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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the Fiscal Year ended: December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from: _____ to _____
Commission File No. 0-024970
ALL-AMERICAN SPORTPARK, INC.
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(Exact Name of Small Business Issuer as Specified in its Charter)
NEVADA 88-0203976
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(State or Other Jurisdiction of (I.R.S. Employer Identi-
Incorporation or Organization) fication Number)
5325 South Valley View Boulevard, Suite 4, Las Vegas, NV 89118
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(Address of Principal Executive Offices, Including Zip Code)
Issuer's Telephone Number, Including Area Code: (702) 798-7777
Securities Registered Pursuant to Section 12(b) of the Act: None.
Securities Registered Pursuant to Section 12(g) of the Act:
COMMON STOCK, $.001 PAR VALUE CLASS A COMMON STOCK PURCHASE WARRANTS
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(Title of Class) (Title of Class)
Check whether the Issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Check if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-B is not contained in this Form, and no disclosure will be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]
State Issuer's revenues for its most recent fiscal year: $1,583,800
As of March 1, 1999, 3,000,000 shares of common stock were outstanding, and
the aggregate market value of the common stock of the Registrant held by
non-affiliates was approximately $3,750,000.
Transitional Small Business Disclosure Format (check one): Yes __ No X
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
THE COMPANY
The Company has developed a concept for family-oriented sports theme
parks named "All-American SportPark". The first SportPark was completed on
October 9, 1998. Included in this 65 acre SportPark located on the south end
of the Las Vegas "Strip" are major attractions which are; the Callaway Golf
Center[TM] including a 110 tee driving range, Divine Nine[R] golf course and
20,000 square foot club house; All-American SportPark Pavilion, Major League
Baseball Slugger Stadium, NASCAR SpeedPark and All-Sport Arena.
Prior to February 26, 1997, the Company was engaged in the business of
franchising retail stores which use the name "Las Vegas Discount Golf &
Tennis" and which sell a variety of golf and tennis equipment, including
apparel and accessories.
The Company's business began in 1974 when Vaso Boreta, the President and
Chairman of the Board of the Company, opened a "Las Vegas Discount Golf &
Tennis" retail store in Las Vegas, Nevada. This store, which is still owned
by Mr. Boreta, subsequently began distributing catalogs and developing a mail
order business for the sale, principally of golf, and, to a lesser extent,
tennis products. In 1984, the Company began to franchise the "Las Vegas
Discount Golf & Tennis" retail store concept and commenced the sale of
franchises. As of February 26, 1997, when the franchise business was sold,
the Company had 43 franchised stores in operation in 17 states and 2 foreign
countries.
The Company is a Nevada corporation which was incorporated on March 6,
1984, under the name "Sporting Life, Inc." The Company's name was changed to
"St. Andrews Golf Corporation" on December 27, 1988, to "Saint Andrews Golf
Corporation" on August 12, 1994, and to All-American SportPark, Inc. on
December 14, 1998. Saint Andrews Golf Corporation changed its name to
All-American SportPark, Inc. to more accurately reflect the Company's main
line of business activity.
The Company was acquired by Las Vegas Discount Golf & Tennis, Inc.
("LVDG"), a publicly-held company, in February 1988, from Vaso Boreta, who was
its sole shareholder. Vaso Boreta presently owns 22.6% of the outstanding
stock of LVDG, and serves as its Chairman of the Board, President and CEO. He
also serves as the Chairman of the Board of the Company. LVDG presently owns
2,000,000 shares of the Company's common stock, which represents approximately
66.7% of the Company's common stock outstanding. In October 1998, LVDG
purchased 250,000 shares of Series B Convertible Preferred Stock of the
Company which represents 33% of the Company's preferred stock outstanding.
On August 12, 1994, the Company effected a 4,000 for 1 stock split of its
Common Stock. All financial information and share data in this Report gives
the retroactive effect to the stock split.
In December 1994, the Company completed an initial public offering of
1,000,000 Units, each Unit consisting of one share of Common Stock and one
Class A Warrant. Two Class A Warrants entitle the holder to purchase one
share of Common Stock at an exercise price of $6.50 per share. The net
proceeds to the Company from this public offering were approximately
$3,684,000. The Class A Warrants expired on March 15, 1999.
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On July 29, 1996, the Company sold 200,000 shares of its newly designated
Series A Convertible Preferred Stock to Three Oceans Inc. ("TOI"), an
affiliate of SANYO North America Corporation, for $2,000,000 in cash pursuant
to an Investment Agreement between the Company and TOI (the "Agreement"). TOI
purchased 300,000 additional shares of Series A Convertible Preferred Stock
for an additional $3,000,000 in September and October 1996, pursuant to the
Agreement. The Company used the proceeds of these sales to develop its first
All-American SportPark in Las Vegas.
On December 16, 1996, the Company and its majority shareholder, LVDG,
entered into negotiations pursuant to an "Agreement for the Purchase and Sale
of Assets" to sell all but one of the four retail stores owned by LVDG, all of
LVDG's wholesale operations and the entire franchising business of the Company
to Las Vegas Golf & Tennis, Inc., an unaffiliated company. On February 26,
1997, the Company and LVDG completed this transaction, and as a result the
Company's operations, assets and liabilities now relate solely to the
development and operation of "All-American SportParks".
The total price for the sale of the golf distribution system was
$5,354,287 of which $4,600,000 was paid in cash, $264,176 was paid with a
short-term unsecured receivable, $200,000 was placed in escrow pending the
accounting of inventory and trade payables, $200,000 was placed in escrow for
two years to cover potential indemnification obligations, $60,475 was withheld
for sales taxes, and $29,635 was withheld for accrued vacation liabilities.
Of the total purchase price, $2,603,787 was allocated to LVDG and $2,750,500
was allocated to the Company.
In connection with the sale of the above-described assets, LVDG and the
Company agreed not to compete with the Buyer in the golf equipment business
except that the Company is permitted to sell golf equipment at SportPark Las
Vegas and driving range facilities which it may operate. In addition, the
Buyer granted Boreta Enterprises, Ltd., a limited partnership owned by Vaso
Boreta, the President of LVDG, Ron Boreta, the President of the Company, and
John Boreta, a principal shareholder of LVDG, the right to operate "Las Vegas
Discount Golf & Tennis" stores in southern Nevada, except for the Summerlin
area of Las Vegas, Nevada.
During June 1997 the Company and Callaway Golf Company formed All-
American Golf LLC, a California limited liability company which was owned 80%
by the Company and 20% by Callaway Golf Company, and which owns and operates
the Callaway Golf Center[TM] at the Las Vegas All American SportPark. In May
1998, the Company sold its 80% interest in All-American Golf LLC to Callaway
Golf Company. (See "BUSINESS -- Feature Attractions.") On December 31, 1998
the Company purchased substantially all the assets of All-American Golf, LLC
and is currently 100% owner of the Callaway Golf Center[TM] located on 42
acres of the Las Vegas All-American SportPark.
On October 19, 1998 the Company sold 250,000 shares of the Series B
Convertible Preferred Stock to LVDG for $2,500,000. LVDG had earlier issued
2,303,290 shares of its Common Stock for $2,500,000 in a private transaction
to ASI Group, L.L.C. ("ASI"). ASI also received 347,975 stock options for
Common Stock at an exercise price of $1.8392 per share through October 19,
2008. ASI is a Nevada limited liability investment company whose members
include Andre Agassi, a professional tennis player and Sunbelt Communications
Company which is engaged in the broadcasting business including the NBC
affiliate in Las Vegas.
The Company's offices are located at 5325 South Valley View Boulevard,
Suite 4, Las Vegas, Nevada 89118. In the first half of 1999, the Company
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anticipates moving to 6730 Las Vegas Boulevard South, Las Vegas, Nevada 89119.
Its telephone number is (702) 798-7777.
On January 20, 1998, the officers of the Company and LVDG executed a
merger agreement pursuant to which the Company would merge with and into LVDG.
As a result, the separate corporate existence of the Company would cease and
LVDG would continue as the surviving corporation of the merger. In November
1998 the proposed merger was cancelled by the Board of Directors of both
companies. Significant changes in capital structure which occurred at both
companies would require a new independent valuation report and shareholder
approval process which time and expense was deemed not to outweigh the
anticipated benefits of the merger at that time.
On July 12, 1996, the Company entered into a lease agreement covering
approximately 65 acres of land in Las Vegas, Nevada, on which the Company
developed its first All-American SportPark. The property is located
south of the Mandalay Bay Hotel on "The Strip" and borders the new I-215 Loop
around the City of Las Vegas.
On June 20, 1997, the lessor of the 65 acre tract agreed with the Company
to cancel the original lease and replace it with two separate leases: one
lease with All American Golf, LLC, which covers the 42 acres where the
Callaway Golf Center[TM] is located; and the second lease with the Company
which covers the 23 acres where the Sports Entertainment Complex is located.
Both leases are very similar in structure. They are both fifteen-year
leases with options to extend for two additional five-year terms. The lease
for the Callaway Golf Center[TM] commenced on October 1, 1997 when the golf
center opened. The other lease commenced on February 1, 1998.
BUSINESS OF THE COMPANY
ALL-AMERICAN SPORTPARK, INC.
In 1998 the Company completed major financing to enable it to complete
construction and open the full All-American SportPark. It borrowed $13.5
million from Nevada State Bank in September 1998, concurrent with a $2.5
million purchase of Series B Preferred Stock by its parent, LVDG, in October
1998. In December 31, 1998, the Company reacquired the Callaway Golf
Center[TM] through the issuance of a 10 year $1 million promissory note.
In April 1997, the Company broke ground on the Callaway Golf Center[TM],
and opened it to the public on October 1, 1997. The remainder of the All-
American SportPark opened on a limited basis on October 9, 1998.
FEATURE ATTRACTIONS
CALLAWAY GOLF CENTER[TM]. In June 1997, the Company completed a final
agreement with Callaway Golf Company ("Callaway Golf") to form a limited
liability company named All American Golf LLC (the "LLC") for the purpose of
operating a golf facility, to be called the "Callaway Golf Center[TM]," on
approximately forty-two (42) acres of land which is inside the All-American
SportPark located on approximately sixty-five (65) acres adjacent to Las Vegas
Boulevard in Las Vegas. The Callaway Golf Center[TM] opened to the public on
October 1, 1997.
The Callaway Golf Center[TM] includes a 110-tee driving range in a
two-tiered format. The driving range is designed to have the appearance of an
actual golf course with ten impact greens and a 1-1/2 acre lake with cascading
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waterfalls and an island green. Pro-line equipment and popular brand name
golf balls are utilized. In addition, the golf center includes a lighted nine
hole, par three golf course named the "Divine Nine". The golf course has been
designed to be challenging, and has several water features including lakes,
creeks, water rapids and waterfalls, golf cart paths and designated practice
putting and chipping areas. At the entrance to the golf center is a 20,000
square foot clubhouse which includes an advanced state of the art golf swing
analyzing system, a retail store, a restaurant and bar, and an outdoor patio
overlooking the golf course and driving range with the Las Vegas "Strip" in
the background.
The LLC was originally owned 80% by the Company and 20% by Callaway Golf.
Callaway Golf agreed to contribute $750,000 of equity capital and loan the LLC
$5,250,000. The Company contributed the value of expenses incurred by the
Company relating to the design and construction of the golf center and cash in
the combined amount of $3,000,000. Callaway Golf's loan to the LLC had a ten
year term and bore interest at ten percent. The principal was due in 60 equal
monthly payments commencing five years after the golf center opened.
Additional payments of principal were required under certain conditions if the
LLC was making cash distributions to its owners before the loan had been
repaid. The loan would also be repaid without penalty at any time.
The LLC had executed a license agreement with Callaway Golf pursuant to
which the LLC licenses the right to use the mark "Callaway Golf Center[TM]"
from Callaway Golf for an annual royalty not to exceed $50,000. Pursuant to
this agreement, Callaway Golf had the right to terminate the agreement at any
time without cause on ninety days prior written notice and with payment of
$500,000.
As a result of the sale of its interest in the LLC, on May 5, 1998, the
Company had no ownership of the Callaway Golf Center[TM] until the end of 1998
(as described in the following paragraph), and the Callaway Golf Center[TM]
was operated separately from the Sport Park Las Vegas. However, the Company
had the option to repurchase the 80% membership interest for a period of two
years on essentially the same financial terms that it sold its interest. This
transaction was completed in order to improve the Company's financial
condition which in turn improved the Company's ability to complete the
financing needed for the final construction stage of the SportPark Las Vegas
and for the business activities going forward.
On December 31, 1998 AASP acquired substantially all the assets subject
to certain liabilities of All-American LLC which managed and operated the
Callaway Golf Center[TM], a premier golf facility adjacent to the Company's
All-American SportPark in Las Vegas, Nevada. Under terms of the asset
purchase agreement, the consideration paid by the Company consisted of payment
to Active Media Services $1,000,000 in the form of a $1,000,000 promissory
note payable in quarterly installments of $25,000 over a 10-year period
without interest. In turn, Active Media delivered a trade credit of
$4,000,000 to Callaway Golf.
MAJOR LEAGUE BASEBALL SLUGGER STADIUM. The Slugger Stadium is a full
size replica of a major league ballpark for batting and baseball training.
The Company has been granted a license from Major League Baseball Properties
to own and operate Major League Baseball Slugger Stadiums. Under the license
agreement, the Company also has the right to utilize certain Major League
Baseball trademarks including those of the All Star Game, Division Series,
League Championship Series and World Series. Slugger Stadium is a nostalgic
formatted batting stadium which attempts to duplicate a major league
experience for its patrons. Unlike batting cages which are the normal
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industry standard, the Company's design is a full size stadium that replicates
many of the features of a modern baseball stadium. There are 16 batter boxes
and 16 on-deck circles. Batters have the option of hitting hard or softballs
delivered at three different speeds. Outfield wall replicas of Fenway Park's
"Green Monster" Wall, Baltimore's Camden Yards, Chicago's Wrigley Field,
Yankee Stadium, and The Ball Park in Arlington, Texas are designed to
challenge batters to hit the balls out of the park. Completing the Major
League experience is authentic turnstiles, classic ballpark food and beverage
concessions, and baseball memorabilia. In the advanced planning stage are a
planned electronic scoreboard and specially designed sound systems that
provide typical baseball sounds including proprietary designed umpire calls of
balls and strikes. See "Agreement with Major League Baseball" below.
NASCAR SPEEDPARK. The Company has a license agreement with The National
Association of Stock Car Auto Racing, Inc. ("NASCAR") for the operation of
SpeedParks as a part of the All-American SportPark or as a stand-alone NASCAR
SpeedPark. The agreement, as amended, provides that the Company has an
exclusive license to use certain trademarks and service marks in the
development, design and operation of go-kart racing facilities having a NASCAR
racing theme in the territories of Las Vegas, Nevada and Southern California.
The 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. Under the
terms of the agreement, if the Company opened the Las Vegas site by March 1,
1998, the license for that site would continue until December 31, 2003, and if
the Company opened the Southern California site by March 1, 1999, the license
for that site would continue until December 31, 2003. NASCAR has verbally
agreed to extend both deadlines for the Las Vegas SportPark. The Company is
planning to meet with NASCAR in early 1999 to renegotiate its entire agreement
with NASCAR.
As consideration for the license, the Company has agreed to pay a fee of
$25,000 plus $25,000 for each new SpeedPark opened after the first SpeedPark.
In addition, the Company has agreed to pay NASCAR a royalty of each
SpeedPark's revenue from racing activities plus a royalty on revenues received
from sponsors and promoters of SpeedPark activities.
The SpeedPark includes three tracks to accommodate three styles of
racing: family, adult and junior tracks. The family go-kart track is a 1,200
linear foot road course for five horsepower go-karts designed for families and
children 10 and up, and the other track is a 2,200-foot road course track for
eighteen horsepower NASCAR-style go-karts designed for youths and adults 16
years and older. The SpeedParks are comprised generally of the NASCAR Go-Kart
SpeedPark, the Garage Experience, the Winner's Circle, the Infield RV Park,
Victory Lane, the NASCAR Jr. Track, the Tailgater's Dining Circle and the
NASCAR Retail Trackside Trailer Merchandising Experience. Scale model, near
emissions-free, gas-powered, stock cars complete with sponsorship graphics and
signage, will compete on the three tracks. The cars are various scale versions
of NASCAR replicas, and replicas of Track Stock Cars that fit each of the
three tracks.
In May 1996, the Company entered into an agreement with Jeff Gordon, the
1997 and 1998 NASCAR Winston Cup Champion, 1998 and 1999 Daytona 500 Champion,
1997 Coca-Cola 600 Champion, 1995 Winston Cup Champion and former NASCAR
Winston Cup Rookie of the year, to serve as spokesperson of the NASCAR
SpeedPark through April 30, 2000. According to the original agreement, Mr.
Gordon was paid $25,000 for his services during 1996, and is to be paid
$25,000 per SpeedPark opening per year with a minimum guarantee over the life
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of the agreement. 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.
ALL-AMERICAN SPORTPARK PAVILION. The 100,000 square foot Pavilion
includes a multi-purpose sports arena (the "Allsport Arena"), speciality
retail areas, food courts, meeting rooms, special events space and leased
tenant facilities for food and beverage service and other Company and tenant
operated sports activities including the "Boston Garden Experience" Restaurant
& Bar, Putting Experience, Time Out Arcade[TM], Rockreation[TM] Sport Climbing
Wall, Field of Dreams[TM] Gift Shop and All-American SportPark Logo Shop[TM].
Other attractions are planned.
