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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
Commission File Number: 0-24970
SAINT ANDREWS GOLF CORPORATION
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(Exact name of small business issuer as specified in its charter)
Nevada 88-0203976
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(State of other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
5325 South Valley View Boulevard, Suite 4, Las Vegas, Nevada 89118
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(Address of principal executive offices including zip code)
(702) 798-7777
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(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the preceding 12 months (or for such
shorter period that the Registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No___
As of November 13, 1998, 3,000,000 shares of common stock were outstanding.
Transitional Small Business Disclosure Format (check one): Yes___ No X
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SAINT ANDREWS GOLF CORPORATION
FORM 10-QSB
INDEX
Page No.
Part I: Financial Information
Item 1. Financial Information:
Unaudited Condensed Consolidated Balance Sheets 3
Unaudited Condensed Consolidated Statements of
Operations 5
Unaudited Condensed Consolidated Statement of
Cash Flows 7
Notes to Unaudited Condensed Consolidated
Financial Statements 9
Item 2. Management's Discussion and Analysis or Plans
of Operations 16
Part II: Other Information
Item 1. Legal Proceedings 20
Item 2. Changes in Securities 20
Item 3. Defaults Upon Senior Securities 20
Item 4. Submission of Matters to a Vote of Security
Holders 20
Item 5. Other Information 20
Item 6. Exhibits and Reports on Form 8-K 20
Signatures 21
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SAINT ANDREWS GOLF CORPORATION
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
September 30, December 31,
1998 1997
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(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 43,700 $ 130,500
Accounts receivable 2,466,000 9,300
Inventories 111,700 -
Due from Affiliated Store 14,500 69,100
Due from officer - 3,000
Due from related party - 565,000
Prepaid expenses and other 106,900 2,800
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Total current assets 2,742,800 779,700
Leasehold improvements and equipment, net 135,000 140,800
Note receivable - related party 20,000 20,000
Deposit for land lease 282,400 433,700
Project development costs 22,886,800 7,850,100
Other assets 60,700 29,300
Net assets of discontinued operations - 3,250,000
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Total assets $26,127,700 $12,503,600
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The accompanying notes are an integral part of these condensed consolidated
financial statements.
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SAINT ANDREWS GOLF CORPORATION
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30, December 31,
1998 1997
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(Unaudited)
CURRENT LIABILITIES:
Bank line of credit $ - $ 668,400
Current portion of notes payable 420,000 500,000
Current portion of obligations under
capital leases 7,100 7,100
Accounts payable and accrued expenses 1,960,400 1,204,800
Due to Affiliated Store 15,200 12,200
Due to related entities 994,900 371,100
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Total current liabilities 3,397,600 2,763,600
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Note payable to shareholder
and related entities 1,968,700 600,000
Long-term portion of notes payable 13,080,000 -
Obligation under capital leases, net
of current portion 20,800 26,000
Deferred income 519,200 516,700
Minority Interest - 650,000
SHAREHOLDERS' 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 at September 30, 1998 and
December 31, 1997 4,740,000 4,740,000
Options issued in connection with Series A
Convertible Preferred Stock to purchase
250,000 shares of Common stock 260,000 260,000
Common stock, $.001 par value, 10,000,000
shares authorized, 3,000,000 shares
issued and outstanding at September 30, 1998
and December 31, 1997 3,000 3,000
Additional paid-in-capital 3,333,300 3,333,300
Common stock purchase warrants, Class A,
1,000,000 warrants authorized and outstanding
at September 30, 1998 and December 31, 1997 187,500 187,500
Accumulated deficit (1,382,400) (576,500)
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Total shareholders' equity 7,141,400 7,947,300
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Total Liabilities and Shareholders' Equity $26,127,700 $12,503,600
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The accompanying notes are an integral part of these condensed consolidated
financial statements.
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SAINT ANDREWS GOLF CORPORATION
UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
For the Three Months
Ended September 30,
1998 1997
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(Unaudited) (Unaudited)
REVENUES:
Royalties $ 6,300 $ 6,000
Other 200 1,000
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Total revenues 6,500 7,000
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OPERATING EXPENSES:
Selling, general and administrative 685,100 177,000
SportPark development cost - -
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Total operating expenses 685,100 177,000
INTEREST EXPENSE (INCOME), net 19,000 (45,000)
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LOSS FROM CONTINUING OPERATIONS (697,600) (125,000)
NET INCOME (LOSS) (697,600) $ (125,000)
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EARNINGS PER SHARE:
Basic and Diluted earnings (loss)
from continuing operations
and net income $ (.23) $ (.04)
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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SAINT ANDREWS GOLF CORPORATION
UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
For the Nine Months
Ended September 30,
1998 1997
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(Unaudited) (Unaudited)
REVENUES:
Royalties 18,800 18,000
Other 18,200 5,000
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Total revenues 37,000 23,000
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OPERATING EXPENSES:
Selling, general and administrative 2,157,600 527,000
SportPark development costs - 152,000
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Total operating expenses 2,157,600 679,000
INTEREST EXPENSE (INCOME), net 19,000 (208,000)
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LOSS FROM CONTINUING OPERATIONS (2,139,600) (448,000)
DISCONTINUED OPERATIONS:
Loss from operations of
All-American Golf, LLC, net of
minority interest share of $76,000 (305,200) -
Loss from operations of discontinued
franchise operations - (41,000)
Gain on disposal of investment in
All-American Golf, LLC 1,638,900 -
Gain on disposal of franchise operations
(less applicable income taxes of
$450,000) - 2,162,000
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Total discontinued operations 1,333,700 2,121,000
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NET INCOME (LOSS) $ (805,900) $ 1,673,000
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EARNINGS PER SHARE:
Basic and Diluted earnings (loss)
from continuing operations $ (.71) $ (.15)
Basic and Diluted earnings from
discontinued operations .44 .71
Basic and Diluted earnings (loss)
from net income (loss) (.27) .70
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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SAINT ANDREWS GOLF CORPORATION
UNAUDITED CONDENSED CONSOLIDATED
STATEMENT OF CASH FLOWS
For the Nine Months
Ended September 30,
1998 1997
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(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (805,900) $ 1,673,000
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 163,300 6,000
Gain on sale of franchise
operations - (2,612,000)
Gain on sale of investment in the
Callaway Golf Center (1,638,900) -
Increase (decrease) in:
Account receivable (2,456,700) 271,000
Other receivables - 443,000
Inventories (111,700) -
Prepaid expenses and other assets (135,500) 4,000
Pre-opening expenses - (386,000)
Accounts payable and accrued expenses 755,600 478,000
Due from officers 3,000 -
Increase (decrease) in deferred income 2,500 (71,000)
Increase in income tax payable - 113,000
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Net cash used by operating
activities (4,224,300) (81,000)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Project development costs (15,036,700) (11,554,000)
Purchases of leasehold improvements
and equipment (17,600) (136,000)
Proceeds from sale of franchise
operations - 2,688,000
Proceeds from sale of
All-American Golf, LLC 1,250,000 -
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Net cash used in investing activities (13,804,300) (9,002,000)
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The accompanying notes are an integral part of these condensed consolidated
financial statements.
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SAINT ANDREWS GOLF CORPORATION
UNAUDITED CONDENSED CONSOLIDATED
STATEMENT OF CASH FLOWS
(CONTINUED)
For the Nine Months
Ended September 30,
1998 1997
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(Unaudited) (Unaudited)
CASH FLOWS FROM FINANCING ACTIVITIES:
(Increase) decrease to amounts due
to/from Affiliate Store and
Related Entities 1,246,400 -
Payments on bank line of credit (668,400) -
Proceeds from notes payable 16,500,000 3,938,000
Payments on note payable (500,000) -
Proceeds from note payable to
shareholder 1,050,000 -
Payments on note payable to shareholder (400,000) -
Proceeds from notes payable to related ent. 805,000 -
Payments on notes payable to related ent. (86,000) -
Payments on capital lease obligations (5,200) -
Proceeds from minority interest in
Callaway Golf Center - 750,000
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Net cash provided by financing activities 17,941,800 4,688,000
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NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (86,800) (4,395,000)
CASH AND CASH EQUIVALENTS-
Beginning of period 130,500 5,818,000
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CASH AND CASH EQUIVALENTS - End of period $ 43,700 $ 1,423,000
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For the nine Months Ended Sept. 30,
1998 1997
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash payments made for interest $ 262,898 $ -
SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
Forgiveness of note payable $ 3,000,000 $ -
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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SAINT ANDREWS GOLF CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
1. CONDENSED FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated financial statements include
the accounts of Saint Andrews Golf Corporation ("SAGC"), consolidated with its
subsidiary, All-American SportPark Inc., a Nevada corporation, and its
subsidiary All-American Golf, LLC, a California limited liability Company,
through the date of its disposition (See Note 2) (collectively the "Company").
All significant inter-company accounts and transactions have been eliminated.
The accompanying condensed consolidated financial statements have been
prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission relating to interim financial statements.
Accordingly, certain information and footnote disclosures normally included in
the financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. In the opinion of
management, all adjustments necessary to present fairly, in all material
respects, the financial position of the Company as of September 30, 1998 and
December 31, 1997, and the results of its operations and cash flows for the
three and nine months ended September 30, 1998 and 1997, respectively, have
been made.
Certain reclassifications have been made to previously reported amounts to
conform them to current classifications.
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.
These condensed consolidated financial statements should be read in
conjunction with the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1997.
The Company's current operations consist of the development and operation of
sport-oriented theme parks under the name "All-American SportPark". The sport
and entertainment activities are primarily featured in the SportPark's four
major attractions: ALL-AMERICAN SPORTPARK PAVILION, MAJOR LEAGUE BASEBALL
SLUGGER STADIUM, NASCAR SPEEDPARK AND ALLSPORT ARENA.
2. SALE OF ASSETS AND DISCONTINUED OPERATIONS
On February 26, 1997, SAGC and Las Vegas Discount Golf & Tennis, Inc. ("LVDG")
(the majority shareholder of 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". 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 $2.75 million was allocated to SAGC.
This transaction resulted in the disposal of the Company's franchise business,
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and the assignment of all franchise rights, trade names, and trade marks
associated with the business. The agreement also contains certain provisions
not to compete in the franchised retail golf equipment business. Accordingly,
the sale of all assets, and assumption of liabilities and rights related to
these businesses have been presented as "Discontinued Operations" in the
accompanying condensed consolidated statement of operations.
During 1997, SAGC and Callaway Golf Company ("Callaway") formed All-American
Golf, LLC (the "LLC"), to construct, manage and operate the "Callaway Golf
Center", a premier golf facility at the site of the All-American SportPark.
SAGC contributed the value of expenses incurred relating to the design and
construction of the golf center plus cash in the combined amount of $3 million
for 80% of the membership units. Callaway contributed equity capital of
$750,000 for the remaining 20% of the membership units and loaned the LLC
$5.25 million (the "Callaway loan").
The Callaway loan bore interest at a rate of 10% per annum with monthly
interest payments commencing 60 days after the opening of the golf center on
October 1, 1997. All-American Golf was unable to make the scheduled interest
payments for 1997 and 1998. Accordingly, on March 18, 1998, All-American Golf
entered into a forbearance agreement with Callaway which cured the default and
established terms to repay the amounts in arrears.
On May 5, 1998, SAGC sold its 80% interest in All-American Golf to Callaway in
exchange for $1.5 million in cash and the cancellation of a $3 million
collateralized note evidencing amounts loaned to the Company in March 1998 by
Callaway, and related accrued interest thereon. Of the consideration,
$500,000 was withheld by Callaway until it has secured all rights necessary to
operate the Callaway Golf Center of which all was collected by September 30,
1998. In connection with the sale of its membership units, SAGC resigned as
manager of the LLC and agreed not to compete with the Callaway Golf Center in
Clark County, Nevada for a period of two years. The agreement also provides
for a buy back option which enables the Company to repurchase its 80% equity
ownership for a period of 2 years on essentially the same financial terms that
it sold its interest to the Callaway Golf Company.
Results of operations of All-American Golf through its disposal date have been
presented as Discontinued Operations in the unaudited condensed consolidated
statements of operations and were as follows for the six months ended June 30,
1998.
Six months
Ended June 30, 1998
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Revenues $ 724,900
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Expenses:
Cost of revenue 716,400
Depreciation and amortization 169,300
Amortization of preopening costs 32,800
Interest expense 187,900
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Total expenses 1,106,400
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Net loss before minority interest (381,500)
Minority interest in net loss 76,300
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Net loss $(305,200)
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Assets and liabilities of All-American Golf consisted of the following on
December 31, 1997:
CURRENT ASSETS:
Cash and cash equivalents $ 45,500
Accounts receivable, net 57,800
Due from Affiliated Store 33,500
Prepaid expenses and other 27,900
Preopening costs 99,900
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Total current assets 264,600
Leasehold improvements and equipment,
net 9,840,700
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Total assets 10,105,300
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CURRENT LIABILITIES:
Current portion of obligations under 65,100
capital leases
Accounts payable and accrued expenses 769,100
Due to Affiliated Store 21,000
Due to Related Entities 564,900
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Total current liabilities 1,420,100
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LONG TERM LIABILITIES:
Obligation under capital leases, net 185,200
of current portion
Note payable 5,250,000
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Total long term liabilities 5,435,200
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Total liabilities 6,855,300
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Net assets of discontinued operations $3,250,000
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The Company recorded a gain of $1,638,900 on the disposal of its 80% interest
in the LLC.
3. PROPOSED MERGER WITH LAS VEGAS DISCOUNT GOLF & TENNIS, INC.
On January 20, 1998, the officers of SAGC and LVDG executed a merger agreement
pursuant to which SAGC would merge with and into LVDG which, if it occurred,
is intended to constitute a tax-free plan of reorganization. As a result, the
separate corporate existence of SAGC could cease and LVDG would change its
name to All-American SportPark, Inc. to reflect the primary business of the
surviving corporation.
At the effective date of the potential merger each share of SAGC's common
stock issued and outstanding immediately prior to the effective date (except
for shares of SAGC's common stock held by LVDG) are planned to be converted
into 2.4 shares of LVDG common stock. Each share of SAGC's Series A Preferred
Stock would be converted into 2.4 shares of LVDG Series B Preferred Stock, and
each share of SAGC's common stock held by LVDG immediately prior to the
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effective date and all rights in respect thereof would be canceled. This
could result in the current shareholders of SAGC (other than LVDG) owning
approximately 38.2% of the surviving corporation, assuming there are no
dissenting shareholders.
At the effective date each option or warrant granted by SAGC to purchase
shares of SAGC's common stock which is outstanding and unexercised immediately
prior to the effective date would 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 similar to that previously discussed (2.4 to 1). The
exercise price per share of LVDG common stock under the new option or warrant
would be equal to the quotient of the exercise price per share of SAGC's
common stock under the original option or warrant divided by the exchange
ratio.
In October 1998, the proposed merger was canceled. See "Subsequent Event".
4. GOING CONCERN MATTERS
The accompanying condensed consolidated financial statements have been
prepared on a going concern basis, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business.
As shown in the accompanying financial statements the Company incurred
operating losses of $2,139,600 and $448,000 for the nine months ended
September 30, 1998 and 1997, respectively. Additionally, as of September 30,
1998 the Company had negative working capital of approximately $654,700. The
Company has entered into several short-term financing transactions as noted
below in order to fund on-going operating cash requirements as well as the
continuing construction of the All-American SportPark. Additionally, the
Company sold its golf distribution business to an unrelated third party on
February 26, 1997 and realized a gain of $2,162,000 on that sale. The Company
also sold its 80% ownership interest in All-American Golf to the Callaway Golf
Company on May 5, 1998 and realized a gain on that sale of $1,638,900. Cash
proceeds from these transactions increased the Company's working capital which
financed operations and were invested in the All-American SportPark.
On January 26, April 2, April 23, May 28, and June 12, 1998 the Company's
chairman loaned SAGC $200,000, $400,000, $200,000, $150,000 and $100,000
respectively for a total of $1,050,000. The loans are due in 2001 and bear
interest at a rate of 10% per annum. The loan balance from prior year loans
from the chairman was $600,000. As of September 30, 1998, loans to related
entities totaled $718,700.
On February 5, 1998 and May 14, 1998 SAGC secured a $5.0 million short-term
bank loan with Nevada State Bank bearing interest at a rate of 10% per annum.
This loan required interest only payments, which commenced on March 10, 1998,
with the full loan plus all unpaid interest due August 10, 1998.
On May 7, 1998, the Company received a Bridge Mortgage Loan Commitment Letter
(the "Commitment Letter") from First Connecticut Consulting Group, Inc. (the
"Lender") pursuant to which the Lender would loan up to $18 million to the
Company for one year. The loan would bear interest at the rate of 12% per
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annum and be secured by a first mortgage on all the All-American SportPark in
Las Vegas and required a commitment fee of $180,000. On June 9, 1998, the
Company was informed by the Lender that they were unable to meet their stated
commitment. The Company is currently evaluating its options for obtaining a
refund of the commitment fee and other expenses paid to First Connecticut
Consulting Group, Inc. as well as recovery of damages to the Company.
On September 15, 1998 the Company completed a $13,500,000 secured loan with
Nevada State Bank in conjunction with a $2,500,000 equity infusion by the
Company's parent, Las Vegas Discount Golf & Tennis (See "Subsequent Event").
The loan is for 15 years and bears interest in 1998 of 9.38% for the first
year and 4% above LIBOR thereafter. The loan is secured by all the assets of
the Company and personal guarantees of the Company President and CEO, and its
Chairman. Approximately $2,100,000 of the Accounts Receivable of $2,466,000
at September 30, 1998 was monies owed to the Company by the bank per terms of
the loan agreement.
5. EARNINGS PER SHARE AND STOCK OPTIONS
Basic loss per share from continuing operations, discontinued operations and
basic net income (loss) per share for the three and nine months ended
September 30, 1998 and 1997, are computed by dividing the loss from continuing
operations, the gain on discontinued operations and net income (loss), by the
weighted average number of shares of common stock outstanding during the
respective periods presented. As required by generally accepted accounting
principles, and because the Company has incurred losses from continuing
operations for all periods presented, there is no effect of potentially
issuable dilutive securities. Accordingly, diluted loss per share from
continuing operations, diluted discontinued operations and diluted net income
(loss) per share is equal to basic loss per share from continuing operations,
basic discontinued operations and basic net income (loss) per share,
respectively, for all periods presented. The weighted average number of
shares of common stock outstanding used in the earnings per share calculation
for all periods presented is 3,000,000 shares.
6. RELATED PARTY TRANSACTIONS
The Company has extensive transactions and relationships with LVDG and
subsidiaries ("Related Entities"), the chairman and principal shareholder of
LVDG, and the retail store owned by the Chairman of LVDG (the "Affiliated
Store") prior to February 26, 1997. 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. The
Affiliated Store operates in Las Vegas, Nevada and is not a franchise of SAGC.
As a result, during the period up to February 26, 1997 prior to the sale of
the Company's franchise business, this store paid no royalties to SAGC but
purchased merchandise at the same cost as SAGC. During that period, The
Affiliated Store also benefited from the SAGC's activities, including any
local and national advertising conducted by the SAGC. In 1997 and 1998 the
chairman of the board has lent the company $1,968,700.
7. PROJECT DEVELOPMENT COSTS
SAGC is currently engaged in the final phase of construction related to the
All-American SportPark. The All-American SportPark in Las Vegas, Nevada is
currently under construction and is expected to be completed in October 1998
utilizing proceeds from the $13.5 million bank loan and the $2.5 million
equity infusion (See "Subsequent Event"). Capitalized project development
costs represent the continuing construction costs of the All-American
SportPark and totaled approximately $22,886,800 as of September 30, 1998.
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These costs consist primarily of $20,052,900 in buildings and land
improvements, and $2,225,600 in furniture and equipment and other$608,300 in
capitalized interest costs during construction. Additional costs relating to
the project have been expensed and include a loan deposit of $339,000, and
$784,000 and $1,200,000 of pre-opening development expensed in 1997 and the
first nine months of 1998, respectively.
8. LEASES
SAGC's lease for approximately 23 acres of undeveloped land on which the All-
American SportPark is being constructed became effective on February 1, 1998.
The base rentals on the lease is $18,910 per month and contains contingent
rentals based on a percentage of gross revenues in the park. The lease term
is 15 years with two five-year renewal options.
9. 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 compensation.
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. This agreement was amended during 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 license payments
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 to MLB a royalty based
on the revenue from the batting cages. of the greater of (I) six and one-
quarter percent (6.25%) 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, SAGC 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. Mr.
Gordon is to be paid $25,000 per SpeedPark opening per year with a minimum
guarantee over the life of the agreement. Under the agreement, he is to
receive 1% of the net profits of each SpeedPark 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. On November 20, 1997, the agreement with Mr. Gordon was amended to,
among other things, reduce the amount of services to be provided by him, to
make his services non-exclusive to the Company, to limit his services to the
Las Vegas SportPark and to set his base fee at $25,000 per year provide for an
annual fee.
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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 standalone 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 agreement
provides that the exclusive rights to Las Vegas are subject to the condition
that the Las Vegas SpeedPark is opened by March 1, 1998, and that the
exclusive rights to Southern California are subject to the condition that the
Southern California SpeedPark is opened by March 1, 1999, the license for that
site would 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. NASCAR has verbally agreed to extend the
March 1, 1998, deadline for the Las Vegas SportPark, but no new deadline has
yet been determined.
In January 1997, SAGC entered into an agreement with the Pepsi-Cola Company
("Pepsi") concerning an exclusive sponsorship agreement. Under the 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 totaling $1,250,000 beginning when the SportPark opens.
SAGC received $250,000 as the first payment on this contract on December 31,
1997. The remaining amounts are due annually over a four year period starting
with the commencement of operations of the All-American SportPark. The first
additional payment of $250,000 is due in November 1998. The rights granted to
Pepsi are 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 multipurpose arena
the AllSport Arena. In addition, Pepsi will provide the equipment needed to
dispense its products at the SportPark. 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.
In September 1997, the Company entered into a lease and concession agreement
with Sportservice Corporation ("Sportservice") which provides SportService
with the exclusive right to prepare and sell all food, beverages (alcoholic
and non-alcoholic), candy and other refreshments throughout the All-American
SportPark, including the Callaway Golf Center, during the ten year term of the
agreement. Sportservice has agreed to pay rent based on a percentage of gross
sales depending upon the level of sales, whether the receipts are from
concession sales, the Arena restaurant, the Clubhouse, vending machines,
mobile stands, or catering sales. Rents from the Callaway Golf Center will be
paid to All-American Golf LLC and all other rents will be paid to the Company.
SportService is expected to invest approximately $3.85 million into the
concessions and operations which includes all food service leasehold
improvements. The agreement also provides Sportservice with a right of first
refusal for future parks to be built by SAGC 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 do not exceed the estimate of $3.85 million. The agreement has
a number of other terms and conditions including a requirement that SAGC and
the LLC must develop and construct the SportPark in accordance with certain
specifications provided to Sportservice, and provide all necessary building
structure and shell components. The Company must operate the SportPark on a
year-round, seven days a week basis throughout the term of the agreement.
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In September 1998, the Company entered into a revenue sharing tenant agreement
with NAMCO Cybertainment Inc. to provide arcade, video games and multi-sport
simulation attractions. NAMCO is the world's largest operator of video
arcades. The lease term is for 6 years commencing on the date of opening of
the amusement center.
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.
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.
10. SUBSEQUENT EVENT
On October 19, 1998 the Company's parent Las Vegas Discount Golf and Tennis
purchased 250,000 shares of Series B convertible Preferred Stock for
$2,500,000 at $10 per share. Simultaneously the Company's parent sold
2,303,290 shares of its common stock to ASI Group, LLC for $2,500,000. ASI is
an investment group headed by Andre Agassi and Sunbelt Communications Inc.
Through its investment, the Agassi/Sunbelt Group has become a strategic
partner with the company and plans to utilize its considerable experience in
sports and marketing to assist in the development and expansion of the
All-American SportPark program.
In October 1998 the proposed merger was canceled by the Board of Directors of
both companies because of significant changes in the capital structure of both
companies. These changes included the sale of 2,303,290 shares of common
stock of the LVDG, the sale of 250,000 shares of Series B Convertible
Preferred Stock for $2,500,000 by the Company to its parent, and the
assumption of $13.5 million of secured debt by the Company. The time and
expense of obtaining a new independent valuation report and completing the
shareholder approval process outweighed the perceived benefits of the merger
at this time.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
This Report contains forward-looking statements within the meaning of Section
21E of the Securities Exchange Act of 1934, as amended. Among others, such
forward-looking statements include statements with respect to (I) the
availability to the Company of additional equity and/or debt proceeds on terms
acceptable to the Company and at the times necessary to satisfy capital
expenditure, debt repayment and other requirements, (ii) the availability of
operating cash flow in amounts and at the times anticipated by management,
(iii) the adequacy of budgeted amounts for capital expenditure projects and
the adequacy of the Company's liquidity and capital resources generally, and
(iv) the anticipated time of completion of capital projects.
These forward-looking statements involve important risks and uncertainties,
many of which will be beyond the control of the Company, and which could
significantly affect anticipated future results, both short-term and long-
term. As a result, actual results may differ, in some cases materially, from
those anticipated or contemplated by forward-looking statements in this
Report. In addition to the cautionary statements included in this section and
elsewhere throughout this Report, attention is directed to the cautionary
statements included in the Company's other publicly available reports filed
with the Securities and Exchange Commission under the Securities Exchange Act
of 1934.
