<PAGE>
As filed with the Securities and Exchange Commission on September 29, 1997
SEC Registration No. 33-84024
- ------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
POST EFFECTIVE AMENDMENT NO. 2 TO
FORM SB-2 REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
SAINT ANDREWS GOLF CORPORATION
(Name of Small Business Issuer in its Charter)
Nevada 6794 88-0203976
(State or Other Jurisdic- (Primary Standard (IRS Employer Iden-
tion of Incorporation) Industrial Classi- tification Number)
fication Code
Number)
5325 South Valley View Boulevard, Suite 4
Las Vegas, Nevada 89118
(702) 798-7777
(Address and Telephone Number of Principal
Executive Offices and Principal Place of Business)
Ronald Boreta, President
5325 South Valley View Boulevard, Suite 4
Las Vegas, Nevada 89118
(702) 798-7777
(Name, Address and Telephone Number of Agent for Service)
Copies to:
Jon D. Sawyer, Esq.
Krys Boyle Freedman & Sawyer, P.C.
600 Seventeenth Street, Suite 2700 South Tower
Denver, Colorado 80202
(303) 893-2300
- ------------------------------------------------------------------------------
Approximate date of proposed sale to the public: As soon as practicable after
the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
<PAGE>
PROSPECTUS
SAINT ANDREWS GOLF CORPORATION
500,000 Shares of Common Stock Obtainable on
Exercise of Class A Warrants
50,000 Shares of Common Stock Obtainable Upon Exercise of
Representative's Class A Warrants
100,000 Shares of Common Stock Obtainable Upon Exercise of
Representative's Warrants to Purchase Common Stock
100,000 Representative's Class A Warrants
100,000 Representative's Warrants to Purchase Common Stock
The securities offered hereby include 500,000 shares of common stock,
$.001 par value ("Common Stock") of Saint Andrews Golf Corporation (the
"Company") obtainable upon the exercise of outstanding Class A Warrants to
purchase Common Stock (the "Class A Warrants"). Two Class A Warrants entitle
the holder to purchase one share of Common Stock at an exercise price of $6.50
per share at any time until November 14, 1997. The Class A Warrants may be
redeemed by the Company upon certain conditions. (See "DESCRIPTION OF
SECURITIES.")
The securities offered hereby also include 50,000 shares of Common Stock
obtainable upon the exercise of outstanding Representative's Class A Warrants
issued to RAF Financial Corporation, the underwriter of the Company's initial
public offering (the "Representative"), to purchase Common Stock (the
"Representative's Class A Warrants"). Two Representative's Class A Warrants
entitle the holder to purchase one share of Common Stock at an exercise price
of $7.80 per share at any time until November 14, 1997. The Representative's
Class A Warrants may be redeemed by the Company upon certain conditions. (See
"DESCRIPTION OF SECURITIES.")
Also included in the securities offered hereby are 100,000 shares of
Common Stock, obtainable upon the exercise of outstanding Representative's
Warrants to Purchase Common Stock ("Representative's Warrants"). Each
Representative's Warrant entitles the holder to purchase one share of Common
Stock at an exercise price of $5.40 per share until December 12, 1999.
Also included in the securities offered hereby are 100,000
Representative's Class A Warrants, 100,000 Representative's Warrants and
150,000 shares of Common Stock issuable upon the exercise of such Warrants
being offered by certain Selling Security Holders. Any person purchasing
Representative's Class A Warrants and/or Representative's Warrants from the
Selling Security Holders must immediately exercise such warrants or they will
immediately expire. (See "DESCRIPTION OF SECURITIES.")
The Company's Common Stock is traded in the over-the-counter market and
is quoted on the Nasdaq Small Cap Market (Symbol: SAGC). On September 25,
1997, the closing price of the Company's Common Stock was $3.25. (See "PRICE
RANGE OF COMMON STOCK.")
__________________
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK. PERSONS INVESTING IN
THESE SECURITIES SHOULD BE ABLE TO SUSTAIN A TOTAL LOSS OF THEIR INVESTMENT.
(SEE "RISK FACTORS.")
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<PAGE>
<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to the
Warrantholders Commissions<FN1> Company<FN2>
<S> <C> <C> <C>
Per Share on Exercise
of Class A Warrants $ 6.50 -0- $ 6.50
Total $3,250,000 -0- $3,250,000
Per Share on Exercise
of Representative's
Class A Warrants $ 7.80 -0- $ 7.80
Total $ 390,000 -0- $ 390,000
Per Share on Exercise
of Representative's
Warrants $ 5.40 -0- $ 5.40
Total $ 540,000 -0- $ 540,000
<FN>
<FN1> No discounts or commissions will be paid in connection with the exercise
of the Class A Warrants, Representative's Class A Warrants or Representative's
Warrants.
<FN2> Before deducting expenses of this offering estimated at $25,000.
</FN>
</TABLE>
The date of this Prospectus is __________, 1997.
<PAGE>
ADDITIONAL INFORMATION
A Registration Statement on Form SB-2, including amendments thereto,
relating to the securities offered hereby has been filed by the Company with
the Securities and Exchange Commission, Washington, D.C. This Prospectus does
not contain all of the information set forth in the Registration Statement and
the exhibits thereto. For further information with respect to the Company and
the securities offered hereby, reference is made to such Registration
Statement and exhibits. Statements contained in this Prospectus as to the
contents of any contract or other document referred to are not necessarily
complete, and in each instance reference is made to the copy of such contract
or other document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference. A copy of the
Registration Statement may be inspected without charge at the Commission's
principal offices in Washington, D.C., and copies of all or any part thereof
may be obtained from the Commission upon the payment of certain fees
prescribed by the Commission.
The Company is subject to the reporting requirements of Section 13(a)
and to the proxy requirements of Section 14 of the Securities Exchange Act of
1934, as amended, and in accordance therewith files periodic reports, proxy
statements and other information with the Commission. Such reports, proxy
statements and other information concerning the Company may be inspected or
copied at the public reference facilities at the Commission located at 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the Commission's
Regional Offices in New York, 7 World Trade Center, New York, New York 10048,
and in Chicago, Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Copies of such documents can be obtained at
the public reference section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. Electronic filings made through
the Electronic Data Gathering Analysis and Retrieval system are publicly
available through the Commission's web site (http.//www.sec.gov).
Callaway Golf Center, Callaway Golf Experience, Ely's Place, and Divine
Nine are trademarks of Callaway Golf Company; and All-American SportPark and
Slugger Stadium are trademarks of the Company.
<PAGE>
TABLE OF CONTENTS
PAGE
PROSPECTUS SUMMARY ................................................... 5
RISK FACTORS ......................................................... 8
THE COMPANY .......................................................... 12
MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS .............. 15
USE OF PROCEEDS ...................................................... 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS ......................................... 17
BUSINESS ............................................................. 20
MANAGEMENT ........................................................... 28
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ....... 35
CERTAIN TRANSACTIONS ................................................. 37
DESCRIPTION OF SECURITIES ............................................ 39
SELLING SECURITY HOLDERS ............................................. 44
PLAN OF DISTRIBUTION ................................................. 45
LEGAL MATTERS ........................................................ 47
EXPERTS .............................................................. 47
INDEX TO FINANCIAL STATEMENTS ........................................ 48
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere in this Prospectus.
THE COMPANY
Saint Andrews Golf Corporation (the "Company" or "Saint Andrews") has
developed a concept for family-oriented sports theme parks named "All-American
SportPark," which will include a live action Sports Entertainment Complex that
will feature a Major League Baseball Slugger Stadium; a NASCAR SpeedPark; an
All-American SportPark Pavillion; and an Allsport Arena. The other portion of
the SportPark will be a Callaway Golf Center, which is comprised of a lighted,
nine-hole par 3 golf course, which wraps around a state-of-the-art 110-tee
driving range, and a 20,000 square foot clubhouse and training center.
On July 12, 1996, the Company entered into a lease covering
approximately 65 acres of land in Las Vegas, Nevada, where the Company is
developing its first All-American SportPark. The property is located south of
the Luxor Hotel on "The Strip" and borders the new I-215 Loop around the City
of Las Vegas. The land is adjacent to McCarran International Airport and in
the vicinity of the new Circus Circus multi-billion dollar hotel resort
development referred to as "The Millennium Project". In April 1997, the
Company broke ground on the Sports Entertainment Complex and the golf facility
and in June 1997 entered into an agreement with Callaway Golf Company relating
to the financing and operation of the golf portion of the SportPark, which is
named the Callaway Golf Center. The Company is currently in the process of
seeking financing for construction of the Sports Entertainment Complex.
The Company and its majority shareholder, Las Vegas Discount Golf &
Tennis, Inc. ("LVDG"), have verbally agreed that they would merge the Company
into LVDG with LVDG being the surviving corporation. It is the intention of
LVDG and the Company to structure the merger as a tax-free transaction. The
two corporations have hired an independent appraiser to estimate the fair
market values of the Company and LVDG and to recommend an exchange ratio for
the number of LVDG shares to be issued for the shares of the Company's common
stock which are not owned by LVDG. Based on this report it is expected that
the final merger agreement will provide that LVDG will issue 2.4 shares of its
common stock for each share of the Company's common stock which is outstanding
and which is not already owned by LVDG. The current officers of LVDG are
expected to resign and be replaced with the Company's officers. The merger
agreement is currently being drafted and all of the terms have not been
finalized.
The proposed merger would be subject to a number of contingencies
including, among other things, the effectiveness of a registration statement
which would be filed with the SEC, and the approval of the respective
shareholders of each corporation. The shareholders will also be asked to
approve a name change to All American SportPark, Inc. and a reverse split in
the range of 1 for 3 to 1 for 5 with the objective of making the shares of the
survivor eligible for listing on the NASDAQ National Market System and
inclusion on the Federal Reserve "List of Marginable Securities."
THE OFFERING
<TABLE>
<CAPTION>
<S> <C>
Securities Offered Upon 500,000 Shares of Common Stock
Exercise of Class A Warrants
-5-
<PAGE>
Securities Offered Upon 50,000 Shares of Common Stock
Exercise of Representative's
Class A Warrants
Securities Offered Upon 100,000 Shares of Common Stock
Exercise of Representative's
Warrants
Securities Offered by Selling 100,000 Representative's Class A
Security Holders Warrants and 100,000 Representa-
tive's Warrants
Common Stock Outstanding 3,000,000 Shares <FN1>
Preferred Stock Outstanding 500,000 Shares
Nasdaq Small-Cap Symbol SAGC
<FN>
<FN1>
As of September 25, 1997. Does not include 657,000 shares of Common Stock
which may be issued in the future upon the exercise of outstanding options or
500,000 shares which may be issued upon conversion of Preferred Stock. (See
"MANAGEMENT" and "DESCRIPTION OF SECURITIES.")
</FN>
</TABLE>
RISK FACTORS
The purchase of these securities involves a high degree of risk.
Prospective investors should review carefully and consider the factors
described under "RISK FACTORS."
USE OF PROCEEDS
In the event any of such warrants are exercised, the Company would use
the proceeds from the exercise of the Class A Warrants, Class A
Representative's Warrants and Representative's Warrants in connection with the
development and/or operation of the Company's Las Vegas Sport Park.
SUMMARY FINANCIAL DATA
The following table sets forth certain selected financial data with
respect to the Company, which has been extracted from financial statements and
is qualified in its entirety by reference to the financial statements and
notes thereto included in this Prospectus.
At June 30, At December 31,
Balance Sheet Data: 1997 1996 1995
- ------------------- ------------ ---------- ----------
Current Assets $ 6,330,000 $6,315,000 $3,558,000
Total Assets $14,276,000 $8,622,000 $4,903,000
Current Liabilities $ 2,611,000 $ 805,000 $1,148,000
Working Capital $ 3,719,000 $5,510,000 $2,410,000
Long-Term Debt $ 1,312,000 $ 0 $ 0
Shareholders' Equity $ 9,524,000 $7,726,000 $3,639,000
Cash Dividends Per Share $ 0 $ 0 $ 0
-6-
<PAGE>
<TABLE>
<CAPTION>
For the Six Months For the Year Ended
Statement of Operations Ended June 30, December 31,
Data: 1997 1996 1996 1995
- ----------------------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C>
Total income $ 179,000 $ 5,000 $ 95,500 $ 94,500
Loss from continuing
operations (323,000) (399,000) (421,100) (292,600)
Discontinued operations:
Loss from operations of
discontinued franchise
operations (41,000) (20,000) (329,100) (24,400)
Gain on disposal of
franchise operations
(less applicable income
taxes of $450,000) 2,162,000 - - -
<FN1>
---------- --------- --------- ---------
Net income (loss) $1,798,000 $(419,000) $(750,200) $(317,000)
Income (loss) per share:
Income (loss) from
operations $ (.11) $ (.13) $ (.14) $ (.10)
Income (loss) from
discontinued operations .70 (.01) (.11) (.01)
---------- --------- --------- ---------
Net income (loss) per
share $ .59 $ (.14) $ (.25) $ (.11)
_______________
<FN>
<FN1>
Represents the Company's gain on the sale of the franchise operations which
was closed on February 26, 1997.
</FN>
</TABLE>
-7-
<PAGE>
RISK FACTORS
The securities offered hereby represent a speculative investment and
involve a high degree of risk of a loss of part or all of the investment.
Therefore, prospective investors should read this entire Prospectus and
carefully consider the following risk factors in addition to the other
information set forth elsewhere in this Prospectus prior to making an
investment.
1. OPERATING LOSSES. The Company reported net losses for the years
ended December 31, 1996 and 1995. The Company's profitability in the future
will be affected by anticipated start-up expenses prior to the opening of any
proposed sportparks. See "FINANCIAL STATEMENTS" and "BUSINESS." Further,
there are no assurances that any sports theme park will be profitable once it
is open.
2. DEPENDENCE UPON MANAGEMENT. The Company is materially dependent
on the continued active participation in the Company's business of Ronald S.
Boreta, its President. The Company does not have any "key-man" life insurance
on Mr. Boreta. The loss of Mr. Boreta's services would materially adversely
affect the Company's business. See "MANAGEMENT."
3. POSSIBLE CONSTRUCTION COSTS OVERRUNS. The Company's estimated
construction costs related to any sportpark will be based on cost estimates of
the Company's engineering firm, bids from various contractors, and discussions
with contractors and others. Since none of these estimates are based on
binding contracts, it is possible that at least some of the costs will be
higher than the estimated amounts. Although the Company will allow a
contingency for cost overruns, there is no assurance that actual costs will
not be significantly higher. If total costs exceed estimated costs, the
Company may be required to seek additional financing, and there can be no
assurance that such financing could be obtained on favorable terms.
4. GOVERNMENT REGULATIONS AFFECTING SPORTPARKS. The construction and
operation of a sportpark will be subject to governmental regulation and
approval with respect to zoning requirements, traffic impact issues and other
matters. Management believes that it has received all of the permits and
approvals that are necessary to construct the SportPark in Las Vegas. Upon
the opening of a sportpark, the Company will also be required to comply with
government regulations concerning sanitation, health and safety. Compliance
with governmental regulations could have an adverse effect on the Company's
ability to build and operate a sportpark.
5. SPORTPARK PROFITABILITY IS UNCERTAIN. Although the Company has
developed a business plan which shows that the SportPark would be profitable
based on Management's projections of the demand and costs to build and operate
the SportPark, the Company is unable to gauge with any degree of certainty the
amount of patronage and/or the revenues of any proposed park. Even if a first
rate park is constructed, maintained and operated as contemplated herein,
there is no assurance that attendance will be sufficient to pay operational
costs and provide a return on the capital investment. See "BUSINESS -- All
American SportPark."
6. COMPETITION IN SPORTPARK BUSINESS. The Company's proposed
sportpark will face substantial competition from other attractions in Las
Vegas including gambling, free entertainment, for-free activities and
inexpensive food outlets. See "BUSINESS -- Competition."
-8-
<PAGE>
7. SEASONAL EFFECTS ON OPERATION OF SPORTPARK. Patronage at the
proposed sports sportpark in Las Vegas, Nevada, is expected to be affected by
the desert climate of Las Vegas. During the hot summer months daytime use of
the facilities could be limited; however, the park is expected to remain open
in the evening. The Company's revenues could be cyclical both with respect to
the time of year and daytime versus nighttime attendance.
8. EXPOSURE TO LIABILITY FROM OPERATION OF SPORTPARK; INSURANCE.
Risk of serious injury by patron participation in activities available at the
proposed park is substantial notwithstanding efforts to be employed by the
Company to reduce such risk by event design features. In view of this, the
Company intends to maintain liability insurance in the amount of at least $5
million per occurrence on each proposed facility. Regardless of the
foregoing, it is possible the Company's assets will become subject to claims
of patrons for injuries and losses and damages resulting therefrom arising out
of accidents or incidents at a proposed sportpark. The Company probably would
not build a sportpark anywhere else unless it could obtain such insurance or
use a self-insurance program. See "BUSINESS -- All American SportPark."
9. LACK OF THEMEPARK EXPERIENCE OF MANAGEMENT. While the officers
and directors of the Company are experienced businessmen, only one of the
members of the Company's management has direct experience in the themepark
business. See "MANAGEMENT."
10. DIVIDEND POLICY. The Company has not paid dividends on its shares
of Common Stock since its inception and does not contemplate paying cash
dividends in the foreseeable future. See "DIVIDEND POLICY."
11. NASDAQ MAINTENANCE REQUIREMENTS AND EFFECTS OF POSSIBLE DELISTING.
Although the Company's Common Stock is currently listed on the Nasdaq
Small-Cap Market, the Company must continue to meet certain maintenance
requirements in order for such securities to continue to be listed on Nasdaq.
Under the recently adopted new maintenance requirements of Nasdaq, the minimum
bid price of the Company's Common Stock must remain at or above $1.00 and the
Company's shareholders' equity must remain at or above $2 million. Currently,
the Company's stock trades above $3.00 and its shareholders' equity on June
30, 1997, was over $9.6 million. If the Company's securities are delisted
from Nasdaq, this could restrict investors' interest in the Company's
securities and could materially and adversely affect the trading market and
prices for such securities. In addition, if the Company's securities were to
be delisted from Nasdaq, and if the Company's net tangible assets do not
exceed $2 million, and if the Company's Common Stock is trading for less than
$5.00 per share, then the Company's Common Stock would be considered a "penny
stock" under federal securities law. Additional regulatory requirements apply
to trading by broker-dealers of penny stocks which could result in the loss of
an effective trading market for the Company's Common Stock.
12. ARBITRARY DETERMINATION OF WARRANT EXERCISE PRICES. The exercise
prices of the Class A Warrants, the Representative's Class A Warrants and the
Representative's Warrants were arbitrarily set at prices above the Unit
offering price in the Company's initial public offering through negotiations
between the Company and the Representative of the underwriters in the initial
public offering, and bear no relationship to any other objective criteria of
value, and in no event should they be regarded as an indication of any future
market price of the Company's securities.
13. OUTSTANDING OPTIONS. Currently, the Company has outstanding
options to purchase up to 677,000 shares of Common Stock at prices ranging
-9-
<PAGE>
from $3.0625 to $5.00 per share. For the term of such options, the holders
thereof will have an opportunity to profit from the rise in the market price
of the Company's Common Stock without assuming the risks of ownership. This
may have an adverse effect on the terms upon which the Company could obtain
additional capital. Furthermore, it might be expected that the holders of
such options would exercise them at a time when the Company would be able to
obtain equity capital on terms more favorable than those provided for by the
options. See "MANAGEMENT" and "DESCRIPTION OF SECURITIES."
14. CONTROL BY PARENT CORPORATION AND OFFICERS AND DIRECTORS. The
Company's Officers and Directors presently have beneficial ownership of
approximately 74% of the common stock of Las Vegas Discount Golf & Tennis,
Inc., the Company's Parent, which presently owns 66.7% of the shares
outstanding. Assuming that all of the Common Stock offered by this Prospectus
is purchased upon the exercise of Warrants, the Company's Officers and
Directors will have control over approximately 54.8% of the shares outstanding
through the Company's Parent. These percentages do not reflect the 500,000
shares of Series A Convertible Preferred Stock which are convertible into an
aggregate of 500,000 shares of common stock. As a result, the Company's
Officers and Directors currently are, and in the foreseeable future will
continue to be, in a position to effectively control the Company. See
"PRINCIPAL SHAREHOLDERS."
15. CURRENT REGISTRATION NEEDED TO EXERCISE WARRANTS; POSSIBLE
REDEMPTION OF WARRANTS. Investors holding warrants to purchase shares of the
Company's Common Stock will not be able to exercise such Warrants unless at
the time of exercise the registration statement of which this Prospectus is a
part is current or a post-effective amendment or new registration statement
registering the Common Stock issuable upon exercise of the Warrants is
effective and such shares have been registered under the Act and qualified or
deemed to be exempt under the securities laws of the state of residence of the
holder of the Warrants. The Company has agreed to maintain a current
prospectus relating thereto until the expiration of the Warrants. While the
Company has undertaken to do so in the Underwriting Agreement, there is no
assurance that it will be able to do so. The Warrants are subject to
redemption by the Company on 30 days prior written notice under certain
conditions. If the Warrants are redeemed, Warrantholders will lose their
right to exercise the Warrants except during such 30 day redemption period.
The Company presently has no intention of redeeming the Warrants. See
"DESCRIPTION OF SECURITIES -- Warrants."
16. POSSIBLE ISSUANCE OF PREFERRED STOCK. The Company is authorized
to issue 5,000,000 shares of Preferred Stock, $.001 par value. The Preferred
Stock may be issued in series from time to time with such designation, rights,
preferences and limitations as the Board of Directors of the Company may
determine by resolution. The potential exists, therefore, that preferred
stock might be issued which would grant dividend preferences and liquidation
preferences to preferred shareholders over common shareholders. Unless the
nature of a particular transaction and applicable statutes require such
approval, the Board of Directors has the authority to issue these shares
without shareholder approval. 500,000 shares of Series A Convertible
Preferred Stock are presently outstanding, and these shares are convertible
into an aggregate of 500,000 shares of Common Stock. The Company presently
has no plans to issue any other shares of Preferred Stock. (See "DESCRIPTION
OF SECURITIES.")
17. NON-REGISTRATION IN CERTAIN JURISDICTIONS OF SHARES UNDERLYING THE
CLASS A WARRANTS. Although Units in the Company's initial public offering
-10-
<PAGE>
were not knowingly sold to purchasers in jurisdictions in which the Units were
not registered or otherwise qualified for sale, investors may buy Warrants in
the aftermarket or may move to jurisdictions in which the shares underlying
the Warrants are not so registered or qualified during the period that the
Warrants are exercisable. In this event, the Company would be unable to issue
shares to those persons desiring to exercise their Warrants unless and until
the shares could be registered or qualified for sale in jurisdictions in which
such persons reside, or an exemption to such qualification exists in such
jurisdictions. Although the Company has agreed to use its best efforts to
register or qualify its shares for sale upon the exercise of the Warrants in
any jurisdiction where the registered holders of 5% or more of the Class A
Warrants reside, no assurances can be given that the Company will be able to
effect any such registration or qualification. Further, the Company may
determine not to register or qualify the shares issuable upon the exercise of
the Warrants in jurisdictions where holders of less than 5% of the Class A
Warrants reside and where the time and expense do not justify such
registration or qualification. In the event that for any reason the shares
are not registered or qualified in particular jurisdictions, persons holding
Warrants in such jurisdictions may not be able to exercise their Warrants.
18. POSSIBLE RESALES OF COMMON STOCK. Of the 3,000,000 shares
outstanding as of the date of this Prospectus, 2,000,000 have not been
registered under the Securities Act of 1933, as amended (the "Act") but are,
under certain circumstances, available for public sale pursuant to Rule 144,
promulgated under the Act. The Representative has obtained the agreement of
Las Vegas Discount Golf & Tennis, Inc., the holder of the 2,000,000 shares, to
not sell, publicly transfer or assign the 2,000,000 Common Shares until
December 12, 1997, without the prior written consent of the Representative.
The possibility of sales under Rule 144 may adversely affect the market price
of the Company's securities. See "DESCRIPTION OF SECURITIES -- Shares
Eligible For Future Sale."
-11-
<PAGE>
THE COMPANY
The Company has developed a concept for family-oriented sports theme
parks named "All-American SportPark," which will include a live action Sports
Entertainment Complex that will feature a Major League Baseball Slugger
Stadium; a NASCAR SpeedPark; an All-American SportPark Pavillion; and an
Allsport Arena. The other portion of the SportPark will be a Callaway Golf
Center, which is comprised of a lighted, nine-hole par 3 golf course, which
wraps around a state-of-the-art 110-tee driving range, and a 20,000 square
foot clubhouse and training center.
On July 12, 1996, the Company entered into a lease covering
approximately 65 acres of land in Las Vegas, Nevada, on which the Company
intends to develop its first All-American SportPark. The property is located
south of the Luxor Hotel on "The Strip" and borders the new I-215 Loop around
the City of Las Vegas. The land is adjacent to McCarran International Airport
and in the vicinity of the new Circus Circus multi-billion dollar hotel resort
development referred to as "The Millennium Project".
Prior to February 26, 1997, the Company was engaged in the business of
franchising retail stores which use the name "Las Vegas Discount Golf &
Tennis" and which sell a variety of golf and tennis equipment, including
apparel and accessories.
The Company's business began in 1974 when Vaso Boreta, the President and
Chairman of the Board of the Company, opened a "Las Vegas Discount Golf &
Tennis" retail store in Las Vegas, Nevada. This store, which is still owned
by Mr. Boreta, subsequently began distributing catalogs and developing a mail
order business for the sale, principally of golf, and, to a lesser extent,
tennis products. In 1984, the Company began to franchise the "Las Vegas
Discount Golf & Tennis" retail store concept and commenced the sale of
franchises. As of February 26, 1997, when the franchise business was sold,
the Company had 43 franchised stores in operation in 17 states and 2 foreign
countries.
The Company is a Nevada corporation which was incorporated on March 6,
1984, under the name "Sporting Life, Inc." The Company's name was changed to
"St. Andrews Golf Corporation" on December 27, 1988, and was further changed
to "Saint Andrews Golf Corporation" on August 12, 1994.
The Company was acquired by Las Vegas Discount Golf & Tennis, Inc., a
publicly-held company, in February 1988, from Vaso Boreta, who was its sole
shareholder. Vaso Boreta presently owns 49.3% of the outstanding stock of Las
Vegas Discount Golf & Tennis, Inc., and serves as the Chairman of the Board of
the Company and Chairman of the Board, President and CEO of Las Vegas Discount
Golf & Tennis, Inc. Las Vegas Discount Golf & Tennis, Inc. presently owns
2,000,000 shares of the Company's common stock, which represents approximately
66.7% of the Company's capital stock outstanding.
During July 1994, the Company set up a wholly-owned Nevada subsidiary
named All-American SportPark, Inc., which will be the entity under which the
All-American SportPark is to be operated. Saint Andrews Golf Corporation and
All-American SportPark, Inc. are referred to herein collectively as the
"Company."
On August 12, 1994, the Company effected a 4,000 for 1 stock split of
its Common Stock. All financial information and share data in this Report
gives retroactive effect to the stock split.
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In December 1994, the Company completed an initial public offering of
1,000,000 Units, each Unit consisting of one share of Common Stock and one
Class A Warrant. Two Class A Warrants entitle the holder to purchase one
share of Common Stock at an exercise price of $6.50 per share. The net
proceeds to the Company from this public offering were approximately
$3,684,000.
On July 29, 1996, the Company sold 200,000 shares of its newly
designated Series A Convertible Preferred Stock to Three Oceans Inc. ("TOI"),
an affiliate of SANYO North America Corporation, for $2,000,000 in cash
pursuant to an Investment Agreement between the Company and TOI (the
"Agreement"). TOI purchased 300,000 additional shares of Series A Convertible
Preferred Stock for an additional $3,000,000 in September and October 1996,
pursuant to the Agreement. The Company is using the proceeds of these sales
to develop its first All-American SportPark in Las Vegas.
On December 16, 1996, the Company and its majority shareholder, Las
Vegas Discount Golf & Tennis, Inc. ("LVDG"), entered into negotiations
pursuant to an "Agreement for the Purchase and Sale of Assets" to sell all but
one of the four retail stores owned by LVDG, all of LVDG's wholesale
operations and the entire franchising business of the Company to Las Vegas
Golf & Tennis, Inc., an unaffiliated company. Accordingly, at December 31,
1996, the Company accounted for its franchise business segment as
"discontinued operations" and three retail stores to be sold as "held for
sale" in the consolidated financial statements included in this Report. On
February 26, 1997, the Company and LVDG completed this transaction, and as a
result the Company's operations, assets and liabilities now relate solely to
the development and operation of "All-American SportParks".
The total price for the transaction was $5,354,287 of which $4,600,000
was paid in cash, $264,176 was paid with a short-term unsecured receivable,
$200,000 was placed in escrow pending the accounting of inventory and trade
payables, $200,000 was placed in escrow for two years to cover potential
indemnification obligations, $60,475 was withheld for sales taxes, and $29,635
was withheld for accrued vacation liabilities. Of the total purchase price,
$2,603,787 was allocated to LVDG and $2,750,500 was allocated to the Company.
During the three months ended June 30, 1997, the Company recognized an
additional $113,000 of gain on the sale of the franchise assets.
In connection with the sale of the above-described assets, LVDG and the
Company agreed not to compete with the Buyer in the golf equipment business
except that the Company is permitted to sell golf equipment at SportPark and
driving range facilities which it may operate. In addition, the Buyer granted
Boreta Enterprises, Ltd., a limited partnership owned by Vaso Boreta, the
President of LVDG, Ron Boreta, the President of the Company, and John Boreta,
a principal shareholder of LVDG, the right to operate "Las Vegas Discount Golf
& Tennis" stores in southern Nevada, except for Summerlin, Nevada.
The Company and its majority shareholder, Las Vegas Discount Golf &
Tennis, Inc. ("LVDG"), have verbally agreed that they would merge the Company
into LVDG in a tax-free transaction with LVDG being the surviving corporation.
The two corporations have hired an independent appraiser to estimate the fair
market values of the Company and LVDG and to recommend an exchange ratio for
the number of LVDG shares to be issued for the shares of the Company's common
stock which are not owned by LVDG. Based on this report it is expected that
the final merger agreement will provide that LVDG will issue 2.4 shares of its
common stock for each share of the Company's common stock which is outstanding
and which is not already owned by LVDG.
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The proposed merger would be subject to a number of contingencies
including, among other things, the effectiveness of a registration statement
which would be filed with the SEC, and the approval of the respective
shareholders of each corporation. The shareholders will also be asked to
approve a name change to All American SportPark, Inc. and a reverse split in
the range of 1 for 3 to 1 for 5 with the objective of making the shares of the
survivor eligible for listing on the NASDAQ National Market System and
inclusion on the Federal Reserve list of marginable securities.
During June 1997 the Company and Callaway Golf Company formed All
American Golf LLC, a California limited liability company which is owned 80%
by the Company and 20% by Callaway Golf Company. (See "BUSINESS -- Feature
Attractions.")
The Company's offices are located at 5325 South Valley View Boulevard,
Suite 4, Las Vegas, Nevada 89118. Its telephone number is (702) 798-7777.
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MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded in the over-the-counter market and
is quoted on the NASDAQ Small-Cap Market under the symbol "SAGC." The
following table sets forth the high and low sales prices of the Common Stock
for the periods indicated.
HIGH LOW
----------------------------- ----- -------
Year Ended December 31, 1995:
First Quarter $6.25 $4.50
Second Quarter $7.75 $5.625
Third Quarter $8.50 $4.875
Fourth Quarter $6.50 $4.375
Year Ended December 31, 1996:
First Quarter $6.375 $3.625
Second Quarter $7.875 $4.5625
Third Quarter $6.875 $3.875
Fourth Quarter $5.25 $3.25
Year Ended December 31, 1997:
First Quarter $4.375 $2.75
Second Quarter $4.625 $2.375
Third Quarter (through September 26,
1997) $4.75 $2.75
A recent closing price for the Company's Common Stock is set forth on
the cover page of this Prospectus.
The number of holders of record of the Company's $.001 par value Common
Stock at June 17, 1997, was 34. This does not include approximately 700
shareholders who hold stock in their accounts at broker/dealers.
Holders of Common Stock are entitled to receive such dividends as may be
declared by the Company's Board of Directors. No dividends have been paid
with respect to the Company's Common Stock and no dividends are anticipated to
be paid in the foreseeable future. It is the present policy of the Board of
Directors to retain all earnings to provide for the growth of the Company.
Payment of cash dividends in the future will depend, among other things, upon
the Company's future earnings, requirements for capital improvements and
financial condition.
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USE OF PROCEEDS
The net proceeds to be realized from the exercise of the Class A
Warrants will be approximately $3,225,000 if all of the Class A Warrants are
exercised, an additional $390,000 will be realized if all of the
Representative's Class A Warrants are exercised, and an additional $540,000
will be realized if all of the Representative's Warrants are exercised. In
the event that any Warrants are exercised, management anticipates that the net
proceeds from these exercises will be used substantially as follows and
applied in the following order of priority:
<TABLE>
<CAPTION>
Represen-
tative's Represen-
Class A Class A tative's
Application of Proceeds Warrants Warrants Warrants
- ----------------------- -------- -------- --------
<S> <C> <C> <C>
Development of SportPark $3,000,000 $300,000 $500,000
General Corporate
Purposes<FN1> 225,000 90,000 40,000
---------- -------- --------
Total $3,225,000 $390,000 $540,000
_______________
<FN>
<FN1> Amounts allocated to general corporate purposes may be used for payment
of accounts payable, financing possible operating losses and other general
working capital.
</FN>
</TABLE>
The amounts set forth above are only an estimate. The Company is unable
to predict precisely what amount will be used for any particular purpose. To
the extent the proceeds received are inadequate in any area of expenditures,
supplemental amounts may be drawn from working capital, if any. Conversely,
any amounts not required for proposed expenditures will be retained and used
for working capital. Should the proceeds actually received, if any, be
insufficient to accomplish the purposes set forth above, the Company may be
required to seek other sources to finance the Company's operations, including
individuals and commercial lenders.
Pending utilization, management intends to make temporary investment of
the proceeds in bank certificates of deposit, interest-bearing savings
accounts, prime commercial paper or government obligations. Such investment
in interest-bearing assets, if continued for an excessive period of time
within the definition of the Investment Company Act of 1940, could subject the
Company to classification as an "investment company" under the Act and to
registration and reporting requirements thereunder.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997, COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
Total income increased to $179,000 from $5,000 for the same period in
1996. The increase in revenue was attributable primarily to an increase in
interest income resulting from the increased level of cash resulting from the
sale of the franchise business and proceeds received from the sale of
preferred stock in 1996.
Selling, general and administrative expenses increased $147,000
primarily as a result of a $100,000 bonus granted to the President during June
1997, while Sportpark development costs decreased by $49,000 resulting from
less activities related to noncapitalizable projects.
On December 16, 1996, the Company entered into an agreement to sell its
franchise operations including all rights under existing franchise agreements;
all trade names and trademarks, specific depreciable assets and a modified
covenant not to compete. The sale was consummated on February 26, 1997, with
the Company receiving proceeds of $2,801,000.
YEAR ENDED DECEMBER 31, 1996, COMPARED TO YEAR ENDED DECEMBER 31, 1995
DISCONTINUED OPERATIONS
Franchise fees and royalties revenues and expenses have been classified
as discontinued operations due to the disposal of the franchise business
segment.
Franchise fee revenue in 1996 was $240,000 compared to $245,000 in 1995.
Six new franchise locations were sold in both 1996 and 1995. Royalties
generated by the Company's 45 franchise stores in operation in 1996 totaled
approximately $1.2 million. The fifty franchises in operation in 1995 produced
approximately $25,000 more in royalty revenue for the Company.
Selling, general and administrative expenses related to the franchise
business segment totaled $1.7 million for the year ended December 31, 1996,
versus $1.5 million in 1995. The increase is due to higher marketing costs to
secure franchise locations and increases in training and other support service
costs related to administration of the franchise program.
The loss from discontinued operations of $329,000 in 1996 versus $24,400
in 1995 is principally due to increased selling, general and administrative
costs of $195,000 and increased bad debt expense of $52,000 in addition to the
decrease in $25,000 in royalty revenue.
CONTINUING OPERATIONS
INCOME. Interest income decreased from $86,200 in 1995 to $69,800 in
1996. Other income was $25,700 in 1996 versus $8,300 in 1995 representing an
increase in income recognition of deferred income related to advance royalty
payments from an agreement with a national credit card company.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and
administrative expenses related to continuing operations consist principally
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of payroll, rent and other corporate costs. The increase from $279,100 in
1995 to $305,600 in 1996 relates to an increase in allocated rental expense of
$25,000 related to the SportPark operations.
SPORTPARK DEVELOPMENT COSTS. The Company's strategic emphasis at this
point is the development of sports-oriented theme parks under the name
"All-American SportPark." During 1996, the Company expensed $207,000 in
development of this concept versus $108,000 in 1995. The Company has leased a
site for its first "All-American SportPark" development in Las Vegas, Nevada
and the Callaway Golf Center is scheduled to open to the public on October 1,
1997, and the Sports Entertainment Complex is expected to open in December
1997 (see discussion under "Liquidity and Capital Resources").
INCOME TAXES. Due to operating losses, the Company has no tax provision
nor has it recorded any tax benefits.
NET LOSS. The loss from continuing operations for the year ended
December 31, 1996 of $421,100 compared to a loss of $292,600 in 1995. The
losses are principally attributed to the startup nature of the Company's new
business focus involving the development of the "All-American SportPark"
operations.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1997, the Company had working capital of approximately
$3,719,000 as compared to working capital of approximately $5,510,000 at
December 31, 1996. Cash increased from $5,818,000 at December 31, 1996 to
$6,262,000 at June 30, 1997. This increase in cash was primarily attributable
to $2,801,000 in proceeds from the sale of franchise operations; $2,062,000 in
debt and minority interest proceeds from Callaway Golf Company for the
Callaway Golf Center; and a $1,252,000 increase in accounts payable. The
increase was partially offset by SportPark expenditures of $5,747,000.
On June 13, 1997 the Company and Callaway Golf Company ("Callaway Golf")
announced the formation of All American Golf, LLC, a limited liability
California corporation, to construct, manage and operate "Callaway Golf
Center", a premier golf facility at the site of the All-American Sportpark.
The total budgeted costs for the Callaway Golf Center are approximately $9.0
million. Callaway Golf will provide $5,250,000 in debt financing which bears
interest at 10 percent with interest only payments commencing 60 days after
the opening of the golf center through a date ten years after the opening at
which point the remaining accrued interest and principal will be due in full.
As of June 30, 1997, $1,312,000 had been drawn under this agreement. The
Company will own 80 percent of the members' units of the LLC for a
contribution of $3 million while Callaway Golf will own 20% for a contribution
of $750,000. The Company will manage the driving range, golf course and
tenant facilities in the clubhouse.
While the Company has secured financing for the Callaway Golf Center as
previously described, the Company has not secured financing for the
construction of the Sports Entertainment Complex portion of the SportPark
which is anticipated to require capital expenditures of approximately $20
million. The Company has been holding discussions with a number of potential
corporate sponsors who have expressed an interest in participating in the
SportPark, and management expects that corporate sponsors will contribute a
portion of the financing needed. The Company expects to receive the balance
of the financing from a combination of sources including outside equity and/or
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debt investors, bank financing, and the Company's own cash. There is no
assurance that sufficient financing will be obtained from any of these
sources. No financing was received from corporate sponsors during the year
ended December 31, 1996, or for the six months ended June 30, 1997.
As of December 31, 1996 and 1995, the Company held cash and cash
equivalents of $5,818,100 and $125,100, respectively. Cash used in operating
activities in 1996 was $680,600. This compares to cash provided by operating
activities during 1995 of $661,200.
During the year ended December 31, 1996, the Company's principal source
of cash resulted from the sale of $5 million in Series A Convertible Preferred
Stock through a private placement.
Capital expenditures during the year related primarily to the Company's
on-going development efforts for the "All-American SportPark" concept.
Project development costs, both those expensed and deferred, totaled $763,000
in 1996. In July 1996, the Company entered into a lease for 65 acres of
undeveloped land in Las Vegas, Nevada, which will be the site of the Company's
first "All-American SportPark." As part of the lease arrangements, the
Company was required to post a refundable $500,000 deposit with the lessor.
This deposit will be applied against the minimum monthly rental payments.
The Company's sources of working capital are its current cash balance
and cash flows from operations. The Company has, in the past, funded a
portion of its cash needs through loans from its parent corporation (Las Vegas
Discount Golf & Tennis, Inc.), however, any future loans from the parent are
likely to be limited. The Company does not expect to have any significant
capital expenditures other than the development of the SportPark.
SAFE HARBOR PROVISION
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Certain information included in this
Prospectus contains statements that are forward-looking, such as statements
relating to plans for future expansion and other business development
activities, as well as other capital spending, financing sources, the effects
of regulations and competition. Such forward-looking information involves
important risks and uncertainties that could significantly affect anticipated
results in the future and, accordingly, such results may differ from those
expressed in any forward-looking statements by or on behalf of the Company.
These risks and uncertainties include, but are not limited to, those relating
to development and construction activities, dependence on existing management,
leverage and debt service (including sensitivity to fluctuations in interest
rates), domestic or global economic conditions (including sensitivity to
fluctuations in foreign currencies), changes in federal or state tax laws or
the administration of such laws, changes in regulations and application for
licenses and approvals under applicable jurisdictional laws and regulations.
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BUSINESS
ALL-AMERICAN SPORTPARK
The Company has developed a concept for family-oriented sports theme
parks named "All-American SportPark," which will include a live action Sports
Entertainment Complex that will feature a Major League Baseball Slugger
Stadium; a NASCAR SpeedPark; an All-American SportPark Pavillion; and an
Allsport Arena. The other portion of the SportPark will be a Callaway Golf
Center, which is comprised of a lighted, nine-hole par 3 golf course, which
wraps around a state-of-the-art 110-tee driving range, and a 20,000 square
foot clubhouse and training center.
On July 12, 1996, the Company entered into a lease agreement covering
approximately 65 acres of land in Las Vegas, Nevada, on which the Company
intends to develop its first All-American SportPark. The property is located
south of the Luxor Hotel on "The Strip" and borders the new I-215 Loop around
the City of Las Vegas. The land is adjacent to McCarran International Airport
and in the vicinity of the new Circus Circus multi-billion dollar hotel resort
development referred to as "The Millennium Project".
On June 20, 1997, the lessor of the 65 acre tract agreed with the
Company to cancel the original lease and replace it with two separate leases:
one lease with All American Golf, LLC, which covers the 41 acres where the
Callaway Golf Center is located; and the second lease with the Company which
covers the 24 acres where the Sports Entertainment Complex is located.
Both leases are very similar in structure. They are both fifteen year
leases with options to extend for two additional five year terms. The lease
for the Callaway Golf Center commences when the golf center opens or February
1, 1998, whichever occurs first. The other lease commences when the Sports
Entertainment Complex portion of the SportPark opens, or June 1998, whichever
occurs first.
The minimum rent for the golf center lease is $398,077 per year for the
first five years and it increases by 10% at the end of each five years during
the term of the lease. The minimum rent for the other lease is $226,923 per
year for the first five years and it increases by 10% at the end of each five
years during the term of the lease. Both leases also provide for additional
rent to the extent that percentages ranging from 3% to 10% of gross receipts,
depending on the type of revenue, exceed the minimum rental. In connection
with the signing of the lease covering 24 acres, the Company paid a deposit of
$500,000 which will be applied to minimum rental payments, and a security
deposit of approximately $37,820 which will be applied to minimum rental
payments at the end of the fourth year of the lease.
As of the date of this Prospectus, the Company has only secured
financing for the golf facility portion of the first SportPark. The Company
has been holding discussions with a number of potential corporate sponsors who
have expressed an interest in participating in the SportPark, and management
expects that corporate sponsors will contribute a portion of the financing
needed. The Company expects to receive the balance of the financing from a
combination of sources including outside equity and/or debt investors, bank
financing, and the Company's own cash. There is no assurance that sufficient
financing will be obtained from these sources for the Sports Entertainment
Complex.
In April 1997, the Company broke ground on the Callaway Golf Center, and
the Company anticipates that the Callaway Golf Center will be open by October
1, 1997. The preliminary opening date of the Sports Entertainment Complex is
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December 1997, however, the actual opening date could depend upon when the
financing for this portion is received. The projected opening date is also
subject to change due to construction delays due to availability of
construction personnel, materials, adverse weather; delays in obtaining
governmental permits and approvals; and other factors.
The Company has obtained project zoning, use permits and variances from
Clark County; Federal Aviation Administration approval for construction (due
to the SportPark's proximity to McCarran International Airport); approval of
the Clark County Department of Aviation; and architectural review approval by
the Planning Commission. The Company has submitted a comprehensive Water Plan
which was accepted for review by the Las Vegas Valley Water District in
February 1997. The Company's improvement plans were approved by the Clark
County Public Works in February 1997 pending review by the Clark County
Building Department.
FEATURE ATTRACTIONS
CALLAWAY GOLF CENTER. In June 1997, the Company completed a final
agreement with Callaway Golf Company ("Callaway Golf") to form a limited
liability company named All American Golf LLC (the "LLC") for the purpose of
operating a golf facility, to be called the "Callaway Golf Center," on
approximately forty-one (41) acres of land which is inside the All-American
SportPark located on approximately sixty-five (65) acres adjacent to Las Vegas
Boulevard in Las Vegas.
The Callaway Golf Center includes a 110-tee driving range in a two-tiered
format. The driving range is designed to have the appearance of an
actual golf course with ten impact greens and a 1-1/2 acre lake with cascading
waterfalls and an island green. Pro-line equipment and popular brand name
golf balls will be utilized. In addition, the golf center includes a lighted
nine hole, par three golf course named the "Divine Nine". The golf course has
been designed to be challenging, and has several water features including
lakes, creeks, water rapids and waterfalls, golf cart paths and designated
practice putting and chipping areas. At the entrance to the golf center is a
20,000 square foot clubhouse which includes The Callaway Golf Experience, a
David Leadbetter Golf Academy, a retail store, a restaurant and bar known as
Ely's Place, and an outdoor patio overlooking the golf course and driving
range with the Las Vegas "Strip" in the background. There is also a
tree-lined driveway with PGA Tour Player personality banners and an eight-foot
tall bronze statue of Bobby Jones.
Callaway Golf has constructed and will operate a state-of-the-art
training center at its own cost (estimated at $2,000,000) which will be known
as "The Callaway Golf Experience". The Callaway Golf Experience, located in
the clubhouse, is Callaway Golf's high-tech evaluation system that allows
golfers of all skill levels to compare the performance of different golf
clubs. The Company will manage the entire Callaway Golf Center except for the
Callaway Golf Experience and other tenant facilities for which it will receive
a management fee of 5% of revenues. Callaway Golf will receive 100% of the
revenues from the Callaway Golf Experience and will pay the LLC $50,000 per
year for the right to occupy that portion of the premises.
The LLC is owned 80% by the Company and 20% by Callaway Golf. Callaway
Golf agreed to contribute $750,000 of equity capital and loan the LLC
$5,250,000. The Company will contribute the value of expenses incurred by the
Company relating to the design and construction of the golf center and cash in
the combined amount of $3,000,000. Callaway Golf's loan to the LLC has a ten
year term and bears interest at 10%. The principal is due in 60 equal monthly
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payments commencing five years after the golf center opens. Additional
payments of principal are required under certain conditions if the LLC is
making cash distributions to its owners before the loan has been repaid. The
loan can also be repaid without penalty at any time.
If during the first year after the effective date of the Callaway Golf
loan the Company contributes additional cash to the LLC for the purpose of
paying down the loan, Callaway Golf is required to also contribute to the LLC
in the form of equity 25% of the amount contributed by the Company up to a
maximum of $850,000.
The LLC has executed a license agreement with Callaway Golf pursuant to
which the LLC licenses the right to use the mark "Callaway Golf Center" from
Callaway Golf for an annual royalty not to exceed $50,000. Pursuant to this
agreement, Callaway Golf has the right to terminate the agreement at any time
without cause on ninety days prior written notice and with payment of
$500,000. Such termination could have an adverse impact on the success of the
golf center.
MAJOR LEAGUE BASEBALL SLUGGER STADIUM. The Slugger Stadium will be a
full size replica of a major league ballpark for batting and baseball
training. The Company has been granted a license from Major League Baseball
Properties to own and operate Major League Baseball Slugger Stadiums. Under
the license agreement, the Company also has the right to utilize certain Major
League Baseball trademarks including those of the All Star Game, Division
Series, League Championship Series and World Series. Slugger Stadium is a
nostalgic formatted batting stadium which attempts to duplicate a major league
experience for its patrons. Unlike batting cages which are the normal
industry standard, the Company's design is a full size stadium that replicates
many of the features of a modern baseball stadium. Plans include 16 batter
boxes and 16 on-deck circles. Batters will have the option of hitting hard or
soft balls delivered at three different speeds. Outfield wall replicas of
Fenway Park's "Green Monster" Wall, Baltimore's Camden Yards, Chicago's
Wrigley Field, Yankee Stadium, and The Ball Park in Arlington, Texas will be
designed to challenge batters to hit the balls out of the park. Completing
the Major League experience will be authentic turnstiles, classic ballpark
food and beverage concessions, baseball memorabilia, electronic scoreboard and
specially designed sound systems that provide typical baseball sounds
including proprietary designed umpire calls of balls and strikes. See
"Agreement with Major League Baseball" below.
NASCAR SPEEDPARK. The Company has a license agreement with The National
Association of Stock Car Auto Racing, Inc. ("NASCAR") for the operation of
SpeedParks as a part of the All-American SportPark or as a stand-alone NASCAR
SpeedPark. The agreement, as amended, provides that the Company has an
exclusive license to use certain trademarks and service marks in the
development, design and operation of go-kart racing facilities having a NASCAR
racing theme in the territories of Las Vegas, Nevada and Southern California.
The exclusive rights to Las Vegas are subject to the condition that the Las
Vegas SpeedPark is opened by March 1, 1998, and the exclusive rights to
Southern California are subject to the condition that the Southern California
SpeedPark is opened by March 1, 1999. If the Company opens the Las Vegas site
by March 1, 1998, the license for that site will continue until December 31,
2003, and if the Company opens the Southern California site by March 1, 1999,
the license for that site will continue until December 31, 2003.
As consideration for the license the Company has agreed to pay a fee of
$25,000 plus $25,000 for each new SpeedPark opened after the first SpeedPark.
In addition, the Company has agreed to pay NASCAR a royalty equal to five
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percent (5%) of each SpeedPark's revenue from racing activities plus a royalty
ranging from two percent (2%) to five percent (5%) on revenues received from
sponsors and promoters of SpeedPark activities.
The SpeedPark will include three tracks to accommodate three styles of
racing: family, adult and junior tracks. The family go-kart track will be a
1,200 linear foot road course for five horsepower go-karts designed for
families and children 10 and up, and the other track will be a 2,200-foot road
course track for eighteen horsepower NASCAR-style go-karts designed for youths
and adults 16 years and older. The SpeedParks will be comprised generally of
the NASCAR Go-Kart SpeedPark, the Garage Experience, the Winner's Circle, the
Infield RV Park, Victory Lane, the NASCAR Jr. Track, the Tailgater's Dining
Circle and the NASCAR Retail Trackside Trailer Merchandising Experience.
Scale model, near emissions-free, gas-powered, stock cars complete with
sponsorship graphics and signage, will compete on the three tracks. The cars
are 5/8 scale NASCAR Winston Cup Stock Car replicas, 5/8 scale NASCAR
Craftsman Truck Series replicas and Jr. Track Stock Cars.
In May 1996, the Company entered into an agreement with Jeff Gordon, the
1997 NASCAR Winston Cup points leader, 1997 Daytona 500 Champion, 1997
Coca-Cola 600 Champion, 1995 Winston Cup Champion and former NASCAR Winston
Cup Rookie of the year, to serve as spokesperson of the NASCAR SpeedPark
through April 30, 2000. According to the original agreement, Mr. Gordon was
paid $25,000 for his services during 1996, and is to be paid $25,000 per
SpeedPark opening per year with a minimum guarantee over the life of the
agreement; .25% of net profits to go to a charity designated by Mr. Gordon;
and additional fees for recording television and radio spots and making more
than six appearances per year. Mr. Gordon was also granted options under the
Company's stock option plan. The Company is currently negotiating a reduction
in the amount of fees payable to Mr. Gordon based on the recent amendment to
the Company's agreement with NASCAR.
ALL-AMERICAN SPORTPARK PAVILION. The 100,000 square foot Pavilion will
include a multi-purpose sports arena (the "Allsport Arena"), speciality retail
areas, a video arcade, food courts, meeting rooms, special events space and
leased tenant facilities for food and beverage service.
ALLSPORT ARENA. This space can be used to accommodate indoor
professional beach volleyball tournaments, professional roller hockey
exhibition games, basketball tournaments, tennis matches, cultural and civic
special events, and annual super bowl parties which coincide with
internationally broadcasted major sporting events, music and entertainment
events. It will include a giant video display and movable seating which is
adaptable for 1,500 to 3,000 people to view an event. When the arena is not
in use for a scheduled event, it will accommodate the core business use for
in-line skaters who will be able to skate to an entertaining multimedia light
and sound performance.
AGREEMENT WITH MAJOR LEAGUE BASEBALL
In December 1994, the Company entered into an agreement with Major
League Baseball ("MLB") concerning a license for the use of MLB logos, marks
and mascots in the decor, advertising and promotions of the Company's Slugger
Stadium concept. This agreement was amended during August 1997. Pursuant to
the amended agreement, the Company holds the exclusive right to identify its
indoor and outdoor baseball batting stadiums as Major League Baseball Slugger
Stadiums. The license covers the United States and expires on November 30,
2000, subject to the right to extend for three additional years provided
certain conditions are met. As consideration for the license, the Company
-23-
<PAGE>
agreed to pay $50,000 for each Stadium opened provided that in any year of the
term of the agreement a stadium is not opened, the Company must pay $50,000
during such year. The Company has made the payments required for 1995 and
1996. In addition to and as an offset against the minimum payments set out
above, the Company is required to pay to MLB a royalty based on the revenue
from the batting cages of the greater of (i) six and one-quarter percent
(6-1/4%) or (ii) the royalty rate payable by the Company to any other
individual or entity for the right to open or operate any attraction or event
in the Sports Entertainment Complex.
The Company's right to exclusively use MLB logos and other marks at its
baseball batting stadiums is dependent upon certain conditions set forth in
the agreement.
LETTER OF INTENT WITH PEPSI-COLA COMPANY
In January 1997, the Company entered into a non-binding letter of intent
with the Pepsi-Cola Company ("Pepsi") concerning an exclusive sponsorship
agreement. As of September 15, 1997, the Company was finalizing negotiations
with Pepsi for the agreement. Under the proposed agreement, Pepsi would
receive certain exclusive rights related to all non-alcoholic beverage
products, except for certain specialty tenants which may use their products
such as Starbucks Coffee Shop, and a few other minor exceptions, in exchange
for an annual fee and advertising support expenditures. In addition, the
agreement will provide that Pepsi will have specified signage rights and the
multipurpose arena is being named the AllSport Arena after Pepsi's Allsport
drink product. In addition, the agreement is expected to provide that Pepsi
will provide, without charge, all equipment needed to dispense its products at
the SporkPark.
The Company also anticipates that the agreement with Pepsi will provide
that the Company and Pepsi will participate in joint marketing programs such
as promotions on Pepsi's products and the SportPark.
In consideration for the above rights, Pepsi is expected to make annual
payments during the term of the lease.
AGREEMENT WITH SPORTSERVICE CORPORATION
In September 1997, the Company entered into a lease and concession
agreement with Sportservice Corporation ("Sportservice") which provides that
Sportservice has the exclusive right to prepare and sell all food, beverages
(alcoholic and non-alcoholic), candy and other refreshments throughout the All
American SportPark, including the Callaway Golf Center, during the ten year
term of the agreement. Sportservice has agreed to pay rent based on a
percentage of gross sales depending upon the level of sales, whether the
receipts are from concession sales, the Arena restaurant, the Clubhouse,
vending machines, mobile stands, or catering sales. Rents from the Callaway
Golf Center will be paid to All American Golf LLC and all other rents will be
paid to the Company.
Sportservice is expected to invest approximately $3.85 million into the
concessions and operations which includes all food service leasehold
improvements. Sportservice is a wholly-owned subsidiary of Delaware North
Company. Other Delaware North Companies include the Boston Garden, the Fleet
Center in Boston, and food service clients which include the Ballpark in
Arlington, Texas, California Speedway, Miller Park in Milwaukee, Space Port
USA @ Kennedy Space Center and Yosemite National Park.
-24-
<PAGE>
The agreement also provides Sportservice with a right of first refusal
for future parks to be built by the Company in consideration for a $100,000
payment. An additional payment of up to $100,000 is due depending on whether
Sportservice's development costs for its leasehold improvements and food
service assets exceed the estimate of $3.85 million.
The agreement has a number of other terms and conditions including a
requirement that the Company and the LLC must develop and construct the
SportsPark in accordance with certain specifications provided to Sportservice,
and provide all necessary building structure and shell components. The
Company and the LLC must operate the SportsPark on a year-round, seven days a
week basis throughout the term of the agreement.
AGREEMENT WITH INTEGRATED SPORTS INTERNATIONAL
The Company has entered into a two year agreement with Integrated Sports
International ("ISI") whereby ISI has been retained to assist the Company in
obtaining corporate sponsorship for various areas of the SportPark.
ISI has agreed to serve as the SportPark's exclusive sponsorship sales
company and to serve as a consultant to develop ways to help the SportPark in
the areas of marketing and promotions that will improve perceived value from
tenants and sponsors. ISI is also to consult on and implement a
licensing/merchandising plan to enhance the image of the SportPark.
ISI will be paid a monthly consulting fee and a percentage of
sponsorship sales and product sponsorships. Although the agreement has a two
year term commencing June 10, 1997, the exclusive nature of the agreement will
terminate after the first six months if ISI is not successful in assisting the
Company in securing sponsorships during the first six months.
ISI represents Disney International and a number of sports celebrities.
LIABILITY INSURANCE
The Company intends to purchase a comprehensive general liability
insurance policy to cover possible claims for injury and damages from
accidents and similar activities. There is no assurance that such coverage
can be obtained, or if obtained, that it can be obtained at reasonable rates
nor that it will be sufficient to cover or be available for future claims.
MARKETING
Major League Baseball Slugger Stadium is the "Official Batting Stadium
of Major League Baseball". The unique baseball stadium concept is expected to
be expanded to other locations in the United States and overseas using the
prototype installation at the All-American SportPark as a demonstration
facility. Considerable market research by management has indicated a large
potential market for Slugger Stadium. Possible locations include new gated
sites inside major theme parks, attachments to regional and value oriented
shopping malls, inside new sports stadium and Major League Ballpark complexes
which are either in the planning and design phase or currently under
construction and other All-American SportParks or as stand alone sites.
Target consumers include the family, adults, softball players and all youth
baseball organizations.
The Callaway Golf Center which includes the nine-hole par 3 golf course,
driving range, and clubhouse is designed as a country club atmosphere for the
general public. This concept may be expanded into various hotel and resort
areas throughout the United States and overseas and can also be included in
-25-
<PAGE>
the SportPark opportunities described above or as a stand alone business.
NASCAR SpeedPark is "The Official Go-Kart Racing Facility Licensed by
NASCAR". Management plans to develop the concept to include installations
alongside Superspeedways, NASCAR Team Race/Shops Racing Retail & Entertainment
Centers, stand alone facilities and as a separate gated attraction inside
major theme parks throughout the United States.
The All-American SportPark Pavilion area of the project can be recreated
as a stand alone development in a downtown urban setting alongside new arenas,
shopping malls, and football/baseball stadiums.
The Company's marketing efforts are directed towards a number of large
existing and potential markets for which there can be no assurance of
financial success. Further, to expand the concepts beyond the first location
in Las Vegas would require considerably more financial resources than the
Company presently has and more management and human resources than presently
exist at the Company.
COMPETITION
Any SportParks built by the Company will compete with any other
family/sports attractions in the city where the SportPark is located. Such
attractions could include amusement parks, driving ranges, water parks, and
any other type of family or sports entertainment. The Company will be relying
on the combination of active user participation in the sports activities and
competitive pricing to encourage visitors and patrons. There can be no
assurance that the Company will be able to operate the park on a profitable
basis.
TRADE NAMES AND TRADEMARKS
Saint Andrews has filed an "intent to use" trademark application for
"All-American SportPark" and a related design and "Slugger Stadium". The
Company has also filed "intent to use" trademark applications with regard to
the "St. Andrews" name and related designs with respect to mens' and womens'
clothing and certain golf equipment and accessories. The Company intends to
maintain the integrity of the trademarks, other proprietary names and marks
against unauthorized use.
The trademarks "Las Vegas Discount Golf & Tennis" and "St. Andrews" on
golf clubs and golf bags, are registered on the principal register of the
United States Patent and Trademark Office as well as in Canada and in the
State of Nevada. Management of the Company also believes that it and/or the
Company have developed proprietary rights to the name "Birdie Golf". In
February 1997, the rights to the trademarks "Las Vegas Discount Golf & Tennis"
and "Birdie Golf" were assigned to the purchaser in the sale of assets
transaction.
The purchaser of the assets granted back to Boreta Enterprises, Ltd. a
perpetual license to use the name Las Vegas Discount Golf & Tennis for retail
equipment stores in the State of Nevada, south of a line between Pahrump,
Nevada and Mesquite, Nevada, except for Summerlin, Nevada.
During September 1997, the Company agreed to sell its rights to the St.
Andrews name to Boreta Enterprises, Ltd. for a $20,000 two year promissory
note since the Company has comitted all of its efforts to the development of
the All- American SportPark and no longer intends to engage in the business of
selling golf equipment or apparel.
-26-
<PAGE>
EMPLOYEES
As of September 1, 1997, the Company employed a total of 10 persons on a
full-time basis. None of the Company's employees are represented by a union,
and the Company believes that its employee relations are good. The Company
expects to add approximately 110 full-time and 40 part-time employees when the
Sports Entertainment Complex opens. The Callaway Golf Center expects to
employ approximately 36 full-time and 10 part-time persons when it is fully
open, however, these persons will be employees of the LLC.
FACILITIES
The Company currently occupies approximately 2,360 square feet of office
space and 2,857 square feet of warehouse space at 5325 South Valley View
Boulevard, Suite 4, Las Vegas, Nevada, and pays monthly rent of $2,944. The
space is leased from Voss Boreta, the Company's Chairman of the Board. The
rent is adjustable annually based on increases in the consumer price index and
the lease expires January 31, 2005. The Company's Board of Directors believes
that the rent paid is comparable to that which it would pay to an unaffiliated
party.
On June 20, 1997, the Company entered into a lease for approximately 24
acres of land in Las Vegas, Nevada, on which the Company intends to build the
Sports Entertainment Complex portion of its SportPark. In addition, All
American Golf LLC entered into a lease for approximately 41 acres of land
where the Callaway Golf Center is being built. The terms of both leases are
described above under the heading "BUSINESS OF THE COMPANY -- ALL AMERICAN
SPORTPARK."
LEGAL PROCEEDINGS
Except for the lawsuits described in the following paragraphs, the
Company is not presently a party to any legal proceedings, except for routine
litigation that is incidental to the Company's business.
On February 27, 1996, the Company filed a Complaint in the District
Court, Clark County, Nevada, against Gordon Gaming Corporation ("Gordon"), the
Company which purchased from Howard Hughes Corporation ("Hughes") the property
in Las Vegas where the Company was preparing to build its first SportPark.
The lawsuit is based on a lease which the Company entered into with Hughes on
May 31, 1994, for approximately 33 acres located at the corner of Sahara and
Las Vegas Boulevard South. Pursuant to the lease, Hughes had the right to
terminate the lease if the property was sold provided that the Company would
be reimbursed for certain expenditures up to a maximum of $3.5 million.
The lease was terminated on June 21, 1995, and according to the terms of
the lease, Hughes was required to pay the Company its reimbursable amount no
later than 30 days after the termination. When Gordon purchased the property
from Hughes, it assumed Hughes' obligations relating to the termination of the
lease. Gordon refused to make any payment to the Company, even the amount
which both parties agreed was reimbursable. The Complaint sought an
unspecified amount of compensatory damages, punitive damages, attorneys' fees
and costs.
In October 1996, a settlement of $3,217,500 was reached and paid to the
Company.
In 1995, Giant Ride, Inc. filed suit in the District Court of Clark
County, Nevada against the Company claiming that the Company had breached a
contract to purchase a giant slide for the Company's Las Vegas SportPark.
-27-
<PAGE>
Giant Ride, Inc. is seeking an unspecified amount of damages. The Company
denies that it had a contract to purchase such a slide. The suit is currently
in the discovery stage.
-28-
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The Directors and Executive Officers of the Company are as follows:
NAME AGE POSITIONS AND OFFICES HELD
---- --- --------------------------
Vaso Boreta 64 Chairman of the Board
Ronald S. Boreta 34 President, Chief Executive Officer, Treasurer,
Secretary and Director
Robert R. Rosburg 70 Director
William Kilmer 57 Director
Motoharu Iue 60 Director
John A. Hoover, Jr. 43 General Manager of All-American SportParks
Kevin B. Donovan 35 Vice President of New Business Development
Except for the fact that Vaso Boreta and Ronald Boreta are father and
son, respectively, there is no family relationship between any Director or
Officer of the Company. The Company presently has no audit, compensation or
nominating committee.
All Directors hold office until the next Annual Meeting of Shareholders.
The Company has agreed with RAF Financial Corporation, the
Representative of the Underwriters of the Company's initial public offering,
that the Company will permit a representative of RAF Financial Corporation to
be present at all meetings of the Board of Directors of the Company for a
period of three years from December 13, 1994. However, such representative
will not have any voting rights.
The Callaway Golf Company ("Callaway Golf") has the right to designate a
person to be appointed to the Company's Board of Directors throughout the term
of the Company's agreement with Callaway Golf regarding the limited liability
company which was formed to operate the Callaway Golf Center. To date,
Callaway Golf has not designated anyone to be appointed to the Company's Board
of Directors.
Officers of the Company are elected annually by, and serve at the
discretion of, the Board of Directors.
The following sets forth biographical information as to the business
experience of each officer and director of the Company for at least the past
five years.
RONALD S. BORETA has served as President of the Company since 1992,
Chief Executive Officer since August 1994, and a Director since its inception
in 1984. He also served as an officer and director of the Company's Parent,
Las Vegas Discount Golf & Tennis, Inc., from 1988 until July 1994, and he
continues to serve as a director. He has been employed by the Company since
its inception in March 1984, with the exception of a 6-month period in 1985
when he was employed by a franchisee of the Company located in San Francisco,
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<PAGE>
California. Prior to his employment by the Company, Mr. Boreta was an
assistant golf professional at San Jose Municipal Golf Course in San Jose,
California, and had worked for two years in the areas of sales and warehousing
activities with a golf discount store in South San Francisco, California. Mr.
Boreta devotes 100% of his time to the business of the Company.
VASO BORETA has served as Chairman of the Board of Directors since
August 1994, and has been an Officer and Director of the Company since its
formation in 1984. He has also been an officer and director of the Company's
Parent, Las Vegas Discount Golf & Tennis, Inc., since 1988. In 1974, Mr.
Boreta first opened a specialty business named "Las Vegas Discount Golf &
Tennis," which retailed golf and tennis equipment and accessories. He was one
of the first retailers to offer golf merchandise at a discount. He also
developed a major mail order catalog sales program from his original store.
Mr. Boreta continues to operate his original store, which has been moved to a
new location adjacent to the Hard Rock Cafe in Las Vegas. Mr. Boreta devotes
approximately 10% of his time to the business of the Company, and the balance
to the Company's Parent and to operating his store.
ROBERT R. ROSBURG has served as a Director of the Company since August
1994, and has been a director of the Company's Parent, Las Vegas Discount Golf
& Tennis, Inc., since November 1989. Mr. Rosburg has been a professional
golfer since 1953. From 1953 to 1974 he was active on the Professional Golf
Association tours, and since 1974 he has played professionally on a limited
basis. Since 1975 he has been a sportscaster on ABC Sports golf tournament
telecasts. Since 1985 he has also been the Director of Golf for Rams Hill
Country Club in Borrego Springs, California. Mr. Rosburg received a
Bachelor's Degree in Humanities from Stanford University in 1948.
WILLIAM KILMER has served as a Director of the Company since August
1994, and has been a director of the Company's Parent, Las Vegas Discount Golf
& Tennis, Inc., since July 1990. Mr. Kilmer is a retired professional
football player, having played from 1961 to 1978 for the San Francisco
Forty-Niners, the New Orleans Saints and the Washington Redskins. Since 1978,
he has toured as a public speaker and also has served as a television analyst.
Mr. Kilmer received a Bachelor's Degree in Physical Education from the
University of California at Los Angeles.
MOTOHARU IUE has served as a Director of the Company since April 1997.
Mr. Iue has served as Chairman of the Board of Sanyo North America Corporation
("Sanyo") and President of Three Oceans Inc. ("Three Oceans") since October
1996. Mr. Iue previously served as President of Sanyo and as Chairman of the
Board of Three Oceans from 1992 to 1996 and still serves as Chief Executive
Officer of Sanyo and Three Oceans. From 1989 to 1992, he was Executive Vice
President of Tottori Sanyo Electric Co., Ltd. All three companies are
affiliates of Sanyo Electric Co., Ltd. ("Sanyo Electric"), and Three Oceans
Inc. is a shareholder of the Company. Mr. Iue has bee a director of Sanyo
Electric since 1977.
JOHN A. HOOVER, JR. has served as General Manager of All-American
SportParks since April 1995. From June 1993 until April 1995, he served as
Director of Operations of the MGM Grand Adventure Theme Park, a $120 million
theme park associated with the MGM Grand Hotel Resort in Las Vegas. From
January 1990 until June 1993, he served as operations manager for the Fiesta
Texas Theme Park in San Antonio, Texas, and from October 1986 until December
1990, he served as general manager for the Malibu Grand Prix/Castle Golf &
Games in San Antonio, Texas.
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<PAGE>
KEVIN B. DONOVAN has served as Vice President of New Business
Development since April 1994. Prior to joining the Company, from March 1992
to March 1994, he was President and Creative Director of Donovan Design
Agency, Dallas, Texas, which is engaged in designing corporate logos and
graphics, and providing marketing and package designs. From June 1989 to
March 1992, he was President, Chief Executive Officer and Creative Director
for Donovan & Houston Design For Retail, Dallas, Texas, which was engaged in
providing design services to retail oriented companies. From March 1986 to
June 1989, Mr. Donovan was Art Director and Creative Director for John Ryan &
Co. Retail Marketing Agency in Minneapolis, Minnesota, which was engaged in
providing design services to retail and banking companies. Mr. Donovan
received a B.A. Degree in Commercial Arts from St. Paul Technical College, St.
Paul, Minnesota, in 1983. He devotes his full time to the business of the
Company.
EXECUTIVE COMPENSATION
The following table sets forth information regarding the executive
compensation for the Company's President and each other executive officer who
received compensation in excess of $100,000 for the years ended December 31,
1996, 1995 and 1994 from the Company:
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------- --------
- ----------------
SECURI-
TIES
UNDERLY-
OTHER RE- ING
ALL
ANNUAL STRICTED OPTIONS/
OTHER
NAME AND PRINCIPAL COMPEN- STOCK SARs LTIP
COMPEN-
POSITION YEAR SALARY BONUS SATION AWARD(S)
(NUMBER)PAYOUTS SATION
- ------------------ ---- -------- ------ ------- -------- -------
- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
<C>
Ronald S. Boreta, 1996 $100,000 $5,500 $39,160 -- 325,000 --
$8,265
President and CEO <FN2>
<FN3>
<FN1> 1995 $100,000 -0- $19,071 -- -0- --
-0-
<FN2>
1994 $100,000 -0- $14,190 -- 110,000 --
-0-
<FN2>
Charles Hohl, 1996 $100,000 $22,000 $10,000 -- -0- --
-0-
Executive Vice <FN5>
President<FN4> 1995 $100,000 -0- $ 2,346 -- -0- --
-0-
<FN5>
_________________
<FN>
<FN1>
Ronald S. Boreta served as Vice President, Secretary and Treasurer of the
Company and Las Vegas Discount Golf & Tennis, Inc. until June 1992 when he
became President of the Company and Las Vegas Discount Golf & Tennis, Inc.
Until July 31, 1994, the Company paid one-half of Ronald S. Boreta's salary
and Las Vegas Discount Golf & Tennis, Inc. paid the other one-half. Effective
August 1, 1994, the Company pays all of Mr. Boreta's salary.
-31-
<PAGE>
<FN2>
Represents amounts paid for country club memberships for Ronald S. Boreta and
contributions made by the Company to retirement plans on his behalf. For
1996, these amounts were $14,160 for club memberships and $25,000 to the
Company's Supplemental Retirement Plan.
<FN3>
Represents premiums paid on a life insurance policy for Ronald S. Boreta's
benefit.
<FN4>
Mr. Hohl's employment as Executive Vice President ended on February 26, 1997.
<FN5>
Represents amount contributed to the Company's retirement plan on behalf of
Mr. Hohl.
</FN>
</TABLE>
<TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
PERCENT
NUMBER OF OF TOTAL
SECURITIES OPTIONS/SARs
UNDERLYING GRANTED TO EXERCISE
OPTIONS/SARs EMPLOYEES IN OR BASE EXPIRATION
NAME GRANTED(#) FISCAL YEAR PRICE ($/SH) DATE
- ---------------- ------------ ------------ ----------- ----------
<S> <C> <C> <C> <C>
Ronald S. Boreta 125,000 36.1% $4.75 <FN1> 4-16-2001
200,000 57.8% $4.625 <FN1> 4-24-2001
___________
<FN>
<FN1>
On June 9, 1997, these options were reissued for the same number of shares at
a new exercise price of $3.0625 per share.
</FN>
</TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
SECURITIES
UNDERLYING VALUE OF UNEXER-
SHARES UNEXERCISED CISED IN-THE
ACQUIRED OPTIONS MONEY OPTIONS/
ON SARs AT FY-END SARs AT FY-END
EXERCISE VALUE EXERCISABLE/ EXERCISABLE/
NAME (NUMBER) REALIZED UNEXERCISABLE UNEXERCISABLE
- ---------------- -------- -------- -------------- ---------------
Ronald S. Boreta -0- -0- 110,000/325,000 $0 / $0
Charles Hohl -0- -0- 40,000/ 20,000 $0 / $0
EMPLOYMENT AGREEMENTS
Effective August 1, 1994, the Company entered into an employment
agreement with Ronald S. Boreta, the Company's President and Chief Executive
Officer, pursuant to which he receives a base salary of $100,000 per year plus
annual increases as determined by the Board of Directors. His salary was
increased to $120,000 for the year ended December 31, 1996. The employment
agreement was scheduled to terminate on December 31, 1996, but it is
automatically extended for additional one year periods unless 60 days' notice
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<PAGE>
of the intention not to extend is given by either party. In addition to his
base salary, Ronald S. Boreta also will receive a royalty equal to 2% of all
gross revenues directly related to the All-American SportPark and Slugger
Stadium concepts. However, such royalty is only payable to the extent that
the Company's annual consolidated income before taxes after the payment of the
royalty exceeds $1,000,000. Ronald S. Boreta also receives the use of an
automobile, for which the Company pays all expenses, and full medical and
dental coverage. The Company also pays all dues and expenses for membership
at two local country clubs at which Ronald S. Boreta entertains business
contacts for the Company. Ronald S. Boreta has agreed that for a period of
three years from the termination of his employment agreement that he will not
engage in a trade or business similar to that of the Company. In the event of
a change of more than 25% of the beneficial ownership of the Company or its
parent, the termination date is extended from December 31, 1996 to December
31, 1998, and it may be extended up to an additional five years under certain
conditions.
In June 1997, the Company's Board of Directors awarded a $100,000 bonus
to Ronald S. Boreta for his extraordinary services related to the raising of
capital and development of the Company's Las Vegas SportPark.
Effective October 1, 1996, the Company entered into a one year
employment agreement with Kevin B. Donovan, pursuant to which he receives a
base salary of $100,000 per year. In addition to his base salary, Mr. Donovan
will receive a $25,000 bonus payable two weeks prior to the opening of the
All-American SportPark, and a commission of 5% of all sponsorship sales
related to the All-American SportPark. Mr. Donovan also receives the use of
an automobile provided by the Company and received $5,000 for moving expenses.
Effective August 8, 1994, the Company entered into an employment
agreement with Charles L. Hohl, the Company's Executive Vice President,
Franchise Systems, pursuant to which he received a base salary of $100,000 per
year plus annual increases as determined by the Board of Directors. This
employment agreement ended on February 26, 1997, in connection with the sale
of the Company's franchise business and the termination of Mr. Hohl's
employment.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company do not receive any fees
for Board meetings they attend but are entitled to be reimbursed for
reasonable expenses incurred in attending such meetings.
STOCK OPTION PLAN
During July 1994, the Board of Directors adopted a Stock Option Plan
(the "Plan"). The Plan authorizes the issuance of options to purchase up to
300,000 shares of the Company's Common Stock.
The Plan allows the Board to grant stock options from time to time to
employees, officers, directors and consultants of the Company. The Board has
the power to determine at the time the option is granted whether the option
will be an Incentive Stock Option (an option which qualifies under Section 422
of the Internal Revenue Code of 1986) or an option which is not an Incentive
Stock Option. Vesting provisions are determined by the Board at the time
options are granted. The option price for any option will be no less than the
fair market value of the Common Stock on the date the option is granted.
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<PAGE>
Since all options granted under the Plan must have an exercise price no
less than the fair market value on the date of grant, the Company will not
record any expense upon the grant of options, regardless of whether or not
they are incentive stock options. Generally, there will be no federal income
tax consequences to the Company in connection with Incentive Stock Options
granted under the Plan. With regard to options that are not Incentive Stock
Options, the Company will ordinarily be entitled to deductions for income tax
purposes of the amount that option holders report as ordinary income upon the
exercise of such options, in the year such income is reported.
In August 1994, the Board of Directors granted stock options to the
following persons who were then Officers and Directors of the Company, to
purchase shares of the Company's Common Stock at $5.00 per share. These
options expire on August 8, 1999. On June 9, 1997, each of these options
(except Charles Hohl's) were reissued for the same number of shares at a new
exercise price of $3.0625 per share.
<TABLE>
<CAPTION>
NAME SHARES SUBJECT TO OPTION
----------------- ------------------------
<S> <C>
Vaso Boreta 110,000
Ronald Boreta 110,000
Charles Hohl 60,000<FN1>
Glenn Raynes 10,000
Robert R. Rosburg 5,000
William Kilmer 5,000
-------
Total 300,000
__________________
<FN>
<FN1>
Mr. Hohl's options expired upon termination of his employment in February
1997.
</FN>
</TABLE>
In April 1996, the Company's Board of Directors approved increases in
the number of shares of Common Stock which may be issued under the Plan from
300,000 to 700,000, subject to approval by the Company's shareholders within
one year. Also in April 1996, the Company's Board of Directors granted stock
options as indicated below.
<TABLE>
<CAPTION>
RELATIONSHIP SHARES SUBJECT EXERCISE
NAME TO THE COMPANY TO OPTION PRICE<FN3>
- ---------------- -------------------- -------------- ----------
<S> <C> <C> <C>
Joel Rubenstein Consultant 10,000 $5.00
Ronald S. Boreta Officer and Director 125,000 $4.75
Ronald S. Boreta Officer and Director 200,000<FN1> $4.625
Kevin B. Donovan Officer 10,000 $4.75
John Hoover Officer 10,000 $4.75
Robert Finley Employee 1,000 $4.75
Ted Abbruzzese Consultant 10,000 $4.75
Jeff Gordon Consultant 10,000<FN2> $4.75
Hal Price Consultant 1,000 $4.75
___________________
<FN>
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<PAGE>
<FN1>
This option was not to vest until the Company completed a transaction with a
major business or investor made it probable that the Company will be able to
pursue its plan of building and operating Sportparks. This condition was met
in September 1996 as a result of the investment by Three Oceans, Inc. of
$5,000,000 in the Company.
<FN2>
This option is currently vested as to 5,000 shares and will vest as to an
additional 2,500 on April 24, 1998 and April 24, 1999.
<FN3>
On June 9, 1997, each of these options were reissued for the same number of
shares at a new exercise price of $3.0625 per share.
</FN>
</TABLE>
401(k) PLAN
The Company's Parent maintains a 401(k) employee retirement and savings
program (the "401(k) Plan") which covers the Company's employees. Under the
401(k) Plan, an employee may contribute up to 15% of his or her gross annual
earnings, subject to a statutory maximum, for investment in one or more funds
identified under the plan. The Company's Parent makes matching contributions
equal to 25% of participants' contributions.
SUPPLEMENTAL RETIREMENT PLAN
In November 1996, the Company and its majority shareholder established a
Supplemental Retirement Plan, pursuant to which certain employees selected by
the Company's Chief Executive Officer receive benefits based on the amount of
compensation elected to be deferred by the employee and the amount of
contributions made on behalf of the employee by the Company. Company
contributions to the Supplemental Retirement Plan are immediately vested for
Category I employees, and vest 20% per year of employment for Category II
employees. Vested amounts under the Supplemental Retirement Plan are paid out
over 5 to 20 years upon retirement, disability, death or termination of
employment.
For 1996, Ronald S. Boreta (the President of the Company) was
designated as a Category I employee, and Charles Hohl (then Executive Vice
President of the Company) was designated as a Category II employee. The
Company made contributions to the Supplemental Retirement Plan on behalf of
these persons for 1996 as follows: Ronald S. Boreta - $25,000; and Charles
Hohl - $10,000.
The Company's Board of Directors has not yet determined the amounts, if
any, which will be contributed to the Supplemental Retirement Plan for 1997.
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<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number and percentage of shares of
the Company's no par value Common Stock owned beneficially, as of August 15,
1997, by any person, who is known to the Company to be the beneficial owner of
5% or more of such Common Stock, and, in addition, by each Director of the
Company, and Nominee for Director, and by all Directors, Nominees for Director
and Officers of the Company as a group. Information as to beneficial owner-
ship is based upon statements furnished to the Company by such persons.
<TABLE>
<CAPTION>
AMOUNT AND PERCENT OF CLASS
NAME AND ADDRESS NATURE OF BENE- BEFORE AFTER
OF BENEFICIAL OWNER FICIAL OWNERSHIP OFFERING OFFERING
- ------------------- ---------------- -------- --------
<S> <C> <C> <C>
Las Vegas Discount Golf &
Tennis, Inc.<FN1> 2,000,000 66.7% 54.8%
Suite 10
5325 S. Valley View Blvd.
Las Vegas, Nevada 89118
Vaso Boreta 110,000<FN2> 3.5% 2.9%
Suite 10
5325 S. Valley View Blvd.
Las Vegas, Nevada 89118
Ronald S. Boreta 435,000<FN2> 14.5% 10.6%
Suite 10
5325 S. Valley View Blvd.
Las Vegas, Nevada 89118
Robert R. Rosburg 5,000<FN2> 0.2% 0.1%
49-425 Avenida Club La Quinta
La Quinta, California 92253
William Kilmer 5,000<FN2> 0.2% 0.1%
1500 Sea Breeze Boulevard
Ft. Lauderdale, Florida 33316
Motoharu Iue 750,000<FN3> 20.0% 16.7%
666 - 5th Avenue
New York, New York 10103
Three Oceans Inc. 750,000<FN4> 20.0% 16.7%
2001 Sanyo Avenue
San Diego, California 92173
All Directors and 1,325,000<FN5> 30.6 26.6%
Officers as a Group
(9 Persons)
___________________
<FN>
<FN1>
Las Vegas Discount Golf & Tennis, Inc. is a publicly-held corporation of which
Vaso Boreta is President, Chairman of the Board and a principal shareholder;
Ronald S. Boreta is a Director and a principal shareholder; and Robert R.
