance with generally accepted construction industry
standards, should be deemed by Contractor and Owner to be
included in this Contract and shall be furnished by the
Contractor as if same had been stated specifically.
5.0 RESPONSIBILITIES OF OWNER
5.1 The Owner shall designate a representative who shall be fully
acquainted with the Project and have authority to recommend
changes in the scope of the Project, render decisions
promptly, and furnish information expeditiously and in time to
meet the dates set forth in the Schedule.
5.2 Owner shall have the right, but not the obligation, to perform
inspections of the work in a manner mutually agreed upon by
both parties but this will in no way relieve Contractor of its
obligations for full compliance with the Contract Documents.
Contractor acknowledges that owner inspections and tests are
for the sole benefit of the Owner and do not relieve the
Contractor of its duty to perform inspection, testing, and
quality control of its work.
5.3 Owner or agent shall have the right to assign access gate to
the job site for use by the Contractor.
5.4 The Owner shall have no contractual obligation to the
Contractor's subcontractors and shall communicate with such
subcontractors only through the Contractor.
Page 5
<PAGE> 6
6.0 CONSIDERATION
This Agreement arises out of a settlement of certain disputed matters
between the Contractor, William Allen, and the Owner. The Contractor,
at its sole expense, shall fund the preparation of the Thompson
Proposal and the Thompson Plans, and the undertaking of the Work
described by the Thompson Plans as finally approved by Contractor and
Owner. Upon approval of the final Thompson Plans by Contractor and
Owner, Contractor, William Allen, and Owner will execute the Settlement
Agreement and Dismissal Motion attached hereto as Exhibit A for Cause
No. 98CI-17581; Retama Development Corporation vs. Call Now, Inc. and
William Allen in the 224th Judicial District Court of Bexar County,
Texas now pending in Bexar County, Texas. In addition, Owner will
execute the Assignment attached hereto as Exhibit B. In the event that
Contractor or its subcontractor(s) assist Owner or its parent, the City
of Selma, in obtaining state or federal funds available to fund any
portion of the Work, Owner and Contractor will negotiate in good faith
modifications to this Agreement allocating a reasonable portion of such
funds to the Work to reduce Contractor's costs hereunder.
7.0 INDEPENDENT CONTRACTOR
7.1 The parties expressly understand and agree that Contractor is
acting as an independent contractor unrelated to Owner or
agent and any of its subsidiary or affiliated companies.
Nothing in this Agreement is intended to create a
relationship, express or implied, of employer-employee or
principal-agent between Owner and Contractor or between Owner
and any individual employed or provided to work under this
Agreement by Contractor.
7.2 Owner or agent shall have no direction and control over
Contractor or Contractor's employees, agents, subcontractors
or the manner and method utilized by Contractor and is
interested only in results obtained by Contractor. Contractor
shall determine and have sole discretion over the manner and
methods utilized to achieve the results desired by Owner or
agent and shall be solely responsible for the direction,
control and supervision of its acts and those of its agents,
employees and subcontractors incident to the performance of
this Agreement. Contractor shall not have nor shall it
represent itself as having any authority to make commitments
in the name of or binding on Owner or agent to pledge Owner or
agent credit or to extend credit in Owner or agent's name.
7.3 Except as provided herein, all expenses incurred by Contractor
in connection with this Agreement shall be the sole
responsibility of Contractor. In the event Contractor makes
unauthorized representations or incurs unauthorized expenses
hereunder that are asserted against Owner or agent, Contractor
shall reimburse Owner or agent, Contractor shall reimburse
Owner for any obligations that may result therefrom.
7.4 Contractor warrants that it is not subject to any restrictive
obligations imposed by former clients or any other third
person that would impair its ability to exercise its
reasonable efforts for or on behalf of Owner in connection
with services to be performed under this Agreement.
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<PAGE> 7
7.5 Contractor has the sole responsibility to determine those
matters governing the employment terms and conditions for its
employees working under this Contract, including, but not
limited to selection, hiring, discipline, grievance
resolution, pay benefits and supervision and control of its
employees. Owner or agent has no authority or rights and shall
not share or have any responsibility in the determination of
such matters for such employees.