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The Company's continuing operations consist solely of the development and
operation of sport-oriented theme parks under the name "All-American
SportPark".
RESULTS OF OPERATIONS
CONTINUING OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1998, COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1997
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses relating to continuing operations consist principally
of Company administrative payroll, All-American SportPark payroll, office
rent, professional fees and other corporate costs. The $508,100 increase in
1998 to $685,100 is attributable to $394,500 of pre-opening development costs
relating to the All-American SportPark.
INTEREST EXPENSE, NET. Net interest expense in 1998 was $147,900 compared to
net interest income of $95,000 in 1997. 1998 net interest expense primarily
represents interest expense on the $5.0 million bank loan obtained in 1998 and
increase in notes to the Company's chairman and majority shareholder. 1997 net
interest income resulted from interest earned on cash balances.
NINE MONTHS ENDED SEPTEMBER 30, 1998, COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1997
REVENUES. Other revenues increased by $13,200 in 1998 from 1997 due primarily
to a refund of prior year sales and use tax refund.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses relating to continuing operations consist principally
of Company administrative payroll, All-American SportPark payroll, financing
costs, office rent, professional fees and other corporate costs. The
$1,630,600 increase in 1998 is attributable to $1,178,100 of pre-opening
development costs relating to the All-American SportPark which were expensed,
and higher legal and financing costs associated with obtaining financing for
the completion of the All-American SportPark.
LIQUIDITY AND CAPITAL RESOURCES
On September 30, 1998 the Company had negative working capital of $654,800
compared to negative working capital of almost $2.0 million at December 31,
1997 and negative working capital of $10.8 million on June 30, 1998. On
September 18, 1998 the Company began to receive proceeds from its $13.5
million bank loan from Nevada State Bank. Monies were mostly employed to:
complete the SportPark, (project development costs which increased from $19.8
million on June 30, 1998 to $22.9 million on September 30, 1998), reduce trade
payables from approximately $5.0 million to $2.0 million; and to pay off
short-term bank loans of $5.0 million and to fund the operating loss.
Total current liabilities of $3.4 million, including $2.0 million of payables
are planned to be primarily serviced from current assets of $2.7 million.
Current assets includes $2.1 million of monies due from the bank loan.
There are no planned major capital expenditures at the SportPark which opened
on a limited basis on October 9, 1998, although there could be minor
investments to upgrade current facilities. Any major capital expenditure at
the SportPark for the near term would require funding from outside sources.
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Since the SportPark is in a start-up mode it is anticipated that it could
experience negative cash flow for the remainder of the year. These cash
deficiencies are intended to be funded from proceeds of the $2.5 million
equity infusion, that occurred October 19, 1998, in addition to various
sponsorship fees and key money from tenants which are scheduled, and tax
refunds and other adjustments due the Company. In addition a portion of near
term obligations due to related and affiliated entities may be partially
extended as required.
During the nine months ended September 30, 1998, operating activities used
approximately $4.2 million cash in comparison to approximately $81,000 used in
the comparable 1997 period.
Cash used in investing activities totaled approximately $13.8 million during
the nine months ended September 30, 1998 as the Company continued construction
of the All-American SportPark with an investment of approximately $15 million.
The investment in the SportPark totaled $11.6 million during the comparable
period in 1997. 1998 proceeds from investing activities included $1.25
million from the sale of All-American Golf. 1997 proceeds for investing
activities included $2.7 million in proceeds from the sale of the Company's
franchise and wholesale business.
Financing activities in 1998 provided cash of approximately $17.9 million.
This resulted from the previously described loans and notes, and proceeds from
the sale of the Callaway Golf Center, offset by the repayment of the $688,400
bank line of credit and $486,300 note payable.
The Company's anticipated sources of working capital are its current cash
balance and future cash flows from operation of the All-American SportPark
which commenced operations on October 9, 1998. The Company has in the past
funded a portion of its cash needs through loans from LVDG, however, any
future loans from LVDG are likely to be limited.
DISCONTINUED OPERATIONS
On February 26, 1997, the Company and LVDG sold certain assets and transferred
certain liabilities to an unrelated buyer. The total consideration received
was approximately $5.3 million of which approximately $2.75 million was
allocated to the Company. Specifically, the Company sold all of its interest
in its franchise business, including its rights under agreements with
franchisees, the right to franchise such stores and the rights to related
trademarks. The buyer also assumed certain trade payables of the Company and
LVDG. The sale of all assets, liabilities and rights related to the franchise
and wholesale businesses have been presented as "Discontinued Operations" in
the accompanying condensed consolidated statements of operations.
During 1997, SAGC and Callaway Golf Company ("Callaway") formed All-American
Golf LLC, a California limited liability company to construct, manage and
operate the "Callaway Golf Center", a premier golf facility at the site of the
All-American SportPark. SAGC contributed the value of expenses incurred
relating to the design and construction of the golf center plus cash in the
combined amount of $3 million for 80% of the membership units. Callaway
contributed equity capital of $750,000 and loaned the LLC $5.25 million for
the remaining 20% of the membership units the "Callaway loan".
The Callaway loan bears interest at a rate of 10% per annum with monthly
interest payments commencing 60 days after the opening of the golf center
(which occurred on October 1, 1997). All-American Golf was unable to make the
interest payments due and, accordingly, on March 18, 1998 entered into a
forbearance agreement with Callaway Golf Company which cured the default and
established terms to repay the amounts in arrears.
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On May 5, 1998, SAGC sold its 80% interest in All-American Golf to Callaway in
exchange for $1.5 million in cash and the cancellation of a $3 million
collateralized note evidencing amounts loaned to the Company in March 1998 by
Callaway, and related accrued interest thereon. Of the consideration,
$500,000 was with held by Callaway until it has secured all rights necessary
to operate the Callaway Golf Center, of which $250,000 was collected by
September 30, 1998. In connection with the sale of its membership units SAGC
resigned as manager of the LLC and agreed not to compete with the Callaway
Golf Center in Clark County, Nevada for a period of two years. The agreement
also provides for a buy back option to the Company which enables it to
repurchase its 80% equity ownership for a period of 2 years on essentially the
same financial terms that it sold its interest to the Callaway Golf Company.
The Company recorded a gain of $1,638,900 on the disposal of its 80% interest
in All-American Golf.
YEAR 2000 COMPLIANCE
The company's accounting system was updated during the first quarter of 1998
and is year 2000 compliant. The Company's All-American SportPark has a number
of computerized systems including a point of sale system. Management has been
advised by the vendors of the various systems that they are all year 2000
compliant.
The company may also be vulnerable to the failure of other companies to be
year 2000 compliant. The company has just recently commenced its assessment
of whether third parties with whom the Company has material relationships are
year 2000 compliant. The company is evaluating its vendors and suppliers to
determine if there would be a material effect on the Company's business if
they do not timely become year 2000 compliant. The Company does not have any
significant customers. The company intends to initiate formal communications
with all of its significant vendors and customers with respect to such
persons' year 2000 compliance programs and status in the fourth quarter of
1998 and the first quarter of 1998. The Company has not yet initiated formal
contingency planning processes to mitigate the risk to the Company if any
vendors or suppliers are not prepared for the year 2000, but the Company
intends to complete this process by June 30, 1999.
Although the Company expects its internal systems to be year 2000 compliant,
the failure of any of its significant vendors or suppliers to correct a
material year 2000 problem could result in an interruption in certain normal
business activities and operations. Due to the general uncertainty inherent
in the year 2000 problem, resulting in part from the uncertainty of the year
2000 readiness of third parties which the Company relies on, the Company is
unable to determine at this time whether the consequences of year 2000
failures will have a material adverse impact on the Company's results of
operations, but the Company believes that with the implementation of its new
computer system and completion of its assessment of its vendors and suppliers,
the possibility of significant interruptions of normal operations should be
reduced.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings. None.
Item 2. Changes in Securities. None.
Item 3. Defaults Upon Senior Securities. None
Item 4. Submission of Matters to a Vote of Security Holders. None.
Item 5. Other Information. None.
Item 6. Exhibits and Reports on Form 8-K.
Exhibits
EXHIBIT
NUMBER DESCRIPTION LOCATION
10.27 Membership Interest Purchase Agreement Filed herewith
dated May 5, 1998, by and among Callaway electronically
Golf Company, CGV, Inc., Saint Andrews
Golf Corporation, et al
10.28 Option Agreement dated May 5, 1998, Filed herewith
between CVG, Inc. and Saint Andrews electronically
Golf Corporation
10.29 Term Loan Agreement with Nevada State Filed herewith
Bank and Promissory Note electronically
27 Financial Data Schedule Filed herewith
electronically
(b) Reports on Form 8-k. None
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SAINT ANDREWS GOLF CORPORATION
Date: November 13, 1998 By:/s/ Ron Boreta
Ron Boreta, President &
Chief Executive Officer
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MEMBERSHIP INTEREST PURCHASE AGREEMENT
THIS MEMBERSHIP INTEREST PURCHASE AGREEMENT (this "Agreement") is made
and entered into as of May 5, 1998, by and among Callaway Golf Company, a
California corporation ("Callaway Golf"), CGV, Inc., a California corporation
("CGV"), Saint Andrews Golf Corporation, a Nevada corporation ("Saint
Andrews"), All-American SportPark, Inc., a Nevada corporation ("SportPark"),
All-American Golf LLC, a California limited liability company ("AAG"), and Ron
Boreta, an individual. Callaway Golf, CGV, Saint Andrews, SportPark, AAG and
Boreta are sometimes collectively referred to herein as the "Parties" and
individually as a "Party." Capitalized terms used herein and not otherwise
defined herein have the meaning given to such terms in Section 10 below.
RECITALS
A. Saint Andrews and Callaway Golf are members of AAG and have entered
into the Operating Agreement for All-American Golf LLC, a Limited Liability
Company dated June 13, 1997 (the "Operating Agreement"). Currently, Saint
Andrews owns an 80% membership interest in AAG and Callaway Golf owns a 20%
membership interest in AAG. Boreta is a principal shareholder of Saint
Andrews and has been responsible as an employee of Saint Andrews for managing
AAG.
B. On or about June 13, 1997, AAG executed and delivered to Callaway
Golf a Secured Promissory Note in the original amount of Five Million Two
Hundred Fifty Thousand Dollars ($5,250,000.00) (the "AAG Note"), evidencing a
loan from Callaway Golf to AAG. The AAG Note is secured pursuant to a
Continuing Security Agreement dated June 13, 1997 by and between AAG and
Callaway Golf (the "AAG Security Agreement"), a Membership Interest Security
Agreement dated June 13, 1997, by and between Callaway Golf and Saint Andrews
(as amended as set forth below, the "Membership Interest Security Agreement"),
and a Leasehold Deed of Trust, Assignment of Leases, Rents and Profits,
Security Agreement and Fixture Filing dated June 13, 1997 executed by AAG in
favor of Callaway Golf encumbering the Indenture of Lease dated June 13, 1997
by and between Urban Land of Nevada, a Nevada corporation and AAG (the "Deed
of Trust"). There is now outstanding under the AAG Note the principal amount
of $5,250,000.00 and accrued and unpaid interest as of May 5, 1998 of at least
$300,000.
C. Under the terms of the AAG Note, AAG was obligated to commence making
payments of interest accrued on the principal outstanding thereunder on
December 21, 1997 and to make monthly installments of interest accrued on the
principal outstanding on the same day of each month thereafter until the
Maturity Date (as defined in the AAG Note). As a result of the failure by AAG
to make the payments referred in the AAG Note, a default occurred under the
AAG Note. In connection therewith, on March 18, 1998, AAG, Saint Andrews and
Callaway Golf entered into a Forbearance Agreement (the "Forbearance
Agreement") pursuant to which Callaway Golf agreed to forbear from proceeding
against AAG and Saint Andrews under the AAG Note and related loan documents on
the terms and conditions set forth therein (The AAG Note, the AAG Security
Agreement, the Membership Interest Security Agreement, the Deed of Trust and
the Forbearance Agreement are collectively referred to as the "AAG Loan
Documents").
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D. Saint Andrews owns all of the outstanding capital stock of SportPark.
On or about March 18, 1998, at the time of entering into the Forbearance
Agreement, SportPark executed and delivered to Callaway Golf a Promissory Note
in the original principal amount of Three Million Dollars ($3,000,000.00) (the
"SportPark Note") evidencing a loan from Callaway Golf to SportPark. The
SportPark Note is guarantied pursuant to a Guaranty executed as of March 18,
1998 by Saint Andrews in favor of Callaway Golf (the "Guaranty"). The
Guaranty is secured by the Membership Interest Security Agreement as set forth
and evidenced by, among other documents, the Amendment to Membership Interest
Security Agreement entered into on March 18, 1998 by Saint Andrews and
Callaway Golf (the "Amendment to Membership Interest Security Agreement").
(The SportPark Note and Guaranty are hereinafter collectively referred to as
the "SportPark Loan Documents"). There is now outstanding under the SportPark
Note the principal amount of $3,000,000.00 and accrued and unpaid interest as
of May 5, 1998 of at least $26,178.
E. The Forbearance Agreement is in default and other defaults exist
under the AAG Loan Documents and the SportPark Loan Documents (collectively
the "Loan Documents"). As a result of these defaults, among other rights and
remedies, Callaway Golf has the immediate and unconditional right to proceed
against AAG under the AAG Note, to collect amounts due thereunder and to
exercise upon or enforce its rights to its collateral as set forth in the Loan
Documents; and further, Callaway Golf has the immediate and unconditional
right to proceed against SportPark under the SportPark Note, to collect
amounts due thereunder and to exercise upon or enforce its rights under the
Guaranty and the collateral therefor as set forth in the Loan Documents.
F. Saint Andrews, SportPark and AAG have requested that Callaway Golf
forbear from proceeding against such parties under the Loan Documents and to
enter into the transactions contemplated by and as set forth in this
Agreement. Among other things, Saint Andrews has requested that CGV purchase
Saint Andrews' membership interest in AAG, and in connection therewith, have
agreed to certain terms and conditions to provide the inducement to Callaway
Golf and CGV for such purchase.
G. CGV is the wholly owned subsidiary of Callaway Golf.
NOW, THEREFORE, in consideration of the mutual covenants, agreements and
understandings herein contained, the Parties hereby agree as follows:
1. Transaction.
1.1 Purchase of Membership Interest. Subject to the terms and
conditions and in reliance on the representations and warranties set forth
herein, Saint Andrews shall sell, assign, transfer, and deliver its entire
Eighty Percent (80%) membership interest (the "Membership Interest") in AAG to
CGV, at the Closing in return for the Purchase Price.
1.2 Unconditional and Absolute Transfer. The grant, assignment,
conveyance and transfer of Saint Andrews' Membership Interest in AAG shall be
unconditional and absolute and Saint Andrews shall not have (and does not
reserve) any right, title or interest of any kind whatsoever in or to any part
of its Membership Interest. Saint Andrews hereby forever waives and releases
any all rights of redemption and other rights, if any, which it might have or
have had in connection with its Membership Interest, whether arising from the
grant, assignment, conveyance and transfer of the Membership Interest, or
arising from any foreclosure sale which Callaway Golf might have elected to
hold or may hereafter hold pursuant to the Loan Documents. CGV does not
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assume, directly or indirectly, any liability, obligation, duty or
responsibility whatsoever for the payment, discharge or other resolution of
any liability, obligation, indebtedness, lien, security interest, encumbrance,
claim or other problem, condition or matter which has been or may hereafter be
created or assumed by Saint Andrews, anyone associated with Saint Andrews or
any of Saint Andrews' predecessors in interest or which may otherwise
presently exist with respect to the Membership Interest. Subject to the
Option Agreement referred to in Section 6.8, herein, CGV may at any time sell,
transfer, lease, assign or abandon the Membership Interest transferred to it
pursuant to this Agreement and may take or omit to take any action which
either of them in their discretion may deem to be in their respective best
interests, and Saint Andrews shall have no right, title or interest in or to
any portion of any consideration received by CGV in connection with any such
sale, transfer, lease, assignment or abandonment of the Membership Interest.
1.3 Purchase Price. The total purchase price ("Purchase Price") to
be paid by CGV for the Membership Interest shall be Four Million Five Hundred
Twenty Six Thousand One Hundred Seventy Eight Dollars ($4,526,178). One
Million Dollars ($1,000,000) of the Purchase Price shall be paid in cash at
the Closing and Five Hundred Thousand Dollars ($500,000) of the Purchase shall
be held back (the "Holdback") and paid pursuant to Section 9.2 below. The
remaining Three Million Twenty Six Thousand One Hundred Seventy Eight Dollars
($3,026,178) shall consist of the release from personal liability by Callaway
Golf of the SportPark under the SportPark Note and of Saint Andrews under the
guaranty thereof. The cash portion of the Purchase Price shall be paid by
Callaway Golf company check or wire transfer at the option of Saint Andrews.
1.4 Closing. The closing of the transaction (the "Closing") shall
take place at the principal offices of Callaway Golf or at such other place as
may be mutually agreeable to each of the Parties, on May 5, 1998 or at a time
and date mutually agreeable to the Parties (the "Closing Date").
2. Deliveries at Closing by Saint Andrews and SportPark.
2.1 Saint Andrews, shall deliver the following to Callaway Golf and
CGV at the Closing:
2.1.1 Assignment of Membership Interest. Delivery of an
Assignment of Membership Interest in the form acceptable to the Parties, duly
executed by a duly authorized officer of Saint Andrews.
2.1.2 Resolutions of Saint Andrews. Certified copies of the
resolutions duly adopted by Saint Andrews' board of directors authorizing the
transfer of the Membership Interest and the execution, delivery and
performance of this Agreement and each of the other agreements contemplated
hereby;
2.1.3 Resolutions of SportPark. Certified copies of the
resolutions duly adopted by SportPark's board of directors authorizing the
execution, delivery and performance of this Agreement and each of the other
agreements contemplated hereby;
2.1.4 Certificate from Officer of Saint Andrews. Delivery by
Saint Andrews of a certificates, duly executed by a duly authorized officer,
in form and substance satisfactory to CGV, certifying that each of the
representations and warranties of Saint Andrews contained in this Agreement
is true and correct and that each of the covenants of Saint Andrews have been
performed.
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2.1.5 Release of Liens. Evidence satisfactory to CGV that
Saint Andrews has obtained releases of any and all Liens encumbering or
purporting to encumber the Membership Interest, other than those Liens in
favor of Callaway Golf.
2.1.6 Resignation of Saint Andrews. Delivery of a written
resignation by Saint Andrews as manager of AAG duly executed by a duly
authorized officer of Saint Andrews.
2.1.7 Third Party Approvals. Copies of any and all third
party consents and approvals that are necessary for the consummation of the
transactions contemplated hereby or that are required in order to prevent a
breach of or default under, a termination or modification of, or acceleration
of the terms of, any contract, agreement or document required to be listed on
the Contracts Schedule attached hereto (collectively, the "Third Party
Approvals"), in each case on terms and conditions reasonably satisfactory to
CGV.
2.1.8 Other Documents. Such other documents relating to the
transactions contemplated by this Agreement as Callaway Golf or CGV or their
respective special counsel may reasonably request.
2.1.9 Waver. Any delivery specified in this section 2.1 may
be waived if consented to in writing by Callaway Golf and CGV.
2.2 Deliveries at Closing by Callaway Golf and CGV. Callaway Golf
and CGV shall deliver the following to Saint Andrews at the Closing:
2.2.1 Purchase Price. The Purchase Price in the manner and
amount set forth in Section 1.3.
2.2.2 Resolutions. Certified copies of the resolutions duly
adopted by Callaway Golf's and CGV's respective board of directors authorizing
the execution, delivery and performance of this Agreement and each of the
other agreements contemplated hereby.
2.2.3 Other Documents. Such other documents relating to the
transactions contemplated by this Agreement as Saint Andrews or their special
counsel may reasonably request.
2.2.4 Waiver. Any delivery specified in this Section 2.2 may
be waived if consented to in writing by Saint Andrews.
3. Representations and Warranties of Saint Andrews and Boreta. As a
material inducement to Callaway Golf and CGV to enter into this Agreement and
purchase the Membership Interest hereunder, Saint Andrews and Boreta jointly
and severally hereby represent and warrant to Callaway Golf and CGV as
follows:
3.1 Organization. Saint Andrews and SportPark are each
corporations duly organized, validly existing and in good standing under the
laws of Nevada and are qualified to do business in every jurisdiction in which
its ownership of property or conduct of business requires them to qualify as
foreign corporations. Saint Andrews and SportPark have all necessary
corporate powers and corporate authority to carry on their business as now
conducted presently and presently proposed to be conducted and to execute,
deliver and perform this Agreement and any related agreements to which they
are a party.
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3.2 Membership Interest and Related Matters. As of the date
hereof, the Membership Interest represent Saint Andrews' entire ownership
interest in AAG and is held beneficially and of record by Saint Andrews free
and clear of all Liens other than those in favor of Callaway Golf. The
assignment of its Membership Interest by Saint Andrews as provided for herein
is an absolute conveyance to CGV of all of the right, title and interest of
Saint Andrews to the membership interest in effect as well as in form, and is
not intended as security for the payment or repayment of any indebtedness or
the performance of any other obligation of Saint Andrews of any kind or nature
whatsoever; Saint Andrews has no equity in the Membership Interest and the sum
of (i) the current fair market value of the Membership Interest (taking into
consideration all liens and encumbrances against the Membership Interest) and
(ii) the value of any rights assigned to CGV pursuant to this Agreement, does
not exceed the net amount of the obligations from which Saint Andrews is
released pursuant or the consideration paid by Saint Andrews to this
Agreement.
3.3 Authorization; No Breach. The execution, delivery and
performance of this Agreement and all of the other agreements and instruments
contemplated hereby to which either Saint Andrews or SportPark is a party have
been duly authorized by Saint Andrews or SportPark, respectively. This
Agreement constitutes a valid and binding obligation of Saint Andrews and
SportPark, enforceable in accordance with its terms, and all other agreements
and instruments contemplated hereby to which either Saint Andrews or SportPark
is a party, when executed and delivered by Saint Andrews and SportPark in
accordance with the terms hereof, shall each constitute a valid and binding
obligation of Saint Andrews and SportPark, enforceable in accordance with
their respective terms. The execution and delivery by Saint Andrews and
SportPark of this Agreement and all other agreements and instruments
contemplated hereby to which either Saint Andrews SportPark or AAG is a party
and the fulfillment of and compliance with the respective terms hereof and
thereof by Saint Andrews SportPark or AAG do not and shall not (i) conflict
with or result in a breach of the terms, conditions or provisions of, (ii)
constitute a default under (whether with or without the passage of time, the
giving of notice or both), (iii) result in the creation of any lien upon the
Membership Interest or material assets pursuant to, (iv) give any Person the
right to modify, terminate or accelerate any obligation under, (v) result in a
violation of, or (vi) require any authorization, consent, approval, exemption
or other action by or notice or declaration to, or filing with, any Person or
any court or administrative or governmental body or agency pursuant to, Saint
Andrews' or SportPark's respective certificate of incorporation or bylaws, or
any material law, statute, rule or regulation to which Saint Andrews or
SportPark is subject, or any agreement, instrument, order, judgment or decree
to which Saint Andrews or SportPark is subject.
3.4 Latest Balance Sheet. Attached hereto as the Latest Balance
Sheet Schedule is the unaudited balance sheet of AAG as of March 31, 1998
(the "Latest Balance Sheet") and the related statements of earnings for the
period then ended. The Latest Balance Sheet (including in all cases the notes
thereto, if any) is accurate and complete in all respects, is consistent with
the books and records of AAG (which, in turn, are accurate and complete in all
respects), fairly presents the financial condition and operating results of
AAG and has been prepared in accordance with GAAP consistently applied as of
the date of the Latest Balance Sheet.
3.5 Absence of Undisclosed Liabilities. Except as set forth on the
attached Liabilities Schedule, AAG does not have any obligation or liability
(whether accrued, absolute, contingent, unliquidated or otherwise, whether due
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or to become due and regardless of when asserted) arising out of transactions
entered into at or prior to the date hereof, including, without limiting the
generality of the foregoing, wrongful dismissal claims filed by former
employees, any outstanding or pending long or short-term disability claims and
any pending labor relations boards unions certification applications, or any
action or inaction at or prior to the date hereof, or any state of facts
existing at or prior to the date hereof, other than: (i) liabilities set forth
on the liabilities side of the Latest Balance Sheet (including any notes
thereto), (ii) liabilities and obligations which have arisen after the date of
the Latest Balance Sheet in the ordinary course of business (none of which is
a liability resulting from noncompliance with any applicable laws, breach of
contract, breach of warranty (in excess of any warranty reserve specifically
established with respect thereto and included on the Latest Balance Sheet),
tort, infringement, claim or lawsuit) and (iii) other liabilities and
obligations expressly disclosed in the Schedules referred to in this Section
4.
3.6 Accounts Receivable. Except as set forth on the attached
Accounts Receivable Schedule, all accounts receivable reflected on the Latest
Balance Sheet and all accounts receivable to be reflected on AAG's books and
records as of the Closing Date (net of allowances for doubtful accounts as
reflected thereon and as determined in accordance with GAAP consistently
applied) are or shall be valid receivables arising in the ordinary course of
business, and are or shall be current and collectible, subject to no valid
counterclaims or setoffs. No person has any Liens on such receivables or any
part thereof (except for Callaway Golf), and no agreement for deduction, free
goods, discount or other deferred price or quantity adjustment has been made
with respect to any such receivables.
