<PAGE>
As filed with the Securities and Exchange Commission on February 4, 1998
SEC Registration No. 33-84024
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
POST EFFECTIVE AMENDMENT NO. 3 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 7996 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
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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
SUBJECT TO COMPLETION; DATED ___________, 1998
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH STATE.
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 March 16, 1998. 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 March 16, 1998. 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 officers and directors, by virtue of their control of the
Company's parent, have control of approximately 54.8% of the shares
outstanding and therefore have a controlling interest in the Company and can
effect the outcome of elections and other business matters. (See "Risk
Factors.")
<PAGE>
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 February 3, 1998,
the closing price of the Company's Common Stock was $3.375. (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.
THE COMPANY'S MANAGEMENT HAS A CONTROLLING INTEREST IN THE COMPANY AND
THEREFORE CAN EFFECT THE OUTCOME OF ELECTIONS AND OTHER BUSINESS MATTERS.
(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.
Underwriting
Price to Discounts and Proceeds to the
Warrantholders Commissions(1) Company(2)
- ---------------------- -------------- --------------- ---------------
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
_______________
(1) 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.
(2) Before deducting expenses of this offering estimated at $25,000.
The date of this Prospectus is _______________, 1998
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.
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<PAGE>
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).
The Company's SEC periodic reports and other information may be inspected
at the offices of NASDAQ located at 1735 K Street, N.W., Washington, D.C.
20006.
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.
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<PAGE>
TABLE OF CONTENTS
PAGE
PROSPECTUS SUMMARY ................................................... 5
RISK FACTORS ......................................................... 8
THE COMPANY .......................................................... 12
MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS .............. 17
USE OF PROCEEDS ...................................................... 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS ......................................... 19
BUSINESS ............................................................. 22
MANAGEMENT ........................................................... 30
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ....... 37
CERTAIN TRANSACTIONS ................................................. 39
DESCRIPTION OF SECURITIES ............................................ 41
SELLING SECURITY HOLDERS ............................................. 46
PLAN OF DISTRIBUTION ................................................. 47
LEGAL MATTERS ........................................................ 47
EXPERTS .............................................................. 47
INDEX TO FINANCIAL STATEMENTS ........................................ 49
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<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 is a Callaway Golf Center[TM], 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[TM]. The Callaway Golf Center[TM] opened to
the public on October 1, 1997. The Company is currently in the process of
seeking financing for completion of the construction of the Sports
Entertainment Complex.
On January 20, 1998, the Company and its majority shareholder, Las Vegas
Discount Golf & Tennis, Inc. ("LVDG"), executed a merger agreement that would
merge the Company into LVDG with LVDG being the surviving corporation in 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, the final merger agreement provides that LVDG would 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. LVDG currently owns 2
million shares of the Company's common stock. Based on this exchange rate,
the current shareholders of the Company (other than LVDG) would own
approximately 38.2% of the surviving corporation, assuming that the merger is
completed and there are no dissenting shareholders. The current officers of
LVDG would resign and be replaced with the Company's officers. See "Proposed
Merger with Las Vegas Discount Golf & Tennis, Inc." below.
The proposed merger is subject to a number of contingencies including,
among other things, the effectiveness of a registration statement which will
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 are expected to be asked to approve a reverse
split in the range of 1 for 2 to 1 for 5 with the objective of making the
shares of the survivor eligible for listing on the NASDAQ National Market
System or the American Stock Exchange and inclusion on the Federal Reserve
"List of Marginable Securities." See "Proposed Merger with Las Vegas Discount
Golf & Tennis, Inc."
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<PAGE>
The Company's executive offices are located at 5325 South Valley View
Boulevard, Suite 4, Las Vegas, Nevada, and its telephone number is (702)
798-7777.
THE OFFERING
Securities Offered Upon 500,000 Shares of Common Stock
Exercise of Class A Warrants
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 (1)
Preferred Stock Outstanding 500,000 Shares
Nasdaq Small-Cap Symbol SAGC
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(1) As of January 15, 1998. Does not include 907,000 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.")
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. The
Company does not intend to use any proceeds from the exercise of warrants to
pay any debt owed to insiders.
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.
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<PAGE>
At September 30, At December 31,
Balance Sheet Data: 1997 1996 1995
- ------------------- ---------------- ---------- ----------
Current Assets $ 1,870,000 $6,315,000 $3,558,000
Total Assets $15,671,000 $8,622,000 $4,903,000
Current Liabilities $ 1,441,000 $ 805,000 $1,148,000
Working Capital $ 429,000 $5,510,000 $2,410,000
Long-Term Debt $ 0 $ 0 $ 0
Shareholders' Equity $ 9,399,000 $7,726,000 $3,639,000
Cash Dividends Per Share $ 0 $ 0 $ 0
For the Nine Months For the Year Ended
Statement of Operations Ended September 30, December 31,
Data: 1997 1996 1996 1995
- ----------------------- ---------- --------- --------- ---------
Total income $ 231,000 $ 5,000 $ 95,500 $ 94,500
Loss from continuing
operations (421,100) (292,600)
Discontinued operations:
Loss from operations of
discontinued franchise
operations (41,000) (26,000) (329,100) (24,400)
Gain on disposal of
franchise operations
(less applicable income
taxes of $450,000) 2,162,000 - - -
---------- --------- --------- ---------
Net income (loss) $1,673,000 $513,000 $(750,200) $(317,000)
Income (loss) per share:
Income (loss) from
operations $ (.15) $ (.07) $ (.14) $ (.10)
Income (loss) from
discontinued operations .70 (.01) (.11) (.01)
---------- --------- --------- ---------
Net income (loss) per
share $ .55 $ (.08) $ (.25) $ (.11)
_______________
(1) Represents the Company's gain on the sale of the franchise operations
which was closed on February 26, 1997.
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<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 of $(750,200) and $(317,000) respectively.
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. INCURRING ADDITIONAL INDEBTEDNESS AND ISSUING NEW SECURITIES. The
Company will need to raise additional financing in order to complete the
construction of its All-American SportPark in Las Vegas. The Company is
attempting to obtain this financing from a combination of sources including
equity and/or debt investors, bank financing and corporate sponsorships. Any
issuance of equity securities would result in dilution to the interests of the
Company's stockholders and any issuance of debt securities would subject the
Company to risks that interest rates may increase or cash flow may be
insufficient to repay such indebtedness. The Company has a preliminary
understanding with someone regarding possible debt financing, but the Company
has no binding arrangements or understandings for additional financing. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
3. DECREASING CASH POSITION. During the nine month period ended
September 30, 1997, the Company's cash position declined from $5,818,000 to
$1,423,000 primarily due to expenditures associated with developing the
All-American SportPark. This compares with a positive cash flow of $5,693,000
during the year ended December 31, 1996, a negative cash flow of $3,116,900
during the year ended December 31, 1995, and a positive cash flow of
$3,227,400 during the year ended December 31, 1994. The ratio of indebtedness
to total capitalization was 57.2%, 10.4%, 31.5% and 16.8% respectively on
September 30, 1997, December 31, 1996, December 31, 1995 and December 31,
1994. The Company anticipates that it will continue to use a significant
amount of cash to build and develop its All-American SportPark in Las Vegas.
There can be no assurance that the Company will be able to obtain sufficient
financing to provide the cash needed. See "Risk Factor 2." above.
4. 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."
5. 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 not all 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.
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<PAGE>
6. 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.
7. 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."
8. 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."
9. 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.
10. 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."
11. 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."
12. 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. No dividends can be paid on the Common
Stock unless a similar dividend is paid on the Series A Convertible Preferred
Stock. See "DIVIDENDS."
13. 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
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<PAGE>
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 $2.00 and its shareholders' equity on September
30, 1997, was over $9.3 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.
14. 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.
15. OUTSTANDING OPTIONS. Currently, the Company has outstanding
options to purchase up to 907,000 shares of Common Stock at prices ranging
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."
16. 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 owned by Three Oceans Inc.
which are convertible into an aggregate of 500,000 shares of common stock. If
all 500,000 shares of preferred stock were converted, the Company's officers
and directors would have control over approximately 60.2% of the shares
outstanding. 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."
17. 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
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<PAGE>
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."
18. 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.")
19. NON-REGISTRATION IN CERTAIN JURISDICTIONS OF SHARES UNDERLYING THE
CLASS A WARRANTS. Although Units in the Company's initial public offering
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.
20. 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 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."
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<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 is a Callaway Golf
Center[TM], 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 common stock outstanding.
During July 1994, the Company set up a wholly-owned Nevada subsidiary
named All-American SportPark, Inc., which is the entity under which the
All-American SportPark is 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.
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
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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.
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, and which owns and operates
the Callaway Golf Center[TM] at the Las Vegas All American SportPark. (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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PROPOSED MERGER WITH LAS VEGAS DISCOUNT GOLF & TENNIS, INC.
GENERAL
On January 20, 1998, the officers of the Company and LVDG executed a
merger agreement pursuant to which the Company would merge with and into LVDG.
As a result, the separate corporate existence of the Company would cease and
LVDG would continue as the surviving corporation of the merger. Management
also intends to change the name of LVDG to All-American SportPark, Inc. to
reflect the primary business of the surviving corporation.
The Company and LVDG have commenced preparation of a registration
statement on Form S-4 which will be filed with the Securities and Exchange
Commission once it is completed. Once this is declared effective by the
Commission, proxy materials will be submitted to the shareholders of the
Company and LVDG seeking their approval of the merger and the name change.
The merger will take place as promptly as practicable after the adoption and
approval of the merger agreement and the approval of the merger by the
stockholders of LVDG and the stockholders of the Company, and the satisfaction
or waiver of the other conditions to the merger set forth in the merger
agreement.
The exchange rate for the merger described below as based upon the
recommendations of Quist Financial Inc., an independent valuation firm.
The following description of the merger assumes that the stockholders
of both the Company and LVDG approve the merger.
EFFECTIVE TIME
The merger will become effective by the filing of certificates of merger
with the Secretary of State of Colorado and the Secretary of State of Nevada.
CORPORATE MATTERS
At the Effective Time the articles of incorporation and by-laws of LVDG
will become the articles of incorporation and by-laws of the Surviving
Corporation, and the officers and directors of Saint Andrews Golf Corporation
immediately prior to the Effective Time will become the officers and directors
of the Surviving Corporation.
CONVERSION OF SECURITIES
At the Effective Time, by virtue of the merger and without any action on
the part of LVDG, or the holders of the Company's Capital Stock, (i) each
share of the Company's Common Stock issued and outstanding immediately prior
to the Effective Time (except for shares of the Company's Common Stock held by
LVDG) will be converted into 2.4 shares of LVDG common Stock, (ii) each share
of the Company's Series A Preferred Stock will be converted into 2.4 shares of
LVDG Preferred Stock, and (iii) each share of the Company's Common Stock held
by LVDG immediately prior to the Effective Time and all rights in respect
thereof will be canceled. This would result in the current shareholders of
the Company (other than LVDG) owning approximately 38.2% of the surviving
corporation, assuming that there are no dissenting shareholders.
OPTIONS AND WARRANTS TO PURCHASE THE COMPANY'S COMMON STOCK
At the Effective Time, each option or warrant granted by the Company to
purchase shares of the Company's Common Stock which is outstanding and
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unexercised immediately prior to the Effective Time will be assumed by LVDG
and converted into an option or warrant to purchase shares of LVDG Common
Stock in such number and at such exercise price as described below and
otherwise having the same terms and conditions as in effect immediately prior
to the Effective Time. The number of shares of LVDG Common Stock to be
subject to the new option or warrant will be equal to the product of (i) the
number of shares of the Company's Common Stock subject to the original option
or warrant multiplied by (ii) the Exchange Ratio. The exercise price per
share of LVDG Common Stock under the new option or warrant will be equal to
the quotient of (i) the exercise price per share of the Company's Common Stock
under the original option or warrant divided by (ii) the Exchange Ratio.
CLASS A WARRANTS
The Class A Warrants will have expired prior to the Effective Time.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains certain customary representations and
warranties on the part of LVDG and the Company, including, without limitation,
representations and warranties as to (i) organization and qualification and
subsidiaries; (ii) organizational documents; (iii) capitalization; (iv)
authority relative to the Merger Agreement; (v) no conflict and required
filings and consents; (vi) permits and compliance with laws; (vii) Commission
filings and financial statements; (viii) employee benefit plans and labor
matters; (ix) accounting and certain tax matters; (x) contracts; (xi)
litigation; (xii) intellectual property; (xiii) insurance; and (xiv) certain
interests of officers and directors in the constituent corporations.
CONDUCT OF BUSINESS PENDING THE MERGER
The Merger Agreement provides that, between the date of the Merger
Agreement and the Effective Time, LVDG and the Company must conduct their
respective businesses in the ordinary course consistent with past practice and
use all reasonable efforts to preserve substantially intact their respective
business organizations. The Merger Agreement also provides that neither LVDG
nor the Company may, without the prior written consent of the other party,
between the date of the Merger Agreement and the Effective Time, (i) amend its
articles of incorporation or by-laws; (ii) declare or pay any dividend or
other distribution with respect to any of its capital stock; (iii) reclassify,
combine, split or subdivide or redeem, purchase or otherwise acquire, directly
or indirectly, any of its capital stock; (iv) authorize or enter into any
formal or informal agreement or otherwise make any commitment to take any
action prohibited by the Merger Agreement; or (v) issue any shares of capital
stock, except for issuances of capital stock pursuant to options, warrants
and other rights to acquire capital stock outstanding on the date of the
Merger Agreement, or for issuances of capital stock in connection with
financing of the Las Vegas All-American SportPark.
PLAN OF REORGANIZATION
The Merger Agreement is intended to constitute a tax-free "plan of
reorganization" within the meaning of the income tax regulations promulgated
under the Code. Pursuant to the Merger Agreement, LVDG and the Company have
agreed that, from and after the date of the Merger Agreement, they will use
all reasonable efforts to cause the Merger to qualify, and will not knowingly
take any actions or cause any actions to be taken which could reasonably be
expected to prevent the Merger from qualifying, as a tax-free reorganization
under the Code.
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<PAGE>
FURTHER ACTION; CONSENTS; FILINGS
The Merger Agreement provides that LVDG and the Company must use all
reasonable efforts to (i) take, or cause to be taken, all appropriate action,
and do, or cause to be done, all things necessary, proper or advisable under
applicable law or otherwise to consummate and make effective the Merger; (ii)
obtain from governmental entities any consents, licenses, permits, waivers,
approvals, authorizations or orders required to be obtained by LVDG or the
Company in connection with the authorization, execution and delivery of the
merger Agreement and the consummation of the Merger; and (iii) make all
necessary filings, and thereafter make any other required or appropriate
submissions, with respect to the Merger Agreement and the Merger required
under the rules and regulations of the Securities Act, the Exchange Act and
any other applicable federal or state securities laws and any other applicable
law.
CONDITIONS TO THE MERGER
CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The obligations of both
LVDG and the Company to consummate the Merger are subject to the satisfaction
or waiver of certain conditions, including, without limitation, (i) the
continuing effectiveness of the Registration Statement which includes the
Joint Proxy Statement/Prospectus; (ii) the approval of the Merger Agreement
and the Merger by the shareholders of LVDG and the Company; (iii) the absence
of any injunction or order making the Merger illegal or otherwise prohibiting
its consummation; and (iv) the receipt of all material consents, approvals and
authorizations legally required to be obtained to consummate the Merger.
CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The obligations of the
Company to consummate the Merger are subject to the satisfaction or waiver of
certain additional conditions, including, without limitation, (i) the accuracy
at and as of the Effective Time of each of the representations and warranties
of LVDG contained in the Merger Agreement; (ii) the performance or compliance
by LVDG with all material agreements and covenants required by the Merger
Agreement to be performed or complied with by it on or prior to the Effective
Time; and (iii) the receipt from Overton Babiarz & Sykes, P.C. of its opinion
to the effect that the Merger will be treated for federal income tax purposes
as a tax-free reorganization.
CONDITIONS TO THE OBLIGATIONS OF LVDG. The obligations of LVDG to
consummate the Merger are subject to the satisfaction or waiver of certain
additional conditions, including, without limitation, (i) the accuracy at and
as of the Effective Time of each of the representations and warranties of the
Company contained in the Merger Agreement; (ii) the performance or compliance
by the Company with all material agreements and covenants required by the
Merger Agreement to be performed or complied with by it on or prior to the
Effective Time; and (iii) the receipt from Overton Babiarz & Sykes, P.C. of
its opinion to the effect that the Merger will be treated for federal income
tax purposes as a tax-free reorganization.
TERMINATION
The Merger Agreement provides that it may be terminated and the Merger
abandoned at any time prior to the Effective Time, notwithstanding the
adoption and approval of the Merger Agreement by the shareholders of LVDG
and/or the Company (i) by the mutual written consent of the boards of
directors of each of LVDG and the Company, or (ii) by either LVDG or the
Company, if any governmental order, writ, injunction, or decree preventing the
consummation of the Merger is
entered by any court of competent jurisdiction and becomes final and
nonappealable.
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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 $4.75 $2.75
Fourth Quarter $3.625 $1.4375
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 December 15, 1997, was 34. This does not include approximately 700
shareholders who hold stock in their accounts at broker/dealers.
DIVIDENDS
Holders of Common Stock are entitled to receive such dividends as may be
declared by the Company's Board of Directors. No dividends can be paid on the
Common Stock unless a similar dividend is paid on the Series A Convertible
Preferred Stock. 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:
Represen-
tative's Represen-
Class A Class A tative's
Application of Proceeds Warrants Warrants Warrants
- ------------------------ ---------- -------- --------
Development of SportPark $3,000,000 $300,000 $500,000
General Corporate
Purposes(1) 225,000 90,000 40,000
---------- -------- --------
Total $3,225,000 $390,000 $540,000
- ---------------
(1) Amounts allocated to general corporate purposes may be used for payment
of accounts payable, financing possible operating losses and other general
working capital. The Company does not intend to use any proceeds from the
exercise of warrants to pay any debt owed to insiders, and the Company has not
identified any specific individuals who will receive proceeds from this
offering.
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
NINE MONTHS ENDED SEPTEMBER 30, 1997, COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1996
Total revenues increased to $231,000 from $5,000 for the same period in
1996. The increase in revenues was primarily attributable to increased
interest income resulting from the increase in cash on interest bearing
accounts.
Selling, general and administrative expenses were $212,000 (70%) higher
than in the prior year as the result of a $100,000 bonus paid to the Company's
President and increased advertising and personnel costs associated with the
Sportpark. The increased personnel costs resulted from additional persons
dedicated to continuing operations in 1997 versus 1996.
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 of payroll, rent
and other corporate costs including investor relations, telephone usage and
insurance 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
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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[TM] opened to the public on October 1, 1997, and the Sports
Entertainment Complex is expected to open in the Spring of 1998 (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 September 30, 1997, the Company had working capital of approximately
$429,000 as compared to working capital of approximately $5,419,000 at
December 31, 1996. Cash decreased from $5,818,000 at December 31, 1996, to
$1,423,000 at September 30, 1997. This decrease in cash was attributable to
Sportpark expenditures of $11,554,000 and was offset by $2,688,000 in proceeds
from the sale of franchise operations; and $4,688,000 in debt and minority
interest proceeds from Callaway Golf for the golf facility. On November 12,
1997, Callaway golf remitted the remaining $1,312,500 it owed the Company in
connection with the agreement described in the following paragraph.
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[TM]", a premier golf facility at the site of the All-American
Sportpark. The total budgeted costs for the Callaway Golf Center[TM] 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 September 30, 1997, $3,937,500 had been
drawn under this agreement. The Callaway Golf Center[TM] commenced operations
on October 1, 1997. The Company owns 80 percent of the members' units of the
LLC for a contribution of $3 million while Callaway Golf owns 20% for a
contribution of $750,000. On November 12, 1997, Callaway remitted the
remaining $1,312,500 pursuant to the Agreement. The Company is managing the
driving range, golf course and tenant facilities in the clubhouse.
While the Company has entered into the Callaway Golf arrangement as
previously described, the Company has not completed financing for the
completion of 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. As of September 30, 1997,
a non-refundable fee of $70,000 was received from CTS who will operate the
amusement portion of the SportsPark. This amount has been deferred and will
be amortized over the life of the agreement. Additionally, in November the
Company received the remaining $30,000 from CTS pursuant to the agreement as
well as $100,000 from Sports Service which will operate the food concessions
for the Golf Center and SportPark. 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. The Company has a
preliminary understanding with someone regarding possible debt financing,
however, the
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Company has no binding arrangements or understandings for additional
financing. No financing was received from corporate sponsors during the year
ended December 31, 1996.
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 is 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.("LVDG")), however, any future loans from the
parent are likely to be limited. If the proposed merger with LVDG is
completed, the current assets and cash flow, if any, of LVDG will be available
to help fund the All-American SportPark. 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 is a Callaway Golf
Center[TM], 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[TM] 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[TM] commenced on October 1, 1997 when the golf
center opened. 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[TM],
and it opened to the public on October 1, 1997. The preliminary opening of
the Sports Entertainment Complex is anticipated to be in the Spring of 1998,
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
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construction delays due to availability of construction personnel, materials,
adverse weather 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. The Company now believes that it has obtained all
required permits and approvals except for minor routine approvals.
FEATURE ATTRACTIONS
Callaway Golf Center[TM]. 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[TM]," 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[TM] opened to the public on
October 1, 1997.
The Callaway Golf Center[TM] 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 are 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, and an outdoor
patio overlooking the golf course and driving range with the Las Vegas "Strip"
in the background.
Callaway Golf has constructed and operates a state-of-the-art training
center at its own cost (estimated at $2,000,000) which is 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 is managing the entire Callaway Golf Center[TM] except for the
Callaway Golf Experience and other tenant facilities for which it receives a
management fee of 5% of revenues. Therefore, the Company receives a 5%
management fee from all revenues from the par 3 golf course, the driving
range, and all tenant facilities except for the Callaway Golf Experience.
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
payments commencing five years after the golf center opened. Additional
payments of principal are required under certain conditions if the LLC is
making cash
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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[TM]"
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 up to five 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.
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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 Champion, 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 and other Company and
tenant operated sports activities.
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
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, 1996
and 1997. In addition to and as an offset against the minimum payments set
out above, the Company is required to pay
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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.
SPONSORSHIP AGREEMENT WITH PEPSI-COLA COMPANY
In December 1997, the Company entered into a sponsorship agreement with
the Pepsi-Cola Company ("Pepsi") under which Pepsi received 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 provides that
Pepsi will have specified signage rights and the multipurpose arena will be
named the AllSport Arena after Pepsi's Allsport drink product. In addition,
the agreement provides that Pepsi will provide, without charge, all equipment
needed to dispense its products at the SporkPark.
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 addition, Pepsi will have the right to provide three
marketing events per year. These events are to be used to promote the
business of the Company and Pepsi.
In consideration for the above rights, Pepsi agreed to pay the Company
$250,000 when any portion of the SportPark was officially opened; an
additional $250,000 when the SportPark is 100% completed and all attractions
are accessible by the public; and make additional comparable payments on an
annual basis for the remaining 3 years of the lease. The sponsorship
agreement will terminate five years after the SportPark is 100% completed,
unless earlier terminated as provided in the agreement. The Company received
the first $250,000 during December 1997 since Callaway Golf Center[TM] had
opened on October 1, 1997.
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[TM], 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[TM] 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 at Kennedy Space Center and Yosemite National Park.
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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[TM] 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
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areas throughout the United States and overseas and can also be included in
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 could 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
uniqueness of the Park features, attractive designs, 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 intends to maintain the integrity of the trademarks, other proprietary
names and marks against unauthorized use. LVDG has filed "intent to use"
trademark application with regard to the "St. Andrews" name and related
designs with respect to mens' and womens' clothing and certain golf equipment
and accessories. LVDG then licensed the rights to use the St Andrews name to
the Company.
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 committed all of its efforts to the development and
management of the All- American SportPark and no longer intends to engage in
the business of selling golf equipment or apparel.
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EMPLOYEES
As of January 15, 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[TM] employed
approximately 36 full-time and 10 part-time persons, however, these persons
are 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 is building 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[TM] 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.
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.
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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[TM]. 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,
California. Prior to his employment by the Company, Mr. Boreta was an
assistant golf professional at
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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 near the corner of Flamingo and Paradise roads 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.
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,
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<PAGE>
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.
<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 $25,000 to the
Company's Supplemental Retirement Plan.
<FN3>
Represents premiums paid on a life insurance policy for Ronald S. Boreta's
benefit.
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<PAGE>
<FN4>
Mr. Hohl's employment as Executive Vice President ended on February 26, 1997.
<FN5>
Represents amount contributed to the Company's retirement plan on behalf of
Mr. Hohl.
</FN>
</TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
PERCENT
NUMBER OF OF TOTAL
SECURITIES OPTIONS/SARs
UNDERLYING GRANTED TO EXERCISE
OPTIONS/SARs EMPLOYEES IN OR BASE EXPIRATION
NAME GRANTED(#) FISCAL YEAR PRICE ($/SH) DATE
- ---------------- ------------ ------------ ----------- ----------
Ronald S. Boreta 125,000 36.1% $4.75 (1) 4-16-2001
200,000 57.8% $4.625(1) 4-24-2001
- -----------
(1) On June 9, 1997, these options were reissued for the same number of shares
at a new exercise price of $3.0625 per share.
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
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,
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<PAGE>
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.
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.
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<PAGE>
NAME SHARES SUBJECT TO OPTION
----------------- ------------------------
Vaso Boreta 110,000
Ronald Boreta 110,000
Charles Hohl 60,000(1)
Glenn Raynes 10,000
Robert R. Rosburg 5,000
William Kilmer 5,000
-------
Total 300,000
- ------------------
(1) Of Mr. Hohl's options, 20,000 expired upon termination of his employment
in February 1997.
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.
RELATIONSHIP SHARES SUBJECT EXERCISE
NAME TO THE COMPANY TO OPTION PRICE(3)
- ---------------- -------------------- -------------- ----------
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(1) $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(2) $4.75
Hal Price Consultant 1,000 $4.75
___________________
(1) 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.
(2) 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.
(3) 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.
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
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<PAGE>
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.
LIMITATION OF LIABILITY OF DIRECTORS AND OFFICERS
Pursuant to the Nevada General Corporation Law, the Company's Articles
of Incorporation exclude personal liability for its directors or officers for
damages based upon any violation of their fiduciary duties as directors or
officers, except as to liability for acts or omissions which involve
intentional misconduct or a knowing violation of law, or distributions in
violation of Section 78.300 of the Nevada General Corporation Law. This
exclusion of liability does not limit any right which a director or officer
may have to be indemnified and does not affect any director's liability under
federal or applicable state securities laws.
INDEMNIFICATION
The Articles of Incorporation and the Bylaws of the Company provide that
the Company shall indemnify its officers and directors for costs and expenses
incurred in connection with the defense of actions, suits or proceedings where
the officer or director acted in good faith and in a manner he reasonably
believed to be in the Company's best interest and is a party by reason of his
status as an officer and director.
Insofar as indemnification for liabilities arising under the Securities
Law of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the Company pursuant to the foregoing provisions, or
otherwise, the Company has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act ans is, therefore, unenforceable.
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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 January 15,
1998, 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
ownership is based upon statements furnished to the Company by such persons.
AMOUNT AND PERCENT OF CLASS
NAME AND ADDRESS NATURE OF BENE- BEFORE AFTER
OF BENEFICIAL OWNER FICIAL OWNERSHIP OFFERING OFFERING
- ------------------- ---------------- -------- --------
Las Vegas Discount Golf &
Tennis, Inc.(1) 2,000,000 66.7% 54.8%
Suite 10
5325 S. Valley View Blvd.
Las Vegas, Nevada 89118
Vaso Boreta 110,000(2) 3.5% 2.9%
Suite 10
5325 S. Valley View Blvd.
Las Vegas, Nevada 89118
Ronald S. Boreta 435,000(2) 14.5% 10.6%
Suite 10
5325 S. Valley View Blvd.
Las Vegas, Nevada 89118
Robert R. Rosburg 5,000(2) 0.2% 0.1%
49-425 Avenida Club La Quinta
La Quinta, California 92253
William Kilmer 5,000(2) 0.2% 0.1%
1500 Sea Breeze Boulevard
Ft. Lauderdale, Florida 33316
Motoharu Iue 750,000(3) 20.0% 16.7%
666 - 5th Avenue
New York, New York 10103
Three Oceans Inc. 750,000(4) 20.0% 16.7%
2001 Sanyo Avenue
San Diego, California 92173
All Directors and 1,325,000(5) 30.6 26.6%
Officers as a Group
(9 Persons)
___________________
(1) Las Vegas Discount Golf & Tennis, Inc. is a publicly-held corporation of
which Vaso Boreta is President, CEO, 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 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.:
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<PAGE>
Vaso Boreta 49.3%
Ronald S. Boreta 21.8%
Robert Rosburg 0.1%
William Kilmer 0.1%
John Boreta 12.2%
(2) 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.