Rosburg and William Kilmer are Directors. In addition, John Boreta, a son of
-36-
<PAGE>
Vaso Boreta, is a principal shareholder of Las Vegas Discount Golf & Tennis,
Inc. The following sets forth the percentage ownership beneficially held by
such persons in Las Vegas Discount Golf & Tennis, Inc.:
Vaso Boreta 49.3%
Ronald S. Boreta 21.8%
Robert Rosburg 0.1%
William Kilmer 0.1%
John Boreta 12.2%
<FN2>
Represents shares underlying currently exercisable options held by the named
person. Does not include shares held by Las Vegas Discount Golf & Tennis,
Inc. of which such person is an Officer, Director and/or principal
shareholder.
<FN3>
Represents shares beneficially owned by Three Oceans, Inc., of which Mr.
Yamagata is President. These are the same shares listed under the name Three
Oceans, Inc.
<FN4>
Represents 500,000 shares of Common Stock issuable upon the conversion of
Series A Convertible Preferred Stock held by Three Oceans Inc. and 250,000
shares underlying stock options held by Three Oceans, Inc. (See "CERTAIN
TRANSACTIONS.")
<FN5>
Includes shares beneficially held by the five named Directors, 10,000 shares
underlying stock options held by Kevin B. Donovan and 10,000 shares underlying
options held by John Hoover, Executive Officers of the Company.
</FN>
</TABLE>
-37-
<PAGE>
CERTAIN TRANSACTIONS
Las Vegas Discount Golf & Tennis, Inc. ("LVDG"), a publicly-held
corporation, owns 66.7% of the Company's outstanding Common Stock. Vaso
Boreta, the Company's Chairman of the Board, is an Officer, Director and
principal shareholder of LVDG. Ronald S. Boreta, President and a Director of
the Company, is a Director and principal shareholder of LVDG. Robert S.
Rosburg and William Kilmer, Directors of the Company, are also Directors of
LVDG. In addition, John Boreta, the son of Vaso Boreta and the brother of
Ronald S. Boreta, is a principal shareholder of LVDG.
Until August 1, 1994, the Company and LVDG shared the expenses of
jointly-used facilities and administrative and accounting personnel on a 50-50
basis under a verbal agreement. Since August 1, 1994, the Company and LVDG
have allocated these costs on a pro rata basis based on which entity receives
the benefit of the particular expense. With respect to the lease for the
office and warehouse facilities, starting July 1, 1996 LVDG paid 33% of the
monthly lease payments and the Company paid 67%.
Effective August 1, 1994, LVDG also agreed to purchase, warehouse and
make available to the Company and its franchisees certain merchandise. In
exchange, the Company agreed to pay $350,000 from the proceeds of its December
1994 initial public offering to retire certain bank indebtedness described
below.
Effective August 1, 1994, LVDG granted the Company a license to use all
of its trademarks, trade names and other commercial names and symbols for so
long as such trademarks, tradenames and other commercial names and symbols are
being used by the Company and its franchisees.
Through February 1997, certain facilities used by the Company and LVDG
were leased by the Company from Vaso Boreta, the Company's Chairman of the
Board. LVDG leased approximately 15,500 square feet of warehouse space and
6,000 square feet of office space from Mr. Boreta at a base monthly rent of
$13,000. The Board of Directors of the Company believes that the terms of
this lease were at least as favorable as those which could have been obtained
from an unaffiliated entity.
Effective October 1, 1990, a franchise agreement with Vaso Boreta, the
Company's Chairman of the Board, was mutually terminated, and a new agreement
was entered into with him pursuant to which he was permitted to operate a Las
Vegas Discount Golf & Tennis store in Las Vegas, Nevada, which is not a
franchise store. The agreement also provided that Mr. Boreta may purchase
certain merchandise for his store at the same cost as the Company, use the
facilities and personnel of the Company on a limited basis, and operate a
limited mail order business from his store. In exchange for these rights, Mr.
Boreta paid the Company a fee of $3,000 per month. This agreement with the
Company was terminated on July 31, 1994. Mr. Vaso Boreta now has a similar
agreement with Las Vegas Discount Golf & Tennis, Inc. As a result of this
arrangement, Mr. Vaso Boreta did not pay any royalties to the Company even
though he may have received a benefit from the Company's activities including
any advertising conducted by the Company.
The Company and LVDG obtained $1,011,000 in loans from an unaffiliated
bank which Vaso Boreta and his wife personally guaranteed. The loans were
also collateralized by inventory and accounts receivable. This loan was
completely paid off during December 1994, and approximately $350,000 of the
proceeds from the Company's public offering was used to pay off the loan. The
loan proceeds were originally used for the purchase of property and equipment
and working capital.
-38-
<PAGE>
Prior to becoming the Company's Vice President of New Business
Development in April 1994, Kevin B. Donovan was President and a major
shareholder of Donovan Design Agency, Inc., which performed certain design
services for the Company. During 1993, Donovan Design Agency billed the
Company $136,000 for such services of which $59,000 had been paid as of
December 31, 1993. During 1994, Donovan Design Agency billed the Company
$9,300 for additional services, and the Company paid $32,000 on its account.
As of December 31, 1995 and 1994, the Company owed Donovan Design Agency
$54,300. During 1996, the amount due was reduced to $36,000 and this amount
was paid. Kevin B. Donovan presently owns all of the outstanding stock of
Donovan Design Agency, however, this receivable has been assigned to an entity
with which Mr. Donovan has no affiliation.
In September 1994, Vaso Boreta, the Company's Chairman of the Board,
loaned the Company $120,000. This note was repaid in full during December
1994, and no interest was charged or paid.
As indicated above, the Company has extensive transactions with LVDG,
LVDG's other subsidiaries, and Voss Boreta's Las Vegas store. As of December
31, 1996, the Company was owed $461,500 by LVDG and its subsidiaries. This
amount was completely paid off during the six months ended June 30, 1997.
During September 1997, the Company agreed to sell its rights to the St.
Andrews name to Boreta Enterprises, Ltd. for a $20,000 two-year promissory
note since the Company has committed all of its efforts to the development of
the All-American SportPark and no longer intends to engage in the business of
selling golf equipment or apparel.
The Company's Board of Directors believes that the terms of the above
transactions were on terms no less favorable to the Company than if the
transactions were with unaffiliated third parties.
-39-
<PAGE>
DESCRIPTION OF SECURITIES
COMMON STOCK
The authorized capital stock of the Company includes 10,000,000 shares
of $.001 par value Common Stock. All shares have equal voting rights and,
when issued, are fully paid and non-assessable. Voting rights are not
cumulative, and, therefore, the holders of more than 50% of the Common Stock
of the Company could, if they chose to do so, elect all the Directors.
Upon liquidation, dissolution or winding up of the Company, the assets
of the Company, after the payment of liabilities, will be distributed pro rata
to the holders of the Common Stock. The holders of the Common Stock do not
have preemptive rights to subscribe for any securities of the Company and have
no right to require the Company to redeem or purchase their shares. The
shares of Common Stock presently outstanding are, and the shares of Common
Stock to be sold pursuant to this offering will be, upon issuance, fully paid
and non-assessable.
Holders of Common Stock are entitled to share equally in dividends when,
as and if declared by the Board of Directors of the Company, out of funds
legally available therefor. The Company has not paid any cash dividends on
its Common Stock, and it is unlikely that any such dividends will be declared
in the foreseeable future.
CLASS A WARRANTS
The following discussion of certain terms and provisions of the Class A
Warrants is qualified in its entirety by reference to the Warrant Agreement
(as hereinafter defined) and also the detailed provisions of the form of
Warrant attached to the Warrant Agreement between the Company and Corporate
Stock Transfer, Inc. (the "Warrant Agent").
Two Class A Warrants entitle the holder to purchase, at a price of
$6.50, subject to adjustment, one share of Common Stock at any time until
November 14, 1997. The Company may redeem the Class A Warrants at $.10 per
Warrant upon 30 days' prior written notice in the event that the Common Stock
has traded above $9.75 for 20 consecutive trading days ending not more than
ten days prior to the mailing of the notice of redemption.
For purposes of determining the daily trading price of the Company's
Common Stock, if the Common Stock is listed on a national securities exchange,
is admitted to unlisted trading privileges on a national securities exchange,
or is on NASDAQ, then the last reported sale price of the Common Stock on such
exchange or NASDAQ each day shall be used. If the Common Stock is not so
listed on such exchange or system or admitted to unlisted trading privileges
then the average of the last reported bid prices reported by the National
Quotation Bureau, Inc. each day shall be used to determine such daily trading
price.
The Class A Warrants may only be redeemed if a current registration
statement is in effect. Any Warrantholder who does not exercise prior to the
redemption date, as set forth in the Company's notice of redemption, will
forfeit the right to purchase the shares of Common Stock underlying such
Warrants and, after the redemption date, any outstanding Warrants will become
void and be of no further force or effect. If the Company does not redeem the
Class A Warrants, such Warrants will expire, become void and be of no further
force or effect on conclusion of the exercise period. All of the Warrants of
a Class must be redeemed if any are to be redeemed of such Class.
-40-
<PAGE>
The Class A Warrants have been issued pursuant to a Warrant Agreement
between the Company and the Warrant Agent. The Company has authorized and
reserved for issuance the shares of Common Stock issuable upon exercise of the
Class A Warrants. When delivered, all shares of Common Stock issued upon
exercise of the Class A Warrants will be duly and validly authorized and
issued, fully paid and non-assessable, and no preemptive rights or rights of
first refusal will exist with respect thereto.
Class A Warrants may be exercised upon surrender of the Warrant
certificate on or prior to its expiration date (or earlier redemption date) at
the offices of Corporate Stock Transfer, Inc., the Warrant Agent, with the
form of "Election to Purchase" on the reverse side of the Warrant certificate
completed and executed as indicated, accompanied by payment of the full
exercise price (by certified or bank check payable to the order of the
Company) for the number of shares with respect to which such Warrant is being
exercised.
The exercise price of the Class A Warrants and the number of shares to
be obtained upon exercise of such Warrants are subject to adjustment in
certain circumstances including a stock split of, or stock dividend on, or a
subdivision, combination, or recapitalization of the Common Stock. In the
event of liquidation, dissolution or winding up of the Company, holders of the
Class A Warrants, unless exercised, will not be entitled to participate in the
assets of the Company. Holders of the Class A Warrants will have no voting,
preemptive, liquidation or other rights of a shareholder, and no dividends
will be declared on the Class A Warrants.
TRANSFER AND WARRANT AGENT
Corporate Stock Transfer, Inc., Denver, Colorado, serves as transfer and
warrant agent for the Company's Common Stock and Class A Warrants.
REPRESENTATIVE'S CLASS A WARRANTS
The following discussion of certain terms and provisions of the
Representative's Class A Warrants is qualified in its entirety by reference to
the Warrant Agreement (as hereinafter defined) and also the detailed
provisions of the form of Warrant attached to the Warrant Agreement between
the Company and Corporate Stock Transfer, Inc. (the "Warrant Agent").
Two Representative's Class A Warrants entitle the holder to purchase, at
a price of $7.80, subject to adjustment, one share of Common Stock at any time
until November 14, 1997. The Company may redeem the Representative's Class A
Warrants at $.10 per Warrant upon 30 days' prior written notice in the event
that the Common Stock has traded above $9.75 for 20 consecutive trading days
ending not more than ten days prior to the mailing of the notice of redemp-
tion.
For purposes of determining the daily trading price of the Company's
Common Stock, if the Common Stock is listed on a national securities exchange,
is admitted to unlisted trading privileges on a national securities exchange,
or is on NASDAQ, then the last reported sale price of the Common Stock on such
exchange or NASDAQ each day shall be used. If the Common Stock is not so
listed on such exchange or system or admitted to unlisted trading privileges
then the average of the last reported bid prices reported by the National
Quotation Bureau, Inc. each day shall be used to determine such daily trading
price.
-41-
<PAGE>
The Representative's Class A Warrants may only be redeemed if a current
registration statement is in effect. Any Warrantholder who does not exercise
prior to the redemption date, as set forth in the Company's notice of
redemption, will forfeit the right to purchase the shares of Common Stock
underlying such Warrants and, after the redemption date, any outstanding
Warrants will become void and be of no further force or effect. If the
Company does not redeem the Representative's Class A Warrants, such Warrants
will expire, become void and be of no further force or effect on conclusion of
the exercise period. All of the Warrants of a Class must be redeemed if any
are to be redeemed of such Class.
The Representative's Class A Warrants have been issued pursuant to a
Warrant Agreement between the Company and the Warrant Agent. The Company has
authorized and reserved for issuance the shares of Common Stock issuable upon
exercise of the Representative's Class A Warrants. When delivered, all shares
of Common Stock issued upon exercise of the Representative's Class A Warrants
will be duly and validly authorized and issued, fully paid and non-assessable,
and no preemptive rights or rights of first refusal will exist with respect
thereto.
Representative's Class A Warrants may be exercised upon surrender of the
Warrant certificate on or prior to its expiration date (or earlier redemption
date) at the offices of Corporate Stock Transfer, Inc., the Warrant Agent,
with the form of "Election to Purchase" on the reverse side of the Warrant
certificate completed and executed as indicated, accompanied by payment of the
full exercise price (by certified or bank check payable to the order of the
Company) for the number of shares with respect to which such Warrant is being
exercised.
The exercise price of the Representative's Class A Warrants and the
number of shares to be obtained upon exercise of such Warrants are subject to
adjustment in certain circumstances including a stock split of, or stock
dividend on, or a subdivision, combination, or recapitalization of the Common
Stock. In the event of liquidation, dissolution or winding up of the Company,
holders of the Representative's Class A Warrants, unless exercised, will not
be entitled to participate in the assets of the Company. Holders of the
Representative's Class A Warrants will have no voting, preemptive, liquidation
or other rights of a shareholder, and no dividends will be declared on the
Representative's Class A Warrants.
The Representative's Class A Warrants are generally non-transferable,
except that they may be transferred to officers of RAF Financial Corporation
and to other persons who immediately exercise such Warrants. In the event of
a transfer to a person who is not an officer of RAF Financial Corporation, the
Class A Warrants will expire if not exercised within three business days of
transfer.
REPRESENTATIVE'S WARRANTS
In connection with the Company's initial public offering, the Company
issued to the Representative of the Underwriters, Representative's Warrants to
purchase 100,000 shares of Common Stock. The Representative's Warrants are
exercisable at $5.40 per share through December 12, 1999. The
Representative's Warrants contain certain demand and piggyback registration
rights. The demand registration rights contained in the Representative's
Warrants are for a term of five years from December 13, 1994, and the
piggyback registration rights contained in the Representative's Warrants are
for a term of seven years after such date. The Representative's Warrants are
protected against dilution only in the event the Company makes a distribution
-42-
<PAGE>
of securities to its shareholders. The Representative's Warrants may not be
transferred other than by will or pursuant to the laws of descent and
distribution, except that (i) the Representative's Warrants may be transferred
to a partner of an underwriter participating in the Offering which is a
partnership; or to a stockholder, officer, or director of an underwriter
participating in the Offering which is a corporation; or to a beneficiary of a
trust which is a stockholder of an underwriter participating in the Offering
which is a corporation, and (ii) the Representative's Warrants may be
transferred if, immediately after such transfer, such Warrants are exercised;
provided, however, if such exercise does not occur immediately after such
transfer then the Warrants transferred under item (ii) above shall expire.
PREFERRED STOCK
The Company is authorized to issue 5,000,000 shares of Preferred Stock,
$.001 par value. The Preferred Stock may be issued in series from time to
time with such designation, rights, preferences and limitations as the Board
of Directors of the Company may determine by resolution. The rights,
preferences and limitations of separate series of Preferred Stock may differ
with respect to such matters as may be determined by the Board of Directors,
including, without limitation, the rate of dividends, method and nature of
payment of dividends, terms of redemption, amounts payable on liquidation,
sinking fund provisions (if any), conversion rights (if any), and voting
rights. The potential exists, therefore, that preferred stock might be issued
which would grant dividend preferences and liquidation preferences to
preferred shareholders over common shareholders. Unless the nature of a
particular transaction and applicable statutes require such approval, the
Board of Directors has the authority to issue these shares without shareholder
approval. The issuance of Preferred Stock may have the affect of delaying or
preventing a change in control of the Company without any further action by
shareholders.
In July 1996, the Board of Directors designated 500,000 shares of its
Preferred Stock as Series A Convertible Preferred Stock. Each share of the
Series A Convertible Preferred Stock is convertible into one share of the
Company's Common Stock at any time. The Series A Convertible Preferred Stock
has a liquidation preference of $10 per share and the holder is entitled to
receive dividends equal to any declared on the Company's Common Stock. Under
certain circumstances, the Company may redeem the Series A Convertible
Preferred Stock at a redemption price of $12.50 per share. Each share of
Series A Convertible Preferred Stock is entitled to one vote and votes along
with the holders of the Company's Common Stock. As of June 17, 1997, 500,000
shares of Series A Convertible Preferred Stock are outstanding.
OPTION HELD BY THREE OCEANS, INC.
In July 1996, the Company issued an option to Three Oceans, Inc. in
connection with its purchase of shares of the Company's Series A Convertible
Preferred Stock. The option is exercisable to purchase 250,000 shares of
Common Stock at an exercise price of $5.00 per share. The option will expire
on July 29, 2001.
SHARES ELIGIBLE FOR FUTURE SALE
There are presently 2,000,000 shares of Common Stock outstanding which
are "restricted securities" as defined by Rule 144. In general, Rule 144
provides that a person (or persons whose shares are aggregated) who has
satisfied a two-year holding period may, under certain circumstances, sell
within any three-month period a number of securities which does not exceed the
greater of 1% of the then outstanding Common Stock or the average weekly
trading volume of the class during the four calendar weeks prior to such sale.
Rule 144 also permits, under certain circumstances, the sale of securities,
without any limitation, by a person who is not an affiliate of the Company and
who has satisfied a three-year holding period.
The Representative of the Underwriters in the Company's initial public
offering obtained the agreement of Las Vegas Discount Golf & Tennis, Inc. not
sell, publicly transfer or assign the 2,000,000 shares of Common Stock until
December 12, 1997, without the prior written consent of the Representative.
REPORTS TO SHAREHOLDERS
The Company intends to furnish annual reports to shareholders which will
include audited financial statements reported on by its independent auditors.
In addition, the Company may issue unaudited quarterly or other interim
reports to shareholders as it deems appropriate.
-43-
<PAGE>
SELLING SECURITY HOLDERS
Included in the securities being offered by this Prospectus are 100,000
Representative's Class A Warrants, 100,000 Representative's Warrants and
150,000 shares of Common Stock issuable upon the exercise of such Warrants, as
shown in the following table:
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
NUMBER OF SHARES REPRESENTA- REPRESEN-
OF COMMON STOCK TIVE'S CLASS TATIVE'S
BENEFICIALLY OWNED A WARRANTS WARRANTS
NAME OF SELLING ------------------ BEING BEING
SHAREHOLDER RECORD OTHER OFFERED OFFERED
- --------------- ------ --------- ------------ ---------
<S> <C> <C> <C> <C>
RAF Financial -0- 75,000<FN1> 50,000 50,000
Corporation
Robert L. Long -0- 75,000<FN1> 50,000 50,000
__________________
<FN>
<FN1>
Represents 25,000 shares underlying Representative's Class A Warrants and
50,000 shares underlying Representative's Warrants.
</FN>
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF SHARES OF COMMON STOCK
TO BE BENEFICIALLY OWNED
NUMBER OF ON COMPLETION OF THE OFFERING
SHARES OF ----------------------------------
NAME OF SELLING COMMON STOCK PERCENT
SHAREHOLDER OFFERED RECORD OTHER OF CLASS
- --------------- ------------ ------ ----- --------
<S> <C> <C> <C> <C>
RAF Financial 75,000 -0- -0- -0-
Corporation
Robert L. Long 75,000 -0- -0- -0-
__________________
<FN>
<FN1>
Represents 25,000 shares underlying Representative's Class A Warrants and
50,000 shares underlying Representative's Warrants.
</FN>
</TABLE>
-44-
<PAGE>
PLAN OF DISTRIBUTION
EXERCISE OF CLASS A WARRANTS AND REPRESENTATIVE'S CLASS A WARRANTS
The shares of the Company's Common Stock which may be purchased upon the
exercise of the outstanding Class A Warrants and Representative's Class A
Warrants are being offered by the Company on a "best efforts" basis. No
commissions or fees will be paid to anyone for the solicitation of the
exercise of such Warrants.
Two Class A Warrants are exercisable to purchase one share of Common
Stock at a price of $6.50 per share until November 14, 1997.
Two Representative's Class A Warrants are exercisable to purchase one
share of Common Stock at a price of $7.80 per share until November 14, 1997.
Persons who wish to exercise Class A Warrants or Representative's Class
A Warrants must deliver an executed Warrant Certificate with the form of
Election to Purchase duly executed, accompanied with payment in check or money
order payable to Corporate Stock Transfer, Inc. (the "Warrant Agent") for the
number of shares subscribed. All payments must be received by the Warrant
Agent prior to the termination of the exercise period, and Warrants not
exercised prior to the termination of the exercise period will expire. (See
"DESCRIPTION OF SECURITIES.")
EXERCISE OF REPRESENTATIVE'S WARRANTS
The shares of the Company's Common Stock which may be purchased upon the
exercise of the outstanding Representative's Warrants are being offered by the
Company on a "best efforts" basis. No commissions or fees will be paid to
anyone for the solicitation of the exercise of the Representative's Warrants.
Each Representative's Warrant is exercisable to purchase one share of Common
Stock at a price of $5.40 per share until December 12, 1999.
Persons who wish to exercise their Representative's Warrants must
deliver an executed Warrant Certificate with the form of Election to Purchase,
duly executed, accompanied with payment in check or money order payable to
Saint Andrews Golf Corporation for the number of shares subscribed to the
Company. All payments must be received by the Company prior to the
termination of the exercise period, and Representative's Warrants not
exercised prior to the termination of the exercise period will expire. (See
"DESCRIPTION OF SECURITIES.")
SELLING SECURITY HOLDERS
Included in the securities offered by this Prospectus are 100,000
Representative's Class A Warrants, 100,000 Representative's Warrants, and
150,000 shares of Common Stock issuable upon exercise of such Warrants being
offered by the holders of such securities. (See "SELLING SECURITY HOLDERS.")
The Common Shares may be sold by the Selling Security Holders from time
to time, in ordinary brokers' transaction through Nasdaq at the market price
prevailing at the time of such sales, or in negotiated transactions, or a
combination of such methods of sale. The commissions payable will be the
regular commissions a broker receives for effecting such sales. The Common
Shares may sold be offered in block trades, private transactions or otherwise.
The net proceeds to the Selling Security Holders will be the proceeds received
by them upon such sales, less brokerage commissions. No market presently
exists for the Representative's Class A Warrants or Representative's Warrants,
-45-
<PAGE>
it is not expected that any such market will develop in the future. Sales
of the Common Shares, the Representative's Class A Warrants and
Representative's Warrants may be made pursuant to this Prospectus or Rule 144
under the Securities Act of 1933. The Company knows of no underwriting
arrangements with respect to the Common Shares, Representative's Class A
Warrants and Representative's Warrants. There can be no assurance that the
Selling Security Holders will sell any or all of the securities registered
hereunder.
Investors are advised that if they purchase Representative's Class A
Warrants or Representative's Warrants from the Selling Security Holders that
they must immediately exercise such Warrants, or they will immediately expire.
(See "DESCRIPTION OF SECURITIES.")
LEGAL MATTERS
The legality of the securities of the Company offered will be passed on
for the Company by Krys Boyle Freedman & Sawyer, P.C., 600 Seventeenth Street,
Suite 2700 South Tower, Denver, Colorado 80202.
EXPERTS
The consolidated financial statements of the Company as of and for the
years ended December 31, 1996 and 1995 included in this Prospectus and
elsewhere in this Registration Statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their reports with
respect thereto, and are included herein in reliance upon the authority of
said firm as experts in auditing and accounting in giving said reports.
-46-
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PAGE
Unaudited Condensed Consolidated Balance Sheets
as of June 30, 1997 and December 31, 1996 ..................... F-1
Unaudited Condensed Consolidated Statements of Income
for the six months ended June 30, 1997 and 1996 ............... F-2
Unaudited Condensed Consolidated Statement of Cash
Flows for the six months ended June 30, 1997 and 1996 ......... F-3
Notes to Unaudited Condensed Consolidated Financial
Statements .................................................... F-4
Report of Independent Public Accountants ...................... F-6
Consolidated Balance sheets as of December 31, 1996
and 1995 ...................................................... F-7
Consolidated Statements of Operations for the years
ended December 31, 1996 and 1995 .............................. F-8
Statements of Shareholders' Equity for the years ended
December 31, 1996 and 1995 .................................... F-9
Consolidated Statements of Cash Flows for the years ended
December 31, 1996 and 1995 ..................................... F-10
Notes to Financial Statements .................................. F-12
-47-
<PAGE>
SAINT ANDREWS GOLF CORPORATION
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, December 31,
1997 1996
----------- -----------
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 6,262,000 $ 5,818,000
Other receivables 44,000 480,000
Prepaid expenses and other 24,000 17,000
----------- -----------
Total current assets 6,330,000 6,315,000
FURNITURE, EQUIPMENT AND
LEASEHOLD IMPROVEMENTS, NET 94,000 84,000
PROJECT DEVELOPMENT COSTS 7,852,000 2,103,000
NET ASSETS OF DISCONTINUED OPERATIONS - 120,000
----------- -----------
$14,276,000 $ 8,622,000
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 2,168,000 $ 742,000
Deferred income - 63,000
Other payables 218,000 -
Income taxes payable 225,000 -
----------- -----------
Total current liabilities 2,611,000 805,000
DEFERRED INCOME 79,000 91,000
NOTE PAYABLE 1,312,000 -
MINORITY INTEREST 750,000 -
STOCKHOLDERS' EQUITY:
Common stock 3,000 3,000
Preferred stock 4,740,000 4,740,000
Options issued in connection with
preferred stock 260,000 260,000
Additional paid in capital 3,333,000 3,333,000
Common stock purchase warrants 187,000 187,000
Retained earnings (deficit) 1,001,000 (797,000)
----------- -----------
Total stockholders' equity 9,524,000 7,726,000
----------- -----------
$14,276,000 $ 8,622,000
NOTE: The balance sheet at December 31, 1996 has been taken from the
consolidated audited financial statements at that date and condensed.
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-1
<PAGE>
SAINT ANDREWS GOLF CORPORATION
UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
For the Six Months
Ended June 30,
1997 1996
----------- -----------
(Unaudited) (Unaudited)
INCOME:
Interest income $ 163,000 $ 5,000
Royalties 12,000 -
Other 4,000 -
----------- -----------
Total income 179,000 5,000
EXPENSES:
Selling, general and administrative 350,000 203,000
SportPark development costs 152,000 201,000
----------- -----------
Total expenses 502,000 404,000
----------- -----------
LOSS BEFORE PROVISION FOR INCOME TAXES (323,000) (399,000)
PROVISION (BENEFIT) FOR INCOME TAXES - -
----------- -----------
LOSS FROM CONTINUING OPERATIONS (323,000) (399,000)
DISCONTINED OPERATIONS
Loss from operations of discontinued
franchise operations (41,000) (20,000)
Gain on disposal of franchise opera-
tions (less applicable income taxes
of $450,000) 2,162,000 -
----------- -----------
NET INCOME (LOSS) $ 1,798,000 $ (419,000)
INCOME (LOSS) FROM OPERATIONS:
Income (loss) from
continuing operations $ (.11) $ (.13)
Income (loss) from
discontinued operations .70 (.01)
----------- -----------
NET INCOME (LOSS) PER SHARE $ .59 $ (.14)
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-2
<PAGE>
SAINT ANDREWS GOLF CORPORATION
UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
For the Six Months
Ended June 30,
1997 1996
----------- -----------
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 1,798,000 $ (419,000)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 4,000 10,000
Gain on sale of franchise
operations (2,612,000) -
Changes in assets and liabilities:
Decrease in other receivables 436,000 6,000
Increase in inventory - (5,000)
(Increase) decrease in prepaid
expenses and other (7,000) 410,000
Increase(decrease) in accounts payable 1,252,000 (59,000)
Increase (decrease) in deferred income (75,000) 23,000
Increase in other payables 321,000 274,000
Increase in income tax payable 225,000 -
----------- -----------
Net cash provided by operating
activities 1,342,000 240,000
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Project development costs (5,747,000) (324,000)
Development cost refund - 85,000
Purchase of equipment (14,000) -
Proceeds from sale of franchise
operations 2,801,000 -
----------- -----------
Net cash provided (used) by investing
activities (2,960,000) (239,000)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from note payable 1,312,000 -
Proceeds from minority interest in
Callaway Golf Center 750,000 -
----------- -----------
Net cash provided by financing activities 2,062,000 -
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 444,000 1,000
CASH AND CASH EQUIVALENTS-
Beginning of period 5,818,000 125,000
----------- -----------
CASH AND CASH EQUIVALENTS - End of period $ 6,262,000 $ 126,000
----------- -----------
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-3
<PAGE>
SAINT ANDREWS GOLF CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 1. CONDENSED FINANCIAL STATEMENTS
The accompanying condensed consolidated financial statements include the
accounts of Saint Andrews Golf Corporation and its wholly-owned subsidiary
All-American SportPark, Inc. (collective, the "Company"). All significant
intercompany transactions have been eliminated.
The accompanying financial statements have been prepared by the Company
without audit pursuant to the rules and regulations of the Securities and
Exchange Commission. In the opinion of management, all adjustments necessary
to present fairly the financial position, results of operations and cash flows
at June 30, 1997 and for all periods presented have been made.
On February 26, 1997, Las Vegas Discount Golf & Tennis, Inc. and the Company
completed the sale of certain of their assets and transferred certain
liabilities to an unrelated buyer who has incorporated under the name Las
Vegas Golf & Tennis, Inc. The total purchase consideration received was $5.3
million of which $4.6 million was paid in cash, $264,000 was received in the
form of a short-term unsecured receivable, $200,000 was placed in escrow
pending the accounting for inventory and trade payables, and $200,000 was
placed in escrow for two years to cover potential indemnification obligations.
Of the total consideration received, approximately $2,801,000 was allocated to
the Company.
The Company's operations, subsequent to the sale, consist solely of the
SportPark facility which is currently under development on the Las Vegas strip
in Las Vegas, Nevada. The assets, liabilities and operations related to the
franchise business have been presented as "Net Assets of Discontinued
Operations" and "Discontinued Operations," respectively, in the accompanying
balance sheet at December 31, 1996 and statement of operations as of and for
the three and six months ended June 30, 1997 and 1996.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these
condensed consolidated financial statements be read in conjunction with the
financial statements and notes thereto included in the Company's December 31,
1996 audited financial statements. The results of operations for the periods
ended June 30, 1997 and 1996 are not necessarily indicative of the operating
results for the full year.
NOTE 2. EARNINGS PER SHARE
In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings Per Share,"
effective for fiscal years ending after December 15, 1997. The Company will
adopt SFAS 128 for the year ending December 31, 1997. SFAS 128 requires the
computation and presentation of basic and diluted earnings per share for all
periods an income statement is presented. For the six months ended June 30,
1997 and 1996 the proforma calculations were as follows:
June 30, 1997 June 30, 1996
Six Months Basic Diluted Basic Diluted
----- ------- ----- -------
Income (loss) from operations $(.11) $(.11) $(.13) $(.13)
Loss from discontinued operations .70 .70 (.01) (.01)
----- ----- ----- -----
Net income (loss) per share $ .59 $ .59 $(.14) $(.14)
F-4
<PAGE>
Options to purchase 657,000 and 677,000 shares of common stock were
outstanding at June 30, 1997 and 1996, respectively. On June 7, 1997 the
Board of Directors approved the repricing of 617,000 stock options granted
under the 1996 Plan at an exercise price of $3.06 per share, which was the
average price on that day. The remaining 40,000 options retained their
original exercise price of $5.00. These options had exercise prices of $4.625
to $5.40 at June 30, 1997 and of $5.00 to $5.40 at June 30, 1996,
respectively, prior to the repricing.
NOTE 3. NOTE PAYABLE AND AGREEMENT WITH CALLAWAY GOLF
On June 13, 1997 the Company and Callaway Golf Company ("Callaway Golf")
announced the formation of the All American Golf, LLC, a limited liability
California corporation, to construct, manage and operate "Callaway Golf
Center", a premier golf facility at the site of the All-American Sportpark.
The total budgeted costs for the Callaway Golf Center are approximately $9.0
million.
Callaway Golf will provide $5,250,000 in debt financing which bears interest
at 10 percent with interest only payments commencing 60 days after the opening
of the golf center through a date ten years after the opening at which point
the remaining accrued interest and principal will be due in full. As of June
30, 1997, $1,312,000 had been drawn under this agreement. The Company will
own 80 percent of the members' units of the LLC. The Company will manage the
driving range, golf course and tenant facilities in the clubhouse.
NOTE 4. STATEMENT OF CASH FLOWS
For purposes of the statements of cash flows, the Company considers all highly
liquid debt investments purchased with a maturity of three months or less to
be cash equivalents.
Cash paid during the six months ended on: June 30,
1997 1996
-------- --------
Interest - $ 31,000
Income taxes $225,000 -
NOTE 5. COMMITMENTS AND CONTINGENCIES
In December 1994, the Company entered into an agreement with Major League
Baseball ("MLB") concerning a license for the use of MLB logos, trade marks
and mascots in the decor, advertising and promotions of the Company's Slugger
Stadium concept. The Company obtained an exclusive license for indoor and
outdoor baseball batting stadiums in the United States through November 30,
2000, and in return the Company will pay a royalty of the gross revenues from
the batting cages with a minimum annual royalty for each stadium. The
Company's right to exclusively use MLB logos and other trade marks at its
baseball batting stadiums is dependent upon certain conditions set forth in
the agreement. The Company and MLB are currently in negotiations to extend
this agreement.
In May 1996, Saint Andrews entered into an agreement with Jeff Gordon, the
1995 NASCAR Winston Cup Champion and the 1997 Daytona 500 Champion, to serve
as spokesperson of the NASCAR SpeedPark through April 30, 2000. Mr. Gordon
will be paid $25,000 for his services during 1996, $25,000 per SpeedPark per
year thereafter ($325,000 guaranteed over the life of the agreement).
The Company has an exclusive license agreement with The National Association
of Stock Car Auto Racing, Inc. ("NASCAR") for the operations of SpeedParks as
a part of the All-American SportPark or as a stand-alone NASCAR SpeedPark in
Las Vegas, Nevada and Southern California through December 31, 2003 provided
certain conditions are satisfied.
F-5
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
Saint Andrews Golf Corporation:
We have audited the accompanying consolidated balance sheets of SAINT ANDREWS
GOLF CORPORATION (a Nevada Corporation) and subsidiary as of December 31, 1996
and 1995, and the related consolidated statements of operations, shareholders'
equity and cash flows for the years then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Saint Andrews Golf
Corporation and subsidiary as of December 31, 1996 and 1995, and the results
of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Las Vegas, Nevada
January 17, 1997 (except with respect
to the matter discussed in Note 13,
as to which the date is February 26,
1997)
F-6
<PAGE>
SAINT ANDREWS GOLF CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS-DECEMBER 31, 1996 AND 1995
ASSETS
1996 1995
---------- ----------
CURRENT ASSETS:
Cash and cash equivalents $5,818,100 $ 125,100
Lease termination receivable - 3,000,000
Due from Affiliate Store 5,400 -
Due from officer 13,000 -
Receivable from related entities 461,500 60,500
Prepaid expenses and other 17,000 7,400
Other receivables - 365,000
Total current assets 6,315,000 3,558,000
LEASEHOLD IMPROVEMENTS, net of accumulated
depreciation of $29,800 and $26,200,
respectively 83,800 87,400
DEPOSIT FOR LAND LEASE 500,000 -
PROJECT DEVELOPMENT COSTS 1,603,400 1,047,000
OTHER ASSETS - 1,000
NET ASSETS OF DISCONTINUED OPERATIONS 119,500 209,900
$8,621,700 $4,903,300
(Continued)
F-7
<PAGE>
SAINT ANDREWS GOLF CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS-DECEMBER 31, 1996 AND 1995
(Continued)
LIABILITIES AND SHAREHOLDERS EQUITY
1996 1995
---------- ----------
CURRENT LIABILITIES:
Accounts payable $ 661,700 $1,031,900
Accrued expenses 79,900 53,300
Payable to related entities - 2,600
Deferred franchise fees 62,500 60,000
Total current liabilities 804,100 1,147,800
DEFERRED INCOME 91,000 116,700
COMMITMENTS AND CONTINGENCIES
SHAREHOLDER' EQUITY:
Preferred stock, $.01 par value, 5,000,000
shares authorized, no shares issued and
outstanding - -
Series A Convertible Preferred stock, $1
par value, 500,000 shares authorized and
outstanding 4,740,000 -
Options issued in connection with Series A
Convertible Preferred Stock to purchase
250,000 shares of Common stock 260,000 -
Common stock, $.001 par value, 10,000,000
shares authorized, 3,000,000 shares
issued and outstanding at December 31,
1996 and 1995 3,000 3,000
Additional paid-in-capital 3,333,300 3,495,300
Common stock purchase warrants, class A,
authorized and outstanding-1,000,000
warrants 187,500 187,500
Accumulated deficit (797,200) (47,000)
Total shareholders' equity 7,726,600 3,638,800
$8,621,700 $4,903,300
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE>
SAINT ANDREWS GOLF CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
1996 1995
---------- ----------
INCOME:
Interest $ 69,800 $ 86,200
Other 25,700 8,300
95,500 94,500
EXPENSES:
Selling, general and administrative 305,600 279,100
Sportpark development costs 207,000 108,000
Interest 4,000 -
Total expenses 516,600 387,100
LOSS BEFORE INCOME TAX PROVISION (421,100) (292,600)
Income tax provision - -
LOSS FROM CONTINUING OPERATIONS (421,100) (292,600)
DISCONTINUED OPERATIONS:
Loss from operations of franchise business
to be disposed of (no income taxes were
recorded in 1996 or 1995) (329,100) (24,400)
NET LOSS $ (750,200) $ (317,000)
LOSS PER SHARE:
Loss from continuing operations $ (.14) $ (.10)
Loss from discontinued operations (.11) (.01)
NET LOSS PER SHARE $ (.25) $ (.11)
The accompanying notes are an integral part of these financial statements.
F-9
<PAGE>
SAINT ANDREWS GOLF CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
RETAINED
COMMON COMMON EARNINGS
STOCK ADDITIONAL STOCK (ACCUMU-
PREFERRED PURCHASE COMMON PAID IN PURHASE LATED)
TOTAL
STOCK OPTIONS STOCK CAPITAL WARRANTS DEFICIT
EQUITY
- ------------ --------- -------- ------- ---------- -------- ---------
- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
December 31,
1994 $ - - $3,000 $3,495,300 $187,500 $ 270,000
$3,955,800
Net loss - - - - - (317,000)
(317,000)
Balance,
December 31,
1995 - - 3,000 3,495,300 187,500 (47,000)
3,638,800
Issuance of
Series A
Convertible
Preferred
Stock 4,740,000 - - (162,000) - -
4,578,000
Issuance of
Common Stock
Purchase Op-
tions in Con-
nection with
Series A Con-
vertible Pre-
ferred Stock 260,000 - - - -
260,000
Net loss - - - - - (750,200)
(750,200)
Balance,
December 31,
1996 $4,740,000 $260,000 $3,000 $3,333,300 $187,500 $(797,200)
$7,726,600
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-10
<PAGE>
SAINT ANDREWS GOLF CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
1996 1995
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (750,200) $ (317,000)
Adjustment to reconcile net loss to
net cash provided by (used in)
operating activities:
Depreciation and amortization 10,800 22,000
Changes in assets and liabilities:
Decrease in accounts and notes receivable 35,500 48,900
Decrease in inventories 56,900 16,700
(Increase) decrease in due from officer (13,000) 15,400
(Increase) decrease in prepaid expenses
and other (12,700) 18,800
Decrease (increase) in other receivables 365,100 (143,600)
Increase (decrease) in accounts payable
and accrued expenses (349,800) 883,300
Increase in deferred franchise fees 2,500 -
(Decrease) increase in deferred revenues (25,700) 116,700
Net cash provided by (used in) operating
activities (680,600) 661,200
CASH FLOWS FROM INVESTING ACTIVITIES:
Lease termination receivable 3,000,000 (3,000,000)
Decrease in other assets 1,000 -
Land lease deposit (500,000) -
Project development costs (556,400) (493,300)
Net cash provided by (used in)
investing activities 1,944,600 (3,493,300)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase to Affiliate Store and related
entities (409,000) (284,800)
Net proceeds from issuance of preferred
stock and options to purchase Common Stock 4,838,000 -
Net cash provided by (used in)
financing activities: 4,429,000 (284,800)
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 5,693,000 (3,116,900)
CASH AND CASH EQUIVALENTS,
Beginning of year 125,100 3,242,000
CASH AND CASH EQUIVALENTS,
End of year $5,818,100 $ 125,100
The accompanying notes are an integral part of these financial statements.
F-11
<PAGE>
SAINT ANDREWS GOLF CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
(continued)
SUPPLEMENTAL CASH FLOW INFORMATION:
1996 1995
---------- --------
Cash paid for:
Interest $ 4,000 $ -
NON-CASH DISCLOSURES:
During 1995, the Company reclassified deposits totaling $221,500 from other
long-term assets to current assets - other receivables. The Company
subsequently collected the deposit in 1996.
The accompanying notes are an integral part of these financial statements.
F-12
<PAGE>
SAINT ANDREWS GOLF CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATIONAL STRUCTURE AND BASIS OF PRESENTATION
a. PRINCIPALS OF CONSOLIDATION
The consolidated financial statements of Saint Andrews Golf Corporation
("SAGC"), a Nevada corporation, include the accounts of SAGC and its
subsidiary, All-American Sportpark Inc., a Nevada corporation (collectively
the "Company"). All significant intercompany accounts and transactions have
been eliminated.
b. COMPANY BACKGROUND
In March 1984, the chairman and principal shareholder of LVDGT formed a
corporation named Sporting Life, Inc. (SLI). On December 27, 1988, the name
SLI was changed to St. Andrews Golf Corporation, and on August 12, 1994, the
name was further changed to SAGC. LVDGT acquired SAGC in February 1988.
Until December 13, 1994, Saint Andrews Golf Corporation was a wholly-owned
subsidiary of Las Vegas Discount Golf & Tennis, Inc. ("LVDGT"). On December
13, 1994, the Company completed an initial public offering of 1,000,000 Units
(representing one-third of the post offering shares outstanding) at a price of
$4.50 per Unit, each Unit consisting of one share of common stock and one
Class A Warrant. The net proceeds of this offering were $3,683,800. Two
Class A Common Stock Purchase Warrants entitle the holders to purchase one
share of the Company's common stock for $6.50 per share. The warrants expired
on December 13, 1996. The Company is extending the expiration date of the
warrants until written communication is sent to warrant holders that fully
describe the impact of the sale of the franchise business of the Company as
described in Note 1(d). LVDGT currently owns 66-2/3% of the Company's
outstanding common stock.
During July 1994, the Company established a wholly-owned subsidiary,
All-American Sportpark, Inc. which will operate the Company's All-American
Sportparks (see Note 5). As of December 31, 1996, All-American Sportpark,
Inc. had not yet conducted any business.
The Company's Chairman owns 100 percent of the original Las Vegas Discount
Golf & Tennis location opened in Las Vegas, Nevada in 1974. This store, which
is not a franchise store, is referred to herein as the "Affiliated Store" and
operates under an agreement with LVDGT (see Note 3).
c. PRIMARY BUSINESS ACTIVITIES
The primary business activity of the Company has historically been the sale
of franchises and the after-sale servicing of franchise retail sporting goods
stores specializing in golf and tennis merchandise and apparel. The franchise
stores operate under the name "Las Vegas Discount Golf & Tennis."
The Company is also engaged in developing a concept for sports-oriented theme
parks. The theme parks will use the name All-American Sportpark ("Sportpark")
and are planned to include a golf driving range and training center, a
baseball batting stadium, a golf pro shop, car racing tracks, a sports
festival, a video arcade, shops and restaurant facilities.
F-13
<PAGE>
d. DISCONTINUED OPERATIONS
On December 16, 1996, the Company jointly entered into negotiations pursuant
to an "Agreement for the Purchase and Sale of Assets" (the "Agreement") along
with Las Vegas Discount Golf & Tennis, Inc. which will result in the disposal
of the Company's franchise business. The agreement also provides for the
assignment of all franchisor rights under existing franchise agreements.
Furthermore, the Company assigns all trade names and trade marks associated
with the business. The agreement also includes a covenant not to compete
which prohibits the Company, and its officers and directors from engaging in
the ownership or operation of franchised retail golf equipment outlets within
the continental United States. Certain exemptions have been granted by the
purchaser to Boreta Enterprises, Ltd., a related entity owned by the President
of the Company and the President of Las Vegas Discount Golf & Tennis, Inc.
with respect to the Company's right to own or operate retail golf equipment
outlets in connection with Saint Andrews Golf Corporation's Sportparks or
driving ranges.
The base purchase price to be paid by the buyer to the Company and Las Vegas
Discount Golf & Tennis, Inc. for all of the assets, subject to certain
adjustments for trade payables and inventory related to Las Vegas Discount
Golf & Tennis, Inc. is $5,000,000. To the extent that inventory exceeds trade
payables by $800,000 the base purchase price shall be increased by the excess.
Conversely, to the extent that inventory does not exceed trade payables by
$800,000 the base purchase price shall be reduced by such amount.
The Company's operations after the sale has been consummated will consist
solely of the Sportpark operations currently under development. The sale of
all assets, liabilities and rights related to the franchise business have been
presented as "Discontinued Operations" in the accompanying balance sheets and
statements of operations as of and for the years ended December 31, 1996 and
1995.
Assets and liabilities of the Company's franchise business to be disposed of
consisted of the following at December 31:
1996 1995
-------- --------
Accounts receivable, net of allowance
of $111,400 and $72,400, respectively $270,600 $306,100
Inventory - 57,000
Prepaid and other assets 10,500 7,400
Property, plant and equipment, net 6,000 13,200
Total assets 287,100 383,700
Accounts payable 75,600 82,300
Accrued liabilities 32,000 31,500
Deferred franchise fees 60,000 60,000
Net assets to be disposed of $119,500 $209,900
Revenues related to discontinued operations totaled $1,424,000 and $1,456,000
for the years ended December 31, 1996 and 1995, respectively. The Company and
Las Vegas Discount Golf & Tennis, Inc. anticipate that a gain will be
recognized on the sale of the franchise segment and, accordingly, has deferred
such gain until it is realized.
F-14
<PAGE>
e. ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt investments with an original
maturity of three months or less to be cash equivalents.
b. ACCOUNTS RECEIVABLE AND DEFERRED INCOME
Accounts receivable consists of amounts due from franchisees for royalties,
and the sale of merchandise, computer equipment and supplies. Additionally,
during 1995, the Company entered into an agreement with MBNA America Bank,
N.A. (MBNA) which allows MBNA to use the Company's trademark on its credit
cards. The agreement provides for a $125,000 Advance Royalty payment which
was deferred and is being amortized into income over the 5 year period of the
agreement. LVDGT will receive royalties for the generation of credit card
accounts.
c. SPORTPARK DEVELOPMENT COSTS
The Company has applied an accounting policy regarding capitalization of
project development costs related to the All-American Sportpark concept which
excludes internal overhead costs and includes direct, incremental third party
expenditures including architectural and design costs and licensing
agreements. In July, 1996, SAGC entered into a land lease for the site of its
first All-American Sportpark in Las Vegas, Nevada. Since that time SAGC has
capitalized direct incremental payroll associated with such development.
During the years ended 1996 and 1995, the Company incurred and expensed
$207,000 and $108,000, respectively, in costs for the development of the
Sportpark concept. These costs included certain direct and indirect costs
including salaries and other administrative expenses.
d. PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation and amortization is
provided for on a straight-line basis over the lesser of the lease term or
estimated useful lives of the assets. Normal repairs and maintenance are
charged to expense when incurred. Expenditures which materially extend the
useful life of assets are capitalized.
e. INCOME TAXES
In May 1992, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS No. 109"), "Accounting for Income
Taxes". The Company adopted SFAS No. 109 during the year ended December 31,
1993. Previously, the Company accounted for income taxes under Opinion No. 11
of the Accounting Principles Board. Adoption of the new standard did not have
a significant effect on the Company's financial position or results of
operations.
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<PAGE>
f. LOSS PER COMMON SHARE
Loss per common share is computed using the weighted average number of common
shares outstanding. Weighted average shares outstanding at December 31, 1996
and 1995 were 3,000,000 shares.
g. CONCENTRATION OF SERVICES
Subsequent to the completion of the sale of the franchise business, the
Company's activities will consist solely of the development of the Sportpark
in Las Vegas, Nevada. There can be no assurance that the Company will be able
to operate the Sportpark on a profitable basis. Further, to expand beyond the
Las Vegas Sportpark will require considerably more financial and management
resources than presently exist at the Company.
h. RECLASSIFICATIONS
Certain reclassifications, which had no impact on the Company's results of
operations, have been made in prior year amounts to conform them to the
current year presentation.
3. RELATED PARTY TRANSACTIONS
The Company has extensive transactions and relationships with LVDGT and
subsidiaries ("the related entities"), the chairman and principal shareholder
of LVDGT, and the retail store owned by the Chairman of LVDGT (the "Affiliated
Store"). The Affiliated Store operates in Las Vegas, Nevada and is not a
franchise of the Company. As a result, this store pays no royalties to the
Company but purchases merchandise for the Affiliated Store at the same cost as
the Company. The Affiliated Store also may benefit from the Company's
activities, including any local and national advertising conducted by the
Company. As of December 31, 1996 and 1995, the Company had $461,500 and
$60,500 in receivables from related entities, respectively, and a $5,400
receivables due from the Affiliated Store as of December 31, 1996. As of
December 31, 1995 the Company also had a $2,600 payable to related entities.
The Company and LVDGT share office and warehouse facilities and LVDGT provides
certain administrative personnel in accounting, purchasing and warehousing.
These occupancy and administrative expenses are allocated proportionately
between the Company and LVDGT in ratios management believes are reasonable.
The monthly payments are subject to adjustment in the event LVDGT enters into
new office lease arrangements or if any salary increases or decreases are
effected by LVDGT with respect to the administrative or accounting personnel
that provide services to the Company.
On August 1, 1994, the Company and LVDGT entered into a written agreement
pursuant to which LVDGT agreed to grant the Company a license to use all of
its trademarks, trade names and other commercial names and symbols. LVDGT
also agreed to purchase, warehouse and make available to the Company and its
franchisees certain merchandise. In exchange, the Company subsequently repaid
with proceeds from its initial public offering loans previously obtained by
the Company and LVDGT from an unaffiliated bank in the amount of $350,000.
This agreement will expire on July 31, 1997.
The Company had outstanding non-interest bearing advances to the President of
the Company of $13,000 as of December 31, 1996.
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4. LEASE TERMINATION RECEIVABLE
In May of 1994, the Company entered into a Ground Lease for approximately 33
acres of land on Las Vegas Boulevard which it intended to use for the
development of an All-American Sportpark. The Ground Lease contained
provisions which allowed the lessor to terminate the lease within the first 6
years of the 15 year lease term in the event that the lessor entered into a
sale of the property as long as the intended use of the property after the
sale was not a golf/sports park as contemplated by the Company.
In June 1995, the lessor notified the Company that it had entered into a sale
agreement for the parcel and that it was exercising its right of termination.
Pursuant to cancellation provisions contained within the Ground Lease the
Company was entitled to reimbursement of unamortized construction costs which
it incurred, based upon criteria contained within the Lease, up to an
aggregate amount of $3.5 million. The purchaser of the parcel assumed the
obligations relating to the termination of the lease.
Upon notification of the Ground Lease termination, the Company ceased
construction activities and submitted substantiation for construction costs
totaling approximately $3.9 million. Utilizing applicable formulas derived
from the Ground Lease the Company believed that $3,279,465 in costs were
reimbursable by the purchaser who assumed the original lessor's obligations
relating to the lease termination. Based upon all of the information
available as of December 31, 1995 the Company believed that the amount would
be collected in 1996 in the amount of $3,000,000 with regards to this
litigation and, accordingly, recorded the lease termination receivable as a
current asset.
In October, 1996 this matter was settled for $3,217,000 of which $3,000,000
was applied to the lease termination receivable balance while the remaining
$217,000 in proceeds was applied against legal fees incurred with respect to
the matter in the current year.
5. PROJECT DEVELOPMENT COSTS
The Company has a capitalized balance of costs incurred related to the
Sportpark of $1,603,000 and $1,047,000 as of December 31, 1996 and 1995,
respectively. These costs consist primarily of concept development and
design, exclusive long-term licensing fees, consulting fees, training and
procedures manuals for Sportpark operations and computer software. All of the
costs related to the balance as December 31, 1995 were to unrelated
third-parties vendors while the balance as of December 31, 1996 includes
$116,700 in capitalized payroll for those direct, incremental employees
working exclusively on the Las Vegas Sportpark.
SAGC is currently engaged in the planning and design of All-American
Sportparks. The first phase of the All-American Sportpark planned for Las
Vegas, Nevada will consist of an executive golf course and other related
amenities and is scheduled for completion by November 1997. The remaining
components of the project are expected to be completed by year-end 1997.
The Company currently has not secured financing for the construction of the
first SportPark. The Company has been holding discussions with a number of
potential corporate sponsors who have expressed an interest in participating
in the SportPark, and management expects that corporate sponsors will
contribute a portion of the financing needed. The Company expects to receive
the balance of the financing from a combination of sources including outside
equity and/or debt investors, bank financing and the Company's own cash.
There is no assurance that financing will be obtained from any of these
sources.
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6. LEASES
The Company and LVDGT share office and warehouse facilities leased from the
Chairman of the Board under a non-cancelable operating lease agreement which
expires on January 31, 2005. The lease provides for initial monthly lease
payments which may be increased based on increases in the consumer price
index. Beginning August 1, 1994, the Company was allocated 33 percent of the
rent with the remaining 67 percent being allocated to LVDGT. Beginning on
July 1, 1996, the Company was allocated 67 percent and LVDGT was allocated 33
percent. Rent expenses for the Company's allocated share of this lease
totaled $76,800 and $51,800 for 1996 and 1995, respectively.
At December 31, 1996, minimum future rental commitments under all of the
Company's non-cancelable operating leases, including the Company's share of
the office and warehouse lease with the Chairman of the Board are as follows:
Year ending
1997 $ 136,700
1998 129,800
1999 128,600
2000 116,700
2001 115,600
Thereafter 577,900
$1,205,300
In July 1996, SAGC entered into a lease for 65 acres of undeveloped land in
Las Vegas, Nevada for the development of its first Las Vegas "All-American
Sportpark". The lease term is for a period of fifteen years with two
consecutive five year renewal periods and commences upon the satisfaction of
certain conditions. These conditions include a determination of economic
feasibility, secured estimates of reasonable infrastructure costs, Federal
Aviation Administration approvals (as the site is located near McCarran
International Airport), and the receipt of all necessary zoning approvals from
other governmental entities.
Beginning the earlier of twelve months after the lease commences, or after
SAGC opens substantially all of the facilities, SAGC will pay the lessor an
annual base amount of $625,000 due in monthly installments of $52,083.
Additionally, the Lease contains contingent rent based upon gross sales at the
park ranging from three to ten percent of the different sources of gross
revenues if such percentage revenues exceed $625,000 annually. If SAGC opens
a portion of the facility prior to the completion of the entire facility, the
fixed monthly rent will be $30,000 per month until the remainder of the
facility is opened. The minimum rent shall be increased at the end of the
fifth year of the term and every five years thereafter by an amount equal to
ten percent of the minimum monthly installment immediately preceding the
adjustment date.
As a condition to the lease, SAGC also entered into a Deposit Agreement which
required SAGC to post a refundable deposit to the lessor of $500,000. The
$500,000 deposit is secured by promissory notes which in turn are
collateralized by a first trust deed in certain unrelated parcels of real
estate owned by the lessor. The deposit will be returned to SAGC if the
conditions previously described are not met.
If SAGC satisfactorily resolves the conditions noted above the $500,000
deposit will be applied as follows: $104,166 as security deposit and the
remainder as prepaid rent to be amortized until exhausted. Future minimum
rental commitments under this lease, assuming the contingencies noted above
are resolved, would be as follows:
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Year ending
1997 $ 60,000
1998 625,000
1999 625,000
2000 625,000
2001 625,000
Thereafter 7,783,750
$10,343,750
7. INCOME TAXES
The federal income tax provision (benefit) consists of the following at
December 31, 1996 and 1995:
1996 1995
Deferred benefit $(262,600) $(104,700)
Change in deferred tax asset
valuation allowance 262,600 104,700
$ - $ -
Deferred tax assets (liabilities) are related to the following at December 31,
1996 and 1995:
1996 1995
Provision for bad debt $ 39,000 $ 25,000
Deferred franchise fees 43,000 41,000
Vacation accrual 11,000 11,000
Commissions (7,000) (5,000)
Depreciation (2,000) (2,000)
Net operating loss carryforward 373,300 124,700
Other, net 1,000 1,000
458,300 195,700
Valuation allowance (458,300) (195,700)
Net deferred tax asset $ - $ -
A reconciliation of income tax expense computed by applying the federal
statutory income tax rate to the Company's income from continuing operations
before provision (benefit) for income taxes is as follows:
1996 1995
----------------- -----------------
Amount % Amount %
Federal income tax
provision (benefit)
at statutory rate $(262,600) (35) $(107,800) (34)
Change in deferred tax
asset valuation allowance 262,600 35 104,700 33
Other - - 3,100 1
$ - - $ - -
As of December 31, 1996, the Company has net operating loss carryforwards of
$875,000 which are available through 2010.
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<PAGE>
8. CAPITAL STOCK, STOCK OPTIONS, AND INCENTIVES
a. STOCK OPTION PLANS
The Company's Board of Directors adopted a stock option plan (the "1994 Plan")
on August 8, 1994 authorizing the issuance of up to 300,000 shares of the
Company's common stock. On April 16, 1996, the Board of Directors voted to
increase the number of authorized shares by 500,000 and on April 24, 1996
voted to increase total shares eligible for grant to 700,000. Three hundred
thousand options to purchase shares of common stock of Saint Andrew Golf
Corporation at an exercise price of $5.00 per share were granted in 1994. Two
hundred and forty thousand of these options are exercisable anytime on or
before August 8, 1999 while the remaining 60,000 options vest in increments of
20,000 annually commencing on August 8, 1995.
In April 1996, a total of 377,000 options were granted in connection with the
increase in shares available. These grants increased the total shares issued
under the plan to 677,000. All of the shares issued in April 1996 are
exercisable at an exercise price ranging between $4.625 and $4.75 through
April 2001. Three hundred and sixty-seven thousand of the shares are
exercisable anytime while 10,000 shares vest ratably over a four year period.
All shares issued by the Board of Directors in 1996 are subject to shareholder
approval which is anticipated to occur on April 16, 1997. The exercise price
was equal to or exceeded the fair market value of the common stock at the date
of grant. At December 31, 1996, 23,000 additional shares are reserved for
future options.
b. PREFERRED STOCK
The Company is authorized to issue 5,000,000 shares of preferred stock. As of
December 31, 1996, there were no preferred shares issued or outstanding.
c. SERIES A CONVERTIBLE PREFERRED STOCK
On July 11, 1996 the SAGC Board of Directors authorized the creation of
500,000 shares of Series A Convertible Preferred Stock with a $.001 par value.
On July 29, 1996, SAGC entered into an agreement which resulted in the sale,
on an installment basis, of the 500,000 shares of the Series A Convertible
Preferred Stock to Three Oceans Inc. ("TOI"), an affiliate of Sanyo North
America Corporation, at $10.00 per share for a total of $5,000,000. The
agreement also resulted in the assignment of certain rights to TOI. All
proceeds related to the agreement were received in accordance with the stated
terms to this agreement on October 7, 1996. Issuance costs totaling $162,000
were incurred related to the preferred stock and have been netted against
retained earnings.
Each share of the Series A Convertible Preferred Stock issued to TOI is
convertible at the option of TOI into one share of SAGC's common stock. In
the event of liquidation or dissolution of the Company, each share of Series A
Convertible Preferred Stock will have a $10.00 liquidation preference over all
other shareholders. In addition, holders of the Series A Convertible
Preferred Stock shall be entitled to receive dividends at a rate equal to the
rate per share payable to common stock holders, assuming conversion of the
Preferred shares. The Preferred shares can be redeemed by the Company upon a
registration statement being declared effective by the Securities and Exchange
Commission covering the issuance of the common stock upon conversion of the
Preferred Stock and the following two conditions being satisfied: (1) SAGC
earns $1,000,000 of pre-tax income for a fiscal year according to the year-end
audited financial statements; and (2) the closing bid price for the Company s
common stock is at
F-20
<PAGE>
least $15.00 for 20 consecutive trading days. If SAGC notifies TOI of its
intent to redeem the Preferred Stock, TOI will have at least 30 days to elect
to convert its Preferred Stock or accept the redemption price of $12.50. Each
share of Series A Convertible Preferred Stock is entitled to vote along with
the holders of SAGC's common stock.
The rights granted to TOI in accordance with the agreement include the
following: (1) rights of first refusal with respect to debt and or equity
financing arrangements for Sportparks developed by SAGC's subsidiary
All-American Sportpark, Inc. for a period of 5 years commencing July 29, 1996
and for a period of 3 years for Anaheim, California and Las Vegas, Nevada, (2)
an obligation to obtain electrical and electronic equipment for such
Sportparks for a period of 5 years, (3) certain signage rights for TOI or its
designees at the first two Sportparks and (4) other miscellaneous rights as
defined. Pursuant to the agreement, SAGC also granted TOI an option to
purchase up to 250,000 shares of SAGC's common stock at $5.00 per share for a
period of 5 years from the date of the agreement.
The agreement also provides for certain demand and piggyback registration
rights with respect to the shares of common stock issuable upon the conversion
of the Series A Convertible Preferred Stock and the exercise of the option.
Pursuant to the agreement, SAGC expanded the number of Directors of SAGC from
four to five, and elected Hideki Yamagata as a Director of SAGC. Mr. Yamagata
is president of Three Oceans Inc.
d. COMMON STOCK AND COMMON STOCK PURCHASE WARRANTS
On December 13, 1994, the Company completed a public offering of 1,000,000
Units, each Unit consisting of one share of Common Stock and one Class A
Common Stock Purchase Warrant. As a result, 1,000,000 shares of Common Stock
and 1,000,000 Class A Warrants were issued. Net proceeds from the offering
were $3,684,000. Two Class A Warrants entitle the holder to purchase one
share of SAGC common stock for $6.50, $2 above the initial public offering
price. The Class A Warrants have been assigned a value of $.1875 for
financial reporting purposes. In connection with the December 1996
announcement by the Company that they had entered into a letter of intent to
sell the franchise business segment (see Note 1), the expiration date of the
Class A Warrants has been extended until after the sale is completed and
written communication to the warrantholders that fully describes the impact of
the sale occurs.
In connection with the initial public offering, the Company issued to the
Representative of the Underwriters, Representative's Warrants to purchase
100,000 shares (10 percent of the units purchased by the underwriters), with
an exercise price of $5.40 for a four year period beginning on December 13,
1995. These Representative's Warrants contain certain demand and piggyback
registration rights. The Company also issued to the Representative 100,000
Class A Warrants which entitle the Underwriter to purchase 50,000 shares of
Common Stock (5 percent of the units purchased by the underwriters), with an
exercise price of $7.80 per share exercisable beginning on December 13, 1995.
As of December 31, 1996, no warrants have been exercised.
e. ACCOUNTING FOR STOCK-BASED COMPENSATION
In 1995, 80,000 options were granted with exercise prices ranging between
$5.00 and $6.00. However, these options expired due to the fact that the
Company's shareholders did not approve the amendment to the 1994 Plan which
would have increased the number of shares eligible for grant.
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The 377,000 options granted in 1996 are also subject to shareholder approval
which will be put to a vote in April 1997. As these options are not
authorized, no pro forma compensation expense and pro forma net income
disclosures required under Statement of Financial Accounting Standards No. 123
has been presented.
10. EMPLOYEES 401(k) PROFIT SHARING PLAN
The Company offers all its eligible employees participation in the Employees
401(k) LVDGT Profit Sharing Plan ("Plan"). The Plan provides for purchases of
certain investment vehicles by eligible employees through annual payroll
deductions of up to 15% of base compensation. For 1996 and 1995, the Company
matched 50% and 25%, respectively, of employees contributions up to a maximum
of 6% and 1-1/2% of an employee's base compensation. The Company had expenses
related to the Plan of $34,300 and $13,200 for 1996 and 1995, respectively.
11. SUPPLEMENTAL NON-QUALIFIED RETIREMENT PLAN
In 1995, the Company entered into a Supplemental Retirement Plan for certain
key employees of which the President of SAGC is included. This plan became
effective on January 1, 1996. During 1996, the Company expensed $35,000
related to the plan.
12. COMMITMENTS AND CONTINGENCIES
The Company has employment agreements with its President, as well as other key
employees which require the payment of fixed and incentive based amounts of
compensation.
The Company has entered into a letter agreement with Oracle One Partners, Inc.
("Oracle") whereby Oracle has been retained to assist the Company in obtaining
corporate sponsorship for certain areas of the All-American Sportpark projects
including a license agreement from Major League Baseball for a Slugger
Stadium. The initial period of the agreement was for the three month period
ending September 30, 1994, and the agreement has been continued on a
month-to-month basis since then. The Company is paying Oracle $4,000 a month
and has agreed to pay Oracle 15% of the gross of any sponsorship fees for
sponsors obtained through the efforts of Oracle. The Company paid Oracle
$60,000 for its efforts in obtaining the exclusive license agreement with
Major League Baseball described below.
In December 1994, the Company entered into an agreement with Major League
Baseball ("MLB") concerning a license for the use of MLB logos, trade marks
and mascots in the decor, advertising and promotions of the Company's Slugger
Stadium concept. The Company obtained an exclusive license for indoor and
outdoor baseball batting stadiums in the United States through December 31,
1997, and in return, the Company will pay a royalty of the gross revenues from
the batting cages with a minimum annual royalty for each stadium. The
Company's right to exclusively use MLB logos and other trade marks at its
baseball batting stadiums is dependent upon certain conditions set forth in
the agreement.
In May 1996, the Company entered into an agreement with Jeff Gordon, the 1995
NASCAR Winston Cup Champion and the 1997 Daytona 500 Champion, to serve as
spokesperson of the NASCAR SpeedPark through April 30, 2000. Mr. Gordon will
be paid $25,000 for his services during 1996, $25,000 per SpeedPark per year
thereafter ($325,000 guaranteed over the life of the agreement).
The Company has an exclusive license agreement with The National Association
of Stock Car Auto Racing, Inc. ("NASCAR") for the operation of SpeedParks as a
part of the All-American SportPark or as a standalone NASDCAR SpeedPark.
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<PAGE>
In January 1997, the Company entered into a non-binding letter of intent with
the Pepsi-Cola Company ("Pepsi") concerning an exclusive sponsorship
agreement. Under the proposed agreement, Pepsi would receive certain
exclusive rights related to soft drinks, tea products, juice products, bottled
water and similar products in exchange for a series of payments beginning when
the SportPark opens. The rights to be granted to Pepsi are expected to
include that Pepsi's products will be exclusively sold for the categories
listed, that only Pepsi identified cups will be used in the SportPark, and
that Pepsi would have the right to name the arena. In addition, the agreement
is expected to provide that Pepsi will provide the equipment needed to
dispense its products at the SportPark. The Company also anticipates that the
agreement with Pepsi will provide that the Company and Pepsi will participate
in joint marketing programs such as promotions on Pepsi's products and local
radio advertising.
The Company is involved in certain litigation as both plaintiff and defendant
related to its business activities. Management, based upon consultation with
legal counsel, does not believe that the resolution of these matters will have
a materially adverse effect upon the Company.
13. SUBSEQUENT EVENT
On February 26, 1997, Las Vegas Discount Golf & Tennis, Inc. and the Company
completed the sale of certain of their assets and transferred certain
liabilities to an unrelated buyer who has incorporated under the name Las
Vegas Golf & Tennis, Inc. in a transaction whose terms were substantially in
accordance with the "Agreement for the Purchase and Sale of Assets" described
in Note 1. The total consideration received was $5.3 million of which $4.6
million was paid in cash, $264,000 was received in the form of a short-term
receivable, $200,000 was placed in escrow pending the accounting for inventory
and trade payables, and $200,000 was placed in escrow for two years to cover
potential indemnification obligations. Of the total consideration received,
approximately $2,750,000 was allocated to SAGC.
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The only statute, charter provision, bylaw, contract, or other arrange-
ment under which any controlling person, Director or Officer of the Registrant
is insured or indemnified in any manner against any liability which he may
incur in his capacity as such, is as follows:
(a) Section 78.751 of the Nevada Business Corporation Act provides
that each corporation shall have the following powers:
"1. A corporation may indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, except an action by or in the right of the corporation, by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses, including
attorneys' fees, judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with the action, suit or proceeding
if he acted in good faith and in a manner which he reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, does not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in or
not opposed to the best interests of the corporation, and that, with respect
to any criminal action or proceeding, he had reasonable cause to believe that
his conduct was unlawful.
2. A corporation may indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment in
its favor by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of
the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses, including amounts paid in settlement and attorneys' fees actually
and reasonably incurred by him in connection with the defense or settlement of
the action or suit if he acted in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation. Indemnification may not be made for any claim, issue or matter
as to which such a person has been adjudged by a court of competent
jurisdiction, after exhaustion of all appeals therefrom, to be liable to the
corporation or for amounts paid in settlement to the corporation, unless and
only to the extent that the court in which the action or suit was brought or
other court of competent jurisdiction, determines upon application that in
view of all the circumstances of the case, the person is fairly and reasonably
entitled to indemnity for such expenses as the court deems proper.
3. To the extent that a director, officer, employee or agent of
a corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections 1 and 2, or in defense
of any claim, issue or matter therein, he must be indemnified by the
corporation against expenses, including attorneys' fees, actually and
reasonably incurred by him in connection with the defense.
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4. Any indemnification under subsections 1 and 2, unless
ordered by a court or advanced pursuant to subsection 5, must be made by the
corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances. The determination must be made:
(a) By the stockholders;
(b) By the board of directors by majority vote of a quorum
consisting of directors who were not parties to the act, suit or proceeding;
(c) If a majority vote of a quorum consisting of directors
who were not parties to the act, suit or proceeding so orders, by independent
legal counsel, in a written opinion; or
(d) If a quorum consisting of directors who were not
parties to the act, suit or proceeding cannot be obtained, by independent
legal counsel in a written opinion.
5. The certificate or articles of incorporation, the bylaws or
an agreement made by the corporation may provide that the expenses of officers
and directors incurred in defending a civil or criminal action, suit or
proceeding must be paid by the corporation as they are incurred and in advance
of the final disposition of the action, suit or proceeding, upon receipt of an
undertaking by or on behalf of the director or officer to repay the amount if
it is ultimately determined by a court of competent jurisdiction that he is
not entitled to be indemnified by the corporation. The provisions of this
subsection do not affect any rights to advancement of expenses to which
corporate personnel other than director or officers may be entitled under any
contract or otherwise by law.
6. The indemnification and advancement of expenses authorized
in or ordered by a court pursuant to this section:
(a) Does not exclude any other rights to which a person
seeking indemnification or advancement of expenses may be entitled under the
certificate or articles of incorporation or any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, for either an action in
his official capacity or an action in another capacity while holding his
office, except that indemnification, unless ordered by a court pursuant to
subsection 2 or for the advancement of expenses made pursuant to subsection 5,
may not be made to or on behalf of any director or officer if a final
adjudication establishes that his acts or omissions involved intentional
misconduct, fraud or a knowing violation of the law and was material to the
cause of action.
(b) Continues for a person who has ceased to be a
director, officer, employee or agent and inures to the benefit of the heirs,
executors and administrators of such a person."
(b) Article VII of the Registrant's Articles of Incorporation provides
in general that the Registrant shall indemnify its Officers and Directors to
the full extent permitted by the Nevada Business Corporation Act.
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<PAGE>
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses of the offering of the shares of the Registrant's
Common Stock underlying Warrants, all of which are to be borne by the
Registrant, are as follows:
Printing Expenses . . . . . . . . . . . . . . . . . . $ 2,000
Accounting Fees and Expenses. . . . . . . . . . . . . $ 5,000
Legal Fees and Expenses . . . . . . . . . . . . . . . $14,000
Blue Sky Fees and Expenses. . . . . . . . . . . . . . $ 2,500
Registrar and Transfer Agent Fees . . . . . . . . . . $ 500
Miscellaneous . . . . . . . . . . . . . . . . . . . . $ 1,000
Total . . . . . . . . . . . . . . . . . . . . . . $25,000
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
On July 29, 1996, Saint Andrews Golf Corporation (the "Company") sold
200,000 shares of its newly designated Series A Convertible Preferred Stock to
Three Oceans, Inc. ("TOI"), an affiliate of SANYO North America Corporation,
for $2,000,000 in cash pursuant to an Investment Agreement between the Company
and TOI (the "Agreement"). An additional 300,000 shares of Series A
Convertible Preferred Stock were sold to TOI for $3,000,000 in September and
October 1996 pursuant to the Agreement. The Company will use the proceeds of
these sales for the SportPark segment of its business. In connection with
this sale, the Company granted to TOI an option to purchase up to 250,000
shares of Common Stock at $5.00 per share through July 29, 2001.
In connection with this transaction, the Company relied on the exemption
from registration provided by Section 4(2) of the Securities Act of 1933, as
amended. TOI is an accredited investor and was given complete information
concerning the Company, and represented that it was acquiring the securities
for investment purposes only.
ITEM 27. EXHIBITS.
The following Exhibits are filed as part of this Registration Statement
pursuant to Item 601 of Regulation S-B:
EXHIBIT NO. DESCRIPTION LOCATION
1.1 Form of Underwriting Agreement Previously filed
1.2 Form of Selected Dealers Agreement Previously filed
1.3 Form of Agreement Among Underwriters Previously filed
2 Agreement for the Purchase and Sale Incorporated by ref-
of Assets, as amended erence to Exhibit 10
to the Registrant's
Current Report on Form
8-K dated February 26,
1997
3.1 Restated Articles of Incorporation Previously filed
and Bylaws
3.2 Certificate of Amendment to Articles Previously filed
of Incorporation
3.3 Revised Bylaws Previously filed
II-3
<PAGE>
3.4 Certificate of Amendment to Articles Filed herewith
of Incorporation (Series A Convertible electronically
Preferred Stock)
4.1 Form of Warrant Agreement Previously filed
4.2 Form of Class A Warrant Certificate Previously filed
4.3 Form of Representative's Warrants Previously filed
5 Opinion of Krys Boyle Freedman Filed herewith
& Sawyer, P.C. concerning the legality electronically
of the securities being registered
10.1 Employment Agreement with Ronald S. Previously filed
Boreta
10.2 Stock Option Plan Previously filed
10.3 Ground Lease with Summa Corporation Previously filed
10.4 Agreement between the Company and Las Previously filed
Vegas Discount Golf & Tennis, Inc.
10.5 License Agreement between the Company Previously filed
and Las Vegas Discount Golf & Tennis,
Inc.
10.6 Employment Agreement with Kevin Previously filed
Donovan
10.7 Employment Agreement with Charles Previously filed
Hohl
10.8 Lease Agreement with A&R Management Previously filed
and Development Co., et al., and
Sublease to Las Vegas Discount Golf &
Tennis, Inc.
10.9 Lease Agreement with Vaso Boreta, Previously filed
as amended, and Assignment to Las
Vegas Discount Golf & Tennis, Inc.
10.10 Letter Agreement with Oracle One Previously filed
Partners, Inc.
10.11 Promissory Note to Vaso Boreta Previously filed
10.12 Agreement with Major League Baseball Incorporated by ref-
Properties, Inc. erence to Exhibit 10.12
to the Registrant's
Form 10-KSB for the
year ended December
31, 1995
10.13 License Agreement with National Incorporated by ref-
Association for Stock Car Auto erence to Exhibit 10.13
Racing, Inc. dated August 1, 1995 to the Registrant's
Form 10-KSB for the
year ended December
31, 1995
II-4
<PAGE>
10.14 Concept Development and Trademark Incorporated by ref-
Agreement with Callaway Golf Company erence to Exhibit 10.14
dated May 23, 1995 to the Registrant's
Form 10-KSB for the
year ended December
31, 1995
10.15 Investment Agreement with Three Incorporated by ref-
Oceans, Inc. erence to Exhibit 10.1
to Registrant's Form
8-K dated July 29,
1996
10.16 Lease Agreement between Urban Land Filed herewith
of Nevada and All-American SportPark, electronically
Inc.
10.17 Lease Agreement between Urban Land Filed herewith
of Nevada and All-American Golf Center, electronically
LLC
10.18 Operating Agreement for All-American Filed herewith
Golf, LLC, a limited liability company electronically
10.19 Employment Agreement with Kevin Filed herewith
Donovan dated October 8, 1996 electronically
10.20 Lease and Concession Agreement with Filed herewith
Sportservice Corporation electronically
21 Subsidiaries of the Registrant Filed herewith
electronically
23.1 Consent of Krys Boyle Freedman Contained in the
& Sawyer, P.C. Opinion of Krys Boyle
Freedman & Sawyer,
P.C., Exhibit 5
23.2 Consent of Piercy, Bowler, Taylor & Previously filed
Kern, Certified Public Accountants &
Business Advisors, a Professional
Corporation
23.3 Consent of Arthur Andersen LLP Filed herewith
electronically
ITEM 28. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for indemni-
fication against such liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been
II-5
<PAGE>
settled by controlling precedent, submit to a court of appropriate jurisdic-
tion the question whether such indemnification by it is against public policy
as expressed in the Act and will be governed by the final adjudication of such
issue.
The undersigned Registrant hereby undertakes:
(1) For purpose of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(4) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(5) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
(6) The undersigned Registrant hereby undertakes to provide to the
Underwriters at the closing specified in the underwriting agreements,
certificates in such denominations and registered in such names as required by
the Underwriters to permit prompt delivery to each purchaser.
II-6
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933,
the Registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form SB-2 and authorized this Post
Effective Amendment No. 2 to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Las
Vegas, State of Nevada, on the 29th day of September, 1997.
SAINT ANDREWS GOLF CORPORATION
By:/s/ Ronald S. Boreta
Ronald S. Boreta, President
In accordance with the requirements of the Securities Act of 1933,
this Post Effective Amendment No. 2 to the Registration Statement has been
signed by the following persons in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/Vaso Boreta Chairman of the Board September 29, 1997
Vaso Boreta and Director
/s/ Ronald S. Boreta President, Treasurer, September 29, 1997
Ronald S. Boreta (Chief Executive
Officer, Principal
Financial and Account-
ing Officer) and Director
/s/ Robert R. Rosburg Director September 29, 1997
Robert R. Rosburg
/s/ William Kilmer Director September 29, 1997
William Kilmer
/s/ Motoharu Iue Director September 29, 1997
Motoharu Iue
CERTIFICATE OF AMENDMENT
ARTICLES OF INCORPORATION
OF
SAINT ANDREWS GOLF CORPORATION
SAINT ANDREWS GOLF CORPORATION, a Nevada corporation (the "Corporation"),
hereby certifies to the Nevada Department of State, as follows:
FIRST: That the Board of Directors of the Corporation, by unanimous
written consent dated July 11, 1996, with respect to Article IV, in lieu of
meetings of such Board, adopted resolutions approving, proposing and declaring
advisable, in the form of this Amendment to the Articles of Incorporation, the
following amendment to the Articles of Incorporation of the Corporation. The
resolutions setting forth the proposed amendment are as follows:
RESOLVED: That the Articles of Incorporation be amended as follows:
ARTICLE IV shall be and hereby is amended to provide:
(d) There is hereby established a series of Preferred Stock
of the Corporation designated "Series A Convertible Preferred
Stock," par value $.001 per share. The number of shares of this
series of Convertible Preferred Stock shall be 500,000 shares. The
powers, designations, preferences and relative, participating,
optional or other special rights of the shares of this series of
Convertible Preferred Stock and the qualifications, limitations and
restrictions of such preferences and rights shall be as follows:
1. Dividend Provisions. None.
2. Liquidation Preference.
(a) In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the
Corporation, the holder of each share of Series A Convertible
Preferred Stock shall be entitled to receive, out of the assets of
the Corporation available for distribution to its stockholders,
before any payment or distribution shall be made on the Common
Stock, an amount per share equal to $10.00. If the assets and funds
to be distributed among the holders of the Series A Convertible
Preferred Stock shall be insufficient to permit the payment of the
full aforesaid preferential amount to such holders, then the entire
assets and funds of the Corporation legally available for the
distribution shall be distributed among the holders of the Series A
Convertible Preferred Stock in proportion to the aggregate
preferential amount of all shares of Series A Convertible Preferred
Stock held by them. After payment has been made to the holders of
the Series A Convertible Preferred Stock, the holders of the Common
Stock shall be entitled to share ratably in the remaining assets on
the basis of the number of shares of Common Stock held by them at
the time of such liquidation.
(b) For purposes of this Section 2, a merger or
consolidation of the Corporation with or into any other corporation
or corporations, or the merger of any other corporation or
corporations into the Corporation, or the sale or any other
corporate reorganization, in which shareholders of the Corporation
receive distributions as a result of such consolidation, merger,
sale of assets or reorganization, shall be treated as a liquidation,
dissolution or winding up of the Corporation, unless the stock-
holders of the Corporation hold more than fifty percent (50%) of the
voting equity securities of the successor or surviving corporation
immediately following such consolidation, merger, sale of assets or
reorganization in which event such consolidation, merger, sale of
assets, or reorganization shall not be treated as a liquidation,
dissolution or winding up.
3. Conversion. The Series A Convertible Preferred Stock
may be converted into shares of the Corporation's Common Stock on
the following terms and conditions (the "Conversion Rights"):
(a) Option to Convert. Commencing immediately,
holders of the Series A Convertible Preferred Stock shall have the
right to convert all or a portion of their shares into shares of
Common Stock at any time or from time to time upon notice to the
Corporation on the terms and conditions set forth herein prior to
the date fixed for redemption of such shares.