3.7 Liability. Except as set forth on the attached Liabilities
Schedule, AAG does not have any liability (and, to Saint Andrews' Knowledge,
there is no reasonable basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim or demand against
it giving rise to any liability) arising out of any injury to individuals or
property as a result of the ownership, possession or use of any products or
equipment manufactured, sold, leased or delivered by AAG or with respect to
any services rendered by AAG.
3.8 No Material Adverse Effect. There has occurred no fact, event
or circumstance which has had or would reasonably be expected to have a
Material Adverse Effect.
3.9 Assets.
3.9.1 The attached Assets Schedule contains a list of all of
the properties and assets, tangible or intangible, used by AAG wherever
located or shown on the Latest Balance Sheet (the "Assets"). Except as set
forth on the attached Assets Schedule, AAG has good and valid marketable title
to, a valid leasehold interest in, or a valid license to use, the Assets, free
and clear of all Liens except for those of Callaway Golf.
3.9.2 Except as set forth on the attached Assets Schedule, all
of AAG's buildings, equipment, machinery, fixtures, improvements and other
tangible assets (whether owned or leased) are in good condition and repair
(ordinary wear and tear excepted) and are fit for use in the ordinary course
of AAG's business as presently conducted and as presently proposed to be
conducted. All such assets have been installed and maintained in accordance
with all applicable laws, regulations and ordinances.
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3.9.2.1 The Intellectual Property currently used by AAG
constitutes all of the Intellectual Property necessary in the conduct of the
businesses of AAG, and there are no other items of Intellectual Property that
are material to AAG or its business.
3.9.2.2 With respect to any license and sublicenses for
Intellectual Property licensed or sublicensed to AAG:
(i) such license or sublicense is valid and binding and
in full force and effect and represents the entire agreement between the
respective licensor and licensee with respect to the subject matter or such
license of sublicense;
(ii) the rights of AAG, in or to any Intellectual
Property owned by or licensed to AAG do not conflict with or infringe on the
right of any other Person.
3.9.3 Except as set forth on the attached Assets Schedule, AAG
owns, has a valid leasehold interest in, or has a valid license to use, all of
the assets, properties and rights, (including water rights) whether tangible
or intangible, necessary for the conduct of its business as presently
conducted and as presently proposed to be conducted.
3.10 Tax Matters. AAG has timely filed any and all required Tax
Returns and has paid any and all Taxes due and has withheld and paid over all
Taxes required to be withheld for all periods ending on or before the Closing
Date. Each such Tax Returns filed are complete and correct and have been
prepared in compliance with all applicable laws and regulations.
3.11 Contracts and Commitments.
3.11.1 Except as expressly contemplated by this Agreement or
as set forth on the attached Contracts Schedule, the attached Employees
Schedule, or the attached Employee Benefits Schedule, AAG is not a party to or
bound by any written or oral:
3.11.1.1 pension, profit sharing, stock option, employee
stock purchase or other plan or arrangement providing for deferred or other
compensation to employees or any other employee benefit plan or material
arrangement or practice;
3.11.1.2 collective bargaining agreement or any other
contract with any labor union, or severance agreements, programs, policies or
arrangements;
3.11.1.3 management agreement, contract for the
employment of any officer, individual employee or other Person on a full-time,
part-time, consulting or other basis;
3.11.1.4 contract or agreement requiring the consent of
any party thereto upon a change in control of AAG, containing any provision
which would result in a modification of any rights or obligations of any party
thereunder upon a change in control of AAG or which would provide any party
any remedy (including rescission or liquidated damages) in the event of a
change in control of AAG;
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3.11.1.5 contract under which it has advanced or loaned
monies to any other Person or otherwise agreed to advance, loan or invest any
funds (other than advances to AAG's employees in the ordinary course of
business consistent with past practice);
3.11.1.6 agreement or indenture relating to borrowed
money or other Indebtedness or the mortgaging, pledging or otherwise placing a
Lien on any material asset or material group of assets of AAG or any letter of
credit arrangements;
3.11.1.7 guaranty of any obligation for borrowed money or
otherwise (other than endorsements made for collection in the ordinary course
of business);
3.11.1.8 lease or agreement under which AAG is lessee of
or holds or operates any property, real or personal, owned by any other
Person;
3.11.1.9 lease or agreement under which AAG is lessor of
or permits any third party to hold or operate any property, real or personal,
owned or controlled by AAG;
3.11.1.10 license or royalty agreements;
3.11.1.11 nondisclosure or confidentiality agreements
(other than those entered into in the ordinary course of business with
customers, suppliers and employees);
3.11.1.12 contract or group of related contracts with the
same party or group of affiliated parties for the purchase of raw materials,
commodities, supplies, products, equipment or other personal property or for
the receipt of services (other than purchase orders entered into in the
ordinary course of business or contracts disclosed elsewhere in connection
with this Section 3);
3.11.1.13 contract or group of related contracts with the
same party or group of affiliated parties for the sale of raw materials,
commodities, supplies, products or other personal property or for the
furnishing of services (other than purchase orders entered into in the
ordinary course of business or contracts disclosed elsewhere in connection
with this Section 3);
3.11.1.14 other contract or group of related contracts
with the same party or group of affiliated parties continuing over a period of
more than six months from the date or dates thereof, not terminable by AAG
upon 30 days' or less notice without penalty (other than purchase orders
entered into in the ordinary course of business or contracts disclosed
elsewhere in connection with this Section 3);
3.11.1.15 contract or group of related contracts
requiring the payment of any fee, penalty or other amount by AAG in the event
of any failure to perform or late performance of such contract or contracts by
AAG;
3.11.1.16 contract relating to the marketing, sale,
advertising or promotion of its products or services;
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3.11.1.17 agreements relating to the ownership of or
investments in any business or enterprise, including investments in joint
ventures and minority equity investments;
3.11.1.18 assignment, license, indemnification or other
agreement with respect to any intangible property;
3.11.1.19 power of attorney or other similar agreement or
grant of agency;
3.11.1.20 contract or agreement prohibiting it from
freely engaging in any business or competing anywhere in the world; or
3.11.1.21 other agreement which is material to its
operations or business prospects or involves an annual consideration in excess
of $5,000.00 whether or not in the ordinary course of business.
3.11.2 All of the contracts, agreements and instruments set
forth or required to be set forth on the attached Contracts Schedule are
valid, binding and enforceable in accordance with their respective terms,
subject to laws of general application relating to bankruptcy, insolvency and
the relief of debtors and other laws of general application effecting
enforcement of creditors' rights generally, rules of law governing specific
performance, injunctive relief or other equitable remedies, and limitations of
public policy; and shall be in full force and effect without penalty in
accordance with their terms upon consummation of the transactions contemplated
hereby. Except as set forth on the Contracts Schedule, AAG has performed all
material obligations required to be performed by it and is not in default
under or in breach of nor in receipt of any claim of default or breach under
any contract, agreement or instrument set forth or required to be set forth on
the attached Contracts Schedule; no event has occurred which with the passage
of time or the giving of notice or both would result in a default, breach or
event of noncompliance by AAG under any such contract, agreement or
instrument; AAG does not have any present expectation or intention of not
fully performing on a timely basis all such obligations required to be
performed by AAG under any contract, agreement or instrument to which AAG is
subject; no partially-filled or unfilled customer purchase order or sales
order is subject to cancellation or any other material modification by the
other party thereto or is subject to any penalty, right of set-off or other
charge by the other party thereto for late performance or delivery; and Saint
Andrews does not have any Knowledge of any cancellation or anticipated
cancellation or any breach by the other parties to any contract, agreement,
instrument or commitment to which it is a party. AAG is not a party to any
contract, agreement or commitment the performance of which could reasonably be
expected to have a Material Adverse Effect.
3.11.3 CGV's special counsel has been supplied with a true
and correct copy of each of the written instruments, plans, contracts and
agreements and an accurate description of each of the oral arrangements,
contracts and agreements which are referred to on the attached Contracts
Schedule, together with all amendments, waivers or other changes thereto.
3.12 Litigation, etc. Except as set forth on the attached
Litigation Schedule, there are no (and, during the two years preceding the
date hereof, there have not been any) actions, suits, proceedings (including
any arbitration proceedings), orders or, to Saint Andrews' Knowledge,
investigations or claims pending or, to Saint Andrews' Knowledge, threatened
against AAG (or to Saint Andrews' Knowledge, pending or threatened against any
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of the members, managers, or employees of AAG with respect to its business or
proposed business activities), or pending or threatened by AAG against any
Person, at law or in equity, or before or by any governmental department,
commission, board, bureau, agency or instrumentality (including any actions,
suits, proceedings or investigations with respect to the transactions
contemplated by this Agreement); AAG is not subject to any arbitration
proceedings under collective bargaining agreements or otherwise or, to Saint
Andrews' Knowledge, any governmental investigations or inquiries; and, to the
Saint Andrews' Knowledge, there is no basis for any of the foregoing. The
foregoing includes, without limitation, actions pending or threatened
involving the prior employment of any of AAG's employees, their use in
connection with AAG's businesses of any information or techniques allegedly
proprietary to any of their former employers or their obligations under any
agreements with prior employers. Except as set forth thereon, AAG is fully
insured with respect to each of the matters set forth on the attached
Litigation Schedule. AAG is not subject to any judgment, order or decree of
any court or other governmental agency, and AAG has not received any opinion
or memorandum or advice from its legal counsel to the effect that it is
exposed, from a legal standpoint, to any liability which could have a Material
Adverse Effect.
3.13 Insurance. The attached Insurance Schedule contains a
description of each insurance policy maintained by AAG with respect to its
properties, assets and business, and each such policy shall be in full force
and effect as of the Closing. AAG is not in default with respect to its
obligations under any insurance policy maintained by it, and AAG has never
been denied insurance coverage. Except as set forth on the attached Insurance
Schedule, AAG has no self-insurance or co-insurance programs and the reserves
set forth on the Latest Balance Sheet are adequate to cover all anticipated
liabilities with respect to any such self-insurance or co-insurance programs.
All materials assets, properties, and risks of AAG and for the past year has
been, covered by valid and, except for the policies that have expired under
their terms in the ordinary course, currently effective insurance policies or
binders of insurance (including, without limitation, general liability
insurance, property insurance, and workers' compensation insurance) issued in
favor of AAG, in each case with responsible insurance companies in such types
and amounts and covering such risks as are consistent with customary practices
and standards of companies engaged in business and in operations similar to
those of AAG. At the time of the Closing, all insurance policies currently in
effect will be outstanding and duly in force.
3.14 Employees. To Saint Andrews' Knowledge, as of the date hereof,
no executive or key employee of AAG and no group of employees of AAG has any
plans to terminate employment with AAG. AAG has no labor relations problems
(including any union organization activities, threatened or actual strikes or
work stoppages or material grievances). The Employees Schedule attached hereto
contains a correct and complete list of all employees of AAG. None of AAG's,
to Saint Andrews' Knowledge, employees or consultants are subject to any
noncompete, nondisclosure, confidentiality, intellectual property assignment,
inventory assignment, employment, consulting or other agreement or judgment,
decree or order of any court or administrative agency, relating to, affecting
or in conflict with the present or proposed business activities of AAG or such
Person's duties to AAG, except for agreements between AAG and its present and
former employees. AAG has not received any notice alleging that any violation
of any such agreements has occurred. The Employees Schedule attached hereto
contains a correct and complete list of all employees and consultants of AAG
which have executed and delivered to AAG any agreement providing for the
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nondisclosure by such Person of any confidential information of AAG. AAG has
made no oral or written representation to any employee regarding the length of
notice such employee would receive on termination of his or her employment.
AAG has made no oral or written representation to any employee regarding the
length of time during which he or she would be employed by AAG. None of the
employees of AAG have been hired for a fixed term. Except as set forth in the
Employees Schedule, all of the employees of AAG have been hired on a full-time
basis.
3.15 Employee Benefit Plans.
3.15.1 Except as set forth on the attached Employee Benefits
Schedule, AAG does not maintain or have any obligation to contribute to (or
any other liability with respect to) any plan or arrangement, whether or not
terminated, which provides medical, health, life insurance, or any
welfare-type or other similar benefits for current or future retired or
terminated employees or any dependents of such employees. All required
payments, premiums, contributions, reimbursements or accruals for all periods
ending prior to or as of the Closing Date shall have been made or properly
accrued. None of the plans has any material unfunded liabilities which are
not reflected on the Latest Balance Sheet.
3.15.2 Except as set forth on the attached Employee Benefits
Schedule, AAG does not maintain, contribute to or have any actual or potential
liability under (or with respect to) any material plan or arrangement
providing benefits or remuneration to current or former employees or any
dependents of such employees or independent contractors, including (but not by
way of limitation) any employment contract, bonus or incentive plan, plan for
deferred compensation, employee health or other welfare benefit plan,
severance arrangement or other material policy, program or arrangement,
whether or not terminated. All required payments, premiums, contributions,
reimbursements or accruals for all periods ending prior to or as of the
Closing Date shall have been made or properly accrued. None of the plans has
any material unfunded liabilities which are not reflected on the Latest
Balance Sheet. The attached Employee Benefits Schedule sets forth the
aggregate amount of bonuses and other incentive compensation expected to be
paid by AAG for its fiscal year ending December 31, 1998.
3.15.3 The plans set forth on the Employee Benefit Schedule
and all related trusts, insurance contracts and funds have been maintained,
funded and administered in compliance in all material respects with the
applicable provisions of applicable federal, provincial, and local laws. AAG
has timely complied with all reporting and disclosure obligations as they
apply to such plans. To Saint Andrews' Knowledge, none of AAG or any trustee
or administrator of any plan has engaged in any transaction with respect to
the plans which would subject AAG or any trustee or administrator of the
plans, or any party dealing with any such plan, nor do the transactions
contemplated by this Agreement constitute transactions which would subject any
such party, to either a civil penalty assessed under the applicable laws. No
actions, suits or claims with respect to the assets of the plans (other than
routine claims for benefits) are pending or, to Saint Andrews' Knowledge,
threatened which could result in or subject AAG to any liability and there are
no circumstances which would give rise to or be expected to give rise to any
such actions, suits or claims.
3.16 Compliance with Laws, Permits; Certain Operations. Except as
set forth on the attached Compliance Schedule:
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3.16.1 AAG has complied and is in compliance with all
applicable laws, ordinances, codes, rules, requirements and regulations of
foreign, federal, provincial and local governments and all agencies thereof
relating to the operation of its business and the maintenance and operation of
its properties and assets. No notices have been received by and, to Saint
Andrews' Knowledge, no claims have been filed or threatened against AAG
alleging a violation of any such laws, ordinances, codes, rules, requirements
or regulations.
3.16.2 AAG holds and is in compliance with all permits,
licenses, bonds, approvals, certificates, registrations, accreditations and
other authorizations of all foreign, federal, provincial and local
governmental agencies required for the conduct of its business and the
ownership of its properties, and the attached Permits Schedule sets forth a
list of all of such material permits, licenses, bonds, approvals,
certificates, registrations, accreditations and other authorizations. No
notices have been received by AAG alleging the failure to hold any of the
foregoing. All of such permits, licenses, bonds, approvals, accreditations,
certificates, registrations and authorizations will be available for use by
AAG immediately after the Closing.
3.17 Environmental and Safety Matters.
3.17.1 Except as set forth on the attached Environmental
Schedule:
3.17.1.1 To the Knowledge of Saint Andrews and Boreta,
AAG has complied with and is in compliance with all Environmental and Safety
Requirements. AAG has not received any oral or written notice, report or
information regarding any actual or alleged violation of Environmental and
Safety Requirements or any liabilities or potential liabilities relating to it
or its facilities arising under Environmental and Safety Requirements.
3.17.1.2 To the Knowledge of Saint Andrews and Boreta,
neither this Agreement nor the consummation of the transactions contemplated
hereby will result in any obligations for site investigation or cleanup, or
notification to or consent of any government agencies or third parties under
any Environmental and Safety Requirements (including any so called
"transaction-triggered" or "responsible property transfer" laws and
regulations).
3.17.1.3 To the Knowledge of Saint Andrews and Boreta,
none of the following exists at any property or facility owned, occupied or
operated by AAG: (i) underground storage tanks; (ii) asbestos containing
material in any form or condition; (iii) materials or equipment containing
polychlorinated biphenyls; or (iv) landfills, surface impoundments or other
disposal areas.
3.17.1.4 To the Knowledge of Saint Andrews and Boreta,
AAG has not treated, stored, disposed of, arranged for or permitted the
disposal of, transported, handled or Released any substance (including any
hazardous substance) or owned, occupied or operated any facility or property
in a manner that has given or could give rise to any liabilities (including
any liability for response costs, corrective action costs, personal injury,
natural resource damages, property damage or attorneys fees or any
investigative, corrective or remedial obligations) pursuant to applicable
Environmental and Safety Requirements.
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3.17.1.5 To the Knowledge of Saint Andrews and Boreta,
AAG has not, either expressly or by operation of law, assumed or undertaken
any liability or corrective, investigatory or remedial obligation of any other
Person relating to any Environmental and Safety Requirements.
3.17.1.6 To the Knowledge of Saint Andrews and Boreta, no
Environmental Lien has attached to any property owned, leased or operated by
AAG.
3.18 Real Property. AAG does not own any real property. The Real
Property Schedule attached hereto sets forth a list of all of the leases,
subleases and licenses ("Leases") of real property (the "Leased Real
Property") in which AAG has a leasehold, sublease hold and licensed interest.
AAG holds a valid and existing leasehold, sublease hold or license interest
under each of the Leases. With respect to each Lease listed on the attached
Real Property Schedule, there are no disputes, oral agreements, or forbearance
programs in effect as to such Lease and AAG has not assigned, transferred,
conveyed, mortgaged, deeded in trust or encumbered any interest in the Lease
except pursuant to Callaway Golf's leasehold deed of trust. Except for the
Leased Real Property, there is no real property which is leased or otherwise
used in AAG's business.
3.19 Existence and Power. AAG is a limited liability company duly
formed. validly existing, and in good standing under the laws of the State of
California, and has all requisite power and authority to own, operate, or
lease the properties owned, operated or leased by AAG and to carry on its
business as it has been and is currently conducted as of the date hereof and
as contemplated by the Operating Agreement.
3.20 Activities. AAG has not engaged in any business or activity
of any kind, other than the business and activities expressly contemplated and
permitted by the Operating Agreement dated June 13, 1997 between Callaway Golf
and Saint Andrews. AAG is duly licensed or qualified to do business and is in
good standing in each jurisdiction in which the properties owned or leased by
it or the operation of its business makes such licensing or qualification
necessary or desirable.
3.21 Subsidiaries. There are no corporation, partnerships, joint
ventures, associations or other entities in which AAG owns, of record or
beneficially, any direct or indirect equity or other interest or any right
(contingent or otherwise) to acquire the same, or in which AAG otherwise
participates.
3.22 Use of Proceeds. All expenditures made by AAG since its date
of organization were for the sole benefit of AAG or the Golf Center and not
for the benefit of Saint Andrews, SportPark or any other person or entity.
3.23 Disclosure. All written statements, faxes, data, information,
projections and materials made, furnished or provided from time to time by or
on behalf of AAG or Saint Andrews to Callaway Golf and CGV relating to AAG or
Saint Andrews shall be true and correct in all material respects, all material
facts relating to AAG or Saint Andrews have been fully disclosed to Callaway
Golf and CGV, and neither this Agreement, any of the Exhibits or Schedules
attached hereto nor any of the written statements, documents, certificates or
other items prepared and supplied to Callaway Golf and CGV by or on behalf of
AAG or Saint Andrews with respect to the transactions contemplated hereby,
when taken together as a whole, contain any untrue statement of a material
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fact or omit a material fact necessary to make each statement contained herein
or therein, in light of the circumstances in which they were made, not
misleading. There is no information which Saint Andrews have not disclosed to
Callaway Golf and CGV in writing and of which any of its stockholders,
officers, directors or executive employees is aware which has had or would
reasonably be expected to deter Callaway Golf and CGV from completing the
transactions contemplated in this Agreement on the terms and conditions
hereof.
4. Representations and Warranties of Callaway Golf and CGV. As a
material inducement to Saint Andrews to enter into this Agreement and take the
actions set forth in Section 1, Callaway Golf and CGV hereby represents and
warrants to Saint Andrews as follows:
4.1 Organization, Power and Authority. Callaway Golf and CGV are
each duly organized, validly existing and in good standing under the laws of
its jurisdiction of organization. Callaway Golf and CGV possess all requisite
power and authority necessary to carry out the transactions contemplated by
this Agreement.
4.2 Authorization; No Breach. The execution, delivery and
performance of this Agreement and all other agreements contemplated hereby to
which Callaway Golf and CGV are parties have been duly authorized by Callaway
Golf and CGV. This Agreement and all other agreements contemplated hereby to
which Callaway Golf and CGV are parties, when executed and delivered by
Callaway Golf and CGV in accordance with the terms hereof, shall each
constitute valid and binding obligations of Callaway Golf and CGV ,
enforceable in accordance with its terms. The execution and delivery by
Callaway Golf and CGV of this Agreement and all other agreements contemplated
hereby to which Callaway Golf and CGV are parties, the purchase of the
Membership Interest hereunder, and the fulfillment of and compliance with the
respective terms hereof and thereof by Callaway Golf and CGV, do not and shall
not (i) conflict with or result in a breach of the terms, conditions or
provisions of, (ii) constitute a default under (whether with or without the
passage of time, the giving of notice or both), (iii) give any third party the
right to modify, terminate or accelerate any obligation under, (iv) result in
a violation of, or (v) require any authorization, consent, approval, exemption
or other action by or notice or declaration to, or filing with, any court or
administrative or governmental body or agency pursuant to, the organizational
documents of Callaway Golf and CGV, or any material law, statute, rule or
regulation to which Callaway Golf and CGV are subject, or any material
agreement, instrument, order, judgment or decree to which Callaway Golf and
CGV are subject.
5. Release of Obligations. Upon execution of this Agreement, Saint
Andrews, Boreta and SportPark and each of their successors, heirs, assigns,
agents, officers, directors, employees, agents, representatives, attorneys,
subsidiaries, divisions, affiliates, and all persons acting by, through, under
or in concert with them, or any of them hereby irrevocably and unconditionally
release and forever discharge Callaway Golf, CGV, and AAG and each of their
predecessors, successors, assigns, agents, officers, directors, employees,
agents, representatives, attorneys, subsidiaries, divisions, affiliates, and
all persons acting by, through, under or in concert with them, or any of them,
from any and all manner of actions, causes of action, suits, debts, liens,
contracts, rights, agreements, obligations, promises, liabilities, claims,
demands, damages, controversies, losses, costs and expenses of any nature
whatsoever, known or unknown, suspected or unsuspected, fixed or contingent
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which they now have, own or hold or claim to have, own or hold at any time,
heretofore had, owned or held, or claim to have had, owned or held, or may
hereafter have, own or hold or claim to have, own or hold, from the beginning
of time to the date hereof; provided, however, nothing contained in this
release is intended to release Callaway Golf and CGV from their obligations
under this Agreement or the Option Agreement referred to in Section 6.8.
This release shall apply to all unknown or unanticipated results of
the foregoing, as well as those known and anticipated, and upon advice of
legal counsel, each of Saint Andrews, SportPark and Boreta, do waive any and
all rights under California Civil Code Section 1542, which section has been
explained to each of such Parties, hereto, and reads as follows:
"A general release does not extend to claims which the creditor does
not know or suspect to exist in his favor at the time of executing the
release, which if known by him must have materially affected his settlement
with the debtor."
Any claim released by Saint Andrews, SportPark or Boreta pursuant to this
Section 5 shall be deemed a capital contribution by Saint Andrews.
6. Conditions to Closing.
6.1 Consulting Agreement. Saint Andrews shall enter into a
separate consulting agreement with AAG, the terms of such consulting agreement
being acceptable to AAG in its sole and absolute discretion, whereby Saint
Andrews shall cause Ron Boreta and John Wenzel to agree to provide to AAG
consulting services on an as-needed basis for a period of ninety (90) days
immediately following the Closing. No compensation shall be payable by
Callaway Golf, AAG or CGV for such consulting services.
6.2 Tenant Leases. All existing tenant leases shall continue in
place, except that the Saint Andrews Golf Shop lease will be amended to
provide more specific operating standards acceptable to Callaway Golf in its
sole discretion.
6.3 Phase I Environmental. CGV shall have conducted a Phase I
Environmental assessment on the premises occupied by AAG and the results of
such assessment shall be acceptable to CGV in its sole discretion.
6.4 Sierra Sportservice, Inc. Agreement. The Lease and Concession
Agreement with Sierra Sportservice, Inc. ("Sportservice Agreement") shall be
amended or a separate agreement will be entered into between AAG and
Sportservice to remove AAG from any liability for Sportservice improvements on
the premises operated by SportPark. Such amendment or separate agreement
shall be acceptable to Callaway Golf in its sole and absolute discretion and
shall also provide for ongoing food service at the premises operated by AAG.
6.5 Covenant Not to Compete. Saint Andrews and Ron Boreta shall
each have entered into a noncompetition agreement with CGV for a period of two
(2) years, the terms of which shall be acceptable to CGV in its sole and
absolute discretion.
6.6 Ground Lease. The Parties shall have obtained the consent of
Urban Land of Nevada, Inc. to the transfer of the Membership Interest from
Saint Andrews to CGV.