(3) Represents shares beneficially owned by Three Oceans, Inc., of which Mr.
Iue is President. These are the same shares listed under the name Three
Oceans, Inc.
(4) 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.")
(5) 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 ptions held by John Hoover, Executive Officers of the Company.
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<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.
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<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 and
management 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.
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<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 March 16,
1998. 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.
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<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 March 16, 1998. 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
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 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
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<PAGE>
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
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,
-43-
<PAGE>
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
-44-
<PAGE>
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 public
accountants. In addition, the Company may issue unaudited quarterly or other
interim reports to shareholders as it deems appropriate.
-45-
<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:
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
- --------------- ------ --------- ------------ ---------
RAF Financial -0- 75,000(1) 50,000 50,000
Corporation
Robert L. Long -0- 75,000(1) 50,000 50,000
- -------------------
(1) Represents 25,000 shares underlying Representative's Class A Warrants and
50,000 shares underlying Representative's Warrants.
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
- --------------- ------------ ------ ----- --------
RAF Financial 75,000(1) -0- -0- -0-
Corporation
Robert L. Long 75,000(1) -0- -0- -0-
__________________
(1) Represents 25,000 shares underlying Representative's Class A Warrants and
50,000 shares underlying Representative's Warrants.
-46-
<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 March 16, 1998.
Two Representative's Class A Warrants are exercisable to purchase one
share of Common Stock at a price of $7.80 per share until March 16, 1998.
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.")
The proceeds from any and all warrants exercised will be forwarded by
the Warrant Agent to the Company on a weekly basis as funds clear. There is
no minimum offering amount and the funds will not be held in an escrow
account.
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
-47-
<PAGE>
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, 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.
-48-
<PAGE>
INDEX TO FINANCIAL STATEMENTS
FINANCIAL STATEMENTS OF THE COMPANY
PAGE
Unaudited Condensed Consolidated Balance Sheets
as of September 30, 1997 and December 31, 1996 ..................... F-1
Unaudited Condensed Consolidated Statements of Income
for the nine months ended September 30, 1997 and 1996 .............. F-2
Unaudited Condensed Consolidated Statement of Cash
Flows for the nine months ended June 30, 1997 and 1996 ............. F-3
Notes to Unaudited Condensed Consolidated Financial Statements...... F-4
Report of Independent Public Accountants ........................... F-7
Consolidated Balance sheets as of December 31, 1996 and 1995 ....... F-8
Consolidated Statements of Operations for the years
ended December 31, 1996 and 1995 ................................... F-10
Statements of Shareholders' Equity for the years ended
December 31, 1996 and 1995 ......................................... F-11
Consolidated Statements of Cash Flows for the years ended
December 31, 1996 and 1995 ......................................... F-12
Notes to Financial Statements ...................................... F-14
FINANCIAL STATEMENTS OF LAS VEGAS DISCOUNT GOLF & TENNIS, INC.
Unaudited Condensed Consolidated Balance Sheets
as of September 30, 1997 and December 31, 1996 ..................... F-25
Unaudited Condensed Consolidated Statements of Income
for the nine months ended September 30, 1997 and 1996 .............. F-27
Unaudited Condensed Consolidated Statement of Cash
Flows for the nine months ended June 30, 1997 and 1996 ............. F-28
Notes to Unaudited Condensed Consolidated Financial Statements ..... F-30
Report of Independent Public Accountants ........................... F-33
Consolidated Balance sheets as of December 31, 1996 and 1995 ....... F-34
Consolidated Statements of Operations for the years
ended December 31, 1996 and 1995 ................................... F-36
Statements of Shareholders' Equity for the years ended
December 31, 1996 and 1995 ......................................... F-37
Consolidated Statements of Cash Flows for the years ended
December 31, 1996 and 1995 ......................................... F-38
Notes to Financial Statements ...................................... F-40
<PAGE>
PRO FORMA FINANCIAL STATEMENTS
Balance Sheets as of September 30, 1997 and December 31, 1996 ...... F-54
Statements of Operations for the year ended December 31, 1996
and the nine months ended September 30, 1997........................ F-55
<PAGE>
SAINT ANDREWS GOLF CORPORATION
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
September 30, December 31,
1997 1996
------------- -----------
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 1,423,000 $ 5,818,000
Other receivables 37,000 480,000
Prepaid expenses and other 24,000 17,000
Preopening expenses 386,000 -
----------- -----------
Total current assets 1,870,000 6,315,000
FURNITURE, EQUIPMENT AND
LEASEHOLD IMPROVEMENTS, NET 144,000 84,000
PROJECT DEVELOPMENT COSTS 13,657,000 2,103,000
NET ASSETS OF DISCONTINUED OPERATIONS - 120,000
----------- -----------
$15,671,000 $ 8,622,000
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 1,328,000 $ 742,000
Deferred income - 63,000
Other payables - -
Income taxes payable 113,000 -
----------- -----------
Total current liabilities 1,441,000 805,000
DEFERRED INCOME 143,000 91,000
NOTE PAYABLE 3,938,000 -
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) 876,000 (797,000)
----------- -----------
Total stockholders' equity 9,399,000 7,726,000
----------- -----------
$15,671,000 $ 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
STATEMENTS OF INCOME
For the Nine Months
Ended September 30,
1997 1996
---------- ----------
(Unaudited) (Unaudited)
INCOME:
Interest income $ 208,000 $ 5,000
Royalties 18,000 -
Other 5,000 -
----------- -----------
Total revenues 231,000 5,000
EXPENSES:
Selling, general and administrative 527,000 315,000
SportPark development costs 152,000 207,000
----------- -----------
Total expenses 679,000 522,000
LOSS BEFORE PROVISION FOR INCOME TAXES (448,000) (517,000)
PROVISION (BENEFIT) FOR INCOME TAXES - -
----------- -----------
LOSS FROM CONTINUING OPERATIONS BEFORE
MINORITY INTEREST (448,000) (517,000)
Loss from operations of discontinued
franchise operations (41,000) (26,000)
Gain on disposal of franchise operations
(less applicable income taxes of
$450,000) 2,162,000 -
----------- -----------
NET INCOME (LOSS) $ 1,673,000 $ (543,000)
INCOME (LOSS) PER SHARE:
Income (loss) from operations $ (.15) $ (.07)
Income (loss) from discontinued
operations .70 (.01)
----------- -----------
NET INCOME (LOSS) PER SHARE $ .55 $ (.08)
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-2
<PAGE>
SAINT ANDREWS GOLF CORPORATION
UNAUDITED CONDENSED CONSOLIDATED
STATEMENT OF CASH FLOWS
For the Nine Months
Ended September 30,
1997 1996
----------- -----------
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 1,673,000 $ (543,000)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 6,000 16,000
Gain on sale of franchise operations (2,612,000) -
Changes in assets and liabilities:
Decrease in accounts receivable 271,000
Decrease in other receivables 443,000 21,000
Increase in inventory - (57,000)
Increase in lease termination receivable - (123,000)
(Increase) decrease in prepaid
expenses and other 4,000 407,000
Increase in preopening expenses (386,000) -
Increase (decrease) in accounts payable 478,000 (68,000)
Increase (decrease) in deferred income (71,000) 63,000
Increase in other payables - 459,000
Increase in income tax payable 113,000 -
----------- -----------
Net cash provided (used) by operating
activities (81,000) 289,000
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Project development costs (11,554,000) (986,000)
Development cost refund - 85,000
Purchases of equipment (136,000) -
Proceeds from sale of franchise operations 2,688,000 -
----------- -----------
Net cash provided (used) by investing
activities (9,002,000) (901,000)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from preferred stock - 4,000,000
Preferred stock issuance costs (162,000)
Proceeds from note payable 3,938,000 -
Proceeds from minority interest in
Callaway Golf Center[TM] 750,000 -
----------- -----------
Net cash provided by financing activities 4,688,000 3,838,000
----------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (4,395,000) 3,226,000
CASH AND CASH EQUIVALENTS-Beginning of period 5,818,000 125,000
----------- -----------
CASH AND CASH EQUIVALENTS-End of period $ 1,423,000 $ 3,351,000
----------- -----------
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 September 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 $2,688,000 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 nine months ended September 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 September 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 three and nine months ended
September 30, 1997 and 1996 the proforma calculations were as follows:
F-4
<PAGE>
September 30, 1997 September 30, 1996
Three Months Basic Diluted Basic Diluted
----- ------- ----- -------
Income (loss) from operations $(.04) $(.04) $(.04) $(.04)
Loss from discontinued operations - - - -
----- ------- ----- -------
Net income (loss) per share $(.04) $(.04) $(.04) $(.04)
September 30, 1997 September 30, 1996
Nine Months Basic Diluted Basic Diluted
----- ------- ----- -------
Income (loss) from operations $(.15) $(.15) $(.07) $(.07)
Loss from discontinued operations .70 .70 (.01) (.01)
----- ----- ----- -----
Net income (loss) per share $ .55 $ .55 $(.08) $(.08)
Options to purchase 657,000 and 677,000 shares of common stock were
outstanding at September 30, 1997 and 1996, respectively. On June 9, 1997,
the Board of Directors approved the repricing of 617,000 of the outstanding
stock options granted under the 1994 Stock Option 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 September 30, 1997 and of $5.00 to
$5.40 at September 30, 1996, respectively, prior to the repricing.
NOTE 3. NOTE PAYABLE AND AGREEMENT WITH CALLAWAY
On June 13, 1997 the Company and Callaway Golf Company ("Callaway") announced
the formation of the All American Golf, LLC, a limited liability California
corporation, to construct, manage and operate "Callaway Golf Center[TM]", a
premier golf facility at the site of the All-American Sportpark. The total
budgeted costs for the Callaway Golf Center[TM] are approximately $9.0
million.
Callaway 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 September
30, 1997, $3,937,500 had been drawn under this agreement. On November 12,
1997 Callaway remitted the remaining $1,312,500 pursuant to the Agreement.
The Company owns 80 percent of the members' units of the LLC while Callaway
purchased the remaining 20 percent for $750,000. The minority interest
presented in the accompanying financial statements represents Callaway's
interest in All American Golf, 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 nine months ended on: September 30,
1997 1996
-------- --------
Interest - $ 31,000
Income taxes $338,000 -
F-5
<PAGE>
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, 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
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 royal based on the revenue from
the batting cages of the great 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.
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 operations of SpeedParks as
a part of the All-American SportPark or as a stand-alone NASCAR SpeedPark.
F-6
<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-7
<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-8
<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-9
<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-10
<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-11
<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-12
<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-13
<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-14
<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-15
<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.
F-16
<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.
F-17
<PAGE>
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.
F-18
<PAGE>
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:
F-19
<PAGE>
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.
F-20
<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-21
<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.
F-22
<PAGE>
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.
F-23
<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. The allocation of $4.6
million in proceeds from the sale of assets and liabilities of the Company was
based upon the respective earnings of each of the companies along with the net
book value of the assets of each company. No independent valuation was
prepared with respect to the allocation of such proceeds.
F-24
<PAGE>
LAS VEGAS DISCOUNT GOLF & TENNIS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
September 30, December 31,
1997 1996
----------- -----------
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 1,660,000 $ 6,457,000
Accounts receivable 339,000 86,000
Inventories 563,000 1,776,000
Prepaid expenses and other 31,000 101,000
Preopening expenses 386,000 -
----------- -----------
Total current assets 2,979,000 8,420,000
FURNITURE, EQUIPMENT AND
LEASEHOLD IMPROVEMENTS, NET 326,000 416,000
PROJECT DEVELOPMENT COSTS 13,657,000 2,103,000
OTHER ASSETS - 150,000
NET ASSETS OF DISCONTINUED OPERATIONS - 443,000
----------- -----------
$16,962,000 $11,532,000
NOTE: The balance sheet at December 31, 1996 has been taken from the audited
financial statements at that date and condensed.
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-25
<PAGE>
LAS VEGAS DISCOUNT GOLF & TENNIS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30, December 31,
1997 1996
----------- -----------
(Unaudited)
CURRENT LIABILITIES:
Bank line of credit $ - $ 398,000
Accounts payable and accrued
expenses 1,375,000 2,047,000
Deferred franchise fees - 63,000
Income taxes payable 137,000 -
----------- -----------
Total current liabilities 1,512,000 2,508,000
NOTE PAYABLE TO SHAREHOLDER - 631,000
NOTE PAYABLE 3,937,000 -
OTHER LONG-TERM LIABILITIES - 20,000
DEFERRED INCOME 143,000 91,000
DEFERRED INCOME TAX LIABILITY 743,000 743,000
PREFERRED STOCK OF SUBSIDIARY 5,000,000 5,000,000
MINORITY INTEREST 2,109,000 802,000
STOCKHOLDERS' EQUITY:
Convertible, preferred stock,
Series A, no par value: authorized
-5,000,000 shares; issued and
outstanding-512,799 shares as of
12/31/96; 0 as of 9/30/97 - 5,000
Common stock, no par value:
authorized-15,000,000 shares,
issued and outstanding-
5,319,008 shares 3,876,000 3,871,000
Accumulated deficit (358,000) (2,139,000)
----------- -----------
Total stockholders' equity 3,518,000 1,737,000
$16,962,000 $11,532,000
NOTE: The balance sheet at December 31, 1996 has been taken from the audited
financial statements at that date and condensed.
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-26
<PAGE>
LAS VEGAS DISCOUNT GOLF & TENNIS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF INCOME
For the Nine Months
Ended September 30,
1997 1996
----------- -----------
(Unaudited) (Unaudited)
REVENUES:
Net merchandise sales $ 3,103,000 $ 7,741,000
Interest income 212,000 34,000
Royalties 18,000 -
Other 62,000 127,000
----------- -----------
Total revenues 3,395,000 7,902,000
EXPENSES:
Cost of sales 2,204,000 5,853,000
Selling, general and administrative 1,492,000 2,501,000
SportPark development costs 156,000 207,000
----------- -----------
Total expenses 3,852,000 8,561,000
INCOME (LOSS) BEFORE PROVISION
FOR INCOME TAXES (457,000) (659,000)
PROVISION (BENEFIT) FOR INCOME TAXES - -
----------- -----------
INCOME (LOSS) BEFORE MINORITY INTEREST (457,000) (659,000)
MINORITY INTEREST (557,000) 187,000
LOSS BEFORE INCOME (LOSS) FROM
DISCONTINUED OPERATIONS (1,014,000) (472,000)
DISCONTINUED OPERATIONS
Income (loss) from operations of
discontinued franchise and
wholesale operations (159,000) 137,000
Gain on disposal of franchised
wholesale operations (less
applicable income taxes of
$575,000) 2,954,000 -
----------- -----------
NET INCOME (LOSS) $ 1,781,000 $ (335,000)
NET INCOME (LOSS) PER SHARE:
Income (loss) from operations $ (.23) $ (.06)
Income (loss) from discontinued
operations .53 -
----------- -----------
NET INCOME (LOSS) PER SHARE $ .30 $ (.06)
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-27
<PAGE>
LAS VEGAS DISCOUNT GOLF & TENNIS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
For the Nine Months
Ended September 30,
1997 1996
----------- -----------
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 1,781,000 $ (335,000)
Adjustments to reconcile net income (loss)
to net cash used by operating activities:
Minority interest (557,000) (187,000)
Depreciation and amortization 24,000 81,000
Gain on sale of franchise and
wholesale operations (3,529,000) -
Changes in assets and liabilities:
(Increase)in accounts receivable 18,000 (63,000)
Increase in lease termination receivables - (123,000)
Decrease in inventory 2,375,000 (430,000)
Decrease in prepaid expenses and other 81,000 623,000
(Increase)decrease in other assets 150,000 95,000
Increase in preopening cost (386,000) -
Increase(decrease) in accounts payable (1,378,000) (323,000)
Increase (decrease) in deferred
franchise fees (63,000) 62,000
Increase in income tax payable 137,000 -
Increase (decrease) in deferred income 52,000 (19,000)
----------- -----------
Net cash used by operating activities (1,295,000) (619,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
Project development costs (11,554,000) (1,093,000)
Purchases of equipment (136,000) -
Refund development costs - 85,000
Proceeds from sale of operations 4,550,000 -
----------- -----------
Net cash flows provided by (used in)
investing activities (7,140,000) (1,008,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from note payable 3,937,000 -
Proceeds from minority interest in
Callaway Golf Center[TM] 750,000 -
Borrowing from line of credit - 468,000
Proceeds from long term debt - 45,000
Proceeds from sale of preferred stock - 4,000,000
Preferred stock issuance costs - (162,000)
Payments on bank line of credit, net (398,000) -
Payments on note to shareholder (631,000) (12,000)
Payments on long-term debt (20,000) (1,000)
----------- -----------
Net cash used by financing activities 3,638,000 4,338,000
(Continued)
F-28
<PAGE>
LAS VEGAS DISCOUNT GOLF & TENNIS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Continued)
For the Nine Months
Ended September 30,
1997 1996
----------- -----------
(Unaudited) (Unaudited)
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (4,797,000) 2,711,000
CASH AND CASH EQUIVALENTS-Beginning of period 6,457,000 1,043,000
CASH AND CASH EQUIVALENTS-End of period $6,491,000 $3,754,000
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-29
<PAGE>
LAS VEGAS DISCOUNT GOLF & TENNIS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 1. CONDENSED FINANCIAL STATEMENTS
The accompanying condensed financial statements include the accounts of Las
Vegas Discount Golf & Tennis, Inc. (LVDGT), and its subsidiaries, Saint
Andrews Golf Corporation (SAGC), LVDGT Development Corporation and LVDGT
Rainbow, Inc. (Rainbow) (collectively 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 SEC. In the
opinion of management, all adjustments necessary to present fairly the
financial position, results of operations and cash flows at September 30, 1997
and for all periods presented have been made.
On February 26, 1997, the Company completed the sale of certain of its 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 $2,612,000 was
allocated to the Company and $2,688,000 was allocated to SAGC.
The Company's operations after the sale consist solely of the SportPark
operations currently under development on the Las Vegas strip and the retail
location on Rainbow Boulevard in Las Vegas, Nevada. The sale of all assets,
liabilities and operations related to the franchise and wholesale business
have been presented as "Discontinued Operations" in the accompanying balance
sheets and statements of operations as of and for the three and nine months
ending September 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 September 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 three and nine months ended
September 30, 1997 and 1996 the proforma calculations were as follows:
F-30
<PAGE>
Three Months September 30, September 30,
1997 1996
Basic Diluted Basic Diluted
-------------- --------------
Income(loss) from operations $(.06) $(.06) $(.02) $(.02)
Income(loss) from discontinued operations - - .01 .01
----- ----- ----- -----
Net income(loss) per share $(.06) $(.06) $(.01) $(.01)
Nine Months September 30, September 30,
1997 1996
Basic Diluted Basic Diluted
-------------- --------------
Income(loss) from operations $(.23) $(.23) $(.06) $(.06)
Income(loss) from discontinued operations .53 .53 - -
---- ---- ----- -----
Net income(loss) per share $.30 $ .36 $(.06) $(.06)
Options to purchase 442,000 shares of common stock were outstanding at
September 30, 1997 and 1996, at exercise prices of $0.80 to $1.625 at
September 30, 1997 and 1996.
NOTE 3. NOTE PAYABLE AND AGREEMENT WITH CALLAWAY
On June 13, 1997, SAGC and Callaway Golf Company ("Callaway") announced the
formation of the All American Golf, LLC, a limited liability California
corporation, to construct, manage and operate "Callaway Golf Center[TM]", a
premier golf facility at the site of the All-American Sportpark. The total
budgeted costs for the Callaway Golf Center[TM] are approximately $9.0
million.
Callaway 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 September
30, 1997, $3,937,500 had been drawn under this agreement. On November 12,
1997 Callaway remitted the remaining $1,312,500 pursuant to the Agreement.
SAGC owns 80 percent of the members' units of the LLC. While Callaway
purchased the remaining 20 percent for $750,000, Callaway's members' units are
included in minority interest. SAGC will manage the driving range, golf
course and tenant facilities in the clubhouse.
NOTE 4. STATEMENT OF CASH FLOWS
For the purposes of the statement of cash flows, the Company considers all
highly liquid debt investments purchased with a maturity of three months or
less to be cash equivalents.
The Company made cash payments for interest of $30,000 and $33,000 for the
nine months ended September 30, 1997 and 1996, respectively and payments for
income taxes for the quarter and nine months ended September 30, 1997 totaled
$138,000 and $430,000, respectively.
NOTE 5. RELATED PARTY TRANSACTIONS
Las Vegas Retail, a related party, purchases inventory at cost from the
Company. Such purchases amounted to $115,000 and $1,096,000 for the nine
months ended September 30, 1997 and 1996, respectively.
F-31
<PAGE>
NOTE 6. COMMITMENTS AND CONTINGENCIES
In December 1994, Saint Andrews 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, Saint Andrews 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, Saint Andrews
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, Saint Andrews must pay $50,000
during such year. St. Andrews has made the payments required for 1995 and
1996. In addition to and as an offset against the minimum payments set out
above, St. Andrews 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 St. Andrews to any other
individual or entity for the right to open or operate any attraction or event
in the Sports Entertainment Complex.
Saint Andrews'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.
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).
Saint Andrews 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.
F-32
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
Las Vegas Discount Golf & Tennis, Inc.:
We have audited the accompanying consolidated balance sheets of LAS VEGAS
DISCOUNT GOLF & TENNIS, INC. (a Colorado corporation) and subsidiaries 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Las Vegas
Discount Golf & Tennis, Inc. and subsidiaries 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 matters discussed in Note 17
as to which the date is February 26,
1997).
F-33
<PAGE>
LAS VEGAS DISCOUNT GOLF & TENNIS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS-DECEMBER 31, 1996 AND 1995
ASSETS
1996 1995
CURRENT ASSETS: ----------- -----------
Cash and cash equivalents $ 6,457,000 $ 1,043,000
Accounts receivable, net of allowance
of $57,000 and $25,000, respectively 66,000 111,000
Accounts receivable, held for sale 20,000 5,000
Lease termination receivable - 3,000,000
Inventories 400,000 427,000
Inventories, held for sale 1,376,000 1,044,000
Due from Affiliated Store 72,000 263,000
Due from officer 13,000 -
Prepaid expenses and other 16,000 9,000
Other receivables - 365,000
Total current assets 8,420,000 6,267,000
PROPERTY AND EQUIPMENT, net 236,000 280,000
PROPERTY AND EQUIPMENT, net held for sale 179,000 165,000
PROJECT DEVELOPMENT COSTS 1,604,000 1,047,000
DEPOSIT FOR LAND LEASE 500,000 -
NOTES RECEIVABLE, net of allowance for
doubtful accounts of $44,000 at December
31, 1996 - 52,000
OTHER ASSETS 82,000 85,000
OTHER ASSETS, held for sale 68,000 54,000
NET ASSETS OF DISCONTINUED OPERATIONS 443,000 289,000
$11,532,000 $ 8,239,000
The accompanying notes are an integral part of these financial statements.
F-34
<PAGE>
LAS VEGAS DISCOUNT GOLF & TENNIS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS-DECEMBER 31, 1996 AND 1995
LIABILITIES AND SHAREHOLDERS' EQUITY
1996 1995
CURRENT LIABILITIES: ----------- -----------
Bank line of credit $ 398,000 $ -
Current portion of obligations under
capital lease 13,000 -
Accounts payable 1,004,000 1,076,000
Accounts payable trade, held for sale 219,000 364,000
Accrued expenses 348,000 349,000
Due to Affiliated Store 463,000 971,000
Deferred franchise fees 63,000 60,000
Total current liabilities 2,508,000 2,820,000
NOTE PAYABLE TO SHAREHOLDER 631,000 663,000
OBLIGATION UNDER CAPITAL LEASE,
net of current portion 20,000 -
DEFERRED INCOME 91,000 117,000
DEFERRED TAX LIABILITY 743,000 743,000
PREFERRED STOCK OF SUBSIDIARY 5,000,000 -
MINORITY INTEREST 802,000 1,214,000
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Convertible, preferred stock, Series A,
no par value; authorized-5,000,000
shares; issued and outstanding-512,799
shares 5,000 5,000
Common stock, no par value; authorized-
15,000,000 shares; issued and outstanding-
5,319,008 shares 3,871,000 3,871,000
Accumulated deficit (2,139,000) (1,194,000)
Total shareholders' equity 1,737,000 2,682,000
$11,532,000 $8,239,000
The accompanying notes are an integral part of these financial statements.
F-35
<PAGE>
LAS VEGAS DISCOUNT GOLF & TENNIS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
1996 1995
REVENUES: ----------- -----------
Retail $10,764,000 $ 7,356,000
Other 34,000 21,000
Total revenues 10,798,000 7,377,000
EXPENSES:
Retail 8,330,000 5,530,000
Selling, general and administrative 3,340,000 2,597,000
Provision for doubtful accounts 50,000 43,000
SportPark development costs 207,000 108,000
Total expenses 11,927,000 8,278,000
LOSS FROM CONTINUING OPERATIONS (1,129,000) (901,000)
OTHER INCOME (EXPENSE):
Interest income 70,000 88,000
Interest expense (90,000) (57,000)
Other income 26,000 8,000
6,000 39,000
LOSS BEFORE INCOME TAX PROVISION (1,123,000) (862,000)
Income tax provision - -
LOSS BEFORE MINORITY INTEREST
AND DISCONTINUED OPERATIONS (1,123,000) (862,000)
MINORITY INTEREST 248,000 105,000
NET LOSS FROM CONTINUING OPERATIONS (875,000) (757,000)
DISCONTINUED OPERATIONS:
Income (loss) from franchise and wholesale
operations to be disposed of (no income
taxes were recorded in 1996 or 1995) (70,000) 515,000
NET LOSS $ (945,000) $ (242,000)
NET LOSS PER SHARE:
Loss from continuing operations $ (.17) $ (.14)
Income (loss) from discontinued
operations (.01) .10
NET LOSS PER SHARE $ (.18) $ (.04)
The accompanying notes are an integral part of these financial statements.
F-36
<PAGE>
LAS VEGAS DISCOUNT GOLF & TENNIS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK ACCUMULATED
TOTAL
SHARES AMOUNT SHARES AMOUNT DEFICIT
EQUITY
Balance, ------- ------ --------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
December 31,
1994 512,799 $5,000 5,319,008 $3,871,000 $ (952,000) $2,924,000
Net loss for
the year ended
December 31,
1995 - - - - (242,000) (242,000)
Balance,
December 31,
1995 512,799 5,000 5,319,008 3,871,000 (1,194,000) 2,682,000
Net loss for
the year ended
December 31,
1996 - - - - (945,000) (945,000)
Balance,
December 31,
1996 512,799 $5,000 5,319,008 $3,871,000 $(2,139,000) $1,737,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-37
<PAGE>
LAS VEGAS DISCOUNT GOLF & TENNIS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES: ----------- -----------
Net loss $ (945,000) $ (242,000)
Adjustment to reconcile net loss to net
cash provided by (used in) operating
activities:
Minority interest (248,000) (105,000)
Depreciation and amortization 77,000 79,000
Changes in assets and liabilities:
Decrease in accounts receivable 108,000 147,000
Decrease (increase) in notes receivable 8,000 (50,000)
Increase in inventories (350,000) (1,332,000)
(Increase) decrease in due from officer (13,000) 15,000
(Increase) decrease in prepaid expenses
and other (5,000) 28,000
Decrease (increase) in other receivables 365,000 (143,000)
(Increase) decrease in accounts payable
and accrued expenses (349,000) 1,841,000
Increase in deferred franchise fees 3,000 -
(Decrease) increase in deferred income (26,000) 117,000
Net cash provided by (used in) operat-
ing activities (1,375,000) 355,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment (19,000) (133,000)
Lease termination receivable 3,000,000 (3,000,000)
Increase in other assets (10,000) (65,000)
Deposit for land lease (500,000) -
Project development costs (563,000) (493,000)
Net cash provided by (used in)
investing activities 1,908,000 (3,691,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from bank line of credit 398,000 -
Principal payments on notes payable (6,000) -
Principal payments on notes payable to
shareholder (32,000) (215,000)
Proceeds from note payable to shareholder - 260,000
(Increase) decrease in receivable/payable
with the Affiliated Store (317,000) 748,000
Proceeds from issuance of preferred
stock and options to purchase
Common Stock by SAGC 4,838,000 -
Net cash provided by financing activities 4,881,000 793,000
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 5,414,000 (2,543,000)
(Continued)
F-38
<PAGE>
LAS VEGAS DISCOUNT GOLF & TENNIS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
(Continued)
1996 1995
CASH AND CASH EQUIVALENTS, ----------- ----------
Beginning of year 1,043,000 3,586,000
CASH AND CASH EQUIVALENTS, End of year $ 6,457,000 $1,043,000
SUPPLEMENTAL CASH FLOW INFORMATION:
1996 1995
Cash paid for: ---------- -----------
Interest $ 99,000 $ 48,000
NON-CASH DISCLOSURES:
During 1995, SAGC reclassified deposits totaling $221,500 from other long-term
assets to current assets - other receivables. SAGC subsequently collected the
deposit in 1996.