7.6 Contractor shall be solely responsible, at its own expense,
and Contractor represents that it has the necessary accounting
resources and an employer identification number, for
withholding all state and federal income taxes, making all
filings and reports with respect to FICA and FUTA taxes, and
making all filings and reports in connection with or relating
to the services of Contractor or any individual employed or
provided to work under this Agreement by Contractor.
Contractor shall indemnify Owner for and against any liability
and expense arising from Contractor's failure to make such
filings and reports.
7.7 Contractor and its employees shall represent themselves only
as independent contractors with respect to work being
performed hereunder. Contractor and its employees shall carry
and represent business cards under Contractor's or
subcontractor's name and/or the name of the individual
employee of Contractor or subcontractor and its employees are
strictly prohibited form using Owner's or agent's trademarks
or trade-name on business cards.
8.0 LIABILITY FOR EXPENSES
Except for costs and expenses specifically allocated to Owner herein,
all expenses in any way pertaining to the provision of services under
this Agreement shall be at the cost of Contractor. Contractor agrees
that is shall assume sole responsibility for receiving funds and paying
all expenses of every kind and nature incurred directly or indirectly
under this Agreement (except for costs and expenses specifically
allocated to Owner herein). Owner assumes no financial responsibility
of any kind or nature relative to this Agreement other than as set
forth herein.
9.0 INDEMNIFICATION AND INSURANCE
In this paragraph, Owner shall mean Retama Development Corporation in
Selma, Texas, and its respective officers, agents, representatives, and
employees. Contractor shall mean Call Now, Inc. and its respective
officers, agents, representatives, and employees.
9.1 Contractor agrees to and shall indemnify Owner against, and
hold Owner harmless from any and all claims, loss, damage
(whether direct, indirect or as a result of), causes of
action, suits and liabilities of every kind (including
reasonable attorney's fees and expenses incurred in the
investigation, defense and settlement of any claim or suit or
for the payment of any judgment) for injuries to or death of
any person, and all damages to and destruction of property by
whomsoever owned, including loss or use thereof, to the extent
resulting from the prosecution or omission of any work or
obligation undertaken by Contractor or required of Contractor
by this Agreement. Contractor shall defend Owner against any
claim or litigation in connection with any injury, death or
damage covered by Contractor's
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<PAGE> 8
indemnity at Contractor's expense; if Contractor fails to
tender a defense if so required, it shall reimburse Owner for
legal fees and other costs incurred in Owner's defense of such
claims or litigation. At its own expense, Owner shall have the
right to participate in the defense of any claims or
litigation. Owner shall reasonably cooperate in any defense
provided by Contractor. Owner shall promptly notify Contractor
of any matter it considers subject to this indemnity. Owner
shall not agree to a judgment or other settlement of an
indemnified matter, without Contractor's consent, unless
Contractor fails to tender a defense.
9.2 Insurance.
Contractor shall secure before commencing and maintain during
the performance of its obligations under this Agreement, a
minimum of at least the following types of insurance and
minimum coverages: (A) Comprehensive General Liability
Insurance with minimum bodily injury limits of $5,000,000.00
each occurrence and minimum property damage limits of
$5,000,000.00 each occurrence; (B) Automobile Liability with
minimum property damage limits of $1,000,000.00 each
occurrence; (C) Statutory Workmen's Compensation. Stated
minimum shall not serve to be interpreted as limiting
Contractor's insurance coverage. Contractor shall furnish to
Owner evidence of such insurance coverage in the form of
Certificates of Insurance. Owner shall be named as an
additional insured on all insurance policies required of
Contractor hereunder. All Certificates of Insurance shall
provide that Owner shall be given 30 days' written notice
prior to any change, substitution or cancellation prior to the
stated expiration date. All insurance policies secured by
Contractor pursuant to this Agreement shall be "occurrence"
policies rather than "claims made" policies. Owner shall
remain named on the policies until contract is completed 100%.