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6.7 Consulting Agreement for John Boreta. John Boreta shall have
entered into a Consulting Agreement with AAG for a period of six months to
provide consulting on an as needed basis at the monthly rate of $4,166.67 per
month. The Consulting Agreement shall be acceptable to AAG in its sole and
absolute discretion.
6.8 Repurchase Option. The Parties shall have executed a separate
Option Agreement whereby Saint Andrews shall have the option for a period of
two (2) years after the Closing Date to repurchase the Membership Interest on
the terms and conditions set forth in the Option Agreement.
The conditions set forth in this Section 6 are for the exclusive benefit of
Callaway Golf and CGV and may be waived by Callaway Golf and CGV in whole or
in part on the Closing Date; provided, however, such conditions may be waived
by Callaway Golf and CGV in writing and any such waived conditions shall
become post-closing covenants pursuant to Section 9.1. Notwithstanding any
such waiver, the completion of the purchase and sale contemplated by this
Agreement by Callaway Golf and CGV shall not prejudice or affect in any way
the rights of Callaway Golf and CGV in respect of the representations and
warranties of Saint Andrews and Boreta set forth in this Agreement and the
representations of Saint Andrews and Boreta set forth in this Agreement shall
survive the completion and payment of the Purchase Price, as set forth in
Section 7.1.
7. Indemnification and other Agreements.
7.1 Survival of Representations and Warranties. Notwithstanding
any investigation or inquiries made by Callaway Golf and CGV prior to Closing,
Saint Andrews, SportPark and Boreta each acknowledge and agree that Callaway
Golf and CGV have entered into this Agreement and has purchased the Membership
Interest in reliance upon the representations and warranties by Saint Andrews
and Boreta contained in this Agreement. Saint Andrews and Boreta further
acknowledge and agree that the representations and warranties made by them and
contained in this Agreement and in other documentation relating to the
transaction contemplated hereby shall be true at the date of this Agreement
and on the Closing Date as if such representations and warranties were made at
such time. The representations and warranties in Section 3.1, 3.2, 3.3, 3.9
and 3.12 shall survive the Closing indefinitely. All other representations
and warranties in this Agreement and the Schedules and Exhibits attached
hereto or in any writing delivered by any Party to another Party in connection
with this Agreement shall survive until expiration of the applicable statutes
of limitations.
7.2 General Indemnification.
7.2.1 Indemnification by Saint Andrews and SportPark. Saint
Andrews, ("Indemnifying Party") shall defend and indemnify each of AAG,
Callaway Golf and CGV and their respective affiliates, stockholders, partners,
officers, directors, employees, agents, representatives, successors and
permitted assigns (collectively, the "Indemnified Parties") and save and hold
each of them harmless against and pay on behalf of or reimburse such
Indemnified Parties as and when incurred for any loss, liability, demand,
claim, action, cause of action, cost, damage, deficiency, Tax, penalty, fine
or expense, whether or not arising out of third party claims (including
interest, penalties, reasonable attorneys' fees and expenses and all amounts
paid in investigation, defense or settlement of any of the foregoing)
(collectively, "Losses"), which any such Indemnified Parties may suffer,
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sustain or become subject to, as a result of, in connection with, relating or
incidental to or by virtue of: (a) any breach of any representation or
warranty of Saint Andrews, or Boreta in this Agreement or in any of the
Schedules or Exhibits attached hereto or in any of the certificates or other
instruments furnished by Saint Andrews, SportPark or Boreta pursuant to this
Agreement; (b) any nonfulfillment or breach of any covenant or agreement by
Saint Andrews, SportPark or Boreta under this Agreement or any of the
Schedules and Exhibits attached hereto required to be performed or complied
with by Saint Andrews, SportPark or Boreta at or prior to the Closing; (c) any
nonfulfillment or breach of any covenant or agreement by either Saint Andrews,
SportPark or Boreta under this Agreement required to be performed or complied
with by either Saint Andrews, SportPark or Boreta after the Closing; (d) any
claim for failure to pay overtime or other employee compensation or benefits
incurred on or prior to the Closing Date; or (e) the failure of AAG to possess
the Required Assets. If and to the extent any provision of this Section 7.2
is unenforceable for any reason, Saint Andrews, hereby agrees to make the
maximum contribution to the payment and satisfaction of any Loss for which
indemnification is provided for in this Section 7.2 which is permissible under
applicable laws.
7.2.2 Procedure for Indemnification - Notice of Claims. If an
Indemnified Party becomes aware of facts or circumstances establishing a claim
("Claim") that an Indemnified Party has experienced or incurred any Loss or
may experience or incur any Loss which will give rise to a right of set-off or
indemnification under this Section, then such Indemnified Party shall give
written notice to the Indemnifying Party of such Claim ("Indemnification
Notice"). The Indemnification Notice shall be provided as soon as reasonably
practicable, but in no event more than thirty (30) days after the Indemnified
Party has received written notice or actual knowledge of such facts or
circumstances (provided that failure to give an Indemnification Notice shall
not limit the Indemnifying Party indemnification obligation hereunder, except
to the extent that the delay in giving, or failure to give, the
Indemnification Notice materially adversely affects the Indemnifying Party's
ability to defend against a Claim). To the extent reasonably practicable, the
Indemnification Notice will describe the nature, basis and amount of the Claim
and include any relevant supporting documentation. Any Claim described in
the Indemnification Notice shall be deemed final and binding (hereinafter, a
"Permitted Indemnification Claim") if the Indemnifying Party does not object
in writing to the propriety of the Claim or the amount of the Loss by
delivering a notice of objection to the Indemnified Party (an "Indemnification
Objection Notice") within thirty (30) days after receipt of the
Indemnification Notice. The Indemnification Objection Notice shall detail the
specific objections of the Indemnifying Party the Claim. If the parties are
unable to resolve the disputed issues concerning the Claim within twenty (20)
business days after the date the Indemnified Party received the
Indemnification Objection Notice, the disputed issues shall be settled
pursuant to Section 8.
7.2.3 Defense of Third Party Claims. Callaway Golf and/or CGV
shall have the right to control the defense or settlement of any third party
claim ("Third Party Claim"). Any legal and related expenses, and any
judgment or settlement paid by Callaway Golf and/or CGV in connection with a
Third Party Claim shall be included as part of the indemnification obligations
of the Indemnifying Party under this Agreement. Saint Andrews shall have the
right to participate in, but not control the defense of any Third Party Claim.
Callaway Golf and CGV shall periodically apprise Saint Andrews of the progress
of such defense. Callaway Golf and CGV shall not consent to the entry of any
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judgement or enter into any settlement (except with the written consent of
Saint Andrews which consent shall not be unreasonably withheld) which does not
include as an unconditional term thereof, the giving by the claimant to Saint
Andrews a release from all liability in respect of such Third Party Claim
(which release only may exclude any obligations incurred in connection with
any such settlement).
8. Dispute Resolution.
8.1 Direct Discussion. In the event of any dispute, claim,
question, or disagreement arising out of or relating to this Agreement (a
"Dispute"), the Parties involved in such Dispute shall use their best efforts
to settle such Dispute. To this effect, senior management of the parties
involved shall consult and negotiate with each other in good faith to attempt
to reach a just and equitable solution satisfactory to both Parties. Any
dispute which cannot be resolved within thirty (30) days may be submitted to
binding arbitration as provided below.
8.2 Requirement of Arbitration. Any Dispute which cannot be
resolved through mutual consultation and negotiation, shall be settled by
final and binding arbitration conducted by the San Diego office of
JAMS/Endispute. Nothing stated herein, however, shall preclude Callaway Golf
or CGV from seeking and obtaining immediate injunctive relief (whether
temporary, preliminary, or permanent) to prevent or restrain a breach by Saint
Andrews or SportPark of this Agreement or to seek enforcement of this
arbitration provision or to seek or enforce prejudgment or ancillary remedies.
8.3 Number of Arbitrators. The number of arbitrators shall be
three (3). The three arbitrators shall be selected as follows: (a) within
ten (10) days of delivery of any demand for arbitration, each party shall
submit to the other party the name of three (3) candidates nominated from the
then-current list of retired judges or justices at the San Diego office of
JAMS/Endispute; (b) within five (5) days of delivery of the opposing party's
list, each party shall submit to the other party the names of two (2)
candidates proposed by the opposing party which are to be stricken from the
opposing party's nomination list, with the non-challenged candidates serving
as two (2) of the three (3) arbitrators; (c) the parties will then confer on
the selection of a third arbitrator and, if no agreement can be reached within
five (5) days, JAMS/Endispute shall appoint the third arbitrator from the list
of retired judges or justices at the San Diego office of JAMS/Endispute.
8.4 Location; Commencement. The arbitration shall take place in
San Diego, California, and shall be commenced within thirty (30) days of the
selection of the arbitrator(s), unless otherwise agreed to by the parties or
ordered by the arbitrator(s) for good cause shown. The arbitration hearing
shall last no longer than two (2) days.
8.5 Discovery. It is expressly understood that the parties have
chosen arbitration to avoid the burdens, costs and publicity of a court
proceeding, and the arbitrators are expected to handle all aspects of the
matter, including discovery, in a manner so as to minimize the expense, time,
burden and publicity of the process, while assuring a fair and just result.
The arbitrator shall limit and restrict the scope of discovery (e.g., number
of depositions, document requests, etc.) to only those matters clearly
relevant to the dispute. Subject to this limitation, the provisions of
California Code of Civil Procedure section 1283.05 are incorporated into, made
part of and are applicable to any arbitration conducted pursuant to this
clause.
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8.6 Arbitrator's Award. The arbitrator(s) shall issue a written
award within twenty (20) days after the matter is submitted for decision. The
arbitrator(s) shall apply the law of the State of California (excluding
California choice of law provisions.) The arbitrator(s) shall not have the
authority to award punitive or exemplary damages to any party.
8.7 Expenses. The expenses of the arbitration, including the
arbitrators' fees, expert witness fees, and attorney's fees, may be awarded to
the prevailing party, in the discretion of the arbitrators, or may be
apportioned between the parties in any manner deemed appropriate by the
arbitrators. Unless and until the arbitrators decide that one party is to pay
for all (or a share) of such expenses, both parties shall share equally in the
payment of the arbitrators' fees as and when billed by the arbitrators.
8.8 Confidentiality. Except as set forth below, the parties shall
keep confidential the fact of the arbitration, the dispute being arbitrated,
the decision of the arbitrators, and any documents produced by the parties in
the course of the arbitration. Notwithstanding the foregoing, the parties may
disclose information about the arbitration to persons who have a need to know,
such as directors, trustees, management employees, witnesses, experts,
investors, attorneys, lenders, insurers, and others who may be directly
affected. Once the arbitration award has become final, if the arbitration
award is not promptly satisfied, then the prevailing party may,
notwithstanding the foregoing, disclose information about the arbitration only
to the extent necessary to obtain judicial enforcement of the award.
8.9 Enforcement of Award. The arbitration award shall be final and
shall bind the parties. Any award may be enforced by an action filed in the
San Diego Superior Court or the Federal District Court, Southern District of
California. For purposes of this arbitration provision, the parties hereby
agree to submit to the jurisdiction of these courts and hereby waive any or
all objections as to personal jurisdiction, subject matter jurisdiction and/or
venue with respect to such courts. In the event any award cannot be satisfied
by Saint Andrews, SportPark or Boreta, Callaway Golf in its sole discretion
may elect to have the award added to the option price in accordance with the
terms of the Option Agreement.
9. Post-Closing Covenants.
9.1 Remaining Conditions to Closing. Saint Andrews shall use its
best efforts to satisfy any Conditions to Closing set forth in Section 6 that
have not been satisfied prior to or at the time of Closing.
9.2 Holdback. The Holdback shall be retained by CGV until it has
determined, in its sole discretion, that AAG has all rights, entitlements, and
other tangible and intangible assets reasonably necessary to operate the
business of AAG (the "Required Assets") and that the conditions set forth in
Sections 6.3 and 6.4 have been satisfied. Any deficiency in the Required
Assets shall be treated as a Loss under Section 7.2.1; shall be subject to the
notice and dispute resolution provisions of Sections 7.2.2 and 8; and any such
Loss may be offset against the Holdback. If the conditions set forth in
Section 6.3 and 6.4 have been satisfied by June 5, 1998, then Two Hundred
Fifty Thousand Dollars ($250,000) of the Holdback after deduction for Losses,
shall be released to Saint Andrews. If the conditions set forth in Section
6.3 and 6.4 have been satisfied by August 5, 1998, then the balance of the
Holdback after deduction for Losses, shall be released to Saint Andrews. The
amount of any Claim for a Loss, including, without limitation, a Loss related
to a deficiency in the Required Assets, which has not been finally determined
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pursuant to Section 7.2.2 or Section 8 shall not be subject to the preceding
two sentences and no distribution, if any, shall be made until the Claim is
resolved. If the conditions set forth in Section 6.3 and 6.4 have not been
satisfied by June 5, 1998 or August 5, 1998, no release of the balance of the
Holdback, if any, shall be made until the conditions set forth in Section 6.3
and 6.4 have been satisfied. Release of the Holdback, or any portion
thereof, shall not release Saint Andrews from any of its indemnity obligations
under this Agreement.
9.3 Pepsi Sponsor Agreement. Saint Andrews and Pepsi-Cola Company
("Pepsi-Cola") entered into a Sponsor Agreement, dated December 4, 1997
("Sponsorship Agreement") whereby Pepsi-Cola agreed to pay to Saint Andrews a
sum of $1,250,000, payable in installments, in return for Saint Andrews'
granting exclusive rights to Pepsi-Cola to have Pepsi-Cola's beverage products
distributed, represented, and promoted throughout the All-American SportPark.
Of the sum due Saint Andrews under the Sponsorship Agreement, AAG will be
allocated and Saint Andrews will pay $25,000 to AAG for the period from
January 1, 1998 to June 30, 1998 from the first payment received by Saint
Andrews. After June 30, 1998 all payments received by Saint Andrews shall be
allocated between AAG and SportPark based upon the number of gallons of syrup
used at each facility. For example, if the total syrup used for the period
ending December 31, 1998 was 1,000 gallons and 250 gallons has been used at
the Golf Center, AAG would be entitled to 25% of any payment received by Saint
Andrews. Within ten (10) days of Saint Andrews' receipt of monies from
Pepsi-Cola pursuant to the Sponsor Agreement, Saint Andrews shall remit to AAG
its share of the revenue from Pepsi-Cola sales.
9.4 Press Release and Announcements. Unless required by law (in
which case each Party agrees to consult with the other Parties prior to any
such disclosure as to the form and content of such disclosure), no press
releases or other releases of information related to this Agreement or the
transactions contemplated hereby will be issued or released without the
consent of AAG, Callaway Golf, and CGV.
9.5 Confidentiality. Upon the Closing, the Saint Andrews shall
return to Callaway Golf and keep confidential all information and materials
regarding Callaway Golf reasonably designated by Callaway Golf as confidential
(except to the extent (i) disclosure of such information is required by law,
(ii) the information was previously known to Saint Andrews or (iii) the
information becomes publicly known except through the actions or inactions of
Saint Andrews). Saint Andrews agrees not to disclose or use at any time,
either during Saint Andrews' consultancy with AAG or thereafter, any
Confidential Information (whether or not such information is or was developed
by Saint Andrews), except to the extent that such disclosure or use is
directly related to and required by the performance of Saint Andrews' duties
to AAG. Saint Andrews further agrees to take all appropriate steps to
safeguard such Confidential Information and to protect it against disclosure,
misuse, espionage, loss and theft. In the event Saint Andrews is required by
law to disclose any Confidential Information, it shall promptly notify
Callaway Golf in writing, which notification shall include the nature of the
legal requirement and the extent of the required disclosure, and shall
cooperate with AAG and Callaway Golf to preserve the confidentiality of such
information consistent with applicable law.
9.6 Maintenance of 3-Acre Vacant Land. If used by Saint Andrews
and/or SportPark, Saint Andrews and/or SportPark shall maintain the
approximately 3-acre vacant parcel of land located at the south entrance to
the Golf Center so that it shall be free of garbage, mobile trailers and
debris and shall have a clean, neat and orderly appearance.
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9.7 Signage. Saint Andrews and SportPark acknowledge that neither
shall have any right to place any signs, billboards, or other advertising
(including, without limitation, the proposed entry pylon sign with 40'
electronic message board) on the premises occupied by AAG premises unless AAG
gives its prior written consent which shall be in AAG's sole and absolute
discretion.
9.8 Severance Obligations. Saint Andrews shall be pay all known
severance obligations related to the employees of AAG employed as of the
Closing Date.
9.9 No Contracting. Saint Andrews, SportPark and Boreta shall not
at any time after the Closing enter into any contract, agreement or lease
which binds or purports to bind AAG, Callaway Golf, CGV or the Golf Center.
Saint Andrews, SportPark and Boreta acknowledge they have no right to bind or
purport to bind AAG, Callaway Golf, CGV or the Golf Center.
9.10 Multiparty Contracts. The parties hereto acknowledge that
certain contracts licenses, accounts and/or entitlements (i) for the benefit
of AAG or the Golf Center may be in the name of Saint Andrews or SportPark or
(ii) for the benefit of Saint Andrews or SportPark may be in the name of AAG.
Such contracts may be, by way of example and not be way of limitation,
contracts for trash removal, pay phones, water entitlement, the Sponsorship
Agreement, the Agreement between and Saint Andrews and Frankel, etc. The
Parties agree to use their reasonable best efforts to cause individual
contracts, licenses, accounts and/or entitlements to be assigned to the Party
which will benefit from the services or rights after the Closing.
9.11 Water Rights. SportPark and Saint Andrews recognize the
unique need for water required by the Golf Center and covenant and agree not
to engage in or permit any activity related to the All-American SportPark
which will restrict the amount of water required by AAG or the Golf Center to
operate the Golf Center in a first class, well maintained and garden green
manner. SportPark and Saint Andrews shall cause this covenant regarding water
rights to pass to all successors-in-interest to the All-American SportPark
and/or any other lessor of the premises upon which the All-American SportPark
is located.
9.12 Encroachment of Parking. The parking lot for the SportPark
encroaches upon the property of AAG. After the Closing, AAG and SportPark
will negotiate in good faith to agree upon a license whereby SportPark may use
the encroachment for as long as Saint Andrews or SportPark operate the
All-American SportPark.
9.13 Irrigation Computer System. The irrigation computer system
for the Golf Center is located on the property of the SportPark. SportPark
hereby grants AAG a license to access the irrigation computer system at all
times. AAG and SportPark shall execute a license for this purpose after the
Closing.
9.14 Right of First Refusal. After the Closing, AAG and Saint
Andrews shall enter into a Right of First Refusal Agreement which grants AAG a
right of first refusal to designate the name of the putting green at the
SportPark.
9.15 Further Assurances. If at any time after the Closing any
further action is necessary or desirable to carry out the purposes of this
Agreement or the transactions contemplated hereby, each of the Parties will
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take such further action (including the execution and delivery of such further
instruments and documents) as any other Party may reasonably request, all at
the sole cost and expense of the requesting Party (unless the requesting Party
is entitled to indemnification therefor under Section 7 above).
10. Definitions. For the purposes of this Agreement, the following
terms have the meanings set forth below:
"GAAP" means generally accepted accounting principles.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended.
"Confidential Information" means all information of a confidential
or proprietary nature (whether or not specifically labeled or identified as
"confidential"), in any form or medium, that is or was disclosed to, or
developed or learned by, any Seller and that relates to the business,
products, services or research or development of the Company or its
Subsidiaries or their respective suppliers, distributors or customers.
Confidential Information includes, but is not limited to, the following: (i)
internal business information (including information relating to strategic and
staffing plans and practices, business, training, marketing, promotional and
sales plans and practices, cost, rate and pricing structures and accounting
and business methods); (ii) identities of, individual requirements of,
specific contractual arrangements with, and information about, the Company's
suppliers, distributors and customers and their confidential information;
(iii) trade secrets, know-how, compilations of data and analyses, techniques,
systems, formulae, research, records, reports, manuals, documentation, models,
data and data bases relating thereto; (iv) inventions, innovations,
improvements, developments, methods, designs, analyses, drawings, reports and
all similar or related information (whether or not patentable) and (v) other
Intellectual Property Rights. Confidential Information shall not include
information that a Seller can demonstrate is publicly known through no
wrongful act or breach of any obligation of confidentiality or was rightfully
received by such Seller from a third party without a breach of any obligation
of confidentiality by such third party.
"Environmental Lien" shall mean any Lien, whether recorded or
unrecorded, in favor of any governmental entity, relating to any liability of
the Company arising under any Environmental and Safety Requirements.
"Environmental and Safety Requirements" shall mean all federal,
provincial, local and foreign statutes, regulations, ordinances and other
provisions having the force or effect of law, all judicial and administrative
orders and determinations, all contractual obligations and all common law, in
each case concerning public health and safety, worker health and safety and
pollution or protection of the environment (including, without limitation, all
those relating to the presence, use, production, generation, handling,
transport, treatment, storage, disposal, distribution, labeling, testing,
processing, discharge, Release, threatened Release, control or cleanup of any
hazardous or otherwise regulated materials, substances or wastes, chemical
substances or mixtures, pesticides, pollutants, contaminants, toxic chemicals,
petroleum products or byproducts, asbestos, polychlorinated biphenyls, noise,
radiation or radon), each as amended and as now or hereafter in effect.
"Golf Center" means the business operated by AAG.
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"Indebtedness" means at a particular time, without duplication, (i)
any indebtedness for borrowed money or issued in substitution for or exchange
of indebtedness for borrowed money, (ii) any indebtedness evidenced by any
note, bond, debenture or other debt security, (iii) any indebtedness for the
deferred purchase price of property or services with respect to which a Person
is liable, contingently or otherwise, as obligor or otherwise (other than
trade payables and other current liabilities incurred in the ordinary course
of business which are not more than six months past due), (iv) any commitment
by which a Person assures a creditor against loss (including contingent
reimbursement obligations with respect to letters of credit), (v) any
indebtedness guaranteed in any manner by a Person (including guarantees in the
form of an agreement to repurchase or reimburse), (vi) any obligations under
capitalized leases with respect to which a Person is liable, contingently or
otherwise, as obligor, guarantor or otherwise, or with respect to which
obligations a Person assures a creditor against loss, (vii) any indebtedness
secured by a Lien on a Person's assets and (viii) any unsatisfied obligation
for "withdrawal liability" to a "multiemployer plan" as such terms are defined
under ERISA.
"Intellectual Property" means (a) inventions, whether ir not
patentable, whether or not reduced to practice, and whether or not yet made
the subject of a pending patent application or applications, (b) ideas and
concepts of potentially patentable subject matter, including, without
limitation, any patent disclosures, whether or not reduced to practice and
whether or not yet made the subject of a pending patent application or
applications, (c) national (including the United States) and multinational
statutory invention registrations, patent, patents registrations and patent
application (including all reissue, division, continuations,
continuations-in-part, extensions, and reexaminations) and all rights therein
provided by international treaties or conventions and all improvements to the
inventions disclosed in which such registration, patent, or application, (d)
trademarks, service marks, trade dress, logos, trade names, and corporate
names, whether or not registered, including all common law rights, and
registration and applications for registration thereof, including, but not
limited to, all marks registered in the United States Patent and Trademark
Office, the Trademark Offices of the States and Territories of the United
State of America, and the Trademark Office of other nations throughout the
world, and all rights therein provided by international treaties or
conventions, (e) copyrights (registered or otherwise) and registrations and
applications for registration thereof, and all rights therein provided by
international treaties of conventions, (f) computer software, including,
without limitation, source code, operating systems and specifications, data,
data bases, filed, documentation and other materials related thereto, (g)
trade secrets and confidential, technical and business information (including
idea formulas, compositions, inventions, and conceptions of inventions where
patentable or unpatentable and whether or not reduced to practice), (h)
whether or not confidential, technology (including know-how and show-how),
manufacturing and production processes and techniques, research and
development information, drawings, specifications, designs, plans, proposals,
technical data, copyrightable works,. financial, marketing and business data,
pricing and cost information, business and marketing plans and customer and
supplier lists and information, (i) copies and tangible embodiments of all the
foregoing, in whatever form or medium, (j) all right to obtain and right to
apply for patens, and to register trademarks and copyrights, and (k) all
rights to sue or recover and retain damages and costs and attorney's fees for
present and past infringement of any of the foregoing.
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"Knowledge" or the phrase "to the Knowledge" means the actual
knowledge, information and belief of Saint Andrews, its officers, directors
and employees after due inquiry as a reasonably prudent person and/or
corporation would conduct or commission in light of prevailing facts and
circumstances.
"Lien" or "Liens" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any conditional sale or
other title retention agreement or lease in the nature thereof), any sale of
receivables with recourse against the Company, any filing or agreement to file
a financing statement as debtor under the Uniform Commercial Code or a similar
statute (other than to reflect ownership by a third party of property leased
to the Company under a lease which is not in the nature of a conditional sale
or title retention agreement), or any subordination arrangement in favor of
another Person.
"Membership Interest" means (i) Saint Andrews' entire interest as a
member in AAG, including all right, title and interest of Saint Andrews as a
member in AAG and all rights and interests of any kind or nature under the
Operating Agreement as a member, including without limitation all voting,
inspection, management and rights in specific AAG property; (ii) any and all
obligations of AAG to Saint Andrews as a member or on account of Saint
Andrews' membership interest of any kind whatsoever, including without
limitation all accounts, fees, general intangibles, chattel paper, documents,
and promissory notes and other instruments, including all rights with respect
any security therefore or guaranties or other securities in respect thereof;
and (iii) all dividends, distributions and earnings arising out of any of the
foregoing and all additions, replacements and substitutions to any and all of
the foregoing.