In 1996 the Company entered into a capital lease for the purchase of equipment
with a cost of approximately $41,000 and a note payable for equipment totaling
$45,000.
The accompanying notes are an integral part of these financial statements.
F-39
<PAGE>
LAS VEGAS DISCOUNT GOLF & TENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATIONAL STRUCTURE AND BASIS OF PRESENTATION
a. PRINCIPALS OF CONSOLIDATION
The consolidated financial statements of Las Vegas Discount Golf & Tennis,
Inc. (LVDGT), a Colorado corporation, include the accounts of LVDGT and its
subsidiaries, Saint Andrews Golf Corporation (SAGC), LVDGT Development
Corporation (Development) and LVDGT Rainbow, Inc. (Rainbow). LVDGT and its
subsidiaries are collectively referred to as "the Company". All significant
intercompany accounts and transactions have been eliminated.
b. COMPANY BACKGROUND
In 1974, the Company's chairman and principal shareholder opened a retail
store in Las Vegas, Nevada under the name Las Vegas Discount Golf & Tennis.
This store is still owned and operated by the Company's chairman and principal
shareholder and is referred to herein as the "Affiliated Store". In March
1984, the Company's chairman and principal shareholder formed a corporation
named Sporting Life, Inc. (SLI) and SLI began to franchise the Las Vegas
Discount Golf & Tennis retail store concept. On December 27, 1988, SLI was
renamed St. Andrews Golf Corporation and on August 12, 1994, the name was
further changed to SAGC.
LVDGT was incorporated in March 1986, under the name La Jolla Capital
Corporation for the purpose of creating a corporate vehicle to seek and
acquire a business opportunity and changed its name to Laguna Capital
Corporation (LCC) in May 1986. In February 1988, LCC acquired all of the
outstanding stock of SAGC and in December 1988, LCC changed its name to LVDGT.
Historically, LVDGT's primary business segments have included the following:
(1) the wholesale of golf and tennis related merchandise to franchisees and
to other golf retailers, (2) the operation of Company-owned Las Vegas Discount
Golf & Tennis retail stores and (3) franchising LVDGT retail stores and
collecting royalty revenue through its subsidiary SAGC.
Development, a wholly-owned subsidiary, was formed in 1993 for the purposes of
operating a Las Vegas Discount Golf & Tennis retail store in Los Angeles,
California. With the addition of retail stores in Encino, California and
Westwood, California, Development now operates three retail stores, all in
Southern California. Rainbow, a wholly-owned subsidiary, was formed in 1990
for the purpose of operating a Las Vegas Discount Golf & Tennis retail store
in Las Vegas, Nevada.
Until December 13, 1994, SAGC was wholly-owned by LVDGT. On December 13,
1994, SAGC 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, which totaled $3,683,800,
have been proportionately allocated to LVDGT and to the minority interest
shareholders. LVDGT currently owns 66-2/3% of SAGC's outstanding common
stock. Operating results of SAGC are proportionately allocated to LVDGT and
the minority interest shareholders. Since 1984, SAGC has been engaged in
franchising LVDGT retail stores and collecting royalty revenues related to
such stores. Additionally, in 1994 SAGC commenced the development, through
its wholly owned subsidiary All American Sportpark, Inc., of a sports oriented
theme park concept (the "Sportpark").
F-40
<PAGE>
c. SALE OF ASSETS AND DISCONTINUED OPERATIONS
On December 16, 1996, the Company entered into negotiations pursuant to an
"Agreement for the Purchase and Sale of Assets" (the "Agreement") to dispose
of its franchise business, wholesale business and the three Company owned
retail stores in Southern California. The assets to be sold include all
inventory, equipment, furniture and other personal property related to these
operations. The Southern California retail stores are located in Encino,
Westwood, and Los Angeles (the "Stores"). Additionally, pursuant to the
Agreement the buyer will assume all trade payables related to the inventory of
the Stores and the wholesale business. The agreement results in the
assignment of all franchisor rights under the existing franchise agreements,
the assumption of the Company's leasehold interests in the Stores and
corporate headquarters and security deposits associated with such leases.
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 SAGC 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 is
approximately $5,000,000 for all of the assets, subject to certain adjustments
at closing for trade payables and inventory. 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 of
the Company owned retail store in Las Vegas, Nevada and the Sportpark concept
being developed by SAGC. The assets, liabilities and rights related to the
franchise and wholesale businesses 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. The assets and
liabilities associated with the retail stores to be sold have been segregated
and classified as held for sale in the accompanying balance sheets of the
Company as of December 31, 1996 and 1995.
Assets and liabilities of the Company's franchise and wholesale 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 $ 271,000 $ 306,000
Inventories 1,162,000 1,118,000
Prepaid and other assets 11,000 7,000
Property and equipment, net 80,000 30,000
Total assets 1,524,000 1,461,000
Accounts payable 936,000 1,067,000
Accrued expenses 45,000 45,000
Notes payable 40,000 -
Deferred franchise fees 60,000 60,000
Net assets to be disposed of $ 443,000 $ 289,000
F-41
<PAGE>
Revenues related to the discontinued operations totaled $4,397,000 and
$5,154,000 for the years ended December 31, 1996 and 1995, respectively. The
Company anticipates that a gain will be recognized on the sale of the three
retail stores, franchise and wholesale business segments, and accordingly, has
deferred such gain until it is realized.
d. 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 a 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, SAGC entered into an agreement with MBNA America Bank, N.A.
(MBNA) which allows MBNA to use SAGC'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.
The Company will receive royalties for the generation of credit card accounts.
c. INVENTORIES
Inventories, which consist primarily of finished sporting goods merchandise,
display units, and supplies held for sale to franchisees, are stated at the
lower of cost (first-in, first-out method) or market. Inventories of the four
Company-owned retail stores are stated at the lower of cost (average cost
method) or market.
Approximately 50% of all inventory and approximately 75% of the Company's
merchandise is imported from overseas suppliers, primarily in the Far East.
As a result, the Company's business could be affected by economic or political
events affecting imports or by a major reduction in the value of the dollar in
relation to the currency of the countries from which the goods are imported.
In addition, overseas suppliers generally require letters of credit to be
posted for the entire purchase price.
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 the
following estimated useful lives of the assets:
Furniture and equipment 5-10 years
Leasehold improvements 15-31.5 years
Normal repairs and maintenance are charged to expense when incurred.
Expenditures which materially extend the useful life of assets are
capitalized.
F-42
<PAGE>
e. 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
(see Note 8). 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 December 31, 1996 and 1995, SAGC 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.
f. 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.
g. LOSS PER COMMON SHARE
Loss per common share is computed using the weighted average number of common
shares. Weighted average shares outstanding at December 31, 1996 and 1995
were 5,319,088 shares.
h. ISSUANCE OF SUBSIDIARY STOCK
The Company recorded the excess of the fair value over the carrying amount of
its investment in SAGC due to SAGC's initial public offering in December 1994
as an equity transaction. Any future transactions involving the issuance of
a subsidiary's stock will be accounted for in a similar manner.
i. CONCENTRATION OF SERVICES
Subsequent to the completion of the sale of assets related to the three
Company-owned retail stores in California, and the wholesale business and the
franchise business, the Company's activities will consist solely of the one
Company-owned retail store in Las Vegas, Nevada and 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.
j. RECLASSIFICATIONS
Certain reclassifications, which had no impact on the Company's results of
operations, have been made to prior year amounts to conform them to the
current year presentation.
3. SEGMENT INFORMATION
The Company's operations after giving effect to the discontinued operations
and assets sold as previously described are classified into two primary
business
F-43
<PAGE>
segments: retail operations consisting of the Company-owned store, and
development activities related to the Sportpark concept. As of December 31,
1996, the Sportpark is still in the development stage and, accordingly, has no
revenues.
The Company's three retail store operations which have been sold (See Note 1)
are located in Southern California. The one remaining retail store is located
in Las Vegas, Nevada. Accordingly, all revenue generated was derived from the
Southwest geographical area.
4. RELATED PARTY TRANSACTIONS
The Company has extensive transactions and relationships with its chairman and
principal shareholder, the Affiliated Store and SAGC. Because of these
relationships, it is possible that the terms of transactions between these
parties are not the same as those which would result from transactions among
unrelated parties. As of December 31, 1996 and 1995, the Company had a
$72,000 and $263,000 receivable from the Affiliated Store. As of December 31,
1996 and 1995, the Company had outstanding payables to the Affiliated Store of
$463,000 and $971,000, respectively. The Affiliated Store operates in Las
Vegas, Nevada and is not a franchise of SAGC. As a result, this store pays no
royalties to SAGC but purchases merchandise at the same cost as SAGC. The
Affiliated Store also benefits from SAGC's activities, including any local and
national advertising conducted by SAGC. The Company provides certain general
and administrative services to the Affiliated Store under a license agreement
that provides for a monthly fee of $3,000 to the Company as compensation for
these services. The Company received $36,000 in connection with this
agreement in 1996 and 1995. The Affiliated Store and Rainbow store share
advertising costs equally in the Las Vegas market area. These advertising
costs were $228,000 and $112,000 in 1996 and 1995, respectively.
Sales of merchandise made to the Affiliated Store are recorded at the
Company's cost and totaled $1,120,000 and $559,000 for the years ended
December 31, 1996 and 1995, respectively. These sales are included in
"Discontinued Operations" in the accompanying statement of operations.
Merchandise purchased from the Affiliated Store are recorded at cost and
totaled $382,000 and $757,000, respectively, in 1996 and 1995. These
purchases were recorded in "Discontinued Operationsin the accompanying
statement of operations.
The Company and SAGC share office and warehouse facilities and the Company
provides certain administrative personnel in accounting, purchasing and
warehousing. These occupancy and administrative expenses are allocated
proportionately between the Company and SAGC 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.
At December 31, 1996 and 1995, the Company had an unsecured, ten percent note
payable totaling $631,000 and $663,000, respectively, with the Company's
chairman and principal shareholder. The principal amount, interest rate, and
payment terms are substantially similar to borrowings which the Company's
chairman and principal shareholder obtained from a bank to fund these loans to
the Company. Interest expense of $65,000 and $57,000 related to this note is
included in interest expense in 1996 and 1995.
On August 1, 1994, LVDGT and SAGC entered into a written agreement pursuant to
which LVDGT agreed to grant SAGC a license to use all of its trademarks, trade
names and other commercial names and symbols. LVDGT also agreed to purchase,
F-44
<PAGE>
warehouse and make available to SAGC and its franchisees certain merchandise.
In exchange, SAGC subsequently repaid with proceeds from its initial public
offering loans previously obtained by LVDGT and SAGC from an unaffiliated bank
in the amount of $350,000 (see Note 9). This agreement will expire on July
31, 1997.
SAGC made non-interest bearing advances to the President of SAGC of $13,000 as
of December 31, 1996 and $15,000 as of December 31, 1994. During 1995, the
amount advanced in 1994 was offset against amounts owed to the Company's
President.
5. NOTES RECEIVABLE
Notes receivable at December 31, 1996 and 1995 represented amounts due from
franchisees or former franchisees
6. PROPERTY AND EQUIPMENT
Property and equipment included the following as of December 31:
1996 1995
--------- ---------
Furniture and equipment $ 50,000 $ 109,000
Furniture and equipment under
capital lease 41,000 -
Leasehold improvements 296,000 291,000
Land improvements 13,000 13,000
Other 50,000 50,000
450,000 463,000
Less--Accumulated depreciation
and amortization (214,000) (183,000)
$ 236,000 $ 280,000
Property and equipment, held for sale, included the following as of December
31:
1996 1995
--------- ---------
Furniture and equipment $ 165,000 $ 102,000
Leasehold improvements 38,000 48,000
Other 34,000 47,000
237,000 197,000
Less--Accumulated depreciation
and amortization (58,000) (32,000)
$ 179,000 $ 165,000
7. 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.
F-45
<PAGE>
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 information
available as of December 31, 1995 the Company believed that the amount would
be collected in 1996 for a total 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 total consideration of $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 this matter in the current year.
8. PROJECT DEVELOPMENT COSTS
The Company has a capitalized balance of costs incurred related to the
Sportpark of $1,604,000 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-party 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.
9. BANK LINE OF CREDIT
As of December 31, 1996 and 1995, the Company had a $400,000 bank line of
credit; interest is payable monthly at one and one half (1.5%) percent over
the bank's prime rate which was 9.75% at December 31, 1996. As of December
31, 1996, approximately $398,000 had been drawn on this facility while at
December 31, 1995, there were no amounts outstanding. The line of credit is
due in full in July 1997.
F-46
<PAGE>
10. OBLIGATIONS UNDER CAPITAL LEASE
In March 1996, the Company entered into a capital lease for the purchase of
certain computer equipment. The lease bears interest at 17.5 percent, has a
term of 36 months and requires monthly payments of $1,466.
Future lease payments required under capital leases for the five years
subsequent to December 31, 1996 are as follows:
Year ending
1997 $ 18,000
1998 18,000
1999 3,000
2000 -
2001 -
Thereafter -
39,000
Less amounts representing interest (6,000)
Present value of net monthly lease payments 33,000
Less current maturities (13,000)
Obligations under capital lease less
current maturities $ 20,000
11. OPERATING LEASES
The Company and SAGC lease office and warehouse facilities from the Company's
Chairman and principal shareholder 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. Until August 1994, the Company and SAGC shared rent
equally. Beginning August 1, 1994, the allocation was changed to 67 percent
to the Company and 33 percent to SAGC, based on the new ownership percentages
effected with the initial public offering of SAGC. Beginning July 1, 1996,
the Company was allocated 33 percent and SAGC was allocated 67 percent. The
lease provides for monthly rental payments of $13,000 which increase based on
the consumer price index. Rent expense under this lease totaled $162,000 and
$155,000 in 1996 and 1995, respectively.
The Company also leases retail space for the Company owned stores under
non-cancelable operating lease agreements which expire at various times
between 1997 and 2007 and provide for base monthly rental payments ranging
from $5,611 to $12,000. Under the leases, the base monthly rental may
increase based on increases in the consumer price index and taxes. Rent
expense under these leases totaled $380,000 and $288,000 in 1996 and 1995,
respectively.
In addition to the leases discussed above, the Company also leases various
equipment and automobiles under non-cancelable operating leases.
At December 31, 1996, minimum future rental commitments under non-cancelable
operating leases, including the office and warehouse lease with the Chairman
and principal shareholder, are as follows:
F-47
<PAGE>
Year ending
1997 $ 658,000
1998 530,000
1999 405,000
2000 336,000
2001 332,000
Thereafter 1,731,000
$ 3,992,000
In July 1996, SAGC entered into a lease for 65 acres of undeveloped land in
Las Vegas, Nevada for the development of the 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 with 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, are as follows:
Year ending
1997 $ 60,000
1998 625,000
1999 625,000
2000 625,000
2001 625,000
Thereafter 7,783,750
$10,343,750
12. INCOME TAXES
The provision (benefit) for income taxes consists of the following at December
31, 1996 and 1995:
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<PAGE>
1996 1995
--------- ---------
Current $ - $ -
State Taxes - -
Deferred benefit (244,000) (69,000)
Increase in deferred tax asset
valuation allowance 244,000 69,000
$ - $ -
Deferred tax assets (liabilities) are related to the following at December 31,
1996 and 1995:
1996 1995
----------- ----------
Provision for bad debt $ 74,000 $ 33,000
Deferred franchise fees 42,000 41,000
Vacation accrual 19,000 18,000
Commissions (7,000) (5,000)
Depreciation (18,000) (17,000)
Book/tax basis difference in SAGC (743,000) (743,000)
Net operating loss carryforward 449,000 245,000
----------- ----------
(184,000) (428,000)
Valuation allowance (559,000) (315,000)
Net deferred tax liability $ (743,000) $ (743,000)
A reconciliation of income tax expense computed by applying the statutory
federal income tax rate to the Company's income from continuing operations
before provision (benefit) for income taxes is as follows:
1996 1995
Dollars % Dollars %
Federal income tax ----------------- -----------------
at statutory rate $(331,000) (35) $(118,000) (34)
Minority interest in loss 87,000 9 36,000 10
Increase in deferred tax
asset valuation allowance 244,000 26 69,000 18
Other - - 13,000 -
$ - - $ - -
As of December 31, 1996 LVDGT and SAGC have net operating loss carryforwards
of $783,000 and $875,000, respectively, which are available through 2010.
13. CAPITAL STOCK, STOCK OPTIONS, AND INCENTIVES
a. STOCK OPTION PLANS
In June 1991, the Company's Board of Directors adopted a Stock Option Plan
(the "1991 Plan"). All options granted under the 1991 Plan except for 4,000
options which were granted in 1992 and 1993 have either expired or were
replaced under an amendment to the plan effective July, 1994. The 1991 Plan
allows the Board to grant stock options from time to time to employees,
officers, directors of the Company and consultants to the Company. The Board
of Directors has the power to determine at the time the option is granted
whether the option will be an Incentive Stock Option or an option which is not
an Incentive Stock Option. However, Incentive Stock Options will only be
granted to persons who are employees or officers of the Company. Vesting
provisions are determined by the Board of Directors at the time options are
granted. The total number of shares of Common Stock subject to options under
the 1991 Plan may not exceed 500,000,
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<PAGE>
subject to adjustment in the event of certain recapitalizations and
reorganizations.
Total options granted under the 1991 Plan in 1994 were 491,000 at an exercise
price of $.80 per share. Of these shares, 50,000 have expired while the
remaining 441,000 shares are exercisable at any time through July 1999. An
additional 11,000 shares were granted in 1995 at exercise prices ranging
between $1.35 and $1.625. As of December 31, 1996, 10,000 of these options
had expired. These options have expiration dates which extend through January
2000. Total options outstanding under the 1991 Plan were 442,000 at December
31, 1996 and 1995, respectively, of which all were exercisable at prices
ranging from $.80 to $1.35 per share.
b. PREFERRED STOCK
On June 1, 1992, the shareholders approved an amendment to the Articles of
Incorporation authorizing the issuance of up to 5,000,000 shares of preferred
stock. On October 21, 1992, the Board of Directors authorized the creation of
Series A convertible preferred stock with no par value. The Board also
authorized the issuance of 512,799 shares of the Series A convertible
preferred stock to the Company's chairman and principal shareholder in
exchange for services rendered valued at $5,128. The Series A Convertible
Preferred Stock shares are not entitled to any dividend, have a liquidation
preference of $.01 per share or $5,128 and are automatically convertible into
512,799 shares of the Company's common stock once the audited financial
statements of the Company for any fiscal year reports pre-tax income of at
least $1,000,000. Each share of Series A Convertible Preferred Stock entitles
the holder to one vote with full voting rights and powers of a holder of
shares of common stock. During 1994 all of theses preferred shares were
transferred to the President of SAGC who is also a director of the Company.
In April 1996 the Board adopted a resolution which would allow the President
of SAGC to convert the 512,799 shares of preferred stock to SAGC common shares
upon a spin off of SAGC common shares by the Company, even if the conversion
requirements have not been met.
c. SAINT ANDREWS 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 of this agreement on October 7, 1996. Issuance costs totaling $162,000
were incurred related to the preferred stock. The preferred stock issued by
SAGC and accompanying options to purchase 250,000 shares of SAGC common stock
is included as a component of minority interest totaling $5,000,000 as of
December 31, 1996.
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 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 Securities and Exchange Commission covering the
issuance of the common stock upon conversion of the Preferred Stock and the
following two
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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 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 and will 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 the president of Three Oceans Inc.
d. COMMON STOCK AND COMMON STOCK PURCHASE WARRANTS
On December 13, 1994, SAGC 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
and SAGC that they had entered into a letter of intent to sell certain retail
stores, the wholesale and franchise business segments (see Note 1), the
expiration date of the Class A Warrants have been extended until after the
sale is completed and written communication to warrantholders that fully
describes the impact of the sale occurs.
In connection with the initial public offering, SAGC 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. SAGC 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.
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<PAGE>
e. ACCOUNTING FOR STOCK-BASED COMPENSATION
Statement of Financial Accounting Standards No. 123 requires pro forma net
income disclosures reflecting compensation expense for stock options granted
after fiscal years commencing December 15, 1994. Accordingly only the 11,000
options granted in 1995 are subject to the provisions of the pronouncement.
The pro forma effect for these grants are not material to the consolidated
financial statements of the Company.
14. EMPLOYEES' 401(k) PROFIT SHARING PLAN
The Company offers all its eligible employees participation in the Employees'
401(k) LVDGT Profit Sharing Plan ("the 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 $106,000 and $27,000 for 1996 and 1995,
respectively.
15. SUPPLEMENTAL NON-QUALIFIED RETIREMENT PLAN
In 1995, the Company entered into a Supplemental Retirement Plan for certain
key employees including the President of the Company and the President of
SAGC. This plan became effective on January 1, 1996. During 1996, the
Company paid $100,000 pursuant to the plan for officers and directors of the
Company.
16. COMMITMENTS AND CONTINGENCIES
SAGC has employment agreements with its President, as well as other key
employees which will require the payment of fixed and incentive based
compensation.
SAGC has entered into a letter agreement with Oracle One partners, Inc.
("Oracle") whereby Oracle has been retained to assist SAGC 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. SAGC 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. In 1995 the Company paid Oracle
$60,000 for its efforts in obtaining the exclusive license agreement with
Major League Baseball described below.
In December 1994, SAGC 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. SAGC obtained an exclusive license for indoor and outdoor baseball
batting stadiums in the United States through December 31, 1997, and in
return, SAGC will pay a royalty of the gross revenues from the batting cages
with a minimum annual royalty for each stadium. SAGC'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.
In May 1996, SAGC 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 quaranteed 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
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<PAGE>
and radio spots and making more than six appearances per year. Mr. Gordon was
also granted options under the Company's stock option plan.
SAGC 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 stand-alone NASCAR SpeedPark.
In January 1997 SAGC 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. SAGC also anticipates that the agreement with Pepsi will
provide that SAGC 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.
17. SUBSEQUENT EVENTS
On February 26, 1997, the Company and SAGC 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 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.
The note payable owed to the Company's chairman and principal shareholder (see
Note 4) originally matured on January 31, 1997; however, on February 1, 1997,
the chairman extended the due date to December 31, 1998.
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<PAGE>
PRO FORMA BALANCE SHEETS AS OF
SEPTEMBER 30, 1997
Pro
Forma Adjusted
September Adjust- September
30, 1997 ments 30, 1997
-------- ------- --------
Cash and cash equivalents $ 1,660 $ 1,660
Accounts receivable 339 339
Inventory 563 563
Prepaid expenses and other 31 31
Preopening expenses 386 386
------- -------
TOTAL CURRENT ASSETS 2,979 2,979
Furniture and equipment 326 326
Project development costs 13,657 13,657
Goodwill 0 598(3) 598
------- -------
TOTAL ASSETS 16,962 17,560
Accounts payable and
accrued expenses 1,375 1,375
Deferred income 0 0
Bank line of credit 0 0
Income taxes payable 137 137
------- -------
TOTAL CURRENT LIABILITIES 1,512 1,512
Other long term liability 143 143
Note payable 3,937 3,937
Deferred tax liability 743 (743)(2) 0
Preferred stock of
subsidiary 5,000 (5,000)(5) 0
Minority interest 2,109 (1,359)(1) 750
Preferred stock 0 5,000(5) 5,000
Common stock 3,876 2,700(4) 6,576
Retained earnings (358) (358)
------- -------
TOTAL LIABILITIES $16,962 $17,560
NOTE 1 - PURCHASE PRICE PAID FOR MINORITY
Las Vegas Discount Golf & Tennis ("LVDGT") has entered into a definitive
agreement to exchange shares of its stock for the 1.0 million shares (33
percent) of stock belonging to minority shareholders in its subsidiary Saint
Andrews golf Corporation ("SAGC"). The exchange rate developed by independent
appraises is 2.4 LVDGT shares to each one share of SAGC stock. LVDGT stock
was trading at approximately $1.125 when the exchange agreement was entered
into resulting in a "purchase price" of $2.7 million (2.4 million shares x
$1.125). Additionally, an offset to the purchase price is a $743,000
deferred tax liability that was recorded at the time of the original IPO of
SAGC shares in 1994 (the gain on IPO was recorded directly to equity).
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<PAGE>
NOTE 2 -
The following calculation presents the calculation of excess of purchase price
over minority interest for the stock of SAGC:
In (000's)
----------
Purchase Price - value of shares issued 2,700
Deferred tax liability release (743)
Carrying Value of Minority (1,359)
------
Excess of purchase price over minority interest 598
------
NOTE 3 -
The following proforma adjustments were made to reflect the exchange of LVDGT
shares for SAGC shares:
1. To eliminate minority interest balance at September 30, 1998 (excluding
Callaway minority interest).
2. To eliminate the deferred tax liability related to the initial gain
recognized for the SAGC public offering in 1994.
3. To create goodwill for the excess of purchase price over minority
interest resulting from purchase accounting.
4. To record the LVDGT shares issued to the SAGC minority shareholders for
the shares purchased.
5. To reflect conversion of SAGC preferred stock into preferred stock of
LVDGT.
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<PAGE>
LAS VEGAS DISCOUNT GOLF AND TENNIS
PRO FORMA STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
Pro
Forma
Ad- Adjusted
December just- December
31, 1996 ments 31, 1996
-------- ----- --------
Revenues:
Retail $10,764 $10,764
Interest income 34 34
Royalties 0 0
------- -------
Total Revenues $10,798 $10,798
Expenses:
Cost of sales 8,330 8,330
Salaries, general and
administrative 3,390 3,390
Sportpark development
costs 207 207
------- -------
11,927 11,927
Loss before income taxes (1,129) (1,129)
Other income (expense) 6,000 6,000
Benefit for income taxes 0 0
------- -------
Loss before minority
interest (1,123) (1,123)
Minority interest 248 (248)(1) 0
------- -------
Loss from continuing
operations (875) (1,123)
Weighted EPS from continuing operations (.17) (.15)
Shares Outstanding 5,319 2,400(2) 7,719
NOTE 1 -
The following proforma adjustments were made to reflect the exchange of 2.4
million shares of LVDGT for 1.0 million shares of SAGC:
1. To eliminate the minority interest share of loss for the twelve months
ended December 31, 1996.
2. To reflect the increase in shares outstanding for the exchange of LVDGT
shares for SAGC shares.
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<PAGE>
LAS VEGAS DISCOUNT GOLF AND TENNIS
PRO FORMA STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
Pro
Forma Adjusted
September Adjust- September
30, 1997 ments 30, 1997
-------- ----- --------
Revenues:
Retail $ 3,103 $ 3,103
Interest income 212 212
Royalties 18 18
Other 62 62
------- -------
Total Revenues 3,395 3,395
Expenses:
Cost of sales 2,204 2,204
Salaries, general and
administrative 1,492 1,492
Sportpark development
costs 156 156
------- -------
3,852 3,852
Loss before income taxes (457) (457)
Benefit for income taxes 0 0
------- -------
Loss before minority
interest (457) (457)
Minority interest (557) 557(1) 0
------- -------
Loss from discontining
operations (1,014) (457)
Weighted EPS (0.17) (.06)
Shares Outstanding 5,832 2,400(2) 8,232
NOTE 1 -
The following proforma adjustments were made to reflect the exchange of 2.4
million shares of LVDGT for 1.0 million shares of SAGC:
1. To eliminate the minority interest share of loss for the nine months
ended September 30, 1997.
2. To reflect the increase in shares outstanding for the exchange of LVDGT
shares for SAGC shares.
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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
arrangement 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.
II-1
<PAGE>
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.
(c) There are no other arrangements regarding indemnification and the
Registrant does not have any officer and director liability insurance.
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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
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<PAGE>
3.3 Revised Bylaws Previously filed
3.4 Certificate of Amendment to Articles Previously filed
of Incorporation (Series A Convertible
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 Previously filed
& 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
II-4
<PAGE>
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
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 Previously filed
of Nevada and All-American SportPark,
Inc.
10.17 Lease Agreement between Urban Land Previously filed
of Nevada and All-American Golf Center,
LLC
10.18 Operating Agreement for All-American Previously filed
Golf, LLC, a limited liability company
10.19 Employment Agreement with Kevin Previously filed
Donovan dated October 8, 1996
10.20 Lease and Concession Agreement with Previously filed
Sportservice Corporation
10.21 Sponsorship Agreement with Pepsi- Filed herewith
Cola Company electronically
10.22 Agreement and Plan of Merger dated Filed herewith
January 20, 1998 between the Company electronically
and Las Vegas Discount Golf & Tennis,
Inc.