ALLSPORT ARENA. This space can be used to accommodate indoor
professional beach volleyball tournaments, professional roller hockey
exhibition games, basketball tournaments, tennis matches, cultural and civic
special events, and annual super bowl parties which coincide with
internationally broadcasted major sporting events, music and entertainment
events. It includes a giant video display and movable seating which is
adaptable for 1,500 to 3,000 people to view an event. When the arena is not in
use for a scheduled event, it accommodates the core business use for in-line
skaters who are able to skate to an entertaining multimedia light and sound
performance.
AGREEMENT WITH MAJOR LEAGUE BASEBALL
In December 1994, the Company entered into an agreement with Major League
Baseball ("MLB") concerning a license for the use of MLB logos, marks and
mascots in the decor, advertising and promotions of the Company's Slugger
Stadium concept. This agreement was amended during August 1997. Pursuant to
the amended agreement, the Company holds the exclusive right to identify its
indoor and outdoor baseball batting stadiums as Major League Baseball Slugger
Stadiums. The license covers the United States and expires on November 30,
2000, subject to the right to extend for three additional years provided
certain conditions are met. As consideration for the license, the Company
agreed to pay $50,000 for each Stadium opened provided that in any year of the
term of the agreement a stadium is not opened, the Company must pay $50,000
during such year. The Company has made the payments required for 1995, 1996
and 1997 and expects to make the 1998 payment in 1999. 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. The
Company is meeting with "MLB" in early 1999 to renegotiate its licensing
agreement.
The Company's right to exclusively use MLB logos and other marks at its
baseball batting stadiums is dependent upon certain conditions set forth in
the agreement.
SPONSORSHIP AGREEMENT WITH PEPSI-COLA COMPANY
In December 1997, the Company entered into a sponsorship agreement with
the Pepsi-Cola Company ("Pepsi") under which Pepsi received certain exclusive
rights related to all non-alcoholic beverage products, except for certain
specialty tenants which may use their products such as Starbucks Coffee Shop,
and a few other minor exceptions, in exchange for an annual fee and
advertising support expenditures. In addition, the agreement provides that
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Pepsi will have specified signage rights and the multipurpose arena will be
named the AllSport Arena after Pepsi's AllSport drink product. In addition,
the agreement provides that Pepsi will provide, without charge, all equipment
needed to dispense its products at the SporkPark.
The agreement with Pepsi provides that the Company and Pepsi will
participate in joint marketing programs such as promotions on Pepsi's products
and the SportPark. In addition, Pepsi will have the right to provide three
marketing events per year. These events are to be used to promote the
business of the Company and Pepsi.
In consideration for the above rights, Pepsi agreed to pay the Company a
fixed payment when any portion of the SportPark was officially opened; an
additional payment when the SportPark is 100% completed and all attractions
are accessible by the public; and make additional comparable payments on an
annual basis for the remaining term of the agreement. The sponsorship
agreement will terminate five years after the SportPark is 100% completed,
unless earlier terminated as provided in the agreement. Pepsi is current in
its payments per the terms of the agreement.
AGREEMENT WITH SPORTSERVICE CORPORATION
In September 1997, the Company entered into a lease and concession
agreement with Sportservice Corporation ("Sportservice") which provides that
Sportservice has the exclusive right to prepare and sell all food, beverages
(alcoholic and non-alcoholic), candy and other refreshments throughout the All
American SportPark, including the Callaway Golf Center[TM], during the ten
year term of the agreement. Sportservice has agreed to pay rent based on a
percentage of gross sales depending upon the level of sales, whether the
receipts are from concession sales, the Arena restaurant, the Clubhouse,
vending machines, mobile stands, or catering sales. Rents from the Callaway
Golf Center[TM] will be paid to the Company.
Sportservice invested approximately $3.85 million into the concessions
and operations which includes all food service leasehold improvements.
Sportservice is a wholly-owned subsidiary of Delaware North Company. Other
Delaware North Companies include the Boston Garden, the Fleet Center in
Boston, and food service clients which include the Ballpark in Arlington,
Texas, California Speedway, Miller Park in Milwaukee, Space Port USA at
Kennedy Space Center and Yosemite National Park.
The agreement also provides Sportservice with a right of first refusal
for future parks to be built by the Company in consideration for a $100,000
payment. An additional payment of up to $100,000 is due depending on whether
Sportservice's development costs for its leasehold improvements and food
service assets exceed the estimate of $3.85 million. The Company has not yet
audited the Delaware North investment to determine monies due, if any.
The agreement has a number of other terms and conditions including a
requirement that the Company must operate the SportPark on a year-round, seven
days a week basis throughout the term of the agreement.
LIABILITY INSURANCE
The Company purchased a comprehensive general liability insurance policy
to cover possible claims for injury and damages from accidents and similar
activities. There is no assurance it will be sufficient to cover all future
claims.
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MARKETING
The primary marketing program for the Company in 1999 is to attract
customers and build revenues at the Las Vegas All-American SportPark.
Numerous programs to generate revenue from the local tourist and convention
markets are in place. A group of marketing individuals have been hired and
trained to call upon specific market segments. Considerable sales and
marketing brochures and other sales support items have been prepared and
distributed. Management expects considerable increases in traffic and
revenues beginning in this years peak season which is the second and third
quarters of 1999.
Major League Baseball Slugger Stadium is the "Official Batting Stadium of
Major League Baseball". The unique baseball stadium concept is expected to be
expanded to other locations in the United States and overseas using the
prototype installation at the All-American SportPark as a demonstration
facility. Considerable market research by management has indicated a large
potential market for Slugger Stadium. Possible locations include new gated
sites inside major theme parks, attachments to regional and value oriented
shopping malls, inside new sports stadium and Major League Ballpark complexes
which are either in the planning and design phase or currently under
construction and other All-American SportParks or as stand alone sites.
Target consumers include the family, adults, softball players and all youth
baseball organizations.
The Callaway Golf Center[TM] which includes the nine-hole par 3 golf
course, driving range, and clubhouse is designed as a country club atmosphere
for the general public. This concept may be expanded into various hotel and
resort areas throughout the United States and overseas and can also be
included in the SportPark opportunities described above or as a stand alone
business.
NASCAR SpeedPark is "The Official Go-Kart Racing Facility Licensed by
NASCAR". Management plans to develop the concept to include installations
alongside Super speedways, NASCAR Team Race/Shops Racing Retail &
Entertainment Centers, stand alone facilities and as a separate gated
attraction inside major theme parks throughout the United States.
The All-American SportPark Pavilion area of the project can be recreated
as a stand alone development in a downtown urban setting alongside new arenas,
shopping malls, and football/baseball stadiums.
The Company's marketing efforts are directed towards a number of large
existing and potential markets for which there can be no assurance of
financial success. Further, to expand the concepts beyond the first location
in Las Vegas could require considerably more financial resources than the
Company presently has and more management and human resources than presently
exist at the Company.
COMPETITION
Any SportParks built by the Company will compete with any other
family/sports attractions in the city where the SportPark is located. Such
attractions could include amusement parks, driving ranges, water parks, and
any other type of family or sports entertainment. The Company will be relying
on the combination of active user participation in the sports activities and
uniqueness of the Park features, attractive designs, and competitive pricing
to encourage visitors and patrons.
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TRADE NAMES AND TRADEMARKS
The Company has filed an "intent to use" trademark application for
"All-American SportPark" and a related design and "Slugger Stadium". The
Company intends to maintain the integrity of the trademarks, other proprietary
names and marks against unauthorized use. LVDG has filed an "intent to use"
trademark application with regard to the "St. Andrews" name and related
designs with respect to men's and women's clothing and certain golf equipment
and accessories. LVDG then licensed the rights to use the St. Andrews name to
the Company.
The trademarks "Las Vegas Discount Golf & Tennis" and "St. Andrews" on
golf clubs and golf bags, are registered on the principal register of the
United States Patent and Trademark Office as well as in Canada and in the
State of Nevada. Management of the Company also believes that it and/or the
Company have developed proprietary rights to the name "Birdie Golf". In
February 1997, the rights to the trademarks "Las Vegas Discount Golf & Tennis"
and "Birdie Golf" were assigned to the purchaser in the sale of assets
transaction.
The purchaser of the assets granted back to Boreta Enterprises, Ltd. a
perpetual license to use the name Las Vegas Discount Golf & Tennis for retail
equipment stores in the State of Nevada, south of a line between Pahrump,
Nevada and Mesquite, Nevada, except for, the Summerlin area of Las Vegas,
Nevada.
During September 1997, the Company agreed to sell its rights to the St.
Andrews name to Boreta Enterprises, Ltd. for a $20,000, two year promissory
note since the Company has committed all of its efforts to the development and
management of the All- American SportPark and no longer intends to engage in
the business of selling golf equipment or apparel.
EMPLOYEES
As of January 28, 1999, there were 9 full time employees at the Company's
executive offices and 69 at SportPark Las Vegas, Inc. There were also 72 part
time employees at the SportPark. In peak season which begins in the spring of
1999, as many as 80 additional full and part time employees could be hired.
ITEM 2. DESCRIPTION OF PROPERTY.
Through March 31, 1999, the Company occupied approximately 5,340 square
feet of office and warehouse space at 5325 South Valley View Boulevard, Suite
4, Las Vegas, Nevada, and pays monthly rent of $1,827. The space was leased
from Vaso Boreta, the Company's Chairman of the Board. The rent was
adjustable annually based on increases in the consumer price index and the
lease was to expire January 31, 2005. The Company's Board of Directors
believed that the rent paid is comparable to that which it would pay to an
unaffiliated party. In the second quarter of 1999, the Company plans to move
its management, sales and marketing staff to the facilities of the Company
owned Callaway Golf Center[TM]. Rental payments will cease to Vaso Boreta and
no penalties will be incurred in termination of the existing lease. Full and
part time operating and management personnel of the SportPark Las Vegas are
also located in the SportPark Pavilion and throughout the SportPark at the
various attractions.
On June 20, 1997, the Company entered into a lease for approximately 65
acres of land in Las Vegas, Nevada, on which the Company built the All-
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American SportPark and the Callaway Golf Center. The terms of both leases are
described above under the heading "ITEM 1. DESCRIPTION OF BUSINESS."
ITEM 3. LEGAL PROCEEDINGS.
Except for the complaints described in the following paragraph, the
Company is not presently a party to any legal proceedings, except for routine
litigation that is incidental to the Company's business.
On December 28, 1998 Sorensen Construction, Inc. filed a complaint in the
District Court of Clark County, Nevada against All-American SportPark LLC
seeking damages in the amount of $104,514. Sorensen claims that it provided
steel and labor to the All-American SportPark pursuant to a contract but was
not paid. The complaint alleged breach of contract, unjust enrichment,
declaratory relief, interest and attorneys fees. No discovery has been
conducted and a trial has not been set. Management intends to vigorously
defend the case.
On December 11, 1998 Frankel & Company filed a complaint in the District
Court of Clark County, Nevada against the Company seeking damages estimated to
be approximately $180,000. Frankel claims that it provided marketing services
for the All-American SportPark pursuant to a contract but was not paid. The
complaint alleged breach of contract and unjust enrichment. Minimal discovery
has been conducted and a trial date has not been set. Management intends to
vigorously defend the case.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
MARKET INFORMATION. The Company's Common Stock is traded in the
over-the-counter market and is quoted on the NASDAQ Small-Cap Market under the
symbol "AASP." The following table sets forth the closing high and low sales
prices of the Common Stock for the periods indicated.
HIGH LOW
------- -------
Year Ended December 31, 1998:
First Quarter $5.438 $1.250
Second Quarter $5.375 $2.750
Third Quarter $4.375 $1.500
Fourth Quarter $3.625 $1.125
Year Ended December 31, 1997:
First Quarter $4.375 $2.75
Second Quarter $4.625 $2.375
Third Quarter $4.75 $2.75
Fourth Quarter $3.625 $1.4375
HOLDERS. The number of holders of record of the Company's $.001 par
value common stock at March 29, 1999, was 59. This does not include
approximately 700 shareholders who hold stock in their accounts at
broker/dealers.
DIVIDENDS. Holders of common stock are entitled to receive such
dividends as may be declared by the Company's Board of Directors. No
dividends have been paid with respect to the Company's common stock and no
dividends are anticipated to be paid in the foreseeable future. It is the
present policy of the Board of Directors to retain all earnings to provide for
the growth of the Company. Payment of cash dividends in the future will
depend, among other things, upon the Company's future earnings, requirements
for capital improvements and financial condition.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The following information should be read in conjunction with the
Company's Consolidated Financial Statements and the Notes thereto included in
this report.
OVERVIEW
The Company's current operations consist of the development and operation
of sport-oriented theme parks under the name "All-American SportPark".
DISCONTINUED OPERATIONS. On February 26, 1997, the Company and Las Vegas
Discount Golf & Tennis, Inc., the majority shareholder of the Company, sold
certain assets and transferred certain liabilities to an unrelated buyer. The
total consideration received was approximately $5.3 million of which
approximately $2,750,000 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 assumed certain trade payables
of the Company and Las Vegas Discount Golf & Tennis, Inc. The Company
recognized a gain of approximately $2.1 million (net of tax) from this sale.
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During 1997 the Company and Callaway Golf formed All-American Golf, LLC
(the "LLC") to construct, manage and operate the "Callaway Golf Center[TM]", a
premier golf facility at the site of the All-American SportPark. The Company
contributed equity capital of $3,000,000 for 80% of the membership units and
Callaway Golf contributed $750,000 equity capital and loaned the LLC $5.25
million at a rate of ten percent per annum.
On May 5, 1998 the Company sold its 80% equity interest in All-American
Golf to Callaway Golf in exchange for $1.5 million in cash and the forgiveness
of a $3 million collateralized note evidencing amounts loaned to the Company
in March and April 1998, and related accrued interest. Callaway Golf retained
$500,000 of the consideration until it secured all rights to operate the
Callaway Golf Center[TM] which was completed on September 30, 1998. The
Company resigned as manager of the LLC and received a buy back option to
repurchase its 80% equity ownership for a period of 2 years on essentially the
same financial terms that it sold its interest.
On December 31, 1998 the Company purchased substantially all the assets
subject to certain liabilities of the Callaway Golf Center. The Company as
consideration paid Active Media $1,000,000 in the form of a promissory note
payable in quarterly installments of $25,000 over a 10 year period without
interest. In turn, Active Media delivered a trade credit of $4,000,000 to
Callaway Golf.
CONTINUING OPERATIONS
YEAR ENDED DECEMBER 31, 1998 VERSUS YEAR ENDED DECEMBER 31, 1997
REVENUES. Revenue increased to $1,583,800 in 1998 compared to $386,200
in 1997. Revenues from the Callaway Golf Center[TM] were $724,900 through May
5, 1998 compared to $321,700 in the three months of initial operations in the
final quarter of 1997. SportPark revenues were $811,400 from its October 9,
1998 initial opening through December 31, 1998.
OTHER INCOME. Other income in 1998 remained consistent with 1997 and
relates primarily to credit card royalty income.
COST OF REVENUES. Cost of revenues increased by $372,500 in 1998
compared to 1997 due to an additional month of Callaway operations, in 1998
compared to 1997, and the opening of SportPark Las Vegas in October 1998.
SELLING, GENERAL AND ADMINISTRATIVE ("SG&A"). Selling, general and
administrative expenses consist principally of payroll, rent and other
corporate costs. The increase to $1,829,400 in 1998 from $878,000 in 1997
reflects higher payroll and other costs associated with the operation of the
Callaway Golf Center[TM] through May 5, 1998 and the SportPark in Las Vegas.
Also in 1998 the Company experienced larger professional costs, mostly
accounting and legal, associated with the multiple financing transactions
which occurred during the year.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization was
$464,400 in 1998 compared to $138,700 in 1997 due mainly to the opening of the
SportPark Las Vegas.
SPORTPARK DEVELOPMENT COST. Development costs expensed for 1997 were
$255,100. In 1998 all development costs were capitalized.
PREOPENING EXPENSES. These costs were $603,000 in 1997. In 1998
preopening expenses were $1,179,300, which consists of payroll and operating
expenses incurred before opening the SportPark Las Vegas.
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OPERATING LOSS. Operating loss was $2,831,100 in 1998 compared to
$2,057,900 in 1997. Losses in both periods reflect preopening and start-up
expenses and other fixed corporate costs during the period when the SportPark
Las Vegas was not opened. While the SportPark was opened, losses occurred
from the combination of fixed corporate and SportPark cost, including
depreciation, land lease fees and limited revenues due to the start-up phase
of the business with limited marketing exposure.
INTEREST INCOME (EXPENSE). Net interest expense was $552,000 in 1998
compared to income of $94,500 in 1997. In 1997 the Company had interest
earning cash balances early in the year. Leasehold improvements, net
increased to $24,513,600 in 1998 from $9,981,400 in 1997 and were financed
principally from Company cash and borrowed funds resulting in the recorded
interest expenses in 1998 after the opening of the SportPark Las Vegas.
Interest costs incurred prior to the opening of the SportPark Las Vegas were
capitalized as part of leasehold improvements.
MINORITY INTEREST. This item reflects the Callaway Golf Company portion
of losses in the Callaway Golf Center[TM] of $100,000 for 3 months of 1997 and
$76,300 for approximately 4 months in 1998.