(b) Mechanics of Conversion. Upon the election of a
holder of the Series A Convertible Preferred Stock to convert shares
of such Preferred Stock, the holder of the shares of Series A
Convertible Preferred Stock which are converted shall surrender the
certificate or certificates therefor, duly endorsed, at the office
of the Corporation or any authorized transfer agent for such stock
together with a written statement that he elects to convert his
preferred stock to common stock. The Corporation or the transfer
agent shall promptly issue and deliver at such office to such holder
of Series A Convertible Preferred Stock a certificate or
certificates for the number of shares of Common Stock to which such
holder is thereby entitled. The effective date of such conversion
shall be a date not later than 30 days after the date upon which the
holder provides written notice of his election to convert to the
Corporation or transfer agent.
(c) Conversion Ratio. Each share of Series A Conver-
tible Preferred Stock may be converted into one (1) fully paid and
nonassessable share of Common Stock (except as adjusted pursuant to
paragraph 3(d) below). In the event that upon conversion of shares
of Series A Convertible Preferred Stock a holder shall be entitled
to a fraction of a share of Common Stock, no fractional share shall
be issued and in lieu thereof the Corporation shall pay to the
holder cash equal to the fair value of such fraction of a share.
(d) Adjustment of Conversion Rate. If the Corporation
shall at any time, or from time to time, after the effective date
hereof effect a subdivision of the outstanding Common Stock and not
effect a corresponding subdivision of the Series A Convertible
Preferred Stock, or if the Corporation at any time or from time to
time after the effective date hereof shall make or issue, or fix a
record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in
additional shares of Common Stock, then and in each such event the
number of shares of Common Stock issuable upon conversion of the
Series A Convertible Preferred Stock shall be proportionately
increased as of the time of such issuance or, in the event such a
record date shall have been fixed, as of the close of business on
such record date.
(e) No Impairment. The Corporation will not, by
amendment of its Articles of Incorporation or through any reor-
ganization, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to
be observed or performed hereunder by the Corporation, but will at
all times in good faith assist in the carrying out of all of the
provisions of this Section 3 and in the taking of all such action as
may be necessary or appropriate in order to protect the Conversion
Rights of the holders of the Series A Convertible Preferred Stock
against impairment.
(f) Reservation of Stock Issuable Upon Conversion.
The Corporation shall at all times reserve and keep available out of
its authorized but unissued shares of Common Stock, solely for the
purpose of effecting the conversion of the shares of Series A
Convertible Preferred Stock, such number of its shares of Common
Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of Series A Convertible
Preferred Stock; and if at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to effect
the conversion of all outstanding shares of Series A Convertible
Preferred Stock, the Corporation will take such corporate action as
is necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient for
such purpose.
4. Status of Converted or Reacquired Stock. In case any
shares of Series A Convertible Preferred Stock shall be converted
pursuant to Section 3 hereof, the shares so converted shall cease to
be a part of the authorized capital stock of the Corporation.
5. Voting Rights. Each share of Series A Convertible
Preferred Stock shall entitle the holder to one (1) vote and with
respect to each such vote, a holder of shares of Series A Conver-
tible Preferred Stock shall have full voting rights and powers equal
to the voting rights and powers of a holder of shares of Common
Stock, share for share, and shall be entitled to notice of any
shareholders' meeting in accordance with the Bylaws of the
Corporation, and shall be entitled to vote with holders of Common
Stock together as a single class.
6. Redemption Provisions. To the extent permitted under
the Nevada Business Corporation Act, shares of the Series A
Convertible Preferred Stock are redeemable as follows:
(a) Redemption at Option of Corporation. In the
event that the Corporation has $1,000,000 of pre-tax income for a
fiscal year according to the audited year-end financial statements,
or if the closing bid price of the Corporation's common stock for
twenty consecutive trading days equals or exceeds $15.00, the
Corporation may redeem shares of Series A Convertible Preferred
Stock. If fewer than all of the outstanding shares of Series A
Convertible Preferred Stock are to be redeemed, the Company will
select those to be redeemed pro rata or by lot or in such other
manner as the Board of Directors may determine.
(b) Redemption Price. The redemption price per share
under this Section 6 shall be Ten Dollars ($10.00) per share.
(c) Notice of Redemption. Notice to the holders of
shares of Series A Convertible Preferred Stock to be redeemed shall
be given not earlier than 60 days nor later than 30 days before the
date fixed for redemption. The notice of redemption to each
stockholder whose shares of Series A Convertible Preferred Stock are
to be redeemed shall specify the number of Series A Convertible
Preferred Stock of such stockholder to be redeemed, the date fixed
for redemption and the redemption price at which shares of Series A
Convertible Preferred Stock are to be redeemed, and shall specify
where payment of the redemption price is to be made upon surrender
of such shares, shall state the conversion rate then in effect, and
that the Conversion Rights of such shares shall cease and terminate
at the close of business on the date fixed for redemption.
7. Notices. Any notice required to be given to holders of
shares of Series A Convertible Preferred Stock shall be deemed given
upon deposit in the United States mail, postage prepaid, addressed
to such holder of record at his address appearing on the books of
the Corporation, or upon personal delivery of the aforementioned
address.
SECOND: This Amendment to the Articles of Incorporation effected herein
is authorized by the vote of the Board of Directors on July 11, 1996.
THIRD: The amendments effected herein were duly adopted in accordance
with the applicable provisions of NRS 78.385.
IN WITNESS WHEREOF, Saint Andrews Golf Corporation has caused this
ertificate of Amendment to be signed and acknowledged by its President and
Secretary this 26th day of July, 1996.
SAINT ANDREWS GOLF CORPORATION
ATTEST:
/s/ Ron Boreta By/s/ Ron Boreta
Ron Boreta, Secretary Ron Boreta, President
STATE OF NEVADA )
) ss.
COUNTY OF CLARK )
I, John Clark, a Notary Public, hereby certify that on the 26th day of
July, 1996, personally appeared before me Ron Boreta, who being by me first
duly sworn, declared that he signed the foregoing document as President and
Secretary of the corporation named therein and that they were each above the
age of eighteen years and that the statements contained therein are true and
correct to the best of their knowledge and belief.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
/s/ John Clark
Notary Public
[ S E A L ]
My commission expires: June 4, 2000
KRYS BOYLE FREEDMAN & SAWYER, P.C.
ATTORNEYS AT LAW
Dominion Plaza, Suite 2700 South Tower
600 Seventeenth Street
Denver, Colorado 80202
Telephone Facsimile
(303) 893-2300 (303) 893-2882
September 29, 1997
Saint Andrews Golf Corporation
5325 South Valley View Boulevard, Suite 4
Las Vegas, Nevada 89118
Gentlemen:
We have acted as counsel to Saint Andrews Golf Corporation, a Nevada
corporation (the "Company"), in connection with the preparation and filing
with the Securities and Exchange Commission of a post effective amendment to a
Registration Statement on Form SB-2 (the "Registration Statement"), pursuant
to which the Company has registered under the Securities Act of 1933, as
amended, a total of 650,000 Shares of Common Stock (the "Shares"), 100,000
Representative's Class A Warrants and 100,000 Representative's Warrants to
purchase Common Stock. This opinion is being rendered in connection with the
filing of the post effective amendment to the Registration Statement. All
capitalized terms used herein and not otherwise defined shall have the
respective meanings given to them in the Registration Statement.
In connection with this opinion, we have examined the Company's
Articles of Incorporation and Bylaws, both as currently in effect; such other
records of the corporate proceedings of the Company and certificates of the
Company's officers as we have deemed relevant; and the Registration Statement
and the exhibits thereto.
In our examination, we have assumed the genuineness of all
signatures, the legal capacity of natural persons, the authenticity of all
documents submitted to us as originals, the conformity to original documents
of all documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such copies.
Based upon the foregoing and in reliance thereon, it is our opinion
that the 500,000 shares issuable upon exercise of the outstanding Class A
Warrants, the 50,000 Shares issuable upon the exercise of the Representative's
Class A Warrants and the 100,000 Shares issuable upon the exercise of the
Representative's Warrants to purchase Common Stock will, upon the purchase,
receipt of full payment, issuance and delivery in accordance with the terms of
the offering described in the Registration Statement, be duly and validly
authorized, legally issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. We hereby further consent to the reference to us
under the caption "Legal Matters" in the prospectus included in the
Registation Statement.
Very truly yours,
KRYS BOYLE FREEDMAN & SAWYER, P.C.
By: /s/ Jon D. Sawyer
Jon D. Sawyer
LEASE AGREEMENT
BETWEEN
URBAN LAND OF NEVADA, INC.
AND
ALL-AMERICAN SPORTPARK, INC.
JUNE 1997
<PAGE>
When recorded return to:
Urban Land of Nevada, Inc.
3271 South Highland Drive, #704
Las Vegas, Nevada 89109
Attn: Theodore B. Lee
MEMORANDUM OF LEASE
Urban Land of Nevada, Inc., a Nevada corporation (hereinafter called
"Landlord"), hereby demises and leases to All-American SportPark, Inc., a
Nevada corporation, (herein called "Tenant"), and Tenant hereby takes and
leases 23.61 acres of land from Landlord upon the terms and conditions and
subject to the limitations more particularly set forth in a certain Lease
Agreement between Landlord and Tenant dated June 13, 1997, (hereinafter
referred to as the "Agreement"), the 23.61 acre tract of land described in
Exhibit "A" hereto to have and to hold the same for a term to commence as the
date determined by the Agreement and to expire upon the expiration of fifteen
(15) years from the date determined by the Agreement. Under the terms of the
Agreement, Tenant has two (2) options to extend the term of this Agreement for
an additional five (5) years each. This Memorandum of Lease is prepared for
the purpose of recordation and shall not alter or effect in any way the rights
and obligations under the Agreement. In the event of any inconsistency between
this Memorandum of Lease and the Agreement, the terms of the Agreement shall
control.
Dated this 20th day of June, 1997.
LANDLORD: TENANT:
Urban Land of Nevada, Inc. All-American SportPark, Inc.,
a Nevada corporation a Nevada corporation
/s/ Theodore B. Lee /s/ Ronald S. Boreta
Theodore B. Lee, President Ronald S. Boreta
<PAGE>
STATE OF NEVADA )
) SS.
COUNTY OF CLARK )
On this 20th day of June, 1997, personally appeared before me, a notary
public, Theodore B. Lee, President of Urban Land of Nevada, Inc., a Nevada
corporation, personally known (or proved) to me to be the person whose name is
subscribed to the foregoing instrument and who acknowledged that he/she
executed the instrument.
/s/ Rebecca Bullard
Notary Public
STATE OF NEVADA )
) SS.
COUNTY OF CLARK )
On this 19th day of June, 1997, personally appeared before me, a notary
public, Ronald S. Boreta, President of All-American SportPark, Inc., a Nevada
corporation, personally known (or proved) to me to be the person whose name is
subscribed to the foregoing instrument and who acknowledged that he/she
executed the instrument.
/s/ Cynthia R. Taylor
Notary Public
<PAGE>
EXHIBIT "A"
ALL-AMERICAN SPORTPARK
Proposed Lease Area 2
[MAP]
<PAGE>
EXHIBIT "B"
ESI ENGINEERS AND
SURVEYORS, INC.
4/7/97
EXPLANATION: Proposed property description for LEASE AREA 1
BASIS OF BEARING:
The basis of bearing for this property description is the northerly line of
the Northwest Quarter (NW 1/4) of Section 4, Township 22 South, Range 61 East,
M.D.M, County of Clark, State of Nevada, which bears South 88o 55' 29" West,
as per map recorded in File 59, Page 55 of Surveys in the Office of the County
Recorded of said County.
Being a portion of the Northwest Quarter (NW 1/4) of Section 4, Township 22
South, Range 61 East, M.D.M., County of Clark, State of Nevada, more
particularly described as follows:
COMMENCING at the northwest corner of said Section 4, said point being the
centerline intersection of Las Vegas Boulevard South (SR-91) and Sunset Road;
Thence along the northerly line thereof, said line also being the certerline
of said Sunset Road, North 88o 50' 29" East, 159.45 feet;
Thence departing said line, South 01o 09' 31" East, 50.00 feet to a point on
the southerly right-of-way line of Sunset Road, being 50.00 feet wide as
described in Deed recorded April 27, 1972 in Book 226, Instrument No. 185689,
Official Records, said point also being in the POINT OF BEGINNING;
Thence along said right-of-way line, North 88o 50; 29" East, 856.78 feet;
Thence departing said right-of-way line, South 01o 09' 31" East, 221.00 feet;
Thence North 88o 50' 29" East, 59.92 feet;
Thence South 29o 07' 55" East, 724.00 feet;
Thence North 89o 24' 46" East, 43.82 feet;
Thence South 15o 06' 26" West, 734.44 feet to a point on a line 974.88 feet
northerly and parallel with measured at right angles from the southerly line
of the Southwest Quarter (SW 1/4) of said Northwest Quarter (NW 1/4);
Thence along said line, South 88o 57' 12" West, 840.96 feet to a point of
curvature;
Thence departing said line, northwesterly, along the arc of a curve to the
right, concave northeasterly, having a radius of 226.00 feet, through a
central angle of 42o 05' 25", an arc distance of 166.02 feet to a point of
reverse curvature to which a radial line bears, South 40o 5_', 57" West;
Thence continuing northwesterly, along the arc of a curve to the left, concave
southwesterly, having a radius of 174.00 feet, through a central angle of 41o
21' 54", an arc distance of 125.82 feet;
Thence south 89o 40' 35" West, 51.25 feet to a point on the easterly right-of-
way line of said Las Vegas Boulevard South as described in Deed recorded June
27, 1995, in Book 960627, Instrument No. 01842, Official Records;
Thence along said right-of-way line, North 00o 14' 54" West, 1403.25 feet to a
point of curvature;
Thence northeasterly, along the arc of a curve to the right, concave
southeasterly, having radius of 54.00 feet, through a central angle of 89o 05'
23", an arc distance of 83.97 feet to the POINT OF BEGINNING.
Said parcel contain 41.37 acres, more or less.
<PAGE>
"The above described parcel of land represents a portion of the Northwest
Quarter (NW 1/4) of Section 4, Township 22 South, Range 61 East, M.D.M. County
of Clark, State of Nevada and is not intended for inclusion in a document
conveying fee ownership. To do so is a violation of state law and or local
ordinance."
END OF DESCRIPTION
<PAGE>
TABLE OF CONTENTS
Paragraph #, Description Page #
1. Term .....................................................1
2. Option To Extend Lease Term ..............................2
3. Purpose Of Occupancy .....................................2
4. Exclusive Use ............................................2
5. Prohibited Activities ....................................2
6. Compliance With Laws .....................................3
7. Access To Leased Premises ................................3
8. Tenant Responsible For Repairs ...........................3
9. Improvements .............................................3
10. Property Loss Assumed By Tenant ..........................4
11. Non-Responsibility Notices ...............................5
12. Attorneys Fees ...........................................5
13. Utilities ................................................5
14. Public Liability And Property Damage Insurance ...........5
15. Tenant's Fire Insurance ..................................6
16. Waiver Of Subrogation ....................................6
17. Other Insurance Matters ..................................6
18. Cumulative Remedies ......................................7
19. Defaults And Remedies In The Event Of Default ............7
20. Landlord Default .........................................8
21. Assignment And Subletting ................................9
22. Holdover .................................................10
23. Non-Waiver ...............................................10
24. Number And Gender ........................................10
25. Heirs, Successors And Assigns ............................10
26. Paragraph Caption ........................................10
27. Minimum Rent And Adjustment ..............................10
28. Deposit ..................................................11
29. Percentage Rental ........................................12
30. Liens ....................................................15
31. Indemnification ..........................................15
32. Offset Statement .........................................16
33. Quite Possession .........................................16
34. Service Of Notices .......................................16
35. Partial Invalidity .......................................16
36. Brokers ..................................................16
37. Condemnation .............................................17
38. section # 38 has been intentionally omitted ..............18
39. Taxes ....................................................18
40. Signage Rights ...........................................19
41. section 41 has been intentionally omitted ................20
42. Gaming ...................................................20
43. section 43 has been intentionally omitted ................20
44. Infrastructures ..........................................20
45. section 45 has been intentionally omitted ................20
46. Tenant's Trademarks/Trade Names ..........................20
47. Hazardous Materials ......................................20
48. Sole And Only Agreement ..................................21
49. Acting In Good Faith, Discretion, And With Reasonable-
ness ....................................................21
50. No Merger ................................................21
51. Transfer Of Landlord's Interest ..........................21
52. Effect Of Exercise Of Privilege By Landlord ..............21
53. Insolvency ...............................................22
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54. Execution Of Documents ...................................22
55. Execution To Perform/Force Majeure .......................22
56. Governing Law ............................................22
57. Landlord's Warrantees And Representations ................22
58. Non-Disturbance, Attornment And Subordination Agreement ..25
59. Arbitration ..............................................26
60. Landlord Bankruptcy Proceeding ...........................27
61. Memorandum Of Leases .....................................27
62. Leasehold Mortgagee Rights ...............................27
-ii-
<PAGE>
INDENTURE OF LEASE
THIS INDENTURE OF LEASE (herein Lease), made and entered into in Las
Vegas, Nevada, on this ------- day of June, 1997 by and between Urban Land of
Nevada, a Nevada corporation (herein called LANDLORD) and All-American
SportPark, Inc., a Nevada Corporation, (herein TENANT).
BACKGROUND/CONDITIONS - LANDLORD owns approximately 135 acres of
unimproved property in Clark County, Nevada, which is bounded by Las Vegas
Boulevard, Gillespie Street, Sunset Road, and I-215 - the Maule Expressway
("LANDLORD s Property"), which is more particularly shown and highlighted in
yellow on EXHIBIT "A", which is attached hereto and by this reference made a
part hereof.
TENANT wishes to lease approximately 23.6 acres of LANDLORD s Property for
a sports park with a golf driving range, a par three executive golf course, a
batting stadium, miniature golf course, go-karts, and buildings to house food
concessions, an arcade and other uses normally expected in a sports park
("Leased Premises") as highlighted in blue on EXHIBIT "A".
LANDLORD wants to provide wholesome, family, sports oriented entertainment
which will be an amenity for its proposed hotel/casino and entertainment
center, planned for the southern part of LANDLORD's Property and expects that
TENANT's development will support and complement LANDLORD's plans for the
balance of LANDLORD's Property.
TENANT has established relationships with certain sports entities, which
will enable TENANT to build first class facilities for go-karts, a batting
stadium, an entertainment area for watching sports event and a retail facility
to sell sports equipment and clothing.
LANDLORD has seen TENANT's prepared preliminary plans and has entered into
this Lease expressly on the condition that TENANT builds such a facility.
W I T N E S S E T H:
LANDLORD hereby leases to TENANT, and TENANT hereby hires from LANDLORD,
the premises outlined in blue on EXHIBIT "A" attached hereto and incorporated
herein by reference as though fully set forth herein (herein Leased Premises)
for the term and in accordance with the provisions hereinafter stated and
provided. An exact legal description attached as EXHIBIT "B" will be attached
hereto when available, as required by an agreement of even date herewith
between LANDLORD and TENANT, which agreement shall cover such matters as
conditions precedent to the effectiveness of this Lease, as a security
deposit.
IN CONSIDERATION WHEREOF, THE PARTIES HERETO HEREBY COVENANT AND AGREE AS
FOLLOWS:
1. TERM - The term of this Lease will be fifteen (15) years and will
commence on the first day of the month next following the date that the TENANT
notifies LANDLORD of the satisfaction or waiver of all conditions precedent
set forth in the Agreement in accordance with PARAGRAPH NUMBERED 3 of the
Agreement, will expire the last day of the 180th month thereafter. Once the
effective commencement date of this Lease is established, the parties will
execute an Amendment to this Lease and the Memorandum of Lease required by
PARAGRAPH NUMBERED 61 hereof, establishing the commencement and termination
dates with certainty.
2. OPTION TO EXTEND LEASE TERM - LANDLORD hereby grants to TENANT the
right, privilege and option to extend this Lease for two (2) additional terms
of five (5) years each upon the same terms and conditions as herein contained,
including, without limitation, the Minimum Rent and Percentage Rent set forth
in PARAGRAPHS NUMBERED 27 and 29 below.
Provided TENANT is not in default under the terms of this Lease beyond any
applicable notice and cure periods, at the time of its exercise of an option,
the given option to extend may be exercised by TENANT by giving written notice
of exercise to LANDLORD at least one hundred eighty (180) days prior to the
end of the term or expiration of the then extended term. The extension
options set forth herein are not personal to TENANT and may be exercised by
any permitted assignee of this Lease or by any Leasehold Mortgagee as defined
herein below.
3. PURPOSE OF OCCUPANCY - TENANT shall initially use and occupy the
Leased Premises for a commercial recreation facility known as the All-American
Sport Park which may include: baseball practice hitting range, miniature golf
course, go-kart facility, video arcade and sports skills challenge area,
sports merchandise retail, sports activity arena for in-like skating and
special events, and food and beverage services including a fast food court,
dining areas, snack food kiosks, catering services and sports bar. TENANT may
not change the use of the Leased Premises to other uses and purposes without
the prior written consent of LANDLORD which consent shall not be unreasonably
withheld, conditioned or delayed. Uses not permitted on the Leased Premises
are set forth in PARAGRAPH NUMBERED 5 of this Lease. All food services must
be inside the main building, or otherwise integrated into TENANT's overall
sports park theme and operation, it being the parties' intention that no food
services will be permitted on pads or otherwise within the Leased Premises at
a location with direct access to Sunset Road or Las Vegas Boulevard.
4. EXCLUSIVE USE - LANDLORD hereby grants to TENANT the exclusive right
to carry on the following uses: baseball practice hitting range, and go-kart
facility, video arcade and sports skills challenge area, sports merchandise
retail, food and beverage service, sports activity areas for in/line skating
and special events. LANDLORD will not permit the conduct of any business or
enterprise of any of the same kind or nature to any of these specific uses on
LANDLORD's Property during the Lease term or any extensions) thereof. The
land to which this covenant pertains is outlined in yellow on EXHIBIT "A".
For these purposes, LANDLORD will execute a recordable restrictive covenant
describing the balance of LANDLORD's Property in EXHIBIT "A" and the use
restrictions applicable thereto and deliver same to TENANT and allow TENANT to
record it. One of TENANT's remedies for a violation of the restrictive
covenant by LANDLORD would be to terminate this Lease.
5. PROHIBITED ACTIVITIES - During the entire term of this Lease, the
following uses shall not be permitted on the Leased Premises: A gas station, a
funeral parlor, a massage parlor, a so-called "flea market," industrial or
residential purposes, an adult bookstore or a store selling or exhibiting
pornographic materials (as used herein "adult bookstore or store selling or
exhibiting pornographic materials" shall include without limitation, a store
displaying for sale or exhibiting books, magazines or other publications
containing any combination of photographs, drawings or sketches of a sexual
nature which are not primarily scientific or educational or store offering for
exhibition, sale or rental videocassettes or other medium capable of
projecting, transmitting, or reproducing independently or in conjunction with
other devices, machine or equipment, an image or series of images the content
of which has been rated or advertised generally "X" or un-rated by the Motion
Picture Rating Association or any successor thereto"), any use that materially
increases the risk of hazardous contamination on the Leased Premises or
surrounding area, and any use that is in any way in violation of any valid
law, ordinance, or regulation of any Federal, State, County, or local agency,
body or entity. In addition, TENANT shall not commit or suffer to be
committed, any waste upon the Leased Premises or any nuisance. LANDLORD
agrees to use its best efforts (including litigation) to prohibit the uses
listed in this Paragraph 5 with the exception of a gas station, on the balance
of LANDLORD's Property during the lease term or any extension thereof.
6. COMPLIANCE WITH LAWS - TENANT shall promptly execute, perform and
comply with each law, rule, order, decision, ordinance, requirement and
regulation of each City, County, State, or Federal authority, department,
board, or body having jurisdiction or authority in relation to this Lease, or
the Leased Premises, and TENANT shall promptly make each such repair,
replacement, improvement or addition required by any such and without cost to
LANDLORD.
7. ACCESS TO LEASED PREMISES - LANDLORD shall have access to the Leased
Premises, at all reasonable times, for the purpose of making any such
improvement, repair or alteration as is the responsibility of LANDLORD
hereunder, if any. It is, however, expressly understood and agreed that the
authority hereby reserved or granted to the LANDLORD, does not impose, nor
does the LANDLORD assume, by reason thereof, any responsibility, or liability,
whatsoever, for the care, maintenance, supervision, improvement, repair or
alteration of the Leased Premises other than as may be set forth herein.
8. TENANT RESPONSIBLE FOR REPAIRS - LANDLORD shall be under no
liability, obligation or expense whatsoever in connection with the maintenance
or the repair of any improvements constructed upon the Leased Premises, of any
and every description. And, any and every need for repair is hereby accepted
by TENANT, who hereby covenants and agrees to make each such repair at
TENANT's sole cost and expense.
9 IMPROVEMENTS - TENANT shall construct on the Leased Premises a
high-quality commercial recreation facility in a good and workmanlike manner.
TENANT shall submit to LANDLORD within one hundred eighty (180) days after
execution of this Lease a Site Plan with colors and an elevation with
architectural detail, Landscaping Plan, Grading Plan, and civil engineering
drawings for the improvements which TENANT intends to construct of the Leased
Premises. LANDLORD shall so notify TENANT as to the portions of the plans and
drawings which do not meet LANDLORD's reasonable approval guidelines. LANDLORD
shall so notify TENANT in writing within fifteen (15) days from the receipt of
said plans and drawings or LANDLORD's objection shall be deemed waived,
thereby constituting an approval. TENANT shall pay for the cost of bringing
all utilities to buildings or improvements constructed on the Leased Premises
by TENANT. Upon completion of the improvements and when any buildings are
ready for occupancy by TENANT, TENANT shall prepare and record a Notice of
Completion and obtain a Certificate of Occupancy. After the initial completion
of TENANT's commercial recreation facility on the Leased Premises, TENANT at
its cost shall have the right to make, without LANDLORD's consent, alterations
to the improvements; provided any material structural alterations or
improvements or any significant change in the exterior colors of any buildings
on the Leased Premises shall require LANDLORD's prior written consent which
shall be deemed given if LANDLORD does not object within fifteen (15) days of
LANDLORD's receipt of TENANT's request for consent.
All buildings and other improvements constructed upon the Leased Premises
by TENANT during the term of this Lease and all alterations, additions, and
fixtures thereto from time to time constructed, installed, or placed in, on or
upon the Leased Premises by TENANT shall be owned by TENANT or any permitted
assignee of TENANT until expiration of the term or sooner termination of this
Lease. TENANT shall not remove any of the buildings or permanent improvements
from the Leased Premises nor waste, destroy or modify any of the buildings and
improvements except as permitted by this Lease. Tenant shall have the right
to remove from the Leased Premises all furniture, trade fixtures and equipment
which are not permanently affixed thereto. At the expiration of the term or
sooner termination of this Lease, all buildings and permanent improvements
shall, without compensation to TENANT, remain upon the Leased Premises, and
shall become LANDLORD's property free and clear of any liens, claims, or
rights of any third parties or of TENANT. TENANT shall indemnify LANDLORD
from any such liens, claims, or rights of third parties. Each party agrees to
execute, acknowledge, and deliver any instrument required by the other to
evidence the respective interest of the parties hereto as stated in this
paragraph. Provided, however, within thirty (30) days after the end of the
lease term or any extension thereof, LANDLORD shall inspect the Leased
Premises and shall promptly advise TENANT in writing if TENANT shall be
required to remove any improvements constructed on the Leased Premises by
TENANT. If LANDLORD determines that certain improvements shall be removed,
then TENANT, at TENANT's cost and expense, shall remove such improvements and
shall return the Leased Premises other than as set forth in PARAGRAPH NUMBERED
57 hereof to its previous condition within sixty (60) days after the date of
Landlord's inspection.
TENANT accepts the Leased Premises in an "as is" condition other than as
set forth in PARAGRAPH NUMBERED 57 hereof. LANDLORD makes no warranty as to
the condition of the Leased Premises. LANDLORD shall not make any
improvements on the Leased Premises or pay for any fees or costs in regard to
TENANT's use of the Leased Premises.
If construction of TENANT's proposed project is not completed on the
Leased Premises within two (2) years of the commencement date of this Lease as
established in accordance with PARAGRAPH NUMBERED 1 hereof, LANDLORD upon
written notice to TENANT shall have the right to terminate this Lease. If any
portion of the Leased Premises is not improved within two (2) years of the
execution of this Lease, this Lease shall terminate as to that portion of the
Leased Premises not so improved and upon such partial termination, there shall
be no adjustment in the Minimum Rent as set forth in PARAGRAPH NUMBERED 27 of
this Lease.
10. PROPERTY LOSS ASSUMED BY TENANT - TENANT shall indemnify and hold
LANDLORD and the property of LANDLORD, including the Leased Premises, and any
buildings or improvements now or hereafter on the Leased Premises, free and
harmless of any and all liability, claims, loss, damages, or expenses
resulting from TENANT's occupation and use of the Leased Premises,
specifically including without limitation any liability, claims, loss,
damages, or expenses arising by reason of:
(a) the death or injury of any person, including TENANT or any
person who is an employee or agent of TENANT, or by reason of the damage to or
destruction of any property, including property owned by TENANT or by any
person who is an employee or agent of TENANT, from any cause whatever, except
for LANDLORD's gross negligence, willful acts or omissions or intentional
misconduct while such person or property is in or on the Leased Premises or in
any way connected with the Leased Premises or with any of the improvements or
personal property on the Leased Premises;
(b) the death or injury of any person, including TENANT or any
person who is an employee or agent of TENANT, or by reason of the damage to or
destruction of any property, including property owned by TENANT or by any
person who is an employee or agent of TENANT, caused or allegedly caused by
(i) the condition of the Leased Premises or some building or improvement on
the Leased Premises, or (ii) some act or omission on the Leased Premises by
TENANT or any person except LANDLORD in or about the Leased Premises with
permission and consent of TENANT;
(c) any work performed on the Leased Premises or materials
furnished to the Leased Premises at the instance or request of TENANT or any
person or entity acting for on behalf of TENANT; or,
(d) TENANT's failure to perform any provision of this Lease or to
comply with any requirement of law or any requirement imposed on TENANT or the
Leased Premises by any duly authorized governmental agency or political
subdivision.
The limits of liability insurance as provided in PARAGRAPH NUMBERED 14 of
this Lease shall not, however, limit the liability of TENANT under the
indemnity provision of this PARAGRAPH NUMBERED 10.
11. NON-RESPONSIBILITY NOTICES - LANDLORD may place upon said Leased
Premises any notices of lien non-responsibility as LANDLORD deems proper, and
may record such as LANDLORD deems proper, and TENANT shall at all times keep
said Leased Premises and the fee title free and clear of, from and against
each mechanics and each materialman's lien, and each encumbrance, attorney's
fee and costs related thereto for which TENANT, or another acting for, as, or
through TENANT shall be responsible.
12. ATTORNEY'S FEES - The Court may award reasonable attorneys fees
and costs to the party hereto prevailing in enforcing any obligation of the
other party hereto under this Lease, or prevailing in any litigation connected
with this Lease.
13. UTILITIES - TENANT shall pay when due any and all Gas, Electricity,
Telephone, Waste Collection, Sewer Rental, and any and all other UTILITY or
USE SERVICE charges which become payable, or accrue, during the term of this
Lease, upon said Leased Premises, and payments therefor shall be made directly
to the Utility Company (except as provided herein elsewhere to the contrary),
and TENANT shall indemnify and hold harmless LANDLORD and also said Leased
Premises of, from and against payment of the same.
14. PUBLIC LIABILITY AND PROPERTY DAMAGE INSURANCE - TENANT at TENANT's
cost shall maintain public liability and property damage insurance with
liability limits of not less than ONE MILLION AND 00/100 DOLLARS
($1,000,000.00) per person and ONE MILLION AND 00/100 DOLLARS ($1,000,000.00)
per occurrence, and property damage limits of not less than FIFTY THOUSAND AND
00/00 DOLLARS ($50,000.00) per occurrence, insuring against all liability of
TENANT and TENANT's agents and employees arising out of or in connection with
TENANT's use or occupancy of the Leased Premises. In addition, TENANT agrees
to name LANDLORD as an additional insured under a $10,000,000.00 umbrella
liability policy to be in force upon receipt of an occupancy permit for the
Leased Premises. Such policies of insurance shall be for periods of not less
than one (1) year, and shall be renewed or a new policy obtained not less than
TWENTY (20) DAYS before a current policy's coverage terminates.
15. TENANT'S FIRE INSURANCE - TENANT at TENANT's cost shall maintain on
all of TENANT's personal property, TENANT's improvements, and alterations, in,
on, or about the Leased Premises, a policy of fire and extended coverage
insurance, with vandalism and malicious mischief endorsements, to the extent
of at least 80% of their full replacement value. The proceeds from any such
policy shall be used by TENANT for the replacement of damaged personal
property and the restoration of TENANT's damaged improvements and alterations,
except, however, in the event any such damage shall occur during the last two
(2) years of the Lease term or any extension thereof, TENANT may elect not to
restore the damaged premises and in such event, the insurance proceeds which
cover the loss of furniture, fixtures and equipment shall be paid directly to
the TENANT. The insurance proceeds which cover the loss of buildings and
permanent improvements shall be paid directly to the LANDLORD. Except as
provided immediately above, TENANT shall hold the insurance proceeds in trust
for such replacement and such restoration and shall disburse the same as
progress in replacement or restoration progresses.
16. WAIVER OF SUBROGATION - The parties release each other, and their
respective authorized representatives, from any claims of damage to any person
or to the Leased Premises and the buildings and other improvements located on
the Leased Premises, and to the fixtures, personal property, TENANT's
improvements, and alterations of either LANDLORD or TENANT in or on the Leased
Premises and the buildings and other improvements located on the Leased
Premises that are caused by or result from risks insured against under any
insurance policies carried by the parties and in force at the time of any such
damage.
Each party shall cause each property insurance policy obtained by it to
provide that the insurance company waives all right of recovery by way of
subrogation against each party in connection with any damage or liability
covered by any policy. Neither party shall be liable to the other for any
damage or liability, caused by fire or any of the risks insured against under
any property insurance policy required by this Lease. If any property
insurance policy cannot be obtained with a waiver of subrogation, or is
obtainable only by the payment of an additional premium charge above that
charged by insurance company issuing the policy without waiver of subrogation,
the party undertaking to obtain the insurance shall notify the other party of
this fact. The other party shall have a period of ten (10) days after
receiving the notice either to place the insurance with a company that is
reasonably satisfactory to the other party and that will carry the insurance
with a waiver of subrogation, or to agree to pay the additional premium if
such a policy is obtainable at additional, reasonable cost. If the insurance
cannot be obtained or the party in whose favor a waiver of subrogation is
desired refuses to pay the additional, reasonable premium charged, the other
party is relieved of the obligation to obtain a waiver of subrogation rights
with respect to the particular insurance involved.
17. OTHER INSURANCE MATTERS - All the insurance required under this
Lease shall:
(a) Be issued by insurance companies authorized to do business in
the State of Nevada with a financial rating of at least a B+ status as rated
in the most recent edition of Best's Insurance Reports.
(b) Be issued as a primary policy.
(c) All of the foregoing insurance policies required pursuant to
PARAGRAPHS NUMBERED 14 and 15 of this Lease shall name LANDLORD as an
additional insured and shall provide that LANDLORD shall be given a minimum of
thirty (30) days written notice by any such insurance company prior to the
cancellation, termination, or alteration of the terms or limits of such
coverage. Each policy, or a certificate of the policy, together with evidence
of payment of premiums, shall be deposited with the other party at the
commencement of the term, and on each renewal of the policy or new policy not
less than TWENTY (20) days before expiration of the term of the policy.
18. CUMULATIVE REMEDIES - All the rights and remedies of the LANDLORD
under this Lease shall be cumulative, and the exercise or assertion of one or
more of said rights or remedies shall not exclude the exercise of or assertion
of any other rights or remedies allowed by law or equity.
19. DEFAULT AND REMEDIES IN THE EVENT OF DEFAULT -
(a) DEFAULTS - TENANT shall be deemed in default and to have
breached this Lease and said default and breach shall be deemed complete and
uncured:
A. In the event that any rental payment, any property tax
payment, any insurance premium or any other monetary payment required herein
to be paid, or reserved herein, has not been paid within ten (10) business
days immediately after the due date thereof.
B. In the event that TENANT fails to keep or perform any other
covenant or condition contained in this Lease on TENANT's part to be kept or
performed, and such failure to keep or perform the same continues in whole or
in part, for a period of 30 days after service or giving of written notice
thereof by LANDLORD to TENANT, as provided for service or giving of notice in
this Lease; provided, however, that TENANT shall not be deemed in default
hereunder if it commences to remedy said default within said notice period and
proceeds therewith with due diligence.
(b) REMEDIES - In the event of any default under this Lease,
complete and uncured, as provided in subparagraph A and B immediately above,
LANDLORD may, at LANDLORD's option, exercise one or more or all of the
following remedies, and each shall be deemed cumulative and the exercise of
one or more shall not be deemed or held an election of any remedy to the
exclusion of any other remedy:
A. LANDLORD or his agent or agents shall have the right to and
may enter the Leased Premises as the agent of TENANT and may re-rent the
Leased Premises as the agent of the TENANT and receive the rent therefor on
such terms as shall be satisfactory to LANDLORD, and all rights of TENANT to
repossess the Leased Premises under such leasing shall be terminated and
forfeited. Such reentry by LANDLORD shall not operate to release TENANT from
any rent to be paid or covenants to be performed hereunder during the full
term of this Lease. For the purpose of re-letting, LANDLORD shall be
authorized to make such repairs or alterations in or to the Leased Premises as
may be necessary to place the same in good order and condition. TENANT shall
be liable to LANDLORD for the cost of such repairs or alterations, and all
expenses of such re-entry and re-letting. If the sum realized from the
re-letting is insufficient to satisfy the monthly or term rent provided in
this Lease, LANDLORD, at LANDLORD's option, may require that TENANT pay such
deficiency month by month or LANDLORD may seek said deficiency periodically or
at the end of said unexpired Lease term. LANDLORD shall not in any event be
required to pay to TENANT any surplus of any sums received by LANDLORD
resulting through a re-letting of said Leased Premises and which sum is in
excess of the rent reserved or to be paid under this Lease.
B. The unexpended deposit elsewhere provided herein to be
deposited by TENANT in favor of LANDLORD, to the extent, if any existing, may
be used in restoration of said Leased Premises to the condition existing
before rental to TENANT, including the costs of cleaning up of said Leased
Premises, if any, the costs of advertising said Leased Premises for leasing
through the making of signs or other means, and to the costs of repair or
restoration of said Leased Premises, any or all of the foregoing, and to
payment of any rental commission, and to the extent that there is any
remainder of said deposit, the same shall be applied toward the remaining
rental as it becomes due.
C. Notwithstanding any re-letting without termination, LANDLORD
may at any time thereafter elect to terminate this Lease for such previous
breach and failure to terminate the Lease in the initial instance for such
breach, or the re-letting of the Leased Premises by LANDLORD shall not
constitute a waiver of this right or stop LANDLORD from terminating this Lease
at any subsequent time. Should LANDLORD at any time terminate this Lease for
any breach in addition to any other remedy LANDLORD may have, LANDLORD may
recover from TENANT all damages incurred by reason of such breach, including,
but not limited to:
(1) The worth, at the time of the award of the unpaid rent
that has been earned at the time of termination of this Lease.
(2) The worth, at the time of the award of the amount by which
the unpaid rent would have been earned after the date of termination of this
Lease until the time of award exceeds the amount of the loss of rent that
TENANT proves could have been reasonably avoided;
(3) The worth, at the time of the award of the amount by which
the unpaid rent for the balance of the term after the time of award exceeds
the amount of loss of rent that TENANT proves could have been reasonably
avoided, and
(4) Any other amount, and court costs necessary to compensate
LANDLORD for all detriment approximately caused by TENANT's default.
"The worth at the time of the award" as used in (1) and (2) of
this paragraph is to be computed by allowing interest at the rate of ten
percent (10%) per annum. "The worth at the time of the award" as referred to
in (3) of this paragraph is to be computed by discounting the amount at the
discount rate of the Federal Reserve Bank of San Francisco at the time of the
award plus one percent (1%).
D. RIGHT TO PERFORM - If an Event of Default occurs, LANDLORD
may perform such covenant or condition at its option, after notice to TENANT,
All reasonable costs incurred by LANDLORD in so performing shall immediately
be reimbursed to LANDLORD by TENANT. Any performance by LANDLORD of TENANT's
obligations shall not waive or cure such default.
20. LANDLORD DEFAULT - In the event LANDLORD defaults in the
performance of any of its obligations, covenants, representations and
warranties hereunder and if such default continues for a period of fifteen
(15) days after written notice to LANDLORD from TENANT specifying the nature
of such default, TENANT may, at its option, cure the same on behalf of the
LANDLORD, whereupon the cost of such curing shall be due and payable to TENANT
from LANDLORD upon demand therefor by TENANT. The foregoing shall not limit
or preclude TENANT from any other rights and remedies available at law or in
equity.
21. ASSIGNMENT AND SUBLETTING - TENANT shall have the absolute right to
assign TENANT's rights under this Lease to a partnership, joint venture,
corporation or entity that is at least fifty percent (50%) owned either
directly or indirectly, by TENANT or a party in interest in the All-American
SportPark or to an entity which controls, is controlled by or is under common
control with TENANT.
Any other assignment of the TENANT's rights under this Lease must be
approved by LANDLORD, which approval will not be unreasonably withheld,
conditioned or delayed, A consent by LANDLORD to one assignment shall not be
deemed to be a consent to any subsequent assignment of this Lease by TENANT.
(a) ASSIGNMENT - Should TENANT be a corporation, any transfer or
assignment of any stock or interest in the corporation totaling in the
aggregate more than fifty percent (50%) of all such stock or interest in the
corporation shall be considered an assignment of this Lease requiring the
prior written consent of LANDLORD; provided, while a transfer of stock or
interest in the corporation of fifty percent (50%) or less shall not be
considered an assignment of this Lease. Upon such transfer, TENANT shall
provide LANDLORD with a copy of the transfer documents which shall include the
name, address, and telephone number of the transferee.
(b) SUBLEASE - TENANT may sublease a portion of the Leased Premises
or TENANT's improvements on the Leased Premises and/or grant a license or
licenses or concession or concessions within the Leased Premises without the
consent of LANDLORD provided that:
(i) Any subtenant, licensee or concessionaire does not occupy
more than fifteen (15%) percent of the Leased Premises;
(ii) Such use is permitted by PARAGRAPH NUMBERED 3 of this
Lease;
(iii) TENANT has executed a sublease agreement with subtenant
which specifically provides for record keeping and reporting as set forth in
the last PARAGRAPH NUMBERED 29(F) hereof.
(iv) TENANT gives LANDLORD prior written notice of such
subletting and/or concession or license, and a copy of those portions of the
subletting or concession/licensing documents relevant to the immediately
preceding Section (iii) and the name, address, and telephone number of the
sublessee, licensee or concessionaire.
TENANT shall not sublease all or any part of the unimproved property
within the Leased Premises without first obtaining LANDLORD's consent. Any
such sublease without LANDLORD's written consent shall be voidable and, at
LANDLORD's election, shall constitute a default. LANDLORD shall have the
right to approve or disapprove any such proposed sublease in LANDLORD's
discretion.
In the event of a sublease, the term of the sublease shall not extend
beyond the term of this Lease and any and all subleases shall contain an
attornment provision whereby the Sublessee shall recognize TENANT's successor
in interest and a non-disturbance provision whereby TENANT's successor shall
recognize the sublease so long as the Sublessee is not in default thereunder
and shall otherwise be expressly made subject to all the terms and covenants
and conditions of this Lease.
22. HOLDOVER - In the event that TENANT shall remain in the
demised
Leased Premises after the expiration or sooner termination of the term of this
Lease or any term theretofore extended as elsewhere provided herein, without
having exercised in writing an option contained in this Lease to extend the
Lease term or the then ending extended term, such holding over shall not
constitute a renewal or an extension of this Lease, and shall constitute a
month-to-month tenancy and, if LANDLORD so requires by written notice to
TENANT, the MINIMUM RENT for such holdover period shall be ONE HUNDRED TWENTY
PERCENT (120%) of the MINIMUM RENT effective on the last day of the term or
extended term, LANDLORD may, at LANDLORD's option, elect to treat TENANT as
one who has not removed at the end of his term, and LANDLORD shall thereupon
be entitled to all the remedies against TENANT provided by law or equity in
that situation, or, if not so treated, the tenancy shall be deemed a tenancy
from month to month, subject to the payment each month of the lease rental
provided for herein.
23. NON-WAIVER - The failure of either party to insist upon strict
compliance with or performance of any term, covenant, condition, or option
contained in this Lease or to the exercise of any option or alternative herein
allowed in any one instance or more instances, shall not be construed, deemed,
found or held a waiver or relinquishment for or in the future of that party's
right to insist upon strict performance of each such term, covenant,
condition, option, or alternative hereof and the same shall be and remain in
full force and effect without waiver.
24. NUMBER AND GENDER - All terms and words used in this Lease,
regardless of the number and gender in which they are used, shall be deemed
and construed to include any other number, singular or plural, and any other
gender, masculine, feminine or neuter, as the context or sense of this Lease
or any paragraph or clause herein may suggest or require, the same as if such
words had been fully, limited by or properly written in the required number
and gender.
25. HEIRS, SUCCESSORS AND ASSIGNS - Each term, covenant, condition and
agreement contained in this Lease, shall be deemed and construed to inure to
the benefit of, apply to, and be binding upon each party hereto and the
respective heirs, executors, administrators, legal representatives, successors
and assigns of each respectively, except as herein expressly stated to the
contrary.
26. PARAGRAPH CAPTION - The captions of paragraphs contained in this
Lease are inserted as a convenience only and by way of guide or reference
only, and none limit, enlarge, define, or otherwise affect the scope or intent
of this Lease or any provision thereof, and none shall in any way be used as a
basis of construction or interpretation of this Lease.
27. MINIMUM RENT AND ADJUSTMENT -
A. Beginning on the date which is the earlier of the two dates: (a)
twelve (12) months after the date that this Lease commences in accordance with
PARAGRAPH NUMBERED 1 hereof, or (b) the date that TENANT first opens
substantially all of the facilities for the uses contemplated by PARAGRAPH
NUMBERED 3 hereof for business on the Leased Premises (the Rental Commencement
Date), TENANT shall pay to LANDLORD minimum rent in the amount of TWO HUNDRED
TWENTY SIX THOUSAND NINE HUNDRED TWENTY-THREE AND 00/100 DOLLARS ($226,923.00)
per year (herein "Minimum Rent") in monthly installments of EIGHTEEN THOUSAND
NINE HUNDRED AND TEN AND 25/100 DOLLARS ($18,910.25) each (herein "Monthly
Installments"),
B. All minimum rent shall be payable in equal monthly installments
and in advance without deduction or offset on the first day of each month
during the term of this Lease. Any Minimum Rent payable for less than a
full calendar month shall be paid on a proportionate basis based on the number
of days in that calendar month, Minimum Rent shall be paid to LANDLORD, in
lawful money of the United States at the address specified in Paragraph 34
below or at such other place as LANDLORD shall from time to time designate in
writing.
C. The Minimum Rent shall be increased at the end of the fifth
(5th) year of the term and every five (5) years thereafter ("Adjustment Date")
by an amount equal to ten percent (10%) of the minimum Monthly Installment for
the month immediately preceding the Adjustment Date. Upon adjustment of the
Monthly Installment as provided in this Lease, the parties shall immediately
execute an amendment to the Lease stating the new Monthly Installment and the
concomitant changes to PARAGRAPH NUMBERED 29 hereof with the reference to
Percentage Rental.
D. In the event TENANT shall be late in paying any Monthly
Installment, then TENANT shall pay a "late charge" of FIVE HUNDRED DOLLARS
($500.00) to LANDLORD for each month late, in addition to any such rent
payments. For purposes of this paragraph, any rent payment received by
LANDLORD more than ten (10) business days after its due date shall be deemed a
late payment.
28. DEPOSIT -
A. Concurrently with the execution of this Lease and/or in
accordance
with the terms of the Agreement, TENANT deposited or will deposit
the sum of $500,000.00 with Landlord (herein RENTAL DEPOSIT). Once the terms
of the Deposit Agreement are fulfilled and this Lease becomes effective, the
sum so deposited shall be applied first to the Security Deposit set forth in
PARAGRAPH NUMBERED 28B below, and then to the said Minimum Monthly Rent
payment first coming due and thereafter to each successive monthly Minimum
Rent payment until exhausted.
B. SECURITY DEPOSIT - Upon the commencement of this Lease in
accordance with the Deposit Agreement and PARAGRAPH NUMBERED 1 hereof, from
the RENTAL DEPOSIT referred to in PARAGRAPH NUMBERED 28A, the sum of THIRTY
SEVEN THOUSAND EIGHT HUNDRED AND TWENTY AND 50/100 DOLLARS ($37,820.50) shall
be deemed deposited with LANDLORD as security for the faithful performance of
all of the terms and conditions of this Lease on the part of TENANT to be
performed. This deposit is not rent, but shall be applied to the Minimum Rent
for the 47th and 48th months of the Term of this Lease, provided Tenant is not
in default of any term or condition of this Lease, The deposit will be
returned to TENANT upon the earlier expiration of the term hereof if TENANT
has fully performed TENANT's obligations hereunder and if TENANT leaves the
premises in the condition required by the Lease. LANDLORD shall not be
required to hold said security deposit as a separate fund, and no interest
shall be payable thereon.
If at any time during the term of this Lease, prior to the application
of the security deposit to Minimum Rent as aforesaid, any of the rent herein
reserved shall, in accordance with the default provisions hereof, be overdue
and unpaid or any other sum payable by TENANT to LANDLORD hereunder shall, in
accordance with said default provisions, be overdue and unpaid, then LANDLORD
may, at LANDLORD's option and after written notice to TENANT, appropriate and
apply any portion of the security deposit to the payment of the overdue rent
or other sum, If LANDLORD does apply any portion of the security deposit for
any such purpose, then TENANT shall promptly redeposit with LANDLORD a
sufficient amount of cash to restore the security to the proper amount,
TENANT's failure to do so within THIRTY (30) DAYS after the date due shall
constitute a breach of this Lease and a default hereunder.
29. PERCENTAGE RENTAL -
A. In addition to the Minimum Rent payable annually of TWO HUNDRED
TWENTY SIX THOUSAND NINE HUNDRED TWENTY-THREE AND 00/100 DOLLARS
($226,923.00), TENANT agrees to pay LANDLORD a percentage rental based upon
the four (4) kinds of gross sales receipts, below set forth, that is, Gross
sales receipts received from customers on the Leased Premises and made up of
or consisting of the following if the total thereof is in excess of TWO
HUNDRED TWENTY SIX THOUSAND NINE HUNDRED TWENTY-THREE AND 00/100 DOLLARS
($226,923.00) per annum:
(i) six percent (6%) of Gross Annual Sales of baseball batting
cage ticket sales, go cart ticket sales, in-line skating ticket sales,
miniature golf ticket sales, arcade token sales and sports challenge ticket
sales;
(ii) three percent (3%) of Gross Annual Sales derived from sales
of foods and beverages;
(iii) three percent (3%) of Gross Annual sales derived from sale
of merchandise;
(iv) three percent (3%) of Gross Annual Sales from any other
revenue source derived from park guests or patron usage of the Leased
Premises.
B. Each Lease Year shall be considered as an independent accounting
period for the purpose of computing the total amount of percentage rental, if
any, payable by TENANT to LANDLORD; and, with respect thereto, (a) if the
total of the said annual percentage receipts for said five (5) kinds of Gross
Annual Sales does not exceed in amount TWO HUNDRED TWENTY SIX THOUSAND NINE
HUNDRED TWENTY-THREE AND 00/100 DOLLARS ($226,923.00), no percentage rental is
due or payable for that Lease Year; and, if TENANT has paid percentage rental,
the amount of such excess payment shall be applied by LANDLORD to the monthly
Minimum Rent(s) next payable in the ensuing Lease Year, except in the case of
the last Lease Year, in which case such adjustment will be made within THIRTY
(30) DAYS after the termination of this Lease; and, (b) if the total of the
said annual percentage receipts exceeds TWO HUNDRED TWENTY SIX THOUSAND NINE
HUNDRED TWENTY-THREE AND 00/100 DOLLARS ($226,923.00) and, in turn, the amount
paid by TENANT exceeds the excess total of said Gross Annual Sales receipts
that should be paid for the Lease Year, the excess paid by TENANT shall be
similarly applied to monthly Minimum Rent as above provided; and, if based
upon the total of the annual percentage receipts over TWO HUNDRED TWENTY SIX
THOUSAND NINE HUNDRED TWENTY-THREE AND 00/100 DOLLARS ($226,923.00) there is a
sum yet owing by TENANT for the Lease Year, then TENANT shall pay said sum to
LANDLORD with the monthly Minimum Rent payment next due.
C. Percentage rent shall be computed each percentage rent period
(as defined in Subparagraph D) below, On or before the fifteenth (15th) day of
the calendar month immediately following the close of each percentage rent
EIGHTEEN THOUSAND NINE HUNDRED AND TEN AND 25/100 DOLLARS ($18910.25) per
month; and FIFTY SIX THOUSAND SEVEN HUNDRED AND THIRTY AND 75/100 DOLLARS
($56,730.75) per calendar quarter that TENANT has paid during the percentage
rent period. period, TENANT shall pay to LANDLORD the amount by which the sum
computed as a percentage of TENANT's gross sales during the percentage rent
period exceeds the herein elsewhere provided Minimum Rent of EIGHTEEN THOUSAND
NINE HUNDRED AND TEN AND 25/100 DOLLARS ($18910.25) per month; and FIFTY SIX
THOUSAND SEVEN HUNDRED AND THIRTY AND 75/100 DOLLARS ($56,730.75) per calendar
quarter that TENANT has paid during the percentage rent period.
D. PERCENTAGE RENT PERIOD; ACCOUNTING PERIODS
DEFINED: The percentage rent period shall be Quarterly. The last percentage
rent period shall end on the date the term expires or terminates.
"Lease Year" is A PERIOD COMMENCING ON THE RENTAL COMMENCEMENT DATE
defined in PARAGRAPH NUMBERED 27 above, AND ENDING ONE (1) YEAR LATER, and,
severally, each such 12 month period thereafter.
"Monthly" rent periods are calendar months within each Lease Year.
"Quarterly" rent periods are three (3) calendar months within each Lease Year.
E. GROSS SALES DEFINED: With respect to "Gross Sales" above
designated, they include those of TENANT, subtenants, licensees, and
concessionaires, if any, whether for cash or on credit (whether collected or
not), made on the Leased Premises, whether made by personnel or vending or
other machines.
Gross Sales shall not include, or if included there shall be
deducted (but deducted only to the extent they have been included), the
following:
(1) The selling price of all merchandise returned by customers
and accepted for full credit, or the amount of discounts, refunds, and
allowances made on such merchandise.
(2) Sums and credits received in the settlement of claims for
loss of or damage to merchandise.
(3) The price allowed on all merchandise traded in by customers
for credit or the amount of credit for discounts and allowances made instead
of acceptance of merchandise.
(4) Gift certificates, or similar vouchers, until such time as
they shall have been converted into a sale by redemption.
(5) Sales and use taxes, so-called luxury taxes, consumers excise
taxes, gross receipts taxes, and other similar taxes now or in the future
imposed on the sale of service or merchandise, but only if such taxes are
added to the selling price during the percentage rent period.
(6) Sales of fixtures, equipment or property which are not
TENANT's stock in trade.
(7) Tips or gratuities given by customers to TENANT's agents,
employees or servants, whether such tips or other gratuities are automatically
added to the customer's bill or given by the customer separate and apart from
the bill.
F. STATEMENT OF GROSS SALES - TENANT shall furnish to LANDLORD a
statement of TENANT's gross sales within fifteen days after the end of each
percentage rent period, and an annual statement of gross sales within THIRTY
(30) days after the end of each Lease year, Each statement shall be signed and
certified to be correct by an officer of TENANT.
At TENANT's option, TENANT shall keep at the Leased Premises or at
TENANT's main office currently located in Las Vegas, Nevada, full and accurate
books of account, records, cash receipts, and other pertinent data showing its
Gross Sales. TENANT shall install and maintain accurate receipt-printing cash
registers and shall record on the cash registers every sale and other
transaction made from the Leased Premises. Such books of account records,
cash receipts, and other pertinent data shall be kept until the lapse of a
period of two (2) years after the end of each Lease Year.
LANDLORD shall be entitled within one (1) year after expiration or
termination of this Lease to inspect and examine all of TENANT's books of
account, records, cash receipts, and other pertinent data, to enable LANDLORD
to ascertain TENANT's Gross Sales. TENANT shall cooperate fully with LANDLORD
in making the inspection. LANDLORD shall also be entitled, once during each
Lease Year to an independent audit conducted of TENANT's books of account,
records, cash receipts, and other pertinent data to determine TENANT's Gross
Sales for the immediately preceding Lease Year, by a certified public
accountant to be designated by LANDLORD. The audit shall be limited to the
determination of Gross Sales and shall be conducted only after notice to
TENANT and during usual business hours at the Leased Premises or at TENANT's
main office.
If the audit shows that there is a deficiency in the payment of any
percentage rent, the deficiency shall become immediately due and payable. If
the audit shows that more percentage rent was paid than was due in accordance
herewith, such overpayment shall be credited against the next ensuing Minimum
Rental payment(s). The costs of the audit shall be paid by LANDLORD unless
the audit shows that TENANT understated Gross Sales by three (3%) percent or
more for the Lease Year, in which case TENANT shall pay all of LANDLORD's
costs of the audit. If such audit indicates an understatement of Gross Sales,
such examined records shall continue at all times to be held by TENANT for
further examination until full payment of the deficiency in rent paid and
resulting from such understatement. To audit, LANDLORD must give TENANT
written notice at least three (3) business days prior to arrival of the
auditor and the name of the auditor, and such audit shall be conducted with as
little disruption of TENANT's business as is reasonably possible and be
conducted during normal business hours.
LANDLORD shall keep any information gained from such statements,
inspection, or audit confidential and shall not disclose it other than to
carry out the purposes of this Lease, except that LANDLORD shall be permitted
to divulge the contents of any statements in connection with any financing
arrangements or sale of LANDLORD's interest in the Leased Premises.
It shall be and is the duty of TENANT to require by each licensing
agreement, concession agreement, and sublease, as the case may be, and, if
applicable, each such licensee, concessionaire, and subtenant, as the case may
be, to keep and' provide to TENANT records, reports and statements
substantially like those required of TENANT to be provided to LANDLORD
hereunder and for the reporting periods herein required and the same to be
provided at the times herein provided, however, advanced by due date by five
(5) days, over that herein provided and which agreements shall further provide
that LANDLORD herein may as part of its audit of TENANT's records audit said
licensees, concessionaires, or subtenant's records, which records will be held
and retained for periods equal to those required of TENANT herein. TENANT
shall not be in default in the event that any subtenant, concessionaire or
licensee fails to properly report gross sales, nor will TENANT be obligated to
pay any audit fees incurred in any such audit.
G. NEGATION OF PARTNERSHIP: LANDLORD shall not become or be deemed,
found or held a partner or a joint venture with TENANT by reason of the
provisions of this Lease.
30. LIENS - The LANDLORD and TENANT covenant each with the other that
each party ordering labor or materials for use on or about the Leased Premises
or any parcel wherein any lien shall affect the Leased Premises shall hold the
other harmless against any loss or damage due to any lien filed against the
Leased Premises on account of non-payment or dispute with respect to labor or
materials furnished in connection with construction referred to herein or any
other construction on the Leased Premises and such party shall prevent entry
of any judgment against the Leased Premises. The party against whom such lien
is filed shall notify the other in writing within fifteen (15) days of its
notice of filing, and said lien shall be removed within' thirty (30) days
thereafter or protected by bond or surety should such party so affected desire
to contest such lien.
31. INDEMNIFICATION - TENANT hereby covenants to indemnify, save and
hold LANDLORD and the Leased Premises free, clear and harmless from each
liability, loss, cost, charge, penalty, obligation, expense, attorney's fee,
litigation, judgment, damage, claim or demand of any kind whatsoever in
connection with, arising out of, or by reason of any violation of law,
ordinance or regulation by TENANT, subtenants, licensees, concessionaires, or
of any independent contractor, agent, or employee of TENANT while in, upon,
about or in any way connected with the Leased Premises or any portion thereof
during the term of this Lease.
LANDLORD hereby covenants to indemnify, save and hold TENANT and the
Leased Premises free, clear and harmless from each liability, loss, cost,
charge, penalty, obligation, expense, attorneys fee, litigation, judgment,
damage, claim or demand of any kind whatsoever in connection with, arising out
of, or by reason of any violation of law, ordinance or regulation by LANDLORD
or of any independent contractor, agent, or employee of LANDLORD while in,
upon, about or in any way connected with the Leased Premises or any portion
thereof or LANDLORD's Property during the term of this Lease.
32. OFFSET STATEMENT - Each party agrees at any time and from time to
time during the term of this Lease and within fifteen (15) days after written
demand therefor, to execute and deliver to the party requesting a certificate
in recordable form certifying that this Lease is in full force and effect and
that there are no defenses or offsets thereto, or stating such defenses or
offsets as are claimed by the party responding and stating the dates to which
all rentals have been paid.
33. QUIET POSSESSION - LANDLORD covenants that TENANT may quietly have,
hold and enjoy the Leased Premises during the term of this Lease without any
disturbance from LANDLORD or from any other person claiming through LANDLORD.
34. SERVICE OF NOTICES - Any and all notices and demands by or from
LANDLORD to TENANT, or by or from TENANT to LANDLORD, required or desired to
be given hereunder shall be in writing and shall be validly given or made if
served either personally or if deposited in the United States mail, certified
or registered, postage prepaid, return receipt requested or given by facsimile
(fax). If such notice or demand be served personally, service shall be
conclusively deemed made at the time of such personal service. If such notice
or demand be served by registered or certified mail in the manner provided,
service shall be deemed to have been given on the date marked on the return
receipt unless delivery is refused or cannot be made, in which case the date
of postmark shall be deemed the date notice has been given. If such notice or
demand is given by fax, the notice shall be deemed given when received.
Any notice or demand to LANDLORD shall be addressed to Landlord at:
Urban Land of Nevada
3271 South Highland Drive, #714
Las Vegas, Nevada 89109
Attn: Mr. Theodore B. Lee, President
Any notice or demand to TENANT shall be addressed to Tenant at:
All-American SportPark, Inc.
5325 South Valley View Boulevard, Suite 10
Las Vegas, Nevada 89118
ATTN: Ronald S. Boreta, President
Any party hereto may change its address for the purpose of receiving
notices or demands as herein provided by a written notice given in the manner
aforesaid to the other party hereto, which notice of change of address shall
not become effective, however, until the actual receipt thereof by the other
party.
35. PARTIAL INVALIDITY - If any term, provision, covenant or condition
of this Lease, or any application thereof, is held by a court of competent
jurisdiction to be invalid, void, or unenforceable, all provisions, covenants
and conditions of this Lease, and all applications thereof, not held invalid,
void or unenforceable, shall continue in full force and effect.
36. BROKERS - Each party warrants that it has not had any dealings with
any realtor, broker or agent in connection with the negotiation of this Lease,
or any dealings of any character the result of which would make either party
liable for any broker's commission or compensation of any kind.
LANDLORD and TENANT each agree to indemnify, defend and hold the other
harmless from and against all loss and expense (including attorney's fees),
damage and liability resulting from breach or the claims of any broker or
finder on account of any services claimed to have been rendered to the
indemnifying party in connection with the transaction contemplated by this
Lease.
37. CONDEMNATION -
A. DEFINITIONS -
(1) "Condemnation" means (a) the exercise of any governmental
power, whether by any legal proceeding or otherwise, by a condemnor and (b) a
voluntary sale or transfer by LANDLORD to any condemnor, either under threat
of condemnation or while any legal proceeding for condemnation is pending.
(2) "Date of Taking" means the date the condemnor has the right
to possession of the leased premises being condemned.
(3) "Award" means all compensations, sums, or anything of value
awarded paid, or received on a total or partial condemnation.
(4) "Condemnor" means any public or quasi-public authority, or a
private corporation or individual, having the power of condemnation.
B. RIGHTS AND OBLIGATIONS TO BE GOVERNED BY LEASE - If, during the
term of this Lease or during the period of time between the execution of this
lease and the date this Lease commences, there is any taking of all or any
part of the buildings, other improvements, or land of which the Leased
Premises are a part or any interest I the Lease by condemnation or of any of
the COMMON AREAS, the rights and obligations of the parties shall be
determined pursuant to the provisions hereof and its subdivisions.
C. TOTAL TAKING - If the Leased Premises are totally taken by
condemnation, this Lease shall terminate on the date of taking.
D. PARTIAL TAKING OF LEASED PREMISES - If any portion of the
Leased Premises is taken by condemnation, this Lease shall remain in effect,
except that TENANT can elect to terminate this lease if as a result of such
partial taking it is no longer economically feasable for TENANT to conduct its
business on the Leased Premises. If TENANT elects to terminate this Lease,
TENANT must exercise its right to terminate pursuant to this paragraph by
giving notice to LANDLORD within ninety (90) days after the nature and the
extent of the taking have been finally determined. If TENANT elects to
terminate this Lease as provided in this paragraph, TENANT also shall notify
LANDLORD of the date of termination, which date shall not be earlier than
thirty (30) days nor later than ninety (90) days after TENANT has notified
LANDLORD of its election to terminate; except, that this Lease shall terminate
on the date of taking if the date of taking falls on a date before the date of
termination as designated by TENANT. If TENANT does not terminate this Lease
within the ninety (90) day period, this Lease shall continue in full force and
effect.
E. EFFECT ON RENT - If any portion of the Leased Premises is taken
by condemnation and this Lease remains in full force and effect, there shall
be no reduction in the MINIMUM MONTHLY RENTAL.
F. RESTORATION OF LEASED PREMISES - If there is a partial taking of
the Leased Premises and this Lease remains in full force and effect as herein
provided, LANDLORD shall assign to TENANT that portion of the award received
for improvements and severance damages which are reasonably needed for
TENANT's reconstruction and restoration of the remaining portions of the
Leased Premises, including any and all improvements made heretofore together
with the remaining portions of the parking areas to an architectural whole in
substantially the same condition that the same were in prior to such taking.
The portion of the award received by Landlord for land value will be entirely
retained by LANDLORD and will not be made available to TENANT for any reason.
G. AWARD-DISTRIBUTION - All compensation awarded for any taking
whether for the whole or a portion of the Leased Premises, shall belong to
LANDLORD; provided that TENANT shall be entitled to any award made whether to
LANDLORD or to TENANT for the undepreciated portion of TENANT's improvements,
moving expenses, the value of TENANT's trade fixtures, and loss or damage to
TENANT's business to the extent allowable under the law then in force and
effect. A leasehold mortgagee shall have no claim or interest in LANDLORD's
award for the depreciated portion of TENANT's improvement. TENANT shall have
no claim against LANDLORD or the condemning body or entity for any portion of
the award relating to the value of the unexpired term of this Lease.
38. - SECTION 38 HAS BEEN INTENTIONALLY OMITTED.
39. TAXES - Subject to apportionment of the taxes to the Rental
Commencement Date (the apportionment to be made on the basis of the fraction
derived from the acreage area of the Leased Premises to the total acreage
owned by LANDLORD out of which the Leased Premises are carved), TENANT shall
pay promptly and before they become delinquent (provided all statements are
received by TENANT in a timely manner), all real and personal property taxes,
assessments and other impositions, including, but not limited to, general and
special, direct or indirect, that become due at any time during the term of
this Lease upon or against the Leased Premises including all buildings and
improvements of TENANT, TENANT's furniture, fixtures, equipment now or
hereafter thereon which may be or are lawfully assessed either in the name of
the LANDLORD or TENANT. Copies of all paid receipts shall be forwarded to
LANDLORD. Any leasehold improvements to the Leased Premises shall be deemed
TENANT's personal property for purposes of this section. TENANT shall be
liable for penalties, interest or other charges imposed upon delinquent
payment provided TENANT has received the applicable tax bills and a written
statement of apportionment on a timely basis. TENANT shall pay all real
estate taxes on the land as distinguished from improvements or buildings
during the Lease Term hereof and forward the paid receipt evidencing such
payment to LANDLORD.
In the event assessments are payable in installments, TENANT shall have
the right to elect to pay same over the longest available installment period;
provided that any special assessments resulting from TENANT's development or
improvements must be paid off prior to the end of the Lease Term or any
extension thereof. TENANT shall not be obligated to pay any such installments
due and payable outside the term hereof or any extended terms if extended by
TENANT. Any taxes applicable to this Lease which shall be assessed during and
for the lease term but shall not be due and payable until after the expiration
thereof shall remain an obligation of TENANT that survives such expiration.
TENANT shall not be liable for any inheritance tax, estate tax, gift tax,
transfer tax, income tax, franchise tax, corporate tax, or similar tax upon
the business of LANDLORD nor for any tax or assessment arising from the sale,
lease or other disposition of the Leased Premises, in whole or in part,
whether from a tax re-evaluation of said real estate or an imposition directly
on such transaction; provided, however, that TENANT shall be responsible for
its share of any increases in real property taxes or assessments as set forth
in this PARAGRAPH NUMBERED 39 resulting from an increased valuation of the
Leased Premises because of a sale of the Leased Premises or a revaluation by
any governmental entity.
LANDLORD shall provide TENANT with each assessment notice with respect to
the Leased Premises within fifteen (15) days of receipt of the same to permit
TENANT to contest the same if appropriate. LANDLORD shall cause the Tax
Assessor of Clark County, Nevada to carve out from the remaining property of
LANDLORD and separately assess the Leased Premises and improvements if it is
feasible for LANDLORD to do so.
The TENANT shall have the right, at its own cost and expense, to initiate
and prosecute any proceedings permitted by law for the purpose of obtaining an
abatement or of otherwise contesting the validity or amount of taxes or
assessments assessed to or levied upon the Leased Premises. If required by
law, TENANT may take such action in the name of the LANDLORD, who shall
cooperate with the TENANT to such extent as reasonably required to the end
that such proceedings may be brought to a successful conclusion, TENANT shall
fully indemnify and hold LANDLORD harmless from all loss, cost, damage and
expense incurred in furtherance of any contest or abatement proceeding.
TENANT agrees that in the event of any such election to contest, that it will
(i) pay the tax (unless such payment would operate to bar its right to
contest), and (ii) assure LANDLORD as reasonably necessary that the Leased
Premises and any mortgage lien thereon, if any, will not be subject to
forfeiture or foreclosure, as the case may be.
40. SIGNAGE RIGHTS - TENANT acknowledges LANDLORD's existing seven (7)
billboard signs along Las Vegas Boulevard and agrees to permit LANDLORD to
maintain such signs immediately to the east of the ONE HUNDRED (100) foot
right of way of Las Vegas Boulevard, subject to TENANT's reasonable approval
rights. LANDLORD shall, prior to the effective date of this Lease, and at no
cost to TENANT, exercise its best, good faith efforts to relocate all signs
along Las Vegas Boulevard to immediately to the east of the new ONE HUNDRED
(100) foot setback in accordance with the Agreement (or cause the same to be
so relocated). LANDLORD reserves the right to place two (2) free standing
signs on the Leased Premises along Sunset Road at locations within ONE HUNDRED
(100) FEET of the Sunset Road right of way and outside of the "Clear Zone",
cross-bolded in red on EXHIBIT A"; with specific locations to be approved by
TENANT, which approval shall not be unreasonably withheld, conditioned or
delayed.
TENANT agrees not to permit third parties not involved in an operation on
the Leased Premises to advertise on the Leased Premises. All signs put on the
Leased Premises by TENANT shall be subject to the prior written approval of
LANDLORD which approval will not be unreasonably denied, conditioned or
delayed. TENANT shall be permitted to put signage on the buildings and/or on
pylon or monument signs within the Leased Premises for parties who are doing
business or occupying space within the Leased Premises or parties who have an
interest in the TENANT's business by virtue of a license or sponsorship
agreement with the TENANT. Audio equipment used on the Leased Premises will
not be in violation of any regulations governing the use of audio equipment,
LANDLORD shall not place or permit to be placed any signs on the Leased
Premises other than as expressly set forth herein.
4l. SECTION 41 HAS BEEN INTENTIONALLY OMITTED.
42. GAMING - TENANT is hereby granted the right itself or by and
through a sublessee to have up to fifteen (15) slot machines and video poker
machines in the sports bar or any other facility, subject to licensing. In
addition to all other rental and charges payable hereunder, if TENANT conducts
a gaming enterprise on the Leased Premises in accordance with this PARAGRAPH
NUMBERED 42, it shall pay LANDLORD a sum equal to TWENTY-FIVE PERCENT (25%) of
the "net win" as defined in any agreement between TENANT and a gaming
licensee, concessionaire or slot route operator.
43. - SECTION 43 HAS BEEN INTENTIONALLY OMITTED.
44. INFRASTRUCTURE - LANDLORD and TENANT mutually agree to share at no
cost to each other the benefits derived from any future development of any
accesses or utility improvements, whether on the Leased Premises or on the
balance of the LANDLORD's Property. Further, LANDLORD and TENANT agree that
any third party who may in the future benefit from any of the improvements
mentioned herein will reimburse, on a pro-rata basis, either the LANDLORD or
the TENANT, depending on which paid for the improvements to which the third
party is deriving benefit.
45. - SECTION 45 HAS BEEN INTENTIONALLY OMITTED.
46. TENANT'S TRADEMARKS/TRADENAMES - LANDLORD shall not use any
trademarks or trade names of TENANT or of any of TENANT's subtenants,
licensees or concessionaires without the prior written consent of TENANT; and,
where applicable, of any affected subtenant, licensee or concessionaire.
47. HAZARDOUS MATERIALS - LANDLORD has no knowledge that the Leased
Premises contains any hazardous substance. A hazardous substance for purposes
of this Lease is defined as any substance whose nature and/or quantity of
existence, use, manufacture or affect, render it subject to Federal, State, or
local regulation, investigation, remediation, or removal as potentially
injurious to public health or welfare, i.e. including, but not limited to,
asbestos-containing materials, PCB's or underground tanks.
Neither TENANT nor its agents, employees, or contractors shall cause or
permit hazardous substances to be brought upon, kept, or used in, on, or about
the Leased Premises, except as permitted under and in full compliance with all
environmental laws. If TENANT obtains knowledge of the actual or suspected
release of a hazardous substance, then TENANT shall promptly notify LANDLORD
of such actual or suspected release. TENANT shall immediately notify LANDLORD
of any inquiry, test, investigation, or enforcement proceeding by or against
TENANT involving a release. If TENANT or its agents, employees, or
contractors shall cause or permit a release, then TENANT shall promptly notify
LANDLORD of such release and immediately begin investigation and remediation
of such release, as required by all environmental laws.
If TENANT breaches any obligation set forth in this paragraph, or if a
release is caused or permitted by TENANT or its agents, employees, or
contractors, and such release results in contamination of the Leased Premises,
then TENANT shall indemnify and defend LANDLORD (and LANDLORD's employees,
agents, partners, officers, and directors) against, and protect and hold
LANDLORD (and LANDLORD's employees, agents, partners, officers, and directors)
harmless from any and all claims, actions, suits, proceedings, judgments,
losses, costs, damages, liabilities (including, without limitation, sums paid
in settlement of claims), fines, penalties, or expenses (including, without
limitation, sums paid in settlement of claims), fines, penalties, or expenses
(including, without limitation, reasonable attorney's fees and consultant's
fees, investigation and laboratory fees, and court costs and litigation
expenses) that arise during or after the term as a result of such breach or
contamination.
This indemnity shall include, without limitation, (i) any damage,
liability, fine, penalty, punitive damage, cost, or expense arising from any
claim, action, suit, or proceeding for: personal injury (including sickness,
disease, or death), tangible property damage, nuisance, pollution,
contamination, leak, spill, release, or other effect on the environment, and
(ii) the cost of any investigation, repair, clean-up, treatment, or
detoxification of the Leased Premises and the preparation and implementation
of any closure, disposal, or other actions in connection with the Leased
Premises.
48. SOLE AND ONLY AGREEMENT - This Lease constitutes the sole and only
agreement between LANDLORD and TENANT respecting the Leased Premises, the
leasing of the Leased Premises to TENANT, the construction of the improvements
described in this Lease on the Leased Premises, or the Lease terms herein
specified and correctly sets forth the obligations of LANDLORD and TENANT to
each other as of its date, Any subsequent agreements or representations
respecting the Leased Premises, their Leasing to TENANT by LANDLORD, or any
other matter discussed in this Lease not expressly set forth in this Lease
shall be null and void unless they are in writing and executed by both
parties.
49. ACTING IN GOOD FAITH, DISCRETION, AND WITH REASONABLENESS -
Whenever either LANDLORD or TENANT must act pursuant to the terms of this
Lease, said actions shall be in good faith and any consents or approvals
required by one party from the other shall not be unreasonably withheld,
conditioned or delayed.
50. NO MERGER - There shall be no merger of the leasehold estate
created by this Lease with the fee estate in the Leased Premises by reason of
the fact that the same person may own or hold (i) the leasehold estate created
by this Lease or any interest in the leasehold estate and (ii) the fee estate
in the Leased Premises or any interest in the fee estate unless and until
LANDLORD and TENANT shall execute, acknowledge and record a written instrument
effecting the merger.
5l. TRANSFER OF LANDLORD'S INTEREST - LANDLORD shall have the right at
any time to sell, transfer, assign, pledge, or otherwise dispose of LANDLORD's
interest in the Leased Premises and in this Lease to any person, firm, or
corporation. In the event of such sale, transfer, assignment, or other
disposition, all obligations of LANDLORD hereunder shall devolve upon the
transferee and LANDLORD shall be released from all obligation and liability
thereafter accruing hereunder.
52. EFFECT OF EXERCISE OF PRIVILEGE BY LANDLORD - The exercise of any
right, or option or privilege hereunder by LANDLORD shall not exclude LANDLORD
from exercising any and all other rights, privileges, and options hereunder,
and LANDLORD's failure to exercise any said right, option, or privilege, shall
not relieve TENANT from TENANT's obligations to perform each and every
covenant and condition on TENANT's part to be performed hereunder, nor from
damage or other remedy for failure to perform or meet the obligation of this
Lease.
53. INSOLVENCY:
(a) For any attachment, garnishment, or execution of this Lease or
the interest of the TENANT hereunder in any action brought by or against the
TENANT, the TENANT shall have fifteen (15) days in which to provide the
LANDLORD written notification of such. Following TENANT's written
notification to LANDLORD, the TENANT shall have sixty (60) days in which to
cure. if such attachment, garnishment, or execution of this Lease brought by
or against TENANT cannot be cured within such sixty (60) day period, TENANT
shall not be in default hereunder; provided, TENANT has begun to cure within
such sixty (60) days and continues to diligently pursue a cure. Failure by
TENANT to either (a) notify LANDLORD as required above, or (b) cure (or
commence cure activity) within sixty (60) days following Notification shall
constitute a breach of this Lease by TENANT and a default hereunder.
(b) To the full extent permissible under the Bankruptcy Reform Act
of 1978, specifically Section 365 thereof (U.S.C. 365) or any successor
thereto, if TENANT shall file a voluntary petition in bankruptcy or take the
benefit of any insolvency act or be dissolved or adjudicated a bankrupt, or if
a receiver shall be appointed for its business or its assets and the
appointment of such receiver is not vacated within sixty (60) days after such
appointment, or if it shall make an assignment for the benefit of its
creditors, then and forthwith thereafter the LANDLORD shall have all of the
rights provided in Paragraph 19 of this Lease in the event of TENANT's default
hereunder.
54. EXECUTION OF DOCUMENTS - LANDLORD and TENANT shall each cooperate
with the other and execute such documents as the other party may reasonably
require or request so as to enable it to conduct its operations, so long as
the requested conduct or execution of documents does not have the effect of
derogating or altering the powers, rights, duties and responsibilities of the
respective parties.
55. INABILITY TO PERFORM/FORCE MAJEURE - The obligations of either
party hereunder shall not be affected or impaired nor shall either party be in
default of its obligations hereunder because such party is unable to fulfill
said obligations or is delayed in doing so, if such inability or delay is
caused by reason of strike, labor troubles, acts of God, governmental laws,
ordinances, rules or regulations or any other cause beyond the reasonable
control of such party.
56. GOVERNING LAW - This Lease, and all matters relating to this Lease,
shall be construed under the laws of the State of Nevada.
57. LANDLORD'S WARRANTIES AND REPRESENTATIONS - LANDLORD hereby
warrants and represents as follows:
(a) TITLE - LANDLORD has good and indefeasible fee simple title to
the Leased Premises and shall be fully capable of delivering to TENANT in
accordance with the terms and provisions of this Lease undisturbed possession
and quiet enjoyment of the Leased Premises.
(b) AUTHORITY OF LANDLORD - This Lease is valid and binding upon
LANDLORD and enforceable against it in accordance with its terms, Without
limiting the generality of the foregoing, (i) the execution and delivery of
this Lease by the person executing this Lease on behalf of LANDLORD and the
consummation by LANDLORD of the transactions contemplated hereby have been
specifically authorized by all requisite corporate action and (ii) the
transactions contemplated hereby are within LANDLORD's purposes and powers as
set forth in the applicable organizational documents forming and governing
LANDLORD.
(c) CONDEMNATION - To LANDLORD's knowledge, there is no pending or
threatened condemnation or similar proceeding affecting the Leased Premises or
any portion thereof nor does LANDLORD have any knowledge that any such action
is presently contemplated.
(d) PENDING LITIGATION - There are no legal actions, suits or other
legal or administrative proceedings pending or threatened against LANDLORD
that would have a material adverse effect upon the Leased Premises, LANDLORD's
interest therein, TENANT's contemplated use thereof or which would prohibit
LANDLORD from completing this transaction.
(e) PARTIES IN POSSESSION/CONTRACTS - No person or entity is in
possession of any portion of the Leased Premises as lessee, tenant at will or
at sufferance, or otherwise, and no person or entity has any right or option
to lease, purchase, occupy, use or possess any portion of the Leased Premises.
There are no maintenance, operations, management or miscellaneous contracts
affecting any portion of the Leased Premises.
(f) NO VIOLATIONS - LANDLORD has no present knowledge of any
violation of any ordinance, regulation, law or statute of any governmental or
quasi-governmental authority pertaining to the Leased Premises or any portion
thereof. The execution by LANDLORD of this Lease and the consummation by
LANDLORD of the transaction contemplated hereby does not and during the Term
of this Lease will not result in a breach of any term or provision of or
constitute a default or a condition which with notice or lapse of time or both
would ripen into a default under any indenture, agreement, instrument or
obligation to which LANDLORD is a party or to which LANDLORD or the Leased
Premises or any portion thereof is subject.
(g) DEBTS AND LIENS - LANDLORD has not incurred and to LANDLORD's
knowledge there are no unpaid charges, debts, liabilities, claims or
obligations as a result of the construction, occupancy, ownership, use or
operation of the Leased Premises which could give rise to any mechanic's,
materialments or other statutory lien against the Leased Premises or any
portion thereof.