21 Subsidiaries of the Registrant Previously filed
23.1 Consent of Krys Boyle Freedman Previously filed
& Sawyer, P.C.
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
II-5
<PAGE>
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
indemnification 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 settled by controlling
precedent, submit to a court of appropriate jurisdiction 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.
II-6
<PAGE>
(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-7
<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. 3 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 4th day of February, 1998.
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. 3 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 February 4, 1998
Vaso Boreta and Director
/s/ Ronald S. Boreta President, Treasurer, February 4, 1998
Ronald S. Boreta (Chief Executive
Officer, Principal
Financial and Account-
ing Officer) and Director
/s/ Robert R. Rosburg Director February 4, 1998
Robert R. Rosburg
/s/ William Kilmer Director February 4, 1998
William Kilmer
_______________________ Director
Motoharu Iue
SPONSORSHIP AGREEMENT
THIS AGREEMENT is made and entered into as of this 4th day of December
1997 by and between Saint Andrews Golf Corporation, a Nevada corporation with
a principal place of business located at 5325 S. Valley View Boulevard, Suite
4, Las Vegas, Nevada 89118 ("SAGC"), and Pepsi-Cola Company, a division of
PepsiCo, Inc., a North Carolina corporation with offices 1 Pepsi Way, Somers,
New York 10589 ("Pepsi-Cola").
1. GENERAL. SAGC is authorized to seek and engage the support of sponsors
for the All-American SportPark ("SportPark"). SAGC is the developer, owner and
operator of such facility which is currently under construction on a 65-acre
parcel on the South east corner of Las Vegas Boulevard and Sunset Road, in Las
Vegas, Nevada. SAGC is also authorized to grant certain rights to such
sponsors relative to the use of trademarks, slogans, devices, names, copyright
materials, publication, publicity and other intellectual property rights which
are associated with the SportPark ("SportPark Property"), and to grant rights
to access and use of the SportPark Properties. SAGC is also authorized to
grant rights with respect to beverages poured at the SportPark. Now, therefore
in consideration of the mutual promises and covenants set forth herein, the
parties hereto agree as follows:
2. TERM. The term of this Agreement shall begin on December 1, 1997 and
end on the later of November 30, 2002 or upon five years after 100% completion
of the SportsPark (the "Term"), unless terminated earlier in accordance with
Paragraph 8 below.
3. SPONSORSHIP RIGHTS. In consideration of the amounts paid by Pepsi-Cola
pursuant to Paragraph 4 below, SAGC grants to Pepsi-Cola the following rights
during the Term of this Agreement:
A. PRODUCT EXCLUSIVITY.
(i) SAGC hereby grants to Pepsi-Cola the exclusive right to have
its beverage products and beverage syrups as the only non-alcoholic beverage
products and beverage syrups available through fountain dispensers, bottle and
cans or vending machines for consumption, advertised, displayed, represented
or promoted in, at or in connection with the SportPark (including without
limitation, print broadcast, direct mail, coupons, handbills, displays and
signage) at all events in the SportPark. Specialty tenants at the SportPark
will be allowed to serve products manufactured by such tenants, e.g. Starbucks
Cappuccino, however if such locations choose to serve products other than
those manufactured by them, such products must be products as defined below.
SAGC will review with Pepsi-Cola such tenants as they become available.
(ii) In addition, SAGC reserves the right to bring in Non-Pepsi
related Specific Special Events which may be tied to other soft drink
Companies national sponsorships such as: The NHL Breakout Off-Ice Tour Event,
The NFL Experience, The National Finals Rodeo Special Touring Event. SAGC will
receive prior written approval from Pepsi-Cola. Pepsi-Cola also has the first
right of refusal to either book a Pepsi-Cola event in that particular event
date or have the option to sponsor a similar event of equal or greater
magnitude. However, SAGC is not prohibited from staging an event that might be
tied to a Pepsi-Cola competitor's product or event. In the event of any such
event at the SportPark, SAGC agrees that it shall not cover or obstruct or
cause to be covered or obstructed any advertising signage of Pepsi Cola nor to
refrain from pouring the Pepsi Cola products at any concessions located at the
SportPark.
(iii) Pepsi-Cola shall have the right to have served in and on the
grounds of the SportPark any or all of the beverage products manufactured,
sold or distributed by Pepsi or its local bottler including without
limitation, all carbonated soft drinks, sport drinks, ready to drink tea,
juice or juice-based drinks, bottled water, bottled iced coffees and other
beverage products that may be developed and sold by Pepsi-Cola (the
"Products") during the Term. At least the following fountain products shall be
served: Pepsi, Diet Pepsi, Lemon-Lime Slice, Lipton, Mountain Dew and Citrus
Hill. SAGC reserves the right to any and all alcoholic beverages that may be
served in and on the grounds of the SportPark and does not provide the pouring
rights of such alcoholic beverages to Pepsi-Cola.
(iv) Pepsi-Cola shall work directly with SAGC and its
concessionaires, restaurants, food stands and food vendors ("Concessionaires")
in place at the SportPark during the Term to promote sales of the Products
through appropriate point-of-sale materials, menu boards, and other
advertising materials bearing the Trademarks of the Products at appropriate
food sale locations at the cost of Pepsi-Cola. SAGC agrees that it will not
authorize or allow any Concessionaire in the SportPark to advertise, sell or
display any soft drinks other than those supplied by Pepsi-Cola.
(v) SAGC agrees that during the Term of this Agreement, it shall
direct and/or cause the Concessionaires, to purchase all of their
non-alcoholic beverages or bottled water requirements for its business from
Pepsi-Cola at Pepsi-Cola's then prevailing prices for national accounts. SAGC
will receive the Fountain Flex Fund at the rate of .65 (sixty-five cents) per
gallon.
Pepsi-Cola agrees that it will promptly and fully furnish all of
SAGC's requirements with respect to the Products required to service SportPark
guests. SAGC shall direct Concessionaires to purchase directly from the local
Pepsi-Cola bottler and exclusively use cups identified with the Pepsi-Cola
logo for soft drink dispensing at the SportPark. Pepsi-Cola will create a
customized cup combining the Pepsi-Cola logo with the All-American SportPark
logo. Pepsi-Cola will incur all costs for creative design and artwork charges
in the creation of the custom cup. SAGC will be purchasing the customized cups
from Pepsi-Cola for use at the SportPark at the local competitive price for
such items as set forth in SCHEDULE A.
(vi) Pepsi-Cola will furnish to SAGC, without charge, all
equipment necessary to dispense the Products at the SportPark. Pepsi-Cola
shall provide, at its expense, repair of such equipment at all times during
the Term, it being understood that SAGC, its Concessionaires and employees
shall exercise prudent care in the handling and operation of this equipment.
Title to such equipment shall remain vested in Pepsi-Cola and Pepsi-Cola shall
have the right to remove this equipment upon termination or expiration of this
Agreement.
(vii) Pepsi-Cola will provide the All-American SportPark, Isotonic
beverage equipment for the sole use of dispensing AllSport to the SportPark
employees.
(viii) Pepsi-Cola will furnish the SportPark with all vending
equipment, Pepsi-Cola will also stock products and service such equipment
parkwide. The agreed upon net commission for all vending at the park will be a
flat 52% paid on all collected moneys less sales tax and refunds. Pricing for
the vended products shall be set by Pepsi -Cola and shall be competitive with
the average market prices. Commissions will be paid directly to SAGC on a by
period basis (thirteen periods per year).
B. SIGNAGE RIGHTS
(i) SAGC agrees to grant Pepsi-Cola the right to have a minimum of
eight (8) mutually agreed upon Pepsi-Cola signage in high visibility areas
which shall be in addition to signage on vending machines, food and beverage
operations and menus.
(ii) The main arena entrance inside the SportPark Pavilion shall
be named the "All Sport Arena" and such naming shall appear at the entrances
into the arena and flyover exposure, informational pamphlets, ail tickets and
ticket stubs for arena event and directional signage relating to the
SportPark. Once the signage is installed at the SportPark, it will continue
to be positioned at the same locations during the Term, SAGC will be
responsible to maintain the signs in good condition, to supply electricity to
the back lit signs and to replace all electrical bulbs or other fixtures as
necessary. If it becomes necessary, the Pepsi-Cola signs will be replaced at
Pepsi-Cola's expense. Any damage caused by vandalism will be Pepsi-Cola's
responsibility. SAGC will be responsible for reasonable and periodic
maintenance.
(iii) The number of signs, dimensions, other specific production
details, i.e.: animated, back lit, etc. will be determined at a later date
after Pepsi-Cola and SAGC have completed their signage Design Charette at
which point an addendum on signage will be added to this contract. The
Pepsi-Cola Company will pay for the design and the production costs of any and
all signs related to the Pepsi-Cola products.
C. PROMOTIONAL AND MARKETING OPPORTUNITIES. Each year during the
Term, Pepsi-Cola shall have the right to:
(i) advertise and publicize worldwide, the exclusive sale of the
Products at the SportPark. All such marketing programs developed by Pepsi-Cola
pursuant to this Agreement shall be mutually agreed to by the parties. The
advertising vehicles may include but not be limited to radio, television,
print, direct mail, internet and other forms of electronic medium, In-Store
Point of Purchase materials, and promotional merchandise.
(ii) provide three marketing events per year throughout the Term
of the agreement. These marketing events will be valued at an approximate
minimum of $250.000 per year. These events will be used to promote the
business of SAGC and Pepsi-Cola. Pepsi Cola will provide SAGC with a marketing
plan, budget and accounting system for soft dollar investments and
expenditures and a measurable system on a yearly basis. As defined in SCHEDULE
B.
(iii) SAGC will provide Pepsi-Cola with a minimum of 200 single
day attraction passes excluding non SAGC sponsored Specific Special events
each year during the Term to be utilized by its guests. SAGC will assist
Pepsi-Cola in obtaining tickets for (non SAGC events at the SportPark).
(iv) SAGC shall provide Pepsi-Cola with the rental free use of the
"All Sport Arena for at least one Pepsi-Cola sponsored event each year during
the Term. Both parties will define the use of the Arena, schedule, type of
event, length of event and will include this as an addendum to this agreement.
SAGC will make available pricing to Pepsi-Cola, standard to the terms of cost
of arena, labor, materials, products, etc.
(v) SAGC reserves the right to approve any and all Pepsi-Cola
staged events at the SportPark, including the Arena, concerning content,
design, use, programming, length of time, marketing, etc.
(vi) SAGC shall provide Pepsi-Cola with passes to games and rides
when used in connection with mutually agreed upon promotions.
4. CONSIDERATION.
In consideration of the rights granted herein, Pepsi-Cola agrees to pay
SAGC the amount of ONE MILLION TWO HUNDRED AND FIFTY THOUSAND DOLLARS
($1,250,000.00) payable as follows:
(a) $250,000 no later than 30 days from the official opening date of
any portion of the SportPark;
(b) $250,000 within 30 days after January 1, 1998; provided that the
SportPark is 100% completed and all attractions are accessible by the public,
in the event the SportPark is not 100% complete on January 1, 1998 Pepsi Cola
will pay the amount set forth in this subparagraph within thirty days of the
actual date the SportPark is 100% completed and all attractions are accessible
by the public.
(c) $250,000 within 30 days of January 1, 1999;
(d) $250,000 within 30 days of January 1, 2000;
(e) $250,000 within 30 days of January 1, 2001
5. REPRESENTATIONS AND WARRANTIES.
A. SAGC represents and warrants to Pepsi-Cola that:
(i) SAGC is the sole and exclusive owner of the SportPark; SAGC
has formed a Limited Liability Company with the Callaway Golf Company for the
Golf Center portion of the SportPark and Three Oceans, Inc. a subsidiary of
Sanyo North America owns approximately 14% of SAGC;
(ii) SAGC has full right, power and authority to enter into this
Agreement and to grant, transfer and sell to Pepsi-Cola all of the rights,
privileges, terms and conditions set forth herein;
(iii) The granting of such rights and privileges to Pepsi-Cola
shall not violate, interfere with nor infringe upon the rights of any third
parties pursuant to written agreements or otherwise;
B. Pepsi-Cola represents and warrants to SAGC that:
(i) it is the sole and exclusive SAGC of the Pepsi-Cola
trademarks, and that use of such marks pursuant to this Agreement will not
infringe the rights of any third parties; and
(ii) it has the full right and authority to enter into this
Agreement and the terms and conditions do not and will not conflict with or
violate any rights granted to any other parties by Pepsi-Cola.
6. INDEMNIFICATION.
(A) Pepsi-Cola will indemnify and hold SAGC harmless from and against
any and all suits, actions, claims, demands, losses, costs, damages,
liabilities, fines, expenses and penalties (including reasonable attorneys'
fees) arising out of: (i) its breach of any representation, warranty, term or
condition of this Agreement; and (ii) any claims, including but no limited to
claims for property damage, personal injury, or death, based on the use or
consumption's of Pepsi-Cola's products.
(B) SAGC will indemnify and hold Pepsi-Cola harmless from and against
any and all suits, actions, claims, demands, losses, costs, damages,
liabilities, fines, expenses and penalties (including reasonable attorneys'
fees) arising out of: (i) its breach of any representation, warranty, term or
condition of this Agreement; and/or (ii) any claims including but limited to
claims for property damage, personal injury or death not based on the use or
consumption of Pepsi-Cola's products.
7. INSURANCE.
(A) SAGC will name Pepsi-Cola as an additional insured on its public
liability insurance policy, which policy shall have at least a two million
dollar ($2,000,000) combined single limit and shall be issued by a financially
sound insurer. Upon request, SAGC shall deliver a certificate of insurance
evidencing such policy.
(B) Pepsi-Cola shall maintain product liability insurance in an amount
not less than two million dollars ($2,000,000) combines single limit bodily
injury/property damage. Upon request, Pepsi-Cola shall deliver a certificate
of insurance evidencing such policy.
8. DEFAULT AND REMEDIES.
(a) In the event of a significant breach or default of any material
term or condition of this Agreement by either party, the non-defaulting party
shall promptly notify the other party of the alleged breach, and the other
party shall promptly take all reasonable steps necessary to cure the alleged
breach.
If after a period of thirty (30) days the party to whom the notice of
breach was sent has not cured or taken reasonable steps to cure the alleged
breach, or otherwise remedied the situation to the reasonable, commercial
satisfaction of the non-defaulting party, the non-defaulting party may suspend
its performance under the Agreement in whole or part, or terminate the
Agreement as it deems appropriate under the circumstances. In the event of
termination by Pepsi-Cola as a result of a material breach by SAGC or if the
SportPark is closed for any continuous period of time in excess of 30 days,
SAGC shall promptly refund to Pepsi-Cola a percentage of that year's funds
equal to a fraction, the numerator of which is the number of months remaining
in the contract year after such breach and the denominator of which is twelve.
(b) If SAGC shall be adjudged a bankrupt or insolvent, or if any
receiver or trustee of all or any substantial part of the business or property
of SAGC shall be appointed and shall not be discharged within ninety (90) days
after such appointment or if SAGC shall make any general assignment of its
property for the benefit of creditors or if SAGC shall file a voluntary
Petition in bankruptcy or insolvency or either such entity shall apply for
reorganization or arrangement with its creditors under the bankruptcy or
insolvency law now in force or hereafter enacted, Federal, State or otherwise,
or if such Petition shall be filed against SAGC and shall not be dismissed
within ninety (90) days after the filing, the non-defaulting party may
immediately, by written notice to the other, terminate the Agreement.
(c) The above remedies are in addition to and not in lieu of any other
rights or remedies which the parties may have at law or in equity.
9. RELATIONSHIP OF THE PARTIES. The parties are independent contractors
with respect to each other; nothing contained in this Agreement will be deemed
or construed as creating a joint venture or partnership between the parties.
10. NO WAIVER. A waiver by either party of any of the terms and conditions
of this Agreement at any instance shall not be deemed or construed to be a
waiver of such term or condition for the future or of any subsequent breach
thereof.
11. NO ASSIGNMENT. Neither party hereto shall assign this Agreement or
delegate its duties thereunder without the express written consent of the
other party.
12. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement
between
the parties. This Agreement cannot be modified, altered, terminated or
otherwise changed except by means of a writing signed by both parties.
13. EXCUSED PERFORMANCE. In the event that either party is prevented or
delayed in the performance of any of its obligations under this Agreement due
to circumstances beyond the control of the non-performing party, including,
but not limited to, strikes, lockouts, earthquakes, fire flood, acts of God,
hostilities, civil commotion, governmental acts, orders or regulations,
failure of power, taking of the SportPark premises by eminent domain, or other
reason of a like or similar nature which is not the fault of the party delayed
in performing services or doing acts required under the terms of this
Agreement, then the performance of such acts shall be excused for the period
of the delay. In the event that the performance of this Agreement is
permanently prevented for any reason whatsoever, this Agreement shall be
terminated and SAGC shall refund a pro rata portion of the Consideration for
the year in which the SportPark ceases to operate.
14. GOVERNING LAW. This Agreement shall be governed by the laws of the
State
of Nevada.
15. NOTICES. All notices required to be given hereunder shall be properly
given if in writing and sent by certified or registered mail, postage prepaid,
or by generally recognized prepaid overnight delivery service to the
respective addresses of the recipient thereof set forth at the commencement of
this Agreement or such other address as may be designated in writing by the
parties hereto. Notice shall be deemed given on the date of receipt (or
refusal to accept receipt) thereof by the recipient.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by an officer being "hereunto duly authorized, all as of the day and
year first above written and intending to be legally bound hereby.
SAINT ANDREWS GOLF PEPSI-COLA COMPANY
CORPORATION
By: /s/ Ronald S. Boreta By: Mitchell Cox
Title: President Title: Market Unit General Manager
Date: 12/4/97 Date: 12/4/97
<PAGE>
SCHEDULE A
PEPSICO
ALL AMERICAN SPORT PARK
CUP AND LID PRICE LIST
CUP CASE
SIZE QUANTITY COST
12 oz. 2250 $64.60
16 oz. 1200 $51.70
22 oz. 1200 $60.58
32 oz. 600 $45.77
44 oz. 600 $55.92
LID CASE
SIZE QUANTITY COST
12/16/22 OZ. 2400 $45.54
32 OZ. 600 $20.37
44 OZ. 600 $20.37
<PAGE>
SCHEDULE B
1997 AND 1998 FIRST QUARTER MARKETING PROGRAMS*
MONDAY NIGHT QUARTERBACK - Advertising and Sponsorship entrance provided by
Pepsi Cola. See attachment for program details.
Estimated Value: $38,250
NEWS 13'S ALL SPORT EXPO 98 - Sponsorship dollars entering the All American
SportPark into event provided by Pepsi Cola.
Estimated Value: $81,050
CIRCLE K CUP PROMOTION - 26 Circle K Convenience Stores. Pepsi Cola will
produce 500 32oz. custom plastic saver cups for each Circle K store. A total
of 13,000 cups in the Las Vegas Market. On each cup we can have a sticker
affixed with a free play at the Sports Park. Pepsi Cola will pay for artwork
and production of cups. An easel sign will also be produced to promote the
cup and park as well. Radio tags will also be made available to promote the
cup.
Estimated Value: $75,000
UNLV STUDENT DAY AT ALL AMERICAN SPORT PARK -
Pepsi Cola will use its relationship with UNLV and Aramark Food Service to
make the University population aware of the Sport Park by sponsoring a Pepsi
Day or Night at the Sports Park. Pepsi Cola is an all food service areas at
the University. The University has a student population of approximately
26,000. Pepsi Cola could produce signage such as banners, table tents and
posters to make students aware of the park. For Pepsi day at the park, we
would charter a bus that would pick students up at a commons area and bring
them to the Sports Parl for a day or night of fun. Each student would get a
coupon for a free Pepsi at the park and their first play free.
Estimated Value: $20,000
CLARK COUNTY MIDDLE SCHOOL VENDING PROGRAM - (12 High Schools and 19 Middle
Schools are Pepsi exclusive) Pepsi Cola will produce a static vendor front
advertising a "Family Four Pack" at the All American Sport Park. We can seed
every 100th can with a sticker that would be redeemable for a free Family Four
Pack at the SportPark. Pepsi will also produce the sticker. As the children
get a can with the sticker they can bring it to the principals office for a
coupon they can redeem at the park.
Estimated Value: $10,000
* Above programs may vary from actual promotion. All above promotions are
ideas and values and program explanations are estimates. All marketing and
promotions must first be approved by Pepsi-Cola and All-American Sport Park.
AGREEMENT AND PLAN OF MERGER
DATED: JANUARY 20, 1998
BY AND BETWEEN
SAINT ANDREWS GOLF CORPORATION
AND
LAS VEGAS DISCOUNT GOLF & TENNIS, INC.
<PAGE>
TABLE OF CONTENTS
Page
AGREEMENT AND PLAN OF MERGER . . . . . . . . . . . . . . . . . .1
ARTICLE 1 - THE MERGER . . . . . . . . . . . . . . . . . . . .1
1.1 Surviving Corporation. . . . . . . . . . . . . . . .1
1.2 Articles of Incorporation. . . . . . . . . . . . . .1
1.3 By-Laws. . . . . . . . . . . . . . . . . . . . . . .1
1.4 Directors. . . . . . . . . . . . . . . . . . . . . .1
1.5 Officers . . . . . . . . . . . . . . . . . . . . . .2
1.6 Effective Time . . . . . . . . . . . . . . . . . . .2
1.7 Additional Actions . . . . . . . . . . . . . . . . .2
ARTICLE 2 - CONSIDERATION; CONVERSION OF SHARES. . . . . . . .2
2.1 Merger Consideration . . . . . . . . . . . . . . . .2
2.2 Conversion of Shares; Treatment of Warrants, Options
and Convertible Securities . . . . . . . . . . . .3
2.3 Cancellation of Certificates . . . . . . . . . . . .4
2.4 No Fractional Securities . . . . . . . . . . . . . .5
2.5 Closing. . . . . . . . . . . . . . . . . . . . . . .5
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES WITH
RESPECT TO LVDG. . . . . . . . . . . . . . . . . . . . . . .5
3.1 Corporate Existence and Power; Qualification; Subsidiaries5
3.2 Corporate and Governmental Authorization; Contravention6
3.3 Capitalization . . . . . . . . . . . . . . . . . . .7
3.4 Financial Statements of LVDG; Changes. . . . . . . .7
3.5 No Undisclosed Liabilities . . . . . . . . . . . . .9
3.6 Compliance with Laws . . . . . . . . . . . . . . . .9
3.7 Tax Matters. . . . . . . . . . . . . . . . . . . . .9
3.8 Title to Properties; Absence of Liens and Encumbrances,
Etc. . . . . . . . . . . . . . . . . . . . . 10
3.9 Facilities . . . . . . . . . . . . . . . . . . . . 10
3.10 Condition of Facilities, Equipment, Etc. . . . . . 10
3.11 Insurance. . . . . . . . . . . . . . . . . . . . . 11
3.12 Agreements, Plans, Arrangements, Etc.. . . . . . . 11
3.13 Intellectual Properties. . . . . . . . . . . . . . 12
3.14 Permits, License, Etc. . . . . . . . . . . . . . . 13
3.15 Litigation . . . . . . . . . . . . . . . . . . . . 13
3.16 Accounts and Notes Receivable. . . . . . . . . . . 13
3.17 No Interest in Competitors, Etc. . . . . . . . . . 13
3.18 Books and Records. . . . . . . . . . . . . . . . . 14
3.19 Employees, Labor Relations, Etc. . . . . . . . . . 14
3.20 Employee Benefit Plans, Etc. . . . . . . . . . . . 15
3.21 SEC Filings. . . . . . . . . . . . . . . . . . . . 15
3.22 Information. . . . . . . . . . . . . . . . . . . . 15
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES WITH
RESPECT TO SAGC. . . . . . . . . . . . . . . . . . . . . . 16
4.1 Corporate Existence and Power; Qualification; Subsidiaries16
4.2 Corporate and Governmental Authorization; Contravention17
4.3 Capitalization . . . . . . . . . . . . . . . . . . 17
4.4 Financial Statements of SAGC; Changes. . . . . . . 18
4.5 No Undisclosed Liabilities . . . . . . . . . . . . 20
4.6 Compliance with Laws . . . . . . . . . . . . . . . 20
4.7 Tax Matters. . . . . . . . . . . . . . . . . . . . 20
4.8 Title to Properties; Absence of Liens and
Encumbrances, Etc. . . . . . . . . . . . . . . . . 20
4.9 Facilities . . . . . . . . . . . . . . . . . . . . 21
4.10 Condition of Facilities, Equipment, Etc. . . . . . 21
4.11 Insurance. . . . . . . . . . . . . . . . . . . . . 21
4.12 Agreements, Plans, Arrangements, Etc.. . . . . . . 21
4.13 Intellectual Properties. . . . . . . . . . . . . . 22
4.14 Permits, License, Etc. . . . . . . . . . . . . . . 23
4.15 Litigation . . . . . . . . . . . . . . . . . . . . 23
4.16 Accounts and Notes Receivable. . . . . . . . . . . 23
4.17 No Interest in Competitors, Etc. . . . . . . . . . 23
4.18 Books and Records. . . . . . . . . . . . . . . . . 24
4.19 Employees, Labor Relations, Etc. . . . . . . . . . 24
4.20 Employee Benefit Plans, Etc. . . . . . . . . . . . 25
4.21 SEC Filings. . . . . . . . . . . . . . . . . . . . 25
4.22 Information. . . . . . . . . . . . . . . . . . . . 26
ARTICLE 5 - CONDUCT OF BUSINESS OF LVDG AND SAGC PRIOR
TO THE EFFECTIVE TIME . . . . . . . . . . . . . . . . . . . 26
5.1 Conduct of Business of LVDG. . . . . . . . . . . . 26
5.2 Conduct of Business of SAGC. . . . . . . . . . . . 27
ARTICLE 6 - ADDITIONAL AGREEMENTS. . . . . . . . . . . . . . 29
6.1 Access to Properties and Records . . . . . . . . . 29
6.2 Registration Statement . . . . . . . . . . . . . . 29
6.3 Stockholders' Approvals. . . . . . . . . . . . . . 29
6.4 Affiliates' Letters. . . . . . . . . . . . . . . . 30
6.5 Reasonable Efforts; Etc. . . . . . . . . . . . . . 30
6.6 Material Events. . . . . . . . . . . . . . . . . . 30
6.7 Tax Consequences . . . . . . . . . . . . . . . . . 30
6.8 Fair Price Statute . . . . . . . . . . . . . . . . 31
6.9 Indemnification. . . . . . . . . . . . . . . . . . 31
6.10 Quarterly Financial Statements . . . . . . . . . . 31
ARTICLE 7 - CONDITIONS TO THE OBLIGATIONS OF LVDG. . . . . . 32
7.1 Representations and Warranties True. . . . . . . . 32
7.2 Performance. . . . . . . . . . . . . . . . . . . . 32
7.3 Authorization of Merger. . . . . . . . . . . . . . 32
7.4 Registration Statement; Blue Sky Laws. . . . . . . 32
7.5 Affiliates Letters . . . . . . . . . . . . . . . . 32
7.6 Restrictive Legends. . . . . . . . . . . . . . . . 32
7.7 Absence of Litigation. . . . . . . . . . . . . . . 33
7.8 Opinion of Counsel . . . . . . . . . . . . . . . . 33
7.9 Appraisal Rights . . . . . . . . . . . . . . . . . 33
7.10 Articles of Merger . . . . . . . . . . . . . . . . 33
7.11 Consents . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE 8 - CONDITIONS TO THE OBLIGATIONS OF SAGC. . . . . . 33
8.1 Representations and Warranties True. . . . . . . . 34
8.2 Performance. . . . . . . . . . . . . . . . . . . . 34
8.3 Authorization of Merger. . . . . . . . . . . . . . 34
8.4 Registration Statement; Blue Sky Laws. . . . . . . 34
8.5 Absence of Litigation. . . . . . . . . . . . . . . 34
8.6 Opinion of Counsel . . . . . . . . . . . . . . . . 34
8.7 Tax Opinion. . . . . . . . . . . . . . . . . . . . 35
8.8 Articles of Merger . . . . . . . . . . . . . . . . 35
8.9 Consents . . . . . . . . . . . . . . . . . . . . . 35
8.10 Inclusion on NASDAQ System . . . . . . . . . . . . 35
ARTICLE 9 - TERMINATION. . . . . . . . . . . . . . . . . . . 35
9.1 Termination. . . . . . . . . . . . . . . . . . . . 35
9.2 Notice of Termination. . . . . . . . . . . . . . . 35
9.3 Effect of Termination. . . . . . . . . . . . . . . 36
ARTICLE 10 - MISCELLANEOUS PROVISION . . . . . . . . . . . . 36
10.1 Amendment. . . . . . . . . . . . . . . . . . . . . 36
10.2 Waiver of Compliance . . . . . . . . . . . . . . . 36
10.3 Notices. . . . . . . . . . . . . . . . . . . . . . 36
10.4 Assignment . . . . . . . . . . . . . . . . . . . . 37
10.5 No Third Party Beneficiaries . . . . . . . . . . . 37
10.6 Expenses . . . . . . . . . . . . . . . . . . . . . 37
10.7 Public Announcements . . . . . . . . . . . . . . . 37
10.8 Brokers and Finders. . . . . . . . . . . . . . . . 38
10.9 Further Agreements . . . . . . . . . . . . . . . . 38
10.10 Counterparts. . . . . . . . . . . . . . . . . 38
10.11 Entire Agreement. . . . . . . . . . . . . . . 38
10.12 Governing Law . . . . . . . . . . . . . . . . 38
10.13 Descriptive Headings. . . . . . . . . . . . . 39
10.14 Specific Performance. . . . . . . . . . . . . 39
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . 39
SCHEDULES
1.4 List of Directors of Surviving Corporation
1.5 List of Officers of Surviving Corporation
3.1 List of LVDG Subsidiaries
3.2 LVDG - Authorizations Required
3.3 LVDG - Schedule of Outstanding Options, Warrants and Other Rights
3.4 LVDG - Changes in Financial Condition
3.5 LVDG - Undisclosed Liabilities
3.7 LVDG - Tax Matters
3.8 LVDG - Real Property
3.9 LVDG - Facilities
3.11 LVDG - Insurance Policies
3.12 LVDG - Agreements
3.13 LVDG - Intellectual Properties
3.14 LVDG - Permits
3.15 LVDG - Litigation
3.17 LVDG - Transactions with Affiliates
3.20 LVDG - Employee Benefit Plans
4.1 List of SAGC Subsidiaries
4.2 SAGC - Authorizations Required
4.3 SAGC - Schedule of Outstanding Options, Warrants and Other Rights
4.4 SAGC - Changes in Financial Condition
4.5 SAGC - Undisclosed Liabilities
4.7 SAGC - Tax Matters
4.9 SAGC - Facilities
4.11 SAGC - Insurance Policies
4.12 SAGC - Agreements
4.13 SAGC - Intellectual Properties
4.14 SAGC - Permits
4.15 SAGC - Litigation
4.17 SAGC - Transactions with Affiliates
4.20 SAGC - Employee Benefit Plans
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of January 20, 1998, by and among
Saint Andrews Golf Corporation, a corporation organized under the laws of the
State of Nevada ("SAGC"), and Las Vegas Discount Golf & Tennis, Inc., a
corporation organized under the laws of the State of Colorado ("LVDG").