NET INCOME (LOSS). The Company generated a net loss of $1,487,200 in
1998 compared to net income of $220,700 in 1997. Net income for 1997 includes
income from discontinued operations of $2,084,000. The net loss for 1998
includes a gain of $1,638,900 resulting from the Company's sale of its
interest in All-American Golf, LLC. Excluding these non-recurring
transactions, the Company had net losses of $3,126,100 and $1,863,300 in 1998
and 1997, respectively. The larger net loss in 1998 is due primarily to
reasons discussed previously in this section.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1998, the Company had working capital of approximately
$419,500 as compared to a working capital deficit of approximately $3,139,300
at December 31, 1997. Cash increased by $2,363,800 to $2,494,300. Various
infusions of capital in 1998 enabled the Company to increase its expenditures
on the SportPark to substantial completion and operation. The principal
sources of capital in 1998 were: an increase in notes payable from $5,750,000
to $13,967,400, an increase in borrowing from a shareholder and affiliated
parties from $600,000 to $1,705,300, an increase in borrowing from related
parties to $914,400 from $371,100 in 1997; a $1,638,900 gain on the sale of
the Callaway Golf Center[TM] which also included the elimination of $3 million
of borrowings in 1998 and a $2,500,000 sale of Series B Preferred Stock to the
Company's parent.
There are no planned major capital expenditures in 1999.
The Company in the normal course of its business receives sponsorship
fees and various advance payments of different kinds, which are recorded as
deferred income until earned. These monies totaled $877,100 at December 31,
1998 compared to $516,700 at December 31, 1997. Deferred income of $130,000
from 1997 was recorded as revenues in 1998. It is anticipated but cannot be
guaranteed that sponsorship fees and advances will be a source of cash flow in
1999.
On September 15, 1998 the Company entered into a $13,500,000 loan
agreement with Nevada State Bank in conjunction with a $2,500,000 equity
infusion by the Company's parent, Las Vegas Discount Golf & Tennis. The loan
is for 15 years with interest measured at a fixed rate of 4% above the
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lender's five-year LIBOR rate measured September 1, 1998, 2003 and 2008. For
1998 through August 31, 2003 the loan bears interest of 9.38%. The loan is
secured by substantially all the assets that existed at the Company at the
time the financing was completed. To facilitate this financing transaction,
the owner of the leasehold interest in the land underlying the Sportpark
executed a trust deed granting a security interest in the leased property to
the Lender to secure repayment of the loan. As consideration for the
Landlord's willingness to provide collateral for the loan, the Company's
President, CEO and its Chairman and a related entity pledged their stock in
the Company as collateral to protect the leased property from foreclosure.
On October 19, 1998 the Company sold 250,000 shares of the Series B
Convertible Preferred Stock to Las Vegas Discount Golf & Tennis, Inc. (LVDG)
for $2,500,000. LVDG had earlier issued 2,303,290 shares of its Common Stock
for $2,500,000 in a private transaction to ASI Group, L.L.C. ("ASI"). ASI
also received 347,975 stock options for Common Stock at an exercise price of
$1.8392 per share through October 19, 2008. ASI is a Nevada limited liability
investment company whose members include Andre Agassi, a professional tennis
player and Sunbelt Communications Company which is engaged in the broadcasting
business including the NBC affiliate in Las Vegas.
On December 31, 1998 the Company purchased substantially all the assets
and assumed certain liabilities of the Callaway Golf Center[TM] for $1,000,000
payable in $25,000 quarterly installments for a 10 year period with no
interest. The Golf Center generated positive cash flow in the first quarter of
1999. If required to fund corporate operations, additional borrowings against
the facility could probably be arranged.
The Company's Chairman increased lendings to the Company to $1,705,300
from $600,000 in 1997. The loans are due in the year 2001 and bear interest
at ten percent per annum. Interest payments of $137,600 and $5,000 for 1998
and 1997, respectively have been deferred, a practice which could continue in
1999 if necessary. The Company paid back $225,000 of these amounts in late
March 1999.
The Company's accounts payable and accrued expenses declined in 1998 to
$1,419,900 from $1,973,600 in 1997.
During 1998, the Company's net cash used in operating activities was
$3,067,500 compared to $309,800 provided by operating activities in 1997. The
increase in cash used in operations activities relates primarily to increased
SG&A costs, increased receivables due to SportPark operations, and
significantly lower balances of trade payables and accrued expenses.
During 1998, net cash used in investing activities totaled $14,285,600
compared to $14,467,200 in 1997. The primary uses of cash for investing
activities relate to the development of the SportPark.
Cash provided by financing activities during 1998 totaled $19,671,400
compared to $8,515,300 in 1997. The sources of borrowings in 1998 related to
notes payable to shareholder, Nevada State Bank financing of $13,500,000, and
to proceeds of $2,500,000 from issuance of Series B preferred stock to LVDG.
The Company's current and expected sources of working capital are its
cash balances which were $2,494,300 at December 31, 1998 and cash flow from
operations including sponsorship fees and advance deposits of various kinds.
The Company has raised considerable capital in the past two years for
development projects. The SportPark is now operational. The Company believes
that any working capital deficiency that may occur could be funded from a
combination of existing cash balances and, if necessary,
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additional borrowings from lenders or other sources. If necessary, additional
borrowings against the Callaway Golf Center could likely be arranged to fund
corporate operations. There are no planned major capital expenditures in 1999.
Expansion programs in other locations are expected to be minimal and when they
occur, are expected to be mostly funded by third parties.
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. During the first quarter of 1998, the Company hired a
consultant to upgrade all of the Company's other computers and work stations
so that they were all year 2000 compliant. The Company will likely incur
additional costs in 1999 which are not expected to be material.
The Company may be vulnerable to the failure of other companies to be
year 2000 compliant. During the fourth quarter of 1998, the Company 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 year 2000 issues related to its
customers. The Company intends to initiate formal communications with all of
its significant vendors and suppliers with respect to their year 2000
compliance programs and status during the second quarter of 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.
A reasonably likely worst case scenario would be for a segment of the
Company's SportPark to shut down, and depending on which segment(s) was shut
down and for how long, the Company's results of operations could be adversely
affected. Daytime operations of the Callaway Golf Center[TM] should not be
affected at all.
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.
SAFE HARBOR PROVISION
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Certain information included in this
Annual Report contains statements that are forward-looking, such as statements
relating to plans for future expansion and other business development
activities, as well as other capital spending, financing sources, the effects
of regulations and competition. Such forward-looking information involves
important risks and uncertainties that could significantly affect anticipated
results in the future and, accordingly, such results may differ from those
expressed in any forward-looking statements by or on behalf of the Company.
These risks and uncertainties include, but are not limited to, those relating
to development and construction activities, dependence on existing management,
leverage and debt service (including sensitivity to fluctuations in interest
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rates), domestic or global economic conditions (including sensitivity to
fluctuations in foreign currencies), changes in federal or state tax laws or
the administration of such laws, changes in regulations and application for
licenses and approvals under applicable jurisdictional laws and regulations.
ITEM 7. FINANCIAL STATEMENTS.
The financial statements are set forth on pages F-1 through F-23 hereto.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING FINANCIAL
DISCLOSURE.
No response required.
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PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
The Directors and Executive Officers of the Company are as follows:
NAME AGE POSITIONS AND OFFICES HELD
- ------------------ --- ----------------------------------------------
Vaso Boreta 66 Chairman of the Board
Ronald S. Boreta 36 President, Chief Executive Officer, Treasurer,
Secretary and Director
Robert R. Rosburg 72 Director
William Kilmer 59 Director
Motoharu Iue 61 Director
Except for the fact that Vaso Boreta and Ronald Boreta are father and
son, respectively, there is no family relationship between any Director or
Officer of the Company.
In February 1998, a majority of the Board of Directors of the Company
established an audit committee whose members are William Kilmer and Robert
Rosburg, both of whom are independent Directors of the Company. The Company
presently has no compensation or nominating committee, but has agreed to
establish a compensation committee.
All Directors hold office until the next Annual Meeting of Shareholders.
Officers of the Company are elected annually by, and serve at the
discretion of, the Board of Directors.
The following sets forth biographical information as to the business
experience of each officer and director of the Company for at least the past
five years.
RONALD S. BORETA has served as President of the Company since 1992, Chief
Executive Officer since August 1994, and a Director since its inception in
1984. He also served as an officer and director of the Company's Parent, Las
Vegas Discount Golf & Tennis, Inc., from 1988 until July 1994, and he
continues to serve as a director. He has been employed by the Company since
its inception in March 1984, with the exception of a 6-month period in 1985
when he was employed by a franchisee of the Company located in San Francisco,
California. Prior to his employment by the Company, Mr. Boreta was an
assistant golf professional at San Jose Municipal Golf Course in San Jose,
California, and had worked for two years in the areas of sales and warehousing
activities with a golf discount store in South San Francisco, California. Mr.
Boreta devotes 100% of his time to the business of the Company.
VASO BORETA has served as Chairman of the Board of Directors since August
1994, and has been an Officer and Director of the Company since its formation
in 1984. He has also been an officer and director of the Company's Parent,
Las Vegas Discount Golf & Tennis, Inc., since 1988. In 1974, Mr. Boreta first
opened a specialty business named "Las Vegas Discount Golf & Tennis," which
retailed golf and tennis equipment and accessories. He was one of the first
retailers to offer pro-line golf merchandise at a discount. He also developed
a major mail order catalog sales program from his original store. Mr. Boreta
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continues to operate his original store, which has been moved to a new
location near the corner of Flamingo and Paradise roads in Las Vegas. Mr.
Boreta devotes approximately ten percent of his time to the business of the
Company, and the balance to the Company's Parent and to operating his store.
ROBERT R. ROSBURG has served as a Director of the Company since August
1994, and has been a director of the Company's Parent, Las Vegas Discount Golf
& Tennis, Inc., since November 1989. Mr. Rosburg has been a professional
golfer since 1953. From 1953 to 1974 he was active on the Professional Golf
Association tours, and since 1974 he has played professionally on a limited
basis. Since 1975 he has been a sportscaster on ABC Sports golf tournament
telecasts. Since 1985 he has also been the Director of Golf for Rams Hill
Country Club in Borrego Springs, California. Mr. Rosburg received a
Bachelor's Degree in Humanities from Stanford University in 1948.
WILLIAM KILMER has served as a Director of the Company since August 1994,
and has been a director of the Company's Parent, Las Vegas Discount Golf &
Tennis, Inc., since July 1990. Mr. Kilmer is a retired professional football
player, having played from 1961 to 1978 for the San Francisco Forty-Niners,
the New Orleans Saints and the Washington Redskins. Since 1978, he has toured
as a public speaker and also has served as a television analyst. Mr. Kilmer
received a Bachelor's Degree in Physical Education from the University of
California at Los Angeles.
MOTOHARU IUE has served as a Director of the Company since April 1997.
Mr. Iue has served as Chairman of the Board of Sanyo North America Corporation
("Sanyo") and President of Three Oceans Inc. ("Three Oceans") since October
1996. Mr. Iue previously served as President of Sanyo and as Chairman of the
Board of Three Oceans from 1992 to 1996 and still serves as Chief Executive
Officer of Sanyo and Three Oceans. From 1989 to 1992, he was Executive Vice
President of Tottori Sanyo Electric Co., Ltd. All three companies are
affiliates of Sanyo Electric Co., Ltd. ("Sanyo Electric"), and Three Oceans
Inc. is a shareholder of the Company. Mr. Iue has bee a director of Sanyo
Electric since 1977.
SECTION 16(A) BENEFICIAL REPORTING COMPLIANCE
Based solely on a review of Forms 3 and 4 and amendments thereto
furnished to the Company during its most recent fiscal year, and Forms 5 and
amendments thereto furnished to the Company with respect to its most recent
fiscal year and certain written representations, no persons who were either a
director, officer, beneficial owner of more than ten percent of the Company's
common stock, failed to file on a timely basis reports required by Section
16(a) of the Exchange Act during the most recent fiscal year.
ITEM 10. EXECUTIVE COMPENSATION.
The following table sets forth information regarding the executive
compensation for the Company's President and each other executive officer who
received compensation in excess of $100,000 for the years ended December 31,
1998, 1997 and 1996 from the Company:
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<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------ ----------------- ---------------
SECURI-
TIES
UNDERLY-
OTHER RE- ING ALL
ANNUAL STRICTED OPTIONS/ OTHER
NAME AND PRINCIPAL COMPEN- STOCK SARs LTIP COMPEN-
POSITION YEAR SALARY BONUS SATION AWARD(S) (NUMBER) PAYOUTS SATION
- ------------------ ---- -------- -------- ------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ronald S. Boreta, 1998 $100,000 -- $39,348 -- 435,000 -- --
President and CEO <FN1>
1997 $101,000 $100,000 $58,183 -- 435,000 -- $4,231
<FN2> <FN3>
1996 $120,000 $ 5,500 $39,160 -- 325,000 -- $8,265
<FN3>
Charles Hohl, 1996 $100,000 $ 22,000 $10,000 -- -- -- --
Executive Vice <FN4>
President
Kevin B. Donovan, 1998 $100,000 -- $ 6,410 -- -- -- --
Vice President <FN5>
of New Business 1997 $117,166 $ 25,000 $ 6,212 -- 10,000 -- --
Development
________________
<FN>
<FN1> Represents amounts paid for country club memberships for Ronald S. Boreta, an
automobile for his personal use, and contributions made by the Company to
retirement plans on his behalf. For 1998, these amounts were $11,148 for club
memberships, $7,200 for an automobile and $21,000 to the Company's Supplemental
Retirement Plan.
<FN2> Ronald Boreta received $68,202 of this bonus in 1998.
<FN3> Represents premiums paid on a life insurance policy for Ronald S. Boreta's
benefit.
<FN4> Represents amount contributed to the Company's retirement plan on behalf of Mr.
Hohl. Mr. Hohl's employment as Executive Vice- President ended on February 26,
1997.
<FN5> Represents $6,410 paid for an automobile provided for Mr. Donovan's personal
use. Mr. Donovan's employment as Vice President of New Business Development
ended in 1998.
</FN>
</TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR - INDIVIDUAL GRANTS
PERCENT
NUMBER OF OF TOTAL
SECURITIES OPTIONS/SARs
UNDERLYING GRANTED TO EXERCISE
OPTIONS/SARs EMPLOYEES IN OR BASE EXPIRATION
NAME GRANTED(#) FISCAL YEAR PRICE($/SH) DATE
- --------------- ------------ ------------ ---------- ----------
Ronald S. Boreta -0- -0- -0- -0-
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AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
SECURITIES
UNDERLYING VALUE OF UNEXER-
SHARES UNEXERCISED CISED IN-THE
ACQUIRED OPTIONS MONEY OPTIONS/
ON SARs AT FY-END SARs AT FY-END
EXERCISE VALUE EXERCISABLE/ EXERCISABLE/
NAME (NUMBER) REALIZED UNEXERCISABLE UNEXERCISABLE
- ---------------- -------- -------- -------------- ---------------
Ronald S. Boreta -0- -0- 435,000 / 0 $0 / $0
EMPLOYMENT AGREEMENTS
Effective August 1, 1994, the Company entered into an employment
agreement with Ronald S. Boreta, the Company's President and Chief Executive
Officer, pursuant to which he receives a base salary of $100,000 per year plus
annual increases as determined by the Board of Directors. His salary was
increased to $120,000 for the year ended December 31, 1996 and returned to
$100,000 for the year ended December 31, 1997. The employment agreement is
automatically extended for additional one year periods unless 60 days' notice
of the intention not to extend is given by either party. In addition to his
base salary, Ronald S. Boreta also will receive a royalty equal to 2% of all
gross revenues directly related to the All-American SportPark and Slugger
Stadium concepts. However, such royalty is only payable to the extent that
the Company's annual consolidated income before taxes after the payment of the
royalty exceeds $1,000,000. Ronald S. Boreta also receives the use of an
automobile, for which the Company pays all expenses, and full medical and
dental coverage. The Company also pays all dues and expenses for membership
at two local country clubs at which Ronald S. Boreta entertains business
contacts for the Company. Ronald S. Boreta has agreed that for a period of
three years from the termination of his employment agreement that he will not
engage in a trade or business similar to that of the Company.
In June 1997, a majority of the Company's Board of Directors awarded a
$100,000 bonus to Ronald S. Boreta for his extraordinary services related to
the raising of capital and development of the Company's Las Vegas SportPark.
$68,202 of this bonus was paid in October 1998.
Effective October 1, 1996, the Company entered into a one-year employment
agreement with Kevin B. Donovan, pursuant to which he received a base salary
of $100,000 per year. In addition to his base salary, Mr. Donovan received a
$25,000 bonus upon the opening of a portion of the All-American SportPark, and
received a commission of 5% of all sponsorship sales related to the
All-American SportPark. Mr. Donovan also received the use of an automobile
provided by the Company. Mr. Donovan's employment agreement ended on
September 30, 1997, but his employment has continued on the same terms through
November 10, 1998 when Mr. Donovan's employment terminated.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company do not receive any fees
for Board meetings they attend but are entitled to be reimbursed for
reasonable expenses incurred in attending such meetings.
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STOCK OPTION PLAN
During July 1994, the Board of Directors adopted a Stock Option Plan (the
"Plan"). The Plan originally authorized the issuance of options to purchase
up to 300,000 shares of the Company's Common Stock.
The Plan allows the Board to grant stock options from time to time to
employees, officers, directors and consultants of the Company. The Board has
the power to determine at the time the option is granted whether the option
will be an Incentive Stock Option (an option which qualifies under Section 422
of the Internal Revenue Code of 1986) or an option which is not an Incentive
Stock Option. Vesting provisions are determined by the Board at the time
options are granted. The option price for any option will be no less than the
fair market value of the Common Stock on the date the option is granted.