(h) HAZARDOUS MATERIALS AND HAZARDOUS MATERIALS CONTAMINATION
DEFINITIONS:
A. For the purposes of this Lease, the parties agree that, unless
the content otherwise specifies or requires, the following terms shall have
the meaning herein specified:
(i) "Hazardous Materials" shall mean (a) any "hazardous
waste" as defined by the Resource Conservation and Recovery Act of 1976 (42 U.
S,C, Section 6901 et secr,) ("CERCLAII) as amended from time to time, and
regulations promulgated thereunder; (c) asbestos; (d) polychlorinated
biphenyls; (e) underground storage tanks, whether empty, filled or partially
filled with any substance, (f) any substance the presence of which on the
Leased Premises is prohibited by any Governmental Requirements; and (g) any
other substance which by any Governmental Requirements requires special
handling or notification of any federal, state or local governmental entity in
its collection, storage, treatment, or disposal.
(ii) "Hazardous Materials Contamination" shall mean the
contamination (whether presently existing or hereafter occurring) of the
Improvements, facilities, soil, ground water, air or other elements on or of
the Leased Premises by Hazardous Materials, or the contamination of the
buildings, facilities, soil, ground water, air or other elements on or of any
other property as a result of Hazardous Materials at any time (whether before
or after the date of this Lease) emanating from the Leased Premises.
(iii) "Governmental Authority" shall mean the United States,
the State of Nevada, the county in which the Leased Premises is situated (or
each such county if the Leased Premises is situated in more than one county),
the city in which the Leased Premises is situated (or each such city if the
Leased Premises is situated in more than one city), and any political
subdivision of any of the foregoing, and any agency, department, commission,
board, bureau, court or instrumentality of any of them which now or hereafter
has jurisdiction over the LANDLORD or the construction, development,
management and operation of the Leased Premises.
(iv) "Governmental Requirement" shall mean any law,
ordinance, order, rule, regulation or directive of a Governmental Authority.
B. LANDLORD hereby expressly warrants and represents:
(i) To the best of LANDLORD's knowledge, no Hazardous
Materials are now located on the Leased Premises, and neither LANDLORD nor any
other person has ever caused or permitted any Hazardous Materials to be
placed, held, located or disposed of on, under or at the Leased Premises or
any part thereof;
(ii) To the best of LANDLORD's knowledge, no part of the
Leased Premises is being used for the disposal, storage, treatment, processing
or other handling of Hazardous Materials, nor is any part of the Leased
Premises affected by any Hazardous Materials Contamination;
(iii) To the best of LANDLORD's knowledge, no part of the
Leased Premises has been used in the past for the disposal, storage,
treatment, processing or other handling of Hazardous Materials;
(iv) To the best of LANDLORD's knowledge, no property
adjoining the Leased Premises is being used, or has been used at any previous
time for the disposal, storage, treatment, processing or other handling of
Hazardous Materials nor is any other property adjoining the Leased Premises
affected by Hazardous Materials Contamination:
(v) To the best of LANDLORD's knowledge, no investigation,
administrative order, consent order and agreement, litigation or settlement
with respect to Hazardous Materials or Hazardous Materials Contamination is
proposed, threatened, anticipated or in existence with respect to the Leased
Premises, To the best of LANDLORD's knowledge, the Leased Premises is not
currently on, and to LANDLORD's knowledge has never been on, any federal or
state "Superfund" or "Superlien" list.
(i) NO CONFLICTS - The execution and delivery of this Lease, and
the performance by the LANDLORD of its obligations hereunder, do not and will
not (a) conflict with or result in a breach of any term, condition or
provision of, or constitute a default under (i) the articles of incorporation
or bylaws of the LANDLORD, (ii) any bond, debenture, note or other evidence of
indebtedness or (iii) any contract, indenture, mortgage, loan agreement,
lease, joint venture or other agreement or instrument to which the LANDLORD is
a party or by which the LANDLORD or any of its properties are bound, or (b)
result in any violation of any Governmental Requirements.
(j) NO CONSENTS NECESSARY - No consent or approval of any third
party, including, without limitation, any Governmental Authority, is required
in connection with the execution, delivery or performance by the LANDLORD of
this Lease and the consummation of the transactions contemplated herein.
LANDLORD shall indemnify and hold TENANT harmless of, from and against any and
all claims, demands, liabilities, liens, costs, expenses, penalties, damages
and losses, including without limitation reasonable attorneys' fees and costs
suffered by TENANT as a result of any breach of warranty or representation
made by LANDLORD in this PARAGRAPH NUMBERED 57. Each warranty and each
representation shall survive the termination of the Lease.
58. NON-DISTURBANCE, ATTORNMENT AND SUBORDINATION AGREEMENT
A. LANDLORD agrees that, no later than TWENTY (20) days after
thedate of full execution of the Lease, it will provide TENANT with
commercially reasonable non-disturbance, subordination and attornment
agreements ("non-disturbance agreement") in favor of TENANT from any ground
lessors, mortgage holders or lien holders (each,, a "Superior Mortgagee") then
in existence, if any, substantially in a form mutually acceptable to LANDLORD
and TENANT. Said non-disturbance agreements shall be in recordable form and
may be recorded at TENANT's election and expense, In the event LANDLORD fails
to provide such commercially reasonable non-disturbance agreements within the
time frame set forth above, TENANT shall have the right, exercisable at any
time thereafter, to give TEN (10) business days' written notice to LANDLORD
terminating the Lease. In the event LANDLORD does not provide TENANT with the
applicable nondisturbance agreements within such TEN (10) business day period,
the Lease shall terminate and LANDLORD shall reimburse TENANT for all of
TENANT's out-of-pocket costs incurred in connection with the design and
construction of the TENANT improvements and TENANT's legal fees incurred in
connection with the review and negotiation of the Lease and this provision
shall survive the termination of the Lease and LANDLORD shall forthwith pay
TENANT the sums represented by the Promissory Notes herein referred to,
LANDLORD agrees to provide TENANT with commercially reasonable and mutually
acceptable non-disturbance agreements, in favor of TENANT from any Superior
Mortgagee(s) of LANDLORD who later come(s) into existence at any time prior to
the expiration of the Term of the Lease, as it may be extended, in
consideration of, and as a condition precedent to, TENANT's agreement to be
bound by Lease PARAGRAPH NUMBERED 58B below. Said nondisturbance agreements
shall be in recordable form and may be recorded at TENANT's election and
expense.
B. OBLIGATIONS OF TENANT - Subject to PARAGRAPH NUMBERED 58A above,
the Lease and the rights granted to TENANT by the Lease shall be subject and
subordinate to (a) all ground or underlying leases affecting all or any part
of the Leased Premises subsequently existing and all amendments, renewals,
modifications, supplements and extensions of the leases, and (b) all deeds of
trust or mortgages subsequently affecting or encumbering all or any part of
the Leased Premises; provided, however, that if LANDLORD elects at any time to
have TENANT's interest in the Lease be or become superior, senior or prior to
any such instrument, then upon receipt by TENANT of written notice of such
election, TENANT shall immediately execute all necessary and reasonable
subordination instruments or other documents confirming the subordination of
such mortgage, deed of trust, ground or underlying lease to the Lease.
C. ATTORNMENT BY TENANT - Subject to PARAGRAPH NUMBERED 58A above,
in the event of the cancellation or termination of any or all ground or
underlying leases affecting all or any part of the Leased Premises in
accordance with its terms or by the surrender thereof, whether voluntary,
involuntary or by operation of law, or by summary proceedings, or in the event
of any foreclosure of any or all mortgages or deeds of trust encumbering the
Leased Premises by trustees sale, voluntary agreement, deed in lieu of
foreclosure, or by the commencement of any judicial action seeking
foreclosure, TENANT, at the request of the then landlord under the Lease,
shall attorn to and recognize (a) the ground or underlying lessor, under the
ground or underlying lease being terminated or canceled, and (b) the
beneficiary or purchaser at the foreclosure sale, as TENANT's landlord under
this Lease, and TENANT agrees to execute and deliver at any time upon request
of such ground or underlying lessor, beneficiary, purchaser, or their
successors, any instrument to further evidence such attornment. TENANT hereby
waives its right, if any, to elect to terminate the Lease or to surrender
possession of the Leased Premises in the event of any such ground or
underlying lease cancellation or termination or mortgage or deed of trust
foreclosure.
D. NON-DISTURBANCE - Notwithstanding any of the provisions of this
PARAGRAPH NUMBERED 58 to the contrary, TENANT shall be allowed to occupy the
Leased Premises, subject to the conditions of this Lease, and this Lease shall
remain in effect, until an Event of Default occurs (and all applicable notice
and cure periods have expired), or until TENANT's rights are modified because
of an Eminent Domain proceeding pursuant to PARAGRAPH NUMBERED 37 hereof.
59. ARBITRATION - The parties agree to submit to arbitration any
dispute related to this Lease and agree that the arbitration process shall be
the exclusive means for resolving disputes which the parties cannot resolve.
Any arbitration hereunder shall be conducted under the Dispute Resolution
Rules of the American Arbitration Association ("AAA") as modified herein.
Arbitration proceedings shall take place in Las Vegas, Nevada, before a single
arbitrator who shall be a lawyer. All arbitration proceedings shall be
confidential. Neither party shall disclose any information about the evidence
produced by the other party in the arbitration proceedings, except in the
course of judicial, regulatory, or arbitration proceeding, or as may be
demanded by government authority. Before making any disclosure permitted by
the preceding sentence, a party shall give the other party reasonable advance
written notice of the intended disclosure and an opportunity to prevent
disclosure. In connection with any arbitration provisions hereunder, each
party shall have the right to take the deposition of two (2) individuals and
any expert witness retained by the other party, Additional discovery may be
had only where the arbitrator so orders, upon a showing of substantial need,
Only evidence that is directly relevant to the issues may be obtained in
discovery. Each party bears the burden of persuasion of any claim or
counterclaim raised by that party. The arbitration provisions of this Lease
shall not prevent any party from obtaining injunctive relief from a court of
competent jurisdiction to enforce the obligations for which such party may
obtain provisional relief pending a decision on the merits by the arbitrator,
Each of the parties hereby consents to the jurisdiction of Nevada courts for
such purpose. The arbitrator shall have authority to award any remedy or
relief that a court of the State of Nevada could grant in conformity to
applicable law, except that the arbitrator shall have no authority to award
attorneys' fees or punitive damages, Any arbitration award shall be
accompanied by a written statement containing a summary of the issues in
controversy, a description of the award, and an explanation of the reasons for
the award, The arbitrators award shall be final and judgment may be entered
upon such award by any court.
60. LANDLORD BANKRUPTCY PROCEEDING - In the event that the obligations
of LANDLORD under this Lease are not performed during the pendency of a
bankruptcy or insolvency proceeding involving the LANDLORD as the debtor, or
following the rejection of this Lease in accordance with Section 365 of the
United States Bankruptcy Code, then notwithstanding any provision of this
Lease to the contrary, TENANT shall have the right to set off against rents
next due and owing under this Lease (a) any and all damages caused by such
non-performance of LANDLORD's obligations under this Lease by LANDLORD,
debtor-in-possession, or the bankruptcy trustee, and (b) any and all damages
caused by the non-performance of LANDLORD'S obligations under this Lease
following any rejection of this Lease in accordance with Section 355 of the
United States Bankruptcy Code.
61. MEMORANDUM OF LEASE - Upon execution of this Lease, LANDLORD and
TENANT shall execute a Memorandum of Lease in recordable form, which LANDLORD
shall deliver to TENANT for recording at TENANT's option. Said Memorandum
shall be amended as to legal descriptions and commencement and termination
dates when such information is available.
62. LEASEHOLD MORTGAGEE RIGHTS
A. DEFINITIONS
(1) The term "Leasehold Mortgagee" shall mean the holder of the
beneficial interest of a Leasehold Deed of Trust, who has given written notice
to LANDLORD of its name and address for notices.
(2) The term "Leasehold Deed of Trust" shall mean any encumbrance
of the Lease, by a deed of trust, mortgage or other security instrument,
including, without limitation, assignments of rents, issues and profits from
the Leased Premises, to secure repayment of loans made to, or obligations of,
TENANT thereunder.
B. TERMINATION AND MODIFICATION - LANDLORD agrees that, so long as
any Leasehold Mortgagee, its successor or assign holds a Leasehold Deed of
Trust, no termination of the Lease by TENANT and no subordination,
cancellation, surrender or modification of the Lease shall be effective
without the prior written consent of such Leasehold Mortgagee.
C. ENCUMBRANCE AND ASSIGNMENT OF LEASE - LANDLORD'S prior written
consent shall not be required to any of the following provided notice is given
to LANDLORD and LANDLORD is provided copies of all documentation relating
thereto:
(1) TENANT's encumbering the Lease by any Leasehold Deed of
Trust, the possession of the Leased Premises by a Leasehold Mortgagee or by a
receiver under a Leasehold Deed of Trust, and a sale or assignment of the
Lease by foreclosure under a Leasehold Deed of Trust, or by a deed or
assignment in lieu of foreclosure; or
(2) Further assignments or subleases of the Lease by a Leasehold
Mortgagee and, to the extent not in conflict with the Lease, the exercise of
any other rights, powers or remedies any Leasehold Mortgagee may have under a
Leasehold Deed of Trust; or
(3) Assignment of all or any part of any interest in the Lease
acquired by a purchaser at a foreclosure sale under a Leasehold Deed of Trust
or by a deed or assignment in lieu of foreclosure to any person or entity,
including, without limitation, a Leasehold Mortgagee.
LANDLORD consents to any of the above-described assignments without
restriction. Nothing in the Lease shall impose on a Leasehold Mortgagee the
obligations of TENANT under the Lease solely because such Leasehold Mortgagee
accepts a Leasehold Deed of Trust.
D. NOTICE OF DEFAULTS - LANDLORD agrees to give Leasehold Mortgagee
immediate notice of all defaults by TENANT under the Lease, and to
simultaneously give to Leasehold Mortgagee a written copy of all notices and
demands that LANDLORD gives to TENANT. No notice or demand under the Lease
shall be effective until after notice is received by Leasehold Mortgagee. Any
notices of default given by LANDLORD under the Lease shall describe the
default(s) with reasonable detail. Leasehold Mortgagee shall have the right
to cure any breach or default within the time periods given below.
E. LEASEHOLD MORTGAGEE'S CURE RIGHTS
(1) After receipt by TENANT of a notice of default under the
Lease and the expiration of any applicable period of cure given to TENANT
under the Lease, LANDLORD shall deliver an additional notice ("Mortgagee's
Notice") to Leasehold Mortgagee (which Leasehold Mortgagee shall be
non-related and non-affiliated as to TENANT) specifying the default and
stating that TENANT'S period of cure has expired. Leasehold Mortgagee shall
thereupon have the additional periods of time to cure any uncured default, as
set forth below, without payment of default charges, fees, late charges or
interest that might otherwise be payable by TENANT. LANDLORD shall not
terminate the Lease or exercise its other remedies under the Lease if:
(i) Within THIRTY (30) days after Leasehold Mortgagee's
receipt of the Mortgagee's Notice, Leasehold Mortgagee (A) cures the default,
or (B) if the default reasonably requires more than THIRTY (30) days to cure,
commences to cure said default and diligently prosecutes the same to
completion; or,
(ii) Where the default cannot be cured by payment or
expenditure of money or without possession of the Leased Premises or
otherwise, Leasehold Mortgagee initiates foreclosure or other appropriate
proceedings within SIXTY (60) days after receipt of the Mortgagee's Notice,
cures all other defaults reasonably capable of cure, complies with all other
covenants and conditions of the Lease reasonably capable of compliance, and
continues to pay all rents, real property taxes and assessments, and insurance
premiums to be paid by TENANT under the Lease, Leasehold Mortgagee shall then
have SIXTY (60) days, following the later to occur of (A) the date of
execution and delivery of a New Lease of the Leased Premises pursuant to
PARAGRAPH NUMBERED E(4) below, or (B) the date on which Leasehold Mortgagee or
its nominee is able to occupy the Leased Premises following eviction of or
vacating by TENANT under the Lease, to cure such default; provided, however,
that if any such default, by its nature, is such that it cannot practicably be
cured within SIXTY (60) days, then Leasehold Mortgagee shall have such time as
shall be reasonably necessary to cure the default provided that Leasehold
Mortgagee commences such cure within such SIXTY (60) day period and thereafter
diligently prosecutes the cure to completion.
(2) LANDLORD agrees to accept performance by Leasehold Mortgagee
of all cures, conditions and covenants as though performed by TENANT, and
agrees to permit Leasehold Mortgagee access to the Leased Premises to take all
such actions as may be necessary or useful to perform any condition or
covenants of the Lease or to cure any default of TENANT.
(3) If Leasehold Mortgagee elects any of the above-mentioned
options, then upon Leasehold Mortgagee's acquisition of the Lease by
foreclosure, whether by power of sale or otherwise or by deed or assignment in
lieu of foreclosure, or if a receiver be appointed, the Lease shall continue
in full force and effect, provided that, if Leasehold Mortgagee elects the
option provided in Subsection E(l)(ii) above, then upon Leasehold Mortgagee's
acquisition of the Lease Leasehold Mortgagee shall cure all prior defaults of
TENANT under the Lease that are reasonably capable of being cured by Leasehold
Mortgagee within the time set forth in Subsection E(l)(ii) above, and LANDLORD
shall treat Leasehold Mortgagee as TENANT under the Lease. If Leasehold
Mortgagee cures all defaults by TENANT and does not acquire the Lease, or if
Leasehold Mortgagee commences an action as set forth in Subsection E(l)(ii),
and thereafter TENANT cures such defaults (which cure LANDLORD shall be
obligated to accept) and Leasehold Mortgagee then terminates all proceedings
under the option in Subsection E(l)(ii) above, then the Lease shall remain in
full force and effect between LANDLORD and TENANT.
(4) In the event the Lease is terminated for any reason prior to
the end of the Lease term (unless the Lease is terminated due to Leasehold
Mortgagee's failure to exercise its rights under this Section 62, LANDLORD
shall enter into a new lease ("New Lease") with Leasehold Mortgagee or
Leasehold Mortgagee's nominee covering the Leased Premises, provided that
Leasehold Mortgagee (i) requests such New Lease by written notice to LANDLORD
within SIXTY (60) days after written notice by LANDLORD of termination of the
Lease, and (ii) cures all prior defaults of TENANT that are reasonably capable
of being cured by Leasehold Mortgagee, The New Lease shall be for the
remainder of the Lease term, effective at the date of such termination,, and
shall only include all the rents and all the covenants, agreements,
conditions, provisions, restrictions and limitations contained in the Lease.
In connection with a New Lease, LANDLORD shall assign to Leasehold Mortgagee
or its nominee all of LANDLORD's interest in all existing subleases of all or
any part of the Leased Premises and all attornments given by the sublessee's.
LANDLORD shall not terminate or agree to terminate any sublease or enter into
any new lease or sublease for all or any portion of the Leased Premises
without Leasehold Mortgagee's prior written consent, unless Leasehold
Mortgagee fails to deliver its request for a New Lease under this PARAGRAPH
62. In connection with any such New Lease, LANDLORD shall, by grant deed,
convey to Leasehold Mortgagee or its nominee title to the improvements, if
any, which become vested in LANDLORD as a result of termination of the Lease.
LANDLORD shall allow to the TENANT under the New Lease a credit against rent
equal to the net income, if any, derived by LANDLORD from the Leased Premises
during the period from the date of termination of the Lease until the date of
execution of the New Lease under this PARAGRAPH 62.
(5) Leasehold Mortgagee or any other purchaser at a foreclosure
sale of the Leasehold Deed of Trust (or Leasehold Mortgagee or its nominee if
one of them enters into a New Lease with LANDLORD) shall succeed to all the
interest of TENANT in any security or other deposits or other impound payments
paid by TENANT to LANDLORD.
F. PERMITTED DELAYS - So long as Leasehold Mortgagee is prevented
by any process or injunction issued by any court or by any statutory stay, or
by reason of any action by any court having jurisdiction of any bankruptcy or
insolvency proceeding involving TENANT, from commencing or prosecuting
foreclosure or other appropriate proceedings in the nature thereof, Leasehold
Mortgagee shall not be deemed for that reason to have failed to commence such
proceedings or to have failed to diligently prosecute such proceedings,
provided that Leasehold Mortgagee uses reasonable efforts to contest and
appeal the issuance or continuance of any such process, stay or injunction.
G. DEFAULTS DEEMED CURED - On transfer of the Lease at any
foreclosure sale under the Leasehold Deed of Trust or by deed or assignment in
lieu of foreclosure, or upon creation of a New Lease, any or all of the
following defaults relating to the prior owner of the Lease shall be deemed
cured:
(1) Attachment, execution or other judicial levy upon the Lease;
(2) Assignment of the Lease for the direct or indirect benefit of
creditors of the prior TENANT;
(3) Judicial appointment of a receiver or similar officer to take
possession of the Lease;
(4) Filing any petition by, for or against TENANT under any
chapter of the federal Bankruptcy Act or any federal or state debtor relief
statute, as amended;
(5) Any other default personal to TENANT and/or not otherwise
reasonably curable by Leasehold Mortgagee.
H. MERGER - So long as an Leasehold Mortgagee holds a Leasehold
Deed of Trust, the fee title to the Leased Premises and the leasehold estate
created by the Lease shall not merge unless all Leasehold Mortgagees expressly
consent to the merger in writing. This provision shall apply even it TENANT
or LANDLORD or any third party acquires both the fee title and the Lease.
I. CONDEMNATION - Any condemnation award to which TENANT is
entitled shall be paid directly to Leasehold Mortgagee. Leasehold Mortgagee
shall have the right to participate in all condemnation award proceedings held
by the condemning authority and the allocation of such award.
J. INSURANCE - Any insurance proceeds payable from any policy of
insurance (other than liability insurance) required by the Lease shall be paid
to Leasehold Mortgagee. Leasehold Mortgagee shall have the right to
participate in all adjustments, settlements, negotiation or actions with the
insurance company regarding the amount and allocation of any such insurance
proceeds. Any insurance policies permitted or required by the Lease shall
name Leasehold Mortgagee as an additional insured or loss payee, as
appropriate.
K. RESTORATION - Leasehold Mortgagee, if it exercises any of its
remedies under this PARAGRAPH 62 above, shall have no obligation to restore or
repair damage to the improvements that cost in excess of available insurance
proceeds.
L. LIMITATION ON LIABILITY - Leasehold Mortgagee shall not be
liable to perform TENANT's obligations under the Lease, unless and until
Leasehold Mortgagee acquires the Lease, by foreclosure under power of sale or
otherwise, by deed or assignment in lieu of foreclosure, or under the New
Lease provisions hereof. The liability of any Leasehold Mortgagee who
acquires the Lease shall be limited to Leasehold Mortgagee's interest in the
Lease. Leasehold Mortgagee shall not be liable for any such obligations under
the Lease following the assignment of its interest under the Lease to any
other transferee or any purchaser at foreclosure, whether conducted by power
of sale or otherwise. An interest in a Leasehold Deed of Trust securing any
unpaid part of the purchase price for the Lease shall not be considered
retention of an interest in the Lease for purposes of this subsection.
M. PRIORITY - The Lease, and any extensions, renewals or
replacements thereof, and a permitted sublease entered into by TENANT as
sublessor, and any Leasehold Deed of Trust or other encumbrance recorded by
Leasehold Mortgagee shall be superior to any mortgages, deeds of trust or
similar encumbrances placed by LANDLORD on the Leased Premises and to any lien
right, if any, of LANDLORD on the buildings, and any furniture, fixtures,
equipment or other personal property of TENANT upon the Leased Premises.
N. ESTOPPEL CERTIFICATE -
(a) Within 20 calendar days of written request by Leasehold
Mortgagee, LANDLORD shall execute and deliver to Leasehold Mortgagee or to any
proposed purchaser of TENANT's estate, a statement certifying as follows:
(1) The existence of the Lease and amendments to it;
(2) The last date LANDLORD received rent under the Lease,
the date such rent was due and the amount thereof;
(3) Whether there are any Events of Default under the Lease
(or whether there is or has been any event, act or omission which would
constitute an event of default with notice or lapse of time or both) to the
best knowledge of LANDLORD as of the date of the certificate;
(4) TENANT's satisfaction of all conditions precedent under
the Lease for commencement of construction of the improvements, or setting
forth the conditions that remain unsatisfied;
(5) Acknowledging receipt of Leasehold Mortgagee's name and
address for notice;
(6) That LANDLORD understands the recipient will rely on the
certificate.
(b) Within 20 calendar days of written request by LANDLORD or
LANDLORD's Fee Mortgagee, TENANT shall execute and deliver to both such
parties or to any proposed purchaser of LANDLORD's estate, a statement
certifying as follows:
(1) The existence of the Lease and amendments to it;
(2) The last date LANDLORD received rent under the Lease,
the date such rent was due and the amount thereof;
(3) Whether there are any Events of LANDLORD Default under
the Lease (or whether there is or has been any event, act or omission which
would constitute such an event of default with notice or lapse of time or
both) to the best knowledge of TENANT as of the date of the certificate;
(4) LANDLORD's satisfaction of all conditions precedent
under the Lease for commencement of construction of the improvements, or
setting forth the conditions that remain unsatisfied;
(5) Acknowledging receipt of Leasehold Mortgagee's or
purchaser's name and address for notice;
(6) That TENANT understands the recipient will rely on the
certificate.
0. NOTICE - Notices and other communications required by the Lease
to be given to Leasehold Mortgagee shall be delivered in accordance with
PARAGRAPH NUMBERED 34 of the Lease, at the address provided by Leasehold
Mortgagee. This address may be changed by a notice given in the same manner.
No notices given to TENANT by LANDLORD pursuant to the Lease shall be deemed
effective unless and until Leasehold Mortgagee receives a copy thereof.
P. SUCCESSORS - The right and benefits of Leasehold Mortgagee under
this Amendment shall benefit and may be exercised by the holder of any
Leasehold Deed of Trust given now or in the future as an encumbrance on the
Lease.
Q. OPTIONS -LANDLORD and TENANT agree that Leasehold Mortgagee may
exercise any OPTION to extend the term of the Lease which is granted to TENANT
under or in connection with the Lease. LANDLORD agrees to accept notice(s) of
exercise of such option(s) signed by Leasehold Mortgagee with the same effect
as though the notice were signed and delivered by TENANT, which notice may be
delivered by Leasehold Mortgagee within FIVE (5) days after the termination of
the period of time in which TENANT must exercise such option. In the event
TENANT fails to complete such extension, LANDLORD shall notify Leasehold
Mortgagee of such failure, and Leasehold Mortgagee shall thereupon have the
option to complete such extension within an additional period of time equal to
the time period originally available to TENANT, commencing from the date such
notice is received by Leasehold Mortgagee.
R. CLAIMS - LANDLORD and TENANT shall deliver to Leasehold
Mortgagee notice of any litigation or arbitration proceedings between the
parties or involving the Leased Premises or the Lease. Leasehold Mortgagee
shall have the right, at its option, to intervene and become a party to any
such proceedings. If Leasehold Mortgagee elects not to intervene or become a
party, LANDLORD shall deliver to Leasehold Mortgagee prompt notice of and a
copy of any award, decision or settlement agreement made in connection with
any such proceeding.
S. FURTHER AMENDMENTS - LANDLORD and TENANT shall cooperate in
including in the Lease by suitable amendment from time to time any provision
which may be reasonably requested by any proposed Leasehold Mortgagee for the
purpose of implementing the mortgagee protection provisions contained in this
PARAGRAPH NUMBERED 62 and allowing that Leasehold Mortgagee reasonable means
to protect or preserve the lien of its Leasehold Deed of Trust upon the
occurrence of a default under the terms of the Lease. LANDLORD and TENANT
each agree to execute and deliver (and to acknowledge for recording purposes,
if necessary) any agreement required to effect any such amendment; provided
that any such amendment shall not in any way affect the term or rent under the
Lease or otherwise in any material respect adversely affect any rights of
LANDLORD under the Lease.
IN WITNESS WHEREOF, the parties hereto have executed this Lease the day
and year first above written.
LANDLORD: URBAN LAND OF NEVADA, a Nevada corporation
By: /s/ Gregory T. H. Lee
Gregory T. H. Lee, Vice President
TENANT: ALL AMERICAN SPORTPARK, INC., a Nevada corporation
By: /s/ Ronald S. Boreta
Ronald S. Boreta, Managing Partner
GUARANTY
The undersigned hereby unconditionally guarantees payment and performance of
the terms, covenants and conditions contained in the above INDENTURE OF LEASE
to be kept, performed and paid by TENANT, ALL AMERICAN SPORTPARK, INC. in
favor of LANDLORD, URBAN LAND OF NEVADA, a Nevada corporation.
DATED: This 9th day of June, 1997.
SAINT ANDREWS GOLF CORPORATION, INC., a Nevada corporation
By: /s/ Ronald S. Boreta
Ronald S. Boreta, President
<PAGE>
EXHIBIT "A"
ALL-AMERICAN SPORTPART
Proposed Lease Area 2
[MAP]
<PAGE>
EXHIBIT "B"
W.O. #993-C370
File: C370ex13.doc
April 7, 1997
By: RNB
Checked by: GDR
ESI ENGINEERS AND
SURVEYORS, INC.
EXPLANATION: Proposed property description for LEASE AREA 2
BASIS OF BEARING:
The basis of bearing for this property is the northerly line of the Northwest
Quarter (NW 1/4) of Section 4, Township 22 South, Range 61 East, M.D.M.,
County of Clark, State of Nevada, which bears South 88o 50' 29" West, as per
map recorded in File 59, Page 55 of Surveys in the Office of the County
Recorder of said County.
Being a portion of the Northwest Quarter (NW 1/4) of Section 4, Township 22
South, Range 61 East, M.D.M., County of Clark, State of Nevada, more
particularly described as follows:
COMMENCING at the northwest corner of said Section 4, said point being the
centerline intersection of Las Vegas Boulevard South (SR-91) and Sunset Road;
Thence along the northerly line thereof, said line also being the centerline
of said Sunset Road, North 88o 50' 29" East, 1016.24 feet;
Thence departing said line, South 010 09' 31" East, 50.00 feet to a point on
the southerly right-of-way line of Sunset Road, being 50.00 feet wide as per
document recorded April 27, 1972 in Book 226, Instrument No. 185689, Official
Records, said point also being the POINT OF BEGINNING;
Thence along said right-of-way line, North 88o 50' 29" East, 1365.65 feet to a
line being 249.99 feet westerly and parallel with measured at right angles
from the easterly line of said Northwest Quarter (NW 1/4);
Thence along said line, South 00o 35' 14" East, 870.00 feet;
Thence departing said line, South 89o 24' 46" West, 957.01 feet;
Thence North 29o 07' 55" West, 724.00 feet;
Thence South 88o 50' 29" West, 79.92 feet;
Thence North 01o 09' 31" West, 221.00 feet to the POINT OF BEGINNING.
Said parcel contains 23.61 acres, more or less.
"The above described parcel of land represents a portion of the Northwest
Quarter (NW 1/4) of Section 4, Township 22 South, Range 61 East, M.D.M.,
County of Clark, State of Nevada and is not intended for inclusion in a
document conveying fee ownership. To do so is a violation of state law and or
local ordinance."
END OF DESCRIPTION
<PAGE>
EXHIBIT "C"
[MAP]
LEASE AGREEMENT
BETWEEN
URBAN LAND OF NEVADA, INC.
AND
ALL-AMERICAN GOLF CENTER, LLC
JUNE 1997
TABLE OF CONTENTS
Paragraph #, Description Page #
1. Term .....................................................1
2. Option To Extend Lease Term ..............................2
3. Purpose Of Occupancy .....................................2
4. Exclusive Use ............................................2
5. Prohibited Activities ....................................2
6. Compliance With Laws .....................................3
7. Access To Leased Premises ................................3
8. Tenant Responsible For Repairs ...........................3
9. Improvements .............................................3
10. Property Loss Assumed By Tenant ..........................4
11. Non-Responsibility Notices ...............................5
12. Attorneys Fees ...........................................5
13. Utilities ................................................5
14. Public Liability And Property Damage Insurance ...........5
15. Tenant's Fire Insurance ..................................6
16. Waiver Of Subrogation ....................................6
17. Other Insurance Matters ..................................6
18. Cumulative Remedies ......................................7
19. Defaults And Remedies In The Event Of Default ............7
20. Landlord Default .........................................8
21. Assignment And Subletting ................................8
22. Holdover .................................................9
23. Non-Waiver ...............................................9
24. Number And Gender ........................................10
25. Heirs, Successors And Assigns ............................10
26. Paragraph Caption ........................................11
27. Minimum Rent And Adjustment ..............................11
28. Deposit ..................................................11
29. Percentage Rental ........................................11
30. Liens ....................................................14
31. Indemnification ..........................................15
32. Offset Statement .........................................15
33. Quite Possession .........................................15
34. Service Of Notices .......................................15
35. Partial Invalidity .......................................16
36. Brokers ..................................................16
37. Condemnation .............................................17
38. section # 38 has been intentionally omitted ..............18
39. Taxes ....................................................18
-I-
<PAGE>
40. Signage Rights ...........................................19
41. section 41 has been intentionally omitted ................19
42. Gaming ...................................................19
43. section 43 has been intentionally omitted ................19
44. Infrastructures ..........................................19
45. section 45 has been intentionally omitted ................20
46. Tenant's Trademarks/Trade Names ..........................20
47. Hazardous Materials ......................................20
48. Sole And Only Agreement ..................................20
49. Acting In Good Faith, Discretion, And With Reasonable-
ness ....................................................21
50. No Merger ................................................21
51. Transfer Of Landlord's Interest ..........................21
52. Effect Of Exercise Of Privilege By Landlord ..............21
53. Insolvency ...............................................21
54. Execution Of Documents ...................................22
55. Execution To Perform/Force Majeure .......................22
56. Governing Law ............................................22
57. Landlord's Warrantees And Representations ................22
58. Non-Disturbance, Attornment And Subordination Agreement ..24
59. Arbitration ..............................................26
60. Landlord Bankruptcy Proceeding ...........................26
61. Memorandum Of Leases .....................................26
62. Leasehold Mortgagee Rights ...............................27
-ii-
<PAGE>
INDENTURE OF LEASE
THIS INDENTURE OF LEASE (herein Lease), made and entered into in Las
Vegas, Nevada, on this ------- day of June, 1997 by and between Urban Land of
Nevada, a Nevada corporation (herein called LANDLORD) and All-American Golf
Center, LLC, a California Corporation, (herein TENANT).
BACKGROUND/CONDITIONS - LANDLORD owns approximately 135 acres of
unimproved property in Clark County, Nevada, which is bounded by Las Vegas
Boulevard, Gillespie Street, Sunset Road, and I-215 - the Maule Expressway
("LANDLORD s Property"), which is more particularly shown and highlighted in
yellow on EXHIBIT "A", which is attached hereto and by this reference made a
part hereof.
TENANT wishes to lease approximately 41.4 acres of LANDLORD s Property for
a Golf Center with a golf driving range, a par three executive golf course, a
Clubhouse building to house food concessions, golf pro shop merchandise
retail, a golf testing and fitting center, golf cart storage and other uses
normally expected in a Golf Center ("Leased Premises") as highlighted in blue
on EXHIBIT "A".
LANDLORD wants to provide wholesome, family, sports oriented entertainment
which will be an amenity for its proposed hotel/casino and entertainment
center, planned for the southern part of LANDLORD's Property and expects that
TENANT's development will support and complement LANDLORD's plans for the
balance of LANDLORD's Property.
LANDLORD has agreed to enter into this Lease with TENANT because of
TENANT's exclusive and special relationship with Callaway Golf (i.e., TENANT
intends to build a first class golf driving range and practice facility
similar to and modeled after Callaway Golf's test and fitting facility known
as The Helmstetter Test Center in Carlsbad, California. Such facility will
provide special golf technology known as The Callaway Golf Performance Center
to be used for fitting Callaway golf clubs and for teaching by professionals,
and will be the only such facility in Las Vegas).
LANDLORD has seen TENANT's prepared preliminary plans and has entered into
this Lease expressly on the condition that TENANT builds such a facility.
W I T N E S S E T H:
LANDLORD hereby leases to TENANT, and TENANT hereby hires from LANDLORD,
the premises outlined in blue on EXHIBIT "A" attached hereto and incorporated
herein by reference as though fully set forth herein (herein Leased Premises)
for the term and in accordance with the provisions hereinafter stated and
provided. An exact legal description attached as EXHIBIT "B" will be attached
hereto when available, as required by an agreement of even date herewith
between LANDLORD and TENANT.
IN CONSIDERATION WHEREOF, THE PARTIES HERETO HEREBY COVENANT AND AGREE AS
FOLLOWS:
1. TERM - The term of this Lease will be fifteen (15) years and will
commence on the first day of the month next following the date that the
All-American Golf Center opens for public business , or February 1, 1998,
whichever date comes first; and will expire the last day of the 180th month
thereafter. Once the effective commencement date of this Lease is
established, the parties will execute an Amendment to this Lease and the
Memorandum of Lease required by PARAGRAPH NUMBERED 61 hereof, establishing the
commencement and termination dates with certainty.
2. OPTION TO EXTEND LEASE TERM - LANDLORD hereby grants to TENANT the
right, privilege and option to extend this Lease for two (2) additional terms
of five (5) years each upon the same terms and conditions as herein contained,
including, without limitation, the Minimum Rent and Percentage Rent set forth
in PARAGRAPHS NUMBERED 27 and 29 below.
Provided TENANT is not in default under the terms of this Lease beyond any
applicable notice and cure periods, at the time of its exercise of an option,
the given option to extend may be exercised by TENANT by giving written notice
of exercise to LANDLORD at least one hundred eighty (180) days prior to the
end of the term or expiration of the then extended term. The extension
options set forth herein are not personal to TENANT and may be exercised by
any permitted assignee of this Lease or by any Leasehold Mortgagee as defined
herein below.
3. PURPOSE OF OCCUPANCY - TENANT shall initially use and occupy the
Leased Premises for a commercial recreation facility known as the Golf Center,
which may include a par three golf course and golf driving range designed for
night play, clubhouse building containing golf merchandise retail, food and
beverage service, golf club fitting and rental and a professional golf
instruction center, TENANT may not change the use of the Leased Premises to
other uses and purposes without the prior written consent of LANDLORD which
consent shall not be unreasonably withheld, conditioned or delayed. Uses not
permitted on the Leased Premises are set forth in PARAGRAPH NUMBERED 5 of this
Lease. All food services must be inside the main building, or otherwise
integrated into TENANT's overall All-American Golf Center theme and operation,
it being the parties' intention that no food services will be permitted on
pads or otherwise within the Leased Premises at a location with direct access
to Sunset Road or Las Vegas Boulevard.
4. EXCLUSIVE USE - LANDLORD hereby grants to TENANT the exclusive right
to carry on the following uses: A par three golf course, golf driving range,
miniature golf course, clubhouse building containing golf sports merchandise
retail, golf club fitting and rental and a professional golf instruction
center, food and beverage service. LANDLORD will not permit the conduct of
any business or enterprise of any of the same kind or nature to any of these
specific uses on LANDLORD's Property during the Lease term or any extensions)
thereof. The land to which this covenant pertains is outlined in yellow on
EXHIBIT "A". For these purposes, LANDLORD will execute a recordable
restrictive covenant describing the balance of LANDLORD's Property in EXHIBIT
"A" and the use restrictions applicable thereto and deliver same to TENANT and
allow TENANT to record it. One of TENANT's remedies for a violation of the
restrictive covenant by LANDLORD would be to terminate this Lease.
5. PROHIBITED ACTIVITIES - During the entire term of this Lease, the
following uses shall not be permitted on the Leased Premises: A gas station, a
funeral parlor, a massage parlor, a so-called "flea market," industrial or
residential purposes, an adult bookstore or a store selling or exhibiting
pornographic materials (as used herein "adult bookstore or store selling or
exhibiting pornographic materials" shall include without limitation, a store
displaying for sale or exhibiting books, magazines or other publications
containing any combination of photographs, drawings or sketches of a sexual
nature which are not primarily scientific or educational or store offering for
exhibition, sale or rental videocassettes or other medium capable of
projecting, transmitting, or reproducing independently or in conjunction with
other devices, machine or equipment, an image or series of images the content
of which has been rated or advertised generally "X" or un-rated by the Motion
Picture Rating Association or any successor thereto"), any use that materially
increases the risk of hazardous contamination on the Leased Premises or
surrounding area, and any use that is in any way in violation of any valid
law, ordinance, or regulation of any Federal, State, County, or local agency,
body or entity. In addition, TENANT shall not commit or suffer to be
committed, any waste upon the Leased Premises or any nuisance. LANDLORD
agrees to use its best efforts (including litigation) to prohibit the uses
listed in this Paragraph 5 with the exception of a gas station, on the balance
of LANDLORD's Property during the lease term or any extension thereof.
6. COMPLIANCE WITH LAWS - TENANT shall promptly execute, perform and
comply with each law, rule, order, decision, ordinance, requirement and
regulation of each City, County, State, or Federal authority, department,
board, or body having jurisdiction or authority in relation to this Lease, or
the Leased Premises, and TENANT shall promptly make each such repair,
replacement, improvement or addition required by any such and without cost to
LANDLORD.
7. ACCESS TO LEASED PREMISES - LANDLORD and other designated LANDLORD
TENANTS shall have access to the Leased Premises, at reasonable times which do
not interrupt the normal business of the All-American Golf Center , for the
purpose of making any such improvement, repair or alteration as is the
responsibility of LANDLORD, or other designated LANDLORD TENANTS hereunder, if
any. LANDLORD and other designated LANDLORD TENANTS shall at times when it is
necessary to enter Leased Premises contact the All-American Golf Center
manager prior to entering the leased premises, to inform the manager of the
reason for entering the Leased Premises, the time the Leased Premises will be
occupied, etc. It is, however, expressly understood and agreed that the
authority hereby reserved or granted to the LANDLORD, does not impose, nor
does the LANDLORD assume, by reason thereof, any responsibility, or liability,
whatsoever, for the care, maintenance, supervision, improvement, repair or
alteration of the Leased Premises other than as may be set forth herein.
8. TENANT RESPONSIBLE FOR REPAIRS - LANDLORD shall be under no
liability, obligation or expense whatsoever in connection with the maintenance
or the repair of any improvements constructed upon the Leased Premises, of any
and every description. And, any and every need for repair is hereby accepted
by TENANT, who hereby covenants and agrees to make each such repair at
TENANT's sole cost and expense.
9. IMPROVEMENTS - TENANT shall construct on the Leased Premises a
high-quality commercial recreation facility in a good and workmanlike manner.
TENANT has submitted to LANDLORD, and LANDLORD has approved prior to execution
of this Lease, a Site Plan with colors and an elevation with architectural
detail, Landscaping Plan, Grading Plan, and civil engineering drawings for the
improvements which TENANT intends to construct of the Leased Premises. TENANT
shall pay for the cost of bringing all utilities to buildings or improvements
constructed on the Leased Premises by TENANT. Upon completion of the
improvements and when any buildings are ready for occupancy by TENANT, TENANT
shall prepare and record a Notice of Completion and obtain a Certificate of
Occupancy. After the initial completion of TENANT's commercial recreation
facility on the Leased Premises, TENANT at its cost shall have the right to
make, without LANDLORD's consent, alterations to the improvements; provided
any material structural alterations or improvements or any significant change
in the exterior colors of any buildings on the Leased Premises shall require
LANDLORD's prior written consent which shall be deemed given if LANDLORD does
not object within fifteen (15) days of LANDLORD's receipt of TENANT's request
for consent.
All buildings and other improvements constructed upon the Leased Premises
by TENANT during the term of this Lease and all alterations, additions, and
fixtures thereto from time to time constructed, installed, or placed in, on or
upon the Leased Premises by TENANT shall be owned by TENANT or any permitted
assignee of TENANT until expiration of the term or sooner termination of this
Lease. TENANT shall not remove any of the buildings or permanent improvements
from the Leased Premises nor waste, destroy or modify any of the buildings and
improvements except as permitted by this Lease. Tenant shall have the right
to remove from the Leased Premises all furniture, trade fixtures and equipment
which are not permanently affixed thereto. At the expiration of the term or
sooner termination of this Lease, all buildings and permanent improvements
shall, without compensation to TENANT, remain upon the Leased Premises, and
shall become LANDLORD's property free and clear of any liens, claims, or
rights of any third parties or of TENANT. TENANT shall indemnify LANDLORD
from any such liens, claims, or rights of third parties. Each party agrees to
execute, acknowledge, and deliver any instrument required by the other to
evidence the respective interest of the parties hereto as stated in this
paragraph. Provided, however, within thirty (30) days after the end of the
lease term or any extension thereof, LANDLORD shall inspect the Leased
Premises and shall promptly advise TENANT in writing if TENANT shall be
required to remove any improvements constructed on the Leased Premises by
TENANT. If LANDLORD determines that certain improvements shall be removed,
then TENANT, at TENANT's cost and expense, shall remove such improvements and
shall return the Leased Premises other than as set forth in PARAGRAPH NUMBERED
57 hereof to its previous condition within sixty (60) days after the date of
Landlord's inspection.
TENANT accepts the Leased Premises in an "as is" condition other than as
set forth in PARAGRAPH NUMBERED 57 hereof. LANDLORD makes no warranty as to
the condition of the Leased Premises. LANDLORD shall not make any
improvements on the Leased Premises or pay for any fees or costs in regard to
TENANT's use of the Leased Premises.
If construction of TENANT's proposed project is not completed on the
Leased Premises within two (2) years of the commencement date of this Lease as
established in accordance with PARAGRAPH NUMBERED 1 hereof, LANDLORD upon
written notice to TENANT shall have the right to terminate this Lease. If any
portion of the Leased Premises is not improved within two (2) years of the
execution of this Lease, this Lease shall terminate as to that portion of the
Leased Premises not so improved and upon such partial termination, there shall
be no adjustment in the Minimum Rent as set forth in PARAGRAPH NUMBERED 27 of
this Lease.
10. PROPERTY LOSS ASSUMED BY TENANT - TENANT shall indemnify and hold
LANDLORD and the property of LANDLORD, including the Leased Premises, and any
buildings or improvements now or hereafter on the Leased Premises, free and
harmless of any and all liability, claims, loss, damages, or expenses
resulting from TENANT's occupation and use of the Leased Premises,
specifically including without limitation any liability, claims, loss,
damages, or expenses arising by reason of:
(a) the death or injury of any person, including TENANT or any
person who is an employee or agent of TENANT, or by reason of the damage to or
destruction of any property, including property owned by TENANT or by any
person who is an employee or agent of TENANT, from any cause whatever, except
for LANDLORD's gross negligence, willful acts or omissions or intentional
misconduct while such person or property is in or on the Leased Premises or in
any way connected with the Leased Premises or with any of the improvements or
personal property on the Leased Premises;
(b) the death or injury of any person, including TENANT or any
person who is an employee or agent of TENANT, or by reason of the damage to or
destruction of any property, including property owned by TENANT or by any
person who is an employee or agent of TENANT, caused or allegedly caused by
(i) the condition of the Leased Premises or some building or improvement on
the Leased Premises, or (ii) some act or omission on the Leased Premises by
TENANT or any person except LANDLORD in or about the Leased Premises with
permission and consent of TENANT;
(c) any work performed on the Leased Premises or materials
furnished to the Leased Premises at the instance or request of TENANT or any
person or entity acting for on behalf of TENANT; or,
(d) TENANT's failure to perform any provision of this Lease or to
comply with any requirement of law or any requirement imposed on TENANT or the
Leased Premises by any duly authorized governmental agency or political
subdivision.
The limits of liability insurance as provided in PARAGRAPH NUMBERED 14
of this Lease shall not, however, limit the liability of TENANT under the
indemnity provision of this PARAGRAPH NUMBERED 10.
11. NON-RESPONSIBILITY NOTICES - LANDLORD may place upon said Leased
Premises any notices of lien non-responsibility as LANDLORD deems proper, and
may record such as LANDLORD deems proper, and TENANT shall at all times keep
said Leased Premises and the fee title free and clear of, from and against
each mechanics and each materialman s lien, and each encumbrance, attorney's
fee and costs related thereto for which TENANT, or another acting for, as, or
through TENANT shall be responsible.
12. ATTORNEYS FEES - The Court may award reasonable attorneys fees
and costs to the party hereto prevailing in enforcing any obligation of the
other party hereto under this Lease, or prevailing in any litigation connected
with this Lease.
13. UTILITIES - TENANT shall pay when due any and all Gas,
Electricity, Telephone, Waste Collection, Sewer Rental, and any and all other
UTILITY or USE SERVICE charges which become payable, or accrue, during the
term of this Lease, upon said Leased Premises, and payments therefor shall be
made directly to the Utility Company (except as provided herein elsewhere to
the contrary), and TENANT shall indemnify and hold harmless LANDLORD and also
said Leased Premises of, from and against payment of the same.
14. PUBLIC LIABILITY AND PROPERTY DAMAGE INSURANCE - TENANT at TENANT's
cost shall maintain public liability and property damage insurance with
liability limits of not less than ONE MILLION AND 00/100 DOLLARS
($1,000,000.00) per person and ONE MILLION AND 00/100 DOLLARS ($1,000,000.00)
per occurrence, and property damage limits of not less than FIFTY THOUSAND AND
00/00 DOLLARS ($50,000.00) per occurrence, insuring against all liability of
TENANT and TENANT's agents and employees arising out of or in connection with
TENANT's use or occupancy of the Leased Premises. In addition, TENANT agrees
to name LANDLORD as an additional insured under a FIVE MILLION DOLLAR
($5,000,000) umbrella liability policy to be in force upon receipt of an
occupancy permit for the Leased Premises. Such policies of insurance shall be
for periods of not less than one (1) year, and shall be renewed or a new
policy obtained not less than TWENTY (20) DAYS before a current policy's
coverage terminates.
15. TENANT S FIRE INSURANCE - TENANT at TENANT's cost shall maintain on
all of TENANT's personal property, TENANT's improvements, and alterations, in,
on, or about the Leased Premises, a policy of fire and extended coverage
insurance, with vandalism and malicious mischief endorsements, to the extent
of at least 80% of their full replacement value. The proceeds from any such
policy shall be used by TENANT for the replacement of damaged personal
property and the restoration of TENANT's damaged improvements and alterations,
except, however, in the event any such damage shall occur during the last two
(2) years of the Lease term or any extension thereof, TENANT may elect not to
restore the damaged premises and in such event, the insurance proceeds which
cover the loss of furniture, fixtures and equipment shall be paid directly to
the TENANT. The insurance proceeds which cover the loss of buildings and
permanent improvements shall be paid directly to the LANDLORD. Except as
provided immediately above, TENANT shall hold the insurance proceeds in trust
for such replacement and such restoration and shall disburse the same as
progress in replacement or restoration progresses.
16. WAIVER OF SUBROGATION - The parties release each other, and their
respective authorized representatives, from any claims of damage to any person
or to the Leased Premises and the buildings and other improvements located on
the Leased Premises, and to the fixtures, personal property, TENANT's
improvements, and alterations of either LANDLORD or TENANT in or on the Leased
Premises and the buildings and other improvements located on the Leased
Premises that are caused by or result from risks insured against under any
insurance policies carried by the parties and in force at the time of any such
damage.
Each party shall cause each property insurance policy obtained by it
to provide that the insurance company waives all right of recovery by way of
subrogation against each party in connection with any damage or liability
covered by any policy. Neither party shall be liable to the other for any
damage or liability, caused by fire or any of the risks insured against under
any property insurance policy required by this Lease. If any property
insurance policy cannot be obtained with a waiver of subrogation, or is
obtainable only by the payment of an additional premium charge above that
charged by insurance company issuing the policy without waiver of subrogation,
the party undertaking to obtain the insurance shall notify the other party of
this fact. The other party shall have a period of ten (10) days after
receiving the notice either to place the insurance with a company that is
reasonably satisfactory to the other party and that will carry the insurance
with a waiver of subrogation, or to agree to pay the additional premium if
such a policy is obtainable at additional, reasonable cost. If the insurance
cannot be obtained or the party in whose favor a waiver of subrogation is
desired refuses to pay the additional, reasonable premium charged, the other
party is relieved of the obligation to obtain a waiver of subrogation rights
with respect to the particular insurance involved.
17. OTHER INSURANCE MATTERS - All the insurance required under this
Lease shall:
(a) Be issued by insurance companies authorized to do business in
the State of Nevada with a financial rating of at least a B+ status as rated
in the most recent edition of Best's Insurance Reports.
(b) Be issued as a primary policy.
(c) All of the foregoing insurance policies required pursuant to
PARAGRAPHS NUMBERED 14 and 15 of this Lease shall name LANDLORD as an
additional insured and shall provide that LANDLORD shall be given a minimum of
thirty (30) days written notice by any such insurance company prior to the
cancellation, termination, or alteration of the terms or limits of such
coverage. Each policy, or a certificate of the policy, together with evidence
of payment of premiums, shall be deposited with the other party at the
commencement of the term, and on each renewal of the policy or new policy not
less than TWENTY (20) days before expiration of the term of the policy.
18. CUMULATIVE REMEDIES - All the rights and remedies of the LANDLORD
under this Lease shall be cumulative, and the exercise or assertion of one or
more of said rights or remedies shall not exclude the exercise of or assertion
of any other rights or remedies allowed by law or equity.
19. DEFAULT AND REMEDIES IN THE EVENT OF DEFAULT -
(a) DEFAULTS - TENANT shall be deemed in default and to have
breached this Lease and said default and breach shall be deemed complete and
uncured:
A. In the event that any rental payment, any property tax
payment, any insurance premium or any other monetary payment required herein
to be paid, or reserved herein, has not been paid within ten (10) business
days immediately after written notice that such amount is due and unpaid.
B. In the event that TENANT fails to keep or perform any other
covenant or condition contained in this Lease on TENANT's part to be kept or
performed, and such failure to keep or perform the same continues in whole or
in part, for a period of 30 days after service or giving of written notice
thereof by LANDLORD to TENANT, as provided for service or giving of notice in
this Lease; provided, however, that TENANT shall not be deemed in default
hereunder if it commences to remedy said default within said notice period and
proceeds therewith with due diligence.
(b) REMEDIES - In the event of any default under this Lease,
complete and uncured, as provided in subparagraph A and B immediately above,
LANDLORD may, at LANDLORD's option, exercise one or more or all of the
following remedies, and each shall be deemed cumulative and the exercise of
one or more shall not be deemed or held an election of any remedy to the
exclusion of any other remedy:
A. LANDLORD or his agent or agents shall have the right to and
may enter the Leased Premises as the agent of TENANT and may re-rent the
Leased Premises as the agent of the TENANT and receive the rent therefor on
such terms as shall be satisfactory to LANDLORD, and all rights of TENANT to
repossess the Leased Premises under such leasing shall be terminated and
forfeited. Such reentry by LANDLORD shall not operate to release TENANT from
any rent to be paid or covenants to be performed hereunder during the full
term of this Lease. For the purpose of re-letting, LANDLORD shall be
authorized to make such repairs or alterations in or to the Leased Premises as
may be necessary to place the same in good order and condition. TENANT shall
be liable to LANDLORD for the cost of such repairs or alterations, and all
expenses of such re-entry and re-letting. If the sum realized from the
re-letting is insufficient to satisfy the monthly or term rent provided in
this Lease, LANDLORD, at LANDLORD's option, may require that TENANT pay such
deficiency month by month or LANDLORD may seek said deficiency periodically or
at the end of said unexpired Lease term. LANDLORD shall not in any event be
required to pay to TENANT any surplus of any sums received by LANDLORD
resulting through a re-letting of said Leased Premises and which sum is in
excess of the rent reserved or to be paid under this Lease.
B. The unexpended deposit elsewhere provided herein to be
deposited by TENANT in favor of LANDLORD, to the extent, if any existing, may
be used in restoration of said Leased Premises to the condition existing
before rental to TENANT, including the costs of cleaning up of said Leased
Premises, if any, the costs of advertising said Leased Premises for leasing
through the making of signs or other means, and to the costs of repair or
restoration of said Leased Premises, any or all of the foregoing, and to
payment of any rental commission, and to the extent that there is any
remainder of said deposit, the same shall be applied toward the remaining
rental as it becomes due.
C. Notwithstanding any re-letting without termination, LANDLORD
may at any time thereafter elect to terminate this Lease for such previous
breach and failure to terminate the Lease in the initial instance for such
breach, or the re-letting of the Leased Premises by LANDLORD shall not
constitute a waiver of this right or stop LANDLORD from terminating this Lease
at any subsequent time. Should LANDLORD at any time terminate this Lease for
any breach in addition to any other remedy LANDLORD may have, LANDLORD may
recover from TENANT all damages incurred by reason of such breach, including,
but not limited to:
(1) The worth, at the time of the award of the unpaid rent that
has been earned at the time of termination of this Lease.
(2) The worth, at the time of the award of the amount by which
the unpaid rent would have been earned after the date of termination of this
Lease until the time of award exceeds the amount of the loss of rent that
TENANT proves could have been reasonably avoided;
(3) The worth, at the time of the award of the amount by which
the unpaid rent for the balance of the term after the time of award exceeds
the amount of loss of rent that TENANT proves could have been reasonably
avoided, and
(4) Any other amount, and court costs necessary to compensate
LANDLORD for all detriment approximately caused by TENANT's default.
"The worth at the time of the award" as used in (1) and (2) of
this paragraph is to be computed by allowing interest at the rate of ten
percent (10%) per annum. "The worth at the time of the award" as referred to
in (3) of this paragraph is to be computed by discounting the amount at the
discount rate of the Federal Reserve Bank of San Francisco at the time of the
award plus one percent (1%).
D. RIGHT TO PERFORM - If an Event of Default occurs, LANDLORD
may perform such covenant or condition at its option, after notice to TENANT,
All reasonable costs incurred by LANDLORD in so performing shall immediately
be reimbursed to LANDLORD by TENANT. Any performance by LANDLORD of TENANT's
obligations shall not waive or cure such default.
20. LANDLORD DEFAULT - In the event LANDLORD defaults in the performance
of any of its obligations, covenants, representations and warranties hereunder
and if such default continues for a period of fifteen (15) days after written
notice to LANDLORD from TENANT specifying the nature of such default, TENANT
may, at its option, cure the same on behalf of the LANDLORD, whereupon the
cost of such curing shall be due and payable to TENANT from LANDLORD upon
demand therefor by TENANT. The foregoing shall not limit or preclude TENANT
from any other rights and remedies available at law or in equity.
21. ASSIGNMENT AND SUBLETTING - TENANT shall have the absolute right
to assign TENANT's rights under this Lease to a partnership, joint venture,
corporation or entity that is at least fifty percent (50%) owned either
directly or indirectly, by TENANT or a party in interest in the Golf Center,
LLC, or to an entity which controls, is controlled by or is under common
control with TENANT.
Any other assignment of the TENANT's rights under this Lease must be
approved by LANDLORD, which approval will not be unreasonably withheld,
conditioned or delayed. A consent by LANDLORD to one assignment shall not be
deemed to be a consent to any subsequent assignment of this Lease by TENANT.
(a) ASSIGNMENT - Should TENANT be a corporation, any transfer or
assignment of any stock or interest in the corporation totaling in the
aggregate more than fifty percent (50%) of all such stock or interest in the
corporation shall be considered an assignment of this Lease requiring the
prior written consent of LANDLORD; provided, while a transfer of stock or
interest in the corporation of fifty percent (50%) or less shall not be
considered an assignment of this Lease. Upon such transfer, TENANT shall
provide LANDLORD with a copy of the transfer documents which shall include the
name, address, and telephone number of the transferee.
(b) SUBLEASE - TENANT may sublease a portion of the Leased Premises
or TENANT's improvements on the Leased Premises and/or grant a license or
licenses or concession or concessions within the Leased Premises without the
consent of LANDLORD provided that:
(i) Any subtenant, licensee or concessionaire does not occupy
more than fifteen (15%) percent of the Leased Premises;
(ii) Such use is permitted by PARAGRAPH NUMBERED 3 of this
Lease;
(iii) TENANT has executed a sublease agreement with subtenant
which specifically provides for record keeping and reporting as set forth in
the last PARAGRAPH NUMBERED 29(F) hereof.
(iv) TENANT gives LANDLORD prior written notice of such
subletting and/or concession or license, and a copy of those portions of the
subletting or concession/licensing documents relevant to the immediately
preceding Section (iii) and the name, address, and telephone number of the
sublessee, licensee or concessionaire.
TENANT shall not sublease all or any part of the unimproved property
within the Leased Premises without first obtaining LANDLORD's consent. Any
such sublease without LANDLORD's written consent shall be voidable and, at
LANDLORD's election, shall constitute a default. LANDLORD shall have the
right to approve or disapprove any such proposed sublease in LANDLORD's
discretion.
In the event of a sublease, the term of the sublease shall not extend
beyond the term of this Lease and any and all subleases shall contain an
attornment provision whereby the Sublessee shall recognize TENANT's successor
in interest and a non-disturbance provision whereby TENANT's successor shall
recognize the sublease so long as the Sublessee is not in default thereunder
and shall otherwise be expressly made subject to all the terms and covenants
and conditions of this Lease.
22. HOLDOVER - In the event that TENANT shall remain in the demised
Leased Premises after the expiration or sooner termination of the term of this
Lease or any term theretofore extended as elsewhere provided herein, without
having exercised in writing an option contained in this Lease to extend the
Lease term or the then ending extended term, such holding over shall not
constitute a renewal or an extension of this Lease, and shall constitute a
month-to-month tenancy and, if LANDLORD so requires by written notice to
TENANT, the MINIMUM RENT for such holdover period shall be ONE HUNDRED TWENTY
PERCENT (120%) of the MINIMUM RENT effective on the last day of the term or
extended term, LANDLORD may, at LANDLORD's option, elect to treat TENANT as
one who has not removed at the end of his term, and LANDLORD shall thereupon
be entitled to all the remedies against TENANT provided by law or equity in
that situation, or, if not so treated, the tenancy shall be deemed a tenancy
from month to month, subject to the payment each month of the lease rental
provided for herein.
23. NON-WAIVER - The failure of either party to insist upon strict
compliance with or performance of any term, covenant, condition, or option
contained in this Lease or to the exercise of any option or alternative herein
allowed in any one instance or more instances, shall not be construed, deemed,
found or held a waiver or relinquishment for or in the future of that party's
right to insist upon strict performance of each such term, covenant,
condition, option, or alternative hereof and the same shall be and remain in
full force and effect without waiver.
24. NUMBER AND GENDER - All terms and words used in this Lease,
regardless of the number and gender in which they are used, shall be deemed
and construed to include any other number, singular or plural, and any other
gender, masculine, feminine or neuter, as the context or sense of this Lease
or any paragraph or clause herein may suggest or require, the same as if such
words had been fully, limited by or properly written in the required number
and gender.
25. HEIRS, SUCCESSORS AND ASSIGNS - Each term, covenant, condition and
agreement contained in this Lease, shall be deemed and construed to inure to
the benefit of, apply to, and be binding upon each party hereto and the
respective heirs, executors, administrators, legal representatives, successors
and assigns of each respectively, except as herein expressly stated to the
contrary.
26. PARAGRAPH CAPTION - The captions of paragraphs contained in this
Lease are inserted as a convenience only and by way of guide or reference
only, and none limit, enlarge, define, or otherwise affect the scope or intent
of this Lease or any provision thereof, and none shall in any way be used as a
basis of construction or interpretation of this Lease.
27. MINIMUM RENT AND ADJUSTMENT
A. Beginning on the date which is the earlier of the two dates: (a)
the date that TENANT first opens substantially all of the facilities for the
uses contemplated by PARAGRAPH NUMBERED 3 hereof for business on the Leased
Premises (the Rental Commencement Date); or, (b) February 1, 1998, TENANT
shall pay to LANDLORD minimum rent in the amount of THREE HUNDRED NINETY EIGHT
THOUSAND SEVENTY SEVEN AND 0/100 DOLLARS ($398,077.00) per year (herein
"Minimum Rent") in monthly installments of THIRTY THREE THOUSAND ONE HUNDRED
SEVENTY THREE AND 08/100 DOLLARS ($33,173.08) each (herein "Monthly
Installments"),
B. All minimum rent shall be payable in equal monthly
installments and in advance without deduction or offset on the first day of
each month during the term of this Lease. Any Minimum Rent payable for
less than a full calendar month shall be paid on a proportionate basis based
on the number of days in that calendar month, Minimum Rent shall be paid to
LANDLORD, in lawful money of the United States at the address specified in
Paragraph 34 below or at such other place as LANDLORD shall from time to time
designate in writing.
C. The Minimum Rent shall be increased at the end of the fifth
(5th) year of the term and every five (5) years thereafter ("Adjustment Date")
by an amount equal to ten percent (10%) of the minimum Monthly Installment for
the month immediately preceding the Adjustment Date. Upon adjustment of the
Monthly Installment as provided in this Lease, the parties shall immediately
execute an amendment to the Lease stating the new Monthly Installment and the
concomitant changes to PARAGRAPH NUMBERED 29 hereof with the reference to
Percentage Rental.
D. In the event TENANT shall be late in paying any Monthly
Installment, then TENANT shall pay a "late charge" of FIVE HUNDRED DOLLARS
($500.00) to LANDLORD for each month late, in addition to any such rent
payments. For purposes of this paragraph, any rent payment received by
LANDLORD more than ten (10) business days after its due date shall be deemed a
late payment.
28. DEPOSIT - Concurrently with the execution of this Lease and/or in
accordance with the terms of the Agreement, TENANT has deposited the sum of
SIXTY-SIX THOUSAND THREE HUNDRED FORTY-SIX AND SIXTEEN CENTS ($66,346.16) with
Landlord (herein RENTAL DEPOSIT). Once the terms of the Deposit Agreement are
fulfilled and this Lease becomes effective, the sum so deposited shall be
applied first to the said Minimum Monthly Rent payment first coming due and
thereafter to each successive monthly Minimum Rent payment until exhausted.
29. PERCENTAGE RENTAL -
A. In addition to the Minimum Rent payable annually of THREE
HUNDRED NINETY EIGHT THOUSAND SEVENTY SEVEN AND 0/100 DOLLARS ($398,077.00),
TENANT agrees to pay LANDLORD a percentage rental based upon the four (4)
kinds of gross sales receipts, below set forth, that is, Gross sales receipts
received from customers on the Leased Premises and made up of or consisting of
the following if the total thereof is in excess of THREE HUNDRED NINETY EIGHT
THOUSAND SEVENTY SEVEN AND 0/100 DOLLARS ($398,077.00) per annum:
(i) ten percent (10%) of Gross Annual Sales derived from
driving range tee rentals and par 3 golf course greens fees;
(ii) three percent (3%) of Gross Annual Sales derived from sales
of foods and beverages;
(iii) three percent (3%) of Gross Annual sales derived from sale
of merchandise;
(iv) three percent (3%) of Gross Annual Sales from any other
revenue source derived from All-American Golf Center guests or patron usage of
the Leased Premises.
B. Each Lease Year shall be considered as an independent accounting
period for the purpose of computing the total amount of percentage rental, if
any, payable by TENANT to LANDLORD; and, with respect thereto, (a) if the
total of the said annual percentage receipts for said four (4) kinds of Gross
Annual Sales does not exceed in amount THREE HUNDRED NINETY EIGHT THOUSAND
SEVENTY SEVEN AND 0/100 ($398,077.00), no percentage rental is due or payable
for that Lease Year; and, if TENANT has paid percentage rental, the amount of
such excess payment shall be applied by LANDLORD to the monthly Minimum
Rent(s) next payable in the ensuing Lease Year, except in the case of the last
Lease Year, in which case such adjustment will be made within THIRTY (30) DAYS
after the termination of this Lease; and, (b) if the total of the said annual
percentage receipts exceeds THREE HUNDRED NINETY EIGHT THOUSAND SEVENTY SEVEN
AND 0/100 DOLLARS ($398,077.00) and, in turn, the amount paid by TENANT
exceeds the excess total of said Gross Annual Sales receipts that should be
paid for the Lease Year, the excess paid by TENANT shall be similarly applied
to monthly Minimum Rent as above provided; and, if based upon the total of the
annual percentage receipts over THREE HUNDRED NINETY EIGHT THOUSAND SEVENTY
SEVEN AND 0/100 DOLLARS ($398,077.00), there is a sum yet owing by TENANT for
the Lease Year, then TENANT shall pay said sum to LANDLORD with the monthly
Minimum Rent payment next due.
C. Percentage rent shall be computed each percentage rent period
(as defined in Subparagraph D) below, On or before the fifteenth (15th) day of
the calendar month immediately following the close of each percentage rent
THIRTY THREE THOUSAND ONE HUNDRED SEVENTY THREE AND 08/100 DOLLARS
($33,173.08)per month and NINETY NINE THOUSAND FIVE HUNDRED NINETEEN AND
24/100 DOLLARS ($99,519.24) per calendar quarter that TENANT has paid during
the percentage rent period. TENANT shall pay to LANDLORD the amount by which
the sum computed as a percentage of TENANT's gross sales during the percentage
rent period exceeds the herein elsewhere provided Minimum Rent of THIRTY THREE
THOUSAND ONE HUNDRED SEVENTY THREE AND 08/100 DOLLARS ($33,173.08) per month
and NINETY NINE THOUSAND FIVE HUNDRED NINETEEN AND 24/100 DOLLARS ($99,519.24)
per calendar quarter, that TENANT has paid during the percentage rent period.
D. PERCENTAGE RENT PERIOD; ACCOUNTING PERIODS
DEFINED: The percentage rent period shall be Quarterly. The last
percentage rent period shall end on the date the term expires or terminates.
"Lease Year" is A PERIOD COMMENCING ON THE RENTAL COMMENCEMENT
DATE defined in PARAGRAPH NUMBERED 27 above, AND ENDING ONE (1) YEAR LATER,
and, severally, each such 12 month period thereafter.
"Monthly" rent periods are calendar months within each Lease
Year.
"Quarterly" rent periods are three (3) calendar months within each
Lease Year.
E. GROSS SALES DEFINED: With respect to "Gross Sales" above
designated, they include those of TENANT, subtenants, licensees, and
concessionaires, if any, whether for cash or on credit (whether collected or
not), made on the Leased Premises, whether made by personnel or vending or
other machines.
Gross Sales shall not include, or if included there shall be
deducted (but deducted only to the extent they have been included), the
following:
(1) The selling price of all merchandise returned by customers
and accepted for full credit, or the amount of discounts, refunds, and
allowances made on such merchandise.
(2) Sums and credits received in the settlement of claims for
loss of or damage to merchandise.
(3) The price allowed on all merchandise traded in by customers
for credit or the amount of credit for discounts and allowances made instead
of acceptance of merchandise.
(4) Gift certificates, or similar vouchers, until such time as
they shall have been converted into a sale by redemption.
(5) Sales and use taxes, so-called luxury taxes, consumers
excise taxes, gross receipts taxes, and other similar taxes now or in the
future imposed on the sale of service or merchandise, but only if such taxes
are added to the selling price during the percentage rent period.
(6) Sales of fixtures, equipment or property which are not
TENANT's stock in trade.
(7) Tips or gratuities given by customers to TENANT's agents,
employees or servants, whether such tips or other gratuities are automatically
added to the customer's bill or given by the customer separate and apart from
the bill.
F. STATEMENT OF GROSS SALES - TENANT shall furnish to LANDLORD a
statement of TENANT's gross sales within fifteen days after the end of each
percentage rent period, and an annual statement of gross sales within THIRTY
(30) days after the end of each Lease year, Each statement shall be signed and
certified to be correct by an officer of TENANT.
At TENANT's option, TENANT shall keep at the Leased Premises or at
TENANT's main office currently located in Las Vegas, Nevada, full and accurate
books of account, records, cash receipts, and other pertinent data showing its
Gross Sales. TENANT shall install and maintain accurate receipt-printing cash
registers and shall record on the cash registers every sale and other
transaction made from the Leased Premises. Such books of account records,
cash receipts, and other pertinent data shall be kept until the lapse of a
period of two (2) years after the end of each Lease Year.
LANDLORD shall be entitled within one (1) year after expiration or
termination of this Lease to inspect and examine all of TENANT's books of
account, records, cash receipts, and other pertinent data, to enable LANDLORD
to ascertain TENANT's Gross Sales. TENANT shall cooperate fully with LANDLORD
in making the inspection. LANDLORD shall also be entitled, once during each
Lease Year to an independent audit conducted of TENANT's books of account,
records, cash receipts, and other pertinent data to determine TENANT's Gross
Sales for the immediately preceding Lease Year, by a certified public
accountant to be designated by LANDLORD. The audit shall be limited to the
determination of Gross Sales and shall be conducted only after notice to
TENANT and during usual business hours at the Leased Premises or at TENANT s
main office.
If the audit shows that there is a deficiency in the payment of any
percentage rent, the deficiency shall become immediately due and payable. If
the audit shows that more percentage rent was paid than was due in accordance
herewith, such overpayment shall be credited against the next ensuing Minimum
Rental payment(s). The costs of the audit shall be paid by LANDLORD unless
the audit shows that TENANT understated Gross Sales by three (3%) percent or
more for the Lease Year, in which case TENANT shall pay all of LANDLORD's
costs of the audit. If such audit indicates an understatement of Gross Sales,
such examined records shall continue at all times to be held by TENANT for
further examination until full payment of the deficiency in rent paid and
resulting from such understatement. To audit, LANDLORD must give TENANT
written notice at least three (3) business days prior to arrival of the
auditor and the name of the auditor, and such audit shall be conducted with as
little disruption of TENANT's business as is reasonably possible and be
conducted during normal business hours.
LANDLORD shall keep any information gained from such statements,
inspection, or audit confidential and shall not disclose it other than to
carry out the purposes of this Lease, except that LANDLORD shall be permitted
to divulge the contents of any statements in connection with any financing
arrangements or sale of LANDLORD's interest in the Leased Premises.
It shall be and is the duty of TENANT to require by each licensing
agreement, concession agreement, and sublease, as the case may be, and, if
applicable, each such licensee, concessionaire, and subtenant, as the case may
be, to keep and' provide to TENANT records, reports and statements
substantially like those required of TENANT to be provided to LANDLORD
hereunder and for the reporting periods herein required and the same to be
provided at the times herein provided, however, advanced by due date by five
(5) days, over that herein provided and which agreements shall further provide
that LANDLORD herein may as part of its audit of TENANT's records audit said
licensees, concessionaires, or subtenant's records, which records will be held
and retained for periods equal to those required of TENANT herein. TENANT
shall not be in default in the event that any subtenant, concessionaire or
licensee fails to properly report gross sales, nor will TENANT be obligated to
pay any audit fees incurred in any such audit.
G. NEGATION OF PARTNERSHIP: LANDLORD shall not become or be deemed,
found or held a partner or a joint venture with TENANT by reason of the
provisions of this Lease.
30. LIENS - The LANDLORD and TENANT covenant each with the other that
each party ordering labor or materials for use on or about the Leased Premises
or any parcel wherein any lien shall affect the Leased Premises shall hold the
other harmless against any loss or damage due to any lien filed against the
Leased Premises on account of non-payment or dispute with respect to labor or
materials furnished in connection with construction referred to herein or any
other construction on the Leased Premises and such party shall prevent entry
of any judgment against the Leased Premises. The party against whom such lien
is filed shall notify the other in writing within fifteen (15) days of its
notice of filing, and said lien shall be removed within' thirty (30) days
thereafter or protected by bond or surety should such party so affected desire
to contest such lien.
31. INDEMNIFICATION - TENANT hereby covenants to indemnify, save and
hold LANDLORD and the Leased Premises free, clear and harmless from each
liability, loss, cost, charge, penalty, obligation, expense, attorney's fee,
litigation, judgment, damage, claim or demand of any kind whatsoever in
connection with, arising out of, or by reason of any violation of law,
ordinance or regulation by TENANT, subtenants, licensees, concessionaires, or
of any independent contractor, agent, or employee of TENANT while in, upon,
about or in any way connected with the Leased Premises or any portion thereof
during the term of this Lease.
LANDLORD hereby covenants to indemnify, save and hold TENANT and
the Leased Premises free, clear and harmless from each liability, loss, cost,
charge, penalty, obligation, expense, attorneys fee, litigation, judgment,
damage, claim or demand of any kind whatsoever in connection with, arising out
of, or by reason of any violation of law, ordinance or regulation by LANDLORD
or of any independent contractor, agent, or employee of LANDLORD while in,
upon, about or in any way connected with the Leased Premises or any portion
thereof or LANDLORD's Property during the term of this Lease.
32. OFFSET STATEMENT - Each party agrees at any time and from time to
time during the term of this Lease and within fifteen (15) days after written
demand therefor, to execute and deliver to the party requesting a certificate
in recordable form certifying that this Lease is in full force and effect and
that there are no defenses or offsets thereto, or stating such defenses or
offsets as are claimed by the party responding and stating the dates to which
all rentals have been paid.
33. QUIET POSSESSION - LANDLORD covenants that TENANT may quietly
have, hold and enjoy the Leased Premises during the term of this Lease
without any disturbance from LANDLORD or from any other person claiming
through LANDLORD.
34. SERVICE OF NOTICES - Any and all notices and demands by or from
LANDLORD to TENANT, or by or from TENANT to LANDLORD, required or desired to
be given hereunder shall be in writing and shall be validly given or made if
served either personally or if deposited in the United States mail, certified
or registered, postage prepaid, return receipt requested or given by facsimile
(fax). If such notice or demand be served personally, service shall be
conclusively deemed made at the time of such personal service. If such notice
or demand be served by registered or certified mail in the manner provided,
service shall be deemed to have been given on the date marked on the return
receipt unless delivery is refused or cannot be made, in which case the date
of postmark shall be deemed the date notice has been given. If such notice or
demand is given by fax, the notice shall be deemed given when received.
Any notice or demand to LANDLORD shall be addressed to Landlord at:
Urban Land of Nevada
3271 South Highland Drive, #714
Las Vegas, Nevada 89109
Attn: Mr. Theodore B. Lee, President
Any notice or demand to TENANT shall be addressed to Tenant at:
All-American Golf Center, LLC
5325 South Valley View Boulevard, Suite 10
Las Vegas, Nevada 89118
ATTN: Ronald S. Boreta, Managing Partner
With a copy to:
Callaway Golf
2285 Rutherford Road
Carlsbad, California 92008-8815
ATTN: David Rane
Any party hereto may change its address for the purpose of receiving
notices or demands as herein provided by a written notice given in the manner
aforesaid to the other party hereto, which notice of change of address shall
not become effective, however, until the actual receipt thereof by the other
party.
35. PARTIAL INVALIDITY - If any term, provision, covenant or condition
of this Lease, or any application thereof, is held by a court of competent
jurisdiction to be invalid, void, or unenforceable, all provisions, covenants
and conditions of this Lease, and all applications thereof, not held invalid,
void or unenforceable, shall continue in full force and effect.
36. BROKERS - Each party warrants that it has not had any dealings with
any Realtor, broker or agent in connection with the negotiation of this Lease,
or any dealings of any character the result of which would make either party
liable for any broker s commission or compensation of any kind.
LANDLORD and TENANT each agree to indemnify, defend and hold the other
harmless from and against all loss and expense (including attorney's fees),
damage and liability resulting from breach or the claims of any broker or
finder on account of any services claimed to have been rendered to the
indemnifying party in connection with the transaction contemplated by this
Lease.
37. CONDEMNATION -
A. DEFINITIONS:
(1) "Condemnation" means (a) the exercise of any governmental
power, whether by any legal proceeding or otherwise, by a condemnor and (b) a
voluntary sale or transfer by LANDLORD to any condemnor, either under threat
of condemnation or while any legal proceeding for condemnation is pending.
(2) "Date of Taking" means the date the condemnor has the right
to possession of the leased premises being condemned.
(3) "Award" means all compensations, sums, or anything of value
awarded paid, or received on a total or partial condemnation.
(4) "Condemnor" means any public or quasi-public authority, or a
private corporation or individual, having the power of condemnation.
B. RIGHTS AND OBLIGATIONS TO BE GOVERNED BY LEASE: If, during the
term of this Lease or during the period of time between the execution of this
lease and the date this Lease commences, there is any taking of all or any
part of the buildings, other improvements, or land of which the Leased
Premises are a part or any interest I the Lease by condemnation or of any of
the COMMON AREAS, the rights and obligations of the parties shall be
determined pursuant to the provisions hereof and its subdivisions.
C. TOTAL TAKING: If the Leased Premises are totally taken by
condemnation, this Lease shall terminate on the date of taking.
D. PARTIAL TAKING OF LEASED PREMISES: If any portion of the Leased
Premises is taken by condemnation, this Lease shall remain in effect, except
that TENANT can elect to terminate this lease if as a result of such partial
taking it is no longer economically feasible for TENANT to conduct its
business on the Leased Premises. If TENANT elects to terminate this Lease,
TENANT must exercise its right to terminate pursuant to this paragraph by
giving notice to LANDLORD within ninety (90) days after the nature and the
extent of the taking have been finally determined. If TENANT elects to
terminate this Lease as provided in this paragraph, TENANT also shall notify
LANDLORD of the date of termination, which date shall not be earlier than
thirty (30) days nor later than ninety (90) days after TENANT has notified
LANDLORD of its election to terminate; except, that this Lease shall terminate
on the date of taking if the date of taking falls on a date before the date of
termination as designated by TENANT. If TENANT does not terminate this Lease
within the ninety (90) day period, this Lease shall continue in full force and
effect.
E. EFFECT ON RENT: If any portion of the Leased Premises is taken by
condemnation and this Lease remains in full force and effect, there shall be
no reduction in the MINIMUM MONTHLY RENTAL.
F. RESTORATION OF LEASED PREMISES: If there is a partial taking of
the Leased Premises and this Lease remains in full force and effect as herein
provided, LANDLORD shall assign to TENANT that portion of the award received
for improvements and severance damages which are reasonably needed for
TENANT's reconstruction and restoration of the remaining portions of the
Leased Premises, including any and all improvements made heretofore together
with the remaining portions of the parking areas to an architectural whole in
substantially the same condition that the same were in prior to such taking.
The portion of the award received by Landlord for land value will be entirely
retained by LANDLORD and will not be made available to TENANT for any reason.
G. AWARD-DISTRIBUTION: All compensation awarded for any taking
whether for the whole or a portion of the Leased Premises, shall belong to
LANDLORD; provided that TENANT shall be entitled to any award made whether to
LANDLORD or to TENANT for the un-depreciated portion of TENANT's improvements,
moving expenses, the value of TENANT's trade fixtures, and loss or damage to
TENANT's business to the extent allowable under the law then in force and
effect. A leasehold mortgagee shall have no claim or interest in LANDLORD's
award for the depreciated portion of TENANT's improvement. TENANT shall have
no claim against LANDLORD or the condemning body or entity for any portion of
the award relating to the value of the un-expired term of this Lease.
38. - SECTION 38 HAS BEEN INTENTIONALLY OMITTED.