10.0 PATENT, COPYRIGHT, TRADEMARK INDEMNIFICATION
Contractor shall, at its expense, hold harmless and defend Owner
against any claim or action for the infringement of any patent,
copyright or trademark and shall indemnify Owner against all damages,
costs and expenses, including reasonable attorney's fees, arising from
the use by Owner of any work prepared by or on behalf of Contractor in
connection with its performance under this Agreement. Owner shall give
Contractor prompt notice in writing of such claim for infringement.
Upon such notice or at the time Contractor actually knows of
infringement, Contractor shall, at its own expense, either procure for
Owner the right to continue using the infringing materials; replace
same with non-infringing materials; or modify same so they become
non-infringing. The method by which Contractor cures the infringement
shall be at Contractor's discretion. If Contractor fails, refuses, or
is unable to cure the infringement within agreed to time period of
receipt of notice from Owner the date Contractor knew of infringement
Owner in its sole discretion may have the materials to be infringing
removed at Contractor's sole cost, expense and risk of damage or loss.
Contractor shall refund to Owner the removal costs and any other
expenses which result from the proven patent, copyright or trademark
infringement. Contractor shall defend Owner against any such cost,
claim or liability at Contractor's expense.
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11.0 RELEASES, LICENSES AND PERMITS
Contractor shall obtain all releases, licenses, permits or other
authorizations required to fulfill its obligations under this
Agreement. Building permit is responsibility of Owner.
12.0 TAX INDEMNIFICATION
Contractor shall defend, indemnify and hold Owner and its subsidiaries
and affiliates harmless from and against all claims by any governmental
or taxing authority for taxes normally paid by Contractor, any of its
subcontractors or any of their respective agents or employees,
including but not limited to income and property taxes.
13.0 WARRANTIES
13.1 Title
Contractor warrants good title, free from defect, to all
equipment and materials, including modified, repaired and
replacement parts furnished to or obtained for Owner by
Contractor. This warranty of title shall continue without
limitation as to time.
13.2 Compliance with Laws
Contractor warrants that the goods and services to be provided
hereunder shall comply with current OSHA, FDA, EPA, TRC and
other applicable federal, state, local regulations or agency
laws at time of signing this Agreement. Contractor shall
immediately contact Owner's Maintenance Director and its
management company's CEO, if hazardous substances are
encountered or if any spill of hazardous materials occurs
during performance of the work under this Agreement, or while
en route to or from property.
13.3 All services performed by Contractor will conform to the terms
and standards described in this Agreement or if not so
described, shall conform to prevailing industry standards.
13.4 All warranties shall survive acceptance and payment by Owner
and shall benefit Owner.
14.0 CORRECTION OF WORK
14.1 Contractor shall promptly and timely correct all work
reasonably rejected by Owner as failing to conform to the
Contract Documents. Contractor shall bear all costs of
correcting such reasonably rejected work. Rejected material
shall be removed from the site of the work.
14.2 If within one year after the date of final completion of the
Work, any of the work is found to be not in accordance with
the Contract Documents, Contractor shall correct it promptly
to conform to Contract Documents, at its sole cost after
receipt of a written notice from Owner to do so. Owner shall
give such notice promptly after discovery of such condition.
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15.0 DELAYS AND REMEDIES
15.1 Contractor and Owner recognize that time is of the essence in
this construction project and agrees that the time provided in
this Contract is sufficient time to complete its performance
taking into account normal rainfall, weather, and other
typical non-owner caused delays. Contractor will make every
reasonable effort to maintain the time schedule shown in this
contract document and Contractor will make every effort,
including but not limited to, overtime, extra shifts and extra
personnel at Contractor's expense to maintain the schedule. A
delay shall be deemed excusable if Contractor, Notifies Owner
in writing of the delay and its causes, and that the cause is
due to an event normally associated with force majeure as
defined in this Agreement or Owner-directed schedule delay.
Delays due to subcontractors, suppliers, or deliverers of
Contractor-furnished material shall not be deemed excusable
unless: (1) such delay is due to force majeure; and (2) the
materials or services could not have been reasonably procured
elsewhere under the terms of applicable subcontracts.
15.2 Upon proper notice and supporting documentation, Owner shall
extend the time for completion of the work by the number of
days Contractor was reasonably delayed by excusable delays.