"Material Adverse Effect" means a material and adverse effect upon
the business, operations, assets, liabilities, financial condition, operating
results, cash flow, prospects, net worth or employee, customer or supplier
relations of the Company.
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Release" shall have the meaning set forth in CERCLA.
"Subsidiary" means, with respect to any Person, any corporation,
limited liability company, partnership, association or other business entity
of which (i) if a corporation, a majority of the total voting power of shares
of stock entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by that Person or one or more of
the other Subsidiaries of that Person or a combination thereof, or (ii) if a
limited liability company, partnership, association or other business entity,
a majority of the partnership or other similar ownership interest thereof is
at the time owned or controlled, directly or indirectly, by that Person or one
or more Subsidiaries of that Person or a combination thereof. For purposes
hereof, a Person or Persons shall be deemed to have a majority ownership
interest in a limited liability company, partnership, association or other
business entity if such Person or Persons shall be allocated a majority of
limited liability company, partnership, association or other business entity
gains or losses or shall be or control any managing director or general
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partner of such limited liability company, partnership, association or other
business entity.
"Tax" or "Taxes" means federal, provincial, state, county, local,
foreign or other income, business, assets, corporate capital, social services,
gross receipts, ad valorem, franchise, profits, sales or use, transfer,
registration, excise, utility, environmental, communications, real or personal
property, capital stock, license, payroll, wage or other withholding,
employment, social security, severance, stamp, occupation, alternative or
add-on minimum, estimated and other taxes, assessments, or levies of any kind
whatsoever (including deficiencies, penalties, additions to tax, and interest
attributable thereto) whether disputed or not.
"Tax Return" means any return, information report, election forms,
or filing with respect to Taxes, including any schedules attached thereto and
including any amendment thereof.
11. Miscellaneous.
11.1 No Merger/Ratification. It is the intent of the Parties that
upon execution and delivery of the Assignment of Membership Interest and the
consummation of the transactions contemplated by this Agreement, that Callaway
Golf's and CGV's interest in the Membership Interest shall not merge with
Callaway Golf's security interest in such Membership Interest as created by
and as set forth in the Loan Documents and that Callaway Golf and its
successors and assigns, shall continue to enjoy all rights and remedies set
forth in the Loan Documents, including the right to foreclose on the
Membership Interest. Callaway Golf and CGV hereby acknowledge and agree that
the Membership Interest is pledged to Callaway Golf under the Loan Documents,
agree to be bound by the Membership Interest Security Agreement and to any
original parties thereto, and agree to execute such other documents as
Callaway Golf shall request to further evidence the foregoing or validity
thereto, including without limitation financing statements. The Parties
hereby ratify and affirm all of their respective obligations under the Loan
Documents.
11.2 Fees and Expenses. Each Party shall pay all of its own fees
and expenses (including fees and expenses of legal counsel, accountants,
investment bankers and other representatives and consultants) in connection
with this Agreement and the consummation of the transactions contemplated
hereby. If any legal action or other proceeding relating to this Agreement,
the agreements contemplated hereby, the transactions contemplated hereby or
thereby or the enforcement of any provision of this Agreement or the
agreements contemplated hereby is brought against any Party, the prevailing
Party in such action or proceeding shall be entitled to recover all reasonable
expenses relating thereto (including attorneys' fees and expenses) from the
Party against which such action or proceeding is brought in addition to any
other relief to which such prevailing Party may be entitled.
11.3 Special Remedies and Enforcement. Each Party recognizes and
agrees that a breach by one of the Parties ("Breaching Party"), of any of the
covenants set forth in this Agreement could cause irreparable harm to the
other Parties, that the Parties' remedies at law in the event of such breach
would be inadequate, and that, accordingly, in the event of any such breach a
restraining order or injunction or both may be issued against the Breaching
Party in addition to any other rights and remedies which are available to the
Parties. If this Section 11.3 is more restrictive than permitted by
applicable Law, this Section 11.3 shall be limited to the extent required by
such Law.
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11.4 Entire Agreement. Modifications. This Agreement, together
with exhibits and schedules attached hereto, contains the entire agreement
between the parties hereto with respect to the transactions contemplated
hereby, and contains all of the terms and conditions thereof and supersedes
all prior agreements and understandings relating to the subject matter hereof.
No changes or modifications of or additions to this Agreement shall be valid
unless the same shall be in writing and signed by each party hereto.
11.5 Waivers. No waiver of any of the provisions of this Agreement
shall be deemed to be or shall constitute a waiver of any other provision of
this Agreement, whether or not similar, nor shall any waiver constitute a
continuing waiver. No waiver of any provision of this Agreement shall be
binding on the parties hereto unless it is executed in writing by the party
making the waiver.
11.6 Successors and Assigns.
11.6.1 This Agreement and all covenants and agreements
contained herein and rights, interests or obligations hereunder, by or on
behalf of any of the Parties hereto, shall bind and inure to the benefit of
the respective successors and assigns of the Parties hereto whether so
expressed or not.
11.6.2 Callaway Golf, CGV and AAG may assign their rights
under this document. Saint Andrews, SportPark and Boreta may not, voluntarily
or by operation of law, assign or otherwise transfer any of his, her or its
rights or obligations under this Agreement, without obtaining the prior
written consent of all other parties hereto. Any attempted assignment in
violation of this Agreement shall be void and of no effect.
11.7 Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement or the
application of any such provision to any Person or circumstance shall be held
to be prohibited by, illegal or unenforceable under applicable law in any
respect by a court of competent jurisdiction, such provision shall be
ineffective only to the extent of such prohibition or illegality or
unenforceability, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.
11.8 Counterparts. This Agreement may be executed simultaneously
in counterparts (including by means of telecopied signature pages), any one of
which need not contain the signatures of more than one Party, but all such
counterparts taken together shall constitute one and the same Agreement.
11.9 Descriptive Heading; Interpretation. The headings and
captions used in this Agreement and the table of contents to this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Any capitalized terms used in any Schedule
or Exhibit attached hereto and not otherwise defined therein shall have the
meanings set forth in this Agreement. The use of the word "including" herein
shall mean "including without limitation." The Parties intend that each
representation, warranty and covenant contained herein shall have independent
significance. If any Party has breached any representation, warranty or
covenant contained herein in any respect, the fact that there exists another
representation, warranty or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the Party has not
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breached shall not detract from or mitigate the fact that the Party is in
breach of the first representation, warranty or covenant.
11.10 No Third-Party Beneficiaries. This Agreement is for the sole
benefit of the Parties and their permitted successors and assigns and nothing
herein expressed or implied shall give or be construed to give any Person,
other than the Parties and such permitted successors and assigns, any legal or
equitable rights hereunder.
11.11 Schedules. Nothing in any Schedule attached hereto shall be
adequate to disclose an exception to a representation or warranty made in this
Agreement unless such Schedule identifies the exception with particularity.
Without limiting the generality of the foregoing, the mere listing (or
inclusion of a copy) of a document or other item shall not be adequate to
disclose an exception to a representation or warranty made in this Agreement,
unless the representation or warranty has to do with the existence of the
document or other item itself. No exceptions to any representations or
warranties disclosed on one Schedule shall constitute an exception to any
other representations or warranties made in this Agreement unless the
substance of such exception is disclosed as provided herein on each such other
applicable Schedule or a specific cross-reference to a disclosure on another
Schedule is made.
11.12 Cooperation on Tax Matters. The Parties shall cooperate
fully, as and to the extent reasonably requested by each Party and at the
requesting Party's expense, in connection with any audit, litigation or other
proceeding with respect to Taxes. Such cooperation shall include the
retention and (upon any Party's request) the provision of records and
information which are reasonably relevant to any such audit, litigation or
other proceeding and making employees available on a mutually convenient basis
to provide additional information and explanation of any material provided
hereunder. The Parties agree (i) to retain all books and records with respect
to Tax matters pertinent to AAG relating to any taxable period beginning
before the Closing Date until the expiration of the statute of limitations
(and, to the extent notified by any Party, any extensions thereof) applicable
to such taxable periods, and to abide by all record retention agreements
entered into with any taxing authority, and (ii) to give each Party reasonable
written notice prior to transferring, destroying or discarding any such books
and records and, if any Party so requests, the other party as the case may be,
shall allow such party to take possession of such books and records.
11.13 Schedules and Exhibits. All Schedules and Exhibits attached
hereto or referred to herein are hereby incorporated in and made a part of
this Agreement as if set forth in full herein.
11.14 Governing Law. This Agreement is made and shall be governed
by, and construed and enforced in accordance with, the internal laws of the
State of California, without regard to the conflict of laws principles
thereof, as the same apply to agreements executed solely by residents of
California and wholly to be performed within California. This Agreement shall
be interpreted in accordance with and any disputes hereunder governed by the
laws of the State of California.
11.15 Authority. Each of the persons executing this Agreement
represents and warrants that it is authorized to execute this Agreement and
the entity on whose behalf they are signing is bound by the terms hereof.
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11.16 Notices. All notices, demands or other communications to be
given or delivered under or by reason of the provisions of this Agreement
shall be in writing and shall be deemed to have been given when delivered
personally to the recipient, one day after being sent to the recipient by
reputable overnight courier service (charges prepaid), upon machine-generated
acknowledgment of receipt after transmittal by facsimile or five (5) days
after being mailed to the recipient by certified or registered mail, return
receipt requested and postage prepaid. Such notices, demands and other
communications shall be sent to the Parties at the addresses indicated below
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
To Callaway Golf, Callaway Golf Company
CGV or AAG: 2285 Rutherford Road
Carlsbad, CA 92008-8815
Attn: Donald H. Dye, President and Chief
Executive Officer
With a copy to: Callaway Golf Company
2285 Rutherford Road
Carlsbad, CA 92008-8815
Attn: Steven C. McCracken, Executive Vice
President, Licensing, Chief Legal Officer
and Secretary
To Saint Andrews, Saint Andrews Golf Corporation
SportPark, or Boreta: 5325 South Valley View Boulevard, Suite 4
Las Vegas, Nevada 89118
Attn: Ron Boreta, President
With a Copy to: Joseph P. Mulhern, Esq.
Gondecki & Del Guidice
221 North LaSalle Street, Suite 2200
Chicago, Illinois 60601
11.17 No Strict Construction. The Parties have participated
jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the Parties, and no presumption or
burden of proof shall arise favoring or disfavoring any Party by virtue of the
authorship of any of the provisions of this Agreement.
11.18 Incorporation of Recitals. The Recitals to this Agreement
are incorporated herein by this referenced with the same force and effect as
if set forth in full herein.
11.19 Brokers. No broker, finder, or investment banker is entitled
to any brokerage, finder's, or other fee or commission in connection with the
transactions hereunder based upon arrangements made by or on behalf of any
party to this Agreement.
[The balance of this page has been intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have executed this Membership
Interest Purchase Agreement on the date first written above.
BORETA
By:/s/ Ron Boreta
Ron Boreta
CGV, INC., a California corporation
By:/s/ Donald H. Dye
Donald H. Dye, President and Chief
Executive Officer
By:/s/ Steven McCracken
Its: Secretary and Chief Legal Officer
CALLAWAY GOLF COMPANY, a California
corporation
By:/s/ Donald H. Dye
Donald H. Dye, President and
Chief Executive Officer
By:/s/ Steven McCracken
Its: Secretary and Chief Legal Officer
SAINT ANDREWS GOLF CORPORATION, a
Nevada corporation
By:/s/ Ron Boreta
Ron Boreta, President
By:/s/ Vaso Boreta
Its: Chairman of the Board
ALL-AMERICAN SPORTPARK, INC., a
Nevada corporation
By: /s/ Ron Boreta
Its: General Manager, CEO, Secretary and Treasurer
By:/s/ Vaso Boreta
Its: Assistant General Manager
ALL-AMERICAN GOLF LLC, a California
limited liability company
By:/s/ Ron Boreta
Ron Boreta, President
Saint Andrews Golf Corporation,
a Nevada corporation, Manager
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OPTION AGREEMENT
This Option Agreement ("Option Agreement") is made and entered into as of
this 5th day of May, 1998, at San Diego, California, by CGV, Inc.
("Optionor"), a California corporation, on the one hand, and Saint Andrews
Golf Corporation, a Nevada corporation (hereinafter referred to as
"Optionee"), on the other hand.
RECITALS
A. Concurrently with the execution of this Option Agreement, Optionor
has purchased all of Optionee's right, title and interest in Optionee's Eighty
Percent (80%) membership interest (the "Membership Interest") in All-American
Golf LLC, a California limited liability company ("All- American Golf")
pursuant to a Membership Interest Purchase Agreement ("Purchase Agreement").
B. Optionor now desires to grant Optionee the right to repurchase the
Membership Interest in All-American Golf on the terms and conditions set forth
herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Grant of Option. Optionor hereby grants to Optionee the right to
purchase the Membership Interest at a price and under the terms and
conditions set forth herein. This option may be exercised only once and upon
exercise only for Optionor's entire eighty percent (80%) interest in
All-American Golf.
2. Option Period. Subject to paragraph 6, Optionee may exercise this
Option at any time prior to May 5, 2000. This Option shall expire if not
exercised at midnight May 5, 2000. Nothing contained herein shall be deemed
to obligate Optionee to exercise the Option.
3. Consideration. This Option is granted in consideration of Optionee's
sale of the Membership Interest to Optionor contemporaneous with the execution
of this Option Agreement.
4. Option Price. The option price ("Option Price") shall be the sum of
the following:
4.1 Four Million Five Hundred Twenty Six Thousand One Hundred
Seventy Eight Dollars ($4,526,178);
4.2 Eighty Percent (80%) of any net losses incurred by All-American
Golf between the date of May 5, 1998 and the date of the exercise of the
Option (all net income shall be distributed prior to computation of losses);
4.3 Eighty Percent (80%) of any capital investment made by Optionor
in All-American Golf ("capital investment" shall mean any loans to or capital
contributions made by Optionor to All-American Golf) after the date of this
Option;
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4.4 One Hundred Percent (100%) of any Losses, as that term is
defined in section 7.2 of the Purchase Agreement, for which Optionor, Callaway
Golf company ("Callaway Golf"), a California corporation, and All-American
Golf have not been indemnified by Saint Andrews Golf Corporation, a Nevada
corporation.
5. Retention of Consideration. If for any reason the Option granted
herein is not exercised, all sums paid and services rendered to Optionor by
Optionee shall be retained by Optionor in consideration of the granting of
this Option.
6. Exercise of Option. Optionee may exercise this Option by delivery to
Optionor of written notice of exercise at any time prior to the expiration of
the Option, or provided that at this time of exercise Optionee or Saint
Andrews Golf Shop, Ltd. is not in breach or default of any their obligations
under (i) this Agreement, (ii) the Covenant not to Compete of even date
herewith, (iii) the Lease Agreement for Retail Operations between All-American
Golf and Saint Andrews Golf Shop, Ltd. dated December 30, 1997, (iv) the
Purchase Agreement, or (v) any other agreement between Optionee or any of its
subsidiaries or affiliates and Optionor, Callaway Golf, All-American Golf or
any of their subsidiaries or affiliates.
6.1 Payment of Option Price. The Option Price shall be paid by
wire transfer to Optionor within thirty (30) days after notice of exercise of
Option.
7. Transferability of Option. Neither the Option nor this Option
Agreement may be transferred by Optionee without the prior written approval of
Optionor which approval may be withheld for any reason or no reason without
limiting any other condition which may be imposed by Optionor. As a condition
to the exercise of the Option by any permitted transferee, the transferee must
pay off the unpaid balance plus interest, of the loan (the "Loan") by Callaway
Golf to All-American Golf in the original principal amount of Five Million Two
Hundred Fifty Thousand Dollars ($5,250,000) evidence by a Secured Promissory
Note dated June 13, 1997. The amount required to pay off the Loan shall be
tendered with the payment of the Option Price.
8. Rights as Member Upon Exercise of Option. Optionee acknowledges that
the only rights it shall have as a member of All-American Golf after exercise
of the Option and payment of the Option Price shall be the right to:
(i) allocation of eighty percent (80%) of the net income or losses
from All-American Golf;
(ii) distributions of eighty percent (80%) of the cash
distributions from operations and eighty percent (80%) of the net proceeds
from sale of the assets by All-American Golf;
(iii) whatever value it may receive from the sale of its membership
interest to a third party (subject to the restrictions on the transferability
of its membership interest as set forth in the Operating Agreement); and
(iv) right to inspect the books and records of All-American Golf.
By way of example and not by way of limitation, Optionee shall have no right
to:
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(i) manage All-American Golf;
(ii) remove or cause the removal of any manager of All-American
Golf including Optionor (or its designee); or
(iii) vote on any matter or cause a dissolution of All-American
Golf.
9. Optionor's Rights During the Existence of the Option. The existence
of the Option shall not restrict Optionor in any manner in its ownership and
operation of All-American Golf. By way of example and not by way of
limitation, Optionor shall have the right to:
(i) cease or modify operations of All-American Golf;
(ii) designate a new manager of All-American Golf;
(iii) sell all or any portion of the assets of All-American Golf;
(iv) remove the name Callaway Golf, or any variation there of, from
the Golf Center; or
(v) consistent with this Option Agreement, amend or change in any
manner the Operating Agreement of All-American Golf.
10. Transferability of Optionor's Interest. Subject to the provisions
of paragraph 11, nothing contained herein shall be deemed in any manner to
restrict Optionor's ability to transfer its membership interest in
All-American Golf in whole or in part including any pledge thereof.
11. Notice of Sale. In the event Optionor intends to sell its
membership interest in All-American Golf, or any portion thereof, or
substantially all of the assets of All-American Golf, Optionor shall give
Optionee thirty (30) days notice prior to the closing date of the proposed
sale for the purpose of giving Optionee the opportunity to exercise the
Option. If Option is not exercised, the sale shall be free of Option and
Option shall be void and of no further force or effect.
12. Accounting. Within thirty (30) days after the request by Optionee,
Optionor shall provide Optionee with an accounting which sets forth the unpaid
balance of the Loan and the computation of the Option Price. The Option Price
provided by the accounting in this paragraph 12 shall be the Option Price for
a period of thirty (30) days from the date of the accounting. Optionor shall
have no right to request an accounting more often than once every six (6)
months during the term of this Option.
13. Operating Agreement for All-American Golf. As a condition to
becoming a member in All-American Golf, Saint Andrews must execute an
Operating Agreement (the "Operating Agreement") for All-American Golf. The
Operating Agreement shall be consistent with Optionor's and Optionee's rights
as set forth in this Option Agreement. Optionee acknowledges and agrees that
the Operating Agreement shall contain all restrictions in the transfer of
Optionee's interest as were set forth in the Operating Agreement for
All-American Golf between Callaway Golf and Optionee dated June 13, 1997
including by way of example and not by way of limitation, restriction such as
those that were set forth in Article VII of that Operating Agreement.
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14. Notices. Unless otherwise provided herein, any notice, tender, or
delivery to be given hereunder by either party to the other may be effected by
personal delivery in writing, or by registered or certified mail, postage
prepaid, return receipt requested, and shall be deemed communicated as of
actual receipt, or three (3) days from mailing. Mailed notices shall be
addressed as set forth below, but each party may change his address by written
notice in accordance with this paragraph.
To Optionor: CGV, Inc. c/o
Callaway Golf Company
2285 Rutherford Road
Carlsbad, CA 92008-8815
Attn: Donald H. Dye, President
and Chief Executive Officer
With a copy to: CGV, Inc. c/o
Callaway Golf Company
2285 Rutherford Road
Carlsbad, CA 92008-8815
Attn: Steven C. McCracken, Executive Vice
President, Licensing, Chief Legal Officer
and Secretary
To Optionee: Saint Andrews Golf Corporation
5325 South Valley View Boulevard, Suite 4
Las Vegas, Nevada 89118
Attn: Ron Boreta, President
With a Copy to: Joseph P. Mulhern, Esq.
Gondecki & Del Guidice
221 North LaSalle Street, Suite 2200
Chicago, Illinois 60601
15. Binding Effect. This Option Agreement shall bind and inure to the
benefit of the respective heirs, personal representatives, successors, and
assigns of the parties hereto, except as hereinabove expressly provided.
16. Construction. In the interpretation and construction of this Option
Agreement, the parties acknowledge that the terms hereof reflect extensive
negotiations between the parties and that this Option Agreement shall not be
deemed, for the purpose of construction and interpretation, that either party
drafted this Option Agreement.
17. Dispute Resolution.
17.1 Direct Discussion. In the event of any dispute, claim,
question, or disagreement arising out of or relating to this Option Agreement
(a "Dispute"), the Parties involved in such Dispute shall use their best
efforts to settle such Dispute. To this effect, senior management of the
parties involved shall consult and negotiate with each other in good faith to
attempt to reach a just and equitable solution satisfactory to both Parties.
Any dispute which cannot be resolved within thirty (30) days may be submitted
to binding arbitration as provided below.
17.2 Requirement of Arbitration. Any Dispute which cannot be
resolved through mutual consultation and negotiation, shall be settled by
final and binding arbitration conducted by the San Diego office of
JAMS/Endispute. Nothing stated herein, however, shall preclude any party
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hereto from seeking and obtaining immediate injunctive relief (whether
temporary, preliminary, or permanent) to prevent or restrain a breach by
another party or to seek enforcement of this arbitration provision or to seek
or enforce prejudgement or ancillary remedies. In the event JAMS/Endispute is
no longer in existence or unwilling to conduct the arbitration, the
arbitrators shall be appointed and the arbitration shall be conducted and
governed by California Code of Civil Procedure section 1281, et seq.
17.3 Number of Arbitrators. The number of arbitrators shall be
three (3). The three arbitrators shall be selected as follows: (a) within
ten (10) days of delivery of any demand for arbitration, each party shall
submit to the other party the name of three (3) candidates nominated from the
then-current list of retired judges or justices at the San Diego office of
JAMS/Endispute; (b) within five (5) days of delivery of the opposing party's
list, each party shall submit to the other party the names of two (2)
candidates proposed by the opposing party which are to be stricken from the
opposing party's nomination list, with the non-challenged candidates serving
as two (2) of the three (3) arbitrators; (c) the parties will then confer on
the selection of a third arbitrator and, if no agreement can be reached within
five (5) days, JAMS/Endispute shall appoint the third arbitrator from the list
of retired judges or justices at the San Diego office of JAMS/Endispute.
17.4 Location; Commencement; Language. The arbitration shall take
place in San Diego, California, and shall be commenced within thirty (30) days
of the selection of the arbitrator(s), unless otherwise agreed to by the
parties or ordered by the arbitrator(s) for good cause shown. The arbitration
hearing shall last no longer than three (3) days.
17.5 Discovery. It is expressly understood that the parties have
chosen arbitration to avoid the burdens, costs and publicity of a court
proceeding, and the arbitrators are expected to handle all aspects of the
matter, including discovery, in a manner so as to minimize the expense, time,
burden and publicity of the process, while assuring a fair and just result.
The arbitrator shall limit and restrict the scope of discovery (e.g., number
of depositions, document requests, etc.) to only those matters clearly
relevant to the dispute. Subject to this limitation, the provisions of
California Code of Civil Procedure section 1283.05 are incorporated into, made
part of and are applicable to any arbitration conducted pursuant to this
clause.
17.6 Arbitrator's Award. The arbitrator(s) shall issue a written
award within twenty (20) days after the matter is submitted for decision. The
arbitrator(s) shall apply the law of the State of California (excluding
California choice of law provisions.) The arbitrator(s) shall not have the
authority to award punitive or exemplary damages to any party.
17.7 Expenses. The expenses of the arbitration, including the
arbitrators' fees, expert witness fees, and attorney's fees, may be awarded to
the prevailing party, in the discretion of the arbitrators, or may be
apportioned between the parties in any manner deemed appropriate by the
arbitrators. Unless and until the arbitrators decide that one party is to pay
for all (or a share) of such expenses, both parties shall share equally in the
payment of the arbitrators' fees as and when billed by the arbitrators.
17.8 Confidentiality. Except as set forth below, the parties shall
keep confidential the fact of the arbitration, the dispute being arbitrated,
the decision of the arbitrators, and any documents produced by the parties in
the course of the arbitration. Notwithstanding the foregoing, the parties may
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disclose information about the arbitration to persons who have a need to know,
such as directors, trustees, management employees, witnesses, experts,
investors, attorneys, lenders, insurers, and others who may be directly
affected. Once the arbitration award has become final, if the arbitration
award is not promptly satisfied, then the prevailing party may,
notwithstanding the foregoing, disclose information about the arbitration only
to the extent necessary to obtain judicial enforcement of the award.
17.9 Enforcement of Award. The arbitration award shall be final
and shall bind the parties. Any award may be enforced by an action filed in
the San Diego Superior Court or the Federal District Court, Southern District
of California. For purposes of this arbitration provision, the parties hereby
agree to submit to the jurisdiction of these courts and hereby waive any or
all objections as to personal jurisdiction, subject matter jurisdiction and/or
venue with respect to such courts.
18. Entire Agreement. Modifications. This Option Agreement, together
with exhibits and schedules attached hereto, contains the entire agreement
between the parties hereto with respect to the transactions contemplated
hereby, and contains all of the terms and conditions thereof and supersedes
all prior agreements and understandings relating to the subject matter hereof.