39. TAXES - Subject to apportionment of the taxes to the Rental
Commencement Date (the apportionment to be made on the basis of the fraction
derived from the acreage area of the Leased Premises to the total acreage
owned by LANDLORD out of which the Leased Premises are carved), TENANT shall
pay promptly and before they become delinquent (provided all statements are
received by TENANT in a timely manner), all real and personal property taxes,
assessments and other impositions, including, but not limited to, general and
special, direct or indirect, that become due at any time during the term of
this Lease upon or against the Leased Premises including all buildings and
improvements of TENANT, TENANT's furniture, fixtures, equipment now or
hereafter thereon which may be or are lawfully assessed either in the name of
the LANDLORD or TENANT. Copies of all paid receipts shall be forwarded to
LANDLORD. Any leasehold improvements to the Leased Premises shall be deemed
TENANT's personal property for purposes of this section. TENANT shall be
liable for penalties, interest or other charges imposed upon delinquent
payment provided TENANT has received the applicable tax bills and a written
statement of apportionment on a timely basis. TENANT shall pay all real
estate taxes on the land as distinguished from improvements or buildings
during the Lease Term hereof and forward the paid receipt evidencing such
payment to LANDLORD.
In the event assessments are payable in installments, TENANT shall have
the right to elect to pay same over the longest available installment period;
provided that any special assessments resulting from TENANT's development or
improvements must be paid off prior to the end of the Lease Term or any
extension thereof. TENANT shall not be obligated to pay any such installments
due and payable outside the term hereof or any extended terms if extended by
TENANT. Any taxes applicable to this Lease which shall be assessed during and
for the lease term but shall not be due and payable until after the expiration
thereof shall remain an obligation of TENANT that survives such expiration.
TENANT shall not be liable for any inheritance tax, estate tax, gift tax,
transfer tax, income tax, franchise tax, corporate tax, or similar tax upon
the business of LANDLORD nor for any tax or assessment arising from the sale,
lease or other disposition of the Leased Premises, in whole or in part,
whether from a tax re-evaluation of said real estate or an imposition directly
on such transaction; provided, however, that TENANT shall be responsible for
its share of any increases in real property taxes or assessments as set forth
in this PARAGRAPH NUMBERED 39 resulting from an increased valuation of the
Leased Premises because of a sale of the Leased Premises or a revaluation by
any governmental entity.
LANDLORD shall provide TENANT with each assessment notice with respect to
the Leased Premises within fifteen (15) days of receipt of the same to permit
TENANT to contest the same if appropriate. LANDLORD shall cause the Tax
Assessor of Clark County, Nevada to carve out from the remaining property of
LANDLORD and separately assess the Leased Premises and improvements if it is
feasible for LANDLORD to do so.
The TENANT shall have the right, at its own cost and expense, to initiate
and prosecute any proceedings permitted by law for the purpose of obtaining an
abatement or of otherwise contesting the validity or amount of taxes or
assessments assessed to or levied upon the Leased Premises. If required by
law, TENANT may take such action in the name of the LANDLORD, who shall
cooperate with the TENANT to such extent as reasonably required to the end
that such proceedings may be brought to a successful conclusion, TENANT shall
fully indemnify and hold LANDLORD harmless from all loss, cost, damage and
expense incurred in furtherance of any contest or abatement proceeding.
TENANT agrees that in the event of any such election to contest, that it will
(i) pay the tax (unless such payment would operate to bar its right to
contest), and (ii) assure LANDLORD as reasonably necessary that the Leased
Premises and any mortgage lien thereon, if any, will not be subject to
forfeiture or foreclosure, as the case may be.
40. SIGNAGE RIGHTS - TENANT acknowledges LANDLORD's existing seven (7)
billboard signs along Las Vegas Boulevard and agrees to permit LANDLORD to
maintain such signs immediately to the east of the ONE HUNDRED (100) foot
right of way of Las Vegas Boulevard, subject to TENANT's reasonable approval
rights. LANDLORD shall, prior to the effective date of this Lease, and at no
cost to TENANT, exercise its best, good faith efforts to relocate all signs
along Las Vegas Boulevard to immediately to the east of the new ONE HUNDRED
(100) foot setback in accordance with the Agreement (or cause the same to be
so relocated). LANDLORD reserves the right to place two (2) free standing
signs on the Leased Premises along Sunset Road at locations within ONE HUNDRED
(100) FEET of the Sunset Road right of way and outside of the "Clear Zone",
cross-bolded in red on EXHIBIT A"; with specific locations to be approved by
TENANT, which approval shall not be unreasonably withheld, conditioned or
delayed.
TENANT agrees not to permit third parties not involved in an operation on
the Leased Premises to advertise on the Leased Premises. All signs put on the
Leased Premises by TENANT shall be subject to the prior written approval of
LANDLORD which approval will not be unreasonably denied, conditioned or
delayed. TENANT shall be permitted to put signage on the buildings and/or on
pylon or monument signs within the Leased Premises for parties who are doing
business or occupying space within the Leased Premises or parties who have an
interest in the TENANT's business by virtue of a license or sponsorship
agreement with the TENANT. Audio equipment used on the Leased Premises will
not be in violation of any regulations governing the use of audio equipment,
LANDLORD shall not place or permit to be placed any signs on the Leased
Premises other than as expressly set forth herein.
4l. SECTION 41 HAS BEEN INTENTIONALLY OMITTED,
42. GAMING - TENANT is hereby granted the right itself or by and through
a sub-lessee to have up to fifteen (15) slot machines and video poker machines
in the clubhouse or any other facility, subject to licensing. In addition to
all other rental and charges payable hereunder, if TENANT conducts a gaming
enterprise on the Leased Premises in accordance with this PARAGRAPH NUMBERED
42, it shall pay LANDLORD a sum equal to TWENTY-FIVE PERCENT (25%) of the "net
win" as defined in any agreement between TENANT and a gaming licensee,
concessionaire or slot route operator.
43. - SECTION 43 HAS BEEN INTENTIONALLY OMITTED
44. INFRASTRUCTURE - LANDLORD and TENANT mutually agree to share at no
cost to each other the benefits derived from any future development of any
accesses or utility improvements, whether on the Leased Premises or on the
balance of the LANDLORD's Property. Further, LANDLORD and TENANT agree that
any third party who may in the future benefit from any of the improvements
mentioned herein will reimburse, on a pro-rata basis, either the LANDLORD or
the TENANT, depending on which paid for the improvements to which the third
party is deriving benefit.
45. - SECTION 45 HAS BEEN INTENTIONALLY OMITTED.
46. TENANT'S TRADEMARKS/TRADE NAMES - LANDLORD shall not use any
trademarks or trade names of TENANT or of any of TENANT's subtenants,
licensees or concessionaires without the prior written consent of TENANT; and,
where applicable, of any affected subtenant, licensee or concessionaire.
47. HAZARDOUS MATERIALS - LANDLORD has no knowledge that the Leased
Premises contains any hazardous substance. A hazardous substance for purposes
of this Lease is defined as any substance whose nature and/or quantity of
existence, use, manufacture or affect, render it subject to Federal, State, or
local regulation, investigation, remediation, or removal as potentially
injurious to public health or welfare, i.e. including, but not limited to,
asbestos-containing materials, PCB's or underground tanks.
Neither TENANT nor its agents, employees, or contractors shall cause or
permit hazardous substances to be brought upon, kept, or used in, on, or about
the Leased Premises, except as permitted under and in full compliance with all
environmental laws. If TENANT obtains knowledge of the actual or suspected
release of a hazardous substance, then TENANT shall promptly notify LANDLORD
of such actual or suspected release. TENANT shall immediately notify LANDLORD
of any inquiry, test, investigation, or enforcement proceeding by or against
TENANT involving a release. If TENANT or its agents, employees, or
contractors shall cause or permit a release, then TENANT shall promptly notify
LANDLORD of such release and immediately begin investigation and remediation
of such release, as required by all environmental laws.
If TENANT breaches any obligation set forth in this paragraph, or if a
release is caused or permitted by TENANT or its agents, employees, or
contractors, and such release results in contamination of the Leased Premises,
then TENANT shall indemnify and defend LANDLORD (and LANDLORD's employees,
agents, partners, officers, and directors) against, and protect and hold
LANDLORD (and LANDLORD's employees, agents, partners, officers, and directors)
harmless from any and all claims, actions, suits, proceedings, judgments,
losses, costs, damages, liabilities (including, without limitation, sums paid
in settlement of claims), fines, penalties, or expenses (including, without
limitation, sums paid in settlement of claims), fines, penalties, or expenses
(including, without limitation, reasonable attorney's fees and consultant's
fees, investigation and laboratory fees, and court costs and litigation
expenses) that arise during or after the term as a result of such breach or
contamination.
This indemnity shall include, without limitation, (i) any damage,
liability, fine, penalty, punitive damage, cost, or expense arising from any
claim, action, suit, or proceeding for: personal injury (including sickness,
disease, or death), tangible property damage, nuisance, pollution,
contamination, leak, spill, release, or other effect on the environment, and
(ii) the cost of any investigation, repair, clean-up, treatment, or
detoxification of the Leased Premises and the preparation and implementation
of any closure, disposal, or other actions in connection with the Leased
Premises.
48. SOLE AND ONLY AGREEMENT - This Lease constitutes the sole and only
agreement between LANDLORD and TENANT respecting the Leased Premises, the
leasing of the Leased Premises to TENANT, the construction of the improvements
described in this Lease on the Leased Premises, or the Lease terms herein
specified and correctly sets forth the obligations of LANDLORD and TENANT to
each other as of its date, Any subsequent agreements or representations
respecting the Leased Premises, their Leasing to TENANT by LANDLORD, or any
other matter discussed in this Lease not expressly set forth in this Lease
shall be null and void unless they are in writing and executed by both
parties.
49. ACTING IN GOOD FAITH, DISCRETION, AND WITH REASONABLENESS - Whenever
either LANDLORD or TENANT must act pursuant to the terms of this Lease, said
actions shall be in good faith and any consents or approvals required by one
party from the other shall not be unreasonably withheld, conditioned or
delayed.
50. NO MERGER - There shall be no merger of the leasehold estate created
by this Lease with the fee estate in the Leased Premises by reason of the fact
that the same person may own or hold (i) the leasehold estate created by this
Lease or any interest in the leasehold estate and (ii) the fee estate in the
Leased Premises or any interest in the fee estate unless and until LANDLORD
and TENANT shall execute, acknowledge and record a written instrument
effecting the merger.
5l. TRANSFER OF LANDLORD'S INTEREST - LANDLORD shall have the right at
any time to sell, transfer, assign, pledge, or otherwise dispose of LANDLORD's
interest in the Leased Premises and in this Lease to any person, firm, or
corporation. In the event of such sale, transfer, assignment, or other
disposition, all obligations of LANDLORD hereunder shall devolve upon the
transferee and LANDLORD shall be released from all obligation and liability
thereafter accruing hereunder.
52. EFFECT OF EXERCISE OF PRIVILEGE BY LANDLORD - The exercise of any
right, or option or privilege hereunder by LANDLORD shall not exclude LANDLORD
from exercising any and all other rights, privileges, and options hereunder,
and LANDLORD's failure to exercise any said right, option, or privilege, shall
not relieve TENANT from TENANT's obligations to perform each and every
covenant and condition on TENANT's part to be performed hereunder, nor from
damage or other remedy for failure to perform or meet the obligation of this
Lease.
53. INSOLVENCY:
(a) For any attachment, garnishment, or execution of this Lease or
the interest of the TENANT hereunder in any action brought by or against the
TENANT, the TENANT shall have fifteen (15) days in which to provide the
LANDLORD written notification of such. Following TENANT's written
notification to LANDLORD, the TENANT shall have sixty (60) days in which to
cure. if such attachment, garnishment, or execution of this Lease brought by
or against TENANT cannot be cured within such sixty (60) day period, TENANT
shall not be in default hereunder; provided, TENANT has begun to cure within
such sixty (60) days and continues to diligently pursue a cure. Failure by
TENANT to either (a) notify LANDLORD as required above, or (b) cure (or
commence cure activity) within sixty (60) days following Notification shall
constitute a breach of this Lease by TENANT and a default hereunder.
(b) To the full extent permissible under the Bankruptcy Reform Act of
1978, specifically Section 365 thereof (U.S.C. 365) or any successor thereto,
if TENANT shall file a voluntary petition in bankruptcy or take the benefit of
any insolvency act or be dissolved or adjudicated a bankrupt, or if a receiver
shall be appointed for its business or its assets and the appointment of such
receiver is not vacated within sixty (60) days after such appointment, or if
it shall make an assignment for the benefit of its creditors, then and
forthwith thereafter the LANDLORD shall have all of the rights provided in
Paragraph 19 of this Lease in the event of TENANT's default hereunder.
54. EXECUTION OF DOCUMENTS - LANDLORD and TENANT shall each cooperate
with the other and execute such documents as the other party may reasonably
require or request so as to enable it to conduct its operations, so long as
the requested conduct or execution of documents does not have the effect of
derogating or altering the powers, rights, duties and responsibilities of the
respective parties.
55. INABILITY TO PERFORM/FORCE MAJEURE - The obligations of either party
hereunder shall not be affected or impaired nor shall either party be in
default of its obligations hereunder because such party is unable to fulfill
said obligations or is delayed in doing so, if such inability or delay is
caused by reason of strike, labor troubles, acts of God, governmental laws,
ordinances, rules or regulations or any other cause beyond the reasonable
control of such party.
56. GOVERNING LAW - This Lease, and all matters relating to this Lease,
shall be construed under the laws of the State of Nevada.
57. LANDLORD'S WARRANTIES AND REPRESENTATIONS - LANDLORD hereby warrants
and represents as follows:
(a) TITLE - LANDLORD has good and indefeasible fee simple title to
the Leased Premises and shall be fully capable of delivering to TENANT in
accordance with the terms and provisions of this Lease undisturbed possession
and quiet enjoyment of the Leased Premises,
(b) AUTHORITY OF LANDLORD - This Lease is valid and binding upon
LANDLORD and enforceable against it in accordance with its terms, Without
limiting the generality of the foregoing, (i) the execution and delivery of
this Lease by the person executing this Lease on behalf of LANDLORD and the
consummation by LANDLORD of the transactions contemplated hereby have been
specifically authorized by all requisite corporate action and (ii) the
transactions contemplated hereby are within LANDLORD's purposes and powers as
set forth in the applicable organizational documents forming and governing
LANDLORD.
(c) CONDEMNATION - To LANDLORD's knowledge, there is no pending or
threatened condemnation or similar proceeding affecting the Leased Premises or
any portion thereof nor does LANDLORD have any knowledge that any such action
is presently contemplated.
(d) PENDING LITIGATION - There are no legal actions, suits or other
legal or administrative proceedings pending or threatened against LANDLORD
that would have a material adverse effect upon the Leased Premises, LANDLORD's
interest therein, TENANT's contemplated use thereof or which would prohibit
LANDLORD from completing this transaction.
(e) PARTIES IN POSSESSION/CONTRACTS - No person or entity is in
possession of any portion of the Leased Premises as lessee, tenant at will or
at sufferance, or otherwise, and no person or entity has any right or option
to lease, purchase, occupy, use or possess any portion of the Leased Premises.
There are no maintenance, operations, management or miscellaneous contracts
affecting any portion of the Leased Premises.
(f) NO VIOLATIONS - LANDLORD has no present knowledge of any
violation of any ordinance, regulation, law or statute of any governmental or
quasi-governmental authority pertaining to the Leased Premises or any portion
thereof. The execution by LANDLORD of this Lease and the consummation by
LANDLORD of the transaction contemplated hereby does not and during the Term
of this Lease will not result in a breach of any term or provision of or
constitute a default or a condition which with notice or lapse of time or both
would ripen into a default under any indenture, agreement, instrument or
obligation to which LANDLORD is a party or to which LANDLORD or the Leased
Premises or any portion thereof is subject.
(g) DEBTS AND LIENS - LANDLORD has not incurred and to LANDLORD's
knowledge there are no unpaid charges, debts, liabilities, claims or
obligations as a result of the construction, occupancy, ownership, use or
operation of the Leased Premises which could give rise to any mechanic's,
materialments or other statutory lien against the Leased Premises or any
portion thereof,
(h) HAZARDOUS MATERIALS AND HAZARDOUS MATERIALS CONTAMINATION
DEFINITIONS:
A. For the purposes of this Lease, the parties agree that, unless the
content otherwise specifies or requires, the following terms shall have the
meaning herein specified:
(i) "Hazardous Materials" shall mean (a) any "hazardous waste" as
defined by the Resource Conservation and Recovery Act of 1976 (42 U. S,C,
Section 6901 et secr,) ("CERCLAII) as amended from time to time, and
regulations promulgated thereunder; (c) asbestos; (d) polychlorinated
bi-phenyls; (e) underground storage tanks, whether empty, filled or partially
filled with any substance, (f) any substance the presence of which on the
Leased Premises is prohibited by any Governmental Requirements; and (g) any
other substance which by any Governmental Requirements requires special
handling or notification of any federal, state or local governmental entity in
its collection, storage, treatment, or disposal.
(ii) "Hazardous Materials Contamination" shall mean the
contamination (whether presently existing or hereafter occurring) of the
Improvements, facilities, soil, ground water, air or other elements on or of
the Leased Premises by Hazardous Materials, or the contamination of the
buildings, facilities, soil, ground water, air or other elements on or of any
other property as a result of Hazardous Materials at any time (whether before
or after the date of this Lease) emanating from the Leased Premises.
(iii) "Governmental Authority" shall mean the United States, the
State of Nevada, the county in which the Leased Premises is situated (or each
such county if the Leased Premises is situated in more than one county), the
city in which the Leased Premises is situated (or each such city if the Leased
Premises is situated in more than one city), and any political subdivision of
any of the foregoing, and any agency, department, commission, board, bureau,
court or instrumentality of any of them which now or hereafter has
jurisdiction over the LANDLORD or the construction, development, management
and operation of the Leased Premises.
(iv) "Governmental Requirement" shall mean any law, ordinance,
order, rule, regulation or directive of a Governmental Authority.
B. LANDLORD hereby expressly warrants and represents:
(i) To the best of LANDLORD's knowledge, no Hazardous Materials
are now located on the Leased Premises, and neither LANDLORD nor any other
person has ever caused or permitted any Hazardous Materials to be placed,
held, located or disposed of on, under or at the Leased Premises or any part
thereof;
(ii) To the best of LANDLORD's knowledge, no part of the Leased
Premises is being used for the disposal, storage, treatment, processing or
other handling of Hazardous Materials, nor is any part of the Leased Premises
affected by any Hazardous Materials Contamination;
(iii) To the best of LANDLORD's knowledge, no part of the Leased
Premises has been used in the past for the disposal, storage, treatment,
processing or other handling of Hazardous Materials;
(iv) To the best of LANDLORD's knowledge, no property adjoining
the Leased Premises is being used, or has been used at any previous time for
the disposal, storage, treatment, processing or other handling of Hazardous
Materials nor is any other property adjoining the Leased Premises affected by
Hazardous Materials Contamination:
(v) To the best of LANDLORD's knowledge, no investigation,
administrative order, consent order and agreement, litigation or settlement
with respect to Hazardous Materials or Hazardous Materials Contamination is
proposed, threatened, anticipated or in existence with respect to the Leased
Premises, To the best of LANDLORD's knowledge, the Leased Premises is not
currently on, and to LANDLORD's knowledge has never been on, any federal or
state "Superfund" or "Superlien" list.
(i) NO CONFLICTS - The execution and delivery of this Lease, and the
performance by the LANDLORD of its obligations hereunder, do not and will not
(a) conflict with or result in a breach of any term, condition or provision
of, or constitute a default under (i) the articles of incorporation or bylaws
of the LANDLORD, (ii) any bond, debenture, note or other evidence of
indebtedness or (iii) any contract, indenture, mortgage, loan agreement,
lease, joint venture or other agreement or instrument to which the LANDLORD is
a party or by which the LANDLORD or any of its properties are bound, or (b)
result in any violation of any Governmental Requirements.
(j) NO CONSENTS NECESSARY - No consent or approval of any third
party, including, without limitation, any Governmental Authority, is required
in connection with the execution, delivery or performance by the LANDLORD of
this Lease and the consummation of the transactions contemplated herein.
LANDLORD shall indemnify and hold TENANT harmless of, from and against
any and all claims, demands, liabilities, liens, costs, expenses, penalties,
damages and losses, including without limitation reasonable attorneys' fees
and costs suffered by TENANT as a result of any breach of warranty or
representation made by LANDLORD in this PARAGRAPH NUMBERED 57. Each warranty
and each representation shall survive the termination of the Lease.
58. NON-DISTURBANCE, ATTORNMENT AND SUBORDINATION AGREEMENT
A. LANDLORD agrees that, no later than TWENTY (20) days after the date of
full execution of the Lease, it will provide TENANT with commercially
reasonable non-disturbance, subordination and attornment agreements
"non-disturbance agreement") in favor of TENANT from any ground lessors,
mortgage holders or lien holders (each,, a "Superior Mortgagee") then in
existence, if any, substantially in a form mutually acceptable to LANDLORD and
TENANT. Said non-disturbance agreements shall be in recordable form and may
be recorded at TENANT's election and expense, In the event LANDLORD fails to
provide such commercially reasonable non-disturbance agreements within the
time frame set forth above, TENANT shall have the right, exercisable at any
time thereafter, to give TEN (10) business days' written notice to LANDLORD
terminating the Lease. In the event LANDLORD does not provide TENANT with the
applicable non-disturbance agreements within such TEN (10) business day
period, the Lease shall terminate and LANDLORD shall reimburse TENANT for all
of TENANT's out-of-pocket costs incurred in connection with the design and
construction of the TENANT improvements and TENANT's legal fees incurred in
connection with the review and negotiation of the Lease and this provision
shall survive the termination of the Lease and LANDLORD shall forthwith pay
TENANT the sums represented by the Promissory Notes herein referred to,
LANDLORD agrees to provide TENANT with commercially reasonable and mutually
acceptable non-disturbance agreements, in favor of TENANT from any Superior
Mortgagee(s) of LANDLORD who later come(s) into existence at any time prior to
the expiration of the Term of the Lease, as it may be extended, in
consideration of, and as a condition precedent to, TENANT's agreement to be
bound by Lease PARAGRAPH NUMBERED 58B below. Said non-disturbance agreements
shall be in recordable form and may be recorded at TENANT's election and
expense.
B. OBLIGATIONS OF TENANT - Subject to PARAGRAPH NUMBERED 58A above, the
Lease and the rights granted to TENANT by the Lease shall be subject and
subordinate to (a) all ground or underlying leases affecting all or any part
of the Leased Premises subsequently existing and all amendments, renewals,
modifications, supplements and extensions of the leases, and (b) all deeds of
trust or mortgages subsequently affecting or encumbering all or any part of
the Leased Premises; provided, however, that if LANDLORD elects at any time to
have TENANT's interest in the Lease be or become superior, senior or prior to
any such instrument, then upon receipt by TENANT of written notice of such
election, TENANT shall immediately execute all necessary and reasonable
subordination instruments or other documents confirming the subordination of
such mortgage, deed of trust, ground or underlying lease to the Lease.
C. ATTORNMENT BY TENANT - Subject to PARAGRAPH NUMBERED 58A above, in the
event of the cancellation or termination of any or all ground or underlying
leases affecting all or any part of the Leased Premises in accordance with its
terms or by the surrender thereof, whether voluntary, involuntary or by
operation of law, or by summary proceedings, or in the event of any
foreclosure of any or all mortgages or deeds of trust encumbering the Leased
Premises by trustees sale, voluntary agreement, deed in lieu of foreclosure,
or by the commencement of any judicial action seeking foreclosure, TENANT, at
the request of the then landlord under the Lease, shall attorn to and
recognize (a) the ground or underlying lessor, under the ground or underlying
lease being terminated or canceled, and (b) the beneficiary or purchaser at
the foreclosure sale, as TENANT's landlord under this Lease, and TENANT agrees
to execute and deliver at any time upon request of such ground or underlying
lessor, beneficiary, purchaser, or their successors, any instrument to further
evidence such attornment. TENANT hereby waives its right, if any, to elect to
terminate the Lease or to surrender possession of the Leased Premises in the
event of any such ground or underlying lease cancellation or termination or
mortgage or deed of trust foreclosure.
D. NON-DISTURBANCE - Notwithstanding any of the provisions of this
PARAGRAPH NUMBERED 58 to the contrary, TENANT shall be allowed to occupy the
Leased Premises, subject to the conditions of this Lease, and this Lease shall
remain in effect, until an Event of Default occurs (and all applicable notice
and cure periods have expired), or until TENANT's rights are modified because
of an Eminent Domain proceeding pursuant to PARAGRAPH NUMBERED 37 hereof.
59. ARBITRATION - The parties agree to submit to arbitration any dispute
related to this Lease and agree that the arbitration process shall be the
exclusive means for resolving disputes which the parties cannot resolve. Any
arbitration hereunder shall be conducted under the Dispute Resolution Rules of
the American Arbitration Association ("AAA") as modified herein. Arbitration
proceedings shall take place in Las Vegas, Nevada, before a single arbitrator
who shall be a lawyer. All arbitration proceedings shall be confidential.
Neither party shall disclose any information about the evidence produced by
the other party in the arbitration proceedings, except in the course of
judicial, regulatory, or arbitration proceeding, or as may be demanded by
government authority. Before making any disclosure permitted by the preceding
sentence, a party shall give the other party reasonable advance written notice
of the intended disclosure and an opportunity to prevent disclosure. In
connection with any arbitration provisions hereunder, each party shall have
the right to take the deposition of two (2) individuals and any expert witness
retained by the other party. Additional discovery may be had only where the
arbitrator so orders, upon a showing of substantial need. Only evidence that
is directly relevant to the issues may be obtained in discovery. Each party
bears the burden of persuasion of any claim or counterclaim raised by that
party. The arbitration provisions of this Lease shall not prevent any party
from obtaining injunctive relief from a court of competent jurisdiction to
enforce the obligations for which such party may obtain provisional relief
pending a decision on the merits by the arbitrator. Each of the parties
hereby consents to the jurisdiction of Nevada courts for such purpose. The
arbitrator shall have authority to award any remedy or relief that a court of
the State of Nevada could grant in conformity to applicable law, except that
the arbitrator shall have no authority to award attorneys' fees or punitive
damages. Any arbitration award shall be accompanied by a written statement
containing a summary of the issues in controversy, a description of the award,
and an explanation of the reasons for the award. The arbitrators award shall
be final and judgment may be entered upon such award by any court.
60. LANDLORD BANKRUPTCY PROCEEDING - In the event that the obligations of
LANDLORD under this Lease are not performed during the pendency of a
bankruptcy or insolvency proceeding involving the LANDLORD as the debtor, or
following the rejection of this Lease in accordance with Section 365 of the
United States Bankruptcy Code, then notwithstanding any provision of this
Lease to the contrary, TENANT shall have the right to set off against rents
next due and owing under this Lease (a) any and all damages caused by such
non-performance of LANDLORD's obligations under this Lease by LANDLORD,
debtor-in-possession, or the bankruptcy trustee, and (b) any and all damages
caused by the non-performance of LANDLORDIS obligations under this Lease
following any rejection of this Lease in accordance with Section 355 of the
United States Bankruptcy Code.
61. MEMORANDUM OF LEASE - Upon execution of this Lease, LANDLORD and
TENANT shall execute a Memorandum of Lease in recordable form, which LANDLORD
shall deliver to TENANT for recording at TENANT's option. Said Memorandum
shall be amended as to legal descriptions and commencement and termination
dates when such information is available.
62. LEASEHOLD MORTGAGEE RIGHTS
A. DEFINITIONS:
(1) The term "Leasehold Mortgagee" shall mean the holder of the
beneficial interest of a Leasehold Deed of Trust, who has given written notice
to LANDLORD of its name and address for notices.
(2) The term "Leasehold Deed of Trust" shall mean any encumbrance of
the Lease, by a deed of trust, mortgage or other security instrument,
including, without limitation, assignments of rents, issues and profits from
the Leased Premises, to secure repayment of loans made to, or obligations of
TENANT thereunder.
B. TERMINATION AND MODIFICATION - LANDLORD agrees that, so long as any
Leasehold Mortgagee, its successor or assign holds a Leasehold Deed of Trust,
no termination of the Lease by TENANT and no subordination, cancellation,
surrender or modification of the Lease shall be effective without the prior
written consent of such Leasehold Mortgagee.
C. ENCUMBRANCE AND ASSIGNMENT OF LEASE - LANDLORD"S prior written
consent shall not be required to any of the following, provided notice is
given to LANDLORD and LANDLORD is provided copies of all documentation
relating thereto:
(1) TENANT's encumbering the Lease by any Leasehold Deed of Trust,
the possession of the Leased Premises by a Leasehold Mortgagee or by a
receiver under a Leasehold Deed of Trust, and a sale or assignment of the
Lease by foreclosure under a Leasehold Deed of Trust, or by a deed or
assignment in lieu of foreclosure; or
(2) Further assignments or subleases of the Lease by a Leasehold
Mortgagee and, to the extent not in conflict with the Lease, the exercise of
any other rights, powers or remedies any Leasehold Mortgagee may have under a
Leasehold Deed of Trust; or
(3) Assignment of all or any part of any interest in the Lease
acquired by a purchaser at a foreclosure sale under a Leasehold Deed of Trust
or by a deed or assignment in lieu of foreclosure to any person or entity,
including, without limitation, a Leasehold Mortgagee. LANDLORD consents to any
of the above-described assignments without restriction. Nothing in the Lease
shall impose on a Leasehold Mortgagee the obligations of TENANT under the
Lease solely because such Leasehold Mortgagee accepts a Leasehold Deed of
Trust.
D. NOTICE OF DEFAULTS - LANDLORD agrees to give Leasehold Mortgagee
immediate notice of all defaults by TENANT under the Lease, and to
simultaneously give to Leasehold Mortgagee a written copy of all notices and
demands that LANDLORD gives to TENANT. No notice or demand under the Lease
shall be effective until after notice is received by Leasehold Mortgagee. Any
notices of default given by LANDLORD under the Lease shall describe the
default(s) with reasonable detail. Leasehold Mortgagee shall have the right
to cure any breach or default within the time periods given below.
E. LEASEHOLD MORTGAGEE'S CURE RIGHTS
(1) After receipt by TENANT of a notice of default under the Lease
and the expiration of any applicable period of cure given to TENANT under the
Lease, LANDLORD shall deliver an additional notice ("Mortgagee's Notice") to
Leasehold Mortgagee (which Leasehold Mortgagee shall be non-related and
non-affiliated as to TENANT) specifying the default and stating that TENANT'S
period of cure has expired. Leasehold Mortgagee shall thereupon have the
additional periods of time to cure any uncured default, as set forth below,
without payment of default charges, fees, late charges or interest that might
otherwise be payable by TENANT. LANDLORD shall not terminate the Lease or
exercise its other remedies under the Lease if:
(i) Within THIRTY (30) days after Leasehold Mortgagee's receipt
of the Mortgagee's Notice, Leasehold Mortgagee (A) cures the default, or (B)
if the default reasonably requires more than THIRTY (30) days to cure,
commences to cure said default and diligently prosecutes the same to
completion; or,
(ii) Where the default cannot be cured by payment or expenditure
of money or without possession of the Leased Premises or otherwise, Leasehold
Mortgagee initiates foreclosure or other appropriate proceedings within SIXTY
(60) days after receipt of the Mortgagee's Notice, cures all other defaults
reasonably capable of cure, complies with all other covenants and conditions
of the Lease reasonably capable of compliance, and continues to pay all rents,
real property taxes and assessments, and insurance premiums to be paid by
TENANT under the Lease, Leasehold Mortgagee shall then have SIXTY (60) days,
following the later to occur of (A) the date of execution and delivery of a
New Lease of the Leased Premises pursuant to PARAGRAPH NUMBERED E(4) below, or
(B) the date on which Leasehold Mortgagee or its nominee is able to occupy the
Leased Premises following eviction of or vacating by TENANT under the Lease,
to cure such default; provided, however, that if any such default, by its
nature, is such that it cannot practicably be cured within SIXTY (60) days,
then Leasehold Mortgagee shall have such time as shall be reasonably necessary
to cure the default provided that Leasehold Mortgagee commences such cure
within such SIXTY (60) day period and thereafter diligently prosecutes the
cure to completion.
(2) LANDLORD agrees to accept performance by Leasehold Mortgagee of
all cures, conditions and covenants as though performed by TENANT, and agrees
to permit Leasehold Mortgagee access to the Leased Premises to take all such
actions as may be necessary or useful to perform any condition or covenants of
the Lease or to cure any default of TENANT.
(3) If Leasehold Mortgagee elects any of the above-mentioned options,
then upon Leasehold Mortgagee's acquisition of the Lease by foreclosure,
whether by power of sale or otherwise or by deed or assignment in lieu of
foreclosure, or if a receiver be appointed, the Lease shall continue in full
force and effect, provided that, if Leasehold Mortgagee elects the option
provided in Subsection E(l)(ii) above, then upon Leasehold Mortgagee's
acquisition of the Lease, Leasehold Mortgagee shall cure all prior defaults of
TENANT under the Lease that are reasonably capable of being cured by Leasehold
Mortgagee within the time set forth in Subsection E(l)(ii) above, and LANDLORD
shall treat Leasehold Mortgagee as TENANT under the Lease. If Leasehold
Mortgagee cures all defaults by TENANT and does not acquire the Lease, or if
Leasehold Mortgagee commences an action as set forth in Subsection E(l)(ii),
and thereafter TENANT cures such defaults (which cure LANDLORD shall be
obligated to accept) and Leasehold Mortgagee then terminates all proceedings
under the option in Subsection E(l)(ii) above, then the Lease shall remain in
full force and effect between LANDLORD and TENANT.
(4) In the event the Lease is terminated for any reason prior to the
end of the Lease term (unless the Lease is terminated due to Leasehold
Mortgagee's failure to exercise its rights under this Section 62, LANDLORD
shall enter into a new lease ("New Lease") with Leasehold Mortgagee or
Leasehold Mortgagee's nominee covering the Leased Premises, provided that
Leasehold Mortgagee (i) requests such New Lease by written notice to LANDLORD
within SIXTY (60) days after written notice by LANDLORD of termination of the
Lease, and (ii) cures all prior defaults of TENANT that are reasonably capable
of being cured by Leasehold Mortgagee. The New Lease shall be for the
remainder of the Lease term, effective at the date of such termination, and
shall only include all the rents and all the covenants, agreements,
conditions, provisions, restrictions and limitations contained in the Lease.
In connection with a New Lease, LANDLORD shall assign to Leasehold Mortgagee
or its nominee all of LANDLORD's interest in all existing subleases of all or
any part of the Leased Premises and all attornments given by the sub-lessee's.
LANDLORD shall not terminate or agree to terminate any sublease or enter into
any new lease or sublease for all or any portion of the Leased Premises
without Leasehold Mortgagee's prior written consent, unless Leasehold
Mortgagee fails to deliver its request for a New Lease under this PARAGRAPH
62. In connection with any such New Lease, LANDLORD shall, by grant deed,
convey to Leasehold Mortgagee, or its nominee, title to the improvements, if
any, which become vested in LANDLORD as a result of termination of the Lease.
LANDLORD shall allow to the TENANT under the New Lease a credit against rent
equal to the net income, if any, derived by LANDLORD from the Leased Premises
during the period from the date of termination of the Lease until the date of
execution of the New Lease under this PARAGRAPH 62.
(5) Leasehold Mortgagee or any other purchaser at a foreclosure sale
of the Leasehold Deed of Trust (or Leasehold Mortgagee or its nominee if one
of them enters into a New Lease with LANDLORD) shall succeed to all the
interest of TENANT in any security or other deposits or other impound payments
paid by TENANT to LANDLORD.
F. PERMITTED DELAYS - So long as Leasehold Mortgagee is prevented by any
process or injunction issued by any court or by any statutory stay, or by
reason of any action by any court having jurisdiction of any bankruptcy or
insolvency proceeding involving TENANT, from commencing or prosecuting
foreclosure or other appropriate proceedings in the nature thereof, Leasehold
Mortgagee shall not be deemed for that reason to have failed to commence such
proceedings or to have failed to diligently prosecute such proceedings,
provided that Leasehold Mortgagee uses reasonable efforts to contest and
appeal the issuance or continuance of any such process, stay or injunction.
G. DEFAULTS DEEMED CURED - On transfer of the Lease at any foreclosure
sale under the Leasehold Deed of Trust or by deed or assignment in lieu of
foreclosure, or upon creation of a New Lease, any or all of the following
defaults relating to the prior owner of the Lease shall be deemed cured:
(1) Attachment, execution or other judicial levy upon the Lease;
(2) Assignment of the Lease for the direct or indirect benefit of
creditors of the prior TENANT;
(3) Judicial appointment of a receiver or similar officer to take
possession of the Lease;
(4) Filing any petition by, for or against TENANT under any
chapter of the federal Bankruptcy Act or any federal or state debtor relief
statute, as amended;
(5) Any other default personal to TENANT and/or not otherwise
reasonably curable by Leasehold Mortgagee.
H. MERGER - So long as a Leasehold Mortgagee holds a Leasehold Deed of
Trust, the fee title to the Leased Premises and the leasehold estate created
by the Lease shall not merge unless all Leasehold Mortgagees expressly consent
to the merger in writing. This provision shall apply even if TENANT or
LANDLORD or any third party acquires both the fee title and the Lease.
I. CONDEMNATION - Any condemnation award to which TENANT is entitled
shall be paid directly to Leasehold Mortgagee. Leasehold Mortgagee shall have
the right to participate in all condemnation award proceedings held by the
condemning authority and the allocation of such award.
J. INSURANCE - Any insurance proceeds payable from any policy of
insurance (other than liability insurance) required by the Lease shall be paid
to Leasehold Mortgagee. Leasehold Mortgagee shall have the right to
participate in all adjustments, settlements, negotiation or actions with the
insurance company regarding the amount and allocation of any such insurance
proceeds. Any insurance policies permitted or required by the Lease shall
name Leasehold Mortgagee as an additional insured or loss payee, as
appropriate.
K. RESTORATION - Leasehold Mortgagee, if it exercises any of its
remedies under this PARAGRAPH 62 above, shall have no obligation to restore or
repair damage to the improvements that cost in excess of available insurance
proceeds.
L. LIMITATION ON LIABILITY - Leasehold Mortgagee shall not be liable to
perform TENANT's obligations under the Lease, unless and until Leasehold
Mortgagee acquires the Lease, by foreclosure under power of sale or otherwise,
by deed or assignment in lieu of foreclosure, or under the New Lease
provisions hereof. The liability of any Leasehold Mortgagee who acquires the
Lease shall be limited to Leasehold Mortgagee's interest in the Lease.
Leasehold Mortgagee shall not be liable for any such obligations under the
Lease following the assignment of its interest under the Lease to any other
transferee or any purchaser at foreclosure, whether conducted by power of sale
or otherwise. An interest in a Leasehold Deed of Trust securing any unpaid
part of the purchase price for the Lease shall not be considered retention of
an interest in the Lease for purposes of this subsection.
M. PRIORITY - The Lease, and any extensions, renewals or replacements
thereof, and a permitted sublease entered into by TENANT as sub-lessor, and
any Leasehold Deed of Trust or other encumbrance recorded by Leasehold
Mortgagee shall be superior to any mortgages, deeds of trust or similar
encumbrances placed by LANDLORD on the Leased Premises and to any lien right,
if any, of LANDLORD on the buildings, and any furniture, fixtures, equipment
or other personal property of TENANT upon the Leased Premises.
N. ESTOPPEL CERTIFICATE -
(a) Within 20 calendar days of written request by Leasehold
Mortgagee, LANDLORD shall execute and deliver to Leasehold Mortgagee or to any
proposed purchaser of TENANT's estate, a statement certifying as follows:
(1) The existence of the Lease and amendments to it;
(2) The last date LANDLORD received rent under the Lease, the
date such rent was due and the amount thereof;
(3) Whether there are any Events of Default under the Lease
(or whether there is or has been any event, act or omission which would
constitute an event of default with notice or lapse of time or both) to the
best knowledge of LANDLORD as of the date of the certificate;
(4) TENANT's satisfaction of all conditions precedent under
the Lease for commencement of construction of the improvements, or setting
forth the conditions that remain unsatisfied;
(5) Acknowledging receipt of Leasehold Mortgagee's or
purchaser's name and address for notice;
(6) That LANDLORD understands the recipient will rely on the
certificate.
(b) Within 20 calendar days of written request by LANDLORD or
LANDLORD's Fee Mortgagee, TENANT shall execute and deliver to both such
parties or to any proposed purchaser of LANDLORD's estate, a statement
certifying as follows:
(1) The existence of the Lease and amendments to it;
(2) The last date LANDLORD received rent under the Lease, the
date such rent was due and the amount thereof;
(3) Whether there are any Events of LANDLORD Default under
the Lease (or whether there is or has been any event, act or omission which
would constitute such an event of default with notice or lapse of time or
both) to the best knowledge of TENANT as of the date of the certificate;
(4) LANDLORD's satisfaction of all conditions precedent under
the Lease for commencement of construction of the improvements, or setting
forth the conditions that remain unsatisfied;
(5) Acknowledging receipt of Leasehold Mortgagee's or
purchaser's name and address for notice;
(6) That TENANT understands the recipient will rely on the
certificate.
0. NOTICE - Notices and other communications required by the Lease to be
given to Leasehold Mortgagee shall be delivered in accordance with PARAGRAPH
NUMBERED 34 of the Lease, at the address provided by Leasehold Mortgagee.
This address may be changed by a notice given in the same manner. No notices
given to TENANT by LANDLORD pursuant to the Lease shall be deemed effective
unless and until Leasehold Mortgagee receives a copy thereof.
P. SUCCESSORS - The right and benefits of Leasehold Mortgagee under this
Amendment shall benefit and may be exercised by the holder of any Leasehold
Deed of Trust given now or in the future as an encumbrance on the Lease.
Q. OPTIONS -LANDLORD and TENANT agree that Leasehold Mortgagee may
exercise any OPTION to extend the term of the Lease which is granted to TENANT
under or in connection with the Lease. LANDLORD agrees to accept notice(s) of
exercise of such option(s) signed by Leasehold Mortgagee with the same effect
as though the notice were signed and delivered by TENANT, which notice may be
delivered by Leasehold Mortgagee within FIVE (5) days after the termination of
the period of time in which TENANT must exercise such option. In the event
TENANT fails to complete such extension, LANDLORD shall notify Leasehold
Mortgagee of such failure, and Leasehold Mortgagee shall thereupon have the
option to complete such extension within an additional period of time equal to
the time period originally available to TENANT, commencing from the date such
notice is received by Leasehold Mortgagee.
R. CLAIMS - LANDLORD and TENANT shall deliver to Leasehold Mortgagee
notice of any litigation or arbitration proceedings between the parties or
involving the Leased Premises or the Lease. Leasehold Mortgagee shall have
the right, at its option, to intervene and become a party to any such
proceedings. If Leasehold Mortgagee elects not to intervene or become a
party, LANDLORD shall deliver to Leasehold Mortgagee prompt notice of and a
copy of any award, decision or settlement agreement made in connection with
any such proceeding.
S. FURTHER AMENDMENTS - LANDLORD and TENANT shall cooperate in including
in the Lease by suitable amendment from time to time any provision which may
be reasonably requested by any proposed Leasehold Mortgagee for the purpose of
implementing the mortgagee protection provisions contained in this PARAGRAPH
NUMBERED 62 and allowing that Leasehold Mortgagee reasonable means to protect
or preserve the lien of its Leasehold Deed of Trust upon the occurrence of a
default under the terms of the Lease. LANDLORD and TENANT each agree to
execute and deliver (and to acknowledge for recording purposes, if necessary)
any agreement required to effect any such amendment; provided that any such
amendment shall not in any way affect the term or rent under the Lease or
otherwise in any material respect adversely affect any rights of LANDLORD
under the Lease.
IN WITNESS WHEREOF, the parties hereto have executed this Lease the day
and year first above written.
LANDLORD: URBAN LAND OF NEVADA, a Nevada corporation
By: /s/ Gregory T. H. Lee
Gregory T. H. Lee, Vice President
TENANT: ALL-AMERICAN GOLF CENTER, LLC., a California corporation
By: /s/ Ronald S. Boreta
Ronald S. Boreta, Managing Partner
GUARANTY
The undersigned hereby unconditionally guarantees payment and performance of
the terms, covenants and conditions contained in the above INDENTURE OF LEASE
to be kept, performed and paid by SAINT ANDREWS GOLF CORPORATION in favor of
LANDLORD, URBAN LAND OF NEVADA, a Nevada corporation.
DATED: This 9th day of June, 1997.
SAINT ANDREWS GOLF CORPORATION, a Nevada corporation
By: /s/ Ronald S. Boreta
Ronald S. Boreta, President
<PAGE>
EXHIBIT "A"
SECURED PROMISSORY NOTE
$______________ _______________, ____
San Diego, California
FOR VALUE RECEIVED, __________________, ("Maker"), promises to pay to
__________________ ("Holder"), or order, at Holder's place of business in
__________________, the principal amount of _____________________ Dollars
($______________), with interest on such amount until paid, at the rate set
forth below and payable as follows:
INTEREST RATE. The amount of outstanding principal shall bear interest at
a rate of ten percent (10%) per annum. Interest shall accrue on the principal
balance from and after the date hereof and shall be calculated on the basis of
a 365-day year.
MAXIMUM INTEREST. Notwithstanding the foregoing, in no event whatsoever
shall the amount paid, or agreed to be paid, to Holder for the use,
forbearance or detention of money to be loaned hereunder or otherwise, for the
performance or payment of any covenant or obligation contained herein, exceed
the maximum amount permissible under applicable law. If from any circumstance
whatsoever fulfillment of any provision hereof exceeds the limit of validity
prescribed by law, then, ipso facto, the obligation to be fulfilled shall be
reduced to the limit of such validity, and if from any such circumstance
Holder shall ever receive as interest under this Note or otherwise an amount
that would exceed the highest lawful rate, such amount that would be excessive
interest shall be applied to the reduction of the principal amount owing
hereunder and not to the payment of interest, or if such excessive interest
exceeds the unpaid balance of principal, such excess shall be refunded to
Maker.
TERM. The term of this Note shall be for a period beginning on the date
hereof and ending on a date twelve (12) months from the date hereof (the
"Maturity Date"). All unpaid principal, together with any and all accrued and
unpaid interest, shall be due on the Maturity Date.
PAYMENT. Principal and interest shall be paid in twelve (12) equal
monthly installments. The first installment is due on the day which is one
month from the date hereof and each subsequent monthly installment shall be
due on the same day of each succeeding month and continuing until the Maturity
Date. All outstanding principal and interest shall be due and payable on the
Maturity Date. Any payment hereunder shall be applied first to the payment of
costs and charges of collection, if any, then to accrued interest, and the
balance, if any, shall be then applied to reduction of principal. Principal
and interest are payable in lawful money of the United States of America.
PREPAYMENT. Maker may prepay this Note in full or in part at any time
without prepayment charge.
SECURITY AGREEMENT. This Note is secured pursuant to a _______________
dated _________________________ by and between Holder and Maker which grants
a security interest in Maker's membership interest in All-American Golf LLC, a
California limited liability company (the "Security Agreement").
DEFAULT/ACCELERATION. If any one or more of the following events shall
occur (hereinafter called an "Event of Default"), namely: (i) Maker shall
fail to make timely payment of any installment hereunder and such failure is
not cured within ten (10) days of written notice by Holder to Maker; or (ii)
default shall occur under the Security Agreement; THEN, upon the occurrence of
any such Event of Default, or upon the expiration of the term of this Note,
Holder at its election, and without presentment demand, notice of any kind all
of which are expressly waived by Maker, may declare the entire outstanding
balance of principal and interest thereon immediately due and payable,
together with all costs of collection, including attorneys' fees, and may
exercise upon or enforce its rights to its collateral, as may be set forth in
the Security Agreement in addition to all of its other rights and remedies,
all of which are cumulative.
NO WAIVER BY HOLDER. The acceptance by Holder of any payment under this
Note after the date such payment is due, or the failure to declare an Event of
Default as herein provided, shall not constitute a waiver of any of the terms
of this Note or the right to require the prompt payment when due of future or
succeeding payments or to declare an Event of Default for any failure to so
pay or for any other default. The acceptance by Holder of a payment of a
portion of any installment at any time that such installment is due in full
shall not cure or excuse the default caused by the failure to pay such
installment in full and shall not constitute a waiver of the right to require
full payment when due of all future or succeeding installments.
ATTORNEYS' FEES AND COSTS. In the event Holder takes any action to
enforce any provision of this Note, either through legal proceedings or
otherwise, Maker promises to immediately reimburse Holder for reasonable
attorneys' fees and all other costs and expenses so incurred as awarded by a
court of law. Maker shall also reimburse Holder for all attorneys' fees and
costs reasonably incurred in the representation of Holder in any bankruptcy,
insolvency, reorganization or other debtor-relief proceeding of or relating to
Maker, or for any action to enforce any judgment rendered hereon or relating
to enforcement hereof.
LATE PAYMENT. Maker agrees that if for any reason it fails to make any of
the monthly payments required herein, including the amount due at the Maturity
Date, within five (5) days after the due date, Holder shall be entitled to
damages for the detriment caused thereby, the extent of which damages are
extremely difficult and impractical to ascertain. Maker therefore agrees that
a sum equal to five percent (5%) of such delinquent payment is a reasonable
estimate of such damages and Maker agrees to pay such sum upon demand by
Holder. Acceptance of such late charge by the Holder shall in no event
constitute a waiver of Maker's default with respect to such overdue amount nor
prevent the Holder from exercising any of the other rights and remedies
granted hereunder.
WAIVERS. The Maker, endorsers, guarantors and sureties of this Note
hereby waive diligence, demand, presentment, notice of nonpayment, protest and
notice of protest, and expressly agree that this Note and any payment
hereunder, may be renewed, modified or extended from time to time and at any
time and consent to the acceptance or release of the security for this Note or
a release of any party or guarantor, all without in any way effecting their
liability and waive the right to plead any and all statutes of limitations as
a defense to any demand on this Note, or on any guaranty thereof, or to any
agreement to pay the same to the full extent permissible by law.
MISCELLANEOUS. The terms of this Note shall inure to the benefit of and
bind the parties hereto and their successors and assigns. Maker represents
and warrants to Holder that the obligations hereunder arise out of or in
connection with business purposes and do not relate to any personal, family or
household purpose. As used herein the term "Maker" shall include the
undersigned Maker and any other person or entity who may subsequently become
eligible for the payment hereof. The term "Holder" shall include the named
Holder as well as any other person or entity to whom this Note or any interest
in this Note is conveyed, transferred or assigned. Each person signing this
Note on behalf of Maker represents and warrants that he has full authority to
do so and that this Note binds Maker.
NOTICE. In the event either party provides notice to the other party
pursuant to this Note, such notice shall be provided in the same manner as
required in the Security Agreement.
GOVERNING LAW. This Note shall be governed by and construed and enforced
in accordance with the internal laws of the State of California without giving
any effect to principles of conflict of laws. This Note shall be deemed made
and entered into in San Diego County, California.
MAKER:
By:
Its:
<PAGE>
EXHIBIT "B"
SECURED PROMISSORY NOTE
$5,250,000.00 June 13, 1997
San Diego, California
FOR VALUE RECEIVED, All-American Golf LLC, a California limited liability
company ("Maker"), promises to pay to Callaway Golf Company, a California
corporation ("Holder"), or order, at its place of business in San Diego,
California, or such other place as Holder may designate, the principal amount
of Five Million Two Hundred Fifty Thousand Dollars ($5,250,000.00), or so much
thereof as may be advanced, with interest on such amounts advanced until paid,
at the rate set forth below and payable as follows:
INTEREST RATE. The amount of outstanding principal shall bear interest at
a rate of ten percent (10%) per annum. Interest shall accrue on the principal
balance from the date of and on the amount of each advance made under this
Note, as advances are made pursuant to the paragraph of this Note titled
Disbursement Instruction and Authorization and shall be calculated on the
basis of a 365-day year.
MAXIMUM INTEREST. In no event whatsoever shall the amount paid, or agreed
to be paid, to Holder for the use, forbearance or detention of money to be
loaned hereunder or otherwise, for the performance or payment of any covenant
or obligation contained herein, exceed the maximum amount permissible under
applicable law. If from any circumstance whatsoever fulfillment of any
provision hereof exceeds the limit of validity prescribed by law, then, ipso
facto, the obligation to be fulfilled shall be reduced to the limit of such
validity, and if from any such circumstance Holder shall ever receive as
interest under this Note or otherwise an amount that would exceed the highest
lawful rate, such amount that would be excessive interest shall be applied to
the reduction of the principal amount owing hereunder and not to the payment
of interest, or if such excessive interest exceeds the unpaid balance of
principal, such excess shall be refunded to Maker.
TERM. The term of this Note shall be for a period beginning on the date
hereof and ending on the tenth anniversary (the "Maturity Date") of the date
which the Center, as such term is defined in the Operating Agreement
(hereinafter defined), is open to the public (the "Center Opening"). All
unpaid principal, together with any and all accrued and unpaid interest, shall
be due on the Maturity Date.
PAYMENT. Payment of principal and interest due hereunder shall be payable
as follows:
(i) Commencing on the date which is sixty (60) days after the Center
Opening and continuing on the same day of each month thereafter until the
Maturity Date, the interest accrued on the principal outstanding shall be
payable in monthly installments.
(ii) Commencing on the fifth anniversary of the Center Opening and
continuing on the same day of each month thereafter until the Maturity Date,
the principal outstanding as of the fifth anniversary of the Center Opening
shall be payable in sixty (60) equal monthly installments, or more, and on the
Maturity Date, the entire unpaid principal balance together with all accrued
and unpaid interest shall be due and payable.
(iii) Additional payments shall be made on amounts outstanding
hereunder from time to time during the term of this Note from distributable
cash from the Maker pursuant to Article VI of that Operating Agreement for
All-American Golf LLC dated June 13, 1997, as amended, restated, modified, or
supplemented from time to time (the "Operating Agreement").
Any payment hereunder shall be applied first to the payment of costs and
charges of collection, if any, then to accrued interest, and the balance, if
any, shall be then applied to reduction of principal. Principal and interest
are payable in lawful money of the United States of America.
PREPAYMENT. Maker may prepay this Note in full or in part at any time
without prepayment charge. No partial prepayment shall release Maker from
thereafter tendering all regular scheduled monthly payments required herein
until this Note is paid in full. No amount prepaid shall be available for
reborrowing. Payments of distributable cash from the Maker pursuant to
Article VI of the Operating Agreement shall be considered to be prepayments of
this Note.
SECURITY AGREEMENT. This Note is secured pursuant to a Continuing
Security Agreement dated June 13, 1997 by and between Holder and Maker (the
"Security Agreement"), a Membership Interest Security Agreement dated June 13,
1997 by and between Holder and Saint Andrews Golf Corporation, a Nevada
corporation ("Saint Andrews") (the "Membership Interest Security Agreement"),
and the Deed of Trust dated June 13, 1997 executed by the Maker in favor of
Holder securing the Indenture of Lease dated June 13, 1997 by and between
Urban Land of Nevada, a Nevada corporation, and Holder (the "Deed of Trust").
DEFAULT/ACCELERATION. If any one or more of the following events shall
occur (hereinafter called an "Event of Default"), namely: (i) Maker shall
fail to timely make payment of any installment hereunder and such failure is
not cured within ten (10) days of written notice by Holder to Maker; (ii) the
Center Opening does not occur on or before April 1, 1998; (iii) default or an
event of default shall occur under the Security Agreement; (iv) default or an
event of default shall occur under the Membership Interest Security Agreement;
(v) default or an event of default shall occur under the Deed of Trust; or
(vi) the Performance Criteria do not meet the specified minimum levels set
forth in Exhibit A hereto; THEN, upon the occurrence of any such Event of
Default, or upon the expiration of the term of this Note, Holder at its
election, and without presentment demand, notice of any kind all of which are
expressly waived by Maker, may declare the entire outstanding balance of
principal and interest thereon immediately due and payable, together with all
costs of collection, including attorneys' fees, or may exercise upon or
enforce its rights to its collateral, as may be set forth in the Security
Agreement, the Membership Interest Security Agreement or the Deed of Trust,
all of which remedies are cumulative.
NO WAIVER BY HOLDER. The acceptance by Holder of any payment under this
Note after the date such payment is due, or the failure to declare an Event of
Default as herein provided, shall not constitute a waiver of any of the terms
of this Note or the right to require the prompt payment when due of future or
succeeding payments or to declare an Event of Default for any failure to so
pay or for any other default. The acceptance by Holder of a payment of a
portion of any installment at any time that such installment is due in full
shall not cure or excuse the default caused by the failure to pay such
installment in full and shall not constitute a waiver of the right to require
full payment when due of all future or succeeding installments. All remedies
and rights of Holder are cumulative.
ATTORNEYS' FEES AND COSTS. In the event Holder takes any action to
enforce any provision of this Note, either through legal proceedings or
otherwise, Maker promises to immediately reimburse Holder for reasonable
attorneys' fees and all other costs and expenses so incurred as awarded by a
court of law. Maker shall also reimburse Holder for all attorneys' fees and
costs reasonably incurred in the representation of Holder in any bankruptcy,
insolvency, reorganization or other debtor-relief proceeding of or relating to
Maker, or for any action to enforce any judgment rendered hereon or relating
to enforcement hereof.
LATE PAYMENT. Maker agrees that if for any reason it fails to make any of
the monthly payments required herein, including the amount due at the Maturity
Date, within five (5) days after the due date, Holder shall be entitled to
damages for the detriment caused thereby, the extent of which damages are
extremely difficult and impractical to ascertain. Maker therefore agrees that
a sum equal to five percent (5%) of such delinquent payment is a reasonable
estimate of such damages and Maker agrees to pay such sum upon demand by
Holder. Acceptance of such late charge by the Holder shall in no event
constitute a waiver of Maker's default with respect to such overdue amount nor
prevent the Holder from exercising any of the other rights and remedies
granted hereunder.
DISBURSEMENT INSTRUCTION AND AUTHORIZATION. Holder is making the loan to
Maker evidenced hereby to facilitate Maker's initial construction costs of the
Center. Accordingly, Holder shall make advances from time to time hereunder
directly to Maker in accordance with the completion of the milestones set
forth on Exhibit B attached hereto. Such advances shall be subject to the
terms of this Note, the Security Agreement, the Membership Interest Security
Agreement and the Deed of Trust. Holder shall note all advances, their
amounts and the disbursement date, and principal amounts paid, on the schedule
attached hereto, and shall provide a copy of the updated schedule to Maker
after each advance and such notations shall constitute prima facie evidence of
the outstanding principal amount hereof; provided, however, that Holder's
failure to record any such advance or payment shall not alter Maker's
obligation to repay all amounts actually advanced hereunder. Notwithstanding
any other provision of this Note, or any other agreement executed in
connection herewith, Holder shall have no obligation to advance any amounts to
Maker, upon or after the occurrence of any Event of Default hereunder, or upon
an event occurring with which the giving of notice or the passage of time
would be an Event of Default.
WAIVERS. The Maker, endorsers, guarantors and sureties of this Note
hereby waive diligence, demand, presentment, notice of nonpayment, protest and
notice of protest, and expressly agree that this Note and any payment
hereunder, may be renewed, modified or extended from time to time and at any
time and consent to the acceptance or release of the security for this Note or
a release of any party or guarantor, all without in any way effecting their
liability and waive the right to plead any and all statutes of limitations as
a defense to any demand on this Note, or on any guaranty thereof, or to any
agreement to pay the same to the full extent permissible by law.
MISCELLANEOUS. The terms of this Note shall inure to the benefit of and
bind the parties hereto and their successors and assigns. Maker represents
and warrants to Holder that the obligations hereunder arise out of or in
connection with business purposes and do not relate to any personal, family or
household purpose. As used herein the term "Maker" shall include the
undersigned Maker and any other person or entity who may subsequently become
eligible for the payment hereof. The term "Holder" shall include the named
Holder as well as any other person or entity to whom this Note or any interest
in this Note is conveyed, transferred or assigned. This Note, or any interest
in this Note, and all rights and security therefore, may be conveyed,
transferred or assigned by the Holder to any other person or entity without
the consent of Maker. Each person signing this Note on behalf of Maker
represents and warrants that he has full authority to do so and that this Note
binds Maker. The terms of this Note may only be modified by a writing signed
by Maker and Holder.
NOTICE. In the event either party provides notice to the other party
pursuant to this Note, such notice shall be provided in the same manner as
required in the Security Agreement.
GOVERNING LAW. This Note shall be governed by and construed and enforced
in accordance with the internal laws of the State of California without giving
any effect to principles of conflict of laws. This Note shall be deemed made
and entered into in San Diego County, California.
ALL-AMERICAN GOLF LLC, a California limited
liability company
By: SAINT ANDREWS GOLF CORPORATION,
a Nevada corporation, Managing Member
By:
Ron Boreta, President
<PAGE>
EXHIBIT A
PERFORMANCE CRITERIA
FISCAL YEAR PERFORMANCE CRITERIA
1997 The Company shall not realize a net loss in excess of
$500,000 from the date of the opening of the Center
to the general public through December 31, 1997.
1998 The Company shall not realize a net loss in excess of
$400,000 for the year nor a cumulative, undiscounted
net loss in excess of $1,000,000 as of the end of the
year.
1999 The Company shall not realize a net loss in excess of
$300,000 for the year nor a cumulative, undiscounted
net loss in excess of $1,000,000 as of the end of the
year.
2000 The Company shall not realize a net loss in excess of
$200,000 for the year nor a cumulative, undiscounted
net loss in excess of $1,000,000 as of the end of the
year.
2001 The Company shall attain inception-to-date, undis-
counted net profit of at least $1.
2002+ During each fiscal year that the Callaway Golf Loan
remains outstanding, the Allocation of Net Income
and Net Loss to Callaway Golf as calculated pursuant
to Article VI of this Agreement will represent at
least a 5% annual return on the equity investment
of Callaway Golf.
During each fiscal year following the year in which
the Callaway Golf Loan is repaid, the Allocation
of Net Income and Net Loss to Callaway Golf as cal-
culated pursuant to Article VI of this Agreement will
represent at least a 10% annual return on the equity
investment* of Callaway Golf.
Performance Criteria shall be subject to applicable governmental laws,
orders, ordinances, rules, regulations and restrictions, acts of God, fires,
strikes and other labor difficulties, accidents, war and any risks in any way
pertaining thereto and all other events and circumstances beyond the control
of Company. Failure to achieve Performance Criteria shall not be deemed to
have occurred if such failure is caused by any of the events set forth in the
preceding sentence.
- --------------
* As to any fiscal year, the equity investment of Callaway Golf is defined as:
- - the initial capital contribution of $750,000
plus
- - any additional capital contribution made by (or conversion of debt to
equity effected by) Callaway Golf pursuant to this Agreement. Contributions
made during the subject year will be appropriately weighted to reflect the
portion of the year benefitted by the contribution
plus
- - cumulative prior year net income allocations pursuant to Article VI of
this Agreement, except that if cumulative prior year allocations represent a
net loss, such cumulative prior year allocations will be disregarded
minus
- - any distributions made to Callaway Golf pursuant to Article VI of this
Agreement.
Distributions made during the subject year will be appropriately weighted to
reflect the portion of the year affected by the distribution.
<PAGE>
EXHIBIT B
MILESTONES AND ADVANCES
MILESTONE AMOUNT OF ADVANCE
1. Execution of Operating Agreement by Holder
and Saint Andrews Golf Corporation. $1,312,500
2. Completion of the grassing of the golf course
and driving range located within the Center. $1,312,500
3. Completion of the construction of the tee line
pad and completion of the clubhouse roof and
wall construction of the clubhouse located
within the Center. $1,312,500
4. At the date which is the later of (i) the
Center Opening, or (ii) the completion of all
construction tasks related to the Center and
scheduled completion of any and all open porch
list items. $1,312,500
<PAGE>
SCHEDULE OF ADVANCES
Unpaid
Amount of Amount of Principal Amount of
Date Advance Principal Paid Balance of Note Interest Paid
EXHIBIT "C"
CONTINUING SECURITY AGREEMENT
This Continuing Security Agreement ("Agreement") is made and entered into
as of June 13, 1997 by and between Callaway Golf Company, a California
corporation ("Callaway Golf") and All-American Golf LLC, a California limited
liability company (the "Company"), with respect to the following facts:
A. Callaway Golf has agreed to make a loan to the Company pursuant to
the terms of the Secured Promissory Note dated June 13, 1997 in the original
principal amount of $5,250,000 by and between the Company, as maker, and
Callaway Golf, as holder (the "Note").
B. Callaway Golf has required, as a condition to making the loans, that
the Company secure its obligations under the Note by granting a security
interest to Callaway Golf in certain of the Company's assets.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants contained herein, and for other good and valuable consideration the
receipt and adequacy of which are hereby acknowledged, the parties agree as
follows.
1. Property Subject To Security Interest. The Company hereby grants
and transfers to Callaway Golf, a security interest in the Company's right,
title and interest in, to and under the property described on Exhibit "A"
attached hereto and incorporated herein by this reference, now owned or
hereafter acquired by the Company (the "Collateral").
2. Obligations Secured. This Agreement and security interest hereunder
is granted to secure the payment of all indebtedness under and the performance
of all obligations of the Company under this Agreement and the Note, and all
extensions, modifications, substitutions, replacements and renewals thereof
(collectively, the "Secured Obligations").
3. The Company's Representations And Warranties. The Company hereby
represents and warrants as follows:
3.1 No Liens. The Company is the sole owner of the Collateral and
there are no liens or encumbrances or adverse claims whatsoever on or against
the Collateral, or any part thereof, created or incurred by the Company. The
Company will not transfer, pledge, sell or dispose of any interest or permit
any lien or encumbrance to be placed on the Collateral during the term of this
Agreement without the prior written consent of Callaway Golf.
3.2 Taxes. The Company will pay, prior to delinquency, all taxes,
liens and assessments of any kind whatsoever levied or assessed against the
Collateral or any part thereof and should the Company fail to do so, Callaway
Golf may pay the same, at its option, and any amount so paid shall bear
interest at the same rate as the Note and said amount of interest shall be
secured hereby and shall be immediately repayable by the Company to Callaway
Golf.
3.3 Maintenance and Insurance. The Company will at all times
maintain the Collateral essential to the conduct of its business in good
condition and repair, ordinary wear and tear excepted. The Company will keep
the Collateral insured against all loss by fire, theft and other risks,
liabilities and perils in form and amounts customary in the industry and with
companies of recognized standing. Any such insurance policies shall provide
for the loss proceeds to be payable to Callaway Golf as its interest may
appear, and shall provide for at least thirty (30) days written cancellation
notice to Callaway Golf. In the event the Company does not procure such
insurance required hereunder upon being requested to do so, Callaway Golf may
do so, at its option, and any sums expended for insurance premiums shall bear
interest at the same rate as the Note and said amount of interest shall be
secured hereby and shall be immediately repayable by the Company to Callaway
Golf.
3.4 Location of Collateral. The Company will keep the Collateral
separate and identifiable and will not sell, lease, transfer, hypothecate,
consign or permit or suffer any lien, attachment, judgment or other judicial
or involuntary lien against, or otherwise dispose of, the Collateral or any
part thereof outside the ordinary course of business without Callaway Golf's
prior written consent, which consent may be given or withheld in its sole and
absolute discretion. The Company will not grant any security interest to any
other party on any of the Collateral or any part thereof without Callaway
Golf's prior written consent, which consent may be given or withheld in its
sole and absolute discretion. The Company shall not remove any Collateral
from its existing location without the prior written consent of Callaway Golf.
3.5 Location and Inspection of Records. The address of the chief
executive office and chief place of business of the Company is its address set
forth in Section 7 hereof, and the Company has no other places of business
except as disclosed to Callaway Golf. All records pertaining to accounts and
contracts (including computer records) of the Company are kept at its chief
executive office, and the Company will notify Callaway Golf, no later than
thirty (30) days prior to any change in address of the chief executive office
or chief place of business of the Company or the change of the location of any
of the Collateral or records pertaining thereto. Callaway Golf may, upon
prior notice, during normal business hours and at reasonable intervals,
examine any of the Company's records, books, accounts, ledgers and assets of
any kind, and may take copies therefrom and may utilize any duplication
equipment located on the premises.
3.6 Compliance with Other Agreements. The Company will perform all
acts and comply with all terms of any agreement, the performance of and/or
compliance with which are secured by a lien that is, or appears to be,
superior, prior, subordinate, or subsequent to the security interest created
hereby.
3.7 Defense of Claims. The Company at its own cost and expense will
defend the Collateral against all claims, liens, security interests, demands
and other encumbrances of third parties which may affect Callaway Golf's
security interest in, or Callaway Golf's title to, any Collateral.
3.8 Notice. The Company will promptly notify Callaway Golf in the
event of any damage to or loss of any material portion of the Collateral or
any part thereof from any source whatsoever.
3.9 Further Assurances. The Company will execute any and all
further agreements, assignments, documents and financing statements that
Callaway Golf may reasonably request from time to time in order to perfect or
continue the security interest of Callaway Golf in the Collateral or otherwise
carry out the purposes and intent of this Agreement.
3.10 Operation of Business. The Company will at all times operate
the Company's business in a manner consistent with any and all rules,
regulations and statutes of governmental agencies having jurisdiction over the
Company's business applicable to the operation of such a business and will
comply with any and all requirements specified by companies insuring the
Collateral, or any part thereof, as conditions for such insurance.
3.11 No Additional Consent; Valid and Binding Obligation. No
consent, authorization, approval or other action by, and no notice to or
filing with, any governmental authority, regulatory body, or other person or
entity is required either (i) for the grant by the Company of the security
interest granted hereby or for the execution, delivery or performance of this
Agreement by the Company or (ii) for the perfection or exercise by Callaway
Golf of Callaway Golf's rights and remedies hereunder, other than the filings
of UCC-1 financing statements by Secured Party and any necessary continuations
thereof. This Agreement is the legal, valid and binding obligation of the
Company, enforceable in accordance with its terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, and other similar laws
affecting creditors' rights generally.
3.12 Maintenance of Business. Following the occurrence and during
the continuation of a "default," as defined in Section 4 below, or of an event
that, with the giving of notice or the lapse of time, or both, would
constitute such a default, Callaway Golf may take, and at Callaway Golf's
direction, the Company shall take, at the Company's expense, such action as
Callaway Golf may deem necessary or advisable to enforce collection of all
amounts due or to become due to the Company. If any default shall have
occurred and be continuing, Callaway Golf shall have the right, with respect
to agreements constituting Collateral, (i) to direct the obligor(s) under such
agreements to make payment of all amounts due or to become due thereunder
directly to Callaway Golf or to a post office lock box under Callaway Golf's
sole control, and/or (ii) to require that all amounts received by the Company
in respect of such agreements be received in trust for the benefit of Callaway
Golf and be segregated from other funds of the Company. Any amounts so
segregated shall, at Callaway Golf's request, be forthwith paid over to
Callaway Golf to be held as Collateral and either (A) released to the Company
after payment in full of all Secured Obligations, or (B) if any such default
shall have occurred and be continuing, applied as provided in Section 6.2, at
Callaway Golf's option. If Callaway Golf notifies the Company of Callaway
Golf's intention to direct such obligor(s) to make payments directly to
Callaway Golf and/or to a post office lock box and/or to require the Company
to segregate and hold such payments in trust, the Company shall enter into
written agreements satisfactory to Callaway Golf to implement such intention.
3.13 Attorney-in-Fact. To the extent allowed by law, the Company
hereby irrevocably appoints Callaway Golf, acting singly, as the Company's
attorney-in-fact, with full authority in the place and stead of the Company
and in the name of the Company, Callaway Golf, or otherwise, from time to time
in Callaway Golf's discretion, if a default shall have occurred and be
continuing, to take any action and to execute any instrument that Callaway
Golf may deem necessary or advisable to accomplish the purposes of this
Agreement (subject to the rights of the Company under Section 3.12), including
without limitation:
(a) to obtain and adjust insurance required to be maintained
pursuant to this Agreement in respect of any of the Collateral:
(b) to ask, demand, collect, sue for, recover, compound,
receive, and give acquittance and receipts for, money due and to become due
under or in respect of any of the Collateral;
(c) to receive, endorse, and collect any drafts or other
instruments and documents in connection with clauses (a) and (b) above; and
(d) to file claims or take any action or institute any
proceedings that the Callaway Golf may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of
Callaway Golf with respect to any of the Collateral.
3.14 Callaway Golf May Perform. If the Company fails to perform
any agreement contained herein, or in the Note, then Callaway Golf may
perform, or cause the performance of, such agreement, and the expenses of
Callaway Golf incurred in connection therewith shall be payable by the Company
under Section 8.2 below.
3.15 Callaway Golf's Duties. The powers conferred on Callaway Golf
hereunder are solely to protect the interests of Callaway Golf in the
Collateral, and shall not impose any duty upon Callaway Golf to exercise any
such powers. Except for the safe custody of any Collateral in its possession
and the accounting for moneys actually received by it hereunder, Callaway Golf
shall have no duty as to any Collateral or as to the taking of any necessary
steps to preserve rights against prior parties or any other rights pertaining
to any Collateral.
4. Acts Constituting Default.
4.1 Events of Default. The happening of any of the following
events, at the option of Callaway Golf, shall constitute a default by the
Company under this Agreement:
(a) if any warranty or representation made by the Company
herein proves to have been false in any material respect when made;
(b) failure by the Company to keep or perform any of the terms,
covenants or conditions of this Agreement, and such monetary failure is not
cured within ten (10) days of written notice by Callaway Golf to the Company,
and such non-monetary failure is not cured within thirty (30) days written
notice by Callaway Golf to the Company;
(c) the levy of any attachment, execution or other process
against the Company or against the Collateral, or any part thereof, and the
failure of removal of such process within sixty (60) days;
(d) an Event of Default shall occur under the Note;
(e) a default or event of default shall occur under the Deed of
Trust dated June 13, 1997 executed by the Company in favor of Callaway Golf
securing the Indenture of Lease dated June 13, 1997 by and between Urban Land
of Nevada, a Nevada corporation, and the Company, or a default or event of
default shall occur under the Membership Interest Security Agreement dated
June 13, 1997 by and between Saint Andrews Golf Corporation and Callaway Golf;
(f) the loss, theft, damage, destruction, or sale to or of the
Collateral or any part thereof which is not replaced with other property of a
value at least equal to that lost, which property shall become subject to this
Agreement; or
(g) if the Company shall make a general assignment for the
benefit of creditors, or shall admit in writing its inability to pay its debts
as they become due, or shall file or have filed against it a petition for
relief under any chapter or provision of the Bankruptcy laws of the United
States, as amended from time to time, or shall be adjudged a bankrupt or
insolvent, or shall file a petition, complaint, pleading, certificate, formal
request or matter of a similar nature seeking any reorganization, arrangement,
composition, liquidation, dissolution or financial relief of a similar nature
under any present or future statute, law or regulation, or shall file an
answer or response admitting or not contesting the material allegations of a
petition or other document filed against it in any proceeding commenced for
the purpose of affecting the Company's rights or creditors' remedies; and in
the case of any such proceeding commenced by any other person or entity
against the Company, or in the event that a receiver, trustee or other court
officer or administrative officer is appointed for the purpose of taking
possession of all or any part of the Collateral, or of the premises of the
Company, or the Company's successors or assigns, or any interest of the
Company or the Company's successors or assigns in the Collateral, and said
proceeding is not terminated or discharged within forty-five (45) days of its
commencement or said receiver, trustee, court officer or administrative
officer is not removed within forty-five (45) days of such appointment.
5. Callaway Golf's Remedies Upon Default. Upon a default by the
Company, as set forth above, Callaway Golf may do any one or more of the
following, in addition to all of its other rights and remedies, all of which
shall be cumulative:
(a) declare the entire indebtedness under the Note and this
Agreement immediately due and payable;
(b) exercise all rights and remedies of a secured party under
the California Uniform Commercial Code;
(c) require the Company to assemble the Collateral and make it
available to Callaway Golf;
(d) enter and/or remain upon the premises of the Company
without any obligation to pay rent to the Company, or any other place or
places where any of the Collateral is located and kept;
(e) enter upon the Company's premises where the Collateral is
kept and possess and remove the same without legal process if Callaway Golf
can do so without a breach of the peace or proceed by legal action to obtain
possession;
(f) proceed against the Company for any deficiency after
proceeding against the Collateral;
(g) incur expenses, including reasonable attorneys' fees and
costs including, but not by way of limitation, any fees and costs incurred in
any bankruptcy, liquidation, receivership or other debtor-relief proceeding by
the Company or relating to any of the Collateral, in the exercise of any right
or remedy hereunder.
6. Disposition of Collateral
6.1 Notice of Public Sale. Unless the Collateral is perishable or
threatens to decline speedily in value or is of the type customarily sold on a
recognized market, Callaway Golf will give the Company at least 5 days' prior
written notice of the time and place of any public sale thereof, or of the
time on or after which any private sale or other intended disposition thereof
is to be made.
6.2 Use of Proceeds. The proceeds of any disposition of Collateral
shall be applied in the following priority:
(a) to pay reasonable expenses of taking, holding, preparing
for sale, selling, leasing and the like, including reasonable attorneys' fees
and legal expenses incurred by Callaway Golf;
(b) to satisfy the indebtedness secured by this Agreement; and
(c) to satisfy any indebtedness secured by any subordinate
security interest in the Collateral, if written notification or demand
therefor is received before distribution of the proceeds is completed. In the
event the Collateral is sold or otherwise disposed of as aforesaid and a
sufficient sum is not realized to pay in full all indebtedness secured by this
Agreement after application of the proceeds as aforesaid, the Company promises
and agrees to pay to Callaway Golf any deficiency.
7. Notices. All notices and other communications provided for
hereunder shall be in writing (including telegraphic, telecopied or telex
communication) and mailed or telegraphed or telecopied or delivered to the
parties at their respective addresses as set forth below, or, as to each
party, at such other address as shall be designated by such party in a written
notice to the other parties complying as to delivery with the terms of this
Section 7. All such notices and communications, if mailed, shall be effective
upon deposit in the United States mail, first-class (or certified) postage
prepaid; if telegraphed or telecopied, shall be effective when transmitted, if
sent by telex, shall be effective when the telex is sent and the appropriate
answer back is received, and if delivered in another way, shall be effective
upon receipt.
(a) If to the Company, then to:
All-American Golf, LLC
c/o Saint Andrews Golf Corporation
5325 South Valley View Boulevard, Suite 10
Las Vegas, Nevada 89118
Attn: Ron Boreta
Telephone: (702) 798-7777
Facsimile: (702) 798-6847
(b) If to Callaway Golf, then to:
Callaway Golf Company
2285 Rutherford Road
Carlsbad, California 92008
Attn: Donald H. Dye, President and
Chief Executive Officer
Telephone: (760) 930-5738
Facsimile: (760) 930-5022
8. Miscellaneous.
8.1 Indemnity. The Company agrees to indemnify, defend and hold
harmless, Callaway Golf and its officers, directors, employees, shareholders
and agents, from and against any and all claims, losses, and liabilities
growing out of, or resulting from, this Agreement (including, without
limitation, enforcement of this Agreement), except claims, losses or
liabilities resulting from Callaway Golf's gross negligence or willful
misconduct.
8.2 Expenses. The Company shall upon demand pay to Callaway Golf
the amount of any and all reasonable expenses, including the reasonable fees
and disbursements of counsel and/or any experts and agents, that Callaway Golf
may incur in connection with (i) the administration of this Agreement, (ii)
the inspection, custody, preservation, use, or operation of, the sale of, the
collection from, or other realization upon, any of the Collateral, (iii) the
exercise or enforcement of any of the rights of Callaway Golf hereunder, or
under the Note, or under any judgment awarded to Callaway Golf in respect of
its rights hereunder, or under the Note (which obligation shall be severable
from the remainder of this Agreement and shall survive the entry of any such
judgment), or (iv) the failure of the Company to perform or observe any of the
provisions of this Agreement, or under the Note, or the failure of any
representation or warranty of the Company made in or pursuant to this
Agreement to be true and correct in all respects. The foregoing shall include
any and all expenses and fees incurred by Callaway Golf in connection with a
bankruptcy, reorganization, receivership, or similar debtor-relief proceeding
by or affecting the Company or any of the Collateral.
8.3 Survival. All covenants, agreements, representations, and
warranties made herein, and in documents delivered pursuant hereto, or in
connection herewith, shall be deemed to have been material and relied upon by
Callaway Golf and shall survive the execution and delivery to Callaway Golf.
8.4 Time. Time is of the essence of this Agreement.
8.5 No Waiver. No course of dealing between the Company and
Callaway Golf, or failure, neglect, or delay by Callaway Golf in exercising
any and all of Callaway Golf's rights hereunder shall operate as a waiver,
forfeiture or abandonment of any such right except only to the extent
expressly waived in writing.
8.6 Rights Cumulative. All rights and remedies provided in this
Agreement shall be cumulative and may be exercised and enforced without notice
or demand being first made to the Company.
8.7 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of
California without giving any effect to principles of conflict of laws. Any
action or legal proceeding arising out of this Agreement may be brought in a
state or federal court of competent jurisdiction located in the County of San
Diego, State of California, and by executing this Agreement the parties
expressly consent and submit themselves to the jurisdiction of such courts.
8.8 No Assignment by the Company. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors
and assigns, provided that the Company may not assign, transfer, or delegate
its obligations hereunder without the prior written consent of Callaway Golf,
which consent may be given or withheld in Callaway Golf's sole discretion.
8.9 Entire Agreement. This Agreement, the Note and other documents
executed simultaneously herewith constitute the full and entire understanding
and agreement between the parties with regard to the subject matter hereof,
and supersede all prior agreements, understandings, inducements or conditions,
express or implied, oral or written, relating to the subject matter hereof.
The express terms hereof control and supersede any course of performance or
usage of trade inconsistent with any of the terms hereof.
8.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original as against any
party whose signature appears thereon, and all of which shall together
constitute one and the same instrument. This Agreement shall become binding
when one or more counterparts hereof, individually or taken together, shall
bear the signatures of all of the parties reflected hereon as the signatories.
8.11 Severability. In case any provision or provisions of this
Agreement shall be held to be invalid, illegal or unenforceable under any
particular circumstances or for any reason whatsoever, (i) the validity,
legality and enforceability of the remaining provisions of this Agreement, or
the validity, legality or enforceability under any other circumstances shall
not in any way be affected or impaired thereby and (ii) to the fullest extent
possible consistent with applicable law, the provisions of this Agreement
shall be deemed revised, and shall be construed so as to give effect to the
intent manifested by this Agreement.
8.12 Rights Cumulative; No Waiver. Callaway Golf's options,
powers, rights, privileges, and immunities specified herein or arising
hereunder are in addition to, and not exclusive of, those otherwise created or
existing now or at any time, whether by contract, by statute, or by rule of
law. Callaway Golf shall not, by any act, delay, omission, or otherwise, be
deemed to have modified, discharged, or waived any of Callaway Golf's options,
powers, or rights in respect of this Agreement, and no modification,
discharge, or waiver of any such option, power, or right shall be valid unless
set forth in writing signed by Callaway Golf or Callaway Golf's authorized
agent, and then only to the extent therein set forth. A waiver by Callaway
Golf of any right or remedy hereunder on any one occasion shall be effective
only in the specific instance and for the specific purpose for which given,
and shall not be construed as a bar to any right or remedy that Callaway Golf
would otherwise have on any other occasion.