Since all options granted under the Plan must have an exercise price no
less than the fair market value on the date of grant, the Company will not
record any expense upon the grant of options, regardless of whether or not
they are incentive stock options. Generally, there will be no federal income
tax consequences to the Company in connection with Incentive Stock Options
granted under the Plan. With regard to options that are not Incentive Stock
Options, the Company will ordinarily be entitled to deductions for income tax
purposes of the amount that option holders report as ordinary income upon the
exercise of such options, in the year such income is reported.
In August 1994, the Board of Directors granted stock options to the
following persons who were then Officers and Directors of the Company, to
purchase shares of the Company's Common Stock at $5.00 per share. These
options expire on August 8, 1999. On June 9, 1997, each of these options
(except Charles Hohl's) were reissued at an exercise price of $3.0625.
NAME SHARES SUBJECT TO OPTION
----------------- ------------------------
Vaso Boreta 110,000
Ronald Boreta 110,000
Charles Hohl 60,000 (1)
Glenn Raynes 10,000
Robert R. Rosburg 5,000
William Kilmer 5,000
-------
Total 300,000
=======
__________________
(1) Mr. Hohl's options vested in increments of 20,000 each year beginning
on August 8, 1995. Upon Mr. Hohl's termination of employment, 20,000
of these options expired unvested.
In April 1996, the Company's Board of Directors approved increases in the
number of shares of Common Stock which may be issued under the Plan from
500,000 to 700,000, subject to approval by the Company's shareholders within
one year. Shareholder approval was obtained in April 1997. Also in April
1996, the Company's Board of Directors granted stock options as indicated
below that were still outstanding as of March 24, 1999.
22
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<PAGE>
RELATIONSHIP SHARES SUBJECT EXERCISE
NAME TO THE COMPANY TO OPTION PRICE (3)
- ---------------- -------------------- -------------- ---------
Joel Rubenstein Consultant 10,000 $5.00
Ronald S. Boreta Officer and Director 125,000 $4.75
Ronald S. Boreta Officer and Director 200,000 (1) $4.625
Ted Abbruzzese Consultant 10,000 $4.75
Jeff Gordon Consultant 10,000 (2) $4.75
Hal Price Consultant 1,000 $4.75
___________________
(1) This option was not to vest until the Company completed a transaction
with a major business or investor that made it probable that the
Company will be able to pursue its plan of building and operating
Sportparks. This condition was met in September 1996 as a result of the
investment by Three Oceans, Inc. of $5,000,000 in the Company.
(2) This option is currently vested as to 5,000 shares and will vest as to
an additional 2,500 on April 24, 1998, and April 24, 1999.
(3) On June 9, 1997, each of these options were reissued for the same number
of shares at a new exercise price of $3.0625 per share.
401(k) PLAN
The Company's Parent maintains a 401(k) employee retirement and savings
program (the "401(k) Plan") which covers the Company's employees. Under the
401(k) Plan, an employee may contribute up to 15% of his or her gross annual
earnings, subject to a statutory maximum, for investment in one or more funds
identified under the plan. The Company's Parent makes matching contributions
equal to 50% of participants' contributions up to six percent of the
participants salary.
SUPPLEMENTAL RETIREMENT PLAN
In November 1996, the Company and its majority shareholder established a
Supplemental Retirement Plan, pursuant to which certain employees selected by
the Company's Chief Executive Officer receive benefits based on the amount of
compensation elected to be deferred by the employee and the amount of
contributions made on behalf of the employee by the Company. Company
contributions to the Supplemental Retirement Plan are immediately vested for
Category I employees, and vest 20% per year of employment for Category II
employees. Vested amounts under the Supplemental Retirement Plan are paid out
over 5 to 20 years upon retirement, disability, death or termination of
employment.
For 1998 and 1997, Ronald S. Boreta (the President of the Company) was
designated as a Category I employee. The Company made contributions in both
years to the Supplemental Retirement Plan on behalf of Ronald S. Boreta in the
amount of $25,000.
The Company's Board of Directors has not yet determined the amounts, if
any, which will be contributed to the Supplemental Retirement Plan for 1999.
1998 STOCK INCENTIVE PLAN
During October 1998, the Board of Directors approved, subject to
stockholder approval, the 1998 Stock Incentive Plan (the "Plan"), and the
Company's shareholders approved the Plan during December 1998.
23
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<PAGE>
The purpose of the Plan is to advance the interests of the Company and
its subsidiaries by enhancing their ability to attract and retain employees
and other persons or entities who are in a position to make significant
contributions to the success of the Company and its subsidiaries, through
ownership of shares of Stock of the Company and cash incentives. The Plan is
intended to accomplish these goals by enabling the Company to grant awards in
the form of options, stock appreciation rights, restricted stock or
unrestricted stock awards, deferred stock awards, or performance awards (in
cash or stock), other stock-based awards, or combinations thereof, all as more
fully described below.
GENERAL
The Plan will be administered and awards granted by the Company's Board
of Directors (the "Board"). Key employees of the Company and its subsidiaries
and other persons or entities, not employees of the Company and its
subsidiaries, who are in a position to make a significant contribution to the
success of the Company or its subsidiaries are eligible to receive awards
under the Plan. In addition, individuals who have accepted offers of
employment from the Company and who the Company reasonably believes will be
key employees upon commencing employment with the Company ("New Hires") are
eligible to receive awards under the Plan.
STOCK OPTIONS. The exercise price of an incentive stock option ("ISO")
granted under the Plan or an option intended to qualify for the performance-
based compensation exception under Section 162(m) of the Code may not be less
than 100% of the fair market value of the Stock at the time of grant. The
exercise price of a non-ISO granted under the Plan is determined by the Board.
Options granted under the Plan will expire and terminate not later than 10
years from the date of grant. The exercise price may be paid in cash or by
check, bank draft or money order, payable to the order of the Company.
Subject to certain additional limitations, the Board may also permit the
exercise price to be paid with Stock, a promissory note, an undertaking by a
broker to deliver promptly to the Company sufficient funds to pay the exercise
price, or a combination of the foregoing.
STOCK APPRECIATION RIGHTS (SARs). Stock appreciation rights ("SARs") may
be granted either alone or in tandem with stock option grants. Each SAR
entitles the holder on exercise to receive an amount in cash or Stock or a
combination thereof (such form to be determined by the Board) determined in
whole or in part by reference to appreciation in the fair market value of a
share of Stock. SARs may be based solely on appreciation in the fair market
value of Stock or on a comparison of such appreciation with some other measure
of market growth. The data at which such appreciation or other measure is
determined shall be the exercise date unless another date is specified by the
Board. If an SAR is granted in tandem with an option, the SAR will be
exercisable only to the extent the option is exercisable. To the extent the
option is exercised, the accompanying SAR will cease to be exercisable, and
vice versa. An SAR not granted in tandem with an option will become
exercisable at such time or times, and on such conditions, as the Board may
specify.
RESTRICTED AND UNRESTRICTED STOCK AWARDS: DEFERRED STOCK. The Plan
provides for awards of nontransferable shares of restricted Stock subject to
forfeiture ("Restricted Stock"), as well as awards of unrestricted shares of
Stock. Except as otherwise determined by the Board, shares of Restricted
Stock may not be sold, transferred, pledged, assigned, or otherwise alienated
or hypothecated until the end of the applicable restriction period and the
satisfaction of any other conditions or restrictions established by the Board.
24
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<PAGE>
Other awards under the Plan may also be settled with Restricted Stock. The
Plan also provides for deferred grants entitling the recipient to receive
shares of Stock in the future at such times and on such conditions as the
Board may specify.
OTHER STOCK-BASED AWARDS. The Board may grant other types of awards
under which stock is or may in the future be acquired. Such awards may
include debt securities convertible into or exchangeable for shares of Stock
upon such conditions, including attainment of performance goals, as the Board
may determine.
PERFORMANCE AWARDS. The Plan provides that at the time any stock
options, SARs, stock awards (including restricted stock, unrestricted stock or
deferred stock) or other stock-based awards are granted, the Board may impose
the additional condition that performance goals must be met prior to the
participant's realization of any vesting, payment or benefit under the award.
In addition, the Board may make awards entitling the participant to receive an
amount in cash upon attainment of specified performance goals.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth, as of April 5, 1998, the stock ownership
of each person known by the Company to be the beneficial owner of five percent
or more of the Company's Common Stock, each Officer and Director individually,
and all Directors and Officers of the Company as a group. Except as noted,
each person has sole voting and investment power with respect to the shares
shown.
AMOUNT AND
NAME AND ADDRESS NATURE OF BENE- PERCENT
OF BENEFICIAL OWNERS FICIAL OWNERSHIP OF CLASS
- ------------------------- --------------- --------
Las Vegas Discount Golf &
Tennis, Inc. 2,250,000 (1) 66.7%
Suite 4
5325 S. Valley View Blvd
Las Vegas, Nevada 89118
Vaso Boreta 110,000 (2) 3.5%
Suite 4
5325 S. Valley View Blvd.
Las Vegas, Nevada 89118
Ronald S. Boreta 435,000 (2) 14.5%
Suite 4
5325 S. Valley View Blvd.
Las Vegas, Nevada 89118
Robert R. Rosburg 5,000 (2) 0.2%
49-425 Avenida Club La Quinta
La Quinta, California 92253
William Kilmer 5,000 (2) 0.2%
1500 Sea Breeze Boulevard
Ft. Lauderdale, Florida 33316
25
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<PAGE>
Motoharu Iue 0 (3) 0%
666 - 5th Avenue
New York, New York 10103
Three Oceans Inc. 750,000 (4) 20.0%
2001 Sanyo Avenue
San Diego, California 92173
All Directors and Officers 575,000 (5) 16.1%
as a Group (7 persons)
___________________
(1) Las Vegas Discount Golf & Tennis, Inc. is a publicly-held corporation
of which Vaso Boreta is President, Director and a principal shareholder;
Ronald S. Boreta is a Director and a principal shareholder; and Robert
R. Rosburg and William Kilmer are Directors. In addition, John Boreta,
a son of Vaso Boreta and Boreta Enterprises Ltd., a limited liability
company owned by Vaso, Ronald and John Boreta, are principal share-
holders of Las Vegas Discount Golf & Tennis, Inc. The following sets
forth the percentage ownership beneficially held by such persons in Las
Vegas Discount Golf & Tennis, Inc.:
Vaso Boreta 16.0%
Ronald S. Boreta 6.7%
Robert Rosburg 0.1%
William Kilmer 0.1%
John Boreta 6.6%
Boreta Enterprises Ltd. 16.0%
Boreta Enterprises Ltd percentage ownership is as follows:
Ronald S. Boreta 68.81%
John Boreta 30.13%
Vaso Boreta 1.06%
Also includes 250,000 shares of Common Stock issuable upon the conver-
sion of Series B Convertible Preferred Stock held by Las Vegas Discount
Golf & Tennis.
(2) Represents shares underlying options exercisable within 60 days held by
the named person. Does not include shares held by Las Vegas Discount
Golf & Tennis, Inc. of which such person is an Officer, Director and/or
principal shareholder.
(3) Mr. Iue is President of Three Oceans, Inc. and the shares held by Three
Oceans, Inc. are not being treated as beneficially owned by Mr. Iue.
(4) Represents 500,000 shares of Common Stock issuable upon the conversion
of Series A Convertible Preferred Stock held by Three Oceans Inc. and
250,000 shares underlying stock options held by Three Oceans, Inc.
(5) Includes shares beneficially held by the five named Directors.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
CERTAIN TRANSACTIONS
Las Vegas Discount Golf & Tennis, Inc. ("LVDG"), a publicly-held
corporation, owns 66.7% of the Company's outstanding Common Stock and 250,000
26
<PAGE>
<PAGE>
shares of Series B Convertible Preferred Stock. Vaso Boreta, the Company's
Chairman of the Board, is an Officer, Director and principal shareholder of
LVDG. Ronald S. Boreta, President and a Director of the Company, is a Director
and principal shareholder of LVDG. Robert S. Rosburg and William Kilmer,
Directors of the Company, are also Directors of LVDG. In addition, John
Boreta, the son of Vaso Boreta and the brother of Ronald S. Boreta, is a
principal shareholder of LVDG.
Until August 1, 1994, the Company and LVDG shared the expenses of
jointly-used facilities and administrative and accounting personnel on a 50-50
basis under a verbal agreement. Since August 1, 1994, the Company and LVDG
have allocated these costs on a pro rata basis based on which entity receives
the benefit of the particular expense. With respect to the lease for the
office and warehouse facilities, starting July 1, 1996 LVDG paid 33% of the
monthly lease payments and the Company paid 67%. The Company is terminating
the lease in the second quarter of 1999 and moving to Company owned facilities
at the Callaway Golf Center[TM].
Effective August 1, 1994, LVDG also agreed to purchase, warehouse and
make available to the Company and its franchisees certain merchandise. In
exchange, the Company agreed to pay $350,000 from the proceeds of its December
1994 initial public offering to retire certain bank indebtedness described
below.
Through February 1997, certain facilities used by the Company and LVDG
were leased by the Company from Vaso Boreta, the Company's Chairman of the
Board. LVDG leased approximately 15,500 square feet of warehouse space and
6,000 square feet of office space from Mr. Boreta at a base monthly rent of
$13,000. The Board of Directors of the Company believes that the terms of
this lease were at least as favorable as those which could have been obtained
from an unaffiliated entity. When the golf distribution business was sold in
February 1997, the rent decreased to $4,230 and was reduced further to $1,830
beginning in October 1998.
Vaso Boreta, the Company's Chairman of the Board, loaned the Company a
total of $1,780,000 and $600,000 in 1998 and 1997, respectively. These loans
are evidenced by a demand note bearing interest at ten percent per annum.
Approximately $220,000 of these amounts were paid back in late March 1999.
During September 1997, a majority of the Board of Directors of the
Company agreed to sell the Company's rights to the St. Andrews name to Boreta
Enterprises, Ltd. for a $20,000 two-year promissory note since the Company has
committed all of its efforts to the development and management of the
All-American SportPark and no longer intends to engage in the business of
selling golf equipment or apparel.
On September 15, 1998 the Company completed a $13,500,000 secured loan
with Nevada State Bank. This loan was secured by all of the assets of the
Company that existed at that time and by the personal guarantees of Vaso
Boreta and Ron Boreta. In addition, the landlord of the property where the
Company's Las Vegas SportPark is located was required to subordinate its
claims against the Company to the Nevada State Bank. In consideration, Vaso
Boreta, Ron Boreta and Boreta Enterprises pledged all of their shares of LVDG
to the landlord and the landlord was issued 75,000 stock options exercisable
at $4.00 per share through the year 2005.
A majority of the Company's Board of Directors believes that the terms of
the above transactions were on terms no less favorable to the Company than if
the transactions were with unaffiliated third parties.
27
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<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) 3. EXHIBITS.
EXHIBIT
NUMBER DESCRIPTION LOCATION
- ------- -------------------------- ------------------------------
2 Agreement for the Purchase Incorporated by reference to
and Sale of Assets, as Exhibit 10 to the Registrant's
amended Current Report on Form 8-K
dated February 26, 1997
3.1 Restated Articles of Incorporated by reference to
Incorporation Exhibit 3.1 to the Registrant's
Form SB-2 Registration Statement
(No. 33-84024)
3.2 Certificate of Amendment Incorporated by reference to
to Articles of Incorporation Exhibit 3.2 to the Registrant's
Form SB-2 Registration Statement
(No. 33-84024)
3.3 Revised Bylaws Incorporated by reference to
Exhibit 3.3 to the Registrant's
Form SB-2 Registration Statement
(No. 33-84024)
3.4 Certificate of Amendment Filed electronically herewith
Articles of Incorporation
Series A Convertible
Preferred
3.5 Certificate of Designation Filed electronically herewith
Series B Convertible
Preferred
3.6 Certificate of Amendment to Filed electronically herewith
Articles of Incorporation -
Name change
10.1 Employment Agreement with Incorporated by reference to
Ronald S. Boreta Exhibit 10.1 to the Registrant's
Form SB-2 Registration Statement
(No. 33-84024)
10.2 Stock Option Plan Incorporated by reference to
Exhibit 10.2 to the Registrant's
Form SB-2 Registration Statement
(No. 33-84024)
10.3 Ground Lease with Summa Incorporated by reference to
Corporation Exhibit 10.3 to the Registrant's
Form SB-2 Registration Statement
(No. 33-84024)
28
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<PAGE>
10.4 Agreement between the Incorporated by reference to
Company and Las Vegas Exhibit 10.4 to the Registrant's
Discount Golf & Tennis, Form SB-2 Registration Statement
Inc. (No. 33-84024)
10.5 License Agreement between Incorporated by reference to
The Company and Las Vegas Exhibit 10.5 to the Registrant's
Discount Golf & Tennis, Form SB-2 Registration Statement
Inc. (No. 33-84024)
10.6 Employment Agreement with Incorporated by reference to
Kevin Donovan Exhibit 10.6 to the Registrant's
Form SB-2 Registration Statement
(No. 33-84024)
10.7 Employment Agreement with Incorporated by reference to
Charles Hohl Exhibit 10.7 to the Registrant's
Form SB-2 Registration Statement
(No. 33-84024)
10.8 Lease Agreement with A&R Incorporated by reference to
Management and Development Exhibit 10.8 to the Registrant's
Co., et al., and Sublease Form SB-2 Registration Statement
to Las Vegas Discount Golf (No. 33-84024)
& Tennis, Inc.