No changes or modifications of or additions to this Option Agreement shall be
valid unless the same shall be in writing and signed by each party hereto.
19. Severability. The provisions of this Option Agreement shall be
deemed severable and the invalidity or unenforceability of any one or more of
the provisions hereof shall not affect the validity and enforceability of the
other provisions hereof.
20. Waivers. No waiver of any of the provisions of this Option
Agreement shall be deemed to be or shall constitute a waiver of any other
provision of this Option Agreement, whether or not similar, nor shall any
waiver constitute a continuing waiver. No waiver of any provision of this
Option Agreement shall be binding on the parties hereto unless it is executed
in writing by the party making the waiver.
21. Governing Law. This Agreement is made and shall be governed by, and
construed and enforced in accordance with, the internal laws of the State of
California, without regard to the conflict of laws principles thereof, as the
same apply to agreements executed solely by residents of California and wholly
to be performed within California.
22. Venue; Submission to Jurisdiction. Each of the parties submits to
the jurisdiction of any state or federal court sitting in San Diego County,
California, in any action or proceeding relating to the enforcement of
paragraph 17 of this Option Agreement, and agrees not to bring any action or
proceeding relating to the enforcement of paragraph 17 of this Operating
Agreement in any other court. Each of the parties waives any defense of
inconvenient forum to the maintenance of any action or proceeding so brought
and waives any bond, surety, or other security that might be required of any
other party with respect thereto.
23. Authority. Each of the persons executing this Option Agreement
represents and warrants that it is authorized to execute this Option Agreement
and the entity on whose behalf they are signing is bound by the terms hereof.
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24. Expenses. Except as otherwise provided for herein, each party
hereto shall be responsible for its own expenses accrued in connection with
the negotiation, execution and consummation of the transactions contemplated
by this Option Agreement, including fees of his or its respective attorneys,
accountants or consultants.
IN WITNESS WHEREOF, the parties hereto have executed this Option
Agreement the day and year first above written.
OPTIONOR:
CGV, INC., a California corporation
By:/s/ Donald H. Dye
Donald H. Dye, President and CEO
By:/s/ Steven McCracken
Its: Secretary and Chief Legal Officer
OPTIONEE:
SAINT ANDREWS GOLF CORPORATION, a Nevada corporation
By:/s/ Ron Boreta
Ron Boreta, President
By:/s/ Vaso Boreta
Vaso Boreta
Chairman of the Board
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TERM LOAN AGREEMENT
This Term Loan Agreement (the "Agreement") is made and entered into this
15th day of September, 1998, by and between NEVADA STATE BANK, a Nevada
banking corporation ("Lender") and ALL AMERICAN SPORTPARK LLC, a Nevada
limited liability company ("Borrower").
In exchange for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Borrower and Lender agree as
follows:
ARTICLE 1
DEFINITIONS
1.1 Defined Terms. When used in this Agreement, the following terms
shall have the following meanings:
1.1.1 "Additional Property" means the real property located in
Clark County, State of Nevada, as that property is more particularly described
in the Additional Trust Deed.
1.1.2 "Additional Trust Deed" means the Trust Deed, Assignment of
Rents, Security Agreement and Fixture Filing dated the Closing Date and
entered into by Voss Boreta, also known as Vaso Boreta in connection with the
Loan which encumbers the Additional Property.
1.1.3 "Appraisal" means the appraisal of the Property, which
appraisal indicates a value for the Project of not less than $27,000,000.00.
1.1.4 "Assignment of Ground Lease" means the Assignment of Ground
Lease for Security dated the Closing Date and entered into in connection with
the Loan.
1.1.5 "Assignment of Leases" means the Assignment of Leases dated
the Closing Date and entered into by Borrower in connection with the Loan.
1.1.6 "Assignment of License Agreement" means collectively the
Assignment of License Agreement dated the Closing Date and entered into by
Borrower in connection with the Loan for each License Agreement, together with
all consents from Licensors attached as exhibits to each Assignment of License
Agreement.
1.1.7 "Borrower Trust Deed" means the Term Loan Trust Deed,
Assignment of Rents, Security Agreement and Fixture Filing dated the Closing
Date and entered into by Borrower in connection with the Loan which encumbers
the Property.
1.1.8 "Closing Date" means the date of this Agreement set forth in
the first paragraph on the first page of this Agreement.
1.1.9 "Collateral" means the property described in Section 2.4 of
this Agreement as collateral for the Loan.
1.1.10 "Continuing Guaranty" means the Continuing Guaranty dated
the Closing Date and executed by Guarantor in connection with the Loan.
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1.1.11 "Debt Service Coverage Ratio" means the ratio, as calculated
by Lender, of Borrower's net operating income before interest, taxes,
depreciation and amortization to annual debt service, including, without
limitation, principal and interest payments on the Loan, and payments under
all capital leases to which Borrower is a party.
1.1.12 "Environmental Compliance Audit" means an audit of the
Project for the purpose of determining whether Borrower and the Project are in
full compliance with all applicable Environmental Laws. The audit shall
include, without limitation, (i) a determination of all environmental
registrations and notices required to be filed by Borrower with respect to the
Project, (ii) a determination of all permits and approvals required to be
obtained or maintained by Borrower with respect to the Project, (iii) an
examination of the Project to determine whether there has been any disposal of
Hazardous Materials on or under the Project or any other violation of any
applicable Environmental Law affecting Borrower or the Project which requires
remediation to be in compliance with Environmental Laws in effect as of the
date of the audit, and (iv) a review of Borrower's facilities, records,
policies, procedures and ongoing operations to determine whether Borrower's
operations are being conducted in full compliance with all applicable
Environmental Laws.
1.1.13 "Environmental Compliance Audit Certificate" means a
certificate addressed to Lender issued by a competent, independent
environmental consultant acceptable to Lender certifying that the consultant
has completed an Environmental Compliance Audit of Borrower and the Project,
and that, except as otherwise disclosed in the Environmental Report, (i) as of
the effective date of the certificate, Borrower and the Project are in full
compliance with all applicable Environmental Laws, (ii) there has been no
known disposal of Hazardous Materials at, in, on or under the Project which
requires remediation to be in compliance with Environmental Laws in effect as
of the date of the audit, and (iii) in the consultant's opinion after due
inquiry, there is no basis for the consultant to recommend or require further
investigation or testing with respect to any suspected or possible disposal of
Hazardous Materials at the Project.
1.1.14 "Environmental Laws" means all federal, state and local laws
and ordinances pertaining to the generation, manufacture, refining, recycling,
treatment, handling, use, storage, transportation, disposal and cleanup of
hazardous, radioactive, reactive, flammable, infectious, toxic or dangerous
substances or materials or the protection of public health or of the
environment, including without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 (42 U.S.C. Sec. 9601, et seq.);
the Resource Conservation and Recovery Act of 1976 (42 U.S.C. Sec. 6901, et
seq.); the Toxic Substances Control Act (15 U.S.C. Sec. 2601, et seq.); the
Clean Air Act (42 U.S.C. Sec. 7401, et seq.); the Federal Water Pollution
Control Act (33 U.S.C. Sec. 1251, et seq.); the Safe Drinking Water Act
(42 U.S.C. Sec. 300(f) et seq.); the Hazardous Material Transportation Act
(49 U.S.C. Sec. 1801, et seq.); the Federal Insecticide, Fungicide and
Rodenticide Act (7 U.S.C. Sec. 136 et seq.); the Occupational Safety and
Health Act (29 U.S.C. Sec. 651 et seq.), including, without limitation, NRS
Chapters 444, 445 and 459, NRS Section 447.045 and NRS Sections 618.750
through 618.850 and the Uniform Fire Code (1988 Edition); and any similar state
law, including all amendments thereto and all regulations promulgated
thereunder, and further including the conditions and requirements of all
permits and regulatory approvals issued thereunder.
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1.1.15 "Environmental Report" means individually and collectively
the Environmental Sensitivity Questionnaire dated May 20, 1998 prepared by
Borrower and delivered to Lender in connection with the Property, and the
Level I Environmental Report dated May 20, 1998 prepared by Terracon and
delivered to Lender in connection with the Property.
1.1.16 "Event of Default" has the meaning set forth in Article 7 of
this Agreement.
1.1.17 "Ground Lease" means collectively (1) the Indenture of Lease
dated June 9, 1997 entered into between Ground Lessor, as "Landlord", and All
American Sportpark, Inc., a Nevada corporation ("Sportpark, Inc."), as
"Tenant", wherein Ground Lessor leases the Property to Sportpark, Inc., (2)
the Memorandum of Lease dated June 20, 1997 entered into between Ground Lessor
and Sportpark, Inc. and recorded in the official records of Clark County,
State of Nevada on June 23, 1997 as Document No. 00042, in Book 970623, (3)
the Assignment and Assumption Agreement and Amendment to Memorandum of Lease
dated September 17, 1997 entered into between Sportpark, Inc., as "Assignor",
Saint Andrews Golf, as "Assignee", and Ground Lessor, as "Landlord" and
recorded in the official records of Clark County, State of Nevada on September
22, 1997 as Document No. 00059, in Book 970922, wherein Sportpark, Inc.
assigned all of its rights, duties and obligations under the Ground Lease to
Saint Andrews Golf, and (4) the Assignment and Assumption Agreement and
Amendment to Lease to be entered into between Saint Andrews Golf, as "Lessee",
Sportpark, Inc., as "Assignor", Borrower, as "Borrower", and Ground Lessor, as
"Lessor", to be recorded in the official records of Clark County, State of
Nevada, wherein Saint Andrews Golf assigns all of its rights, duties and
obligations under the Ground Lease to Sportpark, Inc., and Sportpark, Inc.
assigns all of its rights, duties and obligations under the Ground Lease to
Borrower.
1.1.18 "Ground Lease Estoppel Certificate" means the Ground Lease
Estoppel Certificate and Consent dated the Closing Date and executed by Ground
Lessor in connection with the Loan.
1.1.19 "Ground Lease Subordination Agreement" means the Ground
Lease Subordination Agreement dated the Closing Date and executed by Ground
Lessor in connection with the Loan.
1.1.20 "Ground Lessor" means Urban Land of Nevada, Inc., a Nevada
corporation.
1.1.21 "Ground Lessor Trust Deed" means the Trust Deed, Assignment
of Rents, Security Agreement and Fixture Filing dated the Closing Date and
entered into by Ground Lessor in connection with the Loan which encumbers the
Property.
1.1.22 "Guarantor" means individually and collectively Saint
Andrews Golf and Las Vegas Golf.
1.1.23 "Hazardous Materials" means (a) "hazardous waste" as defined
by the Solid Waste Disposal Act, as amended by the Resource Conservation and
Recovery Act of 1976 (42 U.S.C. Section 6901 et seq.), including any future
amendments thereto, and regulations promulgated thereunder; (b) "hazardous
substance" as defined by the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (42 U.S.C. Section 9601 et seq.), and
by NRS 40.504, including any future amendments thereto, and regulations
promulgated thereunder; (c) asbestos; (d) polychlorinated biphenyls; (e)
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underground storage tanks, whether empty or filled or partially filled with
any substance; (f) any substance the presence of which is or becomes
prohibited by any federal, state, or local law, ordinance, rule, or
regulation; and (g) any hazardous or toxic substance, material, or waste which
under any federal, state, or local law, ordinance, rule, or regulation
requires special handling or notification in its collection, storage,
treatment or disposal, and any matter or material defined as a "Hazardous
Material", or other similar term, under the Ground Lease.
1.1.24 "Las Vegas Golf" means Las Vegas Discount Golf & Tennis,
Inc., a Colorado corporation.
1.1.25 "License Agreements" means individually and collectively (1)
the License Agreement dated August 1, 1995, as amended by the Amendment No. 2
to License Agreement dated May 6, 1997, and the Amendment No. 3 to License
Agreement dated September 1, 1997, each entered into between the National
Association for Stock Car Auto Racing, Inc., a Florida corporation, as
"Licensor", and Saint Andrews Golf, as "Licensee", (2) the Sponsorship
Agreement dated December 4, 1997 entered into between Pepsi-Cola Company, a
division of PepsiCo, Inc., a North Carolina corporation, (3) the Letter
Agreement dated December 22, 1994, as amended by the Amended Letter Agreement
dated August 25, 1997, each entered into between the Major League Baseball
Properties, Inc., acting on behalf of and as an agent for the Major League
Baseball Clubs, and Saint Andrews Golf, and (4) any and all other license
agreements entered into or to be entered into between Saint Andrews Golf or
Borrower and any and all licensors ("Licensors") in connection with granting
of certain rights in such licenses for use in connection the Project.
1.1.26 "Loan" means the loan described in Article 2 of this
Agreement made by Lender to Borrower pursuant to the Loan Documents, which
Loan is in the amount of the Principal Amount.
1.1.27 "Loan Documents" means this Agreement, the Note, Borrower
Trust Deed, Assignment of Leases, SNDA, Continuing Guaranty, UCC-1 Financing
Statement, Assignment of License Agreement, together with all consents from
Licensors attached as exhibits to the Assignment of License Agreement,
Assignment of Ground Lease, Ground Lease Estoppel Certificate, Ground Lease
Subordination Agreement, Ground Lessor Trust Deed, Additional Trust Deed, and
any other documents, whether now or hereafter existing, executed in connection
with the Loan.
1.1.28 "Loan Fee" means the loan fees described in Section 2.3 of
this Agreement.
1.1.29 "Maturity Date" means September 1, 2013, the date on which
the Principal Indebtedness and all accrued and unpaid interest shall be due
and owing.
1.1.30 "Note" means the Promissory Note dated the Closing Date and
executed in connection with the Loan.
1.1.31 "Permitted Encumbrances" means the liens and encumbrances
that have been approved by Lender to appear as exceptions to title in the
Title Policy, pursuant to Lender's escrow instruction letter to the Title
Company executed in connection with the Loan and delivered to the Title
Company, and any other title matters approved by Lender in writing during the
term of the Loan.
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1.1.32 "Principal Amount" means Thirteen Million Five Hundred
Thousand Dollars ($13,500,000.00).
1.1.33 "Principal Indebtedness" means the Principal Amount together
with any additional advances, if any, and any additional amounts advanced by
Lender, if any, pursuant to the Loan Documents.
1.1.34 "Project" means the Property together with all improvements
on the Property, including all buildings.
1.1.35 "Property" means the real property located in Clark County,
State of Nevada, as that property is described on the attached Exhibit A which
is incorporated into this Agreement by this reference.
1.1.36 "Providers" means individually and collectively the key
suppliers, vendors, and customers of Borrower whose business failure would,
with reasonable probability, result in a material adverse change in the
financial condition or prospects of Borrower.
1.1.37 "Saint Andrews Golf" means Saint Andrews Golf Corporation, a
Nevada corporation.
1.1.38 "SNDA" means the Subordination, Non-Disturbance and
Attornment Agreement satisfactory in form and content to Lender and Lender's
counsel, from each tenant holding a leasehold interest in all or any part of
the Project.
1.1.39 "Survey" means the current ALTA survey of the Property
described in Section 5.3 of this Agreement.
1.1.40 "Title Commitment" means the commitment for title insurance
described in Section 5.2 of this Agreement.
1.1.41 "Title Company" means Nevada Title Company, whose address is
3320 West Sahara Avenue, Suite 200, Las Vegas, Nevada 89102.
1.1.42 "Title Policy" means the policy of title insurance described
in Section 6.10 of this Agreement.
1.1.43 "Trust Deed" means collectively the Borrower Trust Deed and
the Ground Lessor Trust Deed.
1.1.44 "UCC-1 Financing Statement" means collectively the UCC-1
Financing Statements dated the Closing Date and entered into in connection
with the Loan.
1.1.45 "Year 2000 Compliant" means, with regard to any entity, that
all material software utilized by such entity is able to fully function
without causing any error to such entity's date-sensitive data.
ARTICLE 2
AMOUNT AND TERMS OF LOAN
2.1 Term of Loan. The Loan shall be an amortizing term loan for a term
commencing on the Closing Date and ending on the Maturity Date, unless such
completion date has been previously extended by Lender
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2.2 Interest Rate and Payment. The Loan shall be payable on the date
and upon the terms and conditions set forth in the Note.
2.3 Loan Fee. Borrower agrees to pay to Lender from the Loan proceeds,
as a non-refundable fee for originating the Loan, an amount equal to One
Hundred Thirty-five Thousand Dollars ($135,000.00), which sum is to be paid on
the Closing Date.
2.4 Collateral. In addition to all other collateral described in any of
the Loan Documents, the Loan shall be secured by the following documents and
all of the collateral described in each of the following documents (the
"Collateral"):
2.4.1 Borrower Trust Deed. The Borrower Trust Deed.
2.4.2 Ground Lessor Trust Deed. The Ground Lessor Trust Deed.
2.4.3 Assignment of Leases. The Assignment of Leases.
2.4.4 UCC-1 Financing Statement. The UCC-1 Financing Statement.
2.4.5 Assignment of License Agreement. The Assignment of License
Agreement.
2.4.6 Assignment of Ground Lease. The Assignment of Ground Lease
for security.
2.4.7 Additional Trust Deed. The Additional Trust Deed. Lender
agrees to reconvey its interest in the Additional Property as Collateral for
the Loan, at such time as the Borrower achieves a Debt Service Coverage Ratio
equal to or greater than 1.75:1 for two consecutive quarters.
2.5 Continuing Guaranty. The performance of Borrower's obligations
under the Loan shall be guaranteed by Guarantor in accordance with the
Continuing Guaranty.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
Borrower makes the following representations and warranties to Lender:
3.1 Organization and Qualification. Borrower is a limited liability
company duly organized and existing in good standing under the laws of the
State of Nevada. Borrower is duly qualified to do business in each
jurisdiction where the conduct of its business requires qualification.
Borrower has the full power and authority to own its properties and to conduct
the business in which it engages and to enter into and perform its obligations
under the Loan Documents, and all agreements, documents, obligations, and
transactions contemplated by this Agreement. The only manager of All American
Sportpark LLC is SportPark Management, Inc.
3.2 Authorization. The execution, delivery, and performance by Borrower
of the Loan Documents and all agreements, documents, obligations, and
transactions contemplated by this Agreement have been duly authorized by all
necessary action on the part of Borrower and are not inconsistent with
Borrower's articles of organization and operating agreement or any resolution
of the members of Borrower, do not and will not contravene any provision of,
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or constitute a default under, any indenture, mortgage, contract, or other
instrument to which Borrower is a party or by which it is bound, and that upon
their execution and delivery the Loan Documents will constitute legal, valid,
and binding agreements and obligations of Borrower, enforceable in accordance
with their respective terms.
The execution, delivery, and performance by any of the members or
managers (collectively the "Manager") of Borrower of the Loan Documents and
all agreements, documents, obligations, and transactions herein contemplated
will not contravene any position of, or constitute a default under, any
indenture, mortgage, contract, or other instrument to which the Manager is a
party or by which it is bound, and that upon execution and delivery hereof and
thereof, the Loan Documents will constitute legal, valid, and binding
agreements and obligations of the Manager, in its capacity as manager of
Borrower enforceable in accordance with their respective terms.
3.3 Pending Litigation. Except as set forth on the attached Exhibit B
which is incorporated herein by this reference, there is no action, suit or
proceeding pending or to the best of Borrower's knowledge, threatened, against
or affecting Borrower or the Property, in any court of law or equity or before
any governmental or quasi-governmental instrumentality, whether federal,
state, county or municipal, which would materially and adversely affect
Borrower's ability to perform under the Loan Documents.
3.4 Tax Returns. To the best of Borrower's knowledge, all tax returns
and reports of Borrower required by law to be filed have been duly filed and
all taxes, assessments, and other governmental charges upon Borrower and upon
Borrower's properties, assets or income and upon the Property, which are due
and payable, have been paid and shall continue to be so paid.
3.5 Compliance with Laws. The Project is in compliance with all
applicable zoning, environmental protection (including, without limitation,
wetlands and endangered species protection), use and building codes, planning,
subdivision covenants, conditions, and restrictions recorded against the
Property, laws, regulations and ordinances, including, without limitation to
the extent applicable, the Miller Act (40 USC Section 270a and following), the
Davis-Bacon Act (40 USC Section 276a and following), and all other federal law
applicable to federal projects, and Borrower has no knowledge or notice of any
violation of any laws, ordinances, codes, requirements or orders of any
governmental instrumentality having jurisdiction of the Property, including,
without limitation, all applicable federal, state and local laws, rules,
ordinances and regulations relating to the use, storage, transportation, and
disposal of any Hazardous Materials on, in or under the Project, and all
applicable federal, state and local laws, rules, ordinances and regulations
relating to wetlands or endangered species protection and the effect of the
development, construction and use of the Project on any wetlands or endangered
species. Borrower has no knowledge of any actions or proceedings pending
before any court or administrative agency with respect to the validity of such
laws, regulations and ordinances or with respect to any certificates issued
thereunder.
3.6 Financial Statements and Other Information. Any and all financial
statements delivered to Lender by Borrower are accurate, complete, prepared by
an independent certified public accounting firm in accordance with generally
accepted accounting principles consistently applied, or other accounting
standards acceptable to Lender, and accurately represent the financial
condition of Borrower and reflect accurately Borrower's assets, properties,
and results of operation of Borrower's business as of the dates thereof. No
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material adverse change has occurred in the financial condition of Borrower
reflected therein since the dates thereof and no additional borrowings have
been made by Borrower since the dates thereof, other than the borrowing
contemplated hereby or approved by Lender. All other documents and
information delivered to Lender by Borrower are accurate in all respects.
3.7 Hazardous Materials and Wetlands. No Hazardous Materials other than
as set forth in the Environmental Report are now located on the Property, and
neither Borrower nor any other person has ever caused or permitted any
Hazardous Materials to be placed, held, located or disposed of on, under or at
the Property, or any part thereof, except in full compliance with all
applicable Environmental Laws. To the best of Borrower's knowledge, no
investigation, administrative order, consent order and agreement, litigation
or settlement with respect to Hazardous Materials is proposed, threatened,
anticipated or in existence with respect the Property. The representations
and warranties contained in this Section 3.7 shall survive the reconveyance of
the Trust Deed. There are no wetlands on the Property, as wetlands are
regulated pursuant to Section 404 of the Federal Water Pollution Control Act
(Clean Water Act), and the regulations promulgated under the statute or its
successor statute.
3.8 Title to Property. Ground Lessor has good and marketable title to
the Property, subject to the terms and conditions of the Ground Lease.
Borrower has a leasehold interest in the Property under the Ground Lease,
subject only to the Permitted Encumbrances. The Property, and any and all
improvements thereon, are free and clear of all liens and encumbrances,
excepting the Permitted Encumbrances.
3.9 Commission. No brokerage or other fee, commission or compensation
is to be paid by Lender, and Borrower hereby indemnifies Lender against any
and all claims for brokerage fees or commissions which may be asserted against
Lender, and hereby agrees to pay all expenses incurred by Lender in connection
with the defense of any action or proceeding brought to collect any such
brokerage fees or commissions, including but not limited to costs and
attorneys fees.
3.10 Release. In recognition of Lender's right to have all its
attorneys fees and expenses incurred in connection with this Agreement secured
by the Collateral, notwithstanding payment in full of the obligations secured
by the Collateral, Lender shall not be required to release, reconvey, or
terminate any security interest or lien in or on the Collateral unless and
until Borrower and Guarantor have executed and delivered to Lender general
releases in form and substance satisfactory to Lender.
3.11 Americans with Disabilities Act. The improvements are accessible
to and usable by persons with disabilities pursuant to the accessibility
requirements of the Americans With Disabilities Act (the "Act"), and all
applicable regulations promulgated by the U.S. Architectural and
Transportation Barriers Compliance Board, by the U.S. Department of Justice,
and by all other applicable agencies. The improvements comply with all
accessibility requirements of the Act and regulations, together with the
requirements of the Americans With Disabilities Act Accessibility Guidelines
for Buildings and Facilities.
3.12 Ground Lease. The Ground Lease is a valid and binding obligation
of Ground Lessor and Borrower enforceable in accordance with its terms, and is
in full force and effect. As of the Closing Date, no defaults have occurred
under the Ground Lease and no events have occurred nor do any conditions exist
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which with the giving of notice, the passage of time, or both, would
constitute a default under the Ground Lease.
3.13 License Agreements. The License Agreements are valid and binding
obligations of Licensors and Borrower enforceable in accordance with their
terms, and are in full force and effect. As of the Closing Date, no defaults
have occurred under the License Agreements and no events have occurred nor do
any conditions exist which with the giving of notice, the passage of time, or
both, would constitute a default under the License Agreements.
ARTICLE 4
GUARANTY
4.1 Guaranty. Borrower's obligations under the Loan Documents shall
be guaranteed by Guarantor. Upon execution and delivery of this Agreement,
Guarantor shall execute and deliver to Lender the Continuing Guaranty in a
form acceptable to Lender.
4.2 Guarantor Organization and Qualification. Saint Andrews Golf
represents and warrants that (i) it is a corporation duly organized and
existing in good standing under the laws of the State of Nevada, (ii) it is
duly qualified to do business in each jurisdiction where the conduct of its
business requires qualification, and (iii) it has the full power and authority
to own its properties and to conduct the business in which it engages and to
enter into and perform its obligations under the Loan Documents, the
Continuing Guaranty, and all agreements, documents, obligations, transactions
contemplated by this Agreement.