15.3 Contractor acknowledges that its sole remedy for an excusable
delay is a time extension. Contractor agrees it is not
entitled to any additional monetary compensation or damages as
a result of any delay or acceleration, including a delay or
acceleration caused by the owner.
16.0 LIENS
16.1 Provided that Owner is current with payments (if any) due to
Contractor, Contractor agrees that it will not make, file, or
maintain a lien or claim of any kind against any property to
which this Agreement relates, or the additions, improvements,
alterations, or repairs made thereon, for or on account of any
goods or services furnished, or any other work done as a
result of this Agreement supplemental hereto.
17.0 FORCE MAJEURE
17.1 In the event either party is rendered unable wholly or in part
by force majeure to carry out its obligations under this
Agreement, other than its obligations to make payments due,
then the party affected by force majeure shall give written
notice with explanation to the other party immediately.
Following such notice, the affected obligations of the party
giving notice shall be suspended only during the continuance
of the force majeure cause, provided due diligence is
demonstrated in seeking remedy to the cause.
17.2 The term "force majeure" as employed herein, shall mean acts
of God, acts of public enemies, wars, blockades,
insurrections, riots, epidemics, landslides, lightning,
earthquakes, fires, storms, floods, washouts, civil
disturbances, explosions, and any other cause not within the
control of the party claiming a delay
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despite its due diligence. Contractor acknowledges and agrees
that any strike, other than beyond Contractor's control,
picketing or labor dispute directly or indirectly involving
Contractor or affecting Contractor's timely performance of
obligations shall not constitute "force majeure" and shall not
entitle Contractor to these rights and remedies. In the event,
however, any situation constituting force majeure causes
suspension of the work for a period of fifteen (15)
consecutive days, Retama
Development Corporation and Contractor shall meet and mutually
decide how to further execute this Agreement.
17.3 Contractor shall notify Owner as promptly as possible of any
actual or potential labor dispute affecting Contractor's
performance under this Agreement and give satisfactory
assurance to Owner of its ability to complete the work.
18.0 MAINTENANCE OF JOB SITE
Contractor agrees to maintain Owner's job site in a clean, safe
condition in compliance with applicable regulations and to Owner's
reasonable satisfaction. If Contractor fails to so maintain the site,
Owner may secure such maintenance from another source at Contractor's
expense without affecting Contractor's obligations or responsibility to
perform hereunder.
19.0 RULES
19.1 Contractor shall ensure that its employees, agents,
representatives, assigns and subcontractors comply with the
terms and conditions set forth in the "Site Policies for
Contractors," and "Contractors Safety Program," attached
hereto and incorporated herein as Attachments E and F,
respectively.
19.2 If required by Owner's Designated Representative, Contractor
shall ensure and require that its employees agents,
representatives, assigns and subcontractors obtain a "Special
Visitor Permit" to be visibly worn at all times while at
Owner's facilities. Permits may be obtained from the Owner's
Designated Representative.
20.0 OWNERSHIP
20.1 All designs, drawings, specification, notes and other work
developed by Contractor or its employees, agents,
representatives, assigns or subcontractors for this Agreement
may be used by Owner for the exclusive purpose of maintaining
the Work covered by this Contract without additional
compensation to Contractor or its employees, agents,
representatives, assigns or subcontractors. All proprietary
designs, drawings, specifications and notes provided by the
Contractor to Owner shall not be provided to any third party
without the written consent of Contractor or direction of the
Texas attorney general.
20.2 Any, if any, drawings, specifications and all copies or
contents thereof given to or made available to Contractor by
Owner for the limited purpose of use by Contractor, its
subcontractors and material suppliers may not be used for any
other purpose
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<PAGE> 12
without the prior written consent of Owner. Upon final
approval by Owner and Contractor of the Thompson Plans, the
Contractor shall assign its interest in the Thompson Plans and
Thompson Proposal to Owner, provided, however, Contractor's
and its subcontractor(s) shall have the right to use the
Thompson Plans and Thompson Proposal for the Work and
otherwise under this Agreement.
21.0 RIGHT TO AUDIT
21.1 Access shall be granted to Owner or to others designated by
Owner by Contractor to records and information relating to
this Agreement, except cost data, unless related to time and
material work for audit purposes, including reports of
corrective actions taken as a result of such audit.