10.9 Lease Agreement with Vaso Incorporated by reference to
Boreta, as amended, and Exhibit 10.9 to the Registrant's
Assignment to Las Vegas Form SB-2 Registration Statement
Discount Golf & Tennis, Inc. (No. 33-84024)
10.10 Letter Agreement with Oracle Incorporated by reference to
One Partners, Inc. Exhibit 10.10 to the Registrant's
Form SB-2 Registration Statement
(No. 33-84024)
10.11 Promissory Note to Vaso Incorporated by reference to
Boreta Exhibit 10.11 to the Registrant's
Form SB-2 Registration Statement
(No. 33-84024)
10.12 Agreement with Major League Incorporated by reference to
Baseball Properties, Inc. Exhibit 10.12 to the Registrant's
Form 10-KSB for the year ended
December 31, 1995
10.13 License Agreement with Incorporated by reference to
National Association for Exhibit 10.13 to the Registrant's
Stock Car Auto Racing, Inc. Form 10-KSB for the year ended
dated August 1, 1995 December 31, 1995
10.14 Concept Development and Incorporated by reference to
Trademark License Agreement Exhibit 10.14 to the Registrant's
with Callaway Golf Company Form 10-KSB for the year ended
Dated May 23, 1995 December 31, 1995
10.15 Investment Agreement with Incorporated by reference to
Three Oceans, Inc. Exhibit 10.1 to Registrant's
Form 8-K dated July 29, 1996
29
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<PAGE>
10.16 Lease Agreement between Incorporated by reference to
Urban Land of Nevada and Exhibit 10.16 to the Registrant's
All-American SportPark, Form SB-2 Registration Statement
Inc. (No. 33-84024)
10.17 Lease Agreement between Incorporated by reference to
Urban Land of Nevada and Exhibit 10.17 to the Registrant's
All-American Golf Center, Form SB-2 Registration Statement
LLC (No. 33-84024)
10.18 Operating Agreement for Incorporated by reference to
All-American Golf, LLC, Exhibit 10.18 to the Registrant's
a limited liability Form SB-2 Registration Statement
Company (No. 33-84024)
10.19 Employment Agreement with Incorporated by reference to
Kevin Donovan dated Exhibit 10.19 to the Registrant's
October 8, 1996 Form SB-2 Registration Statement
(No. 33-84024)
10.20 Lease and Concession Agree- Incorporated by reference to
ment with Sportservice Exhibit 10.20 to the Registrant's
Corporation Form SB-2 Registration Statement
(No. 33-84024)
10.21 Sponsorship Agreement Incorporated by reference to
with Pepsi-Cola Company Exhibit 10.21 to the Registrant's
Form SB-2 Registration Statement
(No. 33-84024)
10.22 Agreement and Plan of Incorporated by reference to
Merger dated January 20, Exhibit 10.22 to the Registrant's
1998 between the Company Form SB-2 Registration Statement
and Las Vegas Discount (No. 33-84024)
Golf & Tennis, Inc.
10.23 Promissory Note of All- Filed electronically herewith
American SportPark, Inc.
for $3 million payable to
Callaway Golf Company
10.24 Guaranty of Note to Filed electronically herewith
Callaway Golf Company
10.25 Forbearance Agreement dated Filed electronically herewith
March 18, 1998 with Callaway
Golf Company
10.26 Amendment No. 2 to License Filed electronically herewith
Agreement with National
Assoc. for Stock Car Auto
Racing, Inc.
30
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<PAGE>
21 Subsidiaries of the Incorporated by reference to
Registrant Exhibit 21 to the Registrant's
Form SB-2 Registration Statement
(No. 33-84024)
27 Financial Data Schedule Filed electronically herewith
(b) REPORTS ON FORM 8-K. The Company filed reports on Form 8-K dated:
(1) May 5, 1998, reporting on Items 2 and 7; (2) October 19, 1998, reporting
on Items 5 and 7; and (3) December 31, 1998, reporting on Items 2 and 7.
31
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<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
All-American SportPark, Inc.:
We have audited the accompanying consolidated balance sheets of ALL-AMERICAN
SPORTPARK, INC. (formerly Saint Andrews Golf Corporation (a Nevada
Corporation)) and subsidiaries (the "Company") as of December 31, 1998 and
1997, and the related consolidated statements of operations, shareholders'
equity and cash flows for the years then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of All-American SportPark, Inc.
and subsidiaries as of December 31, 1998 and 1997, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1e to
the consolidated financial statements, the Company has had recurring operating
losses from continuing operations and generated negative cash flow from
continuing operations for the year ended December 31, 1998, which raise
substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 1e.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Las Vegas, Nevada
March 24, 1999
F-1
<PAGE>
<PAGE>
ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
DECEMBER 31,
1998 1997
---------- ----------
CURRENT ASSETS:
Cash and cash equivalents $ 2,494,300 $ 176,000
Accounts receivable - trade 799,200 67,100
Inventory 99,500 -
Due from affiliated store 14,900 102,700
Due from officer - 3,000
Prepaid expenses and other 50,100 30,600
Preopening expenses, net - 99,800
----------- -----------
Total current assets 3,458,000 479,200
Leasehold improvements and equipment, net 24,513,600 9,981,400
Note receivable - related party 20,000 20,000
Deposit for land lease 225,600 433,700
Project development costs - 7,850,100
Debt issuance costs, net 393,300 -
Other assets 82,900 29,300
----------- -----------
Total assets $28,693,400 $18,793,700
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
F-2
<PAGE>
<PAGE>
ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Continued)
LIABILITIES AND SHAREHOLDERS' EQUITY
DECEMBER 31,
1998 1997
---------- ----------
CURRENT LIABILITIES:
Bank line of credit $ - $ 668,400
Current portion of Long-term debt 559,300 500,000
Current portion of obligations under
capital leases 118,400 72,200
Accounts payable and accrued expenses 1,419,900 1,973,600
Due to Affiliated Store 26,500 33,200
Due to Related Entities 914,400 371,100
----------- ----------
Total current liabilities 3,038,500 3,618,500
Note payable to shareholder 1,705,300 600,000
Long-term debt, net of current portion 13,408,100 5,250,000
Obligation under capital leases, net
of current portion 530,300 211,200
Deferred income 877,100 516,700
Minority interest - 650,000
SHAREHOLDERS' EQUITY:
Series A Convertible Preferred stock, $.001
par value, 500,000 shares authorized and
outstanding at December 31, 1998 and 1997 4,740,000 4,740,000
Series B Convertible Preferred Stock, $.001 2,500,000 -
par value, 250,000 shares authorized
and outstanding at December 31, 1998
Options issued in connection with Series A
Convertible Preferred Stock to purchase
250,000 shares of Common stock 260,000 260,000
Options issued in connection with
financing 174,000 --
Common stock, $.001 par value, 10,000,000
shares authorized, 3,000,000 shares
issued and outstanding at December 31,
1998 and 1997 3,000 3,000
Additional paid-in-capital 3,333,300 3,333,300
Common stock purchase warrants, class A,
authorized and outstanding-1,000,000
warrants at December 31, 1998 and 1997 187,500 187,500
Accumulated deficit (2,063,700) (576,500)
----------- -----------
Total shareholders' equity 9,134,100 7,947,300
----------- -----------
Total liabilities and shareholders' equity $28,693,400 $18,793,700
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
<PAGE>
ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31,
1998 1997
REVENUES: ---------- ----------
Callaway Golf Center[TM] $ 724,900 $ 321,700
SportPark Las Vegas 811,400 -
Management Fee - 16,100
Other 47,500 48,400
---------- ----------
Total Revenues 1,583,800 386,200
COST OF REVENUES:
Callaway Golf Center[TM] 716,400 569,300
SportPark Las Vegas 225,400 -
---------- ----------
Total Cost of Revenues 941,800 569,300
Gross Profit (Loss) 642,000 (183,100)
OPERATING EXPENSES:
Selling, general and administrative 1,829,400 878,000
Depreciation and amortization 464,400 138,700
SportPark development costs - 255,100
Preopening expenses 1,179,300 603,000
---------- ---------
Total Operating Expenses 3,473,100 1,874,800
OPERATING LOSS (2,831,100) (2,057,900)
OTHER INCOME(EXPENSE):
Interest income (expense), net (552,000) 94,500
Gain on sale of interest in All-American
Golf, LLC 1,638,900 -
----------- -----------
Loss from continuing operations before
income taxes and minority interest (1,744,200) (1,963,400)
Provision (benefit) for income taxes - -
---------- -----------
Loss from continuing operations before
minority interest (1,744,200) (1,963,400)
Minority interest 76,300 100,000
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
<PAGE>
ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(CONTINUED)
YEARS ENDED DECEMBER 31,
1998 1997
---------- ----------
DISCONTINUED OPERATIONS:
Loss from operations of franchise business
disposed of (no income taxes were recorded
in 1997) - (39,300)
Gain on disposal of franchise operations
(net of applicable income taxes) 180,700 2,123,400
----------- -----------
Income from discontinued operations 180,700 2,084,000
----------- -----------
NET INCOME (LOSS) $(1,487,200) $ 220,700
=========== ===========
NET INCOME (LOSS) PER SHARE:
Basic and Diluted:
Loss from continuing operations
before income taxes and minority interest $ (.58) $(.65)
Income from discontinued operations and
minority interest .08 .69
------ -----
Net Income (Loss) per share $ (.50) $ .04
======= ======
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
<PAGE>
ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECFEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
COMMON COMMON
STOCK ADDITIONAL STOCK (ACCUMU-
PREFERRED PURCHASE COMMON PAID-IN PURCHASE LATED
STOCK OPTIONS STOCK CAPITAL WARRANTS DEFICIT) TOTAL
---------- -------- ------ ---------- -------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance,
December 31,
1996 $4,740,000 $260,000 $3,000 $3,333,300 $187,500 $ (797,200) $7,726,600
Net income - - - - - 220,700 220,700
---------- -------- ------ ---------- -------- ----------- ----------
Balance,
December 31,
4,740,000 260,000 3,000 3,333,300 187,500 (576,500) 7,947,300
---------- -------- ------ ---------- -------- ----------- ----------
Series B
Preferred
Stock 2,500,000 - - - - - 2,500,000
Options
issued - 174,000 - - - - 174,000
Net Loss - - - - - (1,487,200) (1,487,200)
---------- -------- ------ ---------- -------- ----------- ----------
Balance
December 31,
$7,240,000 $434,000 $3,000 $3,333,300 $187,500 $(2,063,700) $9,134,100
========== ======== ====== ========== ======== =========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
<PAGE>
ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31,
1998 1997
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(1,487,200) $ 220,700
Adjustment to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Minority interest - (100,000)
Depreciation and amortization 470,400 205,000
Preopening expenses - 603,000
Gain on disposition of trademark rights - (20,000)
Gain on sale of investment in Callaway
Golf Center[TM] (1,638,900) -
Gain on disposal of franchise operations - (2,123,400)
Changes in assets and liabilities:
Increase in accounts receivable (789,900) (67,100)
Increase in inventories (99,500) -
Decrease in due from officer 3,000 10,000
Increase in prepaid expenses and other (100,800) (13,600)
Increase in accounts payable
and accrued expenses 215,100 1,232,000
Decrease in deferred franchise fees - (62,500)
Increase in deferred income 360,300 425,700
---------- ----------
Net cash provided by (used in)
operating activities (3,067,500) 309,800
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds from sale of All-American
Golf, LLC 1,204,500 -
Proceeds received from sale of franchise
business and other fixed assets - 2,242,900
Project development costs - (6,246,700)
Increase in other assets - (29,300)
Leasehold improvements expenditures (15,490,100) (9,731,300)
Preopening expenses - (702,800)
----------- ------------
Net cash used in investing
activities (14,285,600) (14,467,200)
----------- -----------
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE>
<PAGE>
ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
YEARS ENDED DECEMBER 31,
1998 1997
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in due to Affiliate Store and
Related Entities 1,176,800 768,500
Payments on notes payable and notes payable
to shareholder and related entity (1,362,100) -
Loan fees paid (226,200) -
Proceeds from issuance of Series B
Preferred Stock 2,500,000 -
Proceeds (payments)on bank line of credit (668,400) 668,400
Proceeds from notes payable and note
payable to shareholder and related entity 18,335,300 6,350,000
Principal payments on capital leases (84,000) (21,600)
Contribution from minority interest - 750,000
---------- ----------
Net cash provided by
financing activities 19,671,400 8,515,300
---------- ----------
NET INCREASE(DECREASE)IN CASH
AND CASH EQUIVALENTS 2,318,300 (5,642,100)
CASH AND CASH EQUIVALENTS,
Beginning of year 176,000 5,818,100
---------- ----------
CASH AND CASH EQUIVALENTS,
End of year $2,494,300 $ 176,000
========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for:
Interest, net of amounts capitalized $ 321,900 $ 122,100
========== ==========
Income taxes $ - $ 338,000
========== ==========
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Equipment financed through capital leases $ 699,600 $ 305,000
========== ==========
Issuance of stock options in connection
with financing $ 174,000 $ -
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
F-8
<PAGE>
<PAGE>
ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATIONAL STRUCTURE AND BASIS OF PRESENTATION
a. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of All-American SportPark, Inc. ("AASP")
(formerly Saint Andrews Golf Corporation), a Nevada corporation, include the
accounts of AASP and its subsidiaries, SportPark Las Vegas, Inc. ("SPLV") and
All-American Golf Center, Inc. ("AAGC"), both Nevada corporations,
collectively the "Company". All significant intercompany accounts and
transactions have been eliminated.
b. COMPANY BACKGROUND AND PRIMARY BUSINESS ACTIVITIES
Until December 13, 1994, AASP was a wholly-owned subsidiary of Las Vegas
Discount Golf & Tennis, Inc. ("LVDG"). On December 13, 1994, the Company
completed an initial public offering of 1,000,000 Units (representing one-
third of the post offering shares outstanding) at a price of $4.50 per Unit,
each Unit consisting of one share of common stock and one Class A Warrant.
The net proceeds of this offering were $3,683,800. Two Class A Common Stock
Purchase Warrants entitled the holders to purchase one share of the Company's
common stock for $6.50 per share. The Warrants expired in March 1999. LVDG
currently owns 66-2/3% of the Company's outstanding common stock and 33% of
the Company's Convertible Preferred Stock. AASP operates the Company's All-
American SportPark.
The Company's Chairman owns 100 percent of the original Las Vegas Discount
Golf & Tennis location on Paradise Road, which opened in Las Vegas, Nevada in
1974. This store is referred to herein as the "Affiliated Store" and operated
under an agreement with LVDG prior to the sale of certain assets as more fully
described in Note 1(c).
On June 13, 1997 the Company and Callaway Golf Company ("Callaway") formed
All-American Golf, LLC (the "LLC") to construct, manage and operate the
"Callaway Golf Center[TM]", a premier golf facility at the site of the SPLV.
The Company contributed $3.0 million for 80 percent of the members' units of
the LLC while Callaway purchased the remaining 20 percent for $750,000. The
minority interest presented in the accompanying financial statements for 1997
represents Callaway's interest in the LLC. Through May 5, 1998 the Company
managed the driving range, golf course and tenant facilities in the clubhouse
for a fee of five percent of gross revenues pursuant to the LLC Operating
Agreement.
On May 5, 1998, pursuant to the terms of a Purchase and Sale Agreement between
the Company and Callaway Golf, the Company sold its 80% membership interest in
the LLC to Callaway Golf for $1,500,000 in cash and the forgiveness of
$3,000,000 of debt, including the interest thereon, owed to Callaway Golf by
the Company. This transaction resulted in a gain to the Company of $1,638,900.
In connection with the sale of the membership interest, the Company resigned
as the manager of the LLC, and agreed not to compete with the Callaway Golf
Center[TM] in Clark County, Nevada for a period of two years.
As a result of the sale of its interest in the LLC, the Callaway Golf
Center[TM] was operated separately from the SportPark Las Vegas. However, the
Company retained the option to repurchase the 80% membership interest for a
period of two years.
F-9
<PAGE>
<PAGE>
On December 31, 1998 the Company acquired substantially all the assets subject
to certain liabilities of All-American Golf, Inc. which managed and operated
the Callaway Golf Center[TM].
The Company has developed a concept for family-oriented sports theme parks
named "All-American SportPark". The first SportPark was completed on October
9, 1998. Included in this 65 acre SportPark located on the south end of the
Las Vegas "Strip" are major attractions which are: the Callaway Golf
Center[TM] including a 110 tee driving range, Divine Nine[R] golf course and
20,000 square foot club house; All-American SportPark Pavilion, Major League
Baseball Slugger Stadium, NASCAR SpeedPark and All-Sport Arena.
c. DISCONTINUED OPERATIONS
On February 26, 1997, LVDG and the Company completed the sale of certain of
their assets and transferred certain liabilities to an unrelated buyer who has
incorporated under the name Las Vegas Golf & Tennis, Inc. in a transaction
whose terms were substantially in accordance with the "Agreement for the
Purchase and Sale of Assets". The total consideration received was $5.3
million ($1.4 million of which was attributed to net assets held for sale) of
which $4.6 million was paid in cash, $264,000 was received in the form of a
short-term receivable, $200,000 was placed in escrow pending the accounting
for inventory and trade payables, and $200,000 was placed in escrow for two
years to cover potential indemnification obligations. Of the total
consideration received, approximately $2,750,000 in cash was allocated to
AASP. LVDG expects to collect the $200,000 remaining in escrow in 1999.
This transaction resulted in the disposal of the Company's franchise business.