Las Vegas Golf represents and warrants that (i) it is a corporation duly
organized and existing in good standing under the laws of the State of
Colorado, (ii) it is duly qualified to do business in each jurisdiction where
the conduct of its business requires qualification, and (iii) it has the full
power and authority to own its properties and to conduct the business in which
it engages and to enter into and perform its obligations under the Loan
Documents, the Continuing Guaranty, and all agreements, documents,
obligations, transactions contemplated by this Agreement.
4.3 Guarantor Authorization. Saint Andrews Golf represents and
warrants that the execution, delivery, and performance by Saint Andrews Golf
of this Agreement, the Continuing Guaranty and all agreements, documents,
obligations, and transactions contemplated by this Agreement have been duly
authorized by all necessary action on the part of Saint Andrews Golf and are
not inconsistent with Saint Andrews Golf's articles of incorporation and
bylaws or any resolution of the board of directors of Saint Andrews Golf, do
not and will not contravene any provision of, or constitute a default under,
any indenture, mortgage, contract, or other instrument to which Saint Andrews
Golf is a party or by which Saint Andrews Golf is bound, and that, upon their
execution and delivery, of this Agreement and the Continuing Guaranty will
constitute legal, valid, and binding agreements and obligations of Saint
Andrews Golf, enforceable in accordance with their respective terms.
Las Vegas Golf represents and warrants that the execution, delivery, and
performance by Las Vegas Golf of this Agreement, the Continuing Guaranty and
all agreements, documents, obligations, and transactions contemplated by this
Agreement have been duly authorized by all necessary action on the part of Las
Vegas Golf and are not inconsistent with Las Vegas Golf's articles of
incorporation and bylaws or any resolution of the board of directors of Las
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Vegas Golf, do not and will not contravene any provision of, or constitute a
default under, any indenture, mortgage, contract, or other instrument to which
Las Vegas Golf is a party or by which Las Vegas Golf is bound, and that, upon
their execution and delivery, of this Agreement and the Continuing Guaranty
will constitute legal, valid, and binding agreements and obligations of Las
Vegas Golf, enforceable in accordance with their respective terms.
4.4 Guarantor Financial Statements and Reports. Guarantor covenants
that it shall provide Lender with such financial statements and reports as
Lender may reasonably request, and that such statements and reports shall be
prepared in accordance with generally accepted accounting principles
consistently applied, or other accounting standards acceptable to Lender, and
shall fully and fairly represent Guarantor's financial condition and the
results of its operations for the period or periods covered. As to all
financial statements and reports which Guarantor has furnished or may in the
future furnish to Lender, Guarantor acknowledges and agrees that it has a
fiduciary duty to ensure that such statements and reports are accurate and
complete.
Until requested otherwise by Lender, Guarantor shall provide the
following financial statements and reports to Lender:
Annual audited financial statements of Guarantor with an unqualified
opinion for each fiscal year from an independent certified public accounting
firm acceptable to Lender and in a form acceptable to Lender, to be delivered
to Lender within one hundred twenty (120) days of the end of each fiscal year
during the term of the Loan, commencing December 31, 1998 and shall cover the
calendar year 1998. Guarantor shall also submit to Lender copies of any
management letters or other reports submitted to Guarantor by independent
certified public accountants in connection with examination of the financial
statements of Guarantor made by such accountants.
Annual tax returns for each fiscal year of Guarantor to be delivered to
Lender within thirty (30) days of the date of filing of the return. The
annual tax returns shall include a certification by Guarantor that each annual
tax return is accurate, not misleading, and prepared in accordance with
applicable law.
4.5 Accuracy of Guarantor Financial Statements. Guarantor represents
and warrants that all of its financial statements, pro forma and actual,
previously delivered to Lender have been prepared in accordance with generally
accepted accounting principles consistently applied, or other accounting
standards acceptable to Lender, and accurately represent Guarantor's actual
and anticipated financial condition as of the date of such financial
statements, and fully and fairly represent the results of Guarantor's
operations for the period or periods covered. Guarantor represents and
warrants that since the date of such financial statements, there has been no
material adverse change in Guarantor's financial condition.
ARTICLE 5
CONDITIONS PRECEDENT TO DISBURSEMENT
As a condition precedent to the disbursement of any Loan proceeds, all of
the following conditions must be fully satisfied as determined by Lender, in
Lender's sole discretion:
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5.1 Authority. Borrower has delivered to Lender a copy of its operating
agreement, together with all amendments, and a certified copy of its articles
of organization, together with certified copies of all amendments thereto and
an original certificate of member resolutions of the members of Borrower
acceptable to Lender. Borrower also has delivered to Lender such other
evidence of Borrower's good standing and authority as Lender may request.
5.2 Title Commitment. Borrower has delivered to Lender a current
commitment for title insurance or preliminary title report satisfactory to
Lender, in Lender's sole discretion, respecting the Project from the Title
Company on a current ALTA extended form coverage basis which is acceptable to
Lender (the "Title Commitment"). The Title Commitment shall set forth a
description of the Property that is the same as the description of the
Property set forth in the Survey. The Title Commitment shall have attached
copies of all instruments which appear as exceptions to title in the Title
Commitment. The Title Commitment shall also include a judgment search
respecting Borrower and any other party that holds title to all or any portion
of the Project.
5.3 Survey. Borrower has delivered to Lender a current survey of the
Project acceptable to Lender and the Title Company (the "Survey"). The Survey
shall be prepared and certified by a land surveyor or engineer registered in
the state in which the Project is located. The Survey must be prepared in
compliance with the minimum standard detail requirements for Land Title
Surveys as most recently adopted by ALTA. The Survey shall bear the land
surveyor's or engineer's certificate in favor of Borrower, Lender and the
Title Company that the Survey has been prepared in compliance with the minimum
standard detail requirements. The Survey shall identify by reference to the
exception number and recording information set forth in the Title Commitment
each of the easements, rights-of-way, encroachments and other exceptions to
title referred to in the Title Commitment that can be depicted on the Survey.
5.4 Opinion of Counsel. If required by Lender, Borrower has delivered
to Lender an opinion from Borrower's counsel in form and content satisfactory
to Lender.
5.5 Appraisal. Lender has received and approved the Appraisal. The
Appraisal shall be prepared by a certified general M.A.I. appraiser
satisfactory to Lender.
5.6 Environmental Report. Borrower has delivered to Lender the
Environmental Report satisfactory to Lender evidencing that there is no
Hazardous Material on the Property and certifying that the Property will not
be affected by any environmental regulations or ordinances of any municipal or
state agency or board.
5.7 Delivery of Loan Documents. All of the Loan Documents requested by
Lender have been fully executed and the original executed documents delivered
to Lender.
5.8 Recording and Filing of Loan Documents. All of the Loan Documents
which require filing or recording have been properly filed and recorded so
that all of the liens and security interests granted to Lender in connection
with the Loan will be properly created and perfected and be priority liens on
the Collateral.
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5.9 Lien on Collateral. The Ground Lessor Trust Deed and other
applicable Loan Documents shall constitute and create a valid first lien upon
the Collateral, free of any prior mechanic's liens or materialmen's liens or
special assessments for work completed or under construction on or before the
Closing Date, subject only to the Permitted Encumbrances. The Ground Lease
and the Borrower Trust Deed shall constitute and create a valid second lien
and third lien, respectively, upon the Collateral, free of any prior
mechanic's liens or materialmen's liens or special assessments for work
completed or under construction on or before the Closing Date, subject only to
the Permitted Encumbrances.
5.10 Ground Lease. Borrower has provided Lender with evidence
satisfactory to Lender that the Ground Lease is in full force and effect and
that no default has occurred under the Ground Lease and no events have
occurred nor do any conditions exist which with the giving of notice, the
passage of time, or both, would constitute a default under the Ground Lease.
Borrower has delivered to Lender the fully executed Ground Lease Estoppel
Certificate from Ground Lessor.
5.11 SNDA. Borrower has provided Lender, as Lender in its sole
discretion may require, with duly executed, in recordable form, SNDAs,
satisfactory in form and content to Lender and Lender's counsel, from tenants
holding a leasehold interest to all or any part of the Project pursuant to
which such tenant, among other things, subordinates all of such tenant's
rights, title, and interest in and to the Project to the Loan Documents.
ARTICLE 6
COVENANTS OF BORROWER
Borrower agrees and covenants with Lender as follows:
6.1 Assignment. Borrower shall not, without the prior written consent
of Lender, mortgage, assign, convey, transfer, sell or otherwise dispose of or
encumber the Project, Borrower's interest in the Project, or any part of the
Project, or the income to be derived from the Project.
6.2 Right of Inspection. Lender or Lender's agents shall at all times
and at Borrower's expense have the right of entry upon and have free access to
the Project and have the right to inspect all books, contracts and records of
Borrower relating thereto.
6.3 Insurance. Borrower shall provide and maintain, or cause to be
provided and maintained, at all times, the insurance policies required to be
provided and maintained pursuant to the Ground Lease, and the following
insurance policies:
6.3.1 Liability Insurance. Bodily injury and general liability
insurance with a single limit per accident or occurrence of not less than
$1,000,000.00 acceptable to Lender insuring against any and all liability of
the insured with respect to the Project or arising out of the maintenance, use
or occupancy thereof.
6.3.2 Property Hazard Insurance. Multi-peril property damage
insurance, including, without limitation, fixtures and personal property to
the extent they are maintained on the Property, and providing, as a minimum,
fire and extended coverage (including all perils normally covered by the
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standard "all risk" endorsement, if such is available) on a full replacement
cost basis in an amount not less than 100% of the insurable value of the
improvements, exclusive of the Property, foundations and other items normally
excluded from coverage (based upon current replacement cost), with a single
limit per accident or occurrence of not less than $1,000,000.00.
6.3.3 Flood Insurance. Flood insurance covering either the
Principal Amount or the maximum amount of insurance available, whichever is
more, or in lieu of such flood insurance, evidence, satisfactory to Lender,
that no part of the Project is, or will be, within an area designated as a
flood hazard area by the Federal Insurance Administration, Department of
Housing and Urban Development.
6.3.4 Policies and Premiums. All policies of insurance required
pursuant to this Section 6.3 shall be in form and substance acceptable to
Lender and issued by insurance companies acceptable to Lender. No insurance
company shall be acceptable to Lender unless it has a company rating of not
less than "A" and a financial rating of not less than Class VII in the most
recent edition of "Best's Insurance Reports". All policies of insurance
required pursuant to the provisions of this Section 6.3 shall contain a
standard "mortgagee protection clause", shall have attached a "lender's loss
payable endorsement", and shall name Lender as an additional insured or loss
payee, as appropriate. All such policies shall contain a provision that such
policies will not be cancelled or materially amended or altered without at
least thirty (30) days prior written notice to Lender.
If Lender consents to Borrower providing any of the required insurance
through blanket policies carried by Borrower and covering more than one
location, then Borrower shall cause the insurance company to deliver to Lender
a certificate of insurance in the form ACORD 27 of such policy which sets
forth the coverage, the limits of liability, the name of the carrier, the
policy number, expiration date and a statement that the insurance company will
not cancel or materially modify or alter the coverage evidenced by the
endorsement without first affording Lender at least thirty (30) days prior
written notice. In the event Borrower fails to provide, maintain, keep in
force or deliver to Lender the policies of insurance required by this Section
6.3, Lender may, but without any obligation to do so, procure such insurance
for such risks covering Lender's interest and Borrower shall pay all premiums
thereon promptly upon demand by Lender. If Borrower fails to pay any premiums
after demand by Lender, Lender, at Lender's option, may advance any sums
necessary to maintain and to keep in force such insurance. Any sums so
advanced, together with interest on such sums at the then current rate under
the Note, shall be secured by the Trust Deed.
Borrower shall deliver to Lender a copy of the original of each of the
policies of insurance that Borrower is required to obtain and maintain, or
cause to be provided and maintained, under this Agreement.
6.4 Repair and Restoration. If the Improvements are partially or wholly
damaged or destroyed by fire or any other cause, and (a) all insurance
proceeds received by Lender together with any cash funds delivered by Borrower
to Lender are sufficient to fully restore and repair the Project as determined
by Lender, in Lender's sole discretion, and (b) Borrower is not in default
under any of the Loan Documents, Lender shall disburse such proceeds in the
manner provided herein for the disbursement of the proceeds of the Loan toward
the cost of such restoration and repair. If Lender determines that such
proceeds together with any cash funds provided by Borrower are insufficient to
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fully restore the Project, Lender will apply any sums received by Lender under
this Section first to the payment of all of Lender's costs and expenses
(including but not limited to legal fees and costs) incurred in obtaining
those sums, and then, in Lender's sole discretion and without regard to the
adequacy of its security, to the payment of the Loan. If the amount of such
proceeds exceeds the cost of restoration of the Project, Lender shall apply
the excess proceeds to the payment of the Loan. If the proceeds of insurance
are used to restore the Project and if the total estimated cost to restore the
Project exceeds the amount of the proceeds of insurance, Borrower shall
deliver to Lender prior to any disbursement of the proceeds of insurance, an
amount equal to such difference in cash or cash equivalents satisfactory to
Lender. After all obligations of Borrower under the Loan Documents have been
paid in full, then all proceeds in excess of such obligations will be paid to
Borrower.
6.5 Taxes and Impositions. Borrower shall promptly pay and discharge
all lawful taxes and assessments imposed upon the Project or upon Borrower
before they become past due and delinquent in accordance with the procedures
and upon the terms set forth in the Trust Deed.
6.6 Hazardous Materials. Borrower shall not cause or permit any
Hazardous Materials to be placed, held, located or disposed of on, under or at
the Project or any part thereof which are in violation of any Environmental
Laws or the Ground Lease. Borrower further agrees to give notice to Lender
immediately upon Borrower's learning of the presence of any Hazardous
Materials on the Property, to promptly comply with any governmental
requirements requiring the removal, treatment or disposal of such Hazardous
Materials, and to defend, indemnify and hold harmless Lender from any and all
liabilities, claims, losses or costs (including, without limitation attorneys'
fees) which may now or in the future be paid, incurred or suffered by or
asserted against Lender by any person, entity or governmental agency with
respect to the presence of Hazardous Materials on the Property or discharge of
Hazardous Materials from the Property. Borrower's covenants in this Section
shall survive payment of the Loan and foreclosure or other transfer of the
Property.
At any time Lender, in good faith, has reason to believe Hazardous
Materials have been placed, held, located or disposed of on, under or at the
Property or any part thereof, other than as stated in the Environmental
Report, and upon written request by Lender and at Borrower's cost and expense,
Borrower shall provide Lender with an Environmental Compliance Audit
Certificate, effective as of a date no earlier than the date of the notice.
Borrower shall certify to Lender in writing within thirty (30) days of the
notice that the Project is in full compliance with Environmental Laws. In the
event Borrower fails or refuses promptly to provide Lender with an
Environmental Compliance Audit Certificate when required, Lender may, at
Borrower's risk and expense, arrange to obtain such a certificate. In the
event the Project is in a condition such that an Environmental Compliance
Audit Certificate cannot be issued, Borrower agrees, at its own cost and
expense, to take all action necessary to bring the Project into compliance
with all Environmental Laws, including all remediation and clean-up, so an
Environmental Compliance Audit Certificate can be issued. Lender and any
consultant retained by or for the benefit of Lender shall have the right,
without further permission from or notice to Borrower, to enter upon the
Project for the purpose of performing any examination or testing required in
order to provide such a certificate, and Borrower shall provide the consultant
with reasonable access to Borrower's records for such purposes. Any costs
incurred by Lender in obtaining such a certificate shall be added to the
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Principal Indebtedness and shall be immediately due and payable, and shall
bear interest at the default rate provided in the Note from the date incurred
until paid by Borrower.
6.7 No Disposition or Merger. Borrower shall not enter into any merger
or joint venture with any third party, or otherwise dispose of its assets
other than in the ordinary course of Borrower's business without the prior
written consent of Lender which consent shall not be unreasonably withheld.
6.8 Additional Debt, Leases or Guarantees. Borrower shall not enter
into any lease or leases of all or any portion of the Project without the
prior written consent of Lender which consent shall not be unreasonably
withheld. Borrower shall maintain all such leases in full force and effect.
Except for the Trust Deed, during the term of the Loan, Borrower shall not
without the prior written consent of Lender create or incur or suffer to be
created or incurred any encumbrance, mortgage, pledge, lien or charge of any
kind upon the Project.
6.9 Financial Statements. Borrower covenants that it shall provide
Lender with such financial statements and reports as Lender may reasonably
request, and that such statements and reports shall be prepared in accordance
with generally accepted accounting principles, or other accounting standards
acceptable to Lender, consistently applied and shall fully and fairly
represent Borrower's financial condition and the results of its operations for
the period or periods covered. As to all financial statements and reports
which Borrower has furnished or may in the future furnish to Lender, Borrower
acknowledges and agrees that it has a fiduciary duty to ensure that such
statements and reports are accurate and complete.
Until requested otherwise by Lender, Borrower shall provide the following
financial statements and reports to Lender:
Annual audited financial statements of Borrower with an unqualified
opinion for each fiscal year from an independent certified public accounting
firm acceptable to Lender and in a form acceptable to Lender, to be delivered
to Lender within one hundred twenty (120) days of the end of each fiscal year
during the term of the Loan, commencing December 31, 1998 and shall cover the
calendar year 1998. Borrower shall also submit to Lender copies of any
management letters or other reports submitted to Borrower by independent
certified public accountants in connection with examination of the financial
statements of Borrower made by such accountants.
Semi-annual compiled financial statements of Borrower from an independent
certified public accounting firm acceptable to Lender and in a form acceptable
to Lender, to be delivered to Lender within sixty (60) days of the end of each
semi-annual period during the term of the Loan, commencing June 30, 1999.
Borrower shall also submit to Lender copies of any management letters or other
reports submitted to Borrower by independent certified public accountants in
connection with examination of the financial statements of Borrower made by
such accountants.
Annual tax returns for each fiscal year of Borrower to be delivered to
Lender within thirty (30) days of the date of filing of the return. The
annual tax returns shall include a certification by Borrower that each annual
tax return is accurate, not misleading, and prepared in accordance with
applicable law.
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6.10 Title Policy. Within sixty (60) days after the Closing Date,
Borrower shall deliver to Lender a policy of title insurance on the Property
which shall be (a) an ALTA extended coverage mortgagee's policy, (b) showing
Ground Lessor as the sole, marketable, fee simple title owner of the Property
and Borrower as the sole ground lessee of the Property, (c) be in the total
amount of the Principal Amount, and (d) be issued by a title insurance company
satisfactory to Lender through the Title Company (the "Title Policy"). The
Title Policy shall insure that (a) the Ground Lessor Trust Deed is a valid
first mortgage lien against the Property, (b) the Ground Lease is a valid
second mortgage lien against the Property, (c) the Borrower Trust Deed is a
valid third mortgage lien against the Property, and (d) that the Property is
free and clear of all liens, encumbrances and other exceptions to title,
except the Permitted Encumbrances. The Title Policy shall include such
additional terms and special endorsements upon issuance as may be required by
Lender, including, but not limited to, a foundation endorsement (CLTA 102.5 or
its equivalent) to the Title Policy showing no encroachments.
6.11 Required Notices. Borrower shall give Lender prompt written notice
of the following:
6.11.1 Any litigation or claims of any kind which might subject
Borrower to any liability in an aggregate amount in excess of $10,000.00,
whether covered by insurance or not and any litigation involving the Property.
6.11.2 All complaints and charges made by any governmental
agency affecting the Property or exercising supervision or control of Borrower
or Borrower's business which may impair the security of Lender.
6.11.3 Any default under any contracts to which Borrower is a
party or acceleration of any other indebtedness incurred by Borrower.
6.11.4 Any event or conditions which constitute an Event of
Default or, with the passage of time or the giving of notice, or both, would
constitute an Event of Default.
6.11.5 Any material adverse change in the financial condition of
Borrower or Guarantor.
6.12 Debt Service Coverage Ratio. Borrower will maintain at all times
during the term of the Loan a Debt Service Coverage Ratio equal to or greater
than 1.75:1, measured commencing with Borrower's June 30, 1999 semi-annual
financial statements as required pursuant to Section 6.9 of this Agreement and
annually thereafter.
6.13 Debt to Equity Ratio. Borrower will maintain at all times during
the term of the Loan a ratio of total senior liabilities to tangible net worth
of less than or equal to 1.75:1, measured commencing with Borrower's June 30,
1999 semi-annual financial statements as required pursuant to Section 6.9 of
this Agreement and annually thereafter.
Total senior liabilities means all senior debt, including bonds,
debentures, bank debt, mortgages, deferred portions of long term debt, capital
lease obligations, together with any other non-current liabilities including
subordinated debt and liability reserves, excluding Borrower's obligations
under the Ground Lease.
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Tangible net worth means the excess of total assets over total
liabilities, total assets and total liabilities each to be determined in
accordance with generally accepted accounting principles consistent with those
applied in the preparation of the financial statements previously submitted by
Borrower to Lender excluding, however, from the determination of total assets
all assets which would be classified as intangible assets under generally
accepted accounting principles, including, without limitation, goodwill,
licenses, patents, trademarks, trade names, copyrights, and franchises.
6.14 Year 2000 Compliant. Borrower has or will soon have (i) undertaken
a detailed assessment of all areas within Borrower's business and operations
that could be adversely affected by the failure of Borrower to be Year 2000
Compliant, (ii) developed and implemented a detailed plan for becoming Year
2000 Compliant on a timely basis, and (iii) made written inquiry of each of
Borrower's Providers as to whether the Providers will be Year 2000 Compliant
in all material respects. Borrower reasonably anticipates that Borrower and
the Providers will be Year 2000 Compliant on a timely basis. Borrower will
promptly advise Lender in writing upon the occurrence of any of the following:
(i) Borrower determines or Borrower is advised by Borrower's accountants,
financial advisers, consultants, or auditors or any Provider that Borrower or
any Provider will not be Year 2000 Compliant on a timely basis, or (ii)
Borrower or any Provider experiences data or data processing problems due to
failure to be Year 2000 Compliant.
6.15 Limited Activities. As long as the Loan from Lender or any part of
the Principal Indebtedness is outstanding:
6.15.1 Business. Borrower will not engage in any business other
than the business of owning and managing the Project which is subject to the
Loan.
6.15.2 Indebtedness. Except for liabilities incurred in the
ordinary course of Borrower's business as set forth in the Loan Documents,
Borrower shall not incur any indebtedness secured by the Project other than
the Loan without Lender's express consent, which consent will not be
unreasonably withheld.
6.15.3 Merger. Borrower shall not consolidate or merge with or
into any other person or entity or sell, lease or otherwise transfer, directly
or indirectly, all or any substantial part of its assets to any other person
or entity, which consent will not be unreasonably withheld.
6.15.4 Transactions. Borrower shall not engage in any
transaction with any of its affiliates unless such transaction is on a
"arm-length" basis and on commercially reasonable terms.
6.15.5 Independent Owner. Borrower's members shall contain at
least one "independent director" whose duties shall not include any day to day
management of Borrower but shall be limited to voting on any bankruptcy
action.
6.15.6 Bankruptcy Action. The unanimous consent of Borrower's
members will be required for Borrower to take any bankruptcy action.
6.15.7 Records and Assets. Borrower shall:
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6.15.7.1 Maintain books and records separate from any other
person or entity; maintain separate financial statements, showing its assets
and liabilities separate and apart from those of any person or entity;
6.15.7.2 Maintain adequate capital for its contemplated
business operations; maintain bank accounts separate from any other person or
entity; pay its own liabilities and expenses only out of its own funds; pay
the salaries of its own employees from its own funds;
6.15.7.3 Not commingle its assets with those of any other
person or entity and shall hold its assets only in its own name; not pledge
its assets for the benefit of any other person or entity; not become liable
for the debts of any other person or entity; not hold out its credit as being
available to satisfy the obligations of any other person or entity; not
acquire the obligations or securities of any of its affiliates or members;
6.15.7.4 Conduct its business in its own name; correct any
misunderstandings regarding its separate identity; not identify itself as a
division of any other person or entity; hold itself out as a separate
identity;
6.15.7.5 Observe all corporate formalities (including,
without limitation, the holding of annual member meetings and the passing of
appropriate resolutions to authorize all necessary action by Borrower in
connection with its business);
6.15.7.6 Maintain a sufficient number of employees in light
of its contemplated business operations; fairly and reasonably allocate any
overhead expenses that are shared with affiliates, including, without
limitation, pay for office space and services performed by employees;
6.15.7.7 Maintain a separate phone number; use separate
stationary, invoices and checks bearing its own name; and
6.15.7.8 Not make loans to any person or entity or buy or
hold evidences of indebtedness issued by any other person or entity (other
than investment-grade securities).
6.16 Amendments. Borrower shall not amend its organizational documents
or such other documents or instruments without the prior written consent of
Lender, which consent may be granted or withheld in Lender's sole discretion,
and which may be conditioned upon delivery of legal opinions or other
documentation requested by Lender.
6.17 Bankruptcy Actions. Borrower agrees that, in the event that any
case is commenced by or against Borrower under the United States Bankruptcy
Code: (i) Borrower will consent to and not oppose any motion made by Lender to
lift the automatic stay provided by the United States Bankruptcy Code in order
to allow Lender to enforce the lien of the Loan; and (ii) Borrower will not
file any plan which has the effect, or may have the effect, of impairing
Lender's rights as a secured creditor.