21.2 Contractor agrees to make, keep and maintain complete books,
records, invoices and records of payments relating to the work
while it is being performed and for a period of three (3)
years following acceptance of the work. Any audit is at
Owner's sole expense.
21.3 For the purpose of audit, Owner shall have the right to
examine, either directly or through its authorized
representatives or agents, during business hours and for a
reasonable period of time, all books, records, accounts,
correspondence, instructions, specifications, plans, drawings,
receipts, manuals and memoranda insofar asa they are pertinent
to this Agreement. Owner's right of inspection shall not apply
to Contractor's trade secrets or other proprietary information
properly designated or asserted as such or records related to
cost involved with the fixed price portion of this Agreement.
22.0 SUBCONTRACTORS, ASSOCIATES, CONSULTANTS
22.1 Any subcontractors or consultants utilized by Contractor
relative to its performance under this Agreement (except as
designated by Section 3.9, above) must be specifically
identified by Contractor and approved by Owner prior to the
provision of services or goods for on site work. Such approval
shall not be unreasonably withheld.
22.2 Contractor shall ensure that any approved subcontractor or
consultant has executed an appropriate agreement prior to the
commencement of approved subcontractors, associates or
consultants agreeing to be bound by all applicable provisions
of this Agreement. Contractor shall provide evidence that all
subcontractors are carrying and maintaining insurance coverage
in accordance with the Contract Documents, in the same manner
as Contractor furnishes such evidence under Section entitled
INDEMNIFICATION AND INSURANCE under this Agreement. No
contractual relationship shall exist between the Owner and any
subcontractor or Contractor.
23.0 INVOICING
23.1 For purposes of information to Owner, Contractor shall submit
itemized subcontractor invoices for work performed monthly.
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23.2 All invoices shall reflect this Agreement and shall be mailed
to:
Retama Development Corporation
c/o Retama Entertainment Group
P.O. Box 47535
San Antonio, Texas 78265-7535
23.3 The invoices shall contain separated costs such that the
following activities, as applicable, are individually
itemized:
a. Labor costs
b. Material costs
c. Sales or use tax paid
d. Engineering cost
e. Freight
23.4 Each invoice shall be accompanied by the appropriate signed
Lien Waiver from Contractor. Failure or refusal to submit
property executed lien waivers by Contractor, shall be deemed
good and sufficient cause for Owner to withhold future
payments in whole or in part.
24.0 CHANGES
24.1 If Owner and Contractor agree, or if Owner agrees to bear the
entire cost thereof, Owner may submit a change order to alter
the Work. Such change order will be substantially related to
the Work and its current scope. The Schedule will be extended
by a reasonable time to allow for the change order.
24.2 Contractor shall not make substitutions for any major material
or equipment specified in this Agreement without the prior
express written approval of Owner's Designated Representative.
24.3 No changes to Contractor's compensation or schedule shall be
made for weather conditions reasonably anticipated for the
geographic location of the site; faulty workmanship; improper
supervision by Contractor; or failure to comply with the
provisions of this Agreement.
24.4 The cost or credit to the Owner resulting from a change in the
work shall be determined in one or more of the following ways:
A. By such applicable unit prices as set forth in the
Contract Documents;
B. If no such unit prices are set forth, then by a lump
sum mutually agreed upon by the Contractor and the
Owner, or
C. If no unit prices are set forth and if the parties
cannot agree upon a lump sum, then by actual costs
reasonably incurred by Contractor.
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25.0 TERMINATION
25.1 Owner may terminate this Agreement in whole or in part at any
time upon ten (10)days written notice to Contractor for the
convenience of Owner, or because of a material breach of
Contractor's failure to fulfill its contractual obligations.
Upon receipt of notice to terminate, Contractor shall, unless
the notice directs otherwise, immediately discontinue all
services affected and if so directed, make every reasonable
effort to secure cancellation of all existing orders or
contracts upon terms and conditions satisfactory to Owner and
deliver to Owner all data, drawings, specifications, reports,
estimates, summaries and other materials and information
supplied by Owner in performing under this Agreement.