The agreement also provides for the assignment of all franchisor rights under
existing franchise agreements. Furthermore, the Company assigned all trade
names and trademarks associated with the business. The agreement also
included a covenant not to compete with the Buyer in the golf equipment
business except that the Company is permitted to sell golf equipment at SPLV
and driving range facilities which it operates. In addition, the Buyer
granted Boreta Enterprises, Ltd., a limited partnership owned by Vaso Boreta,
the president of LVDG, Ron Boreta, the President of the Company, and John
Boreta, a principal shareholder of LVDG, the right to operate "Las Vegas
Discount Golf & Tennis" stores in southern Nevada, except for the Summerlin
area of Las Vegas, Nevada.
The sale of all assets, liabilities and rights related to the franchise
business have been presented as "Discontinued Operations" in the accompanying
consolidated financial statements for the year ended December 31, 1997.
Revenues related to discontinued operations totaled $156,000 for the year
ended December 31, 1997.
d. CONCENTRATIONS OF RISK
The Company operates one All-American Sportpark and the Callway Golf Center in
Las Vegas, Nevada. The level of customer demand for these types of
recreational facilities is undetermined. The Company is implementing various
strategies to market the facilities to both tourists and local residents.
Should attendance levels at the Sportpark and Golf Center not meet
expectations in the short-term, management believes existing cash balances
will be sufficient to fund operating expenses and debt service requirements
for at least the next twelve months. The inability to build attendance to
profitable levels beyond a twelve month period may require the Company to seek
additional debt or equity financing to meet its obligations as they come due.
F-10
<PAGE>
<PAGE>
There is no assurance that the Company would be successful in securing such
debt or equity financing in amounts or with terms acceptable to the Company.
e. GOING CONCERN MATTERS
The accompanying 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 consolidated financial statements, during the year ended
December 31, 1998, the Company had incurred operating losses from continuing
operations of $1,744,200 and negative cash flow from operations of $3,067,500.
Additionally, as of December 31, 1998 the Company had working capital of
approximately $419,500 and cash and cash equivalents of $2,494,300.
In September 1998, the Company successfully secured a $13.5 million loan in
order to complete the construction of the SportPark. To facilitate this
financing transaction, the owner of the leasehold interest in the land
underlying the Sportpark executed a trust deed granting a security interest in
the leased property to the Lender to secure repayment of the loan. As
consideration for the Landlord's willingness to provide collateral for the
loan, the Company's President, CEO and its Chairman and a related entity
pledged their stock in the Company as collateral to protect the leased
property from foreclosure. Additionally, the Company's parent obtained an
additional $2.5 million in equity financing from ASI, L.L.C. an investment
group headed by Andre Agassi and Sunbelt Communications, the proceeds of which
were used to purchase 250,000 shares of Series B Convertible Preferred Stock
of the Company. In addition, the Company will implement various marketing
strategies in 1999 to stimulate visitor volume at both the SportPark and
Callaway Golf Center.
Management believes that existing cash balances will generated from the
financing activities described above will be sufficient to fund operating
cash needs and debt service requirements over at least the next
twelve months. Should additional financing to fund operations be required,
the Company will turn to the lending sources described above or other
sources, as necessary. There can be no assurance such lending sources would
be willing, on terms acceptable to the Company, to provide additional
financing.
The consolidated financial statements do not include any adjustments relating
to the recoverability and classification of liabilities that might be
necessary should the Company be unable to continue as a going concern.
f. ESTIMATES USED IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments with an original
maturity of three months or less to be cash equivalents.
b. ACCOUNTS RECEIVABLE-TRADE
Accounts receivable trade consists of amounts due from tenants at the Callaway
Golf Center[TM] and the SportPark.
F-11
<PAGE>
<PAGE>
c. INVENTORIES
Inventories, which consist primarily of sporting goods merchandise are stated
at the lower of cost or market. Cost is determined using the specific
identification method.
d. PREOPENING EXPENSES
Preopening expenses primarily represent direct personnel and other operating
costs incurred before the opening of the facility. In 1997, these costs were
capitalized when incurred and amortized to expense on a straight-line basis
over a period not to exceed twelve months from the date operations commenced.
Preopening costs totaling approximately $139,300 were capitalized in
connection with the Callaway Golf Center[TM], which commenced operations on
October 1, 1997. Pursuant to Statement of Position No. 98-5 "Reporting the
Costs of Start Up Activities," in 1998 the Company began expensing preopening
costs as incurred.
e. LEASEHOLD IMPROVEMENTS AND EQUIPMENT
Leasehold improvements and equipment are stated at cost. Depreciation and
amortization is provided for on a straight-line basis over the lesser of the
lease term or the following estimated useful lives of the assets:
Furniture and equipment 5-10 years
Leasehold improvements 15 years
Normal repairs and maintenance are charged to expense when incurred.
Expenditures that materially extend the useful life of assets are capitalized.
f. INTEREST COST
The Company capitalizes interest cost as a component of the cost of
construction in progress until the asset is placed in service and ready for
its intended use.
g. DEFERRED INCOME
Deferred income consists primarily of sponsorship fees received from tenants
and corporate sponsors of SPLV. Deferred income is amortized to income over
the life of the agreement. Additionally, deferred income also includes
approximately $41,700 remaining from an agreement with MBNA to use the
Company's trademark on its credit cards over a five-year period, which expires
August 31, 2000.
h. ADVERTISING
The Company expenses advertising costs as incurred. Advertising costs
amounted to $ 171,570 and $94,169 in 1998 and 1997, respectively.
i. INCOME TAXES
The Company accounts for income taxes under the provisions of the Statement of
Financial Accounting Standards ("SFAS No. 109"), "Accounting for Income
Taxes".
F-12
<PAGE>
<PAGE>
j. RECLASSIFICATIONS
Certain items previously reported in specific financial statement captions
have been reclassified to conform with the 1998 presentation.
k. RECOVERABILITY OF LONG-LIVED ASSETS
In 1996 the Company adopted Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets
to Be Disposed Of" ("SFAS 121"). Pursuant to SFAS 121, the Company reviews its
long-lived assets for impairment whenever events or changes in the
circumstances indicate that the carrying amount on an asset or a group of
assets may not be recoverable. The Company deems an asset to be impaired if a
forecast or undiscounted future operating cash flows directly related to the
asset, including disposal value if any, is less than its carrying amount. If
an asset is determined to be impaired, the loss is measured as the amount by
which the carrying amount of the asset exceeds fair value. The Company
generally measures value by discounting estimated cash flows. Considerable
management judgement is necessary to estimate discounted cash flows.
Accordingly, actual results could vary significantly from such estimates.
Based upon the short duration of operations at SportPark Las Vegas, the
Company does not believe that a triggering event has occurred.
3. EARNINGS PER SHARE
In 1997, the Company adopted Statement of Financial Accounting Standards No.
128, "Earnings Per Share" ("SFAS 128"). SFAS 128 replaces previously reported
earnings per share with "basic" and "diluted" earnings per share. Basic
earnings per share is computed by dividing reported earnings by the weighted-
average number of common shares outstanding during the period. Diluted
earnings per share reflects the additional dilution for all potentially
dilutive securities such as stock options. In accordance with SFAS 128, when
an entity has a loss from continuing operations, no potential common shares
shall be included in the computation of any diluted per share amounts. As
such, potential dilution has not been considered in the calculations for the
periods presented.
The weighted-average number of common and common equivalent shares used in the
calculation of basic and diluted earnings per share were 3,000,000 for both
1998 and 1997.
4. 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"). The Affiliated Store operates in Las Vegas, Nevada but was not a
franchise of the Company. As a result, the store paid no royalties to the
Company but purchased merchandise for the Affiliated Store at the same cost as
the Company. These activities ceased upon sale of the Company franchises in
February 1997. The Affiliated Store also benefited from the Company's
activities, including any local and national advertising conducted by the
Company. The Company had a $20,000 receivable from Related Entities and a
$14,900 and a $102,700 receivable due from the Affiliated Stores as of
December 31, 1998 and 1997, respectively. The Company also had a $914,400 and
$371,100 payable to Related Entities and a $26,500 and a $33,200 payable to
the Affiliated Store in 1998 and 1997, respectively.
F-13
<PAGE>
<PAGE>
5. LEASEHOLD IMPROVEMENTS AND EQUIPMENT
Leasehold improvements and equipment included the following as of December 31:
1998 1997
----------- -----------
Building $17,592,200 $ 4,546,100
Roller Skates 20,000 -
Land Improvements 3,127,150 4,573,000
Signs 600,900 57,000
Furniture and equipment 1,639,900 384,400
Leasehold improvements 194,600 259,400
Go-Karts 479,500 -
Equipment under Capital leases 1,041,300 -
Other 108,750 325,900
----------- -----------
24,804,300 10,145,800
Less - Accumulated depreciation
and amortization (290,700) (164,400)
----------- -----------
$24,513,600 $ 9,981,400
=========== ===========
6. PROJECT DEVELOPMENT COSTS
Total project development costs totaled $7,850,100 as of December 31, 1997
relating to the continuing construction of the SportPark Las Vegas. These
costs consisted primarily of $6,740,200 in buildings, $352,500 in land
improvements, and $572,200 in furniture, fixtures and signs. The remaining
$185,200 consists of various items such as fencing. The SPLV was completed
and began operations in October 1998, at which time all project development
costs were reclassified into leasehold improvements and equipment.
7. BANK LINE OF CREDIT
As of December 31, 1997, the Company had a $800,000 bank line of credit, which
was canceled in 1998. Interest was payable monthly at one and one half (1.5%)
percent over the bank's prime rate which was 9 percent at December 31, 1997.
As of December 31, 1997, $668,400 was outstanding. This line of credit was
paid in full during February 1998 with a portion of the proceeds collected
from the $4.0 million short-term loan received on February 13, 1998.
8. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following at December 31:
1998 1997
---------- ----------
Accounts payable - trade $ 868,000 $1,466,200
Accrued compensation 59,100 125,000
Payroll and other taxes 170,050 93,700
Income taxes payable 112,500 112,500
Interest payable 191,350 176,200
Other 18,900 -
---------- ----------
$1,419,900 $1,973,600
========== ==========
F-14
<PAGE>
<PAGE>
9. LONG-TERM DEBT
On September 15, 1998 the Company completed a $13,500,000 secured loan with
Nevada State Bank(the "Lender"). The loan is for 15 years with the interest
measured at a fixed rate of 4% above the Lender's five-year LIBOR rate
measured September 1, 1998, 2003 and 2008. For 1998 through August 31, 2003,
the loan bears interest of 9.38%. The loan is secured by substantially all
the assets of the Company that existed at the time of the financing. In
addition, the landlord of the property where the Company's Las Vegas SportPark
is located was required to subordinate its claims against the Company to the
Nevada State Bank. In consideration, Vaso Boreta, Ron Boreta and Boreta
Enterprises pledged all of their shares of LVDG to the landlord and the
landlord was issued 75,000 stock options exercisable at $4.00 per share
through the year 2005. The loan has covenants related to debt service
coverage and debt to equity that go into effect June 30, 1999.
On December 31, 1998, the Company reacquired substantially all of the assets
subject to certain liabilities of All-American Golf, Inc. which managed and
operated the Callaway Golf Center. Under terms of the asset purchase
agreement, the consideration paid by the Company consisted of payment to
Active Media Services of $1,000,000 in the form of a promissory note payable
due in quarterly installments of $25,000 over 10 years without interest. This
promissory note has been discounted by $345,000 to reflect the notes' present
value.
The Company has unsecured, ten percent notes payable of $1,705,300 and
$600,000 for December 31, 1998 and 1997, respectively, with the Company's
chairman and principal shareholder. The principal amount, interest rate, and
payment terms are substantially similar to borrowings which the Company's
chairman and principal shareholder obtained from a bank to fund these loans to
the Company. Interest payments of $137,600 and $5,000 have been deferred in
1998 and 1997, respectively, a practice which could continue in 1999 if
necessary.
Aggregate maturities of long-term debt for the five years subsequent to
December 31, 1998, are as follows:
Year ending:
1999 $ 500,400
2000 545,600
2001 2,304,300
2002 657,800
2003 722,200
Thereafter 10,942,400
-----------
$15,672,700
===========
10. LEASES
The Company and LVDG share office and warehouse facilities leased from the
Chairman of the Board under a non-cancelable operating lease agreement, which
expires on January 31, 2005. The lease provides for initial monthly lease
payments, which may be increased based on increases in the consumer price
index. The monthly rent expense from January to November 1998 was $4,230.
Effective December 1998 the monthly rent reduced to $1,830 and is allocated
fifty percent to the Company and fifty percent to LVDG. Rent expense for the
Company's allocated share of this lease was $33,970 and $50,400 for 1998 and
1997, respectively.
In July 1996, AASP entered into a lease for 65 acres of undeveloped land in
Las Vegas, Nevada for the development of its first SPLV. Effective June 20,
1997, AASP canceled the original lease and replaced it with two separate
leases, one for the Callaway Golf Center[TM] and the other for SPLV. The
annual base amount of $625,000 is due in monthly installments of $52,083
(Callaway Golf Center[TM] $33,173 and SPLV $18,910). The lease term remains
as stated above, the Callaway Golf Center[TM] lease commenced on October 1,
1997. The SPLV lease commenced on February 1, 1998. Additionally, the Leases
F-15
<PAGE>
<PAGE>
contain contingent rent based upon gross sales at the park, ranging from three
to ten percent of the different sources of gross revenues if such percentage
revenues exceed $625,000 annually. The minimum rent shall be increased at the
end of the fifth year of the term and every five years thereafter by an amount
equal to ten percent of the minimum monthly installment immediately preceding
the adjustment date.
As a condition to the lease, AASP also entered into a Deposit Agreement, which
required the Company to post a refundable deposit to the lessor of $500,000.
The deposit has been applied as follows: $66,346 was used to pay the first two
months rent for the Callaway Golf Center[TM] prior to May 1998, $104,166 as
security deposit and the remainder as prepaid rent to be amortized until
exhausted. At December 31, 1998 the remaining balance is $225,600. When the
Company reacquired the Callaway Golf Center[TM] on December 31, 1998, it also
took responsibility for both leases.
The Company is obligated under various other capital and non-cancelable
operating leases for equipment that expire at various dates over the next five
years. Total rent expense for operating leases was $488,980 and $168,510 for
1998 and 1997, respectively.
At December 31, 1998, minimum future lease payments are as follows:
Capital Operating
Year ending Leases Leases Total
----------- ----------- --------- -----------
1999 $188,044 $ 761,374 $ 949,418
2000 194,617 742,058 936,675
2001 179,190 727,017 906,207
2002 128,870 687,775 816,645
2003 108,600 697,599 806,199
Thereafter 9,051 6,531,250 6,540,301
-------- ----------- -----------
Total $808,372 $10,147,073 $10,955,445
======== =========== ===========
Less amount representing
interest 159,672
--------
Present value of net minimum
Capital leases payments 648,700
Less current installments of
Obligations under capital
leases 118,400
--------
Obligations under capital
leases excluding current
installments $530,300
========
F-16
<PAGE>
<PAGE>
11. INCOME TAXES
The federal income tax provision (benefit) consisted of the following for the
years ended December 31:
1998 1997
--------- ---------
Current $(347,812) $ -
Deferred (134,911) (46,000)
Less: Valuation allowance 482,723 46,000
--------- ---------
Total $ - $ -
========= =========
The benefits from the net operating loss carry forwards from continuing
operations generated in 1997 of $621,556 was realized through an offset
against the taxable gain from discontinued operations. The Company received a
tax refund of approximately $180,000 in 1998 related to a gain on disposal of
its franchised operations which is reflected in the accompanying statement of
operations under discontinued operations.
The components of the deferred tax liability consisted of the following at
December 31:
1998 1997
Deferred Tax Liabilities: --------- ---------
Temporary differences related
to Property and Equipment $( 49,782) $ (56,000)
Deferred Tax Assets:
Deferred Income 298,500 176,000
Other 17,000 11,000
Net Operating Loss Carryforward 348,005 -
--------- ---------
Net Deferred Tax Asset Before
Valuation Allowance 613,723 131,000
Valuation Allowance (613,723) (131,000)
--------- ---------
Net Deferred Tax Asset $ - $ -
========= =========
A valuation allowance has been established to reserve the net deferred tax
asset since management does not believe it is more likely than not that they
will be realized.
As of December 31, 1998, the Company has available for income tax purposes
approximately $348,000 in federal net operating loss carryforwards, which may
offset future taxable income. These loss carryforwards begin to expire in
fiscal year 2003.
The provision (benefit) for income taxes attributable to income (loss) from
continuing operations does not differ materially from the amount computed at
the federal income tax statutory rate.
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12. CAPITAL STOCK, STOCK OPTIONS, AND INCENTIVES
a. STOCK OPTION PLANS
The Company's Board of Directors adopted an incentive stock option plan (the
"1994 Plan") on August 8, 1994 authorizing the issuance of up to 300,000
shares of the Company's common stock. On April 16, 1996, the Board of
Directors voted to increase the number of authorized shares to 500,000 and on
April 24, 1996 voted to increase total shares eligible for grant to 700,000.
Three hundred thousand options to purchase shares of common stock of AASP at
an exercise price of $5.00 per share were granted in 1994. Twenty thousand of
these options expired unvested. Of the remaining 280,000 options, 240,000
were canceled and replaced on June 9, 1997 with a new exercise price of $3.06,
the fair market value on the date of reissuance. The expiration date remained
August 7, 1999.
In April 1996, a total of 377,000 options were granted in connection with the
increase in shares available. These grants increased the total shares issued
under the plan to 657,000. All of the options issued in April 1996 were
cancelled and replaced on June 9, 1997. The original options had an exercise
price ranging between $4.625 and $4.75 through April 2001. The replacement
options are exercisable at an exercise price of $3.06 through April 2001. Six
hundred and twenty-six thousand (626,000) of the options are exercisable
anytime while 10,000 shares vest ratably over a four year period. Shareholder
approval occurred on April 16, 1997 as required for approval of these
additional shares. The exercise price was equal to or exceeded the fair market
value of the common stock at the date of grant. At December 31, 1998, 64,000
additional shares are reserved for future options.