8.13 Headings. The section heading used in this Agreement are
intended principally for convenience and shall not by themselves determine the
rights and obligations of the parties to this Agreement.
[The rest of this page intentionally left blank]
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
CALLAWAY GOLF COMPANY, a California
corporation
By:
Donald H. Dye, President and Chief
Executive Officer
ALL-AMERICAN GOLF LLC, a California
limited liability company
By: SAINT ANDREWS GOLF CORPORATION,
a Nevada corporation,
Managing Member
By:
Ron Boreta, President
<PAGE>
EXHIBIT "A"
DESCRIPTION OF COLLATERAL
The following property of the Company, presently owned or hereafter
arising or acquired, wherever located:
(a) All rights, title, and interest under that certain Service Mark
License Agreement dated June 13, 1997 by and between the Company and Callaway
Golf.
(b) All rights, title and interest under the Indenture of Lease dated
June 13, 1997 by and between Urban Land of Nevada, a Nevada corporation, and
the Company.
(c) All accounts, including, without limitation, all accounts
receivable, book debts, and other form of obligations (to the extent not
constituting obligations evidenced by chattel paper, documents or
instruments), now owned or hereafter received or acquired by or belonging or
owing to the Company, whether arising out of goods sold or services rendered
by the Company or from any other transaction, and all of the Company's rights
in, to, and under all purchase orders or receipts now owned or hereafter
acquired by the Company for goods or services, and all of the Company's rights
to any goods represented by any of the foregoing (including, without
limitation, unpaid seller's rights of rescission, replevin, reclamation, and
stoppage in transit and rights to returned, reclaimed or repossessed goods),
and all monies due or to become due to the Company under all purchase orders
and contracts for the sale of goods or the performance of services, or both,
by the Company (whether or not yet earned by performance on the part of the
Company or in connection with any other transaction), now in existence or
hereafter occurring including, without limitation, the right to receive the
proceeds of said purchase orders and contracts, and all collateral security
and guarantees of any kind given by any person or entity with respect to any
of the foregoing.
(d) All chattel paper now owned or hereafter acquired by the Company.
(e) All documents now owned or hereafter acquired by the Company.
(f) All equipment now or hereafter owned or acquired by the Company,
including, without limitation, all machinery, equipment, furnishings, vehicles
and computers and other electronic data processing and other office equipment,
and any and all addition to, substitution for, and replacements of any of the
foregoing, wherever located, together with all attachments, components, parts,
equipment and accessories installed thereon or affixed thereto.
(g) All fixtures now or hereafter owned or acquired by the Company,
including, without limitation (regardless of where located), all of the
fixtures, systems, machinery, apparatus, equipment, and fittings of every kind
and nature whatsoever and all appurtenances and additions thereto and
substitutions therefor or replacements thereof, now or hereafter attached or
affixed to or constituting a part of, or located in or upon, real property,
together with all right, title, and interest of the Company in and to all
extensions, improvements, betterments, renewals, substitutes and replacements
of, and all additions and appurtenances to, any of the foregoing property and
all conversions of the security constituted thereby immediately upon any
acquisition or release thereof or any such conversion, as the case may be.
(h) All general intangibles now owned or hereafter acquired by the
Company, including, without limitation, all right, title, and interest that
the Company may now or hereafter have in or under any contract, all customer
lists, trademarks, service marks, patents, rights in intellectual property,
interests in partnerships, joint ventures, and other business associations,
licenses, permits, copyrights, trade secrets, proprietary or confidential
information, inventions (whether or not patented or patentable), technical
information, procedures, designs, knowledge, know-how, software, databases,
data, skill, expertise, recipes, experience, processes, models, drawings,
materials and records, goodwill (including, without limitation, the goodwill
associated with any trademark, service mark, trademark or service mark
registration or trademark or service mark licensed under any trademark or
service mark license), claims in or under insurance policies (including,
without limitation, any unearned premiums), partnership interests, membership
interests, deposit accounts, rights to receive tax refunds and other payments
(whether payment in money or payment in kind), repayment rights, and security
interests (and other rights) of the Company relating to advances made,
expenses incurred, and services rendered by the Company to or for the benefit
of third parties (including, without limitation, all rights with respect to
any statutory or common law lien or trust), and rights of indemnification.
(i) All instruments now owned or hereafter acquired by the Company,
including, without limitation, all notes, certificated securities, and other
evidences of indebtedness, to the extent not constituting chattel paper.
(j) All inventory now owned or hereafter acquired by the Company,
including, without limitation, all inventory, merchandise, goods and other
personal property held by or on behalf of the Company for sale or lease or
furnished or to be furnished under a contract of service or that constitute
raw materials, work in process, or materials used or consumed or to be used or
consumed in the Company's business or the processing, packing, packaging,
labeling, promotion, delivery, or shipping of the same, and all finished
goods.
(k) All financial assets, investment property, securities accounts,
securities and security entitlements now owned or hereafter acquired by the
Company, and all interest, earnings, dividends and proceeds thereof.
(l) All other goods and personal property of the Company, whether
tangible or intangible and whether now or hereafter owned or existing, leased,
consigned by or to, or acquired by, the Company and wherever located,
including, without limitation (to the extent not described above), all farm
products, deposit accounts, cash, and any beneficial interest of the Company
under any trust.
(m) All or the foregoing, now owned or hereafter acquired or arising.
All of the property described above, together with the proceeds and
products thereof (and proceeds and products of proceeds and products), is
herein collectively called the "Collateral." Notwithstanding anything else
contained in this Exhibit, the "Collateral" shall exclude all hazardous or
toxic (i.e., deleterious to either the environment or to health) wastes.
<PAGE>
EXHIBIT "D"
MEMBERSHIP INTEREST SECURITY AGREEMENT
This Membership Interest Security Agreement (the "Agreement") is made and
entered into as of June 13, 1997, by and between Saint Andrews Golf
Corporation, a Nevada corporation ("Saint Andrews"), and Callaway Golf
Company, a California corporation ("Callaway Golf"), with respect to the
following facts:
A. All-American Golf LLC, a California limited liability company (the
"Company"), is indebted to Callaway Golf pursuant to that certain Secured
Promissory Note dated June 13, 1997 in the original principal amount of Five
Million Two Hundred Fifty Thousand Dollars ($5,250,000.00) (as amended,
renewed, modified or replaced, the "Note"), in favor of Callaway Golf.
Callaway Golf has requested and Saint Andrews has agreed to grant to Callaway
Golf a security interest in the "Collateral" defined herein to secure the
obligations of the Company to Callaway Golf in respect of the Note. But for
entering into this Agreement, Callaway Golf would not make the loan (the
"Loan") to the Company evidenced by the Note.
B. Pursuant to the terms of that Operating Agreement for All-American
Golf LLC dated June 13, 1997, as amended, restated, modified or supplemented
from time to time (the "Operating Agreement"), Saint Andrews is the owner of
eighty percent (80%) of the membership interests in the Company.
NOW, THEREFORE, in consideration of the premises, and to induce and in
consideration of the Loan or other financial considerations, Saint Andrews
hereby agrees for the benefit of Callaway Golf, its successors and assigns, as
follows:
1. Grant of Security Interest. As security for the full and prompt
performance and payment of all of the Secured Obligations described and
defined in Section 3 of this Agreement, Saint Andrews hereby assigns,
transfers and pledges to Callaway Golf, and grants a security interest to
Callaway Golf in, the following property, now owned or hereafter acquired or
arising (collectively the "Collateral"): (i) Saint Andrews' entire interest
as a member in the Company, whether now owned or hereafter acquired, including
all right, title and interest of Saint Andrews as a member in the Company and
all rights and interests of any kind or nature under the Operating Agreement
as a member, including without limitation all voting, inspection, management
and rights in specific Company property; (ii) any and all obligations of the
Company to Saint Andrews as a member or on account of Saint Andrews'
membership interest of any kind whatsoever, including without limitation, all
accounts, fees, general intangibles, chattel paper, documents, and promissory
notes and other instruments, including all rights with respect to any security
therefor or guaranties or other securities in respect thereof; and (iii) all
dividends, distributions and earnings arising out of any of the foregoing and
all additions, replacements and substitutions to any and all of the foregoing,
including, without limitation, any and all new or substituted or additional
cash, securities, instruments, chattel paper, general intangibles or other
property, tangible or intangible, distributed with respect to any of the
foregoing property or other property subject to this Agreement for any reason
whatsoever, and all proceeds of any and all of the foregoing (collectively,
the "Proceeds"). Saint Andrews also agrees to execute such other assignments
of Saint Andrews' membership interests in such form and content as requested
by Callaway Golf.
2. Additional Collateral. Upon the acquisition by Saint Andrews of any
additional interest of any kind or nature in the Company, such interest shall
become part of the Collateral without any further action by any person. If at
any time after the date hereof all or any portion of the Collateral shall be
represented or evidenced by certificates, promissory notes or other
instruments, all such certificates, promissory notes or instruments
representing or evidencing the Collateral shall be delivered to and held by
Callaway Golf pursuant hereto and shall be (i) if certified, in suitable form
for transfer by delivery or accompanied by duly executed instruments of
transfer or assignment in blank, and (ii) if a promissory note or other
instrument, endorsed to Callaway Golf, all in form and substance satisfactory
to Callaway Golf.
3. Obligations Secured. The security interest granted pursuant to this
Agreement is made by Saint Andrews to secure the payment or performance as the
case may be, of each of the following described obligations to Callaway Golf
(the "Secured Obligations"):
(a) The payment and performance of all indebtedness, obligations,
liabilities, conditions and covenants of the Company to Callaway Golf now or
hereafter arising under the Note, the Continuing Security Agreement dated June
13, 1997 by and between the Company and Callaway Golf (the "Security
Agreement"), the Deed of Trust dated June 13, 1997 executed by the Company in
favor of Callaway Golf (the "Deed of Trust") securing the Indenture of Lease
dated June 13, 1997 by and between Urban Land of Nevada, a Nevada corporation,
and the Company, and/or this Agreement, and any and all extensions, amendments
or renewals or replacements of or for any of them (including, without
limitation, the payment of all principal, interest and other amounts arising
under or relating to the foregoing); and
(b) The payment and performance of all other obligations of the
Company to Callaway Golf now or hereafter existing, arising or owing and
stated to be secured hereby.
4. Rights With Respect to Distributions. So long as no Default (as
defined below) shall have occurred and be continuing, subject to any other
applicable provision of this Agreement, Saint Andrews shall be entitled to
receive payment in respect of obligations of the Company owed to Saint Andrews
or to receive dividends, withdrawals, or other distributions in respect of the
Collateral. Upon the occurrence and during the continuation of any Default,
all rights of Saint Andrews to receive payments in respect of obligations of
the Company owed to Saint Andrews or to receive dividends, withdrawals or
other distributions in respect of the Collateral that Saint Andrews would
otherwise be entitled to receive hereunder shall cease (unless otherwise
agreed by Callaway Golf) and all such rights shall thereupon become
automatically vested in Callaway Golf, which shall have the sole right to
receive such cash or properties and apply them to payment of the Secured
Obligations or to hold them as Collateral, as it may elect. All cash or other
property received by Saint Andrews contrary to the provisions of this Section
4 shall be received in trust for the benefit of Callaway Golf, shall be
segregated from other property or funds of Saint Andrews and shall be
forthwith delivered to Callaway Golf as Collateral in the same form as so
received (with any necessary endorsement). Notwithstanding the foregoing
provisions of this Section 4, no distributions of any kind shall be made to
Saint Andrews unless made in accordance with the provisions of the Operating
Agreement.
5. Voting and Other Rights. So long as no Default (as defined below)
shall have occurred and be continuing, subject to any other applicable
provision of this Agreement, Saint Andrews shall be entitled to exercise any
and all voting and other consensual rights pertaining to the Collateral or any
part thereof for any purpose not prohibited by the terms of this Agreement.
Within three days after exercising any such right, Saint Andrews shall give
Callaway Golf written notice of the action taken or approved in connection
therewith. Upon the occurrence and during the continuance of any Default, all
rights of Saint Andrews to exercise the voting and other consensual rights
that Saint Andrews would otherwise be entitled to exercise hereunder shall
cease, and (unless otherwise agreed by Callaway Golf) all such rights (and any
other rights Saint Andrews may have under the Operating Agreement, as amended,
restated, modified or supplemented from time to time) shall thereupon become
vested in Callaway Golf, which shall thereupon have the sole right to exercise
such rights.
6. Financing Statement; Further Assurances. Saint Andrews agrees that
at any time and from time to time, at the expense of Saint Andrews, Saint
Andrews shall promptly execute and deliver all further instruments and
documents, and take all further action, that Callaway Golf may request in
order to perfect and protect the security interest granted or purported to be
granted hereby or to enable Callaway Golf to exercise and enforce its rights
and remedies hereunder with respect to any Collateral. Saint Andrews hereby
irrevocably makes, constitutes and appoints Callaway Golf (and all persons
designated by Callaway Golf for that purpose) as Saint Andrews' true and
lawful attorney (and agent-in-fact) to sign the name of Saint Andrews on any
financing statements or other written matter, and to take any other act,
deemed necessary or requested by Callaway Golf to perfect and maintain a
perfected lien upon, and security interest in, any Collateral.
7. Representations and Warranties. Saint Andrews represents and
warrants to Callaway Golf as follows:
(a) Except for the Operating Agreement, there are no other
agreements or commitments between or among Saint Andrews and any other member
of the Company, including, without limitation, any agreements or commitments
relating to the management, operations or ownership of the Company or any of
its or its members' obligations with respect thereto;
(b) The Company is a duly organized and validly existing limited
liability company under the laws of the State of California and is duly
qualified to do business and in good standing in all jurisdictions in which
its activities make such qualification necessary;
(c) Neither the execution and delivery of this Agreement, the
consummation of the transactions herein contemplated, nor compliance with the
terms and provisions hereof will conflict with or result in a breach of any of
the terms, conditions or provisions of any indenture, agreement, lease or
instrument to which Saint Andrews is a party or by which Saint Andrews is
bound or to which Saint Andrews or any material part of Saint Andrews'
property may be subject, including, without limitation, the Operating
Agreement (all consents for the transactions contemplated hereby required
under the terms of the Operating Agreement having been obtained), or
constitute a breach thereof or a default thereunder or permit the acceleration
of any obligation due thereunder or result in the creation or imposition of
any lien, charge or encumbrance of any nature whatsoever upon any of the
property of Saint Andrews;
(d) This Agreement constitutes the valid and legally binding
obligation of Saint Andrews enforceable in accordance with its terms;
(e) No portion of the Collateral is evidenced by a certificate,
instrument or other writing except for such as have been delivered to Callaway
Golf;
(f) Saint Andrews is the sole owner of the Collateral, and there
are no liens, encumbrances or claims on or against the Collateral except the
security interest granted hereby; and
(g) Saint Andrews is a corporation in good standing under the laws
of the State of Nevada and has all corporate power and corporate authority
necessary to conduct its business and enter into the Operating Agreement.
(h) Saint Andrews' chief executive office is located in Las Vegas,
Nevada.
8. Covenants of Saint Andrews. So long as any Secured Obligation
remains outstanding, Saint Andrews covenants and agrees as follows:
(a) Saint Andrews shall indemnify, defend and hold harmless
Callaway Golf, its officers, directors, employees, shareholders and agents,
against all losses, claims, demands and liabilities of every kind caused by or
relating to the Collateral or other property subject hereto;
(b) Saint Andrews shall not sell, hypothecate, pledge or otherwise
dispose of any Collateral at any time, or become obligated to do any of the
foregoing, or permit the Collateral to become subject to any lien, judgment,
attachment or other adverse claim except in favor of Callaway Golf; provided,
however, if (i) the Loan is current in payment of principal and interest, (ii)
no Default then exists hereunder, and (iii) the total Appraised Unit Value of
Saint Andrew's Membership Interest in the Company, as determined pursuant to
Section 7 of the Operating Agreement (at the sole cost to Saint Andrews) and
as agreed upon by Saint Andrews and Callaway Golf, exceeds 150% of the then
outstanding principal of the Loan, upon prior written notice to Callaway Golf,
Saint Andrews may pledge to a third party its membership interest in the
Company as security for obligations ("Third Party Obligations") not to exceed
that amount which is equal to the difference between such total Appraised Unit
Value of Saint Andrews' membership interest and 150% of the outstanding
principal of the Loan. Any default under or with respect to the Third Party
Obligations shall also be a Default hereunder. Any such pledge by Saint
Andrews shall be expressly subordinated to the security interests of Callaway
Golf. Saint Andrews and such third parties shall execute such documents and
agreements as Callaway Golf may request to effectuate and evidence the
foregoing, including, without limitation, subordination agreement(s) in a form
acceptable to Callaway Golf (which agreement shall include, but not be limited
to, provisions which limit such third parties' rights and remedies with
respect to Saint Andrews' membership interest or other Collateral upon a
default to pursuit only after exercise of remedies by Callaway Golf). Saint
Andrews' ability to pledge its membership interest as security pursuant to
this Agreement shall be limited to one occasion during the term of this
Agreement and shall be limited to a single third party.
(c) Without the prior written consent of Callaway Golf (which
consent may be given or withheld in Callaway Golf's sole discretion), Saint
Andrews shall not vote or give consent (i) to amend, modify, restate or alter
the Operating Agreement, (ii) to mortgage, encumber, pledge, sell, hypothecate
or otherwise transfer or dispose of all or any substantial portion of the
assets of Saint Andrews or of the Company, (iii) to terminate or dissolve
Saint Andrews or the Company or to withdraw or seek removal as a member in the
Company, (iv) to withdraw any capital from the Company, or (v) to make any
distribution of any kind to the members of the Company;
(d) Saint Andrews shall give Callaway Golf immediate notice of any
change in Saint Andrews' chief executive office or chief place of business or
its name at least thirty (30) days prior to any change. Saint Andrews does
not operate under any trade or other names and has not utilized any trade
names or other names within the previous five years;
(e) All information at any time supplied to Callaway Golf by Saint
Andrews, including without limitation regarding the value of the Collateral
and financial statements, shall be at the time supplied to Callaway Golf,
correct and complete in all material respects;
(f) Saint Andrews will perform all acts and comply with all terms
of the Operating Agreement;
(g) Saint Andrews will execute any additional agreements, finance
statements, assignments or documents as may be requested by Callaway Golf to
effectuate the purpose of this Agreement or in order to perfect or continue
the security interest of Callaway Golf in the Collateral; and
(h) Saint Andrews at its own cost and expense will defend the
Collateral against all claims, liens, security interests, demands and other
encumbrances which may affect Callaway Golf's security interest in or Saint
Andrews' title to any Collateral.
9. Powers of Callaway Golf. Saint Andrews appoints Callaway Golf as
Saint Andrews' true and lawful attorney-in-fact to perform any of the
following acts, which power is coupled with an interest, is irrevocable until
termination of this Agreement and may be exercised from time to time by
Callaway Golf and its officers and employees, or any of them, in their
discretion, to take any action and to execute any instrument which Callaway
Golf may deem reasonably necessary or desirable to accomplish the purposes of
this Agreement, including, without limitation, to receive, endorse and collect
all instruments made payable to Saint Andrews or representing any dividend,
interest payment or other distribution in respect of the Collateral or any
part thereof and to give full discharge for the same, when and to the extent
permitted by this Agreement, and (a) to perform or cause the performance of
any obligation of Saint Andrews hereunder in Saint Andrews' name or otherwise;
(b) during the continuance of any Default, to liquidate any Collateral pledged
to Callaway Golf hereunder and to apply proceeds thereof to payment of the
Secured Obligations or to place such proceeds into a cash collateral account
pursuant to Section 10 hereof, all at Callaway Golf's sole discretion,
notwithstanding the fact that such liquidation may give rise to penalties; (c)
to notify any person obligated on any security, instrument or other document
or obligation subject to this Agreement of Callaway Golf's rights hereunder;
(d) during the continuance of any Default, to collect all cash or other
property now or hereafter payable upon or on account of the Collateral; (e) to
enter into any extension, reorganization, merger or consolidation agreement or
any other agreement relating to or affecting the Collateral and, in connection
therewith, to deposit or surrender control of the Collateral, to accept other
property in exchange for the Collateral, subject otherwise to this Agreement;
(f) to make any compromise or settlement Callaway Golf deems desirable or
proper in respect of the Collateral; (g) to perform any act which Callaway
Golf may deem necessary to preserve or protect the Collateral, or any part
thereof; (h) to execute on Saint Andrews' behalf and in Saint Andrews' name
any documents required in order to give Callaway Golf a continuing first lien
upon the Collateral or any part thereof; and (i) Saint Andrews hereby waives
any and all rights that Saint Andrews may now, or at any time have, to require
Callaway Golf to proceed against any other person or entity or to proceed
against any of the Collateral, or to pursue or enforce any other remedy
Callaway Golf may have at any time. Notwithstanding any other provision of
this Agreement, nothing herein shall limit, impair or modify any right of
Callaway Golf as a member in the Company.
10. Cash Collateral. Any money received by Callaway Golf in respect of
the Collateral may, at Callaway Golf's sole option, be retained, without
interest, as cash collateral and shall, for all purposes, be deemed Collateral
hereunder.
11. Indemnity. Saint Andrews agrees to indemnify, defend and hold
harmless, Callaway Golf and its officers, directors, employees, shareholders
and agents from and against any and all claims, losses and liabilities growing
out of, or resulting from, this Agreement (including, without limitation,
enforcement of this Agreement).
12. Default. The occurrence of any of the following shall constitute a
"Default" under this Agreement:
(a) any event that, under the Note, the Operating Agreement or any
related document, causes or permits the acceleration of any of the Secured
Obligations;
(b) any default or event of default under the Note, the Operating
Agreement, Security Agreement, Deed of Trust or any other document evidencing
or securing any Secured Obligation;
(c) Saint Andrews' breach of, default under or failure to comply
with, perform or pay when due, whether on demand or otherwise, any term,
provision, covenant or condition, the Operating Agreement;
(d) any failure by Saint Andrews to keep or perform any of the
terms, covenants or conditions of this Agreement, and such monetary failure is
not cured within ten (10) days of written notice by Callaway Golf to Saint
Andrews, and such non-monetary failure is not cured within thirty (30) days of
written notice by Callaway Golf to Saint Andrews;
(e) any failure of this Agreement, the Note, the Operating
Agreement, Security Agreement, Deed of Trust or any other agreement or
undertaking related to any Secured Obligation, to be the valid, binding and
enforceable obligation of the parties thereto (other than Callaway Golf);
(f) the levying of any attachment, execution or other process
against Saint Andrews or against the Collateral, or any portion thereof;
(g) if Saint Andrews (or any successor thereto) or the Company
shall make a general assignment for the benefit of Callaway Golf; or shall
file or have filed against it a petition for relief under the bankruptcy laws
of the United States; or in the event that a receiver, trustee or other court
officer is appointed for the purpose of taking possession of all or any part
of the Collateral;
(h) if Saint Andrews revokes or purports to revoke this Agreement
or its obligations hereunder; or
(i) a default shall occur under or with respect to the Third Party
Obligations.
13. Remedies. Upon the occurrence of a Default (but without limiting
any other rights or remedies of Callaway Golf, all of which are cumulative),
Callaway Golf shall thereupon and thereafter have any or all of the rights and
remedies to which a secured party is entitled after a default under the
provisions of the California Uniform Commercial Code. In addition to those
rights and remedies, Saint Andrews agrees that Callaway Golf may in its sole
discretion do or cause to be done any one or more of the following:
(a) declare the entire amount of the Secured Obligations
immediately due and payable;
(b) proceed to realize upon the Collateral or any portion thereof
in any manner or priority;
(c) if notice to Saint Andrews is required, give written notice to
Saint Andrews five (5) days prior to the date of public sale of the Collateral
or prior to the date after which private sale of the Collateral will be made;
(d) exercise all rights and remedies of a secured party under the
California Uniform Commercial Code; and
(e) proceed against Saint Andrews with or without proceeding
against the Collateral.
Saint Andrews acknowledges that all or part of foreclosure of the
Collateral may be restricted by state or federal securities laws and Callaway
Golf may be unable to effect a public sale of all or part of the Collateral
and that a public sale is or may be impractical and inappropriate for a
membership interest in the Company. Saint Andrews acknowledges and consents
that Callaway Golf may resort to one or more private or public sales to a
single purchaser or a restricted or limited group of purchasers. Saint
Andrews agrees that private or public sales under these circumstances may be
at prices and other terms less favorable to Saint Andrews than if Collateral
were sold at a price negotiated by Saint Andrews. Saint Andrews further
consents that Callaway Golf may take any steps it deems appropriate to avoid a
violation of securities laws which exist now or in the future. Saint Andrews
further agrees that sales made under the foregoing circumstances shall be
deemed to have been made in a "commercially reasonable" manner.
The rights, privileges, powers and remedies of Callaway Golf shall be
cumulative, and no single or partial exercise of any of them shall preclude
the further or other exercise of any of them. Any waiver, permit, consent or
approval of any kind by Callaway Golf of any Default hereunder, or any such
waiver of any provisions or conditions hereof, must be in writing and shall be
effective only to the extent set forth in writing. Any proceeds of any
disposition of the Collateral, or any part thereof, may be applied by Callaway
Golf to the payment of expenses incurred by Callaway Golf in connection with
the foregoing, including reasonable attorneys' fees and expenses and expert
witnesses' fees and expenses, and the balance of such proceeds may be applied
by Callaway Golf toward the payment of the Secured Obligations and in such
order of application as Callaway Golf may from time to time elect.
In the event of a foreclosure of the Collateral or portions thereof by
Callaway Golf, and provided Callaway Golf or an affiliate or designee of
Callaway Golf shall become the owner thereof, then upon the written election
of Callaway Golf or such affiliate or designee, Callaway Golf, or such
affiliate or designee, as the case may be, shall become a member in the
Company in place of Saint Andrews and shall have all of the rights thereof.
Notwithstanding, nothing herein shall act to obligate Callaway Golf, or its
affiliate or designee, for Saint Andrews' obligations as a member of the
Company.
14. Costs, Expenses and Attorneys' Fees. All payments, advances,
charges, costs and expenses, including reasonable attorneys' fees and expenses
and expert witnesses' fees and expenses, made or incurred by Callaway Golf in
exercising any right, power or remedy conferred by this Agreement or in the
enforcement thereof, whether before or after judgment (including, without
limitation, those arising in connection with the custody of, the sale of, or
other redemption upon, any of the Collateral or failure by Saint Andrews to
perform or observe any of the provisions hereof or in connection with the
enforcement of any judgment or other award) or in connection with a
bankruptcy, reorganization, receivership or similar debt-relief proceeding by
or effecting the Saint Andrews or any of the Collateral, shall be paid to
Callaway Golf by Saint Andrews immediately and without demand, together with
interest as a rate per annum equal to the rate applicable under the Note, or,
if less, the maximum rate permitted by law. Saint Andrews' obligations under
this Section 14 are severable from the remainder of this Agreement and shall
survive the entry of judgment.
15. Governing Law; Successors, Assigns. This Agreement shall be
governed by and construed in accordance with the laws of the State of
California, and shall be binding on and inure to the benefit of the legal
representatives, successors and assigns of Saint Andrews and Callaway Golf.
16. Severability. If any provision of this Agreement shall be held to
be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provisions or any remaining provisions of
this Agreement.
17. Notice and Payments. All notices and other communications provided
for hereunder shall be in writing (including telegraphic, telecopied or telex
communication) and mailed or telegraphed or telecopied or delivered to the
parties at their respective addresses as set forth below, or, as to each
party, at such other address as shall be designated by such party in a written
notice to the other parties complying as to delivery with the terms of this
Section 17. All such notices and communications, if mailed, shall be
effective upon deposit in the United States mail, first-class (or certified)
postage prepaid; if telegraphed or telecopied, shall be effective when
transmitted, if sent by telex, shall be effective when the telex is sent and
the appropriate answer back is received, and if delivered in another way,
shall be effective upon receipt.
To Saint Andrews at its business office:
Saint Andrews Golf Corporation
5325 South Valley View Boulevard
Suite 10
Las Vegas, Nevada 89118
Attn: Ron Boreta, President
Telephone: (702) 798-7777
Facsimile: (702) 798-6847
To Callaway Golf at its business office:
Callaway Golf Company
2285 Rutherford Road
Carlsbad, California 92008-8815
Attn: Donald H. Dye, President and Chief
Executive Officer
Telephone: (760) 930-5738
Facsimile: (760) 930-5022
18. Additional Provision.
(a) Saint Andrews acknowledges, covenants and agrees that this
Agreement shall survive the payment in full of the Note and shall continue in
full force and effect with respect to any Secured Obligations not performed
upon and that survive payment of the Note.
(b) This Agreement gives rise to continuing obligations relating to
the Secured Obligations, including, without limitation, obligations and
liabilities arising under successive and future transactions that either
increase, decrease, or continue the Secured Obligations, or, from time to
time, renew Secured Obligations that have been satisfied, independent of and
in addition to any guaranty, endorsement, or collateral now or hereafter held
by Callaway Golf, whether or not furnished by Saint Andrews. This Agreement
shall apply and be irrevocable with respect to any indebtedness created or
incurred even after actual receipt by Callaway Golf of any written notice of
revocation by Saint Andrews which indebtedness arises out of any extension,
renewal, advance, additional advance, refunding, replacement or modification
of any indebtedness originally created prior to the actual receipt of such
written notice regardless of whether such extension, renewal, advance,
additional advance, refunding replacement or modification occurs prior to such
revocation, and Saint Andrews waives any right to revoke this Agreement and
the benefits of California Civil Code Section 2815.
(c) Saint Andrews consents that Callaway Golf may, and authorizes
Callaway Golf at any time in its discretion without notice or demand and
without affecting the indebtedness and liabilities of Saint Andrews hereunder
to: (i) enter into agreements with the Company and renew, extend, amend,
waive, restructure, refinance, release, accelerate, or otherwise change the
time for payment of, or otherwise change the terms of, the indebtedness
evidenced thereby (including, without limitation, the Secured Obligations),
including, without limitation, (A) increase or decrease in the Secured
Obligations or the rate of interest on the Secured Obligations and (B) any
amendment of the Secured Obligations to permit Callaway Golf to extend further
or additional accommodations to the Company in any form, including credit by
way of loan, lease, sale or purchase of assets, guarantee, or otherwise, which
shall thereupon be Secured Obligations; (ii) accept new or additional
documents, instruments, or agreements relative to the Secured Obligations;
(iii) consent to the change, restructure or termination of the individual,
partnership, or corporate structure or existence of the Company, Saint Andrews
or any affiliate of the Company or Saint Andrews, and correspondingly
restructure the Secured Obligations; (iv) accept partial payments on the
Secured Obligations; (v) take and hold collateral or additional guaranties for
the Secured Obligations and amend, alter, exchange, substitute, transfer,
enforce, perfect or fail to perfect, waive, subordinate, terminate, or release
any such collateral or guaranties; (vi) apply any collateral, and direct the
order and manner of sale thereof as Callaway Golf in its sole discretion may
determine; (vii) settle, release on terms satisfactory to Callaway Golf or by
operation of law or otherwise, compound, compromise, collect, or otherwise
liquidate the Secured Obligations and/or the collateral or any guaranty
therefor in any manner, whether in liquidation, reorganization, receivership,
bankruptcy, or otherwise; (viii) release the Company or any other party for
all or any part of the Secured Obligations; or (ix) assign the Secured
Obligations or any rights related thereto in whole or in part.
(d) This Agreement is a guaranty of payment and not of collection.
Saint Andrews' obligations under this Agreement are independent of those of
the Company and of the obligations of any other person or entity, and are not
conditioned or contingent upon the genuineness, validity, regularity, or
enforceability of the Note or other Secured Obligations or of the obligations
of any other person or entity. Callaway Golf may bring a separate action
against Saint Andrews without first proceeding against the Company, any other
guarantor, or any other person or entity, or any security held by Callaway
Golf, and without pursuing any other remedy. Callaway Golf's rights under
this Agreement in respect of the Secured Obligations shall not be exhausted by
any action of Callaway Golf until all of the Secured Obligations have been
fully and indefeasibly paid and performed.
(e) Saint Andrews waives and agrees not to assert or take advantage
of (i) any right to require Callaway Golf to proceed against the Company, any
other guarantor, or any other person or entity, or against any security now or
hereafter held by Callaway Golf, or to pursue any other remedy whatsoever,
including, without limitation, any such right or any other right set forth in
or arising out of any of Sections 2845, 2848, 2849, 2850, and 2855 of the
California Civil Code; (ii) any defense based upon any legal disability of the
Company or of any other guarantor, or person or entity, or any discharge or
limitation of the liability of the Company or of any other guarantor, or
person or entity, to Callaway Golf, or any restraint or stay applicable to
actions against the Company or against any other guarantor, person or entity,
whether such disability, discharge, limitation, restraint, or stay is
consensual, arises by order of a court or other governmental authority, or
arises by operation of law or any liquidation, reorganization, receivership,
bankruptcy, insolvency or debtor-relief proceeding, or from any other cause,
including, without limitation, any defense to the payment of interest,
attorneys' fees and costs, and other charges that otherwise would accrue or
become payable in respect of the Secured Obligations after the commencement of
any such proceeding, it being the intent of the parties that the Secured
Obligations shall be determined without regard to any rule of law or order
that may relieve the Company of any portion of such obligations; (iii)
setoffs, counterclaims, presentment, demand, protest, notice of protest,
notice of non-payment, or other notice of any kind; (iv) any defense based
upon the modification, renewal, extension, or other alteration of the Secured
Obligations; (v) any defense based upon the negligence of Callaway Golf,
including, without limitation, the failure to record an interest under a deed
of trust, the failure to perfect any security interest, or the failure to file
a claim in any bankruptcy of the Company or of any other guarantor; (vi) any
defense based upon a statute of limitations (to the fullest extent permitted
by law), and any defense based upon Callaway Golf's delay in enforcing this
guaranty or any other agreement; (vii) any defense based upon or arising out
of any defense that the Company may have to the performance of any part of the
Secured Obligations; (viii) any defense to recovery by Callaway Golf of a
deficiency after non-judicial sale of real or personal property; any defense
based upon the unavailability to Callaway Golf of recovery of a deficiency
judgment after non-judicial sale of real or personal property; and any defense
based upon or arising out of any of Sections 580a (which would otherwise limit
Saint Andrews' liability after a nonjudicial foreclosure sale to the
difference between the obligations guarantied hereby and the fair market value
of the property or interest sold at such nonjudicial foreclosure sale), 580b
and 580d (which would otherwise limit Callaway Golf's right to recover a
deficiency judgment with respect to purchase money obligations and after a
nonjudicial foreclosure sale, respectively), or 726 (which, among other
things, would otherwise require Callaway Golf to exhaust all of its security
before a personal judgment may be obtained for a deficiency) of the California
Code of Civil Procedure (including but not limited to any fair value
limitations under Section 580a or 726 of such Code) or similar anti-deficiency
or one-action statute which may be applicable, if any, or based upon or
arising out of Division 5, 8, or 9 of the California Uniform Commercial Code
or similar provisions to the extent applicable under the California Uniform
Commercial Code as in effect; (ix) any defense based upon the death,
incapacity, lack of authority, or termination of existence of, or revocation
hereof by, any person or entity or persons or entities, or the substitution of
any party hereto; (x) any defense based upon or related to Saint Andrews' lack
of knowledge as to the Company's financial condition; (xi) any defense based
upon Section 2809 of the California Civil Code; (xii) any defense based upon
the impairment of any subrogation or reimbursement rights that Saint Andrews
might have, including any defense or right based upon the acceptance by
Callaway Golf or an affiliate of Callaway Golf of a deed in lieu of
foreclosure without extinguishing the Secured Obligations, even if such
acceptance destroys, alters, or otherwise impairs subrogation rights of Saint
Andrews, the right of Saint Andrews to proceed against the Company for
reimbursement, or both; (xiii) any right to designate the application of any
sums or property received by Callaway Golf; and (xiv) any other defense or
right available to Saint Andrews as a surety.
(f) Saint Andrews acknowledges that Saint Andrews is relying upon
Saint Andrews' own knowledge and is fully informed with respect to the
Company's financial condition. Saint Andrews assumes full responsibility for
keeping fully informed of the financial condition of the Company and all other
circumstances affecting the Company's ability to perform its obligations to
Callaway Golf, and agrees that Callaway Golf will have no duty to report to
Saint Andrews any information that Callaway Golf receives about the Company's
financial condition or any circumstances bearing on the Company's ability to
perform all or any portion of the Secured Obligations, regardless of whether
Callaway Golf has reason to believe that any such facts materially increase
the risk beyond that which Saint Andrews intends to assume or has reason to
believe that such facts are unknown to Saint Andrews or has a reasonable
opportunity to communicate such facts to Saint Andrews.
(g) Saint Andrews agrees that (i) Saint Andrews shall have no right
of subrogation, reimbursement or indemnity against the Company or against any
collateral provided for the Note unless and until all Secured Obligations have
been paid in full; (ii) Saint Andrews shall have no right of contribution
against any other guarantor unless and until all Secured Obligations have been
paid in full; and (iii) until Saint Andrews is permitted by the terms of this
paragraph to exercise any such right of subrogation, reimbursement, indemnity
or contribution, Saint Andrews hereby waives any right to enforce any remedy
that Saint Andrews might have against the Company or any other guarantor, or
to participate in any security held by Callaway Golf for the Secured
Obligations, by reason of any one or more payments by Saint Andrews or
collections under this Agreement, including, without limitation, any such
right or any other right set forth in Sections 2845, 2848 or 2849 of the
California Civil Code. Whether or not any or all of the foregoing waivers of
rights in respect of subrogation, reimbursement, indemnity and contribution
are held to be enforceable: (i) all existing and future indebtedness of the
Company to Saint Andrews (including, without limitation, any indebtedness
arising by reason of any payment by Saint Andrews hereunder) is hereby
subordinated to all Secured Obligations, and, without the prior written
consent of Callaway Golf, such indebtedness shall not be paid, in whole or in
part, nor will Saint Andrews accept any payment of or on account of any such
indebtedness except as expressly permitted by this Agreement; provided,
however, that, if Callaway Golf so requests, Saint Andrews shall enforce
and/or collect such indebtedness, subject to the following clause (ii); (ii)
each payment by the Company, whether received in violation of this Agreement
or pursuant to the request of Callaway Golf, shall be received by Saint
Andrews in trust for Callaway Golf, and Saint Andrews shall cause the same to
be paid to Callaway Golf, immediately upon demand by Callaway Golf, on account
of the Secured Obligations; and (iii) no such payment shall reduce or affect
in any manner the liability of Saint Andrews under this Agreement. Saint
Andrews shall execute such further documents, and take such further acts, as
Callaway Golf may request for the purpose of further perfecting, preserving or
protecting its rights hereunder.
(h) Upon the occurrence of any Default hereunder (but without
limiting Callaway Golf's right to resort to any other remedy it may have in
respect thereof), Callaway Golf may elect to foreclose non-judicially or
judicially against any real or personal property security it holds for the
Secured Obligations or any part thereof, or exercise any other remedy against
the Company or against any security. No such action by Callaway Golf shall
release or limit the liability of Saint Andrews, even if the effect of that
action is to deprive Saint Andrews, or any other guarantor, of the right or
ability to collect reimbursement from or to assert subrogation, indemnity, or
contribution rights against the Company or against any other guarantor for any
sums paid to Callaway Golf, or to obtain reimbursement by means of any
security held by Callaway Golf for the Secured Obligations. Saint Andrews
waives all rights and defenses arising out of an election of remedies by
Callaway Golf, even though that election of remedies, such as nonjudicial
foreclosure with respect to security for the Secured Obligations, has
destroyed Saint Andrews' rights of subrogation and/or reimbursement against
the Company by the operation of Section 580d of the California Code of Civil
Procedure or otherwise. Saint Andrews waives all rights and defenses arising
out of the operation of Section 580a of the California Code of Civil
Procedure, and further waives its right to a fair value hearing under such
Section 580a, or similar provisions of other applicable law, to determine the
size of a deficiency judgment following any foreclosure sale on encumbered
real property. Saint Andrews waives all rights and defenses that it may have
because the Secured Obligations, or parts thereof, are secured by real
property. This means, among other things: (i) Callaway Golf may collect from
Saint Andrews without first foreclosing on any real or personal property
collateral pledged by the Company or otherwise; (ii) if Callaway Golf
forecloses on any real property collateral (a) the amount of the Secured
Obligations may be reduced only by the price for which that collateral is sold
at the foreclosure sale, even if the collateral is worth more than the sale
price; and (b) Callaway Golf may collect from Saint Andrews even if Callaway
Golf, by foreclosing on the real property collateral, has destroyed any right
Saint Andrews may have to collect from the Company. This is an unconditional
and irrevocable waiver of any rights and defenses Saint Andrews may have
because the Secured Obligations or portions thereof are secured by real
property. These rights and defenses include, but are not limited to, any
rights or defenses based upon Sections 580a, 580b, 580d, or 726 of the
California Code of Civil Procedure.
(i) So long as any Secured Obligation shall be owing to Callaway
Golf, Saint Andrews shall not, without the prior written consent of Callaway
Golf, commence, or join with any other person or entity in commencing, any
bankruptcy, reorganization, or insolvency proceeding against the Company. The
obligations of Saint Andrews under this Agreement shall not be altered,
limited, or affected by any proceeding, voluntary or involuntary, involving
the bankruptcy, insolvency, receivership, reorganization, liquidation, or
arrangement of the Company, or by any defense the Company may have by reason
of any order, decree, or decision of any court or administrative body
resulting from any such proceeding. In furtherance of the foregoing, Saint
Andrews agrees that if acceleration of the time for payment of any amount
payable by the Company under the Note or in respect of the other Secured
Obligations is stayed for any reason, all such amounts otherwise subject to
acceleration shall nonetheless be payable by Saint Andrews hereunder forthwith
upon demand.
(j) The liability of Saint Andrews hereunder shall be reinstated
and continued, and the rights of Callaway Golf shall continue, with respect to
any amount at any time paid on account of the Secured Obligations that
Callaway Golf shall thereafter be required to restore or return in connection
with the bankruptcy, insolvency, or reorganization of the Company or Saint
Andrews, or otherwise, all as though such amount had not been paid. The
determination as to whether any such payment must be restored or returned
shall be made by Callaway Golf in its sole discretion; provided, however, that
if Callaway Golf chooses to contest any such matter, Saint Andrews agrees to
indemnify and hold harmless Callaway Golf from all costs and expenses
(including, without limitation, reasonable legal fees and disbursements) of
such litigation. Callaway Golf shall be under no obligation to return or
deliver this Agreement to Saint Andrews, notwithstanding the payment of the
Secured Obligations. If this Agreement is nevertheless returned to Saint
Andrews or is otherwise released, then the provisions of this Section 18(j)
shall survive such return or release, and the liability of Saint Andrews under
this Agreement shall be reinstated and continued under the circumstances
provided in this Section 18(j) notwithstanding such return or release.
19. Miscellaneous. No provision of this Agreement or Callaway Golf's
rights hereunder can be waived or modified nor can Saint Andrews be released
from its obligations hereunder except by a writing executed by Callaway Golf.
No such waiver shall be applicable except in the specific instance for which
given.
20. Counterparts. This Agreement may be executed in counterparts, each
of which shall be considered an original and all of which together shall
constitute one and the same instrument.
[This page intentionally left blank]
IN WITNESS WHEREOF, Saint Andrews and Callaway Golf have executed this
Membership Interest Security Agreement as of the day and year first written
above.
SAINT ANDREWS GOLF CORPORATION, a Nevada
corporation
By:
Ron Boreta, President
CALLAWAY GOLF COMPANY, a California
corporation
By:
Donald H. Dye, President and Chief
Executive Officer
<PAGE>
CONSENT AND ACKNOWLEDGMENT BY COMPANY AND MEMBERS
All-American Golf LLC, a California limited liability company (the
"Company") and each of the undersigned (constituting 100% of the members of
the Company), hereby consent to and acknowledge that they are aware of
Callaway Golf's security interest in and to Saint Andrews' membership interest
in the Company and any and all related obligations of the Company to Saint
Andrews pursuant to the foregoing Membership Interest Security Agreement
("Agreement)", and further acknowledges, consents and agrees as follows:
1. To the granting by Saint Andrews of all of its membership rights,
title and interests in and to the Company and the Operating Agreement in
accordance with the Agreement.
2. To pay all amounts required under the Agreement to be paid to
Callaway Golf and to perform according to the terms therein;
3. Upon a Default, that Callaway Golf may exercise any and all rights
of Saint Andrews under the Operating Agreement, including, without limitation,
all voting, management, and inspection rights.
4. That it shall not cause an amendment, modification or alteration of
the Operating Agreement or any rights thereunder without the prior written
consent of Callaway Golf.
5. That until all of the Secured Obligations are paid and satisfied in
full, it will not mortgage, sell, pledge or hypothecate any assets of the
Company without the consent of Callaway Golf, which can be given or withheld
in Callaway Golf's sole judgment.
6. That it shall provide to Callaway Golf at all times any and all
information reasonably requested by Callaway Golf with respect to the Company
and to allow it to inspect the books and records of the Company at times
requested.
7. In the event of a foreclosure of the Collateral or portions thereof
by Callaway Golf, provided Callaway Golf or an affiliate or designee of
Callaway Golf shall become the owner thereof, then, upon the written election
of Callaway Golf or such affiliate or designee, Callaway Golf or such
affiliate or designee, as the case may be, shall become automatically admitted
as a member in the Company in place of Saint Andrews and shall be entitled to
exercise any and all rights relating thereto.
8. That notwithstanding any provision of the Agreement or this Consent,
Callaway Golf is not assuming any of the obligations of Saint Andrews.
9. That this Consent shall be irrevocable and shall remain in full
force and effect until such time as it shall receive written notice from
Callaway Golf that all of the Secured Obligations shall have been satisfied in
full.
10. That the undersigned have duly registered and recorded in the books
and records of the Company the security interest of Callaway Golf granted by
Saint Andrews to Callaway Golf and that Callaway Golf is deemed a registered
pledgee of such interest.
All capitalized terms not defined hereinabove shall be as defined in the
Agreement. The obligations hereunder shall be joint and several.
<PAGE>
[This page intentionally left blank]
<PAGE>
WHEREFORE, this Consent and Acknowledgment by Company and Members is
executed on June 13, 1997.
ALL-AMERICAN GOLF LLC, a California SAINT ANDREWS GOLF CORPORATION,
limited liability company a Nevada Corporation
By: SAINT ANDREWS GOLF CORPORATION, By:
a Nevada corporation, Ron Boreta, President
Managing Member
By:
Ron Boreta, President
By: CALLAWAY GOLF COMPANY, a CALLAWAY GOLF COMPANY, a
California corporation, Member California corporation
By: By:
Donald H. Dye, President Donald H. Dye, President and
and Chief Executive Officer Chief Executive Officer
<PAGE>
IRREVOCABLE INSTRUCTION
The undersigned hereby irrevocably instructs All-American Golf LLC, a
California limited liability company, and all of its members, to carry out and
perform the terms of the foregoing Consent and Acknowledgment by Company and
Members and the Agreement as defined therein. This Instruction shall be
irrevocable by the undersigned.
SAINT ANDREWS GOLF CORPORATION,
a Nevada corporation
By:
Ron Boreta, President
<PAGE>
SERVICE MARK LICENSE AGREEMENT
THIS SERVICE MARK LICENSE AGREEMENT ("Agreement") is made and effective as
of June 13, 1997, by and between Callaway Golf Company, a California
corporation ("Callaway Golf") and All-American Golf LLC, a California limited
liability company ("LICENSEE") and is made with reference to the following
facts:
A. Callaway Golf is the owner of all right, title, and interest in and
to the registered and unregistered trademarks and any and all trade dress,
labels, and designs associated therewith, which are set forth on Exhibit A
attached hereto, together with the goodwill of the business symbolized
thereby; and
B. Callaway Golf and LICENSEE mutually desire to enter into this
Agreement in accordance with the provisions hereof.
NOW, THEREFORE, in consideration of the premises and mutual agreements
herein contained and for other good and valuable consideration, acknowledged
by each of them to be satisfactory and adequate, the parties do hereby agree
as follows:
1. Definitions.
1.1 "Licensed Mark" shall mean the mark "Callaway Golf Center."
1.2 "Center" shall mean the golf facility, including a golf course,
driving range, performance center, training facility and golf shop, to be
located on the premises of the All-American Sport Park in Las Vegas, Nevada.
1.3 "Operating Agreement" shall mean the Operating Agreement for
All-American Golf LLC dated June 13, 1997.
2. License.
2.1 Grant. Subject to the terms and conditions hereof, Callaway
Golf hereby grants to LICENSEE, and LICENSEE accepts from Callaway Golf, for
the term of this Agreement, a nontransferable, limited exclusive (except as
set forth herein) license, to use the Licensed Mark (i) as the name of the
Center and (ii) in advertisements for the Center. The list of marks set forth
on Exhibit A is solely for purposes of defining Callaway Golf's trademark
rights. Nothing herein shall be construed to grant LICENSEE the right to use
any Callaway Golf mark other than the Licensed Mark "Callaway Golf Center."
2.2 Reservation of Rights. Callaway Golf expressly reserves all
rights with respect to all trademarks or service marks that may be owned by it
or licensed to it which are not expressly licensed to LICENSEE under this
Agreement.
3. Quality Standards.
3.1 Maintenance of Quality. In the course of operating and
marketing the Center in connection with the Licensed Mark, LICENSEE shall
maintain and adhere to standards of quality and technical specifications that
may be in effect and/or adopted and approved by Callaway Golf, in its sole and
absolute discretion, from time to time during the term of this Agreement
including, but not limited to, the approval and review rights of Callaway Golf
with respect to the operation of the Center as set forth in the Operating
Agreement of LICENSEE ("Standards and Specifications"). The Standards and
Specifications are designed to ensure that the operation and marketing of the
Center are consistent with the reputation enjoyed by Callaway Golf and the
Licensed Mark.
3.2 Advertising. Callaway Golf shall have the right to approve all
advertising and marketing materials relating to the Center and which include
the Licensed Mark prior to the initial use by LICENSEE of same.
3.3 Rights of Inspection. To ensure that the Standards and
Specifications are maintained, Callaway Golf and its authorized agents and
representatives shall have the right to enter the Center at all reasonable
times, with prior notice to LICENSEE to inspect the operation of the Center
and to inspect the books, records, advertisements and marketing materials of
LICENSEE.
4. Ownership of the Licensed Mark; Modifications.
4.1 Callaway Golf's Ownership Rights. LICENSEE acknowledges
Callaway Golf's exclusive right, title, and interest in and to the Licensed
Mark and acknowledges that nothing herein shall be construed to accord to
LICENSEE any rights in the Licensed Mark except as otherwise expressly so
provided. LICENSEE acknowledges that its use of the Licensed Mark hereunder
will not create in it any right, title or interest in the Licensed Mark and
that all such use of the Licensed Mark and the goodwill generated thereby will
inure to the benefit of Callaway Golf. LICENSEE warrants and represents with
respect thereto as follows:
4.1.1 LICENSEE will not at any time challenge Callaway Golf's
right, title, or interest in the Licensed Mark or the validity of the Licensed
Mark or any registration thereof;
4.1.2 LICENSEE will not do or cause to be done or omit to do
anything, the doing, causing, or omitting of which would contest or in any way
impair or tend to impair the rights of Callaway Golf in the Licensed Mark;
4.1.3 LICENSEE will not represent that it has any ownership in
or rights with respect to the Licensed Mark other than rights conferred by
this Agreement; and
4.1.4 LICENSEE will not, either during or subsequent to the
term of this Agreement, use any trademark, service mark, trade name, insignia
or logo that is confusingly similar to or a colorable imitation of the
Licensed Mark.
4.2 Changes and Modifications to the Licensed Mark. Callaway Golf
expressly reserves the right from time to time to modify and change the
Licensed Mark. The Licensed Mark, as so modified or changed, shall for all
purposes be deemed to be the Licensed Mark referred to in this Agreement. Any
and all such modifications or changes in said Licensed Mark developed or
adopted by Callaway Golf shall be the sole and absolute property of Callaway
Golf, and Callaway Golf may incorporate the same in the Licensed Mark and
shall have the exclusive right to register such modified or changed marks as
trademarks and/or service marks. LICENSEE may propose changes to the Licensed
Mark for adoption and approval by Callaway Golf.
5. Undertakings of Licensee Respecting the Licensed Mark.
5.1 Marking; Compliance with Trademark Laws. LICENSEE shall, (1)
cause the appropriate designation "TM," ''SM,'' or the registration symbol " "
to be placed adjacent to the Licensed Mark in connection with each use or
display thereof and to indicate such additional information as Callaway Golf
shall specify from time to time concerning the license rights under which
LICENSEE uses the Licensed Mark; and (2) comply with all laws pertaining to
trademarks and service marks in force from time to time.
5.2 Display of the Marks. LICENSEE shall display, in a manner
consistent with Callaway Golf's standards, the Licensed Mark at the Center and
in marketing activities respecting the Center.
5.3 No Use Objectionable to Callaway Golf. LICENSEE shall not use
the Licensed Mark on or in connection with any display, packaging, or
marketing material to which Callaway Golf at any time objects.
6. License Fee.
6.1 Commitment to Pay Royalties. LICENSEE shall pay to Callaway
Golf or its successors-in-interest a royalty (the "Royalty") in U.S. Dollars
to accounts designated by Callaway Golf in accordance with the provisions set
forth in this Section 6.
6.2 Royalty Rate; Payment Requirements; Report. LICENSEE shall pay
Callaway Golf, within ninety (90) days following the end of each fiscal year
of LICENSEE, a "Royalty Payment" equal to three percent (3%) of Licensee's
gross revenues from the Center for such fiscal year, along with a report of
the aggregate gross revenues and Royalty Payments of the Center for such
fiscal year, certified by an independent public accountant (hired and paid for
by LICENSEE and acceptable to Callaway Golf in its sole discretion) as
presenting such information fairly in all material respects. The Royalty
Payment for any one fiscal year shall not exceed Fifty Thousand Dollars
($50,000) ("Maximum Royalty Payment").
6.3 Interest on Late Royalty Payments. Time is of the essence with
respect to all payments by LICENSEE and interest at the rate of interest
announced publicly by Wells Fargo Bank, from time to time, as its base rate
(referred to herein as the "Base Rate"), on the date payment is due, shall
accrue on any amount due Callaway Golf, from and after the date upon which
payment is due until the date of actual payment. The interest so charged
shall be calculated monthly and payable on demand, and shall accrue at the
aforesaid rate until the payment is received by Callaway Golf. The payment of
interest in accordance with the terms hereof is in addition to all other
remedies available to Callaway Golf in the event of default or termination.
6.4 Best Efforts Commitment. LICENSEE acknowledges that the
expectancy of Callaway Golf of receipt of Royalty Payments pursuant to this
Agreement constitutes a material inducement to Callaway Golf to enter into
this Agreement. Accordingly, LICENSEE undertakes to employ its best efforts
during the term of this Agreement to operate and market the Center under the
Licensed Mark in order to generate such Royalty Payments.
7. Prosecution and Defense of Infringement Claims.
7.1 Notice and Prosecution of Infringement of Marks. LICENSEE
shall provide Callaway Golf with prompt notice of any apparent infringement
of the Licensed Mark, any petition to cancel any registration of the Licensed
Mark, or any attempted use of or any application to register any mark
confusingly similar to, or a colorable imitation of, the Licensed Mark of
which it becomes aware. Callaway Golf, in its sole discretion, shall have
sole right to:
7.1.1 Institute and prosecute any actions for such infringement
of the Licensed Mark;
7.1.2 Defend any petition to cancel any registration of the
Licensed Mark; and
7.1.3 Oppose any attempted use of or any application to
register any mark confusingly similar to, or a colorable imitation of, the
Licensed Mark.
7.1.4 Any damages and costs recovered through such proceedings
shall belong exclusively to Callaway Golf, and Callaway Golf shall be solely
responsible for all costs and expenses (including attorney's fees) of
prosecuting such actions. LICENSEE shall provide Callaway Golf with
reasonably requested assistance in connection with such proceedings, and
Callaway Golf shall reimburse LICENSEE's reasonable out-of-pocket costs of
providing such assistance.
7.2 Notice and Defense of Third-Party Infringement Claims.
LICENSEE shall have primary responsibility for defending against any and all
claims charging service mark or trademark infringement involving the use by
LICENSEE of the Licensed Mark. Callaway Golf shall provide LICENSEE with
reasonably requested assistance in connection with such proceedings, and
LICENSEE shall reimburse Callaway Golf's reasonable out-of-pocket costs of
providing such assistance. LICENSEE shall keep Callaway Golf informed of the
status of such proceeding and supply Callaway Golf with any reasonably
requested documents regarding such proceedings. Any expenses, losses,
damages, or judgments (including attorney's fees) in connection with claims
alleging service mark or trademark infringement involving the use by LICENSEE
of the Licensed Mark shall be the responsibility of LICENSEE without any claim
over against Callaway Golf for any portion thereof. LICENSEE shall obtain
Callaway Golf's approval before entering into any compromise, settlement in
stipulation regarding such proceeding, which approval Callaway Golf shall not
unreasonably withhold.
7.3 Callaway Golf's Rights to Defend Infringement Claims. In the
event LICENSEE does not within a reasonable period (having due regard for the
protection of the Licensed Mark) defend against a claim alleging service mark
or trademark infringement involving the use by LICENSEE of the Licensed Mark,
Callaway Golf shall have the right, but shall not be obligated, to defend such
claim. Any expenses, losses, damages, or judgments (including attorney's
fees) in connection with such claims defended by Callaway Golf shall be the
sole responsibility of LICENSEE.
8. Licensee Defense and Indemnification of Licensor. LICENSEE shall
defend, indemnify and save harmless Callaway Golf, its subsidiaries and
affiliates, and their respective successors and assigns from all losses,
costs, liabilities, damages, claims, and expenses of every kind and
description, including reasonable attorney's fees, arising out of or resulting
from any act or omission of LICENSEE relating to the operation and marketing
of the Center in connection with which the Licensed Mark is used, including,
but not limited to (1) unfair or fraudulent advertising claims, warranty
claims, and product defect or liability claims pertaining to the Center; and
(2) claims for unauthorized use or misuse of any patent, trademark, copyright,
or other proprietary right owned, used or controlled by any third party
pertaining to the operation and marketing of the Center.
9. Compliance with Laws by Licensee. In addition to compliance with laws
governing service mark and trademark usage as provided in Section 5 hereof,
LICENSEE agrees to comply with all laws governing operation and marketing of
the Center.
10. Term and Termination.
10.1 Term. The term of this Agreement shall continue until
terminated in accordance with the terms set forth herein.
10.2 Events of Termination. If any of the following events shall
occur with respect to LICENSEE, each such occurrence shall be deemed an "Event
of Termination."
10.2.1 Bankruptcy of LICENSEE. The occurrence of a
"Bankruptcy" with respect to LICENSEE. For this purpose, "Bankruptcy" means a
"Voluntary Bankruptcy" or an "Involuntary Bankruptcy." A "Voluntary
Bankruptcy" means the inability of LICENSEE generally to pay its debts as such
debts become due, or an admission in writing by LICENSEE of its inability to
pay its debts generally or a general assignment by LICENSEE for the benefit of
creditors; the filing of any petition or answer by LICENSEE seeking to
adjudicate it a bankrupt or insolvent, or seeking for itself any liquidation,
winding up, reorganization, arrangement, adjustment, protection, relief, or
composition of LICENSEE or its debts under any law relating to bankruptcy,
insolvency, or reorganization or relief of debtors, or seeking, consenting to,
or acquiescing in the entry of an order for relief or the appointment of a
receiver, trustee, custodian, or other similar official for LICENSEE or for
any substantial part of its property; or corporate action taken by LICENSEE to
authorize any of the actions set forth above. An "Involuntary Bankruptcy"
means without the consent or acquiescence of LICENSEE, the entering of an
order for relief or approving a petition for relief or reorganization or any
other petition seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution, or other similar relief under any
present or future bankruptcy, insolvency or similar statute, law or
regulation, or the filing of any such petition against LICENSEE, which
petition shall not be dismissed within ninety (90) days, or, without the
consent or acquiescence of LICENSEE, the entering of an order appointing a
trustee, custodian, receiver, or liquidator of LICENSEE or of all or any
substantial part of the property of LICENSEE which order shall not be
dismissed within sixty (60) days.
10.2.2 Royalty Payment Default. LICENSEE defaults in the
payment of any amount owed to Callaway Golf for Royalties pursuant to Section
6 when same becomes due and payable.
10.2.3 Breach of Agreements. LICENSEE fails to perform in
accordance with any of the material terms and conditions contained (i) in this
Agreement (except to the extent that such failure to perform constitutes a
royalty payment default subject to Section 10.2.2 above); (ii) the Operating
Agreement for All-American Golf LLC dated June 13, 1997; (iii) the Right of
First Opportunity Agreement by and between LICENSEE and Callaway Golf dated
June 13, 1997; (iv) the Secured Promissory Note dated June 13, 1997 by and
between LICENSEE and Callaway Golf; or (v) the Continuing Security Agreement
dated June 13, 1997 by and between LICENSEE and Callaway Golf.
10.2.4 Dissolution of Licensee. LICENSEE ceases operations for
any reason for more than forty-five (45) consecutive days or sixty (60) days
in any twelve (12) month period.
10.2.5 Performance Criteria. LICENSEE fails to meet the
performance criteria set forth on Exhibit B attached hereto.
10.2.6 Sale of Callaway Golf's Membership Interest in LICENSEE.
Callaway Golf sells all of its membership interest in LICENSEE pursuant to
Section 7.1 of the Operating Agreement.
10.3 Callaway Golf's Right to Terminate Upon Event of Termination.
Callaway Golf may, at its option, without prejudice to any other remedies it
may have, terminate this Agreement upon occurrence of an Event of Termination
by giving written notice of such termination to LICENSEE as follows:
10.3.1 Immediately, upon the occurrence of any Event of
Termination pursuant to Section 10.2.1, 10.2.4, 10.2.5 or 10.2.6, or the
effective date of termination pursuant to Section 10.4;
10.3.2 After the expiration of two (2) business days following
the occurrence of an Event of Termination pursuant to Section 10.2.2 and
delivery of written notice of such payment default to LICENSEE, if such
payment default is then still uncured; or
10.3.3 After the expiration of fifteen (15) days from
LICENSEE's receipt of notice from Callaway Golf of the occurrence of any Event
of Termination pursuant to Section 10.2.3, if such Event of Termination is
then still uncured.
10.4 Callaway Golf's Rights To Terminate For Any Reason Or No
Reason. Callaway Golf shall have the right to terminate this Agreement at
any time for any or no reason upon giving ninety (90) days prior written
notice of such termination and with payment to LICENSEE in the amount of Five
Hundred Thousand Dollars ($500,000). Callaway Golf shall pay such amount on
the effective date of termination pursuant to this Section. Callaway Golf
shall have the right to offset against such termination payment any Royalty
Payment then due to Callaway Golf.
10.5 Availability of Injunctive Relief. LICENSEE agrees that the
remedy at law of Callaway Golf for any act or event that constitutes an Event
of Termination under this Agreement, other than the failure of LICENSEE to pay
any monies when due, will be inadequate and that Callaway Golf shall be
entitled to injunctive relief, specific performance or other such equitable
relief, and that LICENSEE shall not urge in any such proceeding that an
adequate remedy exists at law.
10.6 Post-Termination Obligations of LICENSEE. Upon the
termination of this Agreement for any reason, all rights of LICENSEE to use
the Licensed Mark shall immediately thereafter cease. LICENSEE shall not
thereafter operate or conduct business under any name or in any manner that
might tend to give the general public the impression that this Agreement is
still in force, or that LICENSEE has any right to use the Licensed Mark.
11. Miscellaneous.
11.1 Entire Agreement; Modifications. This Agreement, together
with exhibits and schedules attached hereto, contains the entire agreement
between the parties hereto with respect to the transactions contemplated
hereby, and contains all of the terms and conditions thereof and supersedes
all prior agreements and understandings relating to the subject matter hereof.
No changes or modifications of or additions to this Agreement shall be valid
unless the same shall be in writing and signed by each party hereto.
11.2 Severability. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any one or more of
the provisions hereof shall not affect the validity and enforceability of the
other provisions hereof.
11.3 Assignment. No party to this Agreement may, voluntarily or by
operation of law, assign or otherwise transfer any of his, her or its rights
or obligations under this Agreement, without obtaining the prior written
consent of all other parties hereto. Any attempted assignment in violation of
this Agreement shall be void and of no effect.
11.4 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties, their successors and assigns.
11.5 Waivers. No waiver of any of the provisions of this Agreement
shall be deemed to be or shall constitute a waiver of any other provision of
this Agreement, whether or not similar, nor shall any waiver constitute a
continuing waiver. No waiver of any provision of this Agreement shall be
binding on the parties hereto unless it is executed in writing by the party
making the waiver.
11.6 Notices. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed to
have been duly given on the date of delivery if delivered personally to the
party to whom notice is to be given, or on the third (3rd) day after mailing
if mailed to the party to whom notice is given, by first class mail,
registered or certified, postage prepaid, and properly addressed as follows:
If to Callaway Golf:
Callaway Golf Company
2285 Rutherford Road
Carlsbad, California 92008-8815
Attn: Donald H. Dye, President and Chief
Executive Officer
With a copy to:
G. Edward Arledge, Esq.
Luce, Forward, Hamilton & Scripps LLP
600 West Broadway, Suite 2600
San Diego, California 92101
If to LICENSEE:
Saint Andrews Golf Corporation
Manager of LICENSEE
5325 South Valley View Boulevard
Suite 10
Las Vegas, Nevada 89118
Attn: Ron Boreta, President of Manager
With a copy to:
Joseph P. Mulhern, Esq.
Gozdecki & Del Giudice
221 North La Salle Street, Suite 2200
Chicago, Illinois 60601
Either party may change the address to which notices to such party are to
be addressed by giving the other party hereto written notice of such change in
the manner herein set forth.
11.7 Attorneys' Fees. If either party hereto commences an action
against the other party to enforce any of the terms hereof or because of the
breach by such other party of any of the terms hereof, the prevailing party
shall be entitled, in addition to any other relief granted, to all actual
out-of-pocket costs and expenses incurred by such prevailing party in
connection with such action, including, without limitation, all reasonable
attorneys' fees, and a right to such costs and expenses shall be deemed to
have accrued upon the commencement of such action and shall be enforceable
whether or not such action is prosecuted to judgment.
11.8 No Third-Party Benefits. None of the provisions of this
Agreement shall be for the benefit of, or enforceable by, any third-party
beneficiary.
11.9 Headings. The Section and Subsection headings used herein are
for convenience or reference only, are not a part of this Agreement and are
not to affect the construction of, or be taken into consideration in
interpreting, any provision of this Agreement.
11.10 Counterparts. This Agreement may be executed in several
counterparts all of which together shall constitute one and the same
instrument with the same force and effect as though each of the parties had
executed the same document.
11.11 Governing Law. This Agreement is made and shall be governed
by, and construed and enforced in accordance with, the internal laws of the
State of California, without regard to the conflict of laws principles
thereof, as the same apply to agreements executed solely by residents of
California and wholly to be performed within California.
11.12 Construction. In the interpretation and construction of this
Agreement, the parties acknowledge that the terms hereof reflect extensive
negotiations between the parties and that this Agreement shall not be deemed,
for the purpose of construction and interpretation, that either party drafted
this Agreement.
11.13 No Public Announcement. Except as otherwise required by law,
neither party to this Agreement shall make or cause to be made any public
announcement or press release with respect to the terms of this Agreement or
the transactions contemplated hereby without the prior written approval of the
other party hereto, which consent shall not be unreasonably withheld or
delayed.
11.14 Venue; Submission to Jurisdiction. Each of the parties
submits to the exclusive jurisdiction of any state or federal court sitting in
San Diego County, California, in any action or proceeding arising out of or
relating to this Agreement. Each Member further agrees that personal
jurisdiction over such Member may be effected by service of process, and that
when so made shall be as if served upon such Member personally within the
State of California. Each of the parties waives any defense of inconvenient
forum to the maintenance of any action or proceeding so brought and waives any
bond, surety, or other security that might be required of any other party with
respect thereto.
11.15 Authority. Each of the persons executing this Agreement
represents and warrants that it is authorized to execute this Agreement and
the entity on whose behalf they are signing is bound by the terms hereof.
11.16 Expenses. Except as otherwise provided for herein, each
party hereto shall be responsible for its own expenses accrued in connection
with the negotiation, execution and consummation of the transactions
contemplated by this Agreement, including fees of his or its respective
attorneys, accountants or consultants.
11.17 Good Faith. All parties hereto agree to carry out the terms
of this Agreement and to act in good faith with respect to the terms and
conditions contained herein before and after the execution hereof.
11.18 Time is of the Essence. Time is of the essence in this
Agreement, and all of the terms, covenants and conditions hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
CALLAWAY GOLF COMPANY, LICENSEE:
a California corporation
ALL-AMERICAN GOLF LLC, a
By: California limited liability company
Donald M. Dye, President and
Chief Executive Officer By: Saint Andrews Golf Corporation,
a Nevada corporation
By:
Ron Boreta, President
<PAGE>
EXHIBIT A
REGISTRATION
TRADEMARK NUMBER CLASSES
Ginty 1239514 28
Bouncer 1302835 28
The Purist 1310230 28
Callaway Hickory Stick 1313608 28
Little Poison 1326177 28
Stan Thompson & Design 1374905 28
Stan Thompson & Design 1376015 25, 28
T and Design 1377379 25, 28
Billet Series 1431312 28
Ginty II & Design 1431331 28
S2H2 & Design 1506114 28
S2H2 & Design 1524605 25
The Swing Tube 1627344 28
T and Design 1643727 28
Ladies Gems & Design 1649160 28
Big Bertha 1649164 28
Tru-bore 1656904 28
Callaway & Design 1662574 28
Ginty Steamer 1669906 28
You Can't Argue with Physics 1681308 28
White Gold & Design 1684160 28
Newton Figure Pointing & Device 1691746 28
S2H2 1713921 28
Big Bertha & Design 1720466 28
You Can't Hit It With Your Eyes Closed 1743983 28
Hole in the Head 1746483 28
Callaway & Design 1762932 25
World's Friendliest Fairway Woods 1766823 28
Callaway & Design 1768763 28
RCH 60 1779049 28
World's Friendliest Driver 1783510 28
Big Bertha 1800144 25
Paul Runyan 1807716 28
RCH 90 1816436 28
RCH 90 & Design 1819065 28
Newton Figure Swinging Club & Device 1821440 25
Torus & Device 1821477 28
Heavenwood 1826476 28
Ladies' Gems & Design 1831447 28
The Most Solid Feel in Golf 1833403 28
Newton Figure Swinging Club & Device 1833419 28
World's Friendliest Metal Woods 1851149 28
War Bird 1867722 28
The Tuttle 1877710 28
Divine Nine 1879270 28
Newton Figure Sitting & Device 1887983 28
Big Bertha Callaway Irons USA
Medallion & Design 1912653 28
Chevron & Device 1918107 28
Big Bertha Bottom Design 1918108 28
S2H2 Wood Bottom Design 1922181 28
Big In All The Right Places, For
All The Right Reasons 1932270 28
Kick Butt 1932282 28
S2H2 & Design 1933211 28
Brass Billet 1943259 28
War Bird Bottom Design 1947849 28
Callaway & Design 1959504 25
Great Big Bertha 1982951 28
World's Friendliest Iron 1987183 28
Medallion Outline 1991571 28
G.B.B.UL & Design 1996083 28
Titanic 2007032 28
G.B.B. & Design 2012458 28
World's Friendliest 2022405 28
Ely Would 2039478 28
Medallion Internal Geometries 2045306 28
RCH Series 96 2056210 28
How Golf Should Feel 2056345 28
Medallion Outline 2059675 25
Deuce 2065148 28
Ginty 899593 28
BBB Men's Head Cover 28
BBB Scoreline Design 28
BBB Women's Head Cover 28
Biggest Big Bertha 25
BJ-1 28
Callaway 37
Callaway 16
Callaway 9, 42
Callaway 36
Callaway 8
Callaway 3, 9
Callaway & Design 37
Callaway & Design 9, 42
Callaway & Design 16
Callaway & Design 36
Callaway & Design 3, 9
Callaway & Design 21
Callaway & Design 8
Callaway & Design 6
Callaway Golf 28
Callaway Golf 9, 42
Callaway Golf 16
Callaway Golf 25
Callaway Golf & Design 28
Callaway Golf & Design 9, 42
Callaway Golf & Design 16
Callaway Golf & Design 25
Callaway Golf Center 41
Callaway Golf Experience 42
Callaway Golf Performance Center 42
Callaway Kids 16
Chevron & Device 28
Deuce 25
Divine Nine 25
Ely Would 25
GBB Iron Medallion (broad) & Design 28
GBB Iron Medallion (medium) & Design 28
GBB Iron Medallion (narrow) & Design 28
GBB Scoreline Design 28
Gems Lite 28
Gems UL 28
Gems Ultra Lite 28
Great Big Bertha 25
Heavenwood 25
Memphis "10" Special 28
S2H2 & Design 25
Sir Issac Performance System 9
Tartan & Design 25
Tungsten Titanium & Design 28
War Bird 25
Callaway 18
Callaway & Design 9
Callaway & Design 18
Callaway Golf 18
Callaway Golf 9
Callaway Golf & Design 18
Callaway Golf & Design 9
Memphis "10" 28
<PAGE>
EXHIBIT B
PERFORMANCE CRITERIA
FISCAL YEAR PERFORMANCE CRITERIA
1997 The Company shall not realize a net loss in excess of
$500,000 from the date of the opening of the Center
to the general public through December 31, 1997.
1998 The Company shall not realize a net loss in excess of
$400,000 for the year nor a cumulative, undiscounted
net loss in excess of $1,000,000 as of the end of the
year.
1999 The Company shall not realize a net loss in excess of
$300,000 for the year nor a cumulative, undiscounted
net loss in excess of $1,000,000 as of the end of the
year.
2000 The Company shall not realize a net loss in excess of
$200,000 for the year nor a cumulative, undiscounted
net loss in excess of $1,000,000 as of the end of the
year.
2001 The Company shall attain inception-to-date, undis-
counted net profit of at least $1.
2002+ During each fiscal year that the Callaway Golf Loan
remains outstanding, the Allocation of Net Income
and Net Loss to Callaway Golf as calculated pursuant
to Article VI of this Agreement will represent at
least a 5% annual return on the equity investment
of Callaway Golf.
During each fiscal year following the year in which
the Callaway Golf Loan is repaid, the Allocation
of Net Income and Net Loss to Callaway Golf as cal-
culated pursuant to Article VI of this Agreement will
represent at least a 10% annual return on the equity
investment* of Callaway Golf.
Performance Criteria shall be subject to applicable governmental laws,
orders, ordinances, rules, regulations and restrictions, acts of God, fires,
strikes and other labor difficulties, accidents, war and any risks in any way
pertaining thereto and all other events and circumstances beyond the control
of Company. Failure to achieve Performance Criteria shall not be deemed to
have occurred if such failure is caused by any of the events set forth in the
preceding sentence.
- --------------
* As to any fiscal year, the equity investment of Callaway Golf is defined as:
- - the initial capital contribution of $750,000
plus
- - any additional capital contribution made by (or conversion of debt to
equity effected by) Callaway Golf pursuant to this Agreement. Contributions
made during the subject year will be appropriately weighted to reflect the
portion of the year benefitted by the contribution
plus
- - cumulative prior year net income allocations pursuant to Article VI of
this Agreement, except that if cumulative prior year allocations represent a
net loss, such cumulative prior year allocations will be disregarded
minus
- - any distributions made to Callaway Golf pursuant to Article VI of this
Agreement.
Distributions made during the subject year will be appropriately weighted to
reflect the portion of the year affected by the distribution.
<PAGE>
STATE OF CALIFORNIA
BILL JONES, SECRETARY OF STATE
SACRAMENTO
I, Bill Jones, Secretary of State of California, hereby certify:
That the annexed transcript of 1 page(s) was prepared by and in this
office from the record on file, of which it purports to be a copy, and that it
is full, true and correct.
THE GREAT SEAL
OF THE STATE OF
CALIFORNIA IN WITNESS WHEREOF, I execute this
certificate and affix the Great
Seal of the State of California
May 29, 1997
/s/ Bill Jones
Secretary of State
<PAGE>
STATE OF CALIFORNIA
BILL JONES, SECRETARY OF STATE
SACRAMENTO
LIMITED LIABILITY COMPANY
ARTICLES OF ORGANIZATION
1. Limited liability company name: All-American Golf LLC
2. Latest date (month/day/year) on which the limited liability company is to
dissolve: December 31, 2097
3. The purpose of the limited liability company is to engage in any lawful
act or activity for which a limited liability company may be organized under
the Beverly-Killea Limited Company Act.
4. Enter the name of initial agent for service of process and check the
appropriate provision below:
Davie Rane, which is
[X] an individual residing in California. Proceed to Item 5.
[ ] a corporation which has filed a certificate pursuant to Section 1505
of the California Corporations Code. Skip Item 5 and proceed to Item 6.
5. If the initial registered agent for service of process is an individual,
enter a business or residential street address in California:
Street address: 2285 Rutherford Road
City: Carlsbad State: California Zip Code: 92008-8815
6. The limited liability company will be managed by: (Check one)
[X] one manager [ ] more than one manager [ ] limited liability
company members
7. If other matters are to be included in the Articles of Organization attach
one or more separate pages.
Number of pages attached, if any: 0
8. It is hereby declared that I am the For Secretary of State Use
person who executed this instrument,
which execution is may act and deed.
101997148021
/s/ G. Edward Arledge, Esq.
Signature of organizer FILED in the office of the
Secretary of State of the
G. Edward Arledge, Esq. State of California
Type or print name of organizer
May 28, 1997
Date: May 27, 1997
/s/ Bill Jones
BILL JONES, Secretary of
State
OPERATING AGREEMENT
FOR
ALL-AMERICAN GOLF LLC,
A LIMITED LIABILITY COMPANY
THE SECURITIES REPRESENTED BY THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 NOR REGISTERED NOR QUALIFIED UNDER ANY STATE
SECURITIES LAWS. SUCH SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, DELIVERED
AFTER SALE, TRANSFERRED, PLEDGED, OR HYPOTHECATED UNLESS QUALIFIED AND
REGISTERED UNDER APPLICABLE STATE AND FEDERAL SECURITIES LAWS OR UNLESS, IN
THE OPINION OF COUNSEL SATISFACTORY TO THE COMPANY, SUCH QUALIFICATION AND
REGISTRATION IS NOT REQUIRED. ANY TRANSFER OF THE SECURITIES REPRESENTED BY
THIS AGREEMENT IS FURTHER SUBJECT TO OTHER RESTRICTIONS, TERMS, AND CONDITIONS
WHICH ARE SET FORTH HEREIN.