WHEREAS, the respective Boards of Directors of SAGC and LVDG have
approved the merger of SAGC with and into LVDG (the "Merger"), pursuant to
which LVDG will be the surviving corporation and the holders of SAGC Common
Stock and Preferred Stock (as herein defined) will be entitled to receive the
consideration provided for in this Agreement, all upon the terms and subject
to the conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements set forth herein, and intending to
be legally bound hereby, the parties hereby agree as follows:
ARTICLE 1
THE MERGER
1.1 Surviving Corporation. In accordance with the provisions of this
Agreement, the Nevada General Corporation Law (the "Nevada Act") and the
Colorado Business Corporation Act (the "Colorado Act"), at the Effective Time
(as that term is hereinafter defined in Section 1.6 hereof) SAGC shall be
merged with and into LVDG, with LVDG being the surviving corporation in the
Merger (hereinafter sometimes called the "Surviving Corporation"). At the
Effective Time, the separate existence of SAGC shall cease and the Surviving
Corporation shall continue its corporate existence under the laws of the State
of Colorado. Without limiting the generality of the foregoing, from and after
the Effective Time the Surviving Corporation shall possess all of the rights,
privileges, immunities, powers and purposes, and shall assume and be liable
for all of the liabilities, obligations and penalties, of each of LVDG and
SAGC, and the Merger shall have all of the effects provided for in the Nevada
Act and the Colorado Act.
1.2 Articles of Incorporation. At the Effective Time, the Articles of
Incorporation of LVDG as in effect at the Effective Time shall be the Articles
of Incorporation of the Surviving Corporation until thereafter amended as
provided by law.
1.3 By-Laws. At the Effective Time, the By-Laws of LVDG as in effect
at the Effective Time shall be the By-Laws of the Surviving Corporation until
thereafter amended as provided by law.
1.4 Directors. On and after the Effective Time, the directors of the
Surviving Corporation shall be those persons who are listed on Schedule 1.4,
all such directors to hold office until their respective successors are duly
elected and qualified in the manner provided in the Articles of Incorporation
and Bylaws of the Surviving Corporation, or as otherwise provided by law.
1.5 Officers. On and after the Effective Time, the officers of the
Surviving Corporation shall be those persons who are listed on Schedule 1.5,
each to hold the office(s) set forth opposite their respective names on such
Schedule, all such officers to hold office until their respective successors
are duly elected and qualified in the manner provided in the Articles of
Incorporation and By-Laws of the Surviving Corporation, respectively, or as
otherwise provided by law.
1.6 Effective Time. As soon as practicable following the Closing (as
that term is hereinafter defined in Section 2.5 hereof), Articles of Merger or
any similar document required by state law to effect the Merger (the
"Certificates of Merger") shall be filed with the Secretaries of State of the
States of Colorado and Nevada. The Merger shall become effective upon the
filing of the last of such certificates. The time when the Merger shall
become effective is herein referred to as the "Effective Time."
1.7 Additional Actions. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other acts or things are necessary or
desirable to vest, perfect or confirm, of record or otherwise, in the
Surviving Corporation, its right, title or interest in or to any of the
rights, properties or assets of SAGC acquired or to be acquired by reason of,
or as a result of, the Merger, or otherwise to carry out the purposes of this
Agreement (including, but not limited to, any applications which may be
required in order to allow the Surviving Corporation to transact business in
any jurisdiction), the Surviving Corporation and its proper officers and
directors shall be authorized to execute and deliver, in the name and on
behalf of SAGC, all such deeds, bills of sale, assignment and assurances and
to do, in the name and on behalf of SAGC, all such other acts and things
necessary or desirable to vest, perfect or confirm any and all right, title or
interest in, to or under such rights, properties or assets in the Surviving
Corporation or otherwise to carry out the purposes of this Agreement.
ARTICLE 2
CONSIDERATION; CONVERSION OF SHARES
2.1 Merger Consideration. Except as set forth in Sections 2.2(b) and
2.2(f) hereof, the consideration payable in the Merger to holders of shares of
SAGC Common Stock, $.001 par value per share ("SAGC Common Stock"), and to the
holders of warrants, options, convertible securities and other rights to
purchase SAGC Common Stock upon exercise or conversion of the same, shall
consist solely of shares of Common Stock, no par value, of LVDG ("LVDG Common
Stock"), such shares of LVDG Common Stock to have such rights as are set forth
in the Articles of Incorporation of LVDG and to be issuable in accordance with
the terms of this Agreement. Except as set forth in Section 2.2(g) hereof,
the holders of shares of LVDG Common Stock shall continue to hold such shares,
and the holders of warrants, options, convertible securities and other rights
to purchase LVDG Common Stock will not be affected by the Merger.
2.2 Conversion of Shares; Treatment of Warrants, Options, and
Convertible Securities.
(a) Subject to Section 2.4 hereof, each share of SAGC Common
Stock issued and outstanding as of the Effective Time (other than SAGC
Dissenting Shares, as that term is hereinafter defined in Section 2.2(e)
below) shall, by virtue of the Merger and without any action on the part of
the holders thereof, automatically be converted into 2.4 shares of LVDG Common
Stock.
(b) Subject to Section 2.4 hereof, each share of SAGC Series A
Convertible Preferred Stock (other than SAGC Dissenting Shares as that term is
defined in Section 2.2(e) below) shall by virtue of the Merger and without any
action on the part of the holders thereof, automatically be converted into 2.4
shares of LVDG Series B Convertible Preferred Stock.
(c)(i) Each warrant to acquire shares of SAGC Common Stock (a
"Warrant") that is outstanding and unexercised at the Effective Time shall, by
virtue of the Merger and without any action on the part of the holder thereof,
and subject to the other terms and conditions thereof, automatically be deemed
to be exercisable for that number of shares of LVDG Common Stock the holder of
such Warrant would have received in the Merger pursuant to Section 2.2(a) had
such holder exercised such Warrant in full immediately prior to the Effective
Time, and the price per share of LVDG Common Stock issuable after the
Effective Time upon exercise of such Warrant shall equal the product of the
price per share of SAGC Common Stock under such Warrant as in effect prior to
the Effective Time multiplied by .416667.
(ii) Each option to acquire shares of SAGC Common Stock
issued, or agreed or committed to be issued, under any stock option plan of
SAGC or otherwise (an "Option") that is outstanding and unexercised at the
Effective Time shall, by virtue of the Merger and without any action on the
part of the holders thereof, and subject to the other terms and conditions
thereof, automatically be assumed by LVDG and shall be exercisable for that
number of shares of LVDG Common Stock the holder of such Option would have
received in the Merger pursuant to Section 2.2(a) had such holder exercised
such Option in full (assuming, for the purpose of this calculation only, that
there is no limitation on the vesting of the right to exercise such Option)
immediately prior to the Effective Time, and the price per share of LVDG
Common Stock issuable after the Effective Time upon exercise of such Option
shall equal the product of the price per share of SAGC Common Stock under such
Option as in effect prior to the Effective Time multiplied by .416667. Any
term or condition respecting the vesting of the right to exercise such Option
shall remain unaffected by the Merger; provided, however, that any period
during which the holder of such Option shall have served as an employee or
consultant, as the case may be, of SAGC prior to the Merger shall be counted
toward determining the vesting of the right to exercise such Option after the
Effective Time.
(iii) The SAGC Warrants and Options are hereinafter referred
to collectively as the "SAGC Derivative Securities." Except as provided in
clauses (i) and (ii) above, the terms and conditions of the SAGC Derivative
Securities in effect prior to the Effective Time shall continue in effect
after the Effective Time.
(d) Each share of SAGC Common Stock held in the SAGC treasury as
of the Effective Time, if any, shall, by virtue of the Merger, be canceled
without payment of any consideration thereof.
(e) Each share of SAGC Common Stock held by LVDG at the
Effective Time shall, by virtue of the Merger and without any action on the
part of the holder thereof, be canceled without payment of any consideration
therefor.
(f) Notwithstanding the foregoing, any shares of SAGC Common or
Preferred Stock issued and outstanding immediately prior to the Effective Time
which are held by shareholders of SAGC who have not voted such shares in favor
of the Merger and who have complied with all other relevant provisions of
Section 92A.300 through 92A.500 of the Nevada Act (the "SAGC Dissenting
Shares") shall not be converted into shares of LVDG Common or Preferred Stock
in the manner contemplated by Sections 2.2(a) and (b) above, and the rights of
holders of SAGC Dissenting Shares shall be governed by the provisions of the
Nevada Act.
(g) Notwithstanding the foregoing, any shares of LVDG Common
Stock issued and outstanding immediately prior to the Effective Time which are
held by shareholders of LVDG who have not voted such shares in favor of the
Merger and who have complied with all other relevant provisions of Article 113
of the Colorado Act (the "LVDG Dissenting Shares") shall be governed by the
provisions of the Colorado Act.
2.3 Cancellation of Certificates. As promptly as is practicable after
the Effective Time, LVDG shall designate a bank or trust company (the
"Exchange Agent") to act as exchange agent in effecting the exchange of
certificates representing SAGC Common and Preferred Stock (other than SAGC
Dissenting Shares) for certificates representing the shares of LVDG Common or
Preferred Stock into which such shares of SAGC Common and Preferred Stock have
been converted. The Exchange Agent shall send a letter of transmittal to the
holders of SAGC Common and Preferred Stock offering to exchange the
certificates representing such SAGC Common and Preferred Stock for
certificates representing shares of LVDG Common or Preferred Stock,
respectively. Notwithstanding the foregoing, from and after the Effective
Time, all such outstanding shares of SAGC Common and Preferred Stock when so
converted shall no longer be outstanding and shall automatically be canceled
and retired and shall cease to exist. From and after the Effective Time, each
certificate or instrument which prior to the Effective Time represented shares
of SAGC Common Stock, SAGC Preferred Stock or SAGC Derivative Securities, as
applicable, shall be deemed to represent only the right to receive the
certificates of LVDG Common Stock or the right to acquire shares of LVDG
Common Stock contemplated by Section 2.2 hereof, and the holder of each such
certificate or instrument shall cease to have any rights with respect to the
shares of SAGC Common and Preferred Stock formerly represented thereby, except
as otherwise provided by law.
2.4 No Fractional Securities. No fractional shares of LVDG Common
Stock shall be issuable by LVDG upon the conversion of shares of SAGC Common
or Preferred Stock in the Merger pursuant to Section 2.2(a) hereof or upon
exercise or conversion of any SAGC Derivative Security. In lieu of any
fractional share of LVDG Common Stock which would otherwise be issuable upon
conversion of any shares of SAGC Common Stock or exercise or conversion of any
SAGC Derivative Security, LVDG shall issue one full share of LVDG Common
Stock.
2.5 Closing. Subject to Section 9.1(b)(ii) hereof, the closing of the
transactions contemplated by this Agreement (the "Closing") shall take place
at the offices of LVDG, 5325 South Valley View Boulevard, Suite 4, Las Vegas,
Nevada 89118, at 2:00 p.m. local time, (i) as soon as practicable after the
later to occur of (x) the date of the stockholders' meetings referred to in
Section 6.3 hereof or (y) the day on which the last condition set forth in
Articles 7 and 8 hereof shall have been fulfilled or waived, or (ii) at such
other time as SAGC and LVDG may mutually agree (the "Closing Date").
ARTICLE 3
REPRESENTATIONS AND WARRANTIES WITH RESPECT TO LVDG
LVDG represents and warrants to SAGC as follows (as used in this Article
3, the term "LVDG" shall include LVDG and each subsidiary (as such term is
defined in Rule 405 promulgated under the Securities Act of 1933, as amended
(the "Securities Act") of LVDG (a "LVDG Subsidiary") exclusive of SAGC, unless
the context suggests otherwise):
3.1 Corporate Existence and Power; Qualification; Subsidiaries. LVDG
is a corporation duly incorporated, validly existing and in good standing
under the laws of its jurisdiction of incorporation, has all corporate powers
to execute and deliver this Agreement and to perform its obligations hereunder
and consummate the transactions contemplated hereby, and has all corporate
powers and all governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted and to own its properties,
and is duly qualified to do business and is in good standing in each
jurisdiction in which the conduct of its business or the ownership or leasing
of its properties requires such qualification. The copies of LVDG's Articles
of Incorporation and Bylaws that have been delivered to SAGC are complete and
correct and are in full force and effect. Schedule 3.1 sets forth a complete
list of each LVDG Subsidiary. Each LVDG Subsidiary is a corporation or
partnership duly incorporated (if a corporation), validly existing and in good
standing under the laws of its jurisdiction of incorporation or organization,
as the case may be, has all requisite powers and all governmental licenses,
authorizations, consents and approvals required to carry on its business as
now conducted and to own its properties, and is duly qualified to do business
and is in good standing in each jurisdiction in which the conduct of its
business or the ownership or leasing of its properties requires such
qualification. LVDG has not made any advances to or investments in, nor
directly or indirectly owns any securities of, any domestic or foreign
business entity, enterprise or organization other than as set forth on
Schedule 3.1. Neither LVDG nor any LVDG Subsidiary is in violation of any
provision of its Articles of Incorporation or Bylaws or certificate of limited
partnership, or equivalent organizational document, as the case may be. Each
of the outstanding shares of capital stock of, or other equity interests in,
any LVDG Subsidiary owned by LVDG is owned by LVDG free and clear of any
security interest, pledge, lien, charge, claim or other encumbrance of any
kind or nature (collectively, "Encumbrance").
3.2 Corporate and Governmental Authorization; Contravention. The
execution, delivery and performance by LVDG of this Agreement and the Merger
have been duly authorized by all necessary corporate action (other than the
approval of this Agreement and the Merger by the shareholders of LVDG). This
Agreement has been duly executed and delivered by LVDG. The execution and
delivery of this Agreement do not and the consummation of the transactions
contemplated hereby is not prohibited by, and will not violate or conflict
with, any provision of the Articles of Incorporation or Bylaws of LVDG, or of
any Law (as such term is defined in Section 3.6), or, except as set forth on
Schedule 3.2, any provision of, or result in the acceleration of, result in
any severance or termination pay liability, constitute a default under,
entitle any party to accelerate (whether after the giving of notice or lapse
of time or both) any obligation under, result in the creation or imposition of
any Encumbrance upon any property of LVDG pursuant to any provisions of, or
create any right on the part of any party to modify, amend or terminate, any
Contract (as such term is defined below), lien, instrument, order, Permit (as
such term is defined in Section 3.14 hereof), arbitration award, judgment or
decree to which LVDG is a party or by which it is bound. Other than the
requirement to file the Certificates of Merger with the Secretaries of State
of the States of Colorado and Nevada, as applicable, or as may be required by
the Securities Act, the Exchange Act of 1934, as amended (the "Exchange Act"),
state securities laws and the Nasdaq Stock Market, and except as set forth in
Schedule 3.2, no authorization, consent or approval of, or filing with, any
domestic or foreign public body or authority is necessary on the part of LVDG
for the consummation by LVDG of the transactions contemplated by this
Agreement or the other agreements referred to herein and the ownership and
operation by the Surviving Corporation of the business and properties of LVDG
after the Effective Time in substantially the same manner as presently owned
and operated, except where the failure to give such notices, obtain such
authorizations, consents or approvals or make such filings would not, in the
aggregate, have a material adverse effect on the condition (financial or
otherwise), business or operations of the Surviving Corporation, or delay or
prevent the consummation of the transactions contemplated by this Agreement or
prevent LVDG from performing its obligations hereunder. This Agreement is a
valid, legal and binding agreement of LVDG, subject to applicable bankruptcy,
insolvency, moratorium or other laws affecting the enforcement of creditors'
rights in general from time to time in effect and general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law). As used herein, "Contracts" shall mean any lease, license,
mortgage, contract, sales order, purchase order or other agreement,
arrangement, understanding or commitment, whether written or oral which is
material to the business or properties of LVDG or SAGC as the context shall
require.
3.3 Capitalization.
(a) The shares of LVDG Common Stock which are currently
outstanding have been duly authorized and are validly issued, fully paid,
nonassessable and free of preemptive rights created by statute, LVDG's
Articles of Incorporation or otherwise. The authorized capital stock of LVDG
consists of 15,000,000 shares of LVDG Common Stock, of which 5,831,807 shares
are issued and outstanding, and 5,000,000 shares of Preferred Stock, no par
value, of which no shares are outstanding.
(b) There are no subscriptions, options, warrants or other
rights, calls, agreements or commitments obligating LVDG or any LVDG
Subsidiary to issue, or repurchase, redeem or otherwise acquire, capital stock
or other securities of LVDG or any LVDG Subsidiary, except as set forth in
Schedule 3.3.
(c) The shares of LVDG Common Stock to be issued to the
stockholders of SAGC pursuant to the Merger or upon exercise or conversion of
any SAGC Derivative Security to the holder thereof will be, upon such
issuance, duly authorized and validly issued, fully paid (assuming the
exercise or conversion of such SAGC Derivative Security in accordance with its
terms), nonassessable and free of preemptive rights created by statute, LVDG's
Articles of Incorporation or otherwise.
3.4 Financial Statements of LVDG; Changes.
(a) LVDG has heretofore delivered to SAGC true and complete
copies of (i) its consolidated audited balance sheet as of December 31, 1996,
and audited consolidated statements of operations and audited consolidated
statements of cash flows for the two year period then ended, and (ii) its
unaudited consolidated balance sheet as of September 30, 1997 (the "LVDG
Balance Sheet Date") and unaudited consolidated statements of operations and
statement of cash flows for the nine months then ended (collectively, the
"LVDG Financial Statements"). The LVDG Financial Statements present fairly
the consolidated financial position of LVDG as of the date of the balance
sheets and the consolidated results of operations and cash flows for the
periods then ended, all in conformity with generally accepted accounting
principles applied on a consistent basis, except as stated thereon.
(b) Except as set forth in Schedule 3.4 hereto, except for the
sale of certain assets made by LVDG pursuant to an Agreement for the Purchase
and Sale of Assets, as amended, which occurred on February 26, 1997 (the
"Asset Sale"), and except as contemplated by this Agreement, since the LVDG
Balance Sheet Date:
(i) there has been no material adverse change in the
business, assets, financial condition or results of operations of LVDG;
(ii) there has not been any direct or indirect redemption,
purchase or other acquisition by LVDG of any of its capital stock, or any
declaration, setting aside or payment of any dividend or other distribution by
LVDG in respect of its capital stock, and LVDG has not authorized or proposed
any of the foregoing, or entered into any contract, agreement, commitment or
arrangement to do any of the foregoing, except as may be contemplated by this
Agreement and the agreements contemplated hereby or referred to herein;
(iii) except for the transactions contemplated hereby, LVDG
has conducted its business in the ordinary course and consistent with past
practices;
(iv) there has been no damage, destruction or casualty loss
(whether or not covered by insurance) suffered by LVDG materially adversely
affecting the business, assets, financial condition or results of operations
of LVDG, nor has LVDG been notified of any pending condemnation proceeding
concerning any of its properties;
(v) there have not been any defaults or breaches by LVDG
under agreements to which it is a party or by which it is bound which, taken
in the aggregate, would have a material adverse effect upon the business,
assets, financial condition or results of operation of LVDG;
(vi) LVDG has not directly or indirectly, (A) issued, sold,
pledged, disposed of, or encumbered, or authorized, proposed or agreed to the
issuance, sale, pledge, disposition or encumbrance of, any shares of, or any
options, warrants or rights of any kind to acquire any shares of or any
securities convertible into or exchangeable for any of, the capital stock of
any class of LVDG, or any other securities in respect of, in lieu of, or in
substitution for any such capital stock; (B) acquired (by merger,
consolidation, or acquisition of shares or assets) any corporation,
partnership or other business organization or division thereof or made any
investment either by purchase of shares or securities, contributions to
capital (other than to subsidiaries or affiliates) or property transfer; (C)
authorized any change in its capitalization or authorized, recommended or
proposed any release or relinquishment of any Contract right; or (D)
authorized any of the foregoing, or entered into or modified any contract,
agreement, commitment or arrangement to do any of the foregoing;
(vii) LVDG has not incurred any obligation or liability
(fixed or contingent) with respect to its business or any of its assets,
except (1) obligations incurred in the ordinary course of business consistent
with past practice and (2) obligations and liabilities under this Agreement or
contemplated hereby;
(viii) LVDG has not discharged or satisfied any Encumbrance
or paid any obligation or liability (fixed or contingent) except (1) current
obligations and liabilities included in the LVDG Financial Statements and (2)
current obligations and liabilities incurred since the LVDG Balance Sheet Date
in the ordinary course of business;
(ix) LVDG has not mortgaged, pledged or subjected to any
Encumbrance any of its assets or properties;
(x) LVDG has not sold, transferred or leased any of its
assets or properties except in the ordinary course of business;
(xi) LVDG has not taken any action other than in the
ordinary course of business and consistent with past practice (none of which
actions is unreasonable or unusual) with respect to the grant of any severance
or termination pay (otherwise than pursuant to policies of LVDG in effect on
the date hereof) or with respect to any increase of benefits payable under its
severance or termination pay policies in effect on the date hereof; and
(xii) LVDG has not adopted or amended any bonus, profit
sharing, thrift, savings, compensation, stock option, pension, retirement,
deferred compensation, employment or other employee benefit plan, agreement,
trust, plan, fund or other arrangement for the benefit or welfare of any
employee or increased in any manner the compensation or fringe benefits of any
employee or paid any benefit not required by any existing plan and
arrangement, except for salary increases for employees in the ordinary course
of business consistent with past practices.
3.5 No Undisclosed Liabilities. Except as set forth in Schedules 3.4,
3.5, 3.12, 3.14, 3.15, and 3.20, there are no liabilities of LVDG of any kind
whatsoever, whether accrued, contingent, absolute, determined, determinable or
otherwise, other than:
(a) liabilities disclosed or provided for in the consolidated
balance sheet of LVDG (or the notes thereto) as of the LVDG Balance Sheet Date
included in the LVDG Financial Statements; and
(b) liabilities incurred in the ordinary course of business
consistent with past practice since the LVDG Balance Sheet Date.
3.6 Compliance with Laws. LVDG has complied, and is in compliance, in
all material respects with all applicable federal, state, local or foreign
laws, regulations or orders or any other requirements of any governmental,
regulatory or administrative agency or authority or court or other tribunal
(including, but not limited to, any laws, regulations, order or requirement
relating to securities, the environment, properties, business, products,
manufacturing processes, advertising, sales or employment practices, terms and
conditions of employment, occupational safety, health and welfare conditions
of occupied premises, environmental protection, air or water pollution,
product safety, and liability or civil rights) (each and all of the foregoing
being herein referred to as "Laws"). LVDG is not now charged with or to its
knowledge under investigation with respect to any violation of any applicable
Law where such violation could have a material adverse effect on its business,
assets, financial condition or results of operation. LVDG has filed all
reports required to be filed with any governmental, regulatory or
administrative agency or authority where failure to file such report would
have a material adverse effect on its business, assets, financial condition or
results of operation.
3.7 Tax Matters. Except as set forth in Schedule 3.7, (a) LVDG has
duly filed or will file with the appropriate government agencies all Tax (as
hereinafter defined below) returns required to be filed by it on or before the
Effective Time, (b) LVDG has timely paid, or made provision on its books and
records by establishing a reserve for the payment of, all Taxes due with
respect to its operations or any other operation of the LVDG Group (as
hereinafter defined below) prior to the Effective Time, including all Taxes
shown as due on all Tax returns described in clause (a) above and all
estimated Tax payments due on or before the Effective Time, (c) LVDG has not
executed or filed any agreement extending the period for assessment or
collection of any Taxes, nor is LVDG a party to any pending Litigation (as
hereafter defined in Section 3.15 hereof) by any governmental authority for
assessment or collection of any Taxes, and no claims for assessment or
collection of any Taxes have been asserted against LVDG, and (d) to the
knowledge of LVDG, no Tax returns of LVDG or the LVDG Group are under
examination. LVDG is not a "United States real property holding company"
within the meaning of Section 1445 of the Code. As used herein (i) "LVDG
Group" shall mean LVDG and all members of its affiliated group as defined in
section 1504(a) of the Internal Revenue Code of 1986, as amended (the "Code")
and as defined in any applicable Law providing for consolidated or combined
returns and (ii) "Tax" or "Taxes" shall mean taxes of any kind payable to any
federal, state, local, or foreign taxing authority, including, without
limitation, (A) income, gross receipts, ad valorem, value added, sales, use,
service, franchise, profits, real or personal property, capital stock,
license, payroll, withholding, employment, social security, workers
compensation, unemployment compensation, utility, severance, production,
excise, stamp, sales, liquor, occupation, premium, windfall profits, transfer
and gains taxes, (B) customs duties, (C) interest, penalties, and additions to
tax imposed with respect to the above taxes, and (D) any damages, costs,
expenses, fees or other liability arising from such Tax or Taxes.
3.8 Title to Properties; Absence of Liens and Encumbrances, Etc.
Except as set forth in Schedule 3.8, LVDG owns no real property and has good
title to or a legal, valid and enforceable right to use the properties and
assets used in the conduct of its business (including without limitation the
assets reflected in its balance sheet as at the LVDG Balance Sheet Date,
except as since sold or otherwise disposed of in the ordinary course of
business), free and clear of all Encumbrances, imperfections of or other
matters affecting title, and any rights of third parties whatsoever, except
(i) the lien of taxes not yet due and payable or being contested in good faith
by appropriate proceedings, and (ii) such imperfections of title and other
Encumbrances, if any, which, individually or in the aggregate, do not
materially detract from the marketability, value, or interfere with the
present use, of the property or asset subject thereto or otherwise impair the
operations of its business (collectively, "Permitted Encumbrances").
3.9 Facilities. Schedule 3.9 sets forth a correct and complete list
of all of the real properties, together with the buildings, improvements, and
structures located thereon, owned or used by LVDG in the conduct of its
business, indicating whether such property is owned or leased and setting
forth where such property is located.
3.10 Condition of Facilities, Equipment, Etc. The buildings,
structures, equipment and other physical properties and assets owned,
operated, or leased by LVDG in connection with its business are in good
condition and repair (ordinary wear and tear which are not such as to affect
adversely the operation of LVDG's business excepted), free of any structural
or engineering defect, are suitable for the conduct of its business as
presently conducted and as presently proposed to be conducted, and do not
require any maintenance or repairs except for routine maintenance and repairs.