During October 1998, the Board of Directors approved, subject to stockholder
approval, the 1998 Stock Incentive Plan (the "Plan"), and the Company's
shareholders approved the Plan during December 1998. The purpose of the Plan
is to advance the interests of the Company and its subsidiaries by enhancing
their ability to attract and retain employees and other persons or entities
who are in a position to make significant contributions to the success of the
Company and its subsidiaries, through ownership of shares of Stock of the
Company and cash incentives. The Plan is intended to accomplish these goals
by enabling the Company to grant awards in the form of options, stock
appreciation rights, restricted stock or unrestricted stock awards, deferred
stock awards, or performance awards (in cash or stock), other stock-based
awards, or combinations thereof, all as more fully described below. No
options have been granted under the 1998 plan as of December 31, 1998.
The Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related
Interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under SFAS
123 requires use of option valuation models that were not developed for use in
valuing employee stock options. Under APB 25, because the exercise price of
the Company's employee stock options equals the market price of the underlying
stock on the date of grant, no compensation expense is recognized.
Pro forma information regarding net income (loss) and earnings (loss) per
share is required by SFAS 123, and has been determined as if the Company had
accounted for its employee stock options under the fair value method of that
Statement. The fair value for these options was estimated at the date of
grant using a Black-Scholes option pricing model with the following weighted-
average assumptions for 1998: risk-free interest rates of 4.20; dividend
yields of 0.0%; volatility factors of the expected market price of the
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Company's common stock of 1.36; and a weighted-average expected life of 4.5
years.
The Black-Scholes option pricing model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in
the subjective input assumptions can materially affect the fair value
estimate, in management's opinion, the existing models do not necessarily
provide a reliable single measure of the fair value of its employee stock
options.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The Company's pro
forma information follows:
YEARS ENDED DECEMBER 31,
1998 1997
---------- ----------
Net Income (Loss)
As reported $(1,487,200) $ 220,700
Pro forma (1,487,200) (211,300)
Basic and diluted net income
(loss) per share
As reported (.50) .07
Pro forma (.50) (.07)
A summary of the status of the Company's stock options for the year ended
December 31, 1998 and 1997 is presented below:
1998 1997
------------------- -------------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
------------------- -------------------
Outstanding at beginning
of year 907,000 $3.15 907,000 $3.15
Granted 75,000 4.00 - -
Exercised - - - -
Forfeited (21,000) 3.06 - -
Expired - - - -
------- ----- ------- -----
Outstanding at end of year 961,000 $3.21 907,000 $3.15
======= ===== ======= =====
Exercisable at end of year 951,000 $3.22 902,000 $3.15
======= ===== ======= =====
Weighted average fair value
of options granted $2.32 $3.15
===== =====
F-19
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The following table summarizes information about stock options outstanding at
December 31, 1998:
Options Outstanding Options Exercisable
----------------------- ---------------------------
Weighted
Average Weighted Weighted
Number Remaining Average Number Average
Out- Contractual Exercise Exer- Exercise
standing Life (Years) Price cisable Price
-------- ------------ -------- ------- --------
Range of exercise
prices $3.06-$5.00 961,000 2.22 $3.21 951,000 $3.22
======= ==== ===== ======= =====
b. PREFERRED STOCK
The Company is authorized to issue 5,000,000 shares of preferred stock. As of
December 31, 1998 and 1997, there were 500,000 Series A Convertible Preferred
shares and 250,000 Series B Convertible Preferred Shares issued and
outstanding.
c. SERIES A CONVERTIBLE PREFERRED STOCK
On July 11, 1996 the Company's Board of Directors authorized the creation of
500,000 shares of Series A Convertible Preferred Stock with a $.001 par value.
On July 29, 1996, the Company entered into an agreement which resulted in the
sale, on an installment basis, of the 500,000 shares of the Series A
Convertible Preferred Stock to Three Oceans Inc. ("TOI"), an affiliate of
Sanyo North America Corporation, at $10.00 per share for a total of
$5,000,000. The agreement also resulted in the assignment of certain rights
to TOI. All proceeds related to the agreement were received in accordance
with the stated terms to this agreement on October 7, 1996. Issuance costs
totaling $162,000 were incurred related to the preferred stock and have been
netted against retained earnings.
Each share of the Series A Convertible Preferred Stock issued to TOI is
convertible at the option of TOI into one share of the Company's common stock.
In the event of liquidation or dissolution of the Company, each share of
Series A Convertible Preferred Stock will have a $10.00 liquidation preference
over all other shareholders. In addition, holders of the Series A Convertible
Preferred Stock shall be entitled to receive dividends at a rate equal to the
rate per share payable to common stock holders, assuming conversion of the
Preferred shares. The Preferred shares can be redeemed by the Company upon a
registration statement being declared effective by the Securities and Exchange
Commission covering the issuance of the common stock upon conversion of the
Preferred Stock and the following two conditions being satisfied: (1) the
Company earns $1,000,000 of pre-tax income for a fiscal year according to the
year-end audited financial statements; and (2) the closing bid price for the
Company's common stock is at least $15.00 for 20 consecutive trading days. If
the Company notifies TOI of its intent to redeem the Preferred Stock, TOI will
have at least 30 days to elect to convert its Preferred Stock or accept the
redemption price of $12.50. Each share of Series A Convertible Preferred
Stock is entitled to vote along with the holders of the Company's common
stock.
The rights granted to TOI in accordance with the agreement include the
following: (1) right of first refusal with respect to debt and or equity
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financing arrangements for SportParks developed by the Company for a period of
five years commencing July 29, 1996 and for a period of 3 years for Anaheim,
California and Las Vegas, Nevada, (2) an obligation to obtain electrical and
electronic equipment for such SportParks for a period of 5 years, (3) certain
signage rights for TOI or its designees at the first two SportParks and (4)
other miscellaneous rights as defined. Pursuant to the agreement, the Company
also granted TOI an option to purchase up to 250,000 shares of the Company's
common stock at $5.00 per share for a period of 5 years from the date of the
agreement.
The agreement also provides for certain demand and piggyback registration
rights with respect to the shares of common stock issuable upon the conversion
of the Series A Convertible Preferred Stock and the exercise of the option.
Pursuant to the agreement, the Company expanded the number of Directors of the
Company from four to five, and elected Motoharu Iue as a Director of the
Company. Mr. Iue is President of Three Oceans Inc.
d. SERIES B CONVERTIBLE PREFERRED STOCK
On September 22, 1998, the Company Board of Directors authorized the creation
of 250,000 shares of Series B Convertible Preferred Stock with a $.001 par
value.
On October 19, 1998, the Company issued 250,000 shares of Series B Convertible
Preferred Stock to its majority shareholder, LVDG for $2,500,000 in cash.
Each share of the Series B Convertible Preferred Stock issued to LVDG is
convertible at the option of LVDG into one share of the Company's common
stock. In the event of liquidation or dissolution of the Company, each share
of Series B Convertible Preferred Stock will have a $10.00 liquidation
preference over all other shareholders. In addition, holders of the Series B
Convertible Preferred Stock shall be entitled to receive dividends at a rate
equal to the rate per share payable to common stock holders, assuming
conversion of the Preferred shares. The Preferred shares can be redeemed by
the Company upon a registration statement being declared effective by the
Securities and Exchange Commission covering the issuance of the common stock
upon conversion of the Preferred Stock and the following two conditions being
satisfied: (1) the Company earns $1,000,000 of pre-tax income for a fiscal
year according to the year-end audited financial statements; and (2) the
closing bid price for the Company's common stock is at least $15.00 for 20
consecutive trading days. If the Company notifies LVDG of its intent to
redeem the Preferred Stock, LVDG will have at least 30 days to elect to
convert its Preferred Stock or accept the redemption price of $12.50. Each
share of Series B Convertible Preferred Stock is entitled to vote along with
the holders of the Company's common stock.
e. COMMON STOCK AND COMMON STOCK PURCHASE WARRANTS
On December 13, 1994, the Company completed a public offering of 1,000,000
Units, each Unit consisting of one share of Common Stock and one Class A
Common Stock Purchase Warrant. As a result, 1,000,000 shares of Common Stock
and 1,000,000 Class A Warrants were issued. Net proceeds from the offering
were $3,684,000. Two Class A Warrants entitle the holder to purchase one share
of AASP common stock for $6.50, $2 above the initial public offering price.
The Class A Warrants have been assigned a value of $.1875 for financial
reporting purposes. The expiration date of the class A Warrants had been
extended to March 15, 1999 when they expired.
F-21
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In connection with the initial public offering, the Company issued to the
Representative of the Underwriters, Representative's Warrants to purchase
100,000 shares (10 percent of the units purchased by the underwriters), with
an exercise price of $5.40 for a four-year period beginning on December 13,
1995. These Representative's Warrants contain certain demand and piggyback
registration rights. The Company also issued to the Representative 100,000
Class A Warrants which entitle the Underwriter to purchase 50,000 shares of
Common Stock (5 percent of the units purchased by the underwriters), with an
exercise price of $7.80 per share exercisable beginning on December 13, 1995.
As of December 31, 1998 and 1997, no warrants have been exercised.
13. EMPLOYEES 401(k) PROFIT SHARING PLAN
The Company offers all its eligible employees participation in the Employees
401(k) LVDG Profit Sharing Plan ("Plan"). The Plan provides for purchases of
certain investment vehicles by eligible employees through annual payroll
deductions of up to 15% of base compensation. For 1998 and 1997, the Company
matched 50% of employees contributions up to a maximum of 6% of an employee's
base compensation.
14. SUPPLEMENTAL NON-QUALIFIED RETIREMENT PLAN
In 1995, the Company entered into a Supplemental Retirement Plan for certain
key employees of which the President of AASP is included. This plan became
effective on January 1, 1996.
15. 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. The Company has made the
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. 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, AASP 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 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, provide for an annual fee of $25,000 per year.
AASP has a license agreement with The National Association of Stock Car Auto
Racing, Inc. ("NASCAR") for the operation of SpeedParks as a part of SPLV.
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.
F-22
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In January 1997, AASP entered into an agreement with the Pepsi-Cola Company
("Pepsi") concerning an exclusive sponsorship agreement. Under the agreement,
Pepsi receives certain exclusive rights related to soft drinks, tea products,
juice products, bottled water and similar products in exchange for a series of
payments beginning when the SportPark opened. AASP 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 SPLV. The rights granted to Pepsi include that Pepsi's
products will be exclusively sold for the categories listed, that only Pepsi
identified cups will be used in SPLV, 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 provides that AASP 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 SPLV, including
the Callaway Golf Center[TM], during the ten year term of the agreement.
Sportservice has agreed to pay rent based on a percentage of gross sales
depending upon the level of sales, whether the receipts are from concession
sales, the Arena restaurant, the Clubhouse, vending machines, mobile stands,
or catering sales. The agreement also provides Sportservice with a right of
first refusal for future parks to be built by AASP in consideration for a
$100,000 payment. The agreement has a number of other terms and conditions
including a requirement that the Company must operate SPLV on a year-round,
seven days a week basis throughout the term of the agreement.
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 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.
16. SUBSEQUENT EVENT
On February 16, 1999, the Board of Directors of AASP approved the award to Ron
Boreta, President of AASP, Stock Appreciation Rights (SAR's) as to 125,000
shares independent of any stock option under AASP's 1998 Stock Incentive Plan.
The base value of the SAR's shall be equal to $6 per share, however, no SAR
may be exercised unless and until the market price of AASP's Common Stock
equals or exceeds $10 per share. The maximum amount to be paid on the
exercise of all 125,000 SARs is $500,000. The SARs expire October 26, 2008.
F-23
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned thereunder duly authorized.
ALL-AMERICAN SPORTPARK, INC
Dated: April 27, 1999 By/s/ Ronald S. Boreta
Ronald S. Boreta, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
/s/ Vaso Boreta Chairman of the Board April 27, 1999
Vaso Boreta and Director
/s/ Ronald S. Boreta President (Chief April 27, 1999
Ronald S. Boreta Executive Officer),
Treasurer and Director
/s/ Robert S. Rosburg Director April 27, 1999
Robert S. Rosburg
_________________________ Director
William Kilmer
_________________________ Director
Motoharu Iue
CERTIFICATE OF AMENDMENT
ARTICLES OF INCORPORATION
OF
SAINT ANDREWS GOLF CORPORATION
SAINT ANDREWS GOLF CORPORATION, a Nevada corporation (the "Corporation"),
hereby certifies to the Nevada Department of State, as follows:
FIRST: That the Board of Directors of the Corporation, by unanimous
written consent dated July 11, 1996, with respect to Article IV, in lieu of
meetings of such Board, adopted resolutions approving, proposing and declaring
advisable, in the form of this Amendment to the Articles of Incorporation, the
following amendment to the Articles of Incorporation of the Corporation. The
resolutions setting forth the proposed amendment are as follows:
RESOLVED: That the Articles of Incorporation be amended as follows:
"ARTICLE IV shall be and hereby is amended to provide:
(d) There is hereby established a series of Preferred Stock of the
Corporation designated "Series A Convertible Preferred Stock," par value $.001
per share. The number of shares of this series of Convertible Preferred Stock
shall be 500,000 shares. The powers, designations, preferences and relative,
participating, optional or other special rights of the shares of this series
of Convertible Preferred Stock and the qualifications, limitations and
restrictions of such preferences and rights shall be as follows:
1. Dividend Provisions. No dividends shall be paid on any
share of Common Stock or any other series of Preferred Stock unless a dividend
is paid with respect to all outstanding shares of Series A Convertible
Preferred Stock in an amount for each such shares of Series A Convertible
Preferred Stock equal to the aggregate amount of such dividends for all shares
of Common Stock into which each such share of Series A Convertible Preferred
Stock could then be converted. Such dividends shall be payable only when, as,
and if declared payable to holders of Common Stock by the Board of Directors
and shall be noncumulative. In the event the Corporation shall declare a
distribution (other than any distributions described above) payable in
securities of other persons, evidences or indebtedness issued by the
Corporation or other persons, assets (excluding cash dividends) or options or
rights to purchase any such securities or evidences of indebtedness, then, in
each such case the holders of the Series A Convertible Preferred Stock shall
be entitled to a proportionate equitable share of any such distribution in
accordance with provisions set forth above as though the holders of the Series
A Convertible Preferred Stock were the holders of the number of shares of
Common Stock of the corporation into which their respective shares of Series A
Convertible Preferred Stock are convertible or holders of the Preferred Stock
as of the record date fixed for the determination of the holders of the Common
Stock of the Corporation entitled to receive such distribution.
2. Liquidation Preference.
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(a) In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Corporation, the
holder of each share of Series A Convertible Preferred Stock shall be entitled
to receive, out of the assets of the Corporation available for distribution to
its stockholders, before any payment or distribution shall be made on the
Common Stock, an amount per share equal to $10.00. If the assets and funds to
be distributed among the holders of the Series A Convertible Preferred Stock
shall be insufficient to permit the payment of the full aforesaid preferential
amount to such holders, then the entire assets and funds of the Corporation
legally available for the distribution shall be distributed among the holders
of the Series A Convertible Preferred Stock in proportion to the aggregate
preferential amount of all shares of Series A Convertible Preferred Stock held
by them. After payment has been made to the holders of the Series A
Convertible Preferred Stock, the remaining assets of the Corporation available
for distribution to the holders of the Common Stock shall be distributed,
among the holders of the Series A Convertible Preferred Stock and Common Stock
pro rata based on the number of shares of Common Stock held by each at the
time of such liquidation (assuming conversion of all such Series A Convertible
Preferred Stock).
(b) For purposes of this Section 2, a merger or
consolidation of the Corporation with or into any other corporation or
corporations, or the merger of any other corporation or corporations into the
Corporation, or the sale or any other corporate reorganization, in which
shareholders of the Corporation receive distributions as a result of such
consolidation, merger, sale of assets or reorganization, shall be treated as a
liquidation, dissolution or winding up of the Corporation, unless the
stockholders of the Corporation hold more than fifty percent (50%) of the
voting equity securities of the successor or surviving corporation immediately
following such consolidation, merger, sale of assets or reorganization in
which event such consolidation, merger, sale of assets, or reorganization
shall not be treated as a liquidation, dissolution or winding up.
3. Conversion. The Series A Convertible Preferred Stock may
be converted into shares of the Corporation's Common Stock on the following
terms and conditions (the "Conversion Rights"):
(a) Option to Convert. Commencing immediately, holders of
the Series A Convertible Preferred Stock shall have the right to convert all
or a portion of their shares into shares of Common Stock at any time or from
time to time upon notice to the Corporation on the terms and conditions set
forth herein prior to the date fixed for redemption of such shares.
(b) Mechanics of Conversion. Upon the election of a
holder of the Series A Convertible Preferred Stock to convert shares of such
Preferred Stock, the holder of the shares of Series A Convertible Preferred
Stock which are converted shall surrender the certificate or certificates
therefor, duly endorsed, at the office of the Corporation or any authorized
transfer agent for such stock together with a written statement that he elects
to convert his preferred stock to common stock. The Corporation or the
transfer agent shall promptly issue and deliver at such office to such holder
of Series A Convertible Preferred Stock a certificate or certificates for the
number of shares of Common Stock to which such holder is thereby entitled.