6.18 License Agreements. Within forty-five (45) days from the
Closing Date, Borrower shall have provided Lender with evidence satisfactory
to Lender that the License Agreements are in full force and effect and that no
default has occurred under the License Agreements and no events have occurred
nor do any conditions exist which with the giving of notice, the passage of
time, or both, would constitute a default under the License Agreements.
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Within forty-five (45) days from the Closing Date, Borrower shall also have
delivered to Lender fully executed consents from Licensors attached as
exhibits to the Assignment of License Agreement.
6.19 SNDA. Within thirty-days (30) days from the Closing Date,
Borrower shall have provided Lender with duly executed, in recordable form,
SNDAs, satisfactory in form and content to Lender and Lender's counsel, from
each tenant holding a leasehold interest to all or any part of the Project
pursuant to which such tenant, among other things, subordinates all of such
tenant's rights, title, and interest in and to the Project to the Loan
Documents.
ARTICLE 7
EVENTS OF DEFAULT
7.1 Event of Default. Fifteen (15) days after written notice from
Lender to Borrower for monetary defaults and thirty (30) days after written
notice from Lender to Borrower for non-monetary defaults, if such defaults are
not cured within such fifteen (15) day or thirty (30) day periods,
respectively, each of the following shall constitute an event of default
("Event of Default") under this Agreement:
7.1.1 Default in Payment. If Borrower fails to make any payment
due and payable under the terms of the Note, this Agreement or any other Loan
Document.
7.1.2 Representations and Warranties. If any of the
representations and warranties made by Borrower in this Agreement, or in any
other Loan Document, shall be false or misleading at any time during the term
of the Loan.
7.1.3 Covenants. If Borrower shall be in default under any of
the terms, covenants, conditions, or obligations in this Agreement, or in any
other Loan Document.
7.1.4 Cross Default. If a default occurs or any event occurs or
condition exists, which with the passage of time, the giving of notice, or
both, would constitute a default, occurs on any indebtedness of Borrower to
Lender.
7.1.5 Leases. If a default occurs by Borrower under any leases
of all or any portion of the Property, or any event occurs or condition
exists, which with the passage of time, the giving of notice, or both, would
constitute a default under any leases of all or any portion of the Property.
7.1.6 Ground Lease. If any default occurs by Borrower under the
Ground Lease, or any event occurs or condition exists, which with the passage
of time, the giving of notice, or both, would constitute a default under the
Ground Lease, including, without limitation, the Ground Lease is not in effect
at any time during the term of the Loan or the Ground Lease is terminated for
any reason.
7.1.7 License Agreements. If any default occurs under the
License Agreements, or any event occurs or condition exists, which with the
passage of time, the giving of notice, or both, would constitute a default
under the License Agreements.
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7.1.8 Dissolution. If Borrower becomes dissolved or terminated.
7.1.9 Receiver. If a receiver, trustee, or custodian is
appointed for any part of Borrower's property, or any part of Borrower's
property is assigned for the benefit of creditors.
7.1.10 Impairment to Lien. If at any time the Trust Deed or any
other applicable Loan Document creating a lien on any of the Collateral may be
impaired by any lien, encumbrance or other defect other than the Permitted
Encumbrances.
7.1.11 Bankruptcy. If a petition in bankruptcy is filed against
Borrower, and such petition is not dismissed within ninety (90) days of
filing, a petition in bankruptcy is filed by Borrower or any guarantor of the
Loan or a receiver or trustee of the property of Borrower is appointed; or if
Borrower files a petition for reorganization under any of the provisions of
the Bankruptcy Act or any law, State or Federal, or makes an assignment for
the benefit of creditors or is adjudged insolvent by any State or Federal
Court of competent jurisdiction.
7.1.12 Judgment or Attachment. If a judgment is entered against
Borrower or any attachment be made for an amount in excess of $100,000.00 and
such judgment or attachment is not paid or otherwise fully satisfied within
fifteen (15) days of the date it is entered.
7.1.13 Guarantor. If any of the foregoing events occur
concerning Guarantor.
ARTICLE 8
REMEDIES
8.1 Termination and Acceleration. Upon the occurrence of an Event of
Default under this Agreement, all obligations of Lender under this Agreement,
and under the other Loan Documents at the election of Lender, shall cease and
terminate and Lender may declare the entire unpaid Principal Indebtedness
immediately due and payable and may foreclose the Trust Deed and any other
Collateral, and exercise all remedies available to a mortgagee under the
Ground Lease, and may apply the undisbursed Loan proceeds against the
Principal Indebtedness owed to Lender by Borrower.
8.2 Rights and Remedies Cumulative. All rights, remedies, and powers
conferred in this Agreement are cumulative and not exclusive of any other
rights or remedies, and shall be in addition to every other right, power, and
remedy that Lender may have, whether specifically granted in this Agreement,
the Ground Lease, or existing at law, in equity, or by statute; and any and
all such rights and remedies may be exercised from time to time and as often
and in such order as Lender may deem expedient. Any forbearance or delay by
Lender in exercising any of its rights, remedies, and powers shall not be
deemed to be a waiver and the exercise or partial exercise of any right,
remedy, or power, and shall not preclude the further exercise of such right,
remedy, and power and the same shall continue in full force and effect until
specifically waived by an instrument in writing executed by Lender.
8.3 Attorney-in-Fact. Upon the occurrence of an Event of Default,
Borrower hereby irrevocably constitutes and appoints Lender Borrower's true
and lawful attorney-in-fact to execute, acknowledge and deliver any
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instruments and to do and perform any act such as referred to in this
Agreement in the name and on behalf of Borrower. This power of attorney is
irrevocable and is coupled with an interest.
ARTICLE 9
ARBITRATION
9.1 Arbitration Disclosures.
9.1.1 ARBITRATION IS FINAL AND BINDING ON THE PARTIES AND
SUBJECT TO ONLY VERY LIMITED REVIEW BY A COURT.
9.1.2 IN ARBITRATION THE PARTIES ARE WAIVING THEIR RIGHT TO
LITIGATE IN COURT, INCLUDING THEIR RIGHT TO A JURY TRIAL.
9.1.3 DISCOVERY IN ARBITRATION IS MORE LIMITED THAN DISCOVERY IN
COURT.
9.1.4 ARBITRATORS ARE NOT REQUIRED TO INCLUDE FACTUAL FINDINGS
OR LEGAL REASONING IN THEIR AWARDS. THE RIGHT TO APPEAL OR SEEK MODIFICATION
OF ARBITRATORS' RULINGS IS VERY LIMITED.
9.1.5 A PANEL OF ARBITRATORS MIGHT INCLUDE AN ARBITRATOR WHO IS
OR WAS AFFILIATED WITH THE BANKING INDUSTRY.
9.1.6 IF YOU HAVE QUESTIONS ABOUT ARBITRATION, CONSULT YOUR
ATTORNEY OR THE AMERICAN ARBITRATION ASSOCIATION.
9.2 Arbitration Provisions. This concerns the resolution of any
claim or controversy between or among the parties. In this regard:
9.2.1 Any claim or controversy ("Dispute") between or among the
parties, including, but not limited to, Disputes arising out of or relating to
the Loan, the Collateral, this Agreement, the Note, the Loan Documents, this
Article 9 Arbitration ("arbitration clause"), or any related agreements or
instruments relating hereto or delivered in connection herewith ("Related
Documents"), and including, but not limited to, a Dispute based on or arising
from an alleged tort, shall at the request of any party be resolved by binding
arbitration in accordance with the applicable arbitration rules of the
American Arbitration Association ("the Administrator"). The provisions of
this arbitration clause shall survive any termination, amendment, or
expiration of this Agreement or Related Documents.
9.2.2 The arbitration proceedings shall be conducted in Las
Vegas, Nevada, at a place to be determined by the Administrator. The
Administrator and the arbitrator(s) shall have the authority to the extent
practicable to take any action to require the arbitration proceeding to be
completed and the arbitrator(s)' award issued within one-hundred-fifty (150)
days of the filing of the Dispute with the Administrator. The arbitrator(s)
shall have the authority to impose sanctions on any party that fails to comply
with time periods imposed by the Administrator or the arbitrator(s), including
the sanction of summarily dismissing any Dispute or defense with prejudice.
The arbitrator(s) shall have the authority to resolve any Dispute regarding
the terms of this Agreement, this arbitration clause or Related Documents,
including any claim or controversy regarding the arbitrability of any Dispute.
All limitations periods applicable to any Dispute or defense, whether by
21
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<PAGE>
statute or agreement, shall apply to any arbitration proceeding hereunder and
the arbitrator(s) shall have the authority to decide whether any Dispute or
defense is barred by a limitations period and, if so, to summarily dismiss any
Dispute or defense on that basis. The doctrines of compulsory counterclaim,
res judicata, and collateral estoppel shall apply to any arbitration
proceeding hereunder so that a party must state as a counterclaim in the
arbitration proceeding any claim or controversy which arises out of the
transaction or occurrence that is the subject matter of the Dispute. The
arbitrator(s) may in the arbitrator(s)' discretion and at the request of any
party: (1) consolidate in a single arbitration proceeding any other claim or
controversy involving another party that is substantially related to the
Dispute where that other party is bound by an arbitration clause with Lender,
such as borrowers, guarantors, sureties, and owners of collateral; (2)
consolidate in a single arbitration proceeding any other claim or controversy
that is substantially similar to the Dispute; and (3) administer multiple
arbitration claims or controversies as class actions in accordance with the
provisions of Rule 23 of the Federal Rules of Civil Procedure.
9.2.3 The arbitrator(s) shall be selected in accordance with the
rules of the Administrator from panels maintained by the Administrator. A
single arbitrator shall be knowledgeable in the subject matter of the Dispute.
Where three arbitrators conduct an arbitration proceeding, the Dispute shall
be decided by a majority vote of the three arbitrators, at least one of whom
must be knowledgeable in the subject matter of the Dispute and at least one of
whom must be a practicing attorney. The arbitrator(s) shall award recovery of
all costs and fees (including attorneys' fees and costs, arbitration
administration fees and costs, and arbitrator(s)' fees). The arbitrator(s),
either during the pendency of the arbitration proceeding or as part of the
arbitration award, also may grant provisional or ancillary remedies including
but not limited to injunctive relief, foreclosure, sequestration, attachment,
replevin, garnishment, or the appointment of a receiver.
9.2.4 Judgment upon an arbitration award may be entered in any
court having jurisdiction, subject to the following limitation: the
arbitration award is binding upon the parties only if the amount does not
exceed four million dollars ($4,000,000.00); if the award exceeds that limit,
either party may demand the right to a court trial. Such a demand must be
filed with the Administrator within thirty (30) days following the date of the
arbitration award; if such a demand is not made within that time period, the
amount of the arbitration award shall be binding. The computation of the
total amount of an arbitration award shall include amounts awarded for
attorneys' fees and costs, arbitration administration fees and costs, and
arbitrator(s)' fees.
9.2.5 No provision of this arbitration clause, nor the exercise
of any rights hereunder, shall limit the right of any party to: (1) judicially
or non-judicially foreclose against any real or personal property collateral
or other security; (2) exercise self-help remedies, including but not limited
to repossession and setoff rights; or (3) obtain from a court having
jurisdiction thereover any provisional or ancillary remedies including but not
limited to injunctive relief, foreclosure, sequestration, attachment,
replevin, garnishment, or the appointment of a receiver. Such rights can be
exercised at any time, before or during initiation of an arbitration
proceeding, except to the extent such action is contrary to the arbitration
award. The exercise of such rights shall not constitute a waiver of the right
to submit any Dispute to arbitration, and any claim or controversy related to
the exercise of such rights shall be a Dispute to be resolved under the
provisions of this arbitration clause.
22
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<PAGE>
9.2.6 Notwithstanding the applicability of any other law to this
Agreement, the arbitration clause, or Related Documents between or among the
parties, the Federal Arbitration Act, 9 U.S.C. Sec. 1 et seq., shall apply to
the construction and interpretation of this arbitration clause.
ARTICLE 10
MISCELLANEOUS
10.1 Non-Waiver. No advance of Loan proceeds under this Agreement shall
constitute a waiver of any of the conditions to be performed by Borrower and
in the event Borrower is unable to satisfy any such conditions Lender shall
not be precluded from declaring such failure to be an Event of Default.
10.2 Derivative Rights. Any obligation of Lender to make disbursements
under this Agreement is imposed solely and exclusively for the benefit of
Borrower and no other person, firm or corporation shall, under any
circumstances, be deemed to be a beneficiary of such condition, nor shall it
have any derivative claim or action against Lender.
10.3 Survival. All representations, warranties and covenants by
Borrower shall survive the making of the disbursements under the Loan and the
provisions of this Agreement shall be binding upon Borrower, Borrower's
successors and assigns and inure to the benefit of Lender, Lender's successors
and assigns.
10.4 Conflict. The Note, Trust Deed, and all other Loan Documents shall
be subject to all the terms, covenants, conditions, obligations, stipulations
and agreements contained in this Agreement. In the event there is any
conflict between the terms and conditions of this Agreement, the Note, Trust
Deed, or any other Loan Document, this Agreement shall prevail.
10.5 Assignment. Lender may assign the Loan Documents, in whole or in
part, to any other person, firm or corporation provided that all provisions of
this Agreement shall continue to apply in conjunction with the other Loan
Documents. Borrower shall not assign this Agreement, or any interest of
Borrower in or to this Agreement, the Loan proceeds, or any of the Loan
Documents without the prior written consent of Lender. Any dissolution of
Borrower or any transfer of any interest in Borrower without the prior written
consent of Lender shall be assumed to be an assignment in violation of this
Section.
10.6 Notices. All notices shall be in writing and shall be deemed to
have been sufficiently given or served when personally delivered, deposited in
the United States mail, by registered or certified mail, or deposited with a
reputable overnight mail carrier which provides delivery of such mail to be
traced, addressed as follows:
Lender: NEVADA STATE BANK
Real Estate Loan Department
4240 West Flamingo Road
P.O. Box 990
Las Vegas, Nevada 84125-0990
Attn: Barry Harrison
23
<PAGE>
<PAGE>
With copies to: CALLISTER NEBEKER & McCULLOUGH
Gateway Tower East, Suite 900
10 East South Temple
Salt Lake City, Utah 84133
Attn: John B. Lindsay
Borrower: ALL AMERICAN SPORTPARK LLC
5325 South Valley View Blvd.
Suite 4
Las Vegas, Nevada 89118
Attn: Ronald S. Boreta
With copies to: MARQUIS & AURBACH
228 South Fourth Street
Las Vegas, Nevada 89101-5705
Attn: Avece M. Higbee
Ground Lessor: URBAN LAND OF NEVADA, INC.
3271 South Highland Drive, Suite 704
Las Vegas, Nevada 89109
Attn: Theodore B. Lee
Such addresses may be changed by notice to the other party given in the same
manner provided in this Section.
10.7 Indemnification. Borrower agrees to pay, protect, defend,
indemnify and hold harmless Lender for any and all claims and liabilities, and
for damages which may be awarded or incurred by Lender, and for all reasonable
attorney fees, legal expenses, and other out-of-pocket expenses incurred in
defending such claims, arising from or related in any manner to the
negotiation, execution, or performance by Lender of this Agreement, the Loan
Documents, or any of the agreements, documents, obligations, or transactions
contemplated by this Agreement, including, without limitation, any claims,
liabilities, or causes of actions related to any Hazardous Materials located
on, in, or under the Property, but excluding any such claims based upon breach
or default by Lender or gross negligence or willful misconduct of Lender.
This indemnification shall survive the payment of the Loan, reconveyance of
the Trust Deed, and termination of this Agreement.
Lender shall have the control of the defense of any such claims, but
agrees to act reasonably in the defense of any such claims. Lender is hereby
authorized to settle or otherwise compromise any such claims as Lender in good
faith determines shall be in its best interests.
Any indemnification amount owing to Lender pursuant to this Section 10.7
shall be secured by the Loan Documents and Collateral except that,
notwithstanding anything to the contrary in this Agreement or the Loan
Documents, any such indemnification amount owing to Lender shall not be
secured in any way by the Property on, in or under which any Hazardous
Materials is located.
10.8 Terms. Whenever used in this Agreement, the singular shall include
the plural, the plural the singular, and the use of any gender shall be
applicable to all genders.
24
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<PAGE>
10.9 Joint and Several Liability. All obligations and liabilities of
Borrower and Guarantor imposed in this Agreement, or in any of the other Loan
Documents upon Borrower and Guarantor shall be joint and several.
10.10 Invalidity. The invalidity of any one or more or any part of the
conditions, covenants, articles, sections, phrases or sentences of this
Agreement shall not affect the remaining portions of this Agreement.
10.11 Governing Law. This Agreement and all matters relating to this
Agreement shall be governed by, construed and interpreted in accordance with
the laws of the State of Nevada.
10.12 No Partnership. Nothing contained in this Agreement or in any of
the other Loan Documents shall be construed as creating a joint venture or
partnership between Borrower and Lender. There shall be no sharing of losses,
costs and expenses between Borrower and Lender, and Lender shall have no right
of control or supervision except as it may exercise its rights and remedies
provided in the Loan Documents.
10.13 Attorneys' Fees. Upon the occurrence of an Event of Default,
Lender may employ an attorney or attorneys to protect Lender's rights under
this Agreement, and Borrower shall pay Lender reasonable attorneys' fees and
costs actually incurred by Lender, whether or not action is actually commenced
against Borrower by reason of such breach. Borrower shall also pay to Lender
any attorneys fees and costs incurred by Lender with respect to any insolvency
or bankruptcy proceeding or other action involving Borrower or any guarantor
as a debtor. If Lender exercises the power of sale contained in the Trust
Deed or initiates foreclosure proceedings, Borrower shall pay all costs
incurred and attorney fees and costs as provided in the Trust Deed.
10.14 Waiver of Claims. Borrower (i) represents that Borrower has no
defenses to or setoffs against any indebtedness or other obligations owing to
Lender or Lender's affiliates, nor claims against Lender or Lender's
affiliates for any matter whatsoever, related or unrelated to any indebtedness
or other obligations owing to Lender or Lender's affiliates, and (ii) releases
Lender and Lender's affiliates from all claims, causes of action, and costs,
in law or equity, existing as of the Closing Date, which Borrower has or may
have by reason of any matter of any conceivable kind or character whatsoever,
related or unrelated to any indebtedness or other obligations owing to Lender
or Lender's affiliates, including the subject matter of this Agreement. This
provision shall not apply to claims for performance of express contractual
obligations owing to Borrower by Lender or Lender's affiliates.
10.15 Setoff. In addition to any rights and remedies of Lender provided
by law, if any Event of Default exists, Lender is authorized at any time and
from time to time, without prior notice to Borrower, any such notice being
waived by Borrower to the fullest extent permitted by law, to setoff and apply
any and all deposits (general or special, time or demand, provisional or
final) at any time held by Lender to or for the credit or the account of
Borrower against any and all obligations of Borrower under the Loan or any of
the Loan Documents, now or hereafter existing, irrespective of whether or not
Lender shall have made demand under the Loan, or otherwise, or under any Loan
Document and although such amounts owed may be contingent or unmatured.
Lender agrees promptly to notify Borrower after any such setoff and
application made by Lender; provided, however, that the failure to give such
notice shall not affect the validity of such setoff and application. The
rights of Lender under this Section 10.15 are in addition to the other rights
and remedies (including other rights of setoff) which Lender may have.
25
<PAGE>
<PAGE>
10.16 Severability of Invalid Provisions. With respect to this
Agreement and all other Loan Documents, any provision of this Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction only, be ineffective only to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this
Agreement, and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction.
10.17 Integrated Agreement and Subsequent Amendment. The Loan
Documents, and the other agreements, documents, obligations, and transactions
contemplated by this Agreement constitute the entire agreement between Lender
and Borrower with respect to the subject matter of these agreements, and may
not be altered or amended except by written agreement signed by Lender and
Borrower. BORROWER IS NOTIFIED THAT THESE AGREEMENTS ARE A FINAL EXPRESSION
OF THE AGREEMENT BETWEEN LENDER AND BORROWER AND THESE AGREEMENTS MAY NOT BE
CONTRADICTED BY EVIDENCE OF ANY ALLEGED ORAL AGREEMENT.
All prior and contemporaneous agreements, arrangements and
understandings between the parties to this Agreement as to the subject matter
of this Agreement, are, except as otherwise expressly provided in this
Agreement, rescinded.
DATED: September 15, 1998
BORROWER
ALL AMERICAN SPORTPARK LLC,
a Nevada limited liability company
By: SPORTPARK MANAGEMENT, INC.,
a Nevada corporation, Manager
By:/s/ Ronald S. Boreta
Ronald S. Boreta
President
Attest:
/s/ Vaso Boreta
Secretary
LENDER
NEVADA STATE BANK,
a Nevada banking corporation
By:/s/ Barry Harrison
Barry Harrison
Senior Vice President
26
<PAGE>
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Guarantor hereby acknowledges and consents to the foregoing Term Loan
Agreement, makes the representations, warranties and covenants set forth in
Article 4 Guaranty, and agrees to the provisions of Article 9 Arbitration,
Section 10.9 Joint and Several Liability, and all other applicable provisions
of the foregoing Term Loan Agreement.
DATED: September 15, 1998.
GUARANTOR
SAINT ANDREWS GOLF CORPORATION,
a Nevada corporation
By:/s/ Ronald S. Boreta
Ronald S. Boreta
President
Attest:
/s/ Vaso Boreta
Secretary
LAS VEGAS DISCOUNT GOLF & TENNIS, INC.,
a Colorado corporation
By:/s/ Vaso Boreta
Vaso Boreta
President
Attest:
/s/ Ron Boreta
Secretary
STATE OF NEVADA )
) ss.
COUNTY OF CLARK )
The foregoing instrument was acknowledged before me this 15th day of
November 1998, by Ronald S. Boreta, President and Secretary, of SportPark
Management, Inc., a Nevada corporation, Manager of ALL AMERICAN SPORTPARK LLC,
a Nevada limited liability company.
/s/ Joy K. Hearn
NOTARY PUBLIC
My Commission Expires: 8/6/2000 Residing At:
27
<PAGE>
<PAGE>
STATE OF NEVADA )
) ss.
COUNTY OF CLARK )
The foregoing instrument was acknowledged before me this 15th day of
September 1998, by Barry Harrison, Senior Vice President of NEVADA STATE BANK,
a Nevada banking corporation.
/s/ Joy K. Hearn
NOTARY PUBLIC
My Commission Expires: 8/6/2000 Residing At:
STATE OF NEVADA )
) ss.
COUNTY OF CLARK )
The foregoing instrument was acknowledged before me this 15th day of
September 1998, by Ronald S. Boreta, President and Secretary, of SAINT ANDREWS
GOLF CORPORATION, a Nevada corporation.
/s/ Joy K. Hearn
NOTARY PUBLIC
My Commission Expires: 8/6/2000 Residing At:
STATE OF NEVADA )
) ss.
COUNTY OF CLARK )
The foregoing instrument was acknowledged before me this 15th day of
September 1998, by Vaso Boreta, President and Secretary, of LAS VEGAS DISCOUNT
GOLF & TENNIS, INC., a Colorado corporation.
/s/ Joy K. Hearn
NOTARY PUBLIC
My Commission Expires: 8/6/2000 Residing At:
28
<PAGE>
<PAGE>
EXHIBIT A
REAL PROPERTY DESCRIPTION
The real property located in Clark County, State of Nevada, and more
particularly described as follows:
Being a portion of the Northwest Quarter (NW 1/4) of Section 4, Township
22 South, Range 61 East, M.D.M., County of Clark, State of Nevada, more
particularly described as follows:
Commencing at the Northwest corner of said Section 4, said point being
the centerline intersection of Las Vegas Boulevard South (SR-91) and Sunset
Road; thence along the Northerly line thereof, said line also being the
centerline of said Sunset Road, North 88o50'29" East 1016.24 feet; thence
departing said line South 01o09'31" East, 50.00 feet to a point on the
Southerly right-of-way line of Sunset Road, being 50.00 feet wide as per
document recorded April 27, 1972, in Book 226, Instrument No. 185689, Official
Records, said point also being the point of beginning; thence along said
right-of-way line North 88o50'29" East 1365.65 feet to a line being 249.99
feet Westerly and parallel with measured at right angles from the Easterly
line of the Northwest Quarter (NW 1/4); thence along said line South 00o35'14"
East, 870.00 feet; thence departing said line South 89o24'46" West 957.01
feet; thence North 29o7'56" West 724.00 feet; thence South 88o50'29" West
59.92 feet; thence North 01o09'31" West 221.00 feet to the point of beginning.
<PAGE>
<PAGE>
EXHIBIT B
PENDING LITIGATION
None
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited condensed balance sheets and unaudited condensed statements of
income found on pages 3 and 4 of the Company's Form 10-QSB for the year to
date, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1998
<CASH> 43,700
<SECURITIES> 0
<RECEIVABLES> 2,456,700
<ALLOWANCES> 0
<INVENTORY> 111,700
<CURRENT-ASSETS> 2,742,800
<PP&E> 135,000
<DEPRECIATION> 12,000
<TOTAL-ASSETS> 26,127,700
<CURRENT-LIABILITIES> 3,397,600
<BONDS> 0
<COMMON> 3,000
0
4,740,000
<OTHER-SE> 3,099,000
<TOTAL-LIABILITY-AND-EQUITY> 26,127,700
<SALES> 0
<TOTAL-REVENUES> 37,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,157,600
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,139,600)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 1,333,700
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (805,900)
<EPS-PRIMARY> (.71)
<EPS-DILUTED> (.27)
</TABLE>