All such physical properties and assets are in conformity in all respects with
all applicable Laws and other requirements relating thereto currently in
effect or scheduled to come into effect, including, without limitation, Laws
relating to environmental regulation and the maintenance of occupational
safety and health among the workforce.
3.11 Insurance. The business and the assets of LVDG are covered by
insurance with licensed insurance companies against casualty and other losses
customarily obtained to cover comparable businesses and assets in the region
in which such businesses and assets are located, in amounts, scope and
coverage which are reasonable in light of existing conditions. Schedule 3.11
sets forth a correct and complete list of all of the policies of insurance and
fidelity or surety bonds carried by LVDG with respect to its business or any
of its assets (including prior policies to the extent that they continue to
provide coverage). LVDG has not failed to give any notice or present any
claim under such insurance policies in due and timely fashion, and there are
no claims by LVDG against any of such policies as to which any insurance
company is denying liability or defending under a reservation of rights
clause.
3.12 Agreements, Plans, Arrangements, Etc. Except as set forth in
Schedule 3.12 (which may refer to other specific Schedules hereto), LVDG is
not a party to, nor is LVDG or any of its properties and assets bound or
affected by, any of the following:
(a) a lease (whether as lessor or lessee) relating to real or
personal property;
(b) a license, sublicense, assignment or other Contract (whether
as licensor or licensee, assignor or assignee) relating to Intellectual
Property (as such term is defined in Section 3.13 hereof);
(c) an employment Contract or consulting Contract;
(d) a joint venture or partnership Contract;
(e) a Contract for the borrowing or lending of money or
guaranteeing, indemnifying or otherwise becoming liable for the obligations or
liabilities of another;
(f) a Contract granting any person a security interest or other
Encumbrance on any of the assets of LVDG;
(g) a Contract for the construction or modification of any
building or structure or for the incurrence of any other capital expenditure;
(h) a Contract which restricts LVDG from doing business anywhere
in the world;
(i) a Contract not entered into in the ordinary course of
business;
(j) a Contract requiring the payment of royalties; or
(k) any other Contract which could have a material adverse
effect on the Surviving Corporation.
Correct and complete copies of all Contracts set forth in Schedule 3.12 or any
other Schedule hereto, including all amendments to date (or, where they are
oral, true and complete written summaries thereof), and true and complete
copies of all standard form Contracts used by LVDG in the conduct of its
business have been delivered to SAGC or its Representatives (as such term is
defined in Section 3.23 hereof) prior to the date hereof. Each such Contract
is valid, in full force and effect and enforceable in accordance with its
terms and LVDG has fulfilled, or taken all action reasonably necessary to
enable it to fulfill when due, its obligations under such Contracts. There
has not occurred any default, or any event which, with the lapse of time or
the election of any person other than LVDG, or any combination thereof, will
become a default, by LVDG, nor to the knowledge of LVDG has there occurred any
default by others or any event which, with the lapse of time or the election
of LVDG, will become a default by others under any material Contracts. LVDG
is not, and to the knowledge of LVDG, no other party, is in arrears in respect
of the performance or satisfaction of the terms or conditions on its part to
be performed or satisfied under any of such Contracts and no waiver or
indulgence has been granted by any of the parties thereto.
3.13 Intellectual Properties. Schedule 3.13 sets forth a correct and
complete list of all patents, trademarks, trade names, service marks,
copyrights, and applications therefor (collectively, "Intellectual
Properties") used in the conduct of the business of LVDG. Except as disclosed
in Schedule 3.13, (a) LVDG owns or possesses adequate licenses or other valid
rights to use (without the making of any payment to others or the obligation
to grant rights to others in exchange) all Intellectual Properties necessary
to the conduct of its business as presently being conducted and the
consummation of the transactions contemplated hereby will not alter or impair
any of such rights; (b) the validity of such rights and the title thereto of
LVDG has not been questioned in any Litigation (as defined in Section 3.15
hereof) to which it is a party, nor to the knowledge of LVDG is any such
Litigation threatened; (c) the conduct of LVDG's business as now conducted
does not infringe or conflict with any Intellectual Properties of others; (d)
there is no use of any trademark, service mark or trade name owned by or
licensed to LVDG that has heretofore been or is now being made, except by LVDG
or by an entity duly licensed by it to use the same under a Contract disclosed
in Schedule 3.12; and (e) to the knowledge of LVDG there is no infringement by
others of any Intellectual Properties owned by or licensed by or to LVDG. All
patents, patent applications and rights to inventions heretofore owned or held
by any employee or officer of LVDG and relating to its business in any manner
have been duly effectively transferred to LVDG. All licenses and Contracts
requiring the payment of royalties by LVDG are referenced and correctly
described in LVDG's Annual Report on Form 10-K for the year ended December 31,
1996.
3.14 Permits, License, Etc. LVDG has, and has complied in all material
respects with, all Permits (as hereafter defined below) that are required in
order to carry on its business as presently conducted and is not in default of
any thereof. Schedule 3.14 sets forth a correct and complete list of all such
Permits, all of which are in full force and effect, and to LVDG's knowledge,
no suspension, cancellation or non- renewal of any of them is threatened, nor
does any basis for such suspension, cancellation or non-renewal exist. As to
any such Permit that has expired or is about to expire, LVDG has promptly
applied for the renewal of same. A true and complete copy of each Permit set
forth in Schedule 3.14 has been previously delivered to SAGC. As used herein,
"Permits" shall mean all licenses, permits, consent orders, administrative
orders, registrations, authorizations, franchises and other approvals from any
domestic (federal, state or local) or foreign governmental, public or
self-regulatory body or authority the failure of which to obtain would have a
material adverse effect on the business or properties of LVDG or SAGC, taken
as a whole, as the context shall require.
3.15 Litigation. Except as set forth on Schedule 3.15, there is no
claim, action, suit, proceeding, arbitration, investigation or inquiry (each
and all of the foregoing items being herein referred to as "Litigation")
pending before any federal, state, municipal, foreign or other court or
governmental, administrative or self-regulatory body or agency, or any private
arbitration tribunal, or to the knowledge of LVDG threatened, against,
relating to or affecting LVDG with respect to its business or the transactions
contemplated by this Agreement; nor to the knowledge of LVDG is there any
basis for any such Litigation. Neither LVDG nor any officer, director or
employee of LVDG has been permanently or temporarily enjoined or barred by
order, judgment or decree of any court or other tribunal or any agency or
self-regulatory body from engaging in or continuing any conduct or practice in
connection with its business. There is not in existence any order, judgment
or decree of any court or other tribunal or any agency or self-regulatory body
enjoining LVDG from taking or requiring LVDG to take action of any kind with
respect to its business or to which LVDG is subject or by which LVDG is bound.
3.16 Accounts and Notes Receivable. LVDG has heretofore delivered to
SAGC a true, complete and correct listing of all of the receivables (including
accounts receivable, notes receivable, loans receivable and any advances) of
LVDG as of September 30, 1997. All such receivables, net of any allowance for
doubtful accounts, have been reported in accordance with generally accepted
accounting principles applied on a consistent basis except as stated thereon.
All accounts and notes receivable shown in the listing provided as of
September 30, 1997, or arising thereafter and on or prior to the Effective
Time arose from bona fide transactions in the ordinary course of business.
3.17 No Interest in Competitors, Etc. Except as set forth in Schedule
3.17 (which may refer to other specific Schedules hereto), and except for the
ownership of not more than five percent (5%) of the outstanding securities of
any class of an issuer registered under Section 12 of the Exchange Act neither
LVDG nor any affiliate thereof, nor any officer or director of LVDG or any
affiliate or associate thereof, directly or indirectly is, or owns any
interest in or controls or is an employee, officer, director, or partner of or
participant in or consultant to any corporation, partnership, limited
partnership, joint venture, association, or other entity which is a
competitor, supplier, customer, landlord, or tenant of LVDG. Schedule 3.17
hereto sets forth all Contracts or other arrangements between LVDG and any
affiliate thereof for space, facilities, personnel, management, computer,
telephone or other services. Except as set forth in Schedule 3.17, LVDG does
not owe any amount to, or have any Contract with or commitment to, any of its
shareholders, directors, officers, employees or consultants (other than
compensation for current services not yet due and payable and reimbursement of
expenses arising in the ordinary course of business), none of such persons
owes any amount to LVDG, and no property or assets of any shareholders of LVDG
or any affiliate of any shareholders of LVDG is used by LVDG.
3.18 Books and Records. The books of account and other financial and
corporate records of LVDG are in all material respects complete and correct,
are maintained in accordance with good business practices and all Laws
applicable to LVDG, and are accurately reflected in the LVDG Financial
Statements. The minute books of LVDG as previously made available to SAGC and
its counsel contain accurate records of all meetings, and accurately reflect
all other corporate action of the shareholders and directors of LVDG.
3.19 Employees, Labor Relations, Etc. (a) LVDG is not a party to any
contract or agreement with any labor organization or other representative of
LVDG employees; (b) there is no unfair labor practice charge or complaint
pending or, to the best knowledge of LVDG, threatened, against LVDG; (c) there
is no labor strike, slowdown, work stoppage or other material labor
controversy in effect, or to the knowledge of LVDG threatened against or
otherwise affecting LVDG; (d) LVDG has not experienced any labor strike,
slowdown, work stoppage or other material labor controversy within the past
three years; (e) no representation question has been raised respecting any of
LVDG's employees within the past three years, nor, to the best knowledge of
LVDG are there any campaigns being conducted to solicit cards from LVDG's
employees to authorize representation by any labor organization; (f) no
collective bargaining agreement relating to any of LVDG's employees is being
negotiated; (g) no action, suit, complaint, charge, arbitration, inquiry,
proceeding, or investigation by or before any court, governmental agency,
administrative agency or commission brought by or on behalf of any employee,
prospective employee, former employee, retiree, labor organization or other
representative of LVDG's employees, is pending or, to the best knowledge of
LVDG, threatened, against LVDG; (h) LVDG is not a party to, or otherwise bound
by, any consent decree with, or citation by, any government agency relating to
LVDG's employees or employment practices relating to LVDG's employees; (i)
LVDG is in compliance in all material respects with all applicable Laws and
Contracts relating to employment, employment practices, wages, hours, and
terms and conditions of employment, and have not engaged in any unfair labor
practice or discriminated on the basis of race, age, sex or otherwise in its
employment conditions or practices with respect to its employees; and (j) LVDG
has paid in full to all of its employees all wages, salaries, commissions,
bonuses, benefits and other compensation due and payable to such employees on
or prior to the date hereof.
3.20 Employee Benefit Plans, Etc.
(a) Schedule 3.20 hereto contains a true and complete list of
each plan, Contract, program, policy or arrangement, including, but not
limited to, pension, bonus, section 401(k) plan, deferred compensation,
incentive compensation, stock purchase, supplemental retirement, severance or
termination pay, stock option, hospitalization, medical, life insurance,
dental, disability, salary continuation, vacation, supplemental unemployment
benefits, profit-sharing, or retirement plan, Contract, program, policy or
arrangement, maintained, contributed to, or required to be contributed to, by
LVDG or by any of its subsidiaries or affiliates for the benefit of any
employee, whether or not any of the foregoing is funded, whether formal or
informal, whether or not subject to the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), and whether legally binding or not
(collectively, the "Benefit Plans"). LVDG has delivered to SAGC true and
complete copies of all documents embodying or relating to the Benefit Plans,
including, without limitation, with respect to each Benefit Plan, all
amendments to the Benefit Plans, and any trust or other funding arrangement.
(b) Except as specifically set forth in Schedule 3.20, full
payment has been made of all amounts which LVDG is required, under applicable
law or under any Benefit Plan or any agreement relating to any Benefit Plan to
which LVDG is a party, to have paid as contributions thereto as of the last
day of the most recent fiscal year of such Benefit Plan ended prior to the
date hereof. LVDG has made adequate provision for reserves to meet
contributions that have not been made because they are not yet due under the
terms of any Benefit Plan or related agreements. Benefits under all Benefit
Plans are as represented and have not been increased subsequent to the date as
of which documents have been provided.
3.21 SEC Filings. LVDG has filed with the Securities and Exchange
Commission ("SEC") and has previously delivered to SAGC true and complete
copies of, all forms, reports, schedules, statements, and other documents
required to be filed by LVDG since January 1, 1995, under the Securities Act
or the Exchange Act, and has previously delivered to SAGC true and complete
copies of all forms, reports, schedules, statements, and other documents
otherwise filed by LVDG since January 1, 1995, under the Securities Act or the
Exchange Act. No form, report, schedule, statement or other document filed by
LVDG with the SEC since January 1, 1995, contained any untrue statement of a
material fact or omitted to state any material fact, at the time such document
was filed, necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, other than such
facts as were corrected in any subsequent form, report, schedule, statement or
other document filed by LVDG with the SEC.
3.22 Information. None of the information concerning LVDG supplied or
to be supplied by LVDG or any of its agents, accountants, lawyers or other
consultants or advisors (each of the foregoing referred to herein as
"Representative") for inclusion in the proxy and registration statement on
Form S-4 prepared in connection with the transactions contemplated hereby or
any amendment or supplement thereto has or will, at the time that the proxy
and registration statement was or any amendment is mailed, contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading or, in the case of any such proxy and
registration statement, necessary to correct any statement in any earlier
communication with respect to the solicitation of any proxy for the meeting or
consent in connection with which such proxy and registration statement shall
be mailed. None of the information and documents which have been or may be
furnished by LVDG or any of its Representatives to SAGC or their
Representatives in connection with the transactions contemplated hereby is or
will be materially false or misleading or contains or will contain any
material misstatement of fact or omits or will omit any material fact
necessary to be stated in order to make the statements therein not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES WITH RESPECT TO SAGC
SAGC represents and warrants to LVDG as follows (as used in this Article
4, the term "SAGC" shall include SAGC and each subsidiary (as such term is
defined in Rule 405 promulgated under the Securities Act) of SAGC (an "SAGC
Subsidiary"), unless the context suggests otherwise):
4.1 Corporate Existence and Power; Qualification; Subsidiaries. SAGC
is a corporation duly incorporated, validly existing and in good standing
under the laws of its jurisdiction of incorporation. SAGC has all corporate
powers to execute and deliver this Agreement and to perform its obligations
hereunder and consummate the transactions contemplated hereby, and has all
corporate powers and all governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted and to own its
properties, and is duly qualified to do business and is in good standing in
each jurisdiction in which the conduct of its business or the ownership or
leasing of its properties requires such qualification. The copies of SAGC's
Articles of Incorporation and By-laws that have been delivered to LVDG are
complete and correct and are in full force and effect. Schedule 4.1 sets forth
a complete list of each SAGC Subsidiary. Each SAGC Subsidiary is a
corporation or partnership duly incorporated (if a corporation), validly
existing and in good standing under the laws of its jurisdiction of
incorporation or organization, as the case may be, has all requisite powers
and all governmental licenses, authorizations, consents and approvals required
to carry on its business as now conducted and to own its properties, and is
duly qualified to do business and is in good standing in each jurisdiction in
which the conduct of its business or the ownership or leasing of its
properties requires such qualification. SAGC has not made any advances to or
investments in, nor directly or indirectly owns any securities of, any
domestic or foreign business entity, enterprise or organization other than as
set forth on Schedule 4.1. Neither SAGC nor any SAGC Subsidiary is in
violation of any provision of its Articles of Incorporation or Bylaws or
certificate of limited partnership, or equivalent organizational document, as
the case may be. Each of the outstanding shares of capital stock of, or other
equity interests in, any SAGC Subsidiary owned by SAGC is owned by SAGC free
and clear of any Encumbrance.
4.2 Corporate and Governmental Authorization; Contravention. The
execution, delivery and performance by SAGC of this Agreement and the Merger
have been duly authorized by all necessary corporate action (other than the
approval of this Agreement and the Merger by the holders of a majority of the
outstanding shares of SAGC Common and Preferred Stock voted at the stockholder
meeting referred to in Section 6.3 hereof). This Agreement has been duly
executed and delivered by SAGC. The execution and delivery of this Agreement
do not and the consummation of the transactions contemplated hereby will not
be prohibited by, or violate or conflict with, any provision of the Articles
of Incorporation or Bylaws of SAGC, or of any Law, or, except as set forth on
Schedule 4.2, any provision of, or result in the acceleration of, result in
any severance or termination pay liability, constitute a default under,
entitle any party to accelerate (whether after the giving of notice or lapse
of time or both) any obligation under, result in the creation or imposition of
any Encumbrance upon any property of SAGC pursuant to any provisions of, or
create any right on the part of any party to modify, amend or terminate, any
Contract, lien, instrument, order, Permit (as such term is defined in Section
3.14 hereof), arbitration award, judgment or decree to which SAGC is a party
or by which any of them is bound. Other than the requirement to file the
Certificates of Merger with the Secretaries of State of the States of Colorado
and Nevada, as appropriate, and as required by the Securities Act, the
Exchange Act, state securities laws, and the Nasdaq Stock Market, and except
for the other regulatory filings and approvals set forth in Schedule 4.2
hereof, no authorization, consent or approval of, or filing with, any domestic
or foreign public body or authority is necessary on the part of SAGC for the
consummation by SAGC of the transactions contemplated by this Agreement or the
other agreements referred to herein and the ownership and operation by the
Surviving Corporation of the business and properties of SAGC after the
Effective Time in substantially the same manner as presently owned and
operated, except where the failure to give such notices, obtain such
authorizations, consents or approvals or make such filings would not, in the
aggregate have a materially adverse effect on the condition (financial or
otherwise), business or operations of SAGC, or delay or prevent the
consummation of the transactions contemplated by this Agreement or prevent
SAGC from performing its obligations hereunder. This Agreement is a valid,
legal and binding agreement of SAGC, subject to applicable bankruptcy,
insolvency, moratorium or other laws affecting the enforcement of creditors'
rights in general from time to time in effect and general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
4.3 Capitalization.
(a) The shares of SAGC Common Stock which are currently
outstanding have been duly authorized and are validly issued, fully paid,
nonassessable and free of preemptive rights created by statute, SAGC's
Articles of Incorporation or otherwise. The authorized capital stock of SAGC
consists of 10,000,000 shares of SAGC Common Stock, of which 3,000,000 shares
are issued and outstanding, and 5,000,000 shares of Preferred Stock, par value
$.01 per share, of which 500,000 shares are outstanding.
(b) There are no subscriptions, options, warrants or other
rights, calls, agreements or commitments obligating SAGC or any SAGC
Subsidiary to issue, or repurchase, redeem or otherwise acquire, capital stock
or other securities of SAGC or any SAGC Subsidiary, except as set forth in
Schedule 4.3.
4.4 Financial Statements of SAGC; Changes.
(a) SAGC has heretofore delivered to LVDG true and complete
copies of (i) its consolidated audited balance sheet as at December 31, 1996,
and audited consolidated statements of operations and audited consolidated
statements of cash flows for the two-year period then ended, (ii) its
unaudited consolidated balance sheet as of September 30, 1997 (the "SAGC
Balance Sheet Date"), and unaudited consolidated statements of operations and
statement of cash flows for the nine months then ended (collectively, the
"SAGC Financial Statements"). The SAGC Financial Statements present fairly
the consolidated financial position of SAGC as of the dates of the balance
sheets, and the consolidated results of operations and cash flows for the
periods then ended, all in conformity with generally accepted accounting
principles applied on a consistent basis, except as stated thereon.
(b) Except as set forth in Schedule 4.4 hereto, except for the
sale of certain assets made by SAGC pursuant to an Agreement for the Purchase
and Sale of Assets, as amended, which occurred on February 26, 1997 (the
"Asset Sale"), and except as contemplated by this Agreement, since the SAGC
Balance Sheet Date:
(i) there has been no material adverse change in the
business, assets, financial condition or results of operations of SAGC;
(ii) there has not been any direct or indirect redemption,
purchase or other acquisition by SAGC of any of SAGC's capital stock, or any
declaration, setting aside or payment of any dividend or other distribution by
SAGC in respect of its capital stock, and SAGC has not authorized or proposed
any of the foregoing, or entered into any contract, agreement, commitment or
arrangement to do any of the foregoing, except as may be contemplated by this
Agreement and the agreements contemplated hereby or referred to herein;
(iii) except for the transactions contemplated hereby, SAGC
has conducted its business in the ordinary course and consistent with past
practices;
(iv) there has been no damage, destruction or casualty loss
(whether or not covered by insurance) suffered by SAGC materially adversely
affecting the business, assets, financial condition or results of operations
of SAGC, nor has SAGC been notified of any pending condemnation proceeding
concerning any of its properties;
(v) there have not been any defaults or breaches by SAGC
under agreements to which it is a party or by which it is bound which, taken
in the aggregate, would have a material adverse effect upon the business,
assets, financial condition or results of operation of SAGC;
(vi) SAGC has not directly or indirectly, (A) issued, sold,
pledged, disposed of, or encumbered, or authorized, proposed or agreed to the
issuance, sale, pledge, disposition or encumbrance of, any shares of, or any
options, warrants or rights of any kind to acquire any shares of or any
securities convertible into or exchangeable for any of, the capital stock of
any class of SAGC, or any other securities in respect of, in lieu of, or in
substitution for any such capital stock; (B) acquired (by merger,
consolidation, or acquisition of shares or assets) any corporation,
partnership or other business organization or division thereof or made any
investment either by purchase of shares or securities, contributions to
capital (other than to subsidiaries or affiliates) or property transfer; (C)
authorized any change in its capitalization or authorized, recommended or
proposed any release or relinquishment of any Contract right; or (D)
authorized any of the foregoing, or entered into or modified any contract,
agreement, commitment or arrangement to do any of the foregoing;
(vii) SAGC has not incurred any obligation or liability
(fixed or contingent) with respect to the business of SAGC or any of its
assets, except (1) obligations incurred in the ordinary course of business
consistent with past practice and (2) obligations and liabilities under this
Agreement or contemplated hereby;
(viii) SAGC has not discharged or satisfied any
Encumbrance or paid any obligation or liability (fixed or contingent) except
(1) current obligations and liabilities included in the SAGC Financial
Statements and (2) current obligations and liabilities incurred since the SAGC
Balance Sheet Date in the ordinary course of business;
(ix) SAGC has not mortgaged, pledged or subjected to any
Encumbrance any of the assets or properties of SAGC;
(x) SAGC has not sold, transferred or leased any of the
assets or properties of SAGC, except in the ordinary course of business;
(xi) SAGC has not taken any action other than in the
ordinary course of business and consistent with past practice (none of which
actions is unreasonable or unusual) with respect to the grant of any severance
or termination pay (otherwise than pursuant to policies of SAGC in effect on
the date hereof) or with respect to any increase of benefits payable under its
severance or termination pay policies in effect on the date hereof; and
(xii) SAGC has not adopted or amended any bonus, profit
sharing, thrift, savings, compensation, stock option, pension, retirement,
deferred compensation, employment or other employee benefit plan, agreement,
trust, plan, fund or other arrangement for the benefit or welfare of any
employee or increased in any manner the compensation or fringe benefits of any
employee or paid any benefit not required by any existing plan and
arrangement, except for salary increases for employees in the ordinary course
of business consistent with past practices.
4.5 No Undisclosed Liabilities. Except as set forth in Schedules 4.4,
4.5, 4.12, 4.14, 4.15 and 4.20, there are no liabilities of SAGC of any kind
whatsoever, whether accrued, contingent, absolute, determined, determinable or
otherwise, other than:
(a) liabilities disclosed or provided for in the balance sheet
of SAGC (or the notes thereto) as of the SAGC Balance Sheet Date included in
the SAGC Financial Statements; and
(b) liabilities incurred in the ordinary course of business
consistent with past practice since the SAGC Balance Sheet Date.
4.6 Compliance with Laws. SAGC has complied, and is in compliance, in
all material respects with all applicable Laws. SAGC is not now charged with
or to its knowledge under investigation with respect to any violation of any
applicable Law where such violation could have a material adverse effect on
the business, assets, financial condition or results of operation of SAGC.
SAGC has filed all reports required to be filed with any governmental,
regulatory or administrative agency or authority where failure to file such
report would have a material adverse effect on the business, assets, financial
condition or results of operation of SAGC.
4.7 Tax Matters. Except as set forth in Schedule 4.7, (a) SAGC has
duly filed or will file with the appropriate government agencies all Tax
returns required to be filed by it on or before the Effective Time, (b) SAGC
has timely paid, or made provision on its books and records by establishing a
reserve for the payment of, all Taxes due with respect to its operations or
any other operation of the SAGC Group (as hereinafter defined below) prior to
the Effective Time, including all Taxes shown as due on all Tax returns
described in clause (a) above and all estimated Tax payments due on or before
the Effective Time, (c) SAGC has not executed or filed any agreement extending
the period for assessment or collection of any Taxes, nor is SAGC a party to
any pending Litigation by any governmental authority for assessment or
collection of any Taxes, and no claims for assessment or collection of any
Taxes have been asserted against SAGC, and (d) to the knowledge of SAGC, no
Tax returns of SAGC or the SAGC Group are under examination. As used herein,
"SAGC Group" shall mean SAGC and all members of its affiliated group as
defined in section 1504(a) of the Code and as defined in any applicable Law
providing for consolidated or combined returns. SAGC is not a "United States
real property holding company" within the meaning of Section 1445 of the Code.
4.8 Title to Properties; Absence of Liens and Encumbrances, Etc.
SAGC owns no real property and has good title to or a legal, valid and
enforceable right to use the properties and assets used in the conduct of the
business of SAGC (including without limitation the assets reflected in its
balance sheet as at the SAGC Balance Sheet Date, except as since sold or
otherwise disposed of in the ordinary course of business), free and clear of
all Encumbrances, imperfections of or other matters affecting title, and any
rights of third parties whatsoever, except Permitted Encumbrances.
4.9 Facilities. Schedule 4.9 sets forth a correct and complete list
of all of the real properties, together with the buildings, improvements, and
structures located thereon, owned or used by SAGC in the conduct of its
business, indicating whether such property is owned or leased and setting
forth where such property is located.
4.10 Condition of Facilities, Equipment, Etc. The buildings,
structures, equipment and other physical properties and assets owned,
operated, or leased by SAGC in connection with its business are in good
condition and repair (ordinary wear and tear which are not such as to affect
adversely the operation of SAGC's business excepted), free of any structural
or engineering defect, are suitable for the conduct of SAGC's business as
presently conducted and as presently proposed to be conducted, and do not
require any maintenance or repairs except for routine maintenance and repairs.
All such physical properties and assets are in conformity in all respects with
all applicable Laws and other requirements relating thereto currently in
effect or scheduled to come into effect, including, without limitation, Laws
relating to environmental regulation and the maintenance of occupational
safety and health among the workforce.
4.11 Insurance. The business and the assets of SAGC are covered by
insurance with licensed insurance companies against casualty and other losses
customarily obtained to cover comparable businesses and assets in the region
in which such businesses and assets are located, in amounts, scope and
coverage which are reasonable in light of existing conditions. Schedule 4.11
sets forth a correct and complete list of all of the policies of insurance and
fidelity or surety bonds carried by SAGC with respect to SAGC's business or
any of its assets (including prior policies to the extent that they continue
to provide coverage). SAGC has not failed to give any notice or present any
claim under such insurance policies in due and timely fashion, and there are
no claims by SAGC against any of such policies as to which any insurance
company is denying liability or defending under a reservation of rights
clause.
4.12 Agreements, Plans, Arrangements, Etc. Except as set forth in
Schedule 4.12 (which may refer to other specific Schedules hereto), SAGC is
not a party to, nor is SAGC or any of its properties and assets bound or
affected by, any of the following:
(a) a lease (whether as lessor or lessee) relating to real or
personal property;
(b) a license, sublicense, assignment or other Contract (whether
as licensor or licensee, assignor or assignee) relating to Intellectual
Property;
(c) an employment Contract or consulting Contract;
(d) a joint venture or partnership Contract;
(e) a Contract for the borrowing or lending of money or
guaranteeing, indemnifying or otherwise becoming liable for the obligations or
liabilities of another;
(f) a Contract granting any person a security interest or other
Encumbrance on any of the assets of SAGC;
(g) a Contract for the construction or modification of any
building or structure or for the incurrence of any other capital expenditure;
(h) a Contract which restricts SAGC from doing business anywhere
in the world;
(i) a Contract not entered into in the ordinary course of
business;
(j) a Contract requiring the payment of royalties; or
(k) any other Contract which could have a material adverse
effect on the Surviving Corporation.