<PAGE>
TABLE OF CONENTS
Page
ARTICLE I-DEFINITIONS .............................................. 1
1.1 "Act" .......................................... 1
1.2 "Adjusted Capital Account Deficit" ............. 1
1.3 "Affiliate" .................................... 1
1.4 "Agreement" .................................... 2
1.5 "Appraised Unit Value" ......................... 2
1.6 "Articles" ..................................... 2
1.7 "Bankruptcy" ................................... 2
1.8 "Callaway Golf Loan"............................ 2
1.9 "Callaway Golf Decision" ....................... 2
1.10 "Capital Account"............................... 2
1.11 "Capital Contributions" ........................ 2
1.13 "Cash Shortfall" ............................... 3
1.14 "Center" ....................................... 3
1.16 "Code" ......................................... 3
1.17 "Company" ...................................... 3
1.18 "Company Minimum Gain" ......................... 3
1.19 "Construction Budget" .......................... 3
1.20 "Corporations Code" ............................ 3
1.21 "Default Contribution" ......................... 3
1.22 "Dissolution Event" ............................ 3
1.23 "Distribution" ................................. 3
1.24 "Economic Interest" ............................ 3
1.25 "Economic Interest Owner" ...................... 3
1.26 "Event of Insolvency" .......................... 4
1.27 "Fiscal Year"................................... 4
1.28 "Interest" ..................................... 4
1.29 "Involuntary Transfer Notice" .................. 4
1.30 "Involuntary Transferred Units" ................ 4
1.31 "Joint Decision" ............................... 4
1.32 "License Agreement" ............................ 4
1.33 "Licensing Fee" ................................ 4
1.34 "Liquidation" .................................. 4
1.35 "Management Fee" ............................... 4
1.36 "Manager" ...................................... 4
1.37 "Member" ....................................... 5
1.38 "Member Minimum Gain" .......................... 5
1.39 "Member Nonrecourse Debt" ...................... 5
1.40 "Member Nonrecourse Debt Minimum Gain" ......... 5
1.41 "Member Nonrecourse Deductions"................. 5
1.42 "Membership Interest"........................... 5
1.43 "Net Income" or "Net Loss"...................... 5
1.44 "Nonrecourse Debt".............................. 5
1.45 "Nonrecourse Deductions"........................ 5
1.46 "Nonrecourse Liability"......................... 6
1.47 "Nonvolitional Event"........................... 6
1.48 "Performance Center"............................ 6
1.49 "Person"........................................ 6
1.50 "Prime Rate".................................... 6
1.51 "Property"...................................... 6
1.52 "Remaining Members"............................. 6
1.53 "Regulations"................................... 6
-ii-<PAGE>
<PAGE>
1.54 "SportPark"..................................... 6
1.55 "Transfer"...................................... 6
1.56 "Units"......................................... 6
ARTICLE II-ORGANIZATIONAL MATTERS................................... 6
2.1 Formation....................................... 6
2.2 Name............................................ 7
2.3 Term............................................ 7
2.4 Office and Agent................................ 7
2.5 Purposes of Company............................. 7
2.6 Appointment of Board Member..................... 7
2.7 Ownership of Saint Andrews and the SportPark.... 7
ARTICLE III-CAPITAL CONTRIBUTION.................................... 8
3.1 Initial Capital Contributions................... 8
a. Saint Andrews............................. 8
b. Callaway Golf............................. 8
3.2 Additional Capital Contributions................ 8
a. Additional Capital Contributions To
Pay Callaway Golf Loan................... 8
b. Additional Capital Contributions For
Construction Costs In
Excess of Construction Budget............ 8
c. Other Additional Capital Contributions.... 9
d. Adjustment to Capital Accounts............ 9
3.3 Capital Accounts................................ 9
a. Withdrawal; Successors.................... 9
b. Compliance with Regulations............... 9
3.4 No Interest..................................... 9
3.5 Failure to Make Contributions .................. 10
3.6 Callaway Golf Loan.............................. 11
ARTICLE IV-MEMBERS................................................. 11
4.1 Limited Liability............................... 11
4.2 Members Are Not Agents.......................... 12
4.3 Admission of Additional Members................. 12
4.4 Transactions With The Company................... 12
4.5 License Agreement............................... 12
4.6 Remuneration To Members......................... 12
4.7 Voting Rights................................... 12
a. Unanimous Approval........................ 12
b. Approval by Members....................... 13
c. Other Voting Rights....................... 13
4.8 Meetings of Members............................. 13
ARTICLE V-MANAGEMENT AND CONTROL OF THE COMPANY..................... 13
5.1 Management of the Company by the Manager........ 13
a. Exclusive Management by the Manager....... 13
b. Involvement of Ron Boreta................. 14
5.2 Powers and Obligations of the Manager........... 14
a. Powers of the Manager..................... 14
b. Obligations of the Manager................ 14
c. Limitations on Power of the Manager....... 15
d. Callaway Golf Decisions................... 16
5.3 Operation of the Performance Center............. 17
5.4 Members Have No Managerial Authority............ 17
5.5 Devotion of Time................................ 17
5.6 Covenant Not to Compete With the Company........ 18
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<PAGE>
5.7 Resignation or Removal of the Manager........... 18
5.8 Transactions Between the Company and the
Manager........................................ 18
5.9 Payments to the Manager......................... 18
ARTICLE VI-ALLOCATIONS OF NET INCOME AND NET LOSS
AND DISTRIBUTIONS ............................................... 19
6.1 Allocations of Net Income and Net Loss.......... 19
a. Net Income Allocations.................... 19
b. Net Loss Allocations...................... 19
6.2 Special Allocations............................. 19
a. Minimum Gain Chargeback and Qualified
Income Offset............................ 19
(i) No Impermissible Deficits......... 19
(ii) Qualified Income Offset........... 20
(iii) Minimum Gain Chargeback........... 20
b. Income Characterization.................... 20
c. Change in Units............................ 20
d. Mandatory Allocations - Section 704(c)
and Member Nonrecourse Debt............... 21
e. Guarantee of Company Indebtedness......... 21
f. References to Regulations................. 22
6.3 Excess Nonrecourse Liability Safe Harbor........ 22
6.4 Cash from Operations............................ 22
6.5 Form of Distribution............................ 23
6.6 Liquidating Distributions....................... 23
6.7 Restriction on Distributions.................... 24
6.8 Return of Distributions......................... 24
ARTICLE VII-RESTRICTIONS ON TRANSFER................................ 24
7.1 Transfer Restrictions........................... 24
a. Restrictions On Members................... 24
b. Restrictions on Saint Andrews............. 24
c. Restrictions on Callaway Golf............. 25
7.2 Purchase and Sale Rights........................ 26
7.3 Involuntary Transfers........................... 27
7.4 Warranty........................................ 27
7.5 Invalid Transfer................................ 28
ARTICLE VIII-CONSEQUENCES OF A DISSOLUTION EVENT.................... 28
8.1 Dissolution Event............................... 28
ARTICLE IX-ACCOUNTING, RECORDS, REPORTING BY MEMBERS................ 28
9.1 Books and Records............................... 28
9.2 Delivery to Members and Inspection.............. 29
9.3 Annual and Monthly Statements................... 29
9.4 Filings......................................... 30
9.5 Bank Accounts................................... 30
9.6 Accounting Decisions and Reliance on Others..... 30
9.7 Tax Matters for the Company..................... 30
9.8 Tax Status and Returns.......................... 31
a. Status as Company for Tax Purposes........ 31
ARTICLE X-DISSOLUTION AND WINDING UP................................ 31
10.1 Dissolution..................................... 31
10.2 Winding Up...................................... 31
10.3 Distributions in Kind........................... 32
-iv-
<PAGE>
10.4 Order of Payment of Liabilities Upon
Dissolution.................................... 32
10.5 Compliance with Regulations..................... 32
10.6 Limitations on Payments Made in Dissolution..... 32
10.7 No Action for Dissolution....................... 32
ARTICLE XI-INDEMNIFICATION AND INSURANCE............................ 33
11.1 Indemnification of Agents....................... 33
11.2 Insurance....................................... 33
ARTICLE XII-INVESTMENT REPRESENTATIONS.............................. 34
12.1 Preexisting Relationship or Experience.......... 34
12.2 No Advertising.................................. 34
12.3 Investment Intent............................... 34
12.4 Accredited Investor............................. 34
12.5 Purpose of Entity............................... 34
12.6 Economic Risk................................... 34
12.7 No Registration of Membership Interest.......... 34
12.8 Membership Interest in Restricted Security...... 34
12.9 No Obligation to Register....................... 35
12.10 Legends......................................... 35
12.11 Investment Risk................................. 35
12.12 Restrictions on Transferability................. 35
12.13 No Representations By Company................... 35
12.14 Consultation with Attorney...................... 36
ARTICLE XIII-MISCELLANEOUS.......................................... 36
13.1 Complete Agreement.............................. 36
13.2 Binding Effect.................................. 36
13.3 Parties in Interest............................. 36
13.4 Pronouns; Statutory References.................. 36
13.5 Headings........................................ 36
13.6 References to this Agreement.................... 36
13.7 Jurisdiction.................................... 37
13.8 Governing Law................................... 37
13.9 Exhibits........................................ 37
13.10 Severability.................................... 37
13.11 Additional Documents and Acts................... 37
13.12 Notices......................................... 37
13.13 Amendments...................................... 37
13.14 Reliance on Authority of Person Signing
Agreement...................................... 37
13.15 No Interest in Company Property: Waiver
of Action for Partition........................ 37
13.16 Multiple Counterparts........................... 38
13.17 Attorney Fees................................... 38
13.18 Time is of the Essence.......................... 38
13.19 Remedies Cumulative............................. 38
-v-
<PAGE>
OPERATING AGREEMENT
FOR
ALL-AMERICAN GOLF LLC,
A LIMITED LIABILITY COMPANY
This Operating Agreement is made as of June 13, 1997, by and among the
parties listed on the signature pages hereof, with reference to the following
facts:
A. The parties have formed All-American Golf LLC (the "Company"), a
limited liability company under the laws of the State of California.
B. The parties desire to adopt and approve an operating agreement for
the Company.
NOW, THEREFORE, the parties (hereinafter sometimes collectively referred
to as the "Members," or individually as the "Member") by this Agreement set
forth the limited liability company agreement for the Company under the laws
of the State of California upon the terms and subject to the conditions of
this Agreement.
ARTICLE I
DEFINITIONS
When used in this Agreement, the following terms shall have the meanings
set forth below (all terms used in this Agreement that are not defined in this
Article I shall have the meanings set forth elsewhere in this Agreement):
1.1 "Act" shall mean the Beverly-Killea Limited Liability Company, Act,
codified in the California Corporations Code, Section 17100 et seq., as the
same may be amended from time to time.
1.2 "Adjusted Capital Account Deficit" shall mean, with respect to any
Member, the deficit balance, if any, in such Member's Capital Account as of
the end of the relevant fiscal year, after giving effect to the following
adjustments:
a. Credit to such Capital Account any amounts which the Member is
obligated to restore and the Member's share of Member Minimum Gain and Company
Minimum Gain and;
b. Debit to such Capital Account the items described in Treasury
Regulations Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and
1.704-1(b)(2)(ii)(d)(6).
1.3 "Affiliate" shall mean any individual, partnership, corporation,
trust or other entity or association, directly or indirectly, through one or
more intermediaries, controlling, controlled by, or under common control with
the Member. The term "control," as used in the immediately preceding
sentence, means, with respect to a corporation or limited liability company
the right to exercise, directly or indirectly, more than fifty percent (50%)
of the voting rights attributable to the controlled corporation or limited
liability company, and, with respect to any individual, partnership, trust,
other entity or association, the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of the
controlled entity.
1.4 "Agreement" shall mean this Operating Agreement, as originally
executed and as amended from time to time.
1.5 "Appraised Unit Value" shall have the meaning ascribed to it in
Section 7.2.
1.6 "Articles" shall mean the Articles of Organization of the Company
originally filed with the California Secretary of State and as amended from
time to time.
1.7 "Bankruptcy" shall mean: (a) the filing of an application by a
Member for, or his or her consent to, the appointment of a trustee, receiver,
or custodian of his or her assets; (b) the entry of an order for relief with
respect to a Member in proceedings under the United States Bankruptcy Code, as
amended or superseded from time to time; (c) the making by a Member of a
general assignment for the benefit of creditors; (d) the entry of an order,
judgment, or decree by any court of competent jurisdiction appointing a
trustee, receiver, or custodian of the assets of a Member unless the
proceedings and the person appointed are dismissed within ninety (90) days; or
(e) the failure by a Member generally to pay his or her debts as the debts
become due within the meaning of Section 303(h)(1) of the United States
Bankruptcy Code, as determined by the Bankruptcy Court, or the admission in
writing of his or her inability to pay his or her debts as they become due.
1.8 "Callaway Golf Loan" shall have the meaning ascribed to it in
Section 3.6.
1.9 "Callaway Golf Decision" shall have the meaning ascribed to it in
Section 5.2.
1.10 "Capital Account" shall mean with respect to any Member the
capital account which the Company establishes and maintains for such Member
pursuant to Section 3.3.
1.11 "Capital Contributions" shall mean the total value of cash and
fair market value of property (excluding the Callaway Golf Loan) contributed
and/or services rendered or to be rendered to the Company by Members.
1.12 "Cash from Operations" shall mean the net cash realized by the
Company from all sources, including, but not limited to, the operations of the
Company after payment of all cash expenditures of the Company, including, but
not limited to, operating expenses, including all fees payable to the Manager,
all payments of principal and interest on the Callaway Golf Loan or other
indebtedness, expenses for repairs and maintenance, capital improvements and
replacements, and such reserves and retentions as the Members reasonably
determine to be necessary and desirable in connection with the Company's
operations in connection with its existing assets and any anticipated
acquisitions.
1.13 "Cash Shortfall" shall have the meaning ascribed to it in Section
6.4.
1.14 "Center" shall have the meaning ascribed to it in Section 2.5.
1.15 "Change of Control" shall have the meaning ascribed to it in
Section 7.1.
1.16 "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, the provisions of succeeding law, and to the extent
applicable, the Regulations.
1.17 "Company" shall mean All-American Golf LLC.
1.18 "Company Minimum Gain" shall have the meaning ascribed to the term
"Partnership Minimum Gain" in the Regulations Section 1.704-2(d)(1).
1.19 "Construction Budget" shall have the meaning ascribed to it in
Section 3.2
1.20 "Corporations Code" shall mean the California Corporations Code,
as amended from time to time, and the provisions of succeeding law.
1.21 "Default Contribution" shall have the meaning ascribed to it in
Section 3.5.
1.22 "Dissolution Event" shall mean with respect to any Member one or
more of the following: the death, insanity, expulsion, Bankruptcy, dissolution
or occurrence of any other event which terminates the continued membership of
any Member unless the Members consent to continue the business of the Company
pursuant to Section 8.1.
1.23 "Distribution" shall refer to any money or other property
transferred without consideration to Members with respect to their interests
in the Company, but shall not include any payments to the Manager pursuant to
Article V or payment of the Licensing Fee to Callaway Golf pursuant to Section
4.5.
1.24 "Economic Interest" shall mean a Member's or Economic Interest
Owner's share of one or more of the Company's taxable income, taxable losses,
and distributions of the Company's assets pursuant to this Agreement and the
Act, but shall not include any other rights of a Member, including, without
limitation, the right to vote or participate in the management, or any right
to information concerning the business and affairs, of Company.
1.25 "Economic Interest Owner" shall mean the owner of an Economic
Interest who is not a Member.
1.26 "Event of Insolvency" shall occur when an order for relief against
a Manager is entered under Chapter 7 of the federal bankruptcy law, or (i) a
Manager: (a) makes a general assignment for the benefit of creditors, (b)
files a voluntary petition under the federal bankruptcy law, (c) files a
petition or answer seeking for that Manager a reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under
any statute, law or regulation, (d) files an answer or other pleading
admitting or failing to contest the material allegations of a petition filed
against a Manager in any proceeding of this nature, or (e) seeks, consents to,
or acquiesces in the appointment of a trustee, receiver, or liquidator of that
Manager or of all or a substantial part of that Manager's properties, or (ii)
the expiration of 60 days after either (a) the commencement of any proceeding
against a Manager seeking reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any statute,
law, or regulation, if the proceeding has not been dismissed, or (b) the
appointment without a Manager's consent or acquiescence of a trustee,
receiver, or liquidator of a Manager or of all or any substantial part of a
Manager's properties, if the appointment has not been vacated or stayed (or if
within 60 days after the expiration of any such stay, the appointment is not
vacated).
1.27 "Fiscal Year" shall mean the Company's fiscal year.
1.28 "Interest" shall mean either an Economic Interest or a Membership
Interest.
1.29 "Involuntary Transfer Notice" shall have the meaning ascribed to
it in Section 7.3.
1.30 "Involuntary Transferred Units" shall have the meaning ascribed to
it in Section 7.3.
1.31 "Joint Decision" shall have the meaning ascribed to it in Section
5.2.
1.32 "License Agreement" shall have the meaning ascribed to it in
Section 4.5.
1.33 "Licensing Fee" shall have the meaning ascribed to it in Section
4.5.
1.34 "Liquidation" means in respect to the Company the earlier of the
date upon which the Company is terminated under Section 708(b)(1) of the Code
or the date upon which the Company ceases to be a going concern (even though
it may exist for purposes of winding up its affairs, paying its debts and
distributing any remaining balance to its Members), and in respect to a Member
where the Company is not in Liquidation means the date upon which occurs the
termination of the Member's entire interest in the Company by means of a
Distribution or the making of the last of a series of Distributions (in one or
more years) to the Member by the Company.
1.35 "Management Fee" shall have the meaning ascribed to it in Section
5.9.
1.36 "Manager" shall mean one or more managers. Specifically,
"Manager" shall mean Saint Andrews or any Person appointed as a successor
that succeeds it in that capacity.
1.37 "Member" shall mean each Person who (a) is an initial signatory to
this Agreement, has been admitted to the Company as a Member in accordance
with the Articles or this Agreement or an assignee who has become a Member in
accordance with Article VII and (b) has not resigned, withdrawn, been expelled
or, if other than an individual, dissolved.
1.38 "Member Minimum Gain" shall have the meaning set forth in Treasury
Regulations Section 1.704-2(d)(1).
1.39 "Member Nonrecourse Debt" shall have the meaning ascribed to the
term "Partner Nonrecourse Debt" in Regulations Section 1.704-2(b)(4).
1.40 "Member Nonrecourse Debt Minimum Gain" means an amount with
respect to each Member Nonrecourse Debt, equal to the Company Minimum Gain
that would result if such Member Nonrecourse Debt were treated as a
Nonrecourse Liability, determined in accordance with Treasury Regulations
Section 1.704-2(i)(2).
1.41 "Member Nonrecourse Deductions" shall have the meaning set forth
in Treasury Regulations Section 1.704-2(i). The amount of Member Nonrecourse
Deductions with respect to a Member Nonrecourse Debt for a Company fiscal year
equals the excess, if any, (A) of the net increase, if any, in the amount of
the Company Minimum Gain attributable to such Member Nonrecourse Debt during
that fiscal year, over (B) the aggregate amount of any distributions during
such year to the Member that bears the economic risk of loss for such Member
Nonrecourse Debt to the extent such distributions are from proceeds of such
Member Nonrecourse Debt and are allocable to an increase in Member Nonrecourse
Debt Gain attributable to such Member Nonrecourse Debt, determined according
to the provisions of Treasury Regulations Section 1.704-2(i).
1.42 "Membership Interest" shall mean a Member's entire interest in the
Company including the Member's Economic Interest, the right to vote on or
participate in the management, and the right to receive information concerning
the business and affairs, of the Company.
1.43 "Net Income" or "Net Loss" shall mean the income, gain, loss,
deductions of the Company in the aggregate or separately stated, as determined
in accordance with the method of accounting at the close of each Fiscal Year
on the company's informational tax return filed for federal income tax
purposes.
1.44 "Nonrecourse Debt" shall have the meaning set forth in Treasury
Regulations Section 1.704-2(b)(3).
1.45 "Nonrecourse Deductions" shall have the meaning, and the amount
thereof shall be, as set forth in Treasury Regulations Section 1.704-2(c).
The amount of Nonrecourse Deductions for a Company Fiscal Year equals the
excess, if any, of the net increase, if any, in the amount of Company Minimum
Gain during that Fiscal Year, over the aggregate amount of any distributions
during that Fiscal Year of proceeds of a Nonrecourse Liability that are
allocable to an increase in Company Minimum Gain, determined according to the
provisions of Treasury Regulations Section 1.704-2(c).
1.46 "Nonrecourse Liability" shall have the meaning set forth in
Regulations Section 1.704-2(b)(3).
1.47 "Nonvolitional Event" shall have the same meaning ascribed to it
in Section 7.3.
1.48 "Performance Center" shall have the meaning ascribed to it in
Section 5.3.
1.49 "Person" shall mean an individual, general partnership, limited
partnership, limited liability company, corporation, trust, estate, real
estate investment trust, association or any other entity.
1.50 "Prime Rate" shall mean the Bank of America prime rate, as
adjusted from time to time.
1.51 "Property" shall mean all real and personal property acquired by
the Company whether tangible or intangible.
1.52 "Remaining Members" shall have the meaning ascribed to it in
Section 8.1.
1.53 "Regulations" shall, unless the context clearly indicates
otherwise, mean the regulations currently in force as final or temporary that
have been issued by the U.S. Department of Treasury pursuant to its authority
under the Code.
1.54 "SportPark" shall have the meaning ascribed to it in Section 2.5
1.55 "Transfer" shall have the meaning ascribed to it in Section 7.1.
1.56 "Units" shall mean an interest in the Company as set forth in
Section 3.1 hereto, as may be adjusted from time to time pursuant to the terms
of this Agreement.
ARTICLE II
ORGANIZATIONAL MATTERS
2.1 Formation. Pursuant to the Act, the Members have formed a
California limited liability company under the laws of the State of California
by filing the Articles with the California Secretary of State on May 28, 1997.
The rights and liabilities of the Members shall be determined pursuant to the
Act and this Agreement. To the extent that the rights or obligations of any
Member are different by reason of any provision of this Agreement than they
would be in the absence of such provision, this Agreement shall, to the extent
permitted by the Act, control.
2.2 Name. The name of the Company shall be "All-American Golf LLC."
The business of the Company may be conducted under that name or, upon
compliance with applicable laws, any other name that the Members deem
appropriate or advisable. The Manager shall file any fictitious name
certificates and similar filings, and any amendments thereto, that the Manager
considers appropriate or advisable.
2.3 Term. The term of this Agreement shall be co-terminus with the
period of duration of the Company provided in the Articles, unless extended or
sooner terminated as hereinafter provided.
2.4 Office and Agent. The Company shall continuously maintain an
office and registered agent in the State of California as required by the Act.
The principal office of the Company shall be as the Manager may determine.
The Company also may have such offices, anywhere within and without the State
of California, as the Manager from time to time may determine, or the business
of the Company may require. The registered agent shall be as stated in the
Articles or as otherwise determined by the Manager.
2.5 Purposes of Company. Without the consent of all of the Members,
the Company shall not engage in any business other than the following:
a. Operation of a golf facility on approximately 42 acres of land
(the "Center") inside the All-American SportPark located on approximately 65
acres of property adjacent to Las Vegas Boulevard in Las Vegas, Nevada (the
"SportPark").
b. Such other activities directly related to the foregoing purposes
as may be necessary, advisable, or appropriate to further the foregoing
purposes.
2.6 Appointment of Board Member. Upon the request of Callaway Golf, at
any time during the term of this Agreement, Saint Andrews shall cause one
individual designated by Callaway Golf to be appointed to the Board of
Directors of Saint Andrews. Saint Andrews' obligation set forth in the
preceding sentence shall not be a one-time obligation but shall be a
continuing obligation for the term of this Agreement.
2.7 Ownership of Saint Andrews and the SportPark. Saint Andrews
represents and warrants to Callaway Golf that:
a. The ownership of Saint Andrews is as reflected on Exhibit 2.7;
b. Saint Andrews owns One Hundred percent (100%) of the outstanding
shares of All-American SportPark, Inc. ("All-American"); and
c. Saint Andrews shall be solely responsible for the day-to-day
operational management of the SportPark and will not share such responsibility
with any other entity.
ARTICLE III
CAPITAL CONTRIBUTION
3.1 Initial Capital Contributions.
a. Saint Andrews. Saint Andrews Golf Corporation, a Nevada
corporation ("Saint Andrews"), shall contribute to the Company the value of
the expenses incurred by Saint Andrews relating to the design, construction
and permitting of the Center (the "Center Costs") and cash in the combined
amount of Three Million Dollars ($3,000,000) for 80 Units of the Company.
Saint Andrews shall receive a Three Million Dollar ($3,000,000) credit to its
Capital Account. As of May 30, 1997, Saint Andrews has incurred and paid
approximately One Million Four Hundred Thousand Dollars ($1,400,000) of Center
Costs. Callaway Golf shall have the right to audit the Center Costs and in
its good faith reasonable judgement require a downward adjustment of the
Center Costs. In the event of a downward adjustment Saint Andrews shall make
a sufficient capital contribution to cause its Capital Account to equal Three
Million Dollars ($3,000,000) after the adjustment. If Saint Andrews pays
Center Costs and contributes cash which exceeds Three Million Dollars
($3,000,000), the Company shall reimburse Saint Andrews for those expenses in
excess of Three Million Dollars ($3,000,000). Saint Andrews represents and
warrants that all Center Costs are legitimate and necessary costs which were
incurred and paid by Saint Andrews for the purpose of obtaining materials and
services relating to the construction of the Center.
b. Callaway Golf. Upon the formation of the Company, Callaway Golf
Company, a California corporation ("Callaway Golf") shall contribute to the
Company cash in the amount of Seven Hundred Fifty Thousand Dollars ($750,000)
in exchange for 20 Units of the Company. Callaway Golf shall receive a
$750,000 credit to its Capital Account.
3.2 Additional Capital Contributions.
a. Additional Capital Contributions To Pay Callaway Golf Loan.
Within one (1) year of the effective date of the Callaway Golf Loan (as
defined below), Saint Andrews may make an additional Capital Contribution,
provided the entire amount of the Capital Contribution shall be used for the
sole purpose of paying down the Callaway Golf Loan. If Saint Andrews makes
the Capital Contribution pursuant to this Section 3.2(a), Callaway Golf shall
make an additional Capital Contribution to the Company equal to twenty-five
percent (25%) of the additional Saint Andrews Capital Contribution made
pursuant to this Section 3.2(a), but in no event shall this additional Capital
Contribution by Callaway Golf exceed Eight Hundred Fifty Thousand Dollars
($850,000). This additional Capital Contribution by Callaway Golf shall also
be used solely for the purpose of paying down the Callaway Loan.
b. Additional Capital Contributions For Construction Costs In
Excess of Construction Budget. Saint Andrews may make an additional Capital
Contribution of up to One Million Dollars ($1,000,000) to the Company if the
cost of the construction of the Center exceeds Nine Million Dollars
($9,000,000) (the "Construction Budget"). If Saint Andrews makes the
additional Capital Contribution pursuant to this Section 3.2(b), Callaway Golf
shall also make as an additional Capital Contribution a reduction in
indebtedness due Callaway Golf under the Callaway Golf Loan in an amount equal
to twenty-five percent (25%) of the additional Saint Andrews Capital
Contribution made pursuant to this Section 3.2(b). The Units of Saint Andrews
and Callaway Golf shall be adjusted to reflect the Capital Contributions made
pursuant to this Section 3.2(b).
c. Other Additional Capital Contributions. Except as described
herein, no Member shall be required to make any additional Capital
Contributions. To the extent unanimously approved by the Members, from time
to time, the Members may be permitted to make additional Capital Contributions
if and to the extent they so desire, and if the Manager determines that such
additional Capital Contributions are necessary or appropriate for the conduct
of the Company's business, including without limitation, expansion or
diversification. In that event, the Members shall have the opportunity, but
not the obligation, to participate in such additional Capital Contributions on
a pro rata basis in accordance with their Units.
d. Adjustment to Capital Accounts. Immediately following such
Capital Contributions pursuant to this Section 3.2, the Units shall be
adjusted by the Manager to reflect the new relative proportions of the Capital
Accounts of the Members.
3.3 Capital Accounts. The Company shall establish an individual
Capital Account for each Member. The Company shall determine and maintain
each Capital Account in accordance with Regulations Section 1.704-1(b)(2)(iv).
If a Member transfers his or her Membership Interest in accordance with this
Agreement, such Member's Capital Account shall carry over to the new owner of
such Membership Interest pursuant to Regulations Section 1.704-1(b)(2)(iv)(1).
a. Withdrawal; Successors. A Member shall not be entitled to
withdraw any part of its Capital Account or to receive any distribution from
the Company, and no Member shall be entitled to make any capital contribution
to the Company other than the Capital Contributions provided for herein. Any
Member, including any additional or substitute Member, who shall receive an
Interest in the Company or whose Interest in the Company shall be increased by
means of a transfer to it of all or part of the Interest of another Member,
shall have a Capital Account with respect to such Interest initially equal to
the Capital Account with respect to such Interest of the Member from whom such
Interest is acquired except as otherwise required to account for any step up
in basis resulting from a Code Section 708 termination of the Company by
reason of said Interest transfer.
b. Compliance with Regulations. The provisions of this Section 3.3
are intended to satisfy the capital account maintenance requirements of
Treasury Regulations Section 1.704-1(b)(2)(iv) and such provisions shall be
modified to the extent required by such Section or any successor provision
thereto.
3.4 No Interest. No Member shall be entitled to receive any interest
on his or her Capital Contributions.
3.5 Failure to Make Contributions. If a Member does not timely
contribute capital when required, that Member shall be in default under this
Agreement. In such event, the Managers shall send the defaulting Member
written notice of such default, giving him or her fourteen (14) days from the
date such notice is given to contribute the entire amount of his or her
required Capital Contribution.
a. If the defaulting Member does not contribute his or her required
capital to the Company within said fourteen (14)-day period, the Managers or
those non-defaulting Members who hold a majority of the Interests held by all
non-defaulting Members may elect any one or more of the following remedies:
(i) The non-defaulting Members may advance funds to the Company
to cover those amounts which the defaulting Member fails to contribute.
Amounts which a non-defaulting Member so advances on behalf of the defaulting
Member shall become a loan due and owing from the defaulting Member to such
non-defaulting Member and bear interest at the rate of ten percent (10%) per
annum, payable monthly. All cash distributions otherwise distributable to the
defaulting Member under this Agreement shall instead be paid to the
non-defaulting Members making such advances until such advances and interest
thereon are paid in full. In any event, any such advances shall be evidenced
by a secured promissory note in the form of Exhibit A hereto and shall be due
and payable by the defaulting Member one (1) year from the date that such
advance was made. Effective upon a Member becoming a defaulting Member, each
Member grants to the non-defaulting Members who advance finds under this
Section 3.5(i)(a) security interest in its Interest to secure its obligation
to repay such advances and agrees to execute and deliver a promissory note as
described herein. Any amounts repaid shall first be applied to interest and
thereafter to principal.
(ii) The non-defaulting Members may contribute all or a portion
of the default amount ("Default Contributions"). The number of Units received
by the non-defaulting Member for the Default Contributions shall be equal to
the quotient of: (1) the product of (a) the amount contributed by the
non-defaulting Member pursuant to this Section 3.5(a)(ii); multiplied by (b)
120%; divided by (2) the Appraised Unit Value (determined in accordance with
Section 7.2) of a Unit prior to the contribution of the non-defaulting Member.
(iii) The non-defaulting Members who hold a majority of the
Membership Interests held by all non-defaulting Members may dissolve the
Company, in which event the Company shall be wound-up, liquidated and
terminated pursuant to Article X.
(iv) The Company or the non-defaulting Members or their
designees, may purchase the defaulting Member's entire Membership Interest in
accordance with the same terms and conditions as those set forth in Article
VII except that the purchase price shall be an amount equal to eighty percent
(80%) of the Appraised Unit Value (determined in accordance with Section 7.2),
prior to the contributions of the non-defaulting Member, times the number of
Units owned by the defaulting Member.
b. The defaulting Members shall have no right to receive any
distributions from the Company until the non-defaulting Members have first
received distributions in an amount equal to the additional capital
contributed by each non-defaulting Member to the Company with interest thereon
at the rate of ten percent (10%) per annum.
c. The defaulting Member shall lose his or her voting and approval
rights under the Act, the Articles and this Agreement.
d. The defaulting Member shall lose his or her ability (whether as
a Member or a Manager) to actively participate in the management and
operations of the Company until such time as the defaulting member cures the
default.
e. If the defaulting Member does not make a required contribution
of property or services, the Company may require the defaulting member to
contribute cash equal to that portion of the fair market value of the
contribution that has not been made. This right is in addition to, and not in
lieu of any other rights, including the right to specific performance, the
remedies listed above in this Section 3.5, or any other rights of the Company
or its Members under applicable law.
Each Member acknowledges and agrees that the remedies described in this
Section 3.5 bear a reasonable relationship to the damages which the Members
estimate may be suffered by the Company and the non defaulting Members by
reason of the failure of a defaulting Member to make an additional Capital
Contribution and the election of any or all of the above described remedies is
not unreasonable under the circumstances existing as of the date hereof.
3.6 Callaway Golf Loan. The Company shall enter into a loan agreement
with Callaway Golf for a loan to the Company in the amount of $5,250,000
("Callaway Golf Loan"). The Callaway Golf Loan shall be evidenced by the
Secured Promissory Note set forth in Exhibit B hereto, the Continuing Security
Agreement set forth in Exhibit C hereto, and the Membership Interest Security
Agreement set forth in Exhibit D hereto.
ARTICLE IV
MEMBERS
4.1 Limited Liability. Except as required under the Act or as
expressly set forth in this Agreement, no Member shall be personally liable
for any debt, obligation, or liability of the Company, whether that liability
or obligation arises in contract, tort, or otherwise.
4.2 Members Are Not Agents. Pursuant to Section 5.1 and the Articles,
the management of the Company is vested in the Manager. No Member, acting
solely in the capacity of a Member, is an agent of the Company nor can any
Member in such capacity bind nor execute any instrument on behalf of the
Company.
4.3 Admission of Additional Members. No Member shall be admitted
unless:
a. All of the Members consent to the admission;
b. The additional Member shall make a Capital Contribution in such
amount and on such terms as all of the Members determine to be appropriate
based upon the needs of the Company, the net value of the Company's assets,
the Company's financial condition, and the benefits anticipated to be realized
by the additional Member; and
c. No additional Member shall be admitted if the effect of such
admission would be to terminate the Company within the meaning of Code Section
708(b).
4.4 Transactions With The Company. Subject to any limitations set
forth in this Agreement and with the prior approval of all the Members after
full disclosure of the nature of the transaction, a Member may lend money to
and transact other business with the Company. Subject to other applicable
law, such Member has the same rights and obligations with respect thereto as a
Person who is not a Member.
4.5 License Agreement. The Company shall pay to Callaway Golf the
licensing fee (the "Licensing Fee") pursuant to the Service Mark License
Agreement set forth in Exhibit E hereto. The payment of the Licensing Fee
shall be a guaranteed payment under Code Section 707(c).
4.6 Remuneration To Members. Except as otherwise authorized in, or
pursuant to, this Agreement, no Member is entitled to remuneration for acting
in the Company business, except for (i) the payment of the Licensing Fee to
Callaway Golf pursuant to the License Agreement described in Section 4.5, (ii)
the revenues derived by Callaway Golf related to the operation of the
Performance Center described in Section 5.3, (iii) the payment of the
Management Fee to the Manager pursuant to Section 5.9, and (iv) entitlement of
Manager or Members winding up the affairs of the Company to reasonable
compensation pursuant to Section 10.2.
4.7 Voting Rights. Except as expressly provided in this Agreement or
the Articles, Members shall have no voting, approval or consent rights.
Members shall have the right to approve or disapprove matters as specifically
stated in this Agreement, including the following:
a. Unanimous Approval. The following matters shall require the
unanimous vote, approval or consent of all Members:
(i) A decision to continue the business of the Company after
dissolution of the Company.
(ii) Any amendment of the Articles or this Agreement.
(iii) A change of the name of the Company.
(iv) A Joint Decision (as defined below).
(v) The withdrawal of a Member.
b. Approval by Members. Except as set forth in this Agreement, in
all matters in which a vote, approval or consent of the Members is required,
the unanimous vote, consent or approval of all Members shall be required to
authorize or approve such act.
c. Other Voting Rights. Besides the rights granted in Section
4.7(a), Members may vote, consent or approve to the extent and on the terms
provided in this Agreement in the following Sections:
(i) Section 3.2 on additional Capital Contributions;
(ii) Section 4.3 on admission of new Members and the Capital
Contribution of any new Members;
(iii) Section 2.5 on a change in the purpose of the Company;
(iv) Section 10.1 on dissolving the Company.
4.8 Meetings of Members. The Manager shall conduct quarterly meetings
of Members, either in person or telephonically, no later than twenty-five (25)
days after the end of a quarter. The Manager shall give each Member at least
fifteen (15) days notice of the date and time of the meeting.
ARTICLE V
MANAGEMENT AND CONTROL OF THE COMPANY
5.1 Management of the Company by the Manager.
a. Exclusive Management by the Manager. Except as otherwise
expressly provided in this Agreement, the business, property and affairs of
the Company shall be managed exclusively by the Manager. Except for
situations in which the approval of the Members is expressly required by this
Agreement, the Manager shall have full, complete and exclusive authority,
power, and discretion to manage and control the business, property and affairs
of the Company, to make all decisions regarding those matters and to perform
any and all other acts or activities customary or incident to the management
of the Company's business, property and affairs.
b. Involvement of Ron Boreta. Ron Boreta shall be the principal
person responsible for leading the Manager's management team. Ron Boreta shall
devote eight (8) hours per week to the management and operation of the Center.
In the event of the death or disability of Ron Boreta, within forty-five (45)
days of such event, the Manager shall nominate a replacement to lead its
management team. Callaway Golf may, in its sole and absolute discretion, (i)
accept such nominee or (ii) require the Manager to nominate a different
individual, which individual must be acceptable to Callaway Golf in its sole
and absolute discretion. If Ron Boreta does not devote a minimum of eight (8)
hours per week to the management and operation of the Center, or, in the event
of the death or disability of Ron Boreta, the Manager does not nominate a
replacement which is acceptable to Callaway Golf, in its sole and absolute
discretion, then Callaway Golf may remove Saint Andrews as Manager pursuant to
Section 5.7.
5.2 Powers and Obligations of the Manager.
a. Powers of the Manager. Subject to Section 5.2(c) and Section
5.2(d), the Manager shall have the power to perform the following on behalf of
the Company:
(i) concept development and facilities design;
(ii) strategic business planning;
(iii) new business development;
(iv) develop and implement an advertising and marketing
program;
(v) special events and promotions;
(vi) sponsorship and trademark licensing;
(vii) press and media relations; and
(viii) legal administration.
b. Obligations of the Manager. The Manager shall have the
obligation to perform the following on behalf of the Company:
(i) administration of the lease and landlord relations;
(ii) sublease/tenant relations;
(iii) business licensing, fees and taxation matters;
(iv) government compliance;
(v) daily business operations;
(vi) human resources administration and staff development
program;
(vii) insurance program;
(viii) site utilities;
(ix) site service contracts;
(x) purchasing and inventory programs;
(xi) facilities repair and maintenance;
(xii) accounting and finance;
(xiii) site security; and
(xiv) site safety.
c. Limitations on Power of the Manager. The Manager shall not have
authority hereunder to cause the Company to engage in the following
transactions (a "Joint Decision") without first obtaining the affirmative vote
or written consent of all Members:
(i) making of any loan, including approval of loan documents,
including all construction loans and any loans which pledge any portion of the
Company's assets as security;
(ii) sale, lease or other conveyance or transfer, or mortgaging
or the placing of any security interest, deed of trust, option or other
encumbrance of any kind on any of the Company's assets;
(iii) the approval of the design, construction plans and
architectural drawings relating to the Center;
(iv) the approval of the construction budget and the annual and
monthly operating budget for the Center;
(v) the commencement, settlement, assignment, transfer,
compromise, release or other action (including selection of counsel for the
Company) with respect to any claim of the Company or any legal or
administrative proceedings relating to the Company or the Center;
(vi) selecting or varying accounting methods, filing federal or
state income tax returns and making other decisions with respect to treatment
of items for accounting, financial reporting or federal or state income tax
purposes;
(vii) an amendment of this Agreement;
(viii) dissolution of the Company;
(ix) any transaction with the Manager or a Member;
(x) determining whether distributions should be made to Members
and the plan for such distributions;
(xi) acquisition of any interest in real property;
(xii) the Company borrowing or lending any sum of money,
extending credit or becoming a surety or guarantor;
(xiii) the retention of any contractor, supplier or vendor by
the Company relating to the operation of the Center;
(xiv) material decisions regarding the upkeep and maintenance
of the Center, especially the driving range and golf course;
(xv) any expenditure or commitment of capital by the Company
which is outside the ordinary course of business of operating the Center, and
any expenditure or commitment of capital by the Company which is within the
ordinary course of business of operating the Center but exceeds Twenty-Five
Thousand Dollars ($25,000);
(xvi) approval of all tenants or sponsors which are major
tenants or sponsors within the SportPark, engaged in the golf or golf-related
business, or have a business that conflicts or competes with Callaway Golf's
business; and
(xvii) the purchase of insurance pursuant to Section 11.2.
d. Callaway Golf Decisions. Any action taken, sum expended or
obligation incurred by the Company with respect to any matter enumerated below
("Callaway Golf Decisions") shall be determined by Callaway Golf in its sole
and absolute discretion. Callaway Golf Decisions shall include, but not be
limited to, the following:
(i) operation of the Performance Center (as defined below);
(ii) designation of the operator of a golf clothing boutique
located within the Center;
(iii) designation of the golf ball supplier at the Center from
time to time;
(iv) designation of the operator of the teaching school aspect
of the Center;
(v) the supply of rental and demonstration golf clubs to the
Company for use in the Center;
(vi) the sponsorship of professional golfers visiting the
Center; and
(vii) the installation of poker machines or other gaming
devices in the Center.
5.3 Operation of the Performance Center. Callaway Golf, or a majority
owned subsidiary of Callaway Golf (the "Designee"), shall have the right to
occupy a 4,336 square foot (excluding locker rooms and bathrooms which
comprise 615 square feet) portion of the building within the Center for the
purpose of installing and operating a performance center to be known as "The
Callaway Golf Experience" (the "Performance Center"). Callaway Golf or the
Designee shall have sole responsibility for and control over the Performance
Center and may, in its sole and absolute discretion, charge customers for use
of the Performance Center. Callaway Golf or the Designee shall be under no
obligation whatsoever to charge for the use of the Performance Center.
Revenues, if any, from the Performance Center shall belong solely to Callaway
Golf or the Designee and shall not be considered revenues of the Company.
Callaway Golf or the Designee shall pay Fifty Thousand Dollars ($50,000) to
the Company per year for the right of Callaway Golf or the Designee to occupy
the portion of the Center used for the Performance Center. If the Company is
subject to percentage rent as a result of revenue generated by the Performance
Center, Callaway Golf or the Designee shall reimburse the Company for any such
percentage rent.
5.4 Members Have No Managerial Authority. The Members shall have no
power to participate in the management of the Company except as expressly
authorized by this Agreement or the Articles and except as expressly required
by the Act. Unless expressly and duly authorized in writing to do so by a
Manager or the Manager, no Member shall have any power or authority to bind or
act on behalf of the Company in any way, to pledge its credit, or to render it
liable for any purpose.
5.5 Devotion of Time. The Manager shall devote sufficient time,
effort, and skill as is necessary for the operation of the Company.
5.6 Covenant Not to Compete With the Company. While acting as Manager
of the Company, the Manager shall not act in a management capacity for any
entity which is engaged in any business within Clark County, Nevada, which
directly or indirectly competes with the business of the Company; provided,
however, nothing contained herein shall be deemed to restrict the Manager or
Ron Boreta from engaging in the ownership or operation of the following four
retail golf stores located in Las Vegas, Nevada: (i) Las Vegas Golf (Paradise
Road), (ii) Las Vegas Golf (Rainbow Blvd.), (iii) Las Vegas Golf (Green
Valley), and the Pro Shop at the Center.
5.7 Resignation or Removal of the Manager. Except in the event of a
Transfer (as defined below) of its Units, Saint Andrews shall not resign as
the Manager without the prior written consent of Callaway Golf. Callaway Golf
may, at its option, remove Saint Andrews as the Manager upon the occurrence of
(i) the insolvency of Saint Andrews, (ii) Saint Andrews' (a) commission of
fraud in the formation of the Company or in the performance of its duties, or
(b) commission of a willful breach of an obligation of the terms of this
Agreement, (iii) the Company's failure to meet the performance criteria set
forth in Schedule 5.7 attached hereto, (iv) Saint Andrews' failure to make its
Capital Contribution pursuant to Article III, or (v) the discontinuation of
the minimum level of involvement of Ron Boreta or the Manager's failure to
nominate an acceptable replacement in the event of his death or disability
pursuant to Section 5.1. If Callaway Golf removes Saint Andrews as the
Manager pursuant to this Section 5.7, then Callaway Golf, or its designee, may
purchase Saint Andrews' Membership Interest for cash in an amount equal to the
Appraised Unit Value (determined in accordance with Section 7.2) times the
number of Units owned by Saint Andrews. Such sale and purchase shall be
consummated at the principal offices of the Company on a mutually agreeable
date not less than thirty (30) nor more than forty-five (45) days following
the removal of Saint Andrews as the Manager.
5.8 Transactions Between the Company and the Manager. Notwithstanding
that it may constitute a conflict of interest, the Manager may, engage in any
transaction (including, without limitation, the purchase, sale, lease, or
exchange of any property or the rendering of any service, or the establishment
of any salary, other compensation, or other terms of employment) with the
Company so long as such transaction is approved by the Members pursuant to
Section 5.2(c)(ix).
5.9 Payments to the Manager. Except as specified in this Agreement, no
Manager or Affiliate of a Manager is entitled to remuneration for services
rendered or goods provided to the Company. The Manager shall receive monthly
compensation from the Company in the amount of five percent (5%) of the
Company's total revenues ("Management Fee"); provided, however, that such
compensation shall be paid solely to the extent the Company has sufficient
cash after payment of all operating expenses, including the Company's
obligations under the Callaway Golf Loan and under the License Agreement. The
first two and one half percent (2.5%) of the Management Fee shall be treated
as an operating cost of the Company provided the Callaway Golf Loan is current
in payment of principal and interest. This two and one half percent (2.5%) of
the Management Fee shall be paid monthly. The balance of the Management Fee,
if the Company has sufficient cash, shall be paid quarterly. Any portion of
such compensation that is not paid shall be accumulated and paid before any
distributions to Members. No interest shall be due on any portion of the
Management Fee.
ARTICLE VI
ALLOCATIONS OF NET INCOME AND NET LOSS AND DISTRIBUTIONS
6.1 Allocations of Net Income and Net Loss. Except with respect to
income derived from the Performance Center which income shall belong solely to
Callaway Golf pursuant to Section 5.3, allocations of Net Income and Net Loss
shall be as follows:
a. Net Income Allocations. After giving effect to the special
allocations set forth in Sections 6.2(a)(ii) and (iii), Net Income for any
Fiscal Year shall be allocated as follows:
(i) First, among the Members in proportion to and to the extent
of Net Loss allocated to the Members under Section 6.1(b)(ii) until the
aggregate Net Income allocated to the Members under this Section 6.1(a) for
such fiscal year and all previous fiscal years is equal to the aggregate Net
Loss allocated to the Members pursuant to Section 6.1(b)(ii) for all previous
fiscal years; and
(ii) The balance, if any, among the Members in proportion to
their Units.
b. Net Loss Allocations. After giving effect to the special
allocations set forth in Sections 6.2(a)(ii) and (iii), Net Loss for any
fiscal year shall be allocated as follows:
(i) First, among the Members in proportion to and to the extent
of Net Income allocated to the Members under Section 6.1(a)(ii) until the
aggregate Net Loss allocated pursuant to this Section 6.1(b)(i) for such
fiscal year and all previous fiscal years equals the aggregate Net Income
allocated to the Members pursuant to Section 6.1(a)(ii) for all previous
fiscal years; provided that taxable loss shall not be allocated to any Member
to the extent such allocation would cause any Member to have an Adjusted
Capital Account Deficit at the end of a fiscal year; and
(ii) Second, among the Members in proportion to their Units.
6.2 Special Allocations.
a. Minimum Gain Chargeback and Qualified Income Offset.
(i) No Impermissible Deficits. Notwithstanding any other
provision of this Agreement, Net Loss (or items of deduction) shall not be
allocated to a Member to the extent that the Member has or would have, as a
result of such allocations, an Adjusted Capital Account Deficit (taking into
account any adjustments, allocations or distributions described in Treasury
Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) or (6) in excess of the
Member's share of Company Minimum Gain and Member Nonrecourse Debt Minimum
Gain, plus any other amount the Member is deemed to be obligated to restore to
the Company under the Section 704(b) Treasury Regulations. Any Net Loss (or
items of deduction) which otherwise would be allocated to a Member, but which
cannot be allocated to such Member because of the application of the
immediately preceding sentence, shall instead be allocated to the other
Members.
(ii) Qualified Income Offset. In order to comply with the
"qualified income offset" requirement of the Treasury Regulations under Code
Section 704(b), and notwithstanding any other provision of this Agreement to
the contrary except subsection (e)(iii) below, in the event a Member for any
reason (whether or not expected) has an Adjusted Capital Account Deficit
(taking into account any adjustments, allocations or distributions described
in Treasury Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6)) in excess
of its share of the Company's Minimum Gain and Member Nonrecourse Debt Minimum
Gain, plus any other amount the Member is deemed to be obligated to restore to
the Company under the Section 704(b) Treasury Regulations, items of income
(consisting of a pro rata portion of each item of income comprising the
Company's profits, including both gross income and gain for the taxable year)
will be allocated to such Member in an amount and manner sufficient to
eliminate as quickly as possible the Adjusted Capital Account Deficit referred
to in Treasury Regulations Section 1.704-1(b)(2)(ii)(d) (taking into account
the next to last sentence of each of Treasury Regulations Sections
1.704-2(g)(1) and 1.704-2(i)(5)).
(iii) Minimum Gain Chargeback. In order to comply with the
"minimum gain chargeback" requirements of Treasury Regulations Sections
1.704-2(f)(1) and 1.704-2(i)(4), and notwithstanding any other provision of
this Agreement to the contrary, in the event there is a net decrease in a
Member's share of Company Minimum Gain and/or Member Nonrecourse Debt Minimum
Gain during a Company taxable year, such Member shall be allocated items of
income and gain for that year (and if necessary, other years) as required by
and in accordance with Treasury Regulations Sections 1.704-2(f)(1) and
1.704-2(i)(4) before any other allocation is made.
b. Income Characterization. For purposes of determining the
character (as ordinary income or capital gain) of any taxable income of the
Company allocated to the Members pursuant to this Section 6.2, such portion of
the taxable income of the Company allocated pursuant to this Section 6.2 which
is treated as ordinary income attributable to the recapture of depreciation
shall, to the extent possible, to be allocated among the Members in the
proportion which (i) the amount of depreciation previously allocated to each
Member bears to (ii) the total of such depreciation allocated to all Members.
This Section 6.2 shall not alter the amount of allocations among the Members
pursuant to this Section 6.2, but merely the character of income so allocated.
c. Change in Units. Notwithstanding the foregoing, in the event
any Member's Units change during a fiscal year for any reason, including
without limitation, the transfer of any Interest in the Company, such
allocations of Net Income or Net Loss shall be adjusted as necessary to
reflect the varying interests of the Members during such year.
d. Mandatory Allocations Section 704(c) and Member Nonrecourse
Debt. Notwithstanding the foregoing, (i) in the event Code Section 704(c) or
Code Section 704(c) principles applicable under Treasury Regulations Section
1.704-1(b)(2)(iv) require allocations of income or loss of the Company in a
manner different than that set forth above, the provisions of Section 704(c)
and the regulations thereunder shall control such allocations among the
Members; and (ii) all tax deductions and taxable losses of the Company that,
pursuant to Treasury Regulations Section 1.704-2(i), are attributable to a
Member Nonrecourse Debt for which a Member (or a Person related to such Member
under Treasury Regulations Section 1.752-4(b)) bears the economic risk of loss
(within the meaning of Treasury Regulations Section 1.752-2), shall be
allocated to such Member as required by Treasury Regulations Section
1.704-2(c).
Any item of income, gain, loss and deduction with respect to any property
(other than cash) that has been contributed by a Member to the capital of the
Company or pursuant to which has been revalued for Capital Account purposes
pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv) and which is
required or permitted to be allocated to such Member for income tax purposes
under Section 704(c) of the Code so as to take into account the variation
between the tax basis of such property and its fair market value at the time
of its contribution shall be allocated solely for income tax purposes in the
manner so required or permitted under Code Section 704(c) using the
"traditional method" described in Regulations Section 1.704-3(b) (or any
successor Regulation), provided, however, that curative allocations consisting
of the special allocation of gain or loss upon the sale or other disposition
of the contributed property shall be made in accordance with Regulations
Section 1.704-3(c) to the extent necessary to eliminate any disparity, to the
extent possible, between the Members' book and tax Capital Accounts
attributable to such property; further provided, however, that any other
method allowable under applicable Regulations may be used for any contribution
of property as to which there is agreement between the contributing Member and
Manager.
e. Guarantee of Company Indebtedness. Except for arrangements
expressly described in this Agreement, no Member shall enter into (or permit
any Person related to the Member to enter into) any arrangement with respect
to any liability of the Company that would result in such Member (or a person
related to such Member under Regulations Section 1.752-4(b)) bearing the
economic risk of loss (within the meaning of Regulations Section 1.752-2) with
respect to such liability unless such arrangement has been approved by all
Members. This Section 6.2(e) shall not prohibit any Member of the Company
from satisfying its obligation under state law to pay monies owed to any
creditor of the Company on account of the Company's obligations. To the
extent a Member is permitted to guarantee the repayment of any Company
indebtedness under this Agreement, each of the other Members shall be afforded
the opportunity to guarantee such Member's pro rata share of such
indebtedness, determined in accordance with the Members' respective Units.
f. References to Regulations. Any reference in this Section 6.2 to
a provision of proposed and/or temporary regulations shall, in the event such
provision is modified or renumber, be deemed to refer to the successor
provision as so modified or renumbered, but only to the extent such successor
provision applies to the Company under the effective date rules applicable to
such successor provision.
6.3 Excess Nonrecourse Liability Safe Harbor. Pursuant to Regulations
Section 1.752-3(a)(3), solely for purposes of determining each Member's
proportionate share of the "excess nonrecourse liabilities" of the Company (as
defined in Regulations Section 1.752-3(a)(3)), the Members' respective
interests in Company profits shall be their respective Units.
6.4 Cash from Operations. Except as set forth herein, no cash shall be
distributed without the affirmative vote or written consent of all Members
pursuant to Section 5.2(c)(x). All income derived from the Performance Center
shall belong solely to Callaway Golf and shall not be considered cash from
operations. Cash shall be distributed to the Members in the following order
of priority:
a. Distributions Prior to Repayment of the Callaway Golf Loan. For
so long as the Callaway Golf Loan is outstanding, if the Callaway Golf Loan is
current as to the payment of principal, interest and other charges, and is not
otherwise in default, and if the Company's equity is equal or greater than
three (3) times the Company's debt (which debt for purposes of this Agreement
shall include the Callaway Golf Loan) then sixty percent (60%) of Net Income,
if any, shall be distributed to the Members in accordance with their
respective ownership of Units and the remaining forty percent (40%) of Net
Income, if any, shall be retained by the Company. If the Callaway Golf Loan
is not current as to the payment of principal, interest or other charges, or
is otherwise in default, or if the Company's equity is less than three (3)
times the Company's debt then all Net Income shall be used to repay the
Callaway Golf Loan. If the Company makes cash distributions to Members
pursuant to this Section 6.4(a), then the Company shall use an amount equal to
forty percent (40%) of depreciation expense for that Fiscal Year to make
prepayments on the Callaway Golf Loan and shall retain an amount equal to
sixty percent (60%) of depreciation expense for that Fiscal Year as working
capital.
b. Distributions After Repayment of the Callaway Golf Loan. At
such time as the Callaway Golf Loan is paid in full, if the Company's equity
is equal or greater than three (3) times the Company's debt then one hundred
percent (100%) of Net Income, if any, shall be used to repay any loans by
Members, in proportion to the outstanding principal balances of such loan, and
the balance, if any, shall be available for distribution to Members on a pro
rata basis in accordance with their respective ownership of Units. If the
Company's equity is less than three times the Company's debt, then one hundred
percent (100%) of Net Income, if any, shall be retained by the Company or used
to pay its debt. The Company shall use an amount equal to forty percent (40%)
of depreciation expense for each Fiscal Year after the Callaway Golf is paid
in full to repay any loans by Members, in proportion to the outstanding
principal balances of such loan, and the balance, if any, shall be available
for distribution to Members in accordance with their respective ownership of
Units, and shall retain an amount equal to sixty percent (60%) of depreciation
expense for that Fiscal Year as working capital.
c. Distributions if Cash From Operations is Less than Net Income.
Notwithstanding any other provision of this Section 6.4, in any Fiscal Year
which the Net Income plus depreciation expense exceeds the Cash from
Operations ("Cash Shortfall"), such that the Company is unable to comply fully
with the provisions of Section 6.4(a) or 6.4(b), the amount the Company shall
be required to distribute to the Members pursuant to this Section 6.4 shall be
reduced by the amount of the Cash Shortfall.
6.5 Form of Distribution. A Member, regardless of the nature of the
Member's Capital Contribution, has no right to demand and receive any
distribution from the Company in any form other than money. No Member may be
compelled to accept from the Company a distribution of any asset in kind in
lieu of a proportionate distribution of money being made to other Members.
Except upon a dissolution and the winding up of the Company, no Member may be
compelled to accept a distribution of any asset in kind.
6.6 Liquidating Distributions. Upon a dissolution of the Company, the
Members shall take or cause to be taken a full account of the Company's assets
and liabilities as of the date of such dissolution and shall proceed with
reasonable promptness to liquidate the Company's assets and to terminate its
business. The cash proceeds from the liquidation, as and when available
therefor, shall be applied in the following order of priority:
a. To the payment of all taxes, debts and other obligations and
liabilities of the Company and the necessary expenses of liquidation,
including, but not limited to, the Callaway Golf Loan and any other Member
loans to the Company; provided, however, that all debts, obligations and other
liabilities of the Company as to which personal liability exists with respect
to any Member shall be satisfied, or a reserve shall be established therefor,
prior to the satisfaction of any debt, obligation or other liability of the
Company as to which no such personal liability exists; and provided, further,
that where a contingent debt, obligation or liability exists, a reserve, in
such amount as the Manager deems reasonable and appropriate, shall be
established to satisfy such contingent debt, obligation or liability, which
reserve shall be distributed as provided in this subsection (a) only upon the
termination of such contingency; and
b. The balance, if any, shall be distributed to the Members in
proportion to and to the extent of their respective positive Capital Account
balances after allocating all income and loss of the Company for all periods.
c. The Manager shall use reasonable efforts to distribute the
proceeds from a liquidation in the same calendar year in which the sale of
Company assets occurs.
Pursuant to Section 5.2(c)(x), the distribution plan set forth in this Section
6.4 may be modified upon the affirmative vote or written consent of all
Members.
6.7 Restriction on Distributions. No distribution shall be made if,
after giving effect to the distribution:
a. The Company would not be able to pay its debts as they become
due in the usual course of business.
b. The Company's total assets would be less than the sum of its
total liabilities plus, unless this Agreement provides otherwise, the amount
that would be needed, if the Company were to be dissolved at the time of the
distribution, to satisfy the preferential rights of other Members, if any,
upon dissolution that are superior to the rights of the Member receiving the
distribution.
6.8 Return of Distributions. Except for distributions made in
violation of the Act or this Agreement, no Member or Economic Interest Owner
shall be obligated to return any distribution to the Company or pay the amount
of any distribution for the account of the Company or to any creditor of the
Company. The amount of any distribution returned to the Company by a Member
or Economic Interest Owner or paid by a Member or Economic Interest Owner for
the account of the Company or to a creditor of the Company shall be added to
the account or accounts from which it was subtracted when it was distributed
to the Member or Economic Interest Owner.
ARTICLE VII
RESTRICTIONS ON TRANSFER
7.1 Transfer Restrictions.
a. Restrictions On Members. A Member shall not sell, assign,
transfer, pledge, give, encumber, hypothecate, grant a security interest in or
lien on, or otherwise in any manner alienate or dispose of, whether by
operation of law, sale, merger, change in control of a Member, or otherwise
(any one of the foregoing being referred to as a "Transfer"), any Units owned
by such Member unless:
(i) All other Members consent in writing to such Transfer and
the Appraised Unit Value (as defined below) of the Units Transferred;
(ii) The Members Transferring and receiving the Units have
complied with the provisions of Section 7.5; and
(iii) All Units Transferred shall remain subject to the rights
and obligations set forth in this Article VII (except as otherwise expressly
provided in such article).
b. Restrictions on Saint Andrews. Notwithstanding the provisions
of Section 7.1(a)(i), Saint Andrews may Transfer all, but not less than all,
of its Units or a Change in Control (as defined below) may occur without the
prior written consent of the Members; provided, however, Callaway Golf, upon
receipt of notice from Saint Andrews of a proposed Transfer or Change of
Control, shall have the right, at its option, to either (1) terminate the
License Agreement, at no penalty to Callaway Golf, and require Saint Andrews,
or its designee, to purchase for cash all of the Units owned by Callaway Golf
at the Appraised Unit Value times the number of Units owned by Callaway Golf,
or (2) purchase, or designate a third party to purchase, for cash, all of the
Units owned by Saint Andrews at the Appraised Unit Value times the number of
Units owned by Saint Andrews. A sale or purchase pursuant to this Section
7.1(b) shall be made in accordance with the provisions of Section 7.2(a). A
"Change of Control" pursuant to this Section 7.1(b) shall include, but not be
limited to, the following:
(i) The sale, conveyance, assignment, transfer or otherwise
disposition of, in any transaction or series of transactions, all or
substantially all of the assets or property or business of Saint Andrews or
All-American; or
(ii) The merge into or consolidation with any other corporation
or entity resulting in the exchange of the outstanding shares of Saint
Andrews' or All-American's capital stock or for securities or other
consideration by the acquiring entity in which more than fifty percent (50%)
of the voting power of Saint Andrews or All-American, as such voting power is
reflected in the ownership of outstanding shares of Saint Andrews and
All-American as set forth in Section 2.7, is disposed of or transferred; or
(iii) Any transaction or series of transactions, including the
issuance of additional capital stock, in which, in the aggregate, more than
fifty percent (50%) of the voting power of Saint Andrews or All-American, as
such voting power is reflected in the ownership of outstanding shares of Saint
Andrews and All-American as set forth in Section 2.7, is disposed of or
transferred; or
(iv) Vaso, John and Ronald Boreta cease to beneficially own an
aggregate of fifty percent (50%) or more of the outstanding shares of Las
Vegas Discount Golf & Tennis, Inc.; or
(v) Either Saint Andrews' or All-American's sale, conveyance,
assignment, transfer or otherwise disposition of, in any transaction or series
of transactions, all or substantially all of the assets of the SportPark, its
ownership interests in the SportPark or its partnering agreements with the
other tenants of the SportPark; or
(vi) Saint Andrews ceases to be solely responsible for the
day-to-day operational management of the SportPark; or
(vii) Any transaction similar to those set forth above.
c. Restrictions on Callaway Golf. Notwithstanding the provisions
of Section 7.1(a)(i) and (ii), Callaway Golf may, without the prior written
consent of the Members, (i) at any time during the term of this Agreement,
transfer all or a portion of its Units to a wholly-owned subsidiary of
Callaway Golf, or (ii) at any time after five (5) years from the date of this
Agreement, require Saint Andrews, or its designee, to purchase for cash all,
but not less than all, of the Units owned by Callaway Golf at the Appraised
Unit Value times the number of Units owned by Callaway Golf. If Saint
Andrews, or its designee, elects not to buy all of the Units owned by Callaway
Golf, then Saint Andrews will be required to sell to Callaway Golf, or its
designee, for cash, all of the Units owned by Saint Andrews at the Appraised
Unit Value times the number of Units owned by Saint Andrews. A sale or
purchase of Units by Callaway Golf to Saint Andrews pursuant to this Section
7.1(c) shall be made in accordance with the provisions of Section 7.2(b).
7.2 Purchase and Sale Rights. A sale of Units pursuant to Section
7.1(b) and (c) shall be conducted in the following manner:
a. If Saint Andrews desires to Transfer its Units to a third party
or if a Change of Control is to occur pursuant to Section 7.1(b), Saint
Andrews shall provide written notice to Callaway Golf of its intent to
Transfer its Units or the Change of Control no less than seventy-five (75)
days prior to the closing date for the proposed sale to a third party or the
Change of Control. Within fifteen (15) days of such notice by Saint Andrews,
Callaway Golf and Saint Andrews shall agree upon the appointment of a single
appraiser or appraisers in accordance with Section 7.2(c). The appraisal
shall be conducted and completed by such appraiser or appraisers within thirty
(30) days of their appointment. Within ten (10) days of receipt of the
appraisal conducted pursuant to Section 7.2(c), Saint Andrews shall confirm in
writing to Callaway Golf its intent to Transfer its Units or proceed with the
Change of Control. If Saint Andrews does not provide such written
confirmation to Callaway Golf within ten (10) days of receipt of the
appraisal, Saint Andrews shall be deemed to have withdrawn its intent to
Transfer its Units or proceed with the Change of Control. Callaway Golf shall
have ten (10) days from receipt of such confirmation from Saint Andrews to
provide written notice to Saint Andrews of its election to terminate the
License Agreement, at no penalty to Callaway Golf, and sell its Units to Saint
Andrews (or its designee) or purchase (or designate a third party to purchase)
all of the Units owned by Saint Andrews. If Callaway Golf fails to provide
the notice set forth in the preceding sentence, it shall be deemed to have
elected to terminate the License Agreement and sell its Units. The sale and
purchase of Units shall be consummated at the principal offices of the Company
on a mutually agreeable date, but in no event less than thirty (30) nor more
than forty-five (45) days following Saint Andrews' receipt of Callaway Golf's
election.
b. If Callaway Golf desires to require Saint Andrews to purchase
all of its Units pursuant to Section 7.1(c), Callaway Golf shall provide
written notice of its intent to require Saint Andrews (or its designee) to
purchase all of the Units owned by Callaway Golf. Within fifteen (15) days of
such notice by Callaway Golf, Saint Andrews and Callaway Golf shall agree upon
the appointment of a single appraiser or appraisers in accordance with Section
7.2(c). Within ten (10) days of receipt of the appraisal conducted pursuant
to Section 7.2(c), Callaway Golf shall have ten (10) days to confirm in
writing to Saint Andrews its intent to require the purchase. If Callaway Golf
does not provide such written confirmation to Saint Andrews within ten (10)
days of receipt of the appraisal, Callaway Golf shall be deemed to have
withdrawn its intent to require Saint Andrews to purchase its Units. Saint
Andrews shall have ten (10) days from receipt of such confirmation from
Callaway Golf to provide written notice to Callaway Golf of its election to
purchase, or designate a third party to purchase, Callaway Golf's Units or
have Saint Andrews' Units purchased by Callaway Golf (or Callaway Golf's
designee). If Saint Andrews does not provide such written notice to Callaway
Golf, Saint Andrews shall be deemed to have not elected to so purchase, and
Callaway Golf, or its designee, shall purchase Saint Andrews' Units. The
purchase and sale shall be consummated at the principal offices of the Company
on a mutually agreeable date, but in no event less than thirty (30) nor more
than forty-five (45) days following Callaway Golf's receipt of Saint Andrews'
election (or the failure thereof).
c. The Appraised Unit Value shall be determined by an appraisal of
the Company by an independent investment banking or valuation consultant firm
mutually acceptable to both Saint Andrews and Callaway Golf. If Saint Andrews
and Callaway Golf are unable to agree on an appraiser, each shall have the
right to select its own appraiser (at its own cost), and the two appraisers so
selected shall mutually agree on a third appraiser, who shall appraise the
Company (at a cost divided equally between Saint Andrews and Callaway Golf )
and whose appraisal shall be binding on the parties. The appraisal shall take
into account any decrease in value to the Company attributable to the
discontinuation of the involvement of Ron Boreta in the management of the
Company. Saint Andrews, Callaway Golf, and the Company shall fully cooperate
with such appraisal. The appraised value of Company divided by the total
Units outstanding shall be the "Appraised Unit Value" for purposes of this
Agreement. Once the appraisal is completed, it shall be made available to
Saint Andrews and Callaway Golf.
d. The Member transferring its Units must convey good and
marketable title to the Units, free and clear of any liens, security
interests, options, restrictions or other encumbrances (except any
restrictions that may pertain under applicable federal and state securities
laws).
e. The Member, or its designee, purchasing the Units shall purchase
such Units for cash.
7.3 Involuntary Transfers. If the Units held by Saint Andrews or
Callaway Golf shall be subject to sale or other transfer by reason of any of
the following events (a "Nonvolitional Event"): (i) a bankruptcy or
insolvency proceeding, whether voluntary or involuntary, or (ii) distraint,
levy, execution or other involuntary transfer, then such Member shall give the
other Member written notice thereof ("Involuntary Transfer Notice") promptly
upon the occurrence of such Nonvolitional Event, which Involuntary Transfer
Notice shall state the terms of such proposed sale or other transfer, the
price or other consideration (if known) for which the Units are proposed to be
sold or transferred, and the number of Units to be sold or transferred (the
"Involuntary Transferred Units"). After its receipt of the Involuntary
Transfer Notice or, failing such receipt, after the Member that has not
suffered a Nonvolitional Event otherwise obtains actual knowledge of such a
proposed sale or other Transfer, the Member that has not suffered a
Nonvolitional Event (or its designee) shall have the right and option,
exercisable for a period of 120 days, to purchase all, but not less than all,
of the Involuntarily Transferred Units at the Appraised Value (which shall be
determined in the same manner as provided in the immediately preceding
section).
7.4 Warranty. Each Member represents and warrants that the Units have
been acquired solely for the account of such Member for investment purposes
only, and that the Units are not being acquired for distribution, subdivision
or fractionalization thereof, and that such Member has no contract,
undertaking, agreement or arrangement with any person (other than other
Members and the Company) to sell, transfer or pledge to such person the Units,
or any part thereof, and such Member has no present plans to enter into such
contract, undertaking, agreement or arrangement.
7.5 Invalid Transfer. No purported Transfer of Units in violation of
the provisions of this Agreement shall be valid and the Company shall not
transfer any of such Units on its books, nor shall any of such Units be
entitled to vote, nor shall any distributions be paid thereon, during the
period of any such violation. The provisions of this section shall be in
addition to and not in lieu of any other remedies, legal or equitable,
available to enforce this Agreement. Each Member hereby undertakes not to
make any Transfer of Units otherwise permitted by the terms of this Agreement
(i) unless the Company has received an opinion of counsel in form and
substance satisfactory to the Company, to the effect that such Transfer will
not be in violation of the Securities Act of 1933, as amended, and any
applicable state securities laws and (ii) except to a person who has executed
a counterpart hereof. Upon execution of a counterpart of this Agreement, the
terms "Member" and "Members" shall be deemed to include the person executing
the same.
ARTICLE VIII
CONSEQUENCES OF A DISSOLUTION EVENT
8.1 Dissolution Event. Upon the occurrence of a Dissolution Event, the
Company shall dissolve unless the remaining Members ("Remaining Members")
holding all of the remaining Membership Interests consent within ninety (90)
days of the Dissolution Event to the continuation of the business of the
Company.
ARTICLE IX
ACCOUNTING, RECORDS, REPORTING BY MEMBERS
9.1 Books and Records. The books and records of the Company shall be
kept, and the financial position and the results of its operations recorded,
in accordance with the accounting methods followed for federal income tax
purposes. The books and records of the Company shall reflect all the Company
transactions and shall be appropriate and adequate for the Company's business.
The Company shall maintain at its principal office all of the following:
A current list of the full name and last known business or residence
address of each Member and owner of an Economic Interest set forth in
alphabetical order, together with the Capital Contributions, Capital Account
and Units of each Member and owner of an Economic Interest;
a. A current list of the full name and business or residence
address of the Manager;
b. A copy of the Articles and any and all amendments thereto
together with executed copies of any powers of attorney pursuant to which the
Articles or any amendments thereto have been executed;
c. Copies of the Company's federal, state, and local income tax or
information returns and reports, if any, for the three most recent taxable
years;
d. A copy of this Agreement and any and all amendments thereto
together with executed copies of any powers of attorney pursuant to which this
Agreement or any amendments thereto have been executed; and
e. Copies of the financial statements of the Company, if any, for
the three most recent Fiscal Years.
9.2 Delivery to Members and Inspection.
a. Upon the request of any Member or owner of an Economic Interest
for purposes reasonably related to the interest of that Person as a Member or
owner of an Economic Interest, the Manager shall promptly deliver to the
requesting Member or owner of an Economic Interest, at the expense of the
Company, a copy of the information required to be maintained by Sections 9.1
(a), (b) and (d).
b. Each Member, Manager and owner of an Economic Interest has the
right, upon reasonable request for purposes reasonably related to the interest
of the Person as Member, Manager or owner of an Economic Interest, to:
(i) Inspect and copy during normal business hours any of the
Company records described in Sections 9.1(a) through (e); and
(ii) Obtain from the Manager, promptly after their becoming
available, a copy of the Company's federal, state, and local income tax or
information returns for each Fiscal Year.
9.3 Annual and Monthly Statements.
a. The Manager shall cause an annual report to be sent to each of
the Members not later than 120 days after the close of the Fiscal Year. That
report shall contain a balance sheet as of the end of the Fiscal Year and an
income statement and statement of changes in financial position for the Fiscal
Year. Such financial statements shall be audited and accompanied by a report
thereon of an independent auditor engaged by the Company.
b. The Manager shall cause to be prepared at least annually, at
Company expense, information necessary for the preparation of the Members'
federal and state income tax returns. The Manager shall send or cause to be
sent to each Member or Economic Interest Owner within 90 days after the end of
each taxable year such information as is necessary to complete federal and
state income tax or information returns, and, if the Company has 35 or fewer
Members, a copy of the Company's federal, state, and local income tax or
information returns for that year.
c. The Manager shall prepare and deliver to the Members annually a
budget and shall afford the Members a reasonable opportunity to provide
comments to the Manager's proposed budget.
d. The Manager shall cause a monthly report to be sent to each of
the Members not later than twenty-five (25) days after the end of each month.
The monthly report shall contain a year-to-date profit and loss statement,
balance sheet and cash flow analysis for the Company and the SportPark.
9.4 Filings. The Manager, at Company expense, shall cause the income
tax returns for the Company to be prepared and timely filed with the
appropriate authorities, but in no event later than April 1st of each year.
The Manager, at Company expense, shall also cause to be prepared and timely
filed, with appropriate federal and state regulatory and administrative
bodies, amendments to, or restatements of, the Articles and all reports
required to be filed by the Company with those entities under the Act or other
then current applicable laws, rules, and regulations. If a Manager required
by the Act to execute or file any document fails, after demand, to do so
within a reasonable period of time or refuses to do so, any other Member may
prepare, execute and file that document with the California Secretary of
State.
9.5 Bank Accounts. The Manager shall maintain the funds of the Company
in one or more separate bank accounts in the name of the Company, and shall
not permit the funds of the Company to be commingled in any fashion with the
funds of any other Person.
9.6 Accounting Decisions and Reliance on Others. All decisions as to
accounting matters shall be made by the Members. The Members may rely upon
the advice of their accountants as to whether such decisions are in accordance
with accounting methods followed for federal income tax purposes. The
accountant for the Company shall be as agreed upon by Saint Andrews and
Callaway Golf.
9.7 Tax Matters for the Company. The Manager, with the consent of all
Members, shall from time to time cause the Company to make such tax elections
as they deem to be in the best interests of the Company and the Members.
Saint Andrews shall be designated as "Tax Matters Member" (as defined in Code
Section 6231), to represent the Company (at the Company's expense) in
connection with all examination of the Company's affairs by tax authorities,
including resulting judicial and administrative proceedings, and to expend the
Company funds for professional services and costs associated therewith. In
its capacity as "Tax Matters Member," the designated Member shall oversee the
Company tax affairs in the overall best interests of the Company.
9.8 Tax Status and Returns.
a. Status as Company for Tax Purposes. Any provision hereof to the
contrary notwithstanding, solely for United States federal income tax
purposes, each of the Members hereby confirms that the Company will be subject
to all provisions of Subchapter K of Chapter 1 of Subtitle A of the Code;
provided, however, the filing of U.S. Partnership Returns of Income shall not
be construed to extend the purposes of the Company or expand the obligations
or liabilities of the Members.
ARTICLE X
DISSOLUTION AND WINDING UP
10.1 Dissolution. The Company shall be dissolved, its assets shall be
disposed of, and its affairs wound up on the first to occur of the following:
a. Upon the happening of any event of dissolution specified in the
Articles;
b. Upon the entry of a decree of judicial dissolution pursuant to
Section 17351 of the Corporations Code;
c. Upon the vote of all of the Members;
d. The occurrence of a Dissolution Event and the failure of the
Remaining Members to consent in accordance with Section 8.1 to continue the
business of the Company within ninety (90) days after the occurrence of such
event or the failure of the Company or the Remaining Members to purchase the
Former Member's Interest in accordance with the procedure set forth in Section
7.2.
10.2 Winding Up. Upon the occurrence of any event specified in Section
10.1, the Company shall continue solely for the purpose of winding up its
affairs in an orderly manner, liquidating its assets, and satisfying the
claims of its creditors. The Members shall be responsible for overseeing the
winding up and liquidation of Company, shall take full account of the
liabilities of Company and assets, shall either cause its assets to be sold or
distributed, and if sold as promptly as is consistent with obtaining the fair
market value thereof, shall cause the proceeds therefrom, to the extent
sufficient therefor, to be applied and distributed as provided in Section 6.6.
The Persons winding up the affairs of the Company shall give written notice of
the commencement of winding up by mail to all known creditors and claimants
whose addresses appear on the records of the Company. The Members winding up
the affairs of the Company shall be entitled to reasonable compensation for
such services.
10.3 Distributions in Kind. Any non-cash asset distributed to one or
more Members shall first be valued at its fair market value to determine the
taxable income or taxable loss that would have resulted if such asset were
sold for such value, such taxable income or taxable loss shall then be
allocated pursuant to Article VI, and the Members' Capital Accounts shall be
adjusted to reflect such allocations. The amount distributed and charged to
the Capital Account of each Member receiving an interest in such distributed
asset shall be the fair market value of such interest (net of any liability
secured by such asset that such Member assumes or takes subject to). The fair
market value of such asset shall be determined by the Members or if any Member
objects by an independent appraiser (any such appraiser must be recognized as
an expert in valuing the type of asset involved) selected by the Members or
liquidating trustee and approved by the Members.
10.4 Order of Payment of Liabilities Upon Dissolution. After
determining that all the known debts and liabilities of the Company in the
process of winding up, including, without limitation, debts and liabilities to
Members who are creditors of the Company, including, but not limited to, the
Callaway Golf Loan and loans to Members, have been paid or adequately provided
for, the remaining assets shall be distributed to the Members in accordance
with Section 6.6.
10.5 Compliance with Regulations. All payments to the Members upon the
winding and dissolution of Company shall be strictly in accordance with the
positive capital account balance limitation and other requirements of
Regulations Section 1.704-1(b)(2)(ii)(d).
10.6 Limitations on Payments Made in Dissolution. Except as otherwise
specifically provided in this Agreement, each Member shall only be entitled to
look solely at the assets of Company for the return of his or her positive
Capital Account balance and shall have no recourse for his or her Capital
Contribution and/or share of taxable incomes (upon dissolution or otherwise)
against the Manager or any other Member except as provided in Article XI.
10.7 No Action for Dissolution. Except as expressly permitted in this
Agreement, a Member shall not take any voluntary action that directly causes a
Dissolution Event. The Members acknowledge that irreparable damage would be
done to the goodwill and reputation of the Company if any Member should bring
an action in court to dissolve the Company under circumstances where
dissolution is not required by Section 10.1. This Agreement has been drawn
carefully to provide fair treatment of all parties and equitable payment in
liquidation of the Economic Interests. Accordingly, except where the Manager
have failed to liquidate the Company as required by this Article X, each
Member hereby waives and renounces his or her right to initiate legal action
to seek the appointment of a receiver or trustee to liquidate the Company or
to seek a decree of judicial dissolution of the Company on the ground that (a)
it is not reasonably practicable to carry on the business of the Company in
conformity with the Article or this Agreement, or (b) dissolution is
reasonably necessary for the protection of the rights or interests of the
complaining Member. Damages for breach of this Section 10.7 shall be in
monetary damages only (and not specific performance) and the damages may be
offset against distributions by the Company to which such Member would
otherwise be entitled.
ARTICLE XI
INDEMNIFICATION AND INSURANCE
11.1 Indemnification of Agents. The Company shall indemnify any Person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding by reason of the fact that he
or she is or was a Member, Manager, employee or other agency of the Company or
that, being or having been such a Member, Manager, employee or agent, he or
she is or was serving at the request of the Company as a manager, employee or
other agent of another limited liability company, corporation, partnership,
joint venture, trust or other enterprise (all such persons being referred to
hereinafter as an "agent"), to the fullest extent permitted by applicable law
in effect on the date hereof and to such greater extent as applicable law may
hereafter from time to time permit; provided, however, the Company shall not
indemnify such Member, Manager, employee or other agent of the Company for any
action, suit or proceeding which arises from or relates to the gross
negligence or willful misconduct of such member, Manager, employee or other
agent. The Company specifically indemnifies Saint Andrews and Callaway Golf
for any Environmental Liabilities that may arise or be asserted against Saint
Andrews or Callaway Golf as a result of being a Member of the Company.
"Environmental Liabilities" means any liability, damage, claim, penalty, fine,
lien, cost or expense (including attorneys' and consultants' fees) arising out
of or relating to any Hazardous Substance or storage tank on Company's
premises, or generated, stored, treated, or handled at, or transported or
released from, Company's premises or for Company's benefit or in connection
with its activities. "Hazardous Substance" means any product, substance,
chemical, material or waste whose presence, nature, quantity and/or intensity
of existence, use, manufacture, disposal, transportation, spill, release or
effect, either by itself or in combination with other materials, is either (a)
potentially injurious to the public health, safety or welfare, the environment
or Company's premises, (b) regulated or monitored by any governmental
authority, or (c) a basis for liability to any governmental agency or third
party under any applicable statute or common law theory. Hazardous Substance
shall include, but not be limited to, hydrocarbons, petroleum, gasoline, crude
oil or any products, by-products or fractions thereof.
11.2 Insurance. Upon the consent of all Members, the Company may
purchase and maintain insurance on behalf of any Person who is or was an agent
of the Company against any liability asserted against such Person and incurred
by such Person in any such capacity, or arising out of such Person's status as
an agent, whether or not the Company would have the power to indemnify such
Person against such liability under the provisions of Section 11.1 or under
applicable law.
ARTICLE XII
INVESTMENT REPRESENTATIONS
Each Member hereby represents and warrants to, and agrees with, the
Manager, the other Members, and the Company as follows:
12.1 Preexisting Relationship or Experience. (i) It has a preexisting
personal or business relationship with the Company, Manager or control persons
or (ii) by reason of its business or financial experience, or by reason of the
business or financial experience of its financial advisor who is unaffiliated
with and who is not compensated, directly or indirectly, by the Company or any
affiliate or selling agent of the Company, it is capable of evaluating the
risks and merits of an investment in the Membership Interest and of protecting
its own interests in connection with this investment.
12.2 No Advertising. It has not seen, received, been presented with,
or been solicited by any leaflet, public promotional meeting, newspaper or
magazine article or advertisement, radio or television advertisement, or any
other form of advertising or general solicitation with respect to the sale of
the Membership Interest.
12.3 Investment Intent. It is acquiring the Membership Interest for
investment purposes for its own account only and not with a view to or for
sale in connection with any distribution of all or any part of the Membership
Interest. No other person will have any direct or indirect beneficial
interest in or right to the Membership Interest.
12.4 Accredited Investor. It is an "accredited investor" as defined in
Rule 501(c) promulgated by the Securities and Exchange Commission (the "SEC").
12.5 Purpose of Entity. If the Member is a corporation, partnership,
limited liability company, trust, or other entity, it was not organized for
the specific purpose of acquiring the Membership Interest.
12.6 Economic Risk. It is financially able to bear the economic risk
of an investment in the Membership Interest, including the total loss thereof.
12.7 No Registration of Membership Interest. It acknowledges that the
Membership Interest has not been registered under the Securities Act of 1933,
as amended (the "Securities Act"), or qualified under the California
Securities Law of 1968, as amended, or any other applicable blue sky laws in
reliance, in part, on its representations, warranties, and agreements herein.
12.8 Membership Interest in Restricted Security. It understands that
the Membership Interest is a "restricted security" under the Securities Act in
that the Membership Interest will be acquired from the Company in a
transaction not involving a public offering, and that the Membership Interest
may be resold without registration under the Securities Act only in certain
limited circumstances and that otherwise the Membership Interest must be held
indefinitely.
12.9 No Obligation to Register. It represents, warrants, and agrees
that the Company and the Manager are under no obligation to register or
qualify the Membership Interest under the Securities Act or under any state
securities law, or to assist it in complying with any exemption from
registration and qualification.
12.10 Legends. It understands that the certificates (if any)
evidencing the Membership Interest may bear one or all of the following
legends:
a. "THE SECURITIES REPRESENTED BY THIS AGREEMENT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 NOR REGISTERED NOR QUALIFIED UNDER
ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
DELIVERED AFTER SALE, TRANSFERRED, PLEDGED, OR HYPOTHECATED UNLESS QUALIFIED
AND REGISTERED UNDER APPLICABLE STATE AND FEDERAL SECURITIES LAWS OR UNLESS,
IN THE OPINION OF COUNSEL SATISFACTORY TO THE COMPANY, SUCH QUALIFICATION AND
REGISTRATION IS NOT REQUIRED. ANY TRANSFER OF THE SECURITIES REPRESENTED BY
THIS AGREEMENT IS FURTHER SUBJECT TO OTHER RESTRICTIONS, TERMS, AND CONDITIONS
WHICH ARE SET FORTH HEREIN."
b. Any legend required by applicable state securities laws.
12.11 Investment Risk. It acknowledges that the Membership Interest is
a speculative investment which involves a substantial degree of risk of loss
by it of its entire investment in the Company, that it understands and takes
full cognizance of the risk factors related to the purchase of the Membership
Interest, and that the Company is newly organized and has no financial or
operating history.
12.12 Restrictions on Transferability. It acknowledges that there are
substantial restrictions on the transferability of the Membership Interest
pursuant to this Agreement, that there is no public market for the Membership
Interest and none is expected to develop, and that, accordingly, it may not be
possible for it to liquidate his or her investment in the Company.
12.13 No Representations By Company. Neither any Manager, any agent or
employee of the Company or of any Manager, or any other Person has at any time
expressly or implicitly represented, guaranteed, or warranted to it that it
may freely transfer the Membership Interest, that a percentage of profit
and/or amount or type of consideration will be realized as a result of an
investment in the Membership Interest, that past performance or experience on
the part of the Manager or their Affiliates or any other person in any way
indicates the predictable results of the ownership of the Membership Interest
or of the overall Company business, that any cash distributions from Company
operations or otherwise will be made to the Members by any specific date or
will be made at all, or that any specific tax benefits will accrue as a result
of an investment in the Company.