25.2 If the termination is for the convenience of Owner, no further
consideration shall be payable to Contractor beyond the
release set forth in this Agreement.
25.3 If the termination is due to the material breach of Contractor
to fulfill its contractual obligations, Owner may take over
the work and prosecute the same to completion and may utilize
any other remedies available at law or equity. Provided
however, no material breach shall be deemed to have occurred
unless Owner notifies Contractor of an alleged breach or
provides a reasonable cure period (in event less than 10
days).
25.4 By way of example, but not limitation, Contractor shall be
deemed to have breached this Agreement if Contractor is
insolvent, seeks protection from creditors, makes a general
assignment for the benefit of creditors, persistently or
repeatedly refuses or fails to supply enough properly skilled
workers or proper materials, materially fails to make prompt
payment to subcontractors or material men for materials or
labor, materially violates any material law, ordinance, rule,
regulation or order of any public authority having
jurisdiction, or if a receiver is appointed for its business,
or it otherwise violates a material provision of the Contract
Documents.
25.5 If, after notice of termination for failure to fulfill
contractual obligations, it is determined the Contractor had
not so failed, the termination shall be deemed to have been
effected for the convenience of Owner. In such an event,
Contractor's sole remedy shall be an adjustment in the
Contract Price may be made as provided in this Agreement.
25.6 [Intentionally Deleted]
25.7 [Intentionally Deleted]
25.8 If the Agreement is terminated, Contractor shall have no
obligation to make any further fundings for the Work, except
for damages (if any) for breach of this Agreement if
established by a final, non-appealable judgment of a court of
competent jurisdiction.
26.0 SUSPENSION OF WORK
26.1 Owner may order Contractor in writing to suspend all or part
of the work for such period as Owner may determine to be
appropriate for the convenience of Owner.
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<PAGE> 15
26.2 In the event of a written Owner directed suspension of work,
Contractor shall be entitled to an adjustment in the scheduled
completion date resulting from such adjustment to reflect the
actual number of days in the suspension and the schedules of
affected subcontractors.
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27.0 DESIGNATED REPRESENTATIVE
27.1 Owner's Designated Representative for this Agreement is Bryan
Brown, telephone (210) 651-7131, fax number is (210) 651-7097,
Contractor's Designated Representative for this Agreement is
Robert Buffkin, telephone (210) 349-4141.
28.0 CONTRACT ADMINISTRATOR
All matters of an administrative or contractual nature pertaining to
this Agreement, including, but not limited to, the issuance of notices,
amendments, time extensions, requests for changes, submission of
Insurance Certificates, and any other contractual correspondence,
including exchange of signed copies of this Agreement shall be directed
to:
Retama Development Corporation
c/o Retama Entertainment Group
P.O. Box 47535
San Antonio, Texas 78265-7535
Telephone No. (210) 651-7000
Fax No. (210) 651-7097
All matters of a technical coordinating or project authorization nature
will be directed to Owner's Designated Representative.
29.0 CONTRACTOR'S ADDRESS
Contractor's address for purposes of all communication relevant to this
Agreement is:
Robert Buffkin, President
Call Now, Inc.
10803 Gulfdale, #222
San Antonio, Texas 78232
Telephone No. (210) 349-4141
Fax No. (210) 349-4948
30.0 TITLE AND RISK OF LOSS
Title to all material completed or partially completed work, (upon
final payment by Owner) delivered or stored at job site by Contractor
which are to become part of the completed work shall be in Owner's
name. However, liability for loss or damage to all such work or
materials shall remain with Owner until final acceptance of the
completed work by Owner.
31.0 SERVICES NON-EXCLUSIVE
This Agreement is non-exclusive and Owner may, without notice to
Contractor, engage or use others to perform services of the same or
similar nature including services on projects or specific assignments
upon which Contractor is working.
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<PAGE> 17
32.0 SAFETY
32.1 It is Contractor's responsibility to instruct its agents,
servants, employees, and subcontractors to contact Owner's
Designated Representative, prior to commencing work, regarding
safety policies and procedures and potential hazards or
hazardous materials in the work areas.
32.2 Owner when warranted may suspend the work for a full safety
inspection and correction. The inspection costs and all
correction costs shall be at Contractor's expense, if found to
be in violation.