Correct and complete copies of all Contracts set forth in Schedule 4.12 or any
other Schedule hereto, including all amendments to date (or, where they are
oral, true and complete written summaries thereof), and true and complete
copies of all standard form Contracts used by SAGC in the conduct of its
business have been delivered to LVDG or its Representatives prior to the date
hereof. Each such Contract is valid, in full force and effect and enforceable
in accordance with its terms and SAGC has fulfilled, or taken all action
reasonably necessary to enable it to fulfill when due, all of its obligations
under such Contracts. Except as set forth in Schedule 4.12, there has not
occurred any default, or any event which, with the lapse of time or the
election of any person other than SAGC, or any combination thereof, will
become a default, by SAGC, nor to the knowledge of SAGC has there occurred any
default by others or any event which, with the lapse of time or the election
of SAGC, will become a default by others under any of such Contracts. Neither
SAGC nor to SAGC's knowledge any other party is in arrears in respect of the
performance or satisfaction of the terms or conditions on its part to be
performed or satisfied under any of such Contracts and no waiver or indulgence
has been granted by any of the parties thereto.
4.13 Intellectual Properties. Schedule 4.13 sets forth a correct and
complete list of all Intellectual Properties used or presently proposed to be
used in the conduct of the business of SAGC. Except as disclosed in Schedule
4.13, (a) SAGC owns or possesses adequate licenses or other valid rights to
use (without the making of any payment to others or the obligation to grant
rights to others in exchange) all Intellectual Properties necessary to the
conduct of its business as presently being conducted and the business of SAGC
as presently being conducted and the consummation of the transactions
contemplated hereby will not alter or impair any of such rights; (b) the
validity of such rights and the title thereto of SAGC have not been questioned
in any Litigation (as defined in Section 3.15 hereof) to which SAGC is a
party, nor to the knowledge of SAGC is any such Litigation threatened; (c) to
SAGC's knowledge, the conduct of SAGC's business as now conducted does not
infringe or conflict with any Intellectual Properties of others; (d) there is
no use of any trademark, service mark or trade name owned by or licensed to
SAGC that has heretofore been or is now being made, except by SAGC or by an
entity duly licensed by it to use the same under a Contract disclosed in
Schedule 4.12; and (e) to the knowledge of SAGC there is no infringement by
others of any Intellectual Properties owned by or licensed by or to SAGC. All
patents, patent applications and rights to inventions heretofore owned or held
by any employee or officer of SAGC or affiliate of SAGC and relating to its
business in any manner have been duly effectively transferred to SAGC. All
licenses and Contracts requiring the payment of royalties by SAGC are
referenced and correctly described in the SAGC 1996 Annual Report.
4.14 Permits, License, Etc. SAGC has, and has complied in all material
respects with, all Permits that are required in order to carry on its business
as presently conducted and is not in default of any thereof. Schedule 4.14
sets forth a correct and complete list of all such Permits, all of which are
in full force and effect, and, to SAGC's knowledge, no suspension,
cancellation or non-renewal of any of them is threatened, nor does any basis
for such suspension, cancellation or non-renewal exist. As to any such Permit
that has expired or is about to expire, SAGC has promptly applied for the
renewal of same. A true and complete copy of each Permit set forth in
Schedule 4.14 has been previously delivered to LVDG.
4.15 Litigation. Except as set forth on Schedule 4.15, there is no
Litigation pending before any federal, state, municipal, foreign or other
court or governmental, administrative or self-regulatory body or agency, or
any private arbitration tribunal, or to the knowledge of SAGC threatened,
against, relating to or affecting SAGC with respect to its business or the
transactions contemplated by this Agreement; nor to the knowledge of SAGC is
there any basis for any such Litigation. Neither SAGC nor any officer,
director or employee of SAGC has been permanently or temporarily enjoined or
barred by order, judgment or decree of any court or other tribunal or any
agency or self-regulatory body from engaging in or continuing any conduct or
practice in connection with its business. There is not in existence any
order, judgment or decree of any court or other tribunal or any agency or
self-regulatory body enjoining SAGC from taking or requiring SAGC to take
action of any kind with respect to its business or to which SAGC is subject or
by which it is bound.
4.16 Accounts and Notes Receivable. SAGC has heretofore delivered to
LVDG a true, complete and correct listing of all of the receivables (including
accounts receivable, notes receivable, loans receivable and any advances) of
SAGC as of September 30, 1997. All such receivables, net of any allowance for
doubtful accounts, have been reported in accordance with generally accepted
accounting principles applied on a consistent basis, except as stated thereon.
All accounts and notes receivable shown in the listing provided as of
September 30, 1997, or arising thereafter and on or prior to the Effective
Time arose from bona fide transactions in the ordinary course of business.
4.17 No Interest in Competitors, Etc. Except as set forth in Schedule
4.17 (which may refer to other specific Schedules hereto), and except for the
ownership of not more than five percent (5%) of the outstanding securities of
any class of an issuer registered under Section 12 of the Exchange Act neither
SAGC nor any affiliate thereof, nor any officer or director of SAGC or any
affiliate or associate thereof, directly or indirectly is, or owns any
interest in or controls or is an employee, officer, director, or partner of or
participant in or consultant to any corporation, partnership, limited
partnership, joint venture, association, or other entity which is a
competitor, supplier, customer, landlord, or tenant of SAGC. Schedule 4.17
hereto sets forth all Contracts or other arrangements between any affiliate of
SAGC and SAGC for space, facilities, personnel, management, computer,
telephone or other services. Except as set forth in Schedule 4.17, SAGC does
not owe any amount to, or have any Contract with or commitment to, any of its
shareholders, directors, officers, employees or consultants (other than
compensation for current services not yet due and payable and reimbursement of
expenses arising in the ordinary course of business), none of such persons
owes any amount to SAGC, and no part of the property or assets of any
shareholder of SAGC or any affiliate of any shareholder of SAGC is used by
SAGC.
4.18 Books and Records. The books of account and other financial and
corporate records of SAGC are in all material respects complete and correct,
are maintained in accordance with good business practices and all Laws
applicable to SAGC, and are accurately reflected in the SAGC Financial
Statements. The minute books of SAGC as previously made available to LVDG and
its counsel contain accurate records of all meetings, and accurately reflect
all other corporate action of the shareholders and directors of SAGC.
4.19 Employees, Labor Relations, Etc. (a) SAGC is not a party to any
contract or agreement with any labor organization or other representative of
SAGC's employees; (b) there is no unfair labor practice charge or complaint
pending or, to the best knowledge of SAGC, threatened, against SAGC; (c) there
is no labor strike, slowdown, work stoppage or other material labor
controversy in effect, or to the knowledge of SAGC threatened against or
otherwise affecting SAGC; (d) SAGC has not experienced any labor strike,
slowdown, work stoppage or other material labor controversy within the past
three years; (e) no representation question has been raised respecting any of
SAGC's employees within the past three years, nor, to the best knowledge of
SAGC are there any campaigns being conducted to solicit cards from SAGC's
employees to authorize representation by any labor organization; (f) no
collective bargaining agreement relating to any of SAGC's employees is being
negotiated; (g) no action, suit, complaint, charge, arbitration, inquiry,
proceeding, or investigation by or before any court, governmental agency,
administrative agency or commission brought by or on behalf of any employee,
prospective employee, former employee, retiree, labor organization or other
representative of SAGC's employees, is pending or, to the best knowledge of
SAGC, threatened, against SAGC; (h) SAGC is not a party to, or otherwise bound
by, any consent decree with, or citation by, any government agency relating to
SAGC's employees or employment practices relating to SAGC's employees; (i)
SAGC is in compliance in all material respects with all applicable Laws and
Contracts relating to employment, employment practices, wages, hours, and
terms and conditions of employment, and has not engaged in any unfair labor
practice or discriminated on the basis of race, age, sex or otherwise in its
employment conditions or practices with respect to its employees; and (j) SAGC
has paid in full to all of SAGC's employees all wages, salaries, commissions,
bonuses, benefits and other compensation due and payable to such employees on
or prior to the date hereof.
4.20 Employee Benefit Plans, Etc.
(a) Schedule 4.20 hereto contains a true and complete list of
each plan, Contract, program, policy or arrangement, including, but not
limited to, pension, bonus, section 401(k) plan, deferred compensation,
incentive compensation, stock purchase, supplemental retirement, severance or
termination pay, stock option, hospitalization, medical, life insurance,
dental, disability, salary continuation, vacation, supplemental unemployment
benefits, profit-sharing, or retirement plan, Contract, program, policy or
arrangement, maintained, contributed to, or required to be contributed to, by
SAGC or by any of its subsidiaries or affiliates for the benefit of any
employee, whether or not any of the foregoing is funded, whether formal or
informal, whether or not subject to ERISA, and whether legally binding or not
(collectively, the "Benefit Plans"). SAGC has delivered to LVDG (i) true and
complete copies of all documents embodying or relating to the Benefit Plans,
including, without limitation, with respect to each Benefit Plan, all
amendments to the Benefit Plans, and any trust or other funding arrangement,
including certified financial statements which fairly present the assets and
liabilities of each of the Benefit Plans as of the date thereof (and there
have been no material changes in the assets and the liabilities since the date
of such financial statements), (ii) the most recent annual and periodic
actuarial valuations, if any, prepared for any Benefit Plan, (iii) the most
recent annual reports (series 5500 and all schedules thereto), if any,
required under ERISA, (iv) if the Benefit Plan is funded, the most recent
annual and periodic accounting of the Benefit Plan's assets, (v) the most
recent determination letter received from the Internal Revenue Service, if
any, and (vi) a copy of the most recent summary plan description together with
the most recent summary of modifications required under ERISA with respect to
each such Benefit Plan, and all employee communications relating to each such
Benefit Plan.
(b) Except as specifically set forth in Schedule 4.20, full
payment has been made of all amounts which SAGC is required, under applicable
law or under any Benefit Plan or any agreement relating to any Benefit Plan to
which SAGC is a party, to have paid as contributions thereto as of the last
day of the most recent fiscal year of such Benefit Plan ended prior to the
date hereof. SAGC has made adequate provision for reserves to meet
contributions that have not been made because they are not yet due under the
terms of any Benefit Plan or related agreements. Benefits under all Benefit
Plans are as represented and have not been increased subsequent to the date as
of which documents have been provided.
4.21 SEC Filings. SAGC has filed with the SEC, and has previously
delivered to LVDG true and complete copies of, all forms, reports, schedules,
statements, and other documents required to be filed by SAGC since January 1,
1995, under the Securities Act or the Exchange Act. No form, report,
schedule, statement or other document filed by SAGC with the SEC since January
1, 1995, contained any untrue statement of a material fact or omitted to state
any material fact, at the time such document was filed, necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading, other than such facts as were corrected in any
subsequent form, report, schedule, statement or other document filed by SAGC
with the SEC.
4.22 Information. None of the information concerning SAGC incorporated
by reference, or any other information supplied or to be supplied by SAGC or
its Representatives for inclusion, in the proxy and registration statement on
Form S-4 prepared in connection with the transactions contemplated hereby or
any amendment or supplement thereto has or will, at the time that the proxy
and registration statement was or any amendment is mailed, contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading or, in the case of any such proxy and
registration statement, necessary to correct any statement in any earlier
communication with respect to the solicitation of any proxy for the meeting or
consent in connection with which such proxy and registration statement shall
be mailed. None of the information and documents which have been or may be
furnished by SAGC or any of its Representatives to LVDG or its Representatives
in connection with the transactions contemplated hereby is or will be
materially false or misleading or contains or will contain any material
misstatement of fact or omits or will omit any material fact necessary to be
stated in order to make the statements therein not misleading.
ARTICLE 5
CONDUCT OF BUSINESS OF LVDG
AND SAGC PRIOR TO THE EFFECTIVE TIME
5.1 Conduct of Business of LVDG. During the period commencing on the
date hereof and continuing until the Effective Time, LVDG agrees that, except
as otherwise expressly contemplated by this Agreement or agreed to in writing
by SAGC, LVDG (which for purpose of this Article V shall include the LVDG
Subsidiaries, as appropriate):
(a) will carry on its business only in the ordinary course and
consistent with past practice;
(b) will not declare or pay any dividend on or make any other
distribution (however characterized) in respect of shares of its capital
stock;
(c) will not, directly or indirectly, redeem or repurchase, or
agree to redeem or repurchase, any shares of its capital stock;
(d) will not amend its Articles of Incorporation or By-Laws;
(e) will not issue, or agree to issue, any shares of its capital
stock (except pursuant to the exercise and/or conversion of currently
outstanding LVDG Derivative Securities), or any options, warrants or other
rights to acquire shares of its capital stock, or any securities convertible
into or exchangeable for shares of its capital stock;
(f) will not combine, split or otherwise reclassify any shares
of its capital stock;
(g) will not sell or pledge, or agree to sell or pledge, any
shares of the capital stock of or other equity interest in any LVDG
Subsidiary;
(h) will use all reasonable efforts to preserve intact its
present business organization, keep available the services of its officers and
key employees and preserve its relationships with clients and others having
business dealings with it to the end that its goodwill and ongoing business
shall not be materially impaired at the Effective Time;
(i) will not (A) make any capital expenditures individually in
excess of $25,000 or in the aggregate in excess of $50,000, (B) enter into or
terminate (except in the ordinary course of business and consistent with past
practice) any lease of, or purchase or sell, any real property, (C) enter into
any leases of personal property involving individually in excess of $10,000
annually or in the aggregate in excess of $25,000 annually, (D) incur or
guarantee any additional indebtedness for borrowed money, (E) create or permit
to become effective any Encumbrance on its properties or assets, or (F) enter
into any agreement to do any of the foregoing;
(j) will not, other than in the ordinary course of business,
adopt or amend any Benefit Plan for the benefit of employees, or enter into
any agreement to do the same;
(k) will promptly advise SAGC of the commencement of, or threat
of(to the extent that such threat comes to the knowledge of LVDG), any claim,
action, suit, proceeding or investigation against, relating to or involving
LVDG or any of its directors, officers, employees, agents or consultants in
connection with its business or the transactions contemplated hereby;
(l) will maintain in full force and effect all insurance
policies maintained by LVDG on the date hereof;
(m) will not enter into any agreement to dissolve, merge,
consolidate or, except in the ordinary course, sell any material assets of
LVDG;
(n) will promptly provide SAGC with copies of any and all
reports or documents filed with the SEC.
Notwithstanding the foregoing, LVDG shall have the right at any time to employ
or discharge employees and increase or decrease any employee salaries or
compensation in the ordinary course, but shall notify SAGC after the taking of
any such action.
5.2 Conduct of Business of SAGC. During the period commencing on the
date hereof and continuing until the Effective Time, SAGC agrees that, except
as otherwise expressly contemplated by this Agreement or agreed to in writing
by LVDG, SAGC (which for purposes of this Article V shall include the SAGC
Subsidiaries, as appropriate):
(a) will carry on its business only in the ordinary course and
consistent with past practice;
(b) will not declare or pay any dividend on or make any other
distribution (however characterized) in respect of shares of its capital
stock;
(c) will not, directly or indirectly, redeem or repurchase, or
agree to redeem or repurchase, any shares of its capital stock;
(d) will not amend its Articles of Incorporation or By-Laws;
(e) will not issue, or agree to issue, any shares of its capital
stock (except pursuant to the exercise and/or conversion of currently
outstanding options, warrants, convertible securities or other rights, or
pursuant to SAGC's existing section 401(k) plan or in connection with
financing of the Las Vegas All-American SportPark), or any options, warrants
or other rights to acquire shares of its capital stock, or any securities
convertible into or exchangeable for shares of its capital stock;
(f) will not combine, split or otherwise reclassify any shares
of its capital stock;
(g) will use all reasonable efforts to preserve intact its
present business organization, keep available the services of its officers and
key employees and preserve its relationships with clients and others having
business dealings with it to the end that its goodwill and ongoing business
shall not be materially impaired at the Effective Time;
(h) except in connection with financing and developing the Las
Vegas All-American SportPark, will not (A) make any capital expenditures
individually in excess of $25,000 or in the aggregate in excess of $50,000,
(B) enter into or terminate (except in the ordinary course of business and
consistent with past practice) any lease of, or purchase or sell, any real
property, (C) enter into any leases of personal property involving
individually in excess of $10,000 annually or in the aggregate in excess of
$25,000 annually, (D) incur or guarantee any additional indebtedness for
borrowed money, (E) create or permit to become effective any Encumbrance on
its properties or assets, (F) hire or fire employees receiving compensation in
excess of $50,000 annually or (G) enter into any agreement to do any of the
foregoing;
(i) will not, other than in the ordinary course of business,
adopt or amend any Benefit Plan for the benefit of employees or (except for
such increases in salary or other compensation payable to any employee as the
Board of Directors of SAGC may reasonably determine are necessary to retain
the services of such employee) increase the salary or other compensation
(including, without limitation, bonuses) payable or to become payable to its
employees (except pursuant to existing contractual obligations which have been
disclosed to LVDG or consistent with past practice), or enter into any
agreement to do any of the foregoing;
(j) will promptly advise LVDG of the commencement of, or threat
of (to the extent that such threat comes to the knowledge of SAGC), any claim,
action, suit, proceeding or investigation against, relating to or involving
SAGC or any of its directors, officers, employees, agents or consultants in
connection with its business or the transactions contemplated hereby;
(k) will maintain in full force and effect all insurance
policies maintained by SAGC on the date hereof; and
(l) will not enter into any agreement to dissolve, merge,
consolidate or, except in the ordinary course, sell any material assets of
SAGC.
(m) will promptly provide LVDG with copies of any and all reports
or documents filed with the SEC.
ARTICLE 6
ADDITIONAL AGREEMENTS
6.1 Access to Properties and Records. Between the date of this
Agreement and the Effective Time, LVDG will provide SAGC and its
Representatives and SAGC will provide LVDG and its Representatives, with full
access, during business hours, to their respective premises and properties and
their respective books and records (including, without limitation, contracts,
leases, insurance policies, litigation files, minute books, accounts, working
papers and tax returns filed and in preparation) and each will cause its
officers to furnish to the other and its authorized advisors such additional
financial, tax and operating data and other information pertaining to its
business as the other shall from time to time reasonably request.
6.2 Registration Statement. As soon as reasonably practicable after
the execution and delivery of this Agreement, SAGC and LVDG shall prepare and
file with the SEC a registration and joint proxy statement on Form S-4 (the
"Registration Statement"), which shall cover all of the shares of LVDG Common
Stock to be issued in connection with the Merger, and shall use all reasonable
efforts to have the Registration Statement declared effective by the SEC as
promptly as practicable. LVDG shall also take such actions as may be required
under state blue sky or securities laws in connection with such issuance of
shares of LVDG Common Stock in connection with the Merger. SAGC shall
cooperate fully with LVDG and shall furnish LVDG with all information
concerning SAGC and its shareholders and shall take all such other action as
LVDG may reasonably request in connection with any such actions.
6.3 Stockholders' Approvals. Promptly after the effectiveness of the
Registration Statement and compliance with all state securities and blue sky
laws, each of SAGC and LVDG shall take all action necessary to convene
meetings of their respective stockholders for the purpose of voting upon the
transactions contemplated hereby and such other matters as may be appropriate
at such meetings, and in connection therewith shall in a timely manner mail to
the respective stockholders the Proxy Statement contained in the Registration
Statement and, if necessary after the Proxy Statement shall have been mailed,
shall promptly and in a timely manner circulate amended or supplemental
materials and, if necessary, materials necessary for resoliciting proxies.
Each of SAGC and LVDG will, through its respective Board of Directors,
recommend to its respective stockholders approval of the transactions
contemplated by this Agreement; provided that neither SAGC nor LVDG shall be
obligated to make such recommendation, and either SAGC or LVDG may withdraw
such recommendation if its Board of Directors receives an unsolicited written
proposal to effect a merger, consolidation or other business combination, a
sale of substantial assets or similar transaction involving it or any
subsidiary or a sale of more than 25% of its outstanding capital stock (each
of the foregoing referred to herein as an "Acquisition Proposal") which its
Board of Directors or any committee thereof, in good faith and upon the advice
of its independent financial advisor, determines to be more favorable to its
stockholders than the transactions contemplated by this Agreement.
6.4 Affiliates' Letters. SAGC shall deliver to LVDG, prior to the
Closing, a letter identifying all persons who are, at the time the Merger is
submitted to the aforesaid meeting of the stockholders of SAGC, "affiliates"
of SAGC for purposes of Rule 145 under the Securities Act. SAGC shall use its
best efforts to cause each person who is identified as an "affiliate" in the
letter referred to above to deliver, at or prior to the Closing, a signed,
written agreement to the effect that such person will not sell or otherwise
transfer any shares of LVDG Common Stock issued to such person pursuant to the
Merger, except pursuant to an effective registration statement or in
compliance with Rule 145 or other exemption from the registration requirements
of the Securities Act.
6.5 Reasonable Efforts; Etc. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use its reasonable
efforts to promptly take, or cause to be taken, all actions, and to promptly
do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations, whether before or after the Effective Time,
to consummate and make effective the transactions contemplated by this
Agreement, including obtaining any consents, authorizations, exemptions and
approvals from, and making all filings with, any governmental or regulatory
authority, agency or body which are necessary in connection with the
transactions contemplated by this Agreement; provided that the obligation of
the parties to use reasonable efforts as required by this Section 6.5 shall
not obligate any party to incur unreasonable costs or expenses.
6.6 Material Events. At all times prior to the Effective Time, each
party shall promptly notify the others in writing of the occurrence of any
event which will or may result in the failure to satisfy any of the conditions
specified in Article 7 or Article 8 hereof.
6.7 Tax Consequences. From and after the Effective Time, none of the
parties will take any position in or with regard to their respective Federal,
state or local income tax returns (or any amendments thereto) that is
inconsistent with the treatment of the Merger as a tax-free reorganization for
Federal income tax purposes under Section 368(a)(2)(E) of the Code or with
respect to the tax consequences contemplated thereby (including those related
to the basis of stock and assets).
6.8 Fair Price Statute. If any "fair price" or "control share
acquisition" statute or other similar statute or regulation shall become
applicable to the transactions contemplated hereby, SAGC and LVDG and the
members of their respective Board of Directors shall use their best efforts to
grant such approvals and take such actions as are necessary so that the
transactions contemplated hereby may be consummated as promptly as practicable
on the terms contemplated hereby and otherwise act to minimize the effects of
such statute or regulation on the transactions contemplated thereby.
6.9 Indemnification.
(a) In the event the Merger shall become effective, then from
and after the Effective Time, the Surviving Corporation (the "Indemnifying
Party") shall indemnify, defend and hold harmless each person who is now, or
who becomes prior to the Effective Time, an officer, director, employee or
agent of SAGC or LVDG (the "Indemnified Parties") against (i) all losses,
claims, damages, costs, expenses, liability or judgment or amounts paid with
the approval of the Indemnifying Party (which approval shall not be
unreasonably withheld) in settlement of or in connection with any claim,
action, suit, proceeding or investigation based in whole or in part on or
arising in whole or in part out of the fact that such person is or was an
officer, director, employee or agent of SAGC or LVDG, whether pertaining to
any matter existing or occurring at or prior to the Effective Time, and
whether asserted or claimed prior to, at, or after, the Effective Time (the
"Indemnified Liabilities") and (ii) all Indemnified Liabilities based in whole
or in part on or arising in whole or in part out of or pertaining to this
Agreement or the transactions contemplated hereby, including, without
limitation, any Indemnified Liabilities arising under or out of any state or
federal securities laws, in each case to the fullest extent permitted by law
(the Surviving Corporation shall pay expenses in advance of the final
disposition of any such action or proceeding to each Indemnified Party to the
fullest extent permitted by law upon receipt of any undertaking that may be
required by law).
(b) Any Indemnified Party wishing to claim indemnification under
this Section 6.10 shall notify the Surviving Corporation promptly upon
learning of any such claim, action, suit, proceeding or investigation (but the
failure to notify an Indemnifying Party should not relieve it from any
liability which it may have under this Section 6.9 except to the extent such
failure prejudices such party).
(c) The provisions of this Section 6.9 are intended to be for
the benefit of, and shall be enforceable by each Indemnified Party, and his or
her heirs and representatives.
6.10 Quarterly Financial Statements. Prior to the Effective Time, LVDG
and SAGC shall deliver to the other party as soon as available, but in any
event no later than 45 days after the end of each quarterly period of its
fiscal year (or such later period as may be permitted for the filing of
quarterly financial statements under the Exchange Act), unaudited balance
sheets and the related unaudited statements of income and retained earnings
and unaudited statements of cash flows for each such quarter.
ARTICLE 7
CONDITIONS TO THE OBLIGATIONS OF LVDG
The obligation of LVDG to consummate the transactions contemplated by
this Agreement shall be subject to the satisfaction, on or prior to the
Closing Date, of each of the following conditions (any of which may be waived
in writing by LVDG in its sole discretion):
7.1 Representations and Warranties True. The representations and
warranties of SAGC which are contained in this Agreement, or contained in any
Schedule, certificate or other instrument or document delivered or to be
delivered pursuant to this Agreement shall be true and correct in all material
respects at and as of the Closing Date as though such representations and
warranties were made on and as of the Closing Date except for changes
expressly permitted or contemplated by the terms of this Agreement, and at the
Closing SAGC shall have delivered to LVDG a certificate (signed on its behalf
by its President and the Chief Financial Officer) to that effect with respect
to all such representations and warranties.
7.2 Performance. SAGC shall have performed and complied in all
material respects with all of its obligations under this Agreement which are
required to be performed or complied with on or prior to the Closing Date, and
at the Closing SAGC shall have delivered to LVDG a certificate (signed on its
behalf by its President and its Chief Financial Officer) to that effect with
respect to all such obligations required to have been performed or complied
with by SAGC on or before the Closing Date.
7.3 Authorization of Merger. This Agreement and the consummation of
the transactions contemplated hereby shall have been duly approved and adopted
(i) by the requisite affirmative vote of the stockholders of LVDG and (ii) by
the requisite affirmative vote of the stockholders of SAGC, in each case in
accordance with applicable law.
7.4 Registration Statement; Blue Sky Laws. The Registration Statement
shall have been declared effective under the Securities Act and shall not be
subject to a stop order or any threatened stop order. All necessary state
securities and blue sky permits, approvals and exemption orders required in
connection with the transactions contemplated by this Agreement shall have
been obtained.
7.5 Affiliates Letters. SAGC shall have obtained from each person who
is an "affiliate" (as such term is defined in Rule 144 of the Securities Act)
of SAGC an executed letter agreement in the form of Exhibit 6.4 hereto and
shall have delivered such letter agreements to LVDG.
7.6 Restrictive Legends. The transfer agent for LVDG shall have been
instructed to place the following legend on each certificate representing
shares of LVDG Common Stock issued to any "affiliate" of SAGC pursuant to the
Merger:
"The sale or other transfer of the shares represented by this
certificate is not permitted unless effected pursuant to an effective
registration statement or in compliance with Rule 145 or another exemption
from the registration requirements of the Securities Act of 1933, as amended."
7.7 Absence of Litigation. No statute, rule or regulation shall have
been enacted or promulgated, and no order, decree, writ or injunction shall
have been issued and shall remain in effect, by any court or governmental or
regulatory body, agency or authority which restrains, enjoins or otherwise
prohibits the consummation of the transactions contemplated hereby, and no
action, suit or proceeding before any court or governmental or regulatory
body, agency or authority shall have been instituted by any person (or
instituted or threatened by any governmental or regulatory body, agency or
authority), and no investigation by any governmental or regulatory body,
agency or authority shall have been commenced, with respect to the
transactions contemplated hereby or with respect to SAGC which, in the
reasonable judgment of LVDG's Board of Directors, would have a material
adverse effect on the transactions contemplated hereby or on the business of
SAGC.
7.8 Opinion of Counsel. SAGC shall have delivered to LVDG an opinion
of counsel to SAGC, in a form to be agreed upon by the parties hereto.
7.9 Appraisal Rights. The holders of more than ten percent (10%) of
the issued and outstanding shares of SAGC Common Stock or ten percent (10%) or
more of the issued and outstanding shares of LVDG Common Stock shall not have
demanded appraisal rights in respect of the Merger, and no holder of SAGC
Preferred Stock shall have demanded appraisal rights in respect of the Merger.
7.10 Articles of Merger. SAGC shall have executed and delivered to
LVDG counterparts of the Certificates of Merger to be filed with the
Secretaries of State of the States of Colorado and Nevada in connection with
the Merger.
7.11 Consents. SAGC and LVDG shall have obtained all necessary
waivers, consents, authorizations or approvals of, and made any necessary
filings with, any governmental, public or self-regulatory body or authority or
any other third party to the consummation of the transactions contemplated
hereby, or executions therefrom or waivers thereof, and any requisite waiting
period with respect thereto shall have expired.