12.14 Consultation with Attorney. It has been advised to consult with
its own attorney regarding all legal matters concerning an investment in the
Company and the tax consequences of participating in the Company, and has done
so, to the extent it considers necessary.
ARTICLE XIII
MISCELLANEOUS
13.1 Complete Agreement. This Agreement and the Articles constitute
the complete and exclusive statement of agreement among the Members and
Manager with respect to the subject matter herein and therein and replace and
supersede all prior written and oral agreements or statements by and among the
Members and Manager or any of them. No representation, statement, condition
or warranty not contained in this Agreement or the Articles will be binding on
the Members or Manager or have any force or effect whatsoever. To the extent
that any provision of the Articles conflict with any provision of this
Agreement, the Articles shall control.
13.2 Binding Effect. Subject to the provisions of this Agreement
relating to transferability, this Agreement will be binding upon and inure to
the benefit of the Members, and their respective successors and assigns.
13.3 Parties in Interest. Except as expressly provided in the Act,
nothing in this Agreement shall confer any rights or remedies under or by
reason of this Agreement on any Persons other than the Members and Manager and
their respective successors and assigns nor shall anything in this Agreement
relieve or discharge the obligation or liability of any third person to any
party to this Agreement, nor shall any provision give any third person any
right of subrogation or action over or against any party to this Agreement.
13.4 Pronouns; Statutory References. All pronouns and all variations
thereof shall be deemed to refer to the masculine, feminine, or neuter,
singular or plural, as the context in which they are used may require. Any
reference to the Code, the Regulations, the Act, Corporations Code or other
statutes or laws will include all amendments, modifications, or replacements
of the specific sections and provisions concerned.
13.5 Headings. All headings herein are inserted only for convenience
and ease of reference and are not to be considered in the construction or
interpretation of any provision of this Agreement.
13.6 References to this Agreement. Numbered or lettered articles,
sections and subsections herein contained refer to articles, sections and
subsections of this Agreement unless otherwise expressly stated.
13.7 Jurisdiction. Each Member hereby consents to the exclusive
jurisdiction of the state and federal courts sitting in California in any
action on a claim arising out of, under or in connection with this Agreement
or the transactions contemplated by this Agreement. Each Member further
agrees that personal jurisdiction over such Member may be effected by service
of process, and that when so made shall be as if served upon such Member
personally within the State of California.
13.8 Governing Law. This Agreement shall be interpreted under, and
shall be governed by, the laws of the State of California.
13.9 Exhibits. All Exhibits attached to this Agreement are
incorporated and shall be treated as if set forth herein.
13.10 Severability. If any provision of this Agreement or the
application of such provision to any person or circumstance shall be held
invalid, the remainder of this Agreement or the application of such provision
to persons or circumstances other than those to which it is held invalid shall
not be affected thereby.
13.11 Additional Documents and Acts. Each Member agrees to execute and
deliver such additional documents and instruments and to perform such
additional acts as may be necessary or appropriate to effectuate, carry out
and perform all of the terms, provisions, and conditions of this Agreement and
the transactions contemplated hereby.
13.12 Notices. Any notice to be given or to be served upon the Company
or any party hereto in connection with this Agreement must be in writing
(which may include facsimile) and will be deemed to have been given and
received when delivered to the address specified by the party to receive the
notice. Any party may, at any time by giving five (5) days prior written
notice to the other parties, designate any other address in substitution of
the foregoing address to which such notice will be given.
13.13 Amendments. All amendments to this Agreement will be in writing
and signed by all of the Members.
13.14 Reliance on Authority of Person Signing Agreement. If a Member
is not a natural person, neither the Company nor any Member will (a) be
required to determine the authority of the individual signing this Agreement
to make any commitment or undertaking on behalf of such entity or to determine
any fact or circumstance bearing upon the existence of the authority of such
individual or (b) be responsible for the application or distribution of
proceeds paid or credited to individuals signing this Agreement on behalf of
such entity.
13.15 No Interest in Company Property: Waiver of Action for Partition.
No Member or owner of an Economic Interest has any interest in specific
property of the Company. Without limiting the foregoing, each Member and
owner of an Economic Interest irrevocably waives during the term of the
Company any right that he or she may have to maintain any action for partition
with respect to the property of the Company.
13.16 Multiple Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument.
13.17 Attorney Fees. In the event that any dispute between the Company
and the Members or among the Members should result in litigation or
arbitration, the prevailing party in such dispute shall be entitled to recover
from the other party all reasonable fees, costs and expenses of enforcing any
right of the prevailing party, including without limitation, reasonable
attorneys' fees and expenses.
13.18 Time is of the Essence. All dates and times in this Agreement
are of the essence.
13.19 Remedies Cumulative. The remedies under this Agreement are
cumulative and shall not exclude any other remedies to which any person may be
lawfully entitled.
[The rest of this page intentionally left blank]
IN WITNESS WHEREOF, all of the Members and Manager of All-American Golf
LLC, a California Limited Liability Company, have executed this Agreement,
effective as of the date written above.
MEMBER:
SAINT ANDREWS GOLF CORPORATION, a
Nevada corporation
By: /s/ Ron Boreta
Ron Boreta, President
MEMBER:
CALLAWAY GOLF COMPANY, a California
corporation
By: /s/ Donald H. Dye
Donald H. Dye, President and Chief
Executive Officer
<PAGE>
Schedule 2.7
The ownership of the outstanding common stock of Saint Andrews is as
follows:
SHAREHOLDER NUMBER OF SHARES
Las Vegas Discount Golf & Tennis, Inc. 2,000,000
Three Oceans, Inc. 500,000**
Various Shareholders of Publicly
Traded Shares 1,000,000
---------------
** Three Oceans, Inc., an affiliate of Sanyo North America, owns 500,000
shares of convertible preferred stock which are convertible into a total of
500,000 shares of Saint Andrews common stock.
<PAGE>
Schedule 5.7
Performance Criteria
FISCAL YEAR PERFORMANCE CRITERIA
1997 The Company shall not realize a net loss in excess of
$500,000 from the date of the opening of the Center
to the general public through December 31, 1997.
1998 The Company shall not realize a net loss in excess of
$400,000 for the year nor a cumulative, undiscounted
net loss in excess of $1,000,000 as of the end of the
year.
1999 The Company shall not realize a net loss in excess of
$300,000 for the year nor a cumulative, undiscounted
net loss in excess of $1,000,000 as of the end of the
year.
2000 The Company shall not realize a net loss in excess of
$200,000 for the year nor a cumulative, undiscounted
net loss in excess of $1,000,000 as of the end of the
year.
2001 The Company shall attain inception-to-date, undis-
counted net profit of at least $1.
2002+ During each fiscal year that the Callaway Golf Loan
remains outstanding, the Allocation of Net Income
and Net Loss to Callaway Golf as calculated pursuant
to Article VI of this Agreement will represent at
least a 5% annual return on the equity investment
of Callaway Golf.
During each fiscal year following the year in which
the Callaway Golf Loan is repaid, the Allocation
of Net Income and Net Loss to Callaway Golf as cal-
culated pursuant to Article VI of this Agreement will
represent at least a 10% annual return on the equity
investment* of Callaway Golf.
Performance Criteria shall be subject to applicable governmental laws,
orders, ordinances, rules, regulations and restrictions, acts of God, fires,
strikes and other labor difficulties, accidents, war and any risks in any way
pertaining thereto and all other events and circumstances beyond the control
of Company. Failure to achieve Performance Criteria shall not be deemed to
have occurred if such failure is caused by any of the events set forth in the
preceding sentence.
- --------------
* As to any fiscal year, the equity investment of Callaway Golf is defined as:
- - the initial capital contribution of $750,000
plus
- - any additional capital contribution made by (or conversion of debt to
equity effected by) Callaway Golf pursuant to this Agreement. Contributions
made during the subject year will be appropriately weighted to reflect the
portion of the year benefitted by the contribution
plus
- - cumulative prior year net income allocations pursuant to Article VI of
this Agreement, except that if cumulative prior year allocations represent a
net loss, such cumulative prior year allocations will be disregarded
minus
- - any distributions made to Callaway Golf pursuant to Article VI of this
Agreement.
Distributions made during the subject year will be appropriately weighted to
reflect the portion of the year affected by the distribution.
KEVIN DONOVAN
EMPLOYMENT CONTRACT
SAINT ANDREWS GOLF / ALL-AMERICAN SPORTPARK
TITLE
Vice President New Business Development & Creative Services
TERM
One year or until the first All-American SportPark opens (projected Las Vegas,
NV October 1, 1996 - October 1, 1997)
SALARY
$100,000
BONUS
$25,000Payable at 2 weeks prior to the opening of the SportPark.
COMPANY VEHICLE
Remains the same as existing
COMMISSIONS
5% of All Sponsorship Sales including Hard Dollar Corporate investments and
Soft Dollar assigned value, i.e.: Electronic Hardware, Marketing Promotions,
Advertising Revenue, SportPark Athletic Equipment, etc. for the length and
complete duration of the length of the sponsors contract with Saint Andrews
Golf Corporation and the All-American SportPark.
AASP FOUNDING SPONSORSHIPS (THE MAJORS, COCA-COLA, IBM, KODAK, ETC.)
- Joel Rubenstein 5%
- Hal Price 5%
- Kevin Donovan 5%
- Specialist 5%
(In the event where there is no specialist needed the sales commissions will
be increased and will be distributed equally by 1/3 (one-third) to each
person.
NASCAR SPEEDPARK SPONSORSHIP OF GO-KARTS, TRACK SIGNAGE, ETC.
- Hal Price 5%
- Chip Shelton 5%
- Kathy Dolan 5%
- Kevin Donovan 5%
Payments on commission sales will be paid at the beginning of each quarter
beginning January 1, 1997, if sponsorship revenue is collected. The other
dates include: April 1, 1997, July 1, 1997, October 1, 1997 and all subsequent
years per sponsorship contracts and including their estimated value totals.
RENEWAL
Both parties agree to renegotiate contract beginning on or before but no later
than August 30, 1997, in good faith to finalize a new contract decision before
September 30, 1997.
If parties agree please sign where indicated below.
/s/ Ron Boreta 10/8/96
Ron Boreta Date
President and CEO Saint Andrews Golf Corporation
/s/ Kevin Donovan 10/17/96
Kevin Donovan Date
Vice President New Business and Creative Services
LEASE AND CONCESSION AGREEMENT
This Agreement made as of the 17th day of September, 1997 by and between
All-American Golf LLC ("LLC") and Saint Andrews Golf Corporation ("Developer")
both with offices at 5325 South Valley View Boulevard, Suite 10, Las Vegas, NV
89118 (jointly referred to as "Owners") and Sierra Sportservice, Inc.
("Contractor") and Sportservice Corporation ("Guarantor") with offices at 438
Main Street, Buffalo, New York 14202.
WITNESSETH:
WHEREAS, Developer is the developer of a sports entertainment complex
located at the southeast corner of Las Vegas Boulevard South and Sunset Road,
Las Vegas, NV to include: (1) a Callaway Golf Center to be operated by
All-American Golf LLC, a California limited liability company whose members
are Developer (80%) and Callaway Golf Company (20%); and (2) an All-American
SportPark to be operated by Developer;
WHEREAS, the Owners have leased the sites for the foregoing operations
from Urban Land of Nevada under two separate lease agreements, one covering
the Callaway Golf Center (40+/- acres) and one covering the All-American
SportPark and copies of such leases have been provided to Contractor;
WHEREAS, Contractor is engaged in the food and beverage business and is
experienced in concession services; and
WHEREAS, the parties desire to enter into this agreement whereby
Contractor shall be responsible for providing all food and beverage services
at the above-described facility during the term of this agreement.
NOW, THEREFORE, in consideration of the premises hereto and the mutual
covenants hereinafter set forth, the parties agree as follows:
ARTICLE I
Definitions
1.1 DEFINITIONS. As used herein the terms set forth below shall be
defined as follows:
"Affiliate" shall mean any Person that directly or indirectly, through
one or more intermediaries, controls, or is controlled by, or is under common
control with the specified Person. For the purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling"
"controlled by" or "under common control with"), as used with respect to any
Person, means the possession, directly or indirectly, of the power to direct
or cover the direction of the management and policies of such person, whether
through the ownership of voting securities, by contract or otherwise.
"Agreement" shall mean this Lease and Concession Agreement.
"Arena Restaurant Sales" means Gross Receipts from the sale of
Refreshments in the Sports Bar and Arena Restaurant located in the pavilion of
the All-American SportPark and any outside Cabana Areas where table service is
provided excepting only ClubHouse and adjacent patio and all Catering Sales.
"Branded Products" shall mean: those products with respect to which
Contractor must pay a franchise or licensing fee and/or advertising fees;
and/or those products which are to be sold using vendor supplied equipment.
"Catering Sales" means Gross Receipts of Contractor generated through
Catering Services.
"Catering Services" shall mean the preparation and sale of Refreshments,
including table and banquet type meal service, for conventions, assemblies and
meetings held at any location in the Park, including the Arena Restaurant,
Clubhouse, and any other location in the Park and all Outside Catering
Services.
"Clubhouse Sales" shall mean Gross Receipts derived from the Sale of
Refreshments in the Golf Club House and adjacent outdoor patio areas,
excluding Catering Sales.
"Common Areas" - means all loading docks and facilities, elevators,
common passage areas, restrooms, and other common areas of the Park, and
appurtenant easement and access areas thereto to the extent necessary for
Contractor's use of the Food Service Facilities for the purposes set forth
herein.
"Concession Sales" means Gross Receipts of Contractor generated through
Concession Services. Any advertising revenues received from purveyors for
signage or sponsorships shall be treated as Concession Sales. However, no
rent shall be payable on any in-kind services offered by purveyors, such as
free equipment or menu boards.
"Concession Services" shall mean the sale of Refreshments from concession
stands, bars, and booths and outside areas (if table service is not provided)
and through the use of roving vendors, excluding Catering Services.
"Contractor" shall mean Sportservice Corporation, or its assignee.
"Contractor's Services" shall mean Catering Services, Concession Services
and the Sale of Refreshments from Mobile Stands, in the Clubhouse and in the
Arena Restaurant hereunder and the conduct of all related business hereunder.
"Default Rate" shall mean a rate per annum equal to the lesser of (i) a
varying rate per annum that is equal to two percent (2%) per annum over the
Prime Rate set by Chemical Bank from time to time with adjustments in that
varying rate to be made on the same date as any change in that Prime Rate and
(ii) the maximum non-usurious rate permitted by Applicable Law, with
adjustments in that varying rate to be made on the same date as any change in
that rate.
"Developer" shall mean Saint Andrews Golf Corporation.
"Development Costs" shall include all costs of design and construction of
Food Service Facilities and/or of purchasing, shipping and installing
applicable Food Service Assets, including but not limited to all applicable
labor and material charges; construction insurance and bonding; general
contractor fees and charges; architectural, engineering and design fees and
charges; intercompany charges of Contractor's affiliate of 4% of the aggregate
Development Cost of any project and all other out-of-pocket costs and expenses
related to the applicable construction project.
"Drawings" shall mean plans and specifications for the All-American Park
prepared by Swisher & Hall dated ________________.
"Event" means any concert, entertainment presentation, meeting,
convention or other use of the Park.
"Fiscal Year" shall mean the fiscal year of Contractor which ends on the
Sunday closest to December 31st. The first Fiscal Year shall commence on the
Commencement Date and shall terminate on the next succeeding Sunday closest to
December 31st.
"Food Service Assets" shall mean all Refreshment equipment, furniture,
fixtures and trade fixtures; all related office and commissary equipment and
furniture including but not limited to all concession and commissary items;
all bar, beverage and refrigeration and freezer units; all menu boards, signs
and graphics; all point of sale equipment; appliances and Smallwares; and all
Mobile Stands, transportation equipment; and all patio furniture, fixtures and
equipment.
"Food Service Design Rights" shall mean all intellectual, industrial and
other proprietary rights in and to the design, structure, layout, image, or
name and/or menu of any of the Food Service Facilities, including the right to
copy, reproduce, or otherwise exploit the same and any and all copyrights and
trademarks related thereto.
"Food Service Facilities" shall mean: the Arena Restaurant, the Clubhouse
restaurant associated with the golf club house, all permanent concession
stands associated with the Arena food court; and all other concession stands,
bars, booths, service bars, pantries, restaurants, kitchens, commissaries,
concession storage areas and dressing rooms, concession offices, now or
hereafter erected on the grounds of the Park.
"GAAP" means generally accepted accounting principles, consistently
applied.
"Governmental Authority" shall mean any and all applicable courts,
boards, agencies, commissions, offices or authorities of any nature whatsoever
for any governmental or quasi-governmental unit (federal, state, county,
district or municipal), whether now or hereafter in existence.
"Gross Receipts" shall mean the total amounts received by Contractor for
Contractor's Services rendered at the Park hereunder whether such sales be
evidenced by cash, check, credit, charge account or otherwise and shall
include the amounts received from the sale of all such items at the Park,
together with the amount received from all orders taken or received at the
Park, whether such orders be filled from there or elsewhere, less only:
(1) Any Sales Taxes collected in connection with such sale,
as payable to the appropriate Governmental Authority;
(2) Service charge and/or gratuities received by the
Contractor;
(3) Any reduced price sales made to Owner or third parties
at the request of Owner;
(4) Meals consumed by Contractor's on-duty personnel
without charge (or at a reduced price) to such personnel;
(5) Any sublet sales made in accordance with Section 5.13
hereof, (However, commissions from sublet vendors, except those operating
vending machines, shall be included in Gross Receipts);
(6) Receipts from purveyors related to returns;
(7) Manufacturers' and/or Distributors' rebates and awards;
(8) The amount of cash and quantity discounts received from
sellers, suppliers and manufacturers; and
(9) Receipts from the rental of furniture, equipment,
linens, china, cutlery and/or decorations and/or from the sale of flowers.
(10) Receipts from Vending Machines and/or rental fees
received from third party subcontractors operating such machines in the Park.
In no event shall there be deducted from Gross Receipts any taxes imposed
upon the operations or existence of Contractor (such as, without limitation,
income taxes (whether federal, state or municipal and franchise taxes), nor
shall there be deducted any bank charges or service charges for credit or
credit card sales.
"Hazardous Substance" shall mean substances that are defined or listed
in, or otherwise classified pursuant to, any Applicable Law (or other
enforceable criteria and guidelines promulgated pursuant thereto) as
"hazardous substances," "hazardous materials," "hazardous wastes," "toxic
substances," "pollutants," "contaminants," "radioactive material," "petroleum
or any fraction thereof" or any other formulation intended to define, list or
classify substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, radioactivity, carcinogenicity, reproductive toxicity
or "EP toxicity," and petroleum and drilling fluids, produced waters and other
wastes associated with the exploration, development, or production of crude
oil, natural gas or geothermal energy.
"Indemnities" shall mean Developer, LLC (and its Members), Landlord and
any mortgagee having a security interest in the Park, together with all of
their officers, directors, shareholders, employees and agents.
"Landlord" shall mean Urban Land of Nevada and its successors in title to
the land underlying the Park.
"Legal Requirements" shall mean any and all present and future laws,
statutes, ordinances, decisions, decrees, statutes, rulings, rules, codes,
procedures, orders, regulations, permits, certificates, licenses and other
requirements of any Governmental Authority including, without limitation, any
safety laws, health laws, environmental laws and laws regarding the rights of
and obligations to the handicapped and disabled, including without limitation,
the Occupational Safety And Health Act and the Americans With Disabilities
Act.
"LLC" shall mean All-American Golf LLC whose Members are Developer (80%)
and Callaway Golf Company (20%).
"Mobile Stands" shall mean all portable concession stands and bars, golf
carts, carts and kiosks used by Contractor hereunder.
"Month" shall mean any calendar month unless otherwise specifically
stated.
"Occupancy Taxes" shall mean a tax on rental payments or an ad valorem
tax imposed, assessed or levied by the City of Las Vegas or the County of
Clark (or any taxing jurisdiction that is a subdivision of the foregoing) on
or with respect to Contractor's rights and interests created by this
Agreement, including, but not limited to, Contractor's rights of occupancy and
use of the Food Service Facilities and Food Service Assets provided, however,
the foregoing notwithstanding, in the event that Contractor receives any
written notice of any such Occupancy Taxes, immediate notice thereof shall
promptly be provided to Owner. Owner shall have the right (but not the
obligation) to initiate (or cause to be initiated) a contest of any such
Occupancy Taxes, in which event Contractor shall cooperate in its opposing or
contesting of such levy or assessment. In the event of any such contest,
Owner and Contractor shall each bear their own costs and expenses in
connection therewith.
"Outside Catering" shall mean the provision of Catering Services by
Contractor (or any Affiliate of Contractor) to the Outside Catering Area using
the Food Service Facilities at the Park for preparation of the Refreshments
for which Contractor has obtained the prior written approval of Owner, which
approval will not be unreasonably withheld. Contractor acknowledges that it
will direct its primary focus towards soliciting catering business for its
facilities within the Park and not for providing catering at other locations.
Prior to the acceptance by Contractor of any opportunity to provide Outside
Catering, Contractor shall furnish written notice of each such Outside
Catering opportunity and reasonable details thereof, including copies of any
proposed function sheet(s) and contract(s) for such opportunity to Developer.
Developer shall approve or disapprove of such engagement of Contractor for
Outside Catering within 10 days following receipt of applicable information.
In no event shall Owners assume any risk or liability for the operation by
Contractor of Outside Catering or any costs, liabilities, claims, demands,
losses or damages (of whatever kind) incurred (directly or indirectly) in
connection therewith. Contractor fully assumes any and all such risks and
shall indemnify and hold Owners fully harmless therefrom.
"Outside Catering Area" shall mean anywhere in Las Vegas, Nevada outside
of the Park.
"Owners" shall mean Developer and LLC.
"Park" shall mean the entire 65 acre site described on Exhibit A on which
the Callaway Golf Center and the All-American SportPark are to be built,
together with any expansion hereafter constructed.
"Park Design Rights" shall mean all intellectual, industrial and other
proprietary rights in and to (1) the design, structure or image of the Park or
any entertainment facility therein and (2) to Events held at the Park,
including the right to copy, reproduce or otherwise exploit the same, and the
copyrights and trademarks related thereto. Park Design Rights do not include
the Food Service Design Rights.
"Person" shall mean any individual, corporation, partnership,
association, trust or other entity whatsoever.
"Refreshments" shall mean refreshments, confectioneries, candy, beverages
(alcoholic and non-alcoholic), snacks, meals and all other food and beverage
products of every kind and nature.
"Rent " means the rents and fees due from Contractor to either Developer
or LLC (as applicable) for the exclusive use of the Food Service Facilities
and the grant of rights hereunder, all as provided in Section 5.1 hereof.
"Sales Taxes" means any tax on sales, excise taxes or value-added taxes,
assessed against gross revenues of Contractor hereunder.
"Smallwares" shall mean the following: cutlery utensils, cookware, china,
glassware and uniforms.
"Substantial Completion Date" means the date that construction of all of
the Food Service Facilities in the Callaway Golf Center and the All-American
SportPark, respectively, are substantially complete and all necessary
occupancy and use permits have been issued and substantially all Food Service
Assets have been installed and the entire Park is completed and opened to
patrons for general and customary use.
"Term" shall have the meaning set forth in Section 3.2.
"Utility Systems" means any water, sewage (including but not limited to
all permits, fees and tap fees), gas, plumbing and general lighting, sprinkler
and fire safety, telephone and telecommunication and security facilities,
piping (including drains and grease traps for sewage), ductwork, conduit,
fiber optic lines, wiring (including all electrical panel boards and
transformers), outlets and connections and mechanicals (as applicable); and
heating, ventilating, and air conditioning equipment, ductwork and electrical
components and all applicable elevators and escalators. "Utility Services"
shall mean the full and unimpeded use of the foregoing Utility Systems for
their intended purpose. As used herein, water shall mean water fit for human
consumption and in compliance with all applicable laws, rules, regulations and
orders.
"Vending Machine Receipts" means net receipts from the Sale of
Refreshments from vending machines or rental fees received from third party
subcontractors for permitting such subcontractors to operate Vending Machines
in the Park.
ARTICLE II
Development
2.1 DEVELOPMENT OF PARK.
(a) LLC covenants to develop and construct a portion of the Park on
the site described in Exhibit A on or before October 1, 1997, which will have
the following major attractions:
The Callaway Golf Center (40+/- acres) to include a Country Club
golf experience, as an authorized licensee of Callaway Golf Company to
contain: 110 (on 2 tiers) tee stations; a 14 acre driving range, an executive
par 3 golf course; and a clubhouse (including pro shop, training and custom
club fitting center and Clubhouse Restaurant).
(b)(i) Developer covenants to develop and construct a portion of the
Park on the site described in Exhibit A on or before March 1, 1998 which will
have the following major attractions:
An All-American SportPark with the following amenities:
Slugger Stadium, as an authorized licensee of Major League
Baseball Properties to contain approximately 17 batting stalls facing a home
run wall designed to replicate major league facilities in a full-size batting
stadium.
Go cart racing tracks, as an authorized NASCAR licensee, to be
comprised of three different track formats: Tri-Oval, Road Course and Junior
Oval. The different formats will have a combined capacity of 125 karts with
an instant capacity of 25 karts per track. The driver will have the option to
drive either a 5/8-scale NASCAR Craftsman Truck Series replica, or Junior
Stock Car replica. The Official Go-Karts of the NASCAR SpeedPark are
currently being engineered and will be manufactured by Roush Racing of
Livonia, Michigan. The NASCAR SpeedPark will also be comprised of a Garage
Experience, Pit Row/Pit Stop Challenge, Victory Lane/Winner's Circle,
Tailgaters Picnic Grounds, NASCAR Retail Trackside Hauler, Video Arcade and
Virtual Reality Zone, Snack Bar, Indoor Retail Area, and Grandstands with a
Press Box Tower.
A 80,000 square foot sports and retail pavilion to include: a
large Sports Arena for basketball, tennis and/or roller-blading (together with
skyboxes, broadcast facilities, bleachers); a food court; a two tiered
restaurant and bar; party rooms and a variety of retail and ancillary
entertainment areas.
The parties acknowledge that the licensing arrangements and
entertainment facilities described above may change over the course of the
Term of this Agreement. Owners agree to use all reasonable commercial efforts
to maintain relationships with nationally recognized professional sports
leagues and organizations as sponsors or licensors for its entertainment
facilities and events.
(b) (ii) Developer represents that: (i) it has obtained licensing
rights from Callaway Golf Company, NASCAR and Major League Baseball and that
it has provided Contractor with accurate copies of such agreements; (ii) the
Drawings for the entire Park have been completed and construction of the
entire project shall be completed in accordance with the Drawings and all
Legal Requirements by March 1, 1998; and (iii) all interior building areas
will be fully ventilated and air conditioned for the comfort of the patrons.
2.2 DEVELOPMENT OF FOOD AND BEVERAGE FACILITIES.
(a) In connection with all Food Service Facilities for the Callaway
Golf Center, the LLC will provide at its sole cost and expense, and in
connection with all Food Service Facilities for the All-American SportPark,
Developer will provide at its respective sole cost and expense, all necessary
building structure and shell components; all exterior and interior demising
walls; ceilings and floors (except for floors on the ground floor food court
area); primary power to such facilities; all Utility Systems (and related
items delineated in Section 1.1 above) stubbed through slab or through the
interior side of exterior walls; all transformers and primary electrical panel
boxes; under slab drains for each Food Service Facility per Legal Requirements
(but Contractor will be responsible for connecting fixtures and equipment to
drains); sprinkler systems and runs (but no drops or heads); all base HVAC
systems (including primary supply and return ducts to Contractor's Food
Service Facilities) (with base units set on roof at 250 square feet per ton);
all restrooms (except as described below); and exterior patios, decks,
terraces and cabanas (all of which shall be built on pavers and covered). The
slabs for the ground floor food court area shall be blocked out by Developer.
Contractor shall pour that portion of the floor.
(b) Contractor will expend approximately $3.85MM in Development Costs
for its "Leasehold Improvements" and Food Service Assets for the Food Service
Facilities. Contractor's Leasehold Improvements include the following work:
interior non-demising walls and ceilings (to the extent required by design);
wall, floor, ceiling, and window treatments and finishes; all millwork,
counters, bars, shelving, display cases and cabinetry; mirrors, furnishings,
decorations and memorabilia, lighting, signage and menu boards; sprinkler
drops and heads, subpanels for electricity as required, grease traps, and HVAC
interior ductwork defusers and lighting fixtures. Contractor will be
responsible for construction of interior restrooms for the Arena Restaurant up
to a maximum of $50,000 within the $3.85MM budget. In connection with the
foregoing, Contractor will obtain and retain the Food Service Design Rights
and shall use the logo of its affiliate, the "Boston Garden" for the Arena
Restaurant, with the understanding that any and all such logo and trademarks
shall be removed by Contractor upon termination of this Agreement.
(c) To the extent that Food Service Facilities are not substantially
completed for the opening of Callaway Golf Center or the All-American
SportPark, respectively, Contractor will use all reasonable commercial efforts
to provide food and beverage services from temporary facilities on or about
October 1, 1997.
2.3 SUBMISSION OF PROPOSAL FOR FOOD SERVICE FACILITIES.
Within 30 days following execution of this Agreement, Contractor shall
submit to Developer conceptual plans and elevations for each of the Food
Service Facilities associated with the Callaway Golf Center. Contractor shall
submit a Proposal for the Food Service Facilities for the All-American
SportPark ("Proposal") within 30 days following receipt of Developer's
request for same and satisfaction of the Conditions Precedent described in
Section 13.7. In each case Developer shall complete a review of the
applicable Proposal and within ten (10) days after submission, either approve
the Proposal or advise Contractor in writing and with reasonable specificity
the reason(s) for non-approval. In the latter event, Developer and
Contractor, by their appropriate representatives shall proceed with due
diligence and good faith to meet and resolve outstanding issues so that the
Proposal (as they may be revised) are approved. If such approval is not
obtained within one hundred and twenty (120) days following the original
submission date, Contractor may, at its option, terminate this Agreement upon
ten (10) days' written notice to Developer.
Within 45 days following receipt of approval by Developer of each
Proposal, respectively, Contractor shall prepare its basic layout drawings,
furniture and equipment layout, reflective ceiling plans and representative
sample boards ("Schematic Designs") for the Food Service Facilities and submit
them to Developer for review. Developer shall provide Contractor with any
requests for technical or aesthetic changes within 10 days of receipt of such
Schematic Designs. Such requests will be made only in good faith and shall be
consistent with the previously approved Proposal. If Developer requests
changes, the parties by their appropriate representative shall proceed with
due diligence and good faith to meet and resolve outstanding issues so that
the Contractor can proceed with development of Construction Drawings.
2.4 SUBMISSION OF PLANS AND SPECIFICATIONS FOR INITIAL IMPROVEMENTS.
Based on such discussions, Contractor shall prepare and deliver to
Developer for its records the Construction Drawings for completion of the
applicable Food Service Facility within 30 days following receipt of
Developer's approval/or requests for changes related to the Schematic Designs.
2.5 COMPLETION OF INITIAL IMPROVEMENTS.
Upon submittal of the Construction Drawings, Contractor shall commence
construction in accordance with such Construction Drawings for the Food
Service Facilities including, but not limited to, items of decor, and all
other Concession Assets and supplies necessary in the proper conduct of
Contractor's business. Construction of each Food Service Facility shall be
substantially completed within 120 days following completion of the applicable
Construction Drawings and receipt of appropriate construction permits.
2.6 CERTIFIED DEVELOPMENT COSTS.
Within one hundred eighty (180) days after substantial completion of the
Food Service Facilities, Contractor shall provide Developer with a certified
statement setting out the total Development Costs incurred by Contractor,
together with copies of applicable invoices.
2.7 APPROVAL OF PLANS AND SPECIFICATIONS.
All plans for improvements, alterations or renovations, either for the
construction of the Food Service Facilities or any of additional facilities or
alterations to same, shall be prepared, submitted and approved as outlined in
Sections 2.3 - 2.5 hereof, and shall be subject to the same restrictions as
provided herein. Contractor, at its sole expense, must obtain appropriate
approval from all local, state, and federal agencies, as required, for the
completion of any and all improvements.
(a) All plans for improvements shall be prepared by registered
engineers and architects.
(b) All improvements shall be planned and constructed in accordance
with all Legal Requirements.
(c) Upon completion of any construction project, Contractor shall
provide Developer with one (1) complete set of as-built drawings in
reproducible form.
2.8 WAGE RATES. Contractor will be provided with a non-union gate
for use by Contractor's general construction contractor and its
subcontractors. In the event that Contractor's general contractor and/or its
subcontractors are required to pay "prevailing wages" (as that term is
generally defined under federal law) or honor conditions of employment imposed
under a collective bargaining agreement and the aggregate amount expended by
Contractor for Development Costs exceeds $3,850,000, the term of this
Agreement shall be extended by 30 days for each $33,000 spent in excess of
$3,850,000.
2.9 TITLE. Contractor shall retain title to all Food Service Assets
throughout the term of this Agreement. However, upon expiration or
termination, Contractor shall be obligated to sell same to Owner(s) in
accordance with Section 8.5 of this Agreement.
Contractor shall retain title to all Food Service Design Rights and upon
termination shall have the right to remove all signage, logos and
distinguishing decorations provided that it does so within 60 days following
any such termination.
ARTICLE III
Grant of Rights and Term
3.1 SCOPE: (a) Subject to the terms of Sections 3.1(c) and Article
IV below, Owners, jointly and severally, hereby grant the Contractor the sole
and exclusive right to prepare, present, promote, and sell any and all
Refreshments in , on and about the Park during the Term of this Agreement.
(b) Sales shall be conducted from the Food Service Facilities within
the Park once same are constructed, through vending throughout the Park,
through the use of Mobile Stands and Vending Machines and through Catering
Services provided within and about the Park.
(c) Except as described below, no one shall sell or be permitted to
sell or distribute any Refreshments within and about the Park, except by or
through Contractor.
(d) Contractor agrees to provide the above described services during
all regular operating hours of the Park and, as needed at Events, on the terms
and conditions set forth in this Agreement as herein contained. The level and
type of service shall be appropriate for the anticipated attendance.
(e) Except as described in this Agreement, the Contractor shall have
no right to use the Park Design Rights. Use of Food Service Design Rights
and/or use of signage for Branded Products or to promote any Refreshments sold
by Contractor shall not be considered prohibited under this provision.
(f) The parties acknowledge that under Nevada Law, Contractor might
be able to install a limited number of slot machines and/or video gaming
devices in the Clubhouse Restaurant and/or the Arena Restaurant.
Notwithstanding the foregoing, the scope of rights granted hereunder shall not
include gaming activities without the express prior consent of the LLC with
respect to the Callaway Golf Center and the Developer with respect to the
All-American SportPark.
3.2 TERM. The initial term (the "Term") of this Agreement shall be
for a period commencing on the date hereof and terminating on the 10th
anniversary of the Substantial Completion Date. Notwithstanding the
foregoing, the parties acknowledge that Contractor's occupancy rights and
Contractor's obligation to provide the Contractor's Services (or so much of
same as permitted by the then state of completion of the Food Service
Facilities) shall commence on the date the Park is first opened for business.
3.3 RIGHT OF FIRST REFUSAL. Contractor will have a right of first
refusal for future Parks to be built by Developer, or its affiliates,
elsewhere. Developer shall provide Contractor with all of the information
Contractor requires concerning any such opportunity and Contractor shall have
the right to review same for a period of 90 days. If Contractor accepts the
offer, the parties shall work together to finalize all terms and conditions
required for consummation of the transaction. If Contractor rejects the
offer, Developer shall be free to select another provider of food services for
the park in question. Upon expiration of this Agreement, Contractor shall
also have a right of first refusal to operate as the exclusive concessionaire
of Refreshments in accordance with the scope of rights granted hereunder.
Upon such expiration, Owners shall have the right to seek other offers.
However, Owners shall give Contractor written notice of any bonafide third
party offer receives and Contractor shall have 30 days to decide whether it
wishes to extend and amend this agreement in accordance with the financial
terms of the offer Owners wish to accept. If Contractor fails to notify
Owners in writing of its decision to so extend and amend, Owners shall be free
to accept the bonafide third party offer. In consideration for the foregoing,
Contractor will pay Developer $100,000 upon satisfaction of the Conditions
Precedent described in Section 13.7 and conditional thereon. A "Second
Payment" of $100,000 shall be paid upon completion of construction of all
necessary Food Service Facilities and commencement of on-site operations by
Contractor and Owner, provided that Contractor is able to complete the work
described in Section 2.2(b) for no more than $3.85MM. If the cost of the work
described in Section 2.2(b) is more than $3.85MM but less than $3.95MM, the
foregoing Second Payment shall be equal to the lessor of $100,000 or the
difference between $3.95MM and the aggregate amount expended. If more than
$3.95MM is expended, no Second Payment will be made.
ARTICLE IV
Owner's Responsibilities
4.1 OPERATION OF PARK. Owners covenant to operate the Park on a year
round, seven day a week basis in accordance with the standards of the industry
on a continuous basis throughout the Term of this Agreement.
4.2 LEASE OF FOOD SERVICE FACILITIES. LLC shall and does hereby
lease to Contractor, for its sole and exclusive use throughout the Term
hereof, all Food Service Facilities shown in the Drawings for the Callaway
Golf Center and all others constructed hereafter in the Callaway Golf Center.
Developer shall and hereby does lease to Contractor, for its sole and
exclusive use throughout the Term hereof, all Food Service Facilities shown in
the Drawings for the All-American SportPark and all others constructed
hereafter in the All-American SportPark. Possession of Food Service
Facilities shall be delivered to Contractor upon completion of the work
described in Sections 2.1(a) and 2.2(a). Contractor's right of occupancy to
all Food Service Facilities shall be a leasehold interest, granted by each
Owner, respectively, in consideration of the services to be rendered by
Contractor for Owners hereunder and each Owner warrants that for so long as
Contractor fulfills its obligations under this Agreement and (subject to any
Condemnation or Casualty Event (as those terms are hereinafter defined in
Article XI or Article IX)), Contractor shall and may peacefully and quietly
have, hold and enjoy all of the respective Food Service Facilities (now
contemplated and/or hereafter constructed), to the exclusion of all others,
for the Term of this Agreement. In addition, throughout the Term hereof,
Contractor shall have the right to occupy and use on a non-exclusive basis all
Common Areas of the Park in common with others using the Park. Owners agree
to execute appropriate short form notices or memorandums of lease for filing
on the appropriate land records in the form of Exhibit B. Contractor shall
retain title to all of its Food Service Assets.
(a) Owners reserve a right of access to the Food Service Facilities
for themselves and their authorized agents, representatives, and contractors
for the limited purposes of inspecting, maintaining and repairing the
structural components of the Food Service Facilities and/or their Utility
Systems and for the purposes of maintaining health, safety and security
standards throughout the Park. Upon the expiration of the Term or the earlier
termination of this Agreement, Contractor shall surrender the Food Service
Facilities in good order, condition and repair except for ordinary wear and
tear and deficiencies in repair, maintenance and replacement for which Owners
are responsible pursuant to the further terms hereof.
(b) Location of all Mobile Stands and auxiliary storage space
required by Contractor, from time to time, shall be approved in writing by the
Owner which controls the applicable location. Owners reserve the right to
require the Contractor to move Mobile Stands and to relocate items from any
auxiliary storage space when needs of an Event require the use of them.
(c) Contractor hereby irrevocably assigns to Owner(s) any award,
compensation or insurance payment to which Contractor may become entitled by
reason of the leasehold granted to Contractor hereunder in the event of a
Casualty or Condemnation (each as hereinafter defined) other than any
insurance payment received by Contractor under a policy maintained by
Contractor.
(d) Subject to the terms of Articles IX and XI, Owners, at their sole
cost and expense, shall be responsible for the repair and maintenance of the
Park, including but not limited to all structural components of the Food
Service Facilities, all Utility Systems (and all components installed and/or
constructed by Owners, or either of them, under Section 2.2(a)) of the Food
Service Facilities.
4.3 SECURITY. Owners shall be fully responsible, at its sole cost
and expense, for providing all necessary security forces for crowd control
and/or to fulfill Legal Requirements of any Governmental Authority.
4.4 ATTENDANCE INFORMATION. Owners agree to furnish to Contractor
daily with a statement of daily turnstile count showing the total number of
paid and free admissions and passes (to the extent such information is
available). Owner shall also provide Contractor with any advance ticket sales
information as same becomes available.
4.5 ACCESS. Owners shall provide Contractor's personnel with ready
ingress and egress to and from the Park, without charge, during the term
hereof in order to enable Contractor to maintain the interior of its Food
Service Facilities and its Food Service Assets, and to maintain inventory and
product. Free parking will be provided for Contractor's executive staff.
4.6 THIRD PARTY VENDORS. Vendors, peddlers, or Persons other than
Contractor's employees, shall not be permitted to vend, otherwise sell, or
distribute any Refreshments at or within the Park, and Owners shall, at all
times, see to their dispersal, to the extent Owners can legally do so. Except
as permitted under Section 3.1(c) above, neither Owners nor their licensees
will sell or distribute Refreshments within the Park or the Park site, nor
will patrons be permitted to bring Refreshments into the Park or the parking
areas abutting same. To the extent they can legally do so, Owners will
enforce this provision within all parking lots servicing the Park.
4.7 UTILITY SERVICES. Full and unimpeded use of all Utility Systems
shall be provided to Contractor at no cost, except Contractor shall be
responsible for all applicable metered gas and electrical charges incurred in
operation of its kitchen facilities.
Owners, under no circumstances, shall be liable to Contractor, in damages
or otherwise, for any interruption of any of the above Utility Services.
However, Owners shall use all reasonable efforts to restore as promptly as
possible to full service any Utility Service which is interrupted.
4.8 NO CONSENTS. Owners represent and warrant to Contractor that
there are no consents required from any third party including any other
Governmental Authority to the terms, conditions or effectiveness of this
Agreement except for Landlord and Callaway Golf Company.
4.9 CLEANING AND MAINTENANCE. Owners shall be responsible for all
cleaning and maintenance of the Park and all public areas of the Food Service
Facilities, excluding only the commissary areas, and inside concession stands
and bars, kitchen and office areas and inside the public serving areas of the
restaurants. Owners will be responsible for cleaning all patio areas.
However, Contractor shall bus all tables.
ARTICLE V
Contractor's Rent and Other Duties
5.1 CONTRACTOR'S RENT.
(a) Contractor agrees to pay Developer the following Rent with
respect to Concession Sales:
(i) for the first $1,700,000 in annual
Concession Sales 12%
(ii) for all annual Concession Sales in
excess of $1,700,000 but less than
$2,000,000 14%
(iii) for all annual Concession Sales
in excess of $2,000,000 but less
than $2,500,000 15%
(iv) for all annual Concession Sales in
excess $2,500,000 but less than
$3,000,000 17%
(v) for all annual Concession Sales in
excess of $3,000,000 20%
(b) Contractor agrees to pay Developer as rent with respect to
all Gross Receipts derived from the sale of Refreshments in the Arena
Restaurant:
(i) for the first $1,500,000 in annual
Gross Receipts derived from the
sale of Refreshments in the Arena
Restaurant 5%
(ii) for all annual Gross Receipts derived
from the sale of Refreshments in the
Arena Restaurant in excess of $1,500,000
but less than $2,500,000 6%
(iii) for all annual Gross Receipts derived
from the sale of Refreshments in the
Arena Restaurant in excess of $2,500,000 7%
(c) Contractor agrees to pay the LLC as rent with respect to
Clubhouse Sales, 6% of all Clubhouse Sales generated on and after the
Substantial Completion Date of the Clubhouse.
(d) Contractor agrees to pay the following rent with respect to
all Gross Receipts derived from the sale of Refreshments through the use of
Mobile Stands:
(i) Prior to the Substantial Completion Date or November 1,
1997 (whichever shall earlier occur) the rental rate with respect to Gross
Receipts derived from Mobile Stands shall be 6%.
(ii) For the first $500,000 in annual Gross Receipts
derived from the sale of Refreshments from Mobile Stands after the Substantial
Completion Date or November 1, 1997 (whichever shall earlier occur) the rental
rate shall be 12%.
(iii) For all annual Gross Receipts derived from the Sale
of Refreshments from Mobile Stands after the Substantial Completion Date or
November 1, 1997 (whichever shall earlier occur) in excess of $500,000 shall
be 15%.
The foregoing rents shall be paid to the Owner controlling the
site where the applicable Mobile Stands are located.
(e) Except as described below, Contractor agrees to pay
Developer the following rent with respect to Catering Sales:
(i) for the first $500,000 in annual
Catering Sales 12%
(ii) for all annual Catering Sales in excess
of $500,000 15%
Any Catering Services performed in either the Arena Restaurant
or the Clubhouse (including any outdoor area serviced from either location)
shall be commissionable under this subsection (e) and not under subsection (b)
or (c) above. However, the rent for any Catering Services performed in the
Club house or on the grounds of the Callaway Golf Center shall be paid to the
LLC instead of to Developer. Rents for Outside Catering shall be payable to
the Owner controlling the site providing the services.
(f) Contractor agrees to pay as rent with respect to all Vending
Machines operated by Contractor (or its designee) a sum equal to fifty (50%)
of the net amount collected (i.e. Gross Receipts less all applicable costs if
Contractor operates the machines) or fifty percent (50%) of the net amount
collected from any subcontractor retained to provide such services. The
foregoing rents shall be paid to the Owner controlling the site where the
applicable Vending Machines are located.
(g) Contractor agrees to pay its pro-rata share of charges for
Utility Services and Utility usage fees, common area maintenance and cleaning
costs associated with the Park based on its percentage of the total useable
square footage of the Park, up to a maximum payment equal to 4% of
Contractor's Gross Receipts. Such payment shall be made to Developer.
(h) Rents under this Section 5.1 payable hereunder shall be
computed separately for each Owner on a monthly basis and shall be paid on the
20th day of the month following the month in which the applicable sales occur.
(i) For purposes of this Section 5.1, "Annual" shall mean the
Fiscal Year of this Agreement.
(j) To the extent Gross Receipts at an Event can be allocated to
a specific category of sales described herein because payment is received
specifically for such category, the rental rate shall be that associated with
such category. If Gross Receipts for an Event cannot be allocated (such as
when the sponsoring group pays a lump sum for use of all facilities), the
applicable rental rate shall be that described in Section 5.1(e) above.
(k) Contractor shall have the right to deduct from and offset
against any and all Rent payable under Section 5.1 hereof, all sums due and
payable to Contractor from Owners, or either of them, from time to time, for
any goods and/or services supplied Owners, or either of them, from time to
time, and for any Occupancy Taxes paid by Contractor, it being the intent of
the parties that Owners shall be responsible for any such taxes, whether
assessed against Owners or Contractor.
5.2 RECORDS, ACCOUNTING AND AUDIT.
(a) Contractor will keep at its headquarters at the Park adequate and
accurate accounting books and records prepared in accordance with GAAP of all
business and transactions conducted under this Agreement, for all periods
included within the Term of this Agreement, said records to include without
limitation the daily receipts, the daily bank deposits, the daily sales and
business done by the Contractor and Contractor shall preserve and make
available for audit and examination by the Owner all of such records relating
to the performance by Contractor of its obligations under this Agreement.
Such records will be maintained for two years following completion of
operations for each year.
(b) Contractor shall maintain such accounting records on a Fiscal
Year basis.
(c) Throughout the Term of this Agreement, Contractor shall submit to
Developer, within ninety (90) days after the end of each Fiscal Year a report
of all Gross Receipts for the prior Fiscal Year in the following categories:
Concession Sales, Catering Sales, Arena Restaurant Sales, Clubhouse Sales and
Mobile Stand Sales (the "Sales Categories") certified by the chief financial
officer of Contractor. In the event that Developer is not satisfied with the
statements presented hereunder, Developer shall have the right to conduct a
special audit of the Contractor's books and records related to the Gross
Receipts, by auditors selected by Developer, provided it does so within 24
months following receipt of the above described financial statement. Should
such audit(s) uncover a deficiency or deficiencies in payments by Contractor
for any period covered, Contractor shall pay to the Owner to which such
payment is due the amount of such payment deficiency within 20 days following
receipt of the audit report and interest on the deficiency at the Default Rate
from the applicable due date. If such payment deficiency is in excess of five
percent of the aggregate amount reported, the cost of the audit shall be
immediately due and payable by the Contractor. The foregoing shall not apply
with respect to any potential "deficiency" which is the result of a
disagreement between the parties unless and until such disagreement is
resolved in favor of Owner(s).
(d) Contractor must submit to each Owner monthly by the twentieth
(20th) of the following month a report showing Gross Receipts in the Sales
Categories described above.
5.3 PERSONNEL. Contractor will hire, train and supervise, discipline
and, if need be, dismiss all persons necessary to operate the Contractor's
Services hereunder and will use all reasonable efforts to assure that its
employees continually practice high standards of cleanliness, safety, courtesy
and service customary in the industry. Training shall include: customer
service, alcohol awareness, emergency procedures, health, safety, and
sanitation practices. Employees of Contractor shall wear neat and clean
uniforms displaying the Park's logo, but identifying themselves as
Contractor's employees. Such uniforms shall be of a design reasonably
satisfactory to both parties. Determining appropriate staffing levels and
disposition of employees shall be Contractor's sole responsibility.
Contractor shall appoint a general manager for Contractor's Services who
shall be responsible for participation in Owner's budget process and shall
report to representatives of Owners as shall be designated from time to time.
The general manager so designated by Contractor shall participate in periodic
meetings with Owners to review all matters pertaining to the design,
operation, financial results and marketing and quality of Contractor's
Services. Such general manager shall work at the Park on a full time basis
and shall maintain his offices at the Park.
Neither Contractor, nor any Affiliate of Contractor performing services
under this Agreement, shall knowingly discriminate against any employee or
applicant for employment because of age, race, creed, sex, color, disability
or national origin, and Contractor and its Affiliates shall take affirmative
action to ensure that any employee or applicant for employment is afforded
equal employment opportunities, without discrimination because of age, race,
creed, sex, color, disability or national origin. Such action shall be taken
with reference to, but not limited to, recruitment, employment, job
assignment, promotion, upgrading, demotion, transfer, layoff or termination,
rates of pay or other forms of compensation in selection for training or
retraining, including on the job training. Contractor shall require that its
employees comply with Owner's general standards of conduct and customer
service. Subject to compliance with such obligations, Contractor shall have
plenary power with respect to the hiring and discharge of its employees.
Owners shall not assume any obligations of Contractor to its employees,
and all such obligations shall be the obligations of Contractor.
The Contractor will participate in all of the Owners' "guest
satisfaction" research and management programs and department reward and
recognitions programs related to guest satisfaction. The Contractor's full
time and seasonal employees shall be required to attend the Owners' guest
services orientation program which emphasizes safety, service and quality.
5.4 LICENSES AND PERMITS. Contractor shall obtain no later than the
Substantial Completion Date, and thereafter, maintain in force during the
Term of this Agreement, all necessary food, liquor and other licenses and
permits and renewals thereof, provided that the Park's building structures,
Utility Systems and transportation pathways and systems are in compliance with
all Legal Requirements. Contractor shall pay fees and taxes which may be due
and owing, from time to time, to federal, state or municipal authorities
incidental to Contractor's Services. Owners agree to cooperate with
Contractor in connection with filing applications for, and securing and
maintaining in good standing, any and all licenses and permits and renewals
thereof needed by Contractor to fulfill its obligations hereunder.
5.5 COMPLIANCE WITH LAWS, POLICIES AND PROGRAMS. In connection with
the performance of its obligations under this Agreement, Contractor shall at
all times be, and will conduct Contractor's Services, in full and complete
compliance and with any and all Legal Requirements. Contractor shall use all
reasonable commercial efforts to maintain compliance with health code
regulations, maintain no less than a B rating as determined by the County
Health Department, and shall take all reasonable actions to cure any
deficiencies promptly upon receipt of notification of same.
Owners specifically grant to Contractor:
(i) The right to enforce all Nevada laws, rules, regulations or
orders relating to premises licensed to sell and serve alcoholic beverages and
enforce all rules, regulations or orders of applicable Governmental
Authorities.
(ii) Full right, power and authority to take any and all actions
necessary to enable and to ensure compliance with all laws, rules, regulations
and orders concerning the sale and consumption of alcoholic beverages in the
Park.
5.6 PROCEEDINGS INVOLVING LICENSE AND PERMITS. Contractor shall
promptly advise Owners in writing of any pending or threatened actions against
it, by Governmental Authorities, which seek, or could result in, the
suspension of revocation of any license or permit necessary for its
performance under this Agreement. In the event of any scheduled suspension or
revocation of Contractor's license to serve alcoholic beverages, and if such
suspension or revocation shall not be stayed or appealed in such manner that
will permit Contractor to continue to serve alcoholic beverages at the Park,
then Contractor shall be obligated, subject to the approval of Developer, to
secure an interim licensed bar operator at the Park to enable or permit the
serving of alcoholic beverages. If Contractor has not secured an interim bar
operator or made other arrangements as provided above, within a reasonable
period of time, Developer without waiving any rights which it may otherwise
have hereunder, shall have the right, but not the obligation, to secure an
interim licensed bar operator.
In such event, Contractor will make available to the interim bar
operator, to the extent permitted by applicable law, if any, all supplies of
applicable beverages then in its possession which were intended for sale or
use at the Park, will afford to such interim bar operator the benefit of
supply arrangements for beverages and will make applicable Food Service
Facilities available to such interim bar operator.
Contractor shall be entitled to reimbursement, at its cost, for all
Refreshments furnished to and usable by such interim bar operator and for its
cost and expenses actually and necessarily incurred in rendering the
assistance and cooperation contemplated by the foregoing. Sales of interim
bar operator, if retained by Developer, shall be excluded from Gross Receipts
of Contractor and Contractor shall owe no percentage rent to Owners as a
result of any of such Sales. Contractor shall resume the sale of alcoholic
beverages at the Park upon restoration of the licenses or permits to do so.
5.7 HOURS OF OPERATION. Contractor will open a sufficient number of
Food Service Facilities (based on anticipated attendance and pre-sold ticket
information provided by Owners) to satisfy anticipated patron demand on all
days that the Park is open to the public. The parties covenant to work
together on an on-going basis to ensure that service levels are maintained to
mutually satisfactory levels.
5.8 MAINTENANCE AND REFUSE. Contractor shall be responsible for the
operation of its Food Service Assets and all maintenance, repair , upkeep and
replacement thereof. Contractor shall use reasonable efforts to keep the
private areas (i.e. . . kitchens, offices, commissary areas, and the interior
of stands and bars) of the Food Service Facilities neat and clean. Contractor
will not permit its employees to dispose of or discharge waste, garbage or
refuse in any area in or outside the Park other than in areas specifically
designated therefor.
All of Contractor's refuse shall be removed by Contractor to the central
refuse collection point for the Park on a regular basis. In addition,
Contractor shall be responsible for cleaning the private areas of the Food
Service Facilities and for any and all necessary pest control and sanitation
activities, on a regular and continuing basis. Maintenance and cleaning of
public portions of the Food Service Facilities and all outside areas such as
cabanas, patios, terraces and decks shall be the responsibility of Owner.
Both Owners and Contractor agree not to use Hazardous Substances at the
Park except in accordance with all applicable Legal Requirements and each of
them agrees to indemnify, defend, and hold the other party harmless for all
losses, costs, damages, liabilities and expenses arising out of its use,
generation or storage of Hazardous Substances at the Park.
5.9 DELIVERIES. All deliveries of Refreshments and other items used
or sold by Contractor at the Park shall be made only during normal operating
hours and shall be made through a gate or gates designated by Developer.
Acceptance of deliveries shall be solely Contractor's responsibility.
Contractor shall use reasonable efforts to prevent the entry of any
unauthorized persons into the Park through such gate or gates when open for
purpose of such deliveries.
5.10 MECHANICS LIEN. Contractor shall at all times protect and keep
the Food Service Facilities and any property of Owners free and clear of all
mechanics and other liens, attachments, encumbrances, or claims arising out of
Food Service Services hereunder, its performance under this Agreement, and/or
its use of the Concession Facilities. In the event any such lien is placed,
or such encumbrances created, Contractor shall use all reasonable efforts to
attempt to have them removed, and if necessary, shall provide the applicable
Owner with a bond or other reasonable security. Nothing in this Agreement
shall be construed to authorize or permit Contractor to create any lien or
encumbrance on the Park or any portion thereof including the Food Service
Facilities.
5.11 PRODUCTS. Contractor agrees that it will have available at all
times sufficient quantities and varieties of pure and wholesome Refreshments.
Subject to Developer's reasonable approval, Contractor shall be entitled to
use and promote any "private brand products" Contractor may own or control.
Contractor will post menus, with prices, in conspicuous places within or
adjacent to the Food Service Facilities. The menu design shall be subject to
Developer's reasonable approval.
5.12 SPONSOR AND BRANDED PRODUCTS. Developer shall have the right to
require Contractor to sell certain food and/or non-alcoholic products or
Branded Products and to otherwise take innovative action to increase sales
and/or improve customer satisfaction, provided that Contractor's percentage
fees (as delineated in Section 5.1 above) with respect to such items is
equitably reduced to take into account any differential between the cost of
product (including but not limited to applicable licensing, franchise and/or
advertising fees) for such item and the average price of similar items
Contractor is then selling. Contractor will not be required to sell Branded
Products if any capital investment is necessary.
5.13 SUBLEASING. Contractor shall have the right to license Food
Service Facilities to third party vendors (including both private and
charitable and/or not-for-profit organizations), provided that Developer shall
have in its sole discretion first approved in writing such license, the
products to be sold, the decor used, and any right's fee to be collected on
Owner's behalf.
5.14 INDEPENDENT CONTRACTORS. Contractor shall be an independent
contractor under this Agreement and solely responsible for its own employees,
agents and other representatives. This Agreement does not give rise to a
partnership or joint venture among the parties hereto.
5.15 OPERATING PLAN. On or before January 1st of each Fiscal Year,
Contractor shall provide to Developer an operating plan that will include the
following: menus and prices, proposed improvements, if any, a list of
promotional items, if any, and Contractor's plan with respect to management
and staffing. Any changes in such plan must be submitted to the Developer for
approval. The Owner agrees not to unreasonably withhold its consent.
5.16 SALES AT COST. Contractor will sell to each Owner Refreshments
(except for alcoholic beverages) provided same is for consumption and not
resale at Contractor's aggregate cost of production and service. Payment
shall be due on a monthly basis. Contractor shall provide Owners with a
monthly report and shall deduct what it is due from rents otherwise payable
hereunder.
ARTICLE VI
Indemnification and Insurance
6.1 INDEMNIFICATION:
(a) The Contractor shall and does agree to indemnify, protect,
defend and hold harmless the Indemnities for, from and against all
liabilities, claims, damages, losses, liens, fines, penalties, costs, causes
of action, suits, judgments and expenses (including court costs, attorney fees
and costs of investigation), of any nature, kind or description ("Damages") to
the extent such Damages arise, directly or indirectly out of, or are caused
by, or result from: (1) the services performed by Contractor at the Park; (2)
Contractor's performance under this Agreement; or (3) any act or omission of
Contractor, its Affiliate or anyone directly or indirectly employed by it.
(b) Each Owner hereby agrees to indemnify, defend and hold
harmless Contractor and any Affiliate thereof and all directors, officers,
employees and agents of each of the foregoing (collectively "Contractor
Indemnitees"), from and against all Damages asserted against, imposed upon or
incurred by any of the Contractor Indemnitees, to the extent such Damages
arise; directly or indirectly, out of or are caused by, or result from any of
the following:
(i) Any breach by such Owner of any of its representations,
warranties, covenants, or agreements made in this Agreement.
(ii) The performance (or nonperformance) by such Owner of
its obligations hereunder, except any Damages resulting from the negligent
acts or omissions of Contractor.
(iii) Any attempt or threat (regardless of whether
successful and regardless of whether litigation is commenced) by any person or
entity to cause or require Contractor to pay or discharge any actual or
claimed debt, obligation, liability or commitment of or associated with such
Owner.
6.2 WAIVER OF SUBROGATION RIGHTS: Notwithstanding any other
provision of this Agreement, it is expressly agreed that neither Owners nor
Contractor (the "First Party") shall be liable to the other (the "Second
Party"), and each Second Party hereto hereby releases and waives all claims,
rights of recovery, and causes of action that either such Second Party or any
party claiming by, through or under such Second Party, by subrogation or
otherwise, may now or hereafter have against the First Party or any of the
First Party's directors, officers, employees, or agents for any loss or damage
that may occur to the Park, the Food Service Facilities (and any and all
improvements thereto), Food Service Assets or any of the contents of the Park,
or for any interruption in its business, if sustained by reason of fire, (even
if such fire is a result of the negligence or gross negligence of the First
Party or any one or more of its directors, officers, employees or agents), or
if sustained by reason of storm damage or the elements, or by other casualty
event to the extent that such loss or damage is of a type that is, by its
nature, recoverable by insurance (including any deductible), regardless of
whether any policy is actually in effect. Both Owners and Contractor shall
cause their respective insurance carriers to include provisions in all
applicable policies authorizing the waiver of any rights by way of subrogation
each might have against the other.
6.3 CONTRACTOR'S INSURANCE. (a) The Contractor shall carry: (i)
Worker's Compensation insurance in such amount as is required by the laws of
the State of Nevada; (ii) liability insurance (commercial, liquor, and
automobile liability coverages) with a combined single limit per occurrence of
not less than $5,000,000 (with no exclusion for liability assumed by contract)
and (iii) blanket crime insurance covering its employees in a minimum amount
of $500,000. The Contractor shall deliver to Developer, as agent for both
Owners, prior to the Commencement Date and then on or prior to, the expiration
date of any then existing policies in the future during the Term hereof, a
certificate of certificates evidencing that such insurance coverages are in
effect for a period of not less than one year from the date of such
certificate. All policies shall contain a clause providing in substance that
such policies shall not be cancelled or any material provisions thereof
amended adversely to Owners unless Owners shall have been first given at least
thirty (30) days advance notice of such termination or of any such proposed
amendment. Contractor shall cause the Indemnities to be named as an
additional insured on its liability insurance policies.
(b) All such policies may be provided under blanket and/or umbrella
policies carried by the Contractor.
(c) The insurance required by Section 6.3(a)(ii) shall be primary
insurance and the insurer shall be liable for the full amount of any loss up
to the total limit of liability required without the right of contribution of
any other insurance coverage held by Owners.
(d) This Section 6.3 is subject to all limitations identified in
Sections 6.1 and 6.2. Nothing in this Section 6.3 shall be construed as
requiring liability coverage and/or indemnification of Owners' negligence or
willful action or omission.
ARTICLE VII
Assignment
7.1 CONTRACTOR'S ASSIGNMENT. The Contractor shall not, without prior
receipt of the express written consent of Owners, assign this Agreement or any
of its duties as Contractor, provided that such written consent shall not be
required where such assignment is to an Affiliate of Contractor. In the event
of an assignment to an affiliate, Contractor shall remain liable for
performance hereunder.
7.2 TRANSFER OF OWNERSHIP. Owners covenant to cause this Agreement
to be assigned to any transferee of the Park (or any portion thereof) and
covenant to cause such transferee to assume its then unfulfilled obligations
hereunder. Upon acceptance of such assignment, such transferee shall be bound
by all of the provisions of this Agreement which are then applicable and shall
be entitled to all of the corresponding rights hereunder and such transferee
shall permit Contractor to continue in occupancy of the Food Service
Facilities and to continue to operate under this Agreement, provided that
Contractor is not in default hereunder, which default has remained uncured or
unremedied after expiration of applicable grace/cure periods described in
Article VIII below.
7.3 ATTORNMENT/NONDISTURBANCE. Contractor agrees that all of its
rights under this Agreement are and will be subject and subordinate to any
rights of the Landlord or any mortgages and/or security instruments that now
exist or may later be placed upon the Park (collectively referred to as
"Senior Interest"). Contractor also agrees that if the holder of any such
Senior Interest ("Holder") or if the "Purchaser" of such Senior Interest at
foreclosure sale, or sale in lieu thereof, requests Contractor to do so,
Contractor shall attorn to and establish direct privity of estate and contract
with and recognize such Holder or Purchaser as Owners' successor under this
Agreement, provided that such Holder or Purchaser agrees to abide by the terms
and conditions hereof. In consideration for the foregoing, Owners covenant to
obtain from any and all of such Holder(s) (including, but not limited to
Landlord), a covenant of nondisturbance for Contractor's benefit in the form
of Exhibit C. Provision for such subordination, attornment and nondisturbance
shall be made in one or more Subordination, Nondisturbance and Attornment
Agreements (as necessary), each in substantially the form of Exhibit C hereto,
which Contractor hereby agrees to enter into and Owners hereby agree to
arrange for such Holder to enter into.
7.4 ESTOPPEL CERTIFICATES. Contractor shall, from time to time, upon
the request of Owners (or either of them) execute and deliver to the
requesting Owner, or the requesting Owner's designee, a statement,
satisfactory to Owner in form and substance, certifying, to the extent true
and ascertainable: (a) that this Agreement constitutes the entire agreement
between Owner(s) and Contractor and is unmodified and in full force and effect
(or if there have been modification, that the same is in full force and effect
as modified and stating the modifications); (b) the date to which the Rents
hereunder have been paid; (c) that Owner is or Owners are not in default
under this Agreement and that, to the best of Contractor's knowledge, no
circumstance exists which, with the giving of notice, the passage of time, or
both, would constitute a default by Owner(s) hereunder; (d) the expiration
date of the Term; and (e) any other matters relating to the status of this
Agreement or the condition of the Park that Owner(s) may reasonably request.
Such statement shall be delivered to Owner(s) or Owners' designee no later
than twenty (20) business days after Owners' reasonable request therefor.
ARTICLE VIII
Termination
8.1 TERMINATION OF CONTRACTOR. Owners may terminate this Agreement
by written notice to such effect in the event: (a) Contractor fails to
remit, for a period of twenty (20) days after receipt of written notice of
demand therefor, any sums due and owing under this Agreement (except for such
amounts which the Contractor, in good faith, disputes as owing); or (b) the
Contractor fails in a material and substantial manner to perform its
obligations hereunder where the effect thereof is to deprive Owners, in a
substantial and material manner, of the benefits of this Agreement for a
period of twenty (20) days after receipt of written notice specifying the
nature of such default (except where such failure or refusal is due to a
"Force Majeure" as described in Section 12.1 hereof) or (c) "Contractor's
Insolvency" as defined in Section 8.4 shall occur or (d) as expressly provided
elsewhere in this Agreement.
8.2 TERMINATION BY CONTRACTOR.
(a) In the event Owners or either of them fail to fulfill, in any
material and substantial respect, its obligations hereunder and such failure
continues unremedied for thirty (30) days after receipt of written notice of
the particular failure (except where such failure or refusal is due to a
"Force Majeure, as described in Section 12.1 hereof), Contractor may terminate
this Agreement by furnishing Owners with written notice of its intent to do
so.
(b) In addition, Contractor shall have the unilateral right to
terminate this Agreement in the event that:
(i) sufficient financing for the development and construction of
the All-American SportPark is not raised and written evidence of same
presented to Contractor on or before November 30, 1997; or
(ii) the All-American SportPark is not fully operational and
open to the public by February 28, 1998.
Such termination may be effected by written notice of intent to do so
provided that same is delivered to Owners on or before February 28, 1998. If
Contractor exercises its right to terminate in accordance with this provision,
termination shall be effective 30 days following the date of the notice and
the amount payable under Section 8.5(a) shall be equal to 100% of Contractor's
Investment, payable in full upon date of termination. Section 8.3(d) shall
not be applicable to this provision.
8.3 GENERAL CURE PERIOD. If the particular failure to perform under
Section 8.1 or Section 8.2 cannot be cured within the applicable curative
periods provided above, the breaching party shall have a reasonable time
thereafter in which to remedy the problem provided that it is diligently and
continuously making any and all reasonable efforts required to correct the
problem.
8.4 REPOSSESSION, ETC. If this Agreement shall have terminated as
provided in Section 8.1 or 8.2 or if a Contractor Insolvency occurs (whether
or not this Agreement shall have terminated), Owners or their agents or
employees may at any time thereafter either enter upon and repossess the Food
Service Facilities or any part thereof, either by force, summary dispossession
proceedings, ejectment or any suitable action or proceeding at law or
otherwise, and may remove Contractor therefrom. For purposes hereof,
"Contractor Insolvency" means (i) commencement by Contractor of a voluntary
case or other proceeding seeking liquidation, reorganization, moratorium,
dissolution, winding-up or composition or readjustment of its debts or other
relief with respect to it or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect, or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it or
any substantial part of its property, or the consent by Contractor to any such
relief or to the appointment of or taking of possession by any such official
in an involuntary case or other proceeding commenced against it or the making
by Contractor of a general assignment for the benefit of creditors, or the
taking by Contractor of any action to authorize any of the foregoing or
indicating its consent to or approval of or acquiescence in any of the
foregoing; or (ii) the commencement of an involuntary case or other proceeding
against Contractor seeking liquidation, reorganization, moratorium,
dissolution, winding-up or composition or readjustment of its debts or other
relief with respect to it or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official or it or
any substantial part of its property, which involuntary case or other
proceeding shall remain undismissed or unstayed for a period of 90 consecutive
days.
8.5 SALE OF CONTRACTOR'S ASSETS. Upon termination or expiration of
this agreement for any reason, Contractor shall transfer its Refreshment
inventory; its paper goods and supplies, and cleaning products; its leasehold
interests, its Food Service Assets located at the Park (in the aggregate as
the "Contractor's Then Existing Assets") to Owners and Owners shall pay
Contractor a sum equal to the sum of the following in the aggregate:
(a) Except as described in Section 8.3(b), 110% of the then
undepreciated value of Contractor's Investment at the Park, using a 10 year
straight-line method of depreciation from the Date of Substantial Completion
or the date of installation (whichever shall later occur) of each asset until
the date of termination of this Agreement. For purposes of this provision,
"Contractor's Investment" shall mean the aggregate amount expended by
Contractor for Development Costs for the Food Service Facilities and Food
Service Assets (excluding only those items Contractor intends to remove in
order to protect its Food Service Design Rights) under the terms and
conditions of Article II including the unamortized balance of payments made by
Contractor to Developer under Section 3.3 and all similar capital costs
thereafter expended by Contractor at the Park.
Notwithstanding the foregoing, upon expiration of this Agreement in
accordance with its terms at the 10 year term hereof, the above-described
"buyout" formula shall be reduced to 100% of the then undepreciated value of
Contractor's Investment at the Park, using a 10 year straight-line method of
depreciation from date of installation of each asset.
(b) The invoice cost of then existing Refreshments, supply and paper
goods, cleaning products and Smallwares.
(c) To secure the above described obligation, Owners hereby grant
Contractor a first priority security interest in: (i) any and all sums now
or hereafter payable by Contractor to Owners hereunder; and (ii) all Food
Service Facilities (and related improvements) installed at the Park and the
proceeds thereof (the "Pledged Assets"). Owners further grant Contractor the
right to execute and file any and all UCC-1's or other security filings
Contractor may deem appropriate to perfect Contractor's security interest
without Owners' signature. In the event of occurrence of default hereunder,
Contractor shall have all rights of enforcement against and recourse to the
foregoing Pledged Assets permitted under the Uniform Commercial Code.
(d) In the event of termination during the first five years of the
Term (unless such termination is due to the default of Owners, or either of
them, or unless the termination is effected by Contractor under Section
8.2(b)), upon termination Owners shall have the right to pay the buyout
described above over a four year period, provided they first give Contractor a
duly executed negotiable promissory note and security agreement and related
UCC-1 in a form provided by Contractor. Such security shall cover the Pledged
Assets and the food and beverage sales at the Park. The note shall bear
interest at 10% per annum. Said instruments shall give Contractor a perfected
first priority lien on the Pledged Assets and the food and beverage sales.
Repayment shall be made in 30 consecutive equal monthly payments.
ARTICLE IX
Casualty Event
9.1 After any damage to or destruction of the Park or any portion of
the Park, Contractor shall continue the operation of Contractor's Services in
the Park to the extent practicable from the standpoint of good business. If
Owners shall elect to make any repairs, reconstruction or restoration of any
such damage or destruction, Contractor shall not be entitled to any monetary
or other damages because of any resulting inconvenience or loss. However, the
Term of this Agreement shall be automatically extended in an equitable manner
so that all parties shall have the full operational benefit of operating for
the entire period originally intended under this Agreement. In the event of
partial damages or destruction such extension shall be computed on a pro rata
basis based on the proportionate reduction in Gross Receipts.
Notwithstanding any provision hereof to the contrary, in case of any
damage to or destruction of the Park (i) in connection with any taking or
requisition of the Park or any part thereof or interest therein or any
transfer in lieu thereof (an occurrence of the character described in this
clause (i) being referred to herein as a "Condemnation" under Article XI
hereof) or (ii) arising out of fire, flood or other casualty (an occurrence of
the character referred to in this clause (ii) being referred to herein as a
"Casualty"), Owners shall have no obligation to Contractor to effect any
repair or restoration of such damage or destruction. If Owners fail to
rebuild within 12 months, Contractor shall have the right to terminate this
Agreement by written notice of its election to do so.
ARTICLE X
Arbitration
10.1 Any controversy arising out of or relating to this Agreement, or
relating to any breach hereof, shall be settled by arbitration in Las Vegas,
Nevada in accordance with the Commercial Arbitration Rules of the American
Arbitration Association ("AAA") then in effect. For disputes involving less
than $500,000, one Arbitrator shall be selected by the "strike-off" method.
Owners, jointly, and Contractor shall have the right to strike off
unacceptable candidates or to prioritize the list of candidates, as the
parties may elect. All disputes involving a sum of $500,000 or more shall be
decided by a panel of 3 arbitrators selected by AAA through its normal panel
presentation process. The award rendered by the Arbitrator(s) shall be final
and judgment upon the award rendered by the Arbitrator(s) may be entered upon
it in any court having jurisdiction thereof. The Arbitrator(s) shall possess
the power to issue mandatory orders, and restraining orders in connection
with such arbitration, including ordering specific performance. The expense
of arbitration shall be borne by the losing party unless otherwise allocated
by the Arbitrator(s). This agreement to arbitrate shall be specifically
enforceable under the prevailing Arbitration Law. During the continuance of
any arbitration proceedings, the parties shall continue to perform their
respective obligations under this Agreement.
ARTICLE XI
Condemnation
11.1 In the event of a taking (for any public or quasi-public use,
under any statute or by right of eminent domain) of (a) all of the Park or (b)
so much of the Park so that it no longer can be used for, or restored as a
Park, Contractor's rights and obligation to perform under the terms and
conditions of this Agreement, shall cease.
11.2 In the event of any other taking of the Park for public or
quasi-public use, under any statute or by right of eminent domain, if the Park
is restored, this Agreement shall continue in full force and effect and the
Term shall be extended in an equitable manner so that both parties will have
the full operational benefit of operating for the entire period originally
contemplated under this Agreement.
ARTICLE XII
Force Majeure
12.1 It is expressly understood and agreed that failure or delay on
the part of any party hereto in the performance in whole, or in part, of the
terms and conditions of this Agreement shall not constitute a breach hereof,
nor a default hereunder, if such failure or delay is attributable to acts of
God, fire, floods, inevitable accident, or riots, insurrection, terrorism,
public commotion, strikes or labor disturbances, embargo, emergency or
governmental orders, regulations, actions, priority or other limitations or
restrictions, or unforeseen cause interfering with personnel, sales, source of
supplies, production, transportation and delivery, or for any cause beyond the
control either party ("Force Majeure). The term of this Agreement shall be
equitably extended in the event that the Park is shut down due to the
occurrence of a Force Majeure for a period of time equal to the shut down
period.
ARTICLE XIII
Miscellaneous
13.1 The Agreement shall be governed in all respect by the laws of
the State of Nevada without regard to such state's position with respect to
Conflict of Laws.
13.2 This Agreement may not be amended or modified except in a
writing and signed by the parties.
13.3 This Agreement and the terms hereof shall be unaffected by any
reorganization, merger, recapitalization or change in structure of either
party or by any transfer, lease, assignment or other change in ownership of
the Park or any portion thereof.
13.4 Where "consent" or "approval" of or "authorization" (in the
aggregate a "Consent") from Owners or Developer is required hereunder, such
Consent shall mean the Consent from Developer's Chief Executive Officer.
Where Consent of Contractor is required hereunder such Consent shall mean that
of Contractor's Chief Executive Officer. Each party agrees that, except as
otherwise provided in this Agreement, whenever prior Consent of a proposed
action is required, it will not unreasonably withhold or delay such Consent.
Failure to provide an explanation for disapproval shall be considered
"unreasonable" per se. Each party also agrees that if it fails to either
approve or disapprove a request for a Consent for a period of twenty (20) days
(after receipt of the written request) or longer, the other party shall have
the right to construe such silence as approval.
13.5 All notices required or permitted to be given under the terms of
this Agreement shall be sent in writing by certified mail, return receipt
requested, hand delivered, or by courier service to the parties hereto at
their addresses set forth below.
To Contractor:
Sierra Sportservice, Inc.
438 Main Street
Buffalo, NY 14202
To Guarantor:
Sportservice Corporation
438 Main Street
Buffalo, NY 14202
Attn: Office of the President
With a copy to:
General Counsel
Sportservice Corporation
438 Main Street
Buffalo, NY 14202
To Owners:
Saint Andrews Golf Corporation
5325 South Valley View
Suite 10
Las Vegas, NV 89118
or at such other address or addresses as may be specified by either party
hereto by written notice delivered to the other as provided herein. Any such
notice if sent in accordance with the provisions of this Section 13.5 shall be
deemed the earlier of when received or within five (5) days following the
deposit thereof in the U.S. mails as above provided.
13.6 Any provision of this Agreement prohibited or invalidated by a
court of competent jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or invalidity without affecting the validity
of the remaining provisions of this Agreement.
13.7 Except as otherwise described in Section 2.3 above, Contractor's
obligations hereunder shall not vest until and unless the afterstated
Conditions Precedent have been satisfied or waived by Contractor:
a) Contractor has been provided with documentary evidence of sources
of funding for the development budget of the Callaway Golf Center;
b) Contractor received fully executed and filed copies of the
memorandum of lease described in Section 4.2 above and confirmation of a first
priority security position by its attorneys;
c) Contractor has received fully executed copies of the
nondisturbance agreements described in Section 7.3 above; and
d) All third party approvals have been received by both parties.
In the event the foregoing has not been received by September 30, 1997,
Contractor shall have the right to terminate this Agreement. Notwithstanding
the foregoing, if Contractor fails to issue notice of termination by September
30, 1997, Contractor shall be deemed to have waived its right to so terminate.
ARTICLE XIV
Guaranties of Payment and Performance
14.1 As a condition and specific inducement to the Owners entering
into this Agreement and in consideration of TEN AND NO/100 DOLLARS ($10.00)
and the benefits to be derived by Guarantor upon the execution and performance
of this Agreement by Contractor through the close affiliation of Guarantor
with Contractor, the receipt and sufficiency of which are hereby acknowledged
and confessed, Guarantor hereby covenants, guarantees and agrees as follows:
(a) Subject to the terms of this Section, Guarantor hereby
guarantees to the Owners the timely payment of all Rent, all sums now or
hereafter due and owing by Contractor pursuant to Section 5.1 or otherwise
under this Agreement, and the full and timely performance and observance of
all of Contractor's other obligations and covenants in accordance with and
subject to the terms and conditions of this Agreement throughout the entire
Term of the Agreement (collectively, the "Guaranteed Obligations"). The
guaranty covenants and obligations pursuant to this Article XIV are and shall
for all purposes be deemed to be a guaranty of payment and performance, and
not merely a guaranty of collection.
(b) If any default is made by Contractor in the payment of any
portion of the Guaranteed Obligations, or if Contractor defaults in the
performance or observance of any of the terms, covenants or conditions of this
Agreement or any portion of the Guaranteed Obligations and such default
continues following notice to Contractor and Guarantor and expiration of
applicable periods for remediation or cure by either Contractor or Guarantor
(such notice and periods as described in Article VIII hereof), Guarantor
shall, pay, perform and/or observe the same, provided that Guarantor shall
enjoy (jointly with Contractor): (i) any and all defenses of Contractor with
respect to any default of the Owners arising out of this Agreement (but
specifically excluding, without limitation, any and all defenses arising, at
law, in equity or otherwise out of the financial incapacity of Contractor
under Bankruptcy Law or otherwise); and (ii) all rights hereunder of
Contractor to enforce the obligations of the Owners described in this
Agreement and the Contractor's rights under this Agreement.
(c) Any act of the Owners consisting of a waiver of any of the
terms or conditions of this Agreement, or the giving of any consent to any
matter or thing relating to this Agreement, or the granting of any indulgence
or extensions of time to Contractor, may be done without notice to Guarantor
and without releasing the obligations of Guarantor hereunder.
(d) It shall not be necessary for the Owners to enforce or seek
to enforce any of its rights and remedies hereunder against Contractor prior
to enforcing or seeking to enforce the same against Guarantor.
(e) Guarantor waives diligence of the Owners or its assignees in
pursuing any remedy against Contractor. Furthermore, the Owners shall not be
required to pursue or exhaust any other remedies before invoking the benefits
of the guaranty provided in this Article XIV and any pursuant of any such
remedies shall in no manner impair or diminish the rights of the Owners under
this Article XIV; however, Guarantor shall have the right to all defenses
otherwise available to Contractor and to enforce, in its own name, all
obligations of the Owners to the Contractor contained in this Agreement and
for purposes of this Guaranty. The Owners acknowledge that it shall not have
the right to allege lack of privity or that Guarantor does not hold the rights
granted to Contractor herein in any action in which Guarantor asserts such
defenses which are so available to Guarantor. Nothing in this Article XIV
shall relieve or be deemed to relieve Contractor in any way of its obligations
and liabilities under this Contract.
14.2 Guarantor agrees that this provisions of Section 13.1 above
shall apply to the provisions of this Article XIV and the performance
hereunder by Guarantor.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day
and year first above written.
ATTEST: SIERRA SPORTSERVICE, INC.
________________________ By:/s/ Gordon Smith, Secretary/Treasurer
SPORTSERVICE CORPORATION
_________________________ By:/s/ Gordon Smith, Vice President
SAINT ANDREWS GOLF CORPORATION
_________________________ By:/s/ Ron Boreta, President
All-AMERICAN GOLF LLC
By: Saint Andrews Golf Corporation,
its Manager
_________________________ By:/s/ Ron Boreta, President
<PAGE>
EXHIBITS
A = Legal Description of Park
B = Memorandum of Lease
C = Subordination, Nondisturbance & Attornment Agreement
SUBSIDIARIES OF THE REGISTRANT
NAME OF SUBSIDIARY STATE OF INCORPORATION
All-American SportPark, Inc. Nevada
All-American Golf, LLC California
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
(and to all references to our Firm) included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
/s/ Arthur Andersen LLP
Las Vegas, Nevada
September 29, 1997