32.3 If Contractor has two or more major safety violations proven
and documented by Owner, then such violations shall be grounds
for termination of this Contract under the section entitled
Termination (termination for failure to fulfill contractual
obligations of this Agreement).
32.4 Contractor shall take a pro-active role toward all safety
issues and shall actively promote working conditions and work
practices which will ensure all workers a safe and healthy
environment.
33.0 AMENDMENT
This Agreement may not be amended except in writing properly executed
by the parties hereto. Except as specifically amended, this Agreement
shall remain in full force and effect.
34.0 ASSIGNMENT AND SUBCONTRACTING
Except as otherwise provided in this Agreement (and particularly
Section 3), Contractor shall not have the right or power to assign or
subcontract its rights or obligations hereunder without the express
written consent of Owner. Any attempt to do so without such consent
shall be null and void and shall give Owner the right to cancel and
terminate this Agreement. In the event consent is properly given, the
provisions of this Agreement shall bind and benefit the parties hereto
and their representatives, successors and assigns. Provided however,
Contractor shall subcontract all design and construction work to
Thompson Engineering.
35.0 GOVERNING LAW AND VENUE
This Agreement shall be deemed to have been made and accepted in Bexar
County, Texas, and the laws of the State of Texas shall govern any
interpretations or instructions of this Agreement.
36.0 AUTHORITY
36.1 Contractor warrants that it has the full authority and power
to enter into and perform under this Agreement and to make all
representations, warranties and covenants as set forth herein.
Contractor shall provide, upon Owner's request, written
evidence satisfactory to Owner of Contractor's authority or,
if Contractor is acting as an agent, evidence of that
relationship.
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<PAGE> 18
36.2 Contractor warrants that the individual executing this
Agreement is properly authorized to bind Contractor to the
terms of this Agreement.
36.3 If Contractor hereunder is comprised of more than one legal
entity, each such entity shall be jointly and severally liable
hereunder, and each shall sign this Agreement.
37.0 WAIVER
Owner's failure in any one or more instances to insist upon strict
performance of any of the terms and conditions of this Agreement or to
exercise any right herein conferred shall not be construed as a waiver
or relinquishment of that right or of Owner's right to assert or rely
upon the terms and conditions of this Agreement. Any express waiver of
a term of this Agreement shall not be binding and effective unless made
in writing and properly executed by the waiving party.
38.0 SEVERABILITY
The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision.
Any invalid or unenforceable provision shall be deemed severed from
this Agreement to the extent of its invalidity or unenforceability, and
this Agreement shall be construed and enforced as if the Agreement did
not contain that particular provision to the extent of its invalidity.
39.0 INTEGRATION OF UNDERSTANDING
There are no understandings between the parties hereto as to the
subject matter of this Agreement other than as set forth herein and in
the documents specifically incorporated herein. Any previous
communications concerning the subject matter of this Agreement are
hereby superseded and this Agreement shall constitute the entire and
integrated agreement between the parties. This Agreement may be amended
only by written instrument signed by both Owner and Contractor.
40.0 PAYMENT AND PERFORMANCE BOND.
The Contractor shall cause Thompson Engineering to obtain for the
benefit of Contractor and Owner a payment and performance bond in the
amount of $650,000.00 that the Work will be performed in accordance
with the Thompson Plans. The surety must be licensed to do business in
Texas and reasonably acceptable to Owner.
BY SIGNING BELOW, all parties hereto accept this Agreement.
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<PAGE> 19
Owner:
RETAMA DEVELOPMENT CORPORATION
By:
------------------------------------
Name:
-------------------------------
Title:
------------------------------
Contractor:
CALL NOW, INC.
By:
------------------------------------
Robert Buffkin, President
For the purposes of approving Section 6, only, and not
otherwise, this Agreement is joined by William Allen.
- ------------------------------------
WILLIAM ALLEN, Individually
Page 19
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<INCOME-TAX> (1,247,637)
<INCOME-CONTINUING> (3,326,342)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,345,774)
<EPS-BASIC> (.39)
<EPS-DILUTED> (.39)
</TABLE>