ARTICLE 8
CONDITIONS TO THE OBLIGATIONS OF SAGC
The obligation of SAGC to consummate the transactions contemplated by
this Agreement shall be subject to the satisfaction, on or prior to the
Closing Date, of each of the following conditions (any of which may be waived
in writing by SAGC in its sole discretion):
8.1 Representations and Warranties True. The representations and
warranties of LVDG contained in this Agreement, or contained in any Schedule,
certificate or other instrument or document delivered or to be delivered
pursuant to this Agreement, shall be true and correct in all material respects
at and as of the Closing Date as though such representations and warranties
were made on and as of the Closing Date except for changes expressly permitted
or contemplated by the terms of this Agreement, and at the Closing LVDG shall
have delivered to SAGC a certificate (signed on its behalf by its President
and its Chief Financial Officer) to that effect with respect to all such
representations and warranties made by such entity.
8.2 Performance. LVDG shall have performed and complied in all
material respects with all of its obligations under this Agreement which are
required to be performed or complied with on or prior to the Closing Date, and
at the Closing LVDG shall have delivered to SAGC a certificate, signed on its
behalf by its President and its Chief Financial Officer, to that effect with
respect to all such obligations required to have been performed or complied
with on or before the Closing Date.
8.3 Authorization of Merger. This Agreement and the consummation of
the transactions contemplated hereby shall have been duly approved and adopted
by (i) the requisite affirmative vote of the stockholders of SAGC, and (ii) by
the requisite affirmative vote of the stockholders of LVDG, in each case in
accordance with applicable law.
8.4 Registration Statement; Blue Sky Laws. The Registration Statement
shall have been declared effective under the Securities Act and shall not be
subject to a stop order or any threatened stop order. All necessary state
securities and blue sky permits, approvals and exemption orders required in
connection with the transactions contemplated by this Agreement shall have
been obtained.
8.5 Absence of Litigation. No statute, rule or regulation shall have
been enacted or promulgated, and no order, decree, writ or injunction shall
have been issued and shall remain in effect, by any court or governmental or
regulatory body, agency or authority which restrains, enjoins or otherwise
prohibits the consummation of the transactions contemplated hereby, and no
action, suit or proceeding before any court or governmental or regulatory
body, agency or authority shall have been instituted by any person (or
instituted or threatened by any governmental or regulatory body, agency or
authority) and no investigation by any governmental or regulatory body, agency
or authority shall have been commenced, with respect to the transactions
contemplated hereby or with respect to LVDG which, in the reasonable judgment
of SAGC's Board of Directors, would have a material adverse effect on the
transactions contemplated hereby or on the business of LVDG.
8.6 Opinion of Counsel. LVDG shall have delivered to SAGC an opinion
of counsel to LVDG, in a form to be agreed upon by the parties hereto.
8.7 Tax Opinion. Counsel to SAGC, or counsel to LVDG, shall have
rendered its opinion to SAGC concerning certain tax matters, in a form to be
agreed upon the the parties hereto.
8.8 Articles of Merger. LVDG shall have executed and delivered to
SAGC counterparts of the Certificates of Merger to be filed with the
Secretaries of State of the States of Colorado and Nevada in connection with
the Merger.
8.9 Consents. LVDG and SAGC shall have obtained all necessary
waivers, consents, authorizations or approvals of, and made any necessary
filings with, any governmental, public or self-regulatory body or authority or
any other third party to the consummation of the transactions contemplated
hereby, or executions therefrom or waivers thereof, and any requisite waiting
period with respect thereto shall have expired.
8.10 Inclusion on Nasdaq Stock Market. The LVDG Common Stock to be
issued to the stockholders of SAGC pursuant to the Merger shall be listed for
trading on the Nasdaq Small Cap Market, and there shall have been no
involuntary trading halt, as of the Effective Time, of LVDG Common Stock
imposed by the NASD.
ARTICLE 9
TERMINATION
9.1 Termination. This Agreement may be terminated at any time prior
to the Effective Time, whether prior to or after approval of this Agreement
and the transactions contemplated hereby by the stockholders of LVDG and/or
SAGC:
(a) by the mutual written consent of the Boards of Directors of
LVDG and SAGC;
(b) by either LVDG or SAGC
(i) if any court or governmental or regulatory agency,
authority or body shall have enacted, promulgated or issued any statute, rule,
regulation, ruling, writ or injunction, or taken any other action,
restraining, enjoining or otherwise prohibiting the transactions contemplated
hereby and all appeals and means of appeal therefrom have been reasonably
exhausted; or
(ii) if the stockholders of SAGC and/or LVDG shall have
failed to approve the Merger at the meetings referred to in Section 6.3;
9.2 Notice of Termination. In the event LVDG or SAGC shall elect to
terminate this Agreement pursuant to Section 9.1, it shall give written notice
of such termination to the other party, which notice shall state the reasons
for such termination.
9.3 Effect of Termination. In the event of the termination of this
Agreement, this Agreement shall forthwith become void and there shall be no
liability on the part of any of the parties hereto or their respective
officers or directors, except for Sections 10.6, 10.7 and 10.9, which shall
remain in full force and effect, and except that nothing herein shall relieve
any party from liability for a breach of this Agreement prior to the
termination hereof.
ARTICLE 10
MISCELLANEOUS PROVISIONS
10.1 Amendment. This Agreement may be amended by written agreement
between LVDG and SAGC prior to the Effective Time, whether prior to or after
approval hereof by the stockholders of SAGC and/or the stockholders of LVDG,
but after any such approval no amendment shall be made to the exchange ratio
pursuant to which outstanding shares of SAGC Common and Preferred Stock are
converted into shares of LVDG Common and Preferred Stock pursuant to the
Merger, without the further approval of such stockholders.
10.2 Waiver of Compliance. Except as otherwise provided in this
Agreement, any failure of any of the parties to comply with any obligation,
covenant or agreement contained herein may be waived only by a written notice
from the party or parties entitled to the benefits thereof. No failure by any
party hereto to exercise, and no delay in exercising, any right hereunder,
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right hereunder preclude any other or future exercise of that right by
that party.
10.3 Notices. All notices and other communications hereunder shall be
deemed given if given in writing and delivered personally, by registered or
certified mail, return receipt requested, postage prepaid, or by overnight
courier to the party to receive the same at its respective address set forth
below (or at such other address as may from time to time be designated by such
party to the others in accordance with this Section 10.3):
(a) if to LVDG, to:
Vaso Boreta, President
Las Vegas Discount Golf & Tennis, Inc.
5325 South Valley View Boulevard, Suite 10
Las Vegas, Nevada 89118
with copies to:
Jon D. Sawyer, Esq.
Krys Boyle Freedman & Sawyer, P.C.
600 17th Street, Suite 2700 South Tower
Denver, Colorado 80202-5427
(b) if to SAGC, to:
Ronald S. Boreta, President
Saint Andrews Golf Corporation
5325 South Valley View Boulevard, Suite 4
Las Vegas, Nevada 89118
with copies to:
Douglas A. Sykes, Esq.
Overton Babiarz & Sykes, P.C.
7720 East Belleview Avenue, Suite 200
Englewood, Colorado 80111
All such notices and communications hereunder shall be deemed given when
received, as evidenced by the signed acknowledgment of receipt of the person
to whom such notice or communication shall have been personally delivered, the
acknowledgment of receipt returned to the sender by the applicable postal
authorities or the confirmation of delivery rendered by the applicable
overnight courier service.
10.4 Assignment. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns. Neither this Agreement nor any
rights, duties or obligations hereunder shall be assigned by any party hereto
without the prior written consent of the other parties hereto.
10.5 No Third Party Beneficiaries. Except as provided in Section 6.11
hereof to the contrary, neither this Agreement nor any provision hereof nor
any Schedule, certificate or other instrument delivered pursuant hereto, nor
any agreement to be entered into pursuant hereto or any provision hereof, is
intended to create any right, claim or remedy in favor of any person or
entity, other than the parties hereto and their respective successors and
permitted assigns.
10.6 Expenses. Each party shall pay its own expenses in connection
with this Agreement, the agreements to be entered into pursuant hereto and the
transactions contemplated hereby; provided, that if the Merger is consummated
pursuant to this Agreement, all such expenses of SAGC incurred on behalf of
SAGC in connection with the transactions contemplated hereby shall be the
responsibility of the Surviving Corporation.
10.7 Public Announcements. Promptly upon execution and delivery of
this Agreement, SAGC and LVDG shall issue a joint press release in such form
as they shall mutually agree. Thereafter, and prior to the consummation of
the Merger or the termination of this Agreement, none of the parties hereto
shall, except as mutually agreed by SAGC and LVDG, or except as may be
required by law or applicable regulatory authority (including, without
limitation, the rules applicable to NASDAQ listed companies), issue any
reports, releases, announcements or other statements to the public relating to
the transactions contemplated hereby.
10.8 Brokers and Finders. LVDG and SAGC each represent and warrant to
the other that no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission based on arrangements made by
or on behalf of either, other than fees payable to Quist Financial, Inc. for
services rendered to LVDG and SAGC in connection with its valuation opinion.
10.9 Further Agreements. The parties acknowledge and agree that if,
following any breach of any of the representations and warranties of the
parties set forth in this Agreement, the existence of which is disclosed in
writing signed by the disclosing party and submitted to the non-breaching
party prior to the Effective Time, and the parties thereafter nevertheless
proceed to consummate the transactions contemplated hereby, it shall be
conclusively presumed, in the absence of written agreement of the parties to
the contrary, that the breach so disclosed has been waived by the non-
breaching party and no party shall be liable therefor in damages, whether
pursuant to this Agreement or otherwise.
10.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.11 Entire Agreement. This Agreement, and the Schedules, certificates
and other instruments and documents delivered pursuant hereto, together with
the other agreements referred to herein and to be entered into pursuant
hereto, embody the entire agreement of the parties hereto in respect of, and
there are no other agreements or understandings, written or oral, among the
parties relating to, the subject matter hereof. This Agreement supersedes all
prior agreements and understandings, written or oral, between the parties with
respect to such subject matter.
10.12 Governing Law. The parties hereby agree that this Agreement, and
the respective rights, duties and obligations of the parties hereunder, shall
be governed by and construed in accordance with the laws of the State of
Nevada, without giving effect to principles of conflicts of law thereunder,
except for the provisions of Article 1 hereto setting forth the provisions for
consummating, and the effects of, the Merger, which shall be governed by and
construed in accordance with the Colorado Act to the extent that the Colorado
Act is applicable by its terms. Each of the parties hereby (i) irrevocably
consents and agrees that any legal or equitable action or proceeding arising
under or in connection with this Agreement shall be brought exclusively in the
Court of the State of Nevada or any federal district court located in Nevada
and any court to which an appeal may be taken in any such litigation, and (ii)
by execution and delivery of this Agreement, irrevocably submits to and
accepts, with respect to any such action or proceeding, for itself and in
respect of its properties and assets, generally and unconditionally, the
jurisdiction of the aforesaid courts, and irrevocably waives any and all
rights such party may now hereafter have to object to such jurisdiction.
10.13 Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of
or to affect the meaning or interpretation of this Agreement.
10.14 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event this Agreement were not to be performed in
accordance with the terms hereof and that the parties shall be entitled to
specific performance of the terms hereof in addition to any other remedies at
law or equity.
IN WITNESS WHEREOF, SAGC and LVDG have caused this Agreement to be duly
executed and delivered as of the date first above written.
SAINT ANDREWS GOLF LAS VEGAS DISCOUNT GOLF & TENNIS,
CORPORATION INC.
By /s/ Ronald S. Boreta By /s/ Vaso Boreta
Ronald S. Boreta, President Vaso Boreta, President
<PAGE>
SCHEDULE 1.4
LIST OF DIRECTORS OF SURVIVING CORPORATION
Vaso Boreta
Ronald Boreta
Robert R. Rosburg
William Kilmer
Motoharu Iue
<PAGE>
SCHEDULE 1.5
LIST OF OFFICERS OF SURVIVING CORPORATION
Vaso Boreta - Chairman of the Board
Ronald S. Boreta - President, Chief Executive Officer, Treasurer and Secretary
Kevin B. Donovan - Vice President of New Business Development
<PAGE>
SCHEDULE 3.1
LIST OF LVDG SUBSIDIARIES
1. Saint Andrews Golf Corporation
2. Las Vegas Discount Golf & Tennis Rainbow, Inc.
3. Las Vegas Discount Golf & Tennis Development Corp.
4. All-American SportPark, Inc.
5. All-American Golf, LLC
<PAGE>
SCHEDULE 3.2
LVDG - AUTHORIZATIONS REQUIRED
None
<PAGE>
SCHEDULE 3.3
LVDG - SCHEDULE OF OUTSTANDING OPTIONS,
WARRANTS AND OTHER RIGHTS
Number of Number
Shares Exercise of Options
Under Option Price Status Outstanding
------------ -------- ------- -----------
Incentive Options Granted July 28, 1994:
Brent W. Bogden 10,000 $0.80 Expired
John F. Singleton, Sr. 10,000 $0.80 Expired
Rogert W. Williamson 10,000 $0.80 Expired
John Singleton III 5,000 $0.80 * 5,000
Marlena A. Hill 5,000 $0.80 * 5,000
Richard J. Corby, Jr. 5,000 $0.80 Expired
Paula McCormick 5,000 $0.80 Expired
Kevin Donovan 10,000 $0.80 * 10,000
Tom Rojas 10,000 $0.80 Expired
Ronald S. Boreta 138,000 $0.80 * 138,000
TOTAL 208,000
Non-Qualified Options Granted July 28, 1994:
John Boreta 130,000 $0.80 * 130,000
Theodore V. Abbruzzese 10,000 $0.80 * 10,000
Ronald S. Boreta 143,000 $0.80 * 143,000
TOTAL 283,000
Incentive Options Granted January 27, 1995:
Wayne Abraham 10,000 $1.625 Expired
Incentive Options Granted July 5, 1995:
Robert Finley 1,000 $1.35 ** 1,000
_________________________
* Exercisable until 7/28/99
**Exercisable until 7/5/00
<PAGE>
SCHEDULE 3.4
LVDG - CHANGES IN FINANCIAL CONDITION
Ron Boreta has converted the 512,799 shares of preferred stock he owned into
512,799 shares of LVDG common stock.
<PAGE>
SCHEDULE 3.5
LVDG - UNDISCLOSED LIABILITIES
None
<PAGE>
SCHEDULE 3.7
LVDG - TAX MATTERS
None
<PAGE>
SCHEDULE 3.8
LVDG - REAL PROPERTY
None
<PAGE>
SCHEDULE 3.9
LVDG - FACILITIES
LVDG leases approximately 15,500 square feet of warehouse space and
approximately 6,000 square feet of office space at 5325 South Valley View
Boulevard, Suite 10, Las Vegas, Nevada, at an aggregate monthly rent of
approximately $13,700 from Vaso Boreta. The rent is adjustable annually based
on increases in the consumer price index and the lease expires January 31,
2005. Beginning July 1, 1996, SAGC was allocated 67% of the rent and LVDG was
allocated 33% of the rent. In February 1997, LVDG subleased a majority of the
warehouse space and approximately one-half of the office space to the
purchaser in the asset sale.
LVDG has a retail store at 2200 Rainbow Boulevard South in Las Vegas,
Nevada. The store is located in leased space in a small shopping center in a
growing area of Las Vegas. The space covers 5,600 square feet of space, and
is leased from an unaffiliated party for $7,000 per month plus cost of living
adjustments, real estate taxes and other expenses. The lease expires in
August 2000.
SAGC and a subsidiary have entered into leases for 65 acres of land in
Las Vegas, Nevada. The leases are described in Schedule 4.9.
<PAGE>
SCHEDULE 3.11
LVDG - INSURANCE POLICIES
1. LVDG is one of the insured parties under an umbrella insurance policy with
Travelers Insurance which covers the corporate offices in addition to LVDG's
Rainbow store and Voss Boreta's store on Paradise.
<PAGE>
SCHEDULE 3.12
LVDG - AGREEMENTS
1. Lease Agreement with Vaso Boreta, as amended
2. Employment Agreement with Vaso Boreta, as amended
3. License Agreement with Vaso Boreta
4. Agreement between the Company and Saint Andrews Golf Corporation
5. License Agreement between the Company and Saint Andrews Golf
Corporation
6. Lease Agreement with A&R Management and Development Co., et al., and
Sublease to Las Vegas Discount Golf & Tennis, Inc.
7. Lease Agreement with Vaso Boreta, as amended, and Assignment to Las
Vegas Discount Golf & Tennis, Inc.
See also Schedule 4.12 for Agreements of SAGC.
<PAGE>
SCHEDULE 3.13
LVDG - INTELLECTUAL PROPERTIES
SAGC has filed an "intent to use" trademark application for "All-American
SportPark" and a related design and Slugger Stadium.
LVDG has 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 trademarks "Las Vegas Discount Golf & Tennis, Inc." and "St.
Andrews" on golf club 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. These were owned by LVDG.
LVDG also has common law trademark and tradename rights in "Saint
Andrews" to the extent that it has used the mark as applied to goods or as a
corporate source identifier.
On August 1, 1994, LVDG entered into a license agreement with SAGC
pursuant to which LVDG granted a license to SAGC to use all trademarks,
tradenames and other commercial symbols that were owned by LVDG and licensed
to franchisees of Saint Andrews. Included in this license were the following:
(a) Las Vegas Discount Golf & Tennis - name (Reg. No. 1,482,753)
(b) Las Vegas Discount Golf & Tennis - logo ( Reg. No. 1,350,039)
(c) St. Andrews - name and design (Reg. No. 1,303,946) and related
applications
(d) Saint Andrews
(e) Birdie Golf
(f) Royal Scot
In February 1997, the rights to the trademarks "Las Vegas Discount Golf
& Tennis" and "Birdie Golf" were assigned to the purchaser in connection with
the sale of the franchise business. 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. Boreta Enterprises, Ltd. has agreed to allow LVDG's retail
store on Rainbow Boulevard in Las Vegas to continue to use the name Las Vegas
Discount Golf & Tennis.
<PAGE>
SCHEDULE 3.14
LVDG - PERMITS
None.
<PAGE>
SCHEDULE 3.15
LVDG - LITIGATION
In 1995, Giant Ride, Inc. filed suit in the District Court of Clark
County, Nevada, against SAGC claiming that SAGC has breached a contract to
purchase a giant slide for Saint Andrews' Las Vegas SportPark. Giant Ride,
Inc. is seeking an unspecified amount of damages. SAGC denies that it had a
contract to purchase such a slide.
<PAGE>
SCHEDULE 3.17
LVDG - TRANSACTIONS WITH AFFILIATES
LVDG owns 66.7% of the outstanding Common Stock of SAGC. SAGC is
registered under Section 12(g) of the Exchange Act.
Effective August 1, 1994, LVDG granted SAGC a license to use all of its
trademarks, trade names and other commercial names and symbols for so long as
such trademarks, trade names and other commercial names and symbols are being
used by SAGC.
Certain facilities used by LVDG and SAGC are leased by the Company from
Vaso Boreta. LVDG leases 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 approximately $13,700.
LVDG owns a retail store in Las Vegas and LVDG and a store owned by Vaso
Boreta share advertising costs in the Las Vegas market and on an equal basis.
See LVDG's Form 10-KSB for additional disclosures concerning
transactions with affiliated persons.
<PAGE>
SCHEDULE 3.20
LVDG - EMPLOYEE BENEFIT PLANS
1989 Stock Option Plan (LVDG)
1991 Stock Option Plan (LVDG)
Employee Retirement and Savings Program (401(k))
Supplemental Retirement Plan
1994 Stock Option Plan (SAGC)
Medical Insurance with Sierra Health
<PAGE>
SCHEDULE 4.1
LIST OF SAGC SUBSIDIARIES
1. All-American SportPark, Inc.
2. All-American Golf, LLC
<PAGE>
SCHEDULE 4.2
SAGC - AUTHORIZATIONS REQUIRED
The Investment Agreement between SAGC and Three Oceans, Inc. dated July
29, 1996, prevents SAGC from effecting a merger without the prior written
consent of Three Oceans, Inc. SAGC has obtained such consent.
The Membership Interest Security Agreement between SAGC and Callaway
Golf Company could be interpreted to require the prior written consent of
Callaway Golf Company to the merger, but it is the opinion of SAGC that such
consent is not required.
<PAGE>
SCHEDULE 4.3
SAGC - SCHEDULE OF OUTSTANDING OPTIONS,
WARRANTS AND OTHER RIGHTS
OPTIONS:
# of
Date Type Shares Expiration
of of Under Exercise Date or
Grant Name of Grantee Option Option Price Status
- ------- ------------------ ------ ------- -------- ----------
8/8/94 Charles Hohl NQSO 40,000 $5.00 8/7/99
7/29/96 Three Oceans, Inc. NQSO 250,000 $3.0625 7/29/01
6/9/97 Vaso Boreta NQSO 110,000 $3.0625 8/7/99
Ronald S. Boreta NQSO 110,000 $3.0625 8/7/99
Glenn Raynes NQSO 10,000 $3.0625 8/7/99
Robert R. Rosburg NQSO 5,000 $3.0625 8/7/99
William Kilmer NQSO 5,000 $3.0625 8/7/99
Kevin Donovan ISO 10,000 $3.0625 4/16/01
Robert Finley ISO 1,000 $3.0625 4/16/01
John Hoover ISO 10,000 $3.0625 4/16/01
Ronald S. Boreta NQSO 125,000 $3.0625 4/16/01
Joel Rubenstein NQSO 10,000 $3.0625 4/16/01
Ted Abbruzzese NQSO 10,000 $3.0625 4/16/01
Ronald S. Boreta NQSO 200,000 $3.0625 4/24/01
Jeff Gordon NQSO $3.0625 4/24/01
Hal Price NQSO 10,000(1) $3.0625 4/24/01
1,000
WARRANTS:
Shares of
Common Stock Exercise
Underlying Price Expiration
Type Warrants Per Share Date
- --------------------------------- ------------ --------- ----------
Class A Warrants 500,000 $6.50 3/16/98
Representatives' Class A Warrants 50,000 $7.80 3/16/98
Representatives' Warrants 100,000 $5.40 12/12/99
PREFERRED STOCK:
Series Shares of Common
Stock Underlying Conversion
Preferred Rate
- ------------------------------------ ---------------- ------------
Series A Convertible Preferred Stock 500,000 One for One
<PAGE>
SCHEDULE 4.4
SAGC - CHANGES IN FINANCIAL CONDITION
None
<PAGE>
SCHEDULE 4.5
SAGC - UNDISCLOSED LIABILITIES
None
<PAGE>
SCHEDULE 4.7
SAGC - TAX MATTERS
None
<PAGE>
SCHEDULE 4.9
SAGC - FACILITIES
SAGC 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 rent is adjustable annually based on increases
in the consumer price index and the lease expires January 31, 2005.
On June 20, 1997, SAGC entered into a lease for approximately 24 acres
of land in Las Vegas, Nevada, on which it 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.
<PAGE>
SCHEDULE 4.11
SAGC - INSURANCE POLICIES
1. SAGC is one of the insured parties under an umbrella policy with
Travelers Insurance which covers the corporate offices in addition to LVDG's
Rainbow store and Voss Boreta's golf store on Paradise. The policy covers
loss from fire and other causes and includes liability insurance.
2. SAGC pays an annual bond for the State Industrial Insurance system
for workmen's compensation.
3. SAGC has insurance on its vehicles.
<PAGE>
SCHEDULE 4.12
SAGC - AGREEMENTS
1. Employment Agreement with Ronald S. Boreta.
2. Employment Agreement with Kevin Donovan.
3. Lease Agreement with A&R Management and Development Co., et al., and
Sublease to Las Vegas Discount Golf & Tennis, Inc.
4. Lease Agreement with Vaso Boreta, as amended, and Assignment to Las
Vegas Discount Golf & Tennis, Inc.
5. Letter Agreement with Oracle One Partners, Inc.
6. Agreement with Major League Baseball Properties, Inc.
7. License Agreement with National Association for Stock Car Auto
Racing, Inc., dated August 1, 1995
8. Concept Development and Trademark Agreement with Callaway Golf
Company dated May 23, 1995
9. Investment Agreement with Three Oceans, Inc.
10. Indenture of Lease Agreement between Urban Land of Nevada and
All-American SportPark, Inc.
11. Indenture of Lease between Urban Land of Nevada and All-American Golf
Center, LLC
12. Operating Agreement for All-American Golf, LLC, a limited liability
company
13. Agreement dated September 30, 1997 with Boreta Enterprises, Ltd.
14. Sponsorship Agreement with Pepsi-Cola Company dated December 4, 1997.
<PAGE>
SCHEDULE 4.13
SAGC - INTELLECTUAL PROPERTIES
SAGC has filed an "intent to use" trademark application for "All-American
SportPark" and a related design and "Slugger Stadium". LVDG has
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.
On August 1, 1994, LVDG entered into a license agreement with SAGC
pursuant to which LVDG granted a license to SAGC to use all trademarks,
tradenames and other commercial symbols that were owned by LVDG and licensed
to franchisees of Saint Andrews. Included in this license were the following:
(a)Las Vegas Discount Golf & Tennis - name (Reg. No. 1,482,753)
(b)Las Vegas Discount Golf & Tennis - logo ( Reg. No. 1,350,039)
(c)St. Andrews - name and design (Reg. No. 1,303,946) and related applications
(d)Saint Andrews
(e)Birdie Golf
(f)Royal Scot
In February 1997, the rights to the trademarks "Las Vegas Discount Golf
& Tennis" and "Birdie Golf" were assigned to the purchaser in connection with
the sale of the franchise business.
During September 1997, SAGC 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 no longer intends to engage in the business of selling golf
equipment and apparel.
<PAGE>
SCHEDULE 4.14
SAGC - PERMITS
Below are listed the steps completed by SAGC related to the All-American
SportPark in Las Vegas.
TECHNICAL STUDIES
Traffic Study Completed-September 3, 1996
Hydrology Study Completed-February 7, 1997
Geo-Technical Study Completed-October 18, 1996
Environmental Impact Study Not required
ZONING AND CONDITIONAL USE PERMIT
APPLICATION AND APPROVALS
Clark County Department of Comprehensive Planning
Zone Charge Application Completed-August 14, 1996
Condition Use Permit Approved, Conditional Approval-
January 17, 1997
Code Variance Application Completed-February 7, 1997
Vacation of Public Right of Way Approved, Conditional Approval-
January 17, 1997
FAA-DOA PERMIT APPLICATIONS AND APPROVALS
FAA Notice of Proposed Construction Completed-December 9, 1997
or Alteration Approved, Conditional
Approval-February 7, 1997
Clark County Department of Aviation Completed-February 8, 1997
McCarren Airport (Directors Permit) Approved, Conditional
Approval-February 18, 1997
NEVADA DEPARTMENT OF TRANSPORTATION
(Rights of Way, Dedications, Easements) Applications and Approvals
Abandonment of State Right of Way Submitted-January 23, 1997
Approved, Conditional Approval-
January 17, 1997
Recorded-May 21, 1996
<PAGE>
SCHEDULE 4.14
SAGC - PERMITS
(Continued)
PUBLIC WORKS
Off-Site Improvements Agreement Agreement-Dated February 21, 1997
Improvement Plans Submitted-September 21, 1996 HTE
#96-271-27136
Approved-Pending Review by Clark
County Building Department
LAS VEGAS VALLEY WATER DISTRICT
Application for Water Plan Review Accepted for review-February 10, 1997
<PAGE>
SCHEDULE 4.15
SAGC - LITIGATION
In 1995, Giant Ride, Inc. filed suit in the District Court of Clark
County, Nevada, against SAGC claiming that SAGC has breached a contract to
purchase a giant slide for Saint Andrews' Las Vegas SportPark. Giant Ride,
Inc. is seeking an unspecified amount of damages. SAGC denies that it had a
contract to purchase such a slide.
<PAGE>
SCHEDULE 4.17
SAGC - TRANSACTIONS WITH AFFILIATES
LVDG owns 66.7% of SAGC's outstanding common stock. Vaso Boreta, SAGC's
Chairman of the Board, is an Officer, Director and principal shareholder of
LVDG. Ronald S. Boreta, President and a Director of SAGC, is a Director and
principal shareholder of LVDG. Robert S. Rosburg and William Kilmer,
Directors of SAGC, 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.
SAGC has extensive transactions with LVDG, LVDG's other subsidiaries,
and Voss Boreta's Las Vegas store.
SAGC 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. The space is leased from Voss Boreta and the monthly rent
is $2,944.
During September 1997, SAGC agreed to sell its right to the St. Andrews
name to Boreta Enterprises, Ltd. for a $20,000 two-year promissory note since
SAGC no longer intends to engage in the business of selling golf equipment or
apparel.
See SAGC's Form 10-KSB for additional disclosures concerning
transactions with affiliated persons.
<PAGE>
SCHEDULE 4.20
SAGC - EMPLOYEE BENEFIT PLANS
Employee Retirement and Savings Program (401(k))
Supplemental Retirement Plan
1994 Stock Option Plan
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.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Las Vegas, Nevada
January 26, 1998