The effective date of such conversion shall be a date not later than 30 days
after the date upon which the holder provides written notice of his election
to convert to the Corporation or transfer agent.
2
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(c) Conversion Ratio. Each share of Series A Convertible
Preferred Stock may be converted into one (1) fully paid and nonassessable
share of Common Stock (except as adjusted pursuant to paragraph 3(d) below).
In the event that upon conversion of shares of Series A Convertible Preferred
Stock a holder shall be entitled to a fraction of a share of Common Stock, no
fractional share shall be issued and in lieu thereof the Corporation shall pay
to the holder cash equal to the fair value of such fraction of a share.
(d) Adjustment of Conversion Rate. If the Corporation
shall at any time, or from time to time, after the effective date hereof
effect a subdivision of the outstanding Common Stock and not effect a
corresponding subdivision of the Series A Convertible Preferred Stock, or if
the Corporation at any time or from time to time after the effective date
hereof shall make or issue, or fix a record date for the determination of
holders of Common Stock entitled to receive, a dividend or other distribution
payable in additional shares of Common Stock, then and in each such event the
number of shares of Common Stock issuable upon conversion of the Series A
Convertible Preferred Stock shall be proportionately increased as of the time
of such issuance or, in the event such a record date shall have been fixed, as
of the close of business on such record date.
(e) No Impairment. The Corporation will not, by amendment
of its Articles of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms to be observed or performed hereunder by the Corporation,
but will at all times in good faith assist in the carrying out of all of the
provisions of this Section 3 and in the taking of all such action as may be
necessary or appropriate in order to protect the Conversion Rights of the
holders of the Series A Convertible Preferred Stock against impairment.
(f) Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock, solely for the purpose of
effecting the conversion of the shares of Series A Convertible Preferred
Stock, such number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares of Series A
Convertible Preferred Stock; and if at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to effect the
conversion of all outstanding shares of Series A Convertible Preferred Stock,
the Corporation will take such corporate action as is necessary to increase
its authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purpose.
4. Status of Converted or Reacquired Stock. In case any
shares of Series A Convertible Preferred Stock shall be converted pursuant to
Section 3 hereof, the shares so converted shall cease to be a part of the
authorized capital stock of the Corporation.
5. Voting Rights.
(a) Each share of Series A Convertible Preferred Stock
entitle the holder to one (1) vote and with respect to each such vote, a
holder of shares of Series A Convertible Preferred Stock shall have full
voting rights and powers equal to the voting rights and powers of a holder of
3
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shares of Common Stock, share for share, and shall be entitled to notice of
any shareholders' meeting in accordance with the Bylaws of the Corporation,
and shall be entitled to vote with holders of Common Stock together as a
single class.
(b) The Board of Directors shall consist of five (5)
members. Holders of Series A Convertible Preferred stock, voting together as
a class, shall be entitled to elect one (1) member of the Board of Directors
at each meeting or pursuant to each consent of the Corporation's shareholders
for the election of directors.
6. Redemption Provisions. To the extent permitted under the
Nevada Business Corporation Act, shares of the Series A Convertible Preferred
Stock are redeemable as follows:
(a) Redemption at Option of Corporation. If there is a
registration statement covering the issuance of the Common Stock upon the
conversion of the Series A Convertible Preferred Stock which has been declared
effective by the Securities and Exchange Commission, and both of the following
two conditions have been satisfied:
(i) The Corporation has $1,000,000 of pre-tax income
for a fiscal year according to the audited year-end financial statements; and
(ii) If the closing bid price of the Corporation's
Common Stock for twenty consecutive trading days equals or exceeds $15.00,
the Corporation may redeem shares of Series A Convertible Preferred Stock.
If fewer than all of the outstanding shares of Series A
Convertible Preferred Stock are to be redeemed, the Company will select those
to be redeemed pro rata or by lot or in such other manner as the Board of
Directors may determine.
(b) Redemption Price. The redemption price per share
under this Section 6 shall be Twelve Dollars and Fifty Cents ($12.50) per
share.
(c) Notice of Redemption. Notice to the holders of shares
of Series A Convertible Preferred Stock to be redeemed shall be given not
earlier than 60 days nor later than 30 days before the date fixed for
redemption. The notice of redemption to each stockholder whose shares of
Series A Convertible Preferred Stock are to be redeemed shall specify the
number of Series A Convertible Preferred Stock of such stockholder to be
redeemed, the date fixed for redemption and the redemption price at which
shares of Series A Convertible Preferred Stock are to be redeemed, and shall
specify where payment of the redemption price is to be made upon surrender of
such shares, shall state the conversion rate then in effect, and that the
Conversion Rights of such shares shall cease and terminate at the close of
business on the date fixed for redemption.
7. Notices. Any notice required to be given to holders of
shares of Series A Convertible Preferred Stock shall be deemed given upon
deposit in the United States mail, postage prepaid, addressed to such holder
of record at his address appearing on the books of the Corporation, or upon
personal delivery of the aforementioned address.
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SECOND: This Amendment to the Articles of Incorporation effected herein
is authorized by the vote of the Board of Directors on July 11, 1996.
THIRD: The amendments effected herein were duly adopted in accordance
with the applicable provisions of NRS 78.385.
IN WITNESS WHEREOF, Saint Andrews Golf Corporation has caused this
Certificate of Amendment to be signed and acknowledged by its President and
Secretary this 26th day of July 1996.
SAINT ANDREWS GOLF CORPORATION
ATTEST:
/s/ Ron Boreta By /s/ Ron Boreta
Ron Boreta, Secretary Ron Boreta, President
STATE OF NEVADA )
) ss.
COUNTY OF CLARK )
I, John Curtis, a Notary Public, hereby certify that on the 26th day of
July, 1996, personally appeared before me Ron Boreta, who being by me first
duly sworn, declared that he signed the foregoing document as President and
Secretary of the corporation named therein and that he was above the age of
eighteen years and that the statements contained therein are true and correct
to the best of his knowledge and belief.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
/s/ John Curtis
Notary Public
My commission expires: June 4, 2000
5
CERTIFICATE OF DESIGNATION
FOR SERIES B CONVERTIBLE PREFERRED STOCK
SAINT ANDREWS GOLF CORPORATION
SAINT ANDREWS GOLF CORPORATION, a Nevada corporation (the "Corporation"),
hereby certifies to the Secretary of State of the State of Nevada as follows:
RESOLVED: That the Board of Directors of the Corporation, by unanimous
written consent dated September 22, 1998, in lieu of meetings of such Board,
pursuant to Article IV of the Articles of Incorporation, adopted resolutions
approving, proposing and declaring advisable, the establishment of a series or
series of preferred stock of the Corporation in the form of this Certificate
of Designation and the Board of Directors hereby establishes and states the
designation and number of such shares, and fixes the relative rights and
preferences, designations, voting powers, qualification and limitation thereof
as follows:
There is hereby established a series of Preferred Stock of the
corporation designated "Series B Convertible Preferred Stock," par value $.001
per share. The number of shares of this series of Convertible Preferred Stock
shall be 250,000 shares. The powers, designations, preferences and relative,
participating, optional or other special rights of the shares of this series
of Convertible Preferred Stock and the qualifications, limitations and
restrictions of such preferences and rights shall be as follows:
1. Dividend Provisions. No dividends shall be paid on any share of
Common Stock or any other series of Preferred Stock unless a dividend is paid
with respect to all outstanding shares of Series B Convertible Preferred Stock
in an amount for each such share of Series B Convertible Preferred Stock equal
to (a) in the case of a dividend with respect to the Common Stock, the
aggregate amount of such dividends for all shares of Common Stock into which
each such share of Series B Convertible Preferred Stock could then be
converted and (b) in the case of a dividend with respect to the Preferred
Stock, (i) if such Preferred Stock is convertible into Common Stock, the
aggregate amount of such dividends (calculated on the basis per share of
Common Stock into which such Preferred Stock is convertible) for all shares of
Common Stock into which each such share of Series B Convertible Preferred
Stock could then be converted or (ii) if such Preferred Stock is not
convertible into Common Stock, an aggregate amount of such dividends
calculated in accordance with the following formula: aggregate dividends =
[then current liquidation value of Preferred divided by then current liquida-
tion value of Series B Convertible Preferred Stock] x dividend per share of
Preferred Stock x number of shares of Series B Convertible Preferred Stock then
outstanding. Such dividends shall be payable only when, as, and if declared
payable to holders of Common Stock or Preferred Stock, as the case may be, by
the Board of Directors and shall be noncumulative. In the event the
Corporation shall declare a distribution (other than any distributions
described above) payable in securities of other persons, evidences or
indebtedness issued by the Corporation or other persons, assets (excluding
cash dividends) or options or rights to purchase any such securities or
evidences of indebtedness, then, in each such case the holders of the Series B
Convertible Preferred Stock shall be entitled to a proportionate equitable
share of any such distribution in accordance with provisions set forth above
as though the holders of the Series B Convertible Preferred Stock were the
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holders of the number of shares of Common Stock of the corporation into which
their respective shares of Series B Convertible Preferred Stock are
convertible or holders of the Preferred Stock as of the record date fixed for
the determination of the holders of Common Stock of the Corporation entitled
to receive such distribution.
2. Liquidation Preference.
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation, the holder of
each share of Series B Convertible Preferred Stock shall be entitled to
receive, out of the assets of the Corporation available for distribution to
its stock holders, pro rata with the holders of the Series A Convertible
Preferred Stock with respect to their preference amount before any payment or
distribution shall be made on the Common Stock or any other series of
Preferred Stock as the case may be, an amount per share equal to $10.00. If
the assets and funds to be distributed among the holders of the Series A
Convertible Preferred Stock and the Series B Convertible Preferred Stock shall
be insufficient to permit the payment of the full aforesaid preferential
amount to such holders, then the entire assets and funds of the corporation
legally available for the distribution shall be distributed among the holders
of the Series A Convertible Preferred Stock and the Series B Convertible
Preferred Stock in proportion to the aggregate preferential amount of all
shares of Series A Convertible Preferred Stock and the Series B convertible
Preferred Stock held by them. After payment has been made to the holders of
the Series A Convertible Preferred Stock and the Series B Convertible
Preferred Stock, the remaining assets of the Corporation available for
distribution to the holders of the Common Stock shall be distributed, among
the holders of the Series A Convertible Preferred Stock, the Series B
Convertible Preferred Stock and Common Stock pro rata based on the number of
Shares of Common Stock held by each at the time of such liquidation (assuming
conversion of all such Series A Convertible Preferred Stock and Series B
Convertible Preferred Stock).
(b) For purposes of this Section 2, a merger or consolidation of the
Corporation with or into any other corporation or corporations, or the merger
of any other corporation or corporations into the Corporation, or the sale or
any other corporate reorganization, in which shareholders of the corporation
receive distributions as a result of such consolidation, merger, sale of
assets or reorganization, shall be treated as a liquidation, dissolution or
winding up of the Corporation, unless the stockholders of the Corporation hold
more than fifty percent (50%) of the voting equity securities of the successor
or surviving corporation immediately following such consolidation, merger,
sale of assets or reorganization in which event such consolidation, merger,
sale of assets, or reorganization shall not be treated as a liquidation,
dissolution or winding up.
3. Conversion. The Series B Convertible Preferred Stock may be
converted into shares of the Corporation's Common Stock on the following terms
and conditions (the "Conversion Rights"):
(a) Option to Convert. Commencing immediately, holders of the
Series B Convertible Preferred Stock shall have the right to convert all or a
portion of their shares into shares of Common Stock at any time or from time
to time upon notice to the Corporation on the terms and conditions set forth
herein prior to the date fixed for redemption of such shares.
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(b) Mechanics of Conversion. Upon the election of a holder of the
Series B Convertible Preferred Stock to convert shares of such Preferred
Stock, the holder of the shares of Series B Convertible Preferred Stock which
are converted shall surrender the certificate or certificates therefor, duly
endorsed, at the office of the corporation or any authorized transfer agent
for such stock together with a written statement that he elects to convert his
preferred stock to common stock. The Corporation or the transfer agent shall
promptly issue and deliver at such office to such holder of Series B
Convertible Preferred Stock a certificate or certificate for the number of
shares of Common Stock to which such holder is thereby entitled. The
effective date of such conversion shall be a date not later than 30 days after
the date upon which the holder provides written notice of his election to
convert to the Corporation or transfer agent.
(c) Conversion Ratio. Each share of Series B Convertible Preferred
Stock may be converted into one (1) fully paid and nonassessable share of
Common Stock (subject to adjustment pursuant to Section 3(d) below). In the
event that upon conversion of shares of Series B Convertible Preferred Stock a
holder shall be entitled to a fraction of a share of Common Stock, no
fractional share shall be issued and in lieu thereof the Corporation shall pay
to the holder cash equal to the fair value of such fraction of a share.
(d) Adjustment of Conversion Rate. If the Corporation shall at any
time, or from time to time, after the effective date hereof effect a
subdivision of the outstanding Common Stock and not effect a corresponding
subdivision of the Series B Convertible Preferred Stock, or if the Corporation
at any time or from time to time after the effective date hereof shall make or
issue, or fix a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in additional
shares of Common Stock, then and in each such event the number of shares of
Common Stock issuable upon conversion of the Series B Convertible Preferred
Stock shall be proportionately increased as of the time of such issuance or,
in the event such a record date shall have been fixed, as of the close of
business on such record date.
(e) No Impairment. The Corporation will not, by amendment of its
Articles of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any
of the terms to be observed or performed hereunder by the Corporation, but
will at all times in good faith assist in the carrying out of all of the
provisions of this Section 3 and in the taking of all such action as may be
necessary or appropriate in order to protect the Conversion Rights of the
holders of the Series B Convertible Preferred Stock against impairment.
(f) Reservations of Stock Issuable Upon Conversion. The Corporation
shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of Series B Convertible Preferred Stock, such number
of its shares of Common Stock as shall time to time be sufficient to effect
the conversion of all outstanding shares of Series B Convertible Preferred
Stock; and if at any time the number of authorized but unissued shares of
Common Stock shall not be sufficient to effect the conversion of all
outstanding shares of Series B Convertible Preferred Stock, the Corporation
will take such corporate action as is necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be
sufficient for such purpose.
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4. Status of Converted or Reacquired Stock. In case any shares of
Series B Convertible Preferred Stock shall be converted pursuant to Section 3
hereof, the shares so converted shall cease to be a part of the authorized
capital stock of the Corporation.
5. Voting Rights. Each share of Series B Convertible Preferred Stock
entitles the holder to one (1) vote and with respect to each such vote, a
holder of shares of Series B Convertible Preferred Stock shall have full
voting rights and powers equal to the voting rights and powers of a holder of
shares of Common Stock, share for share, and shall be entitled to notice of
any shareholders' meeting in accordance with the Bylaws of the Corporation,
and shall be entitled to vote with holders of Common Stock and Series A
Convertible Preferred Stock together as a single class.
6. Redemption Provisions. To the extent permitted under the Nevada
Business Corporation Act, shares of the Series B Convertible Preferred Stock
are redeemable as follows:
(a) Redemption at Option of Corporation. If there is a registration
statement covering the issuance of the Common Stock upon the conversion of the
Series B Convertible Preferred Stock which has been declared effective by the
Securities and Exchange Commission, and both of the following two conditions
have been satisfied:
(i) The Corporation has $1,000,000 of pre-tax income for a
fiscal year according to the audited year-end financial statements; and
(ii) If the closing bid price of the Corporation's common stock
for twenty consecutive trading days equals or exceeds $15.00,
the Corporation may redeem shares of Series B Convertible Preferred Stock.
If fewer than all of the outstanding shares of Series B Convertible
Preferred Stock are to be redeemed, the Company will select those to be
redeemed pro rata or by lot or in such other manner as the Board of Directors
may determine.
(b) Redemption Price. The redemption price per share under this
Section 6 shall be $12.50 per share.
(c) Notice of Redemption. Notice to the holders of shares of Series
B Convertible Preferred Stock to be redeemed shall be given not earlier than
60 days nor later than 30 days before the date fixed for redemption. The
notice of redemption to each stockholder whose shares of Series B Convertible
Preferred Stock are to be redeemed shall specify the number of Series B
Convertible Preferred Stock of such stockholder to be redeemed, the date fixed
for redemption and the redemption price at which shares of Series B
Convertible Preferred Stock are to be redeemed, and shall specify where
payment of the redemption price is to be made upon surrender of such shares,
shall state the conversion rate then in effect, and that the Conversion Rights
of such shares shall cease and terminate at the close of business on the date
fixed for redemption.
7. Preferences Generally. Except as otherwise set forth in this Section
7, the Series B Convertible Preferred Stock shall be pari passu with the
Series A Convertible Preferred Stock. The Corporation shall not authorize or
issue any securities having any rights or preferences senior or preferential
to or pari passu with those of the Series B Convertible Preferred Stock
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without the vote of the holders of a majority of the Series B Convertible
Preferred Stock, voting separately as a class, in addition to any other vote
required by law.
8. Notices. Any notice required to be given to holders of shares of
Series B Convertible Preferred Stock shall be deemed given upon deposit in the
United States mail, postage prepaid, addressed to such holder of record at his
address appearing on the books of the corporation, or upon personal delivery
of the aforementioned address.
RESOLVED: This Certificate of Designation effected herein is authorized
by the vote of the Board of Directors on September 22, 1998.
RESOLVED: The resolutions effected herein were duly adopted in
accordance with the applicable provisions of NRS 78.1955.
IN WITNESS WHEREOF, Saint Andrews Golf Corporation has caused this
Certificate of Designation to be signed and acknowledged by its President and
Secretary this 30th day of September 1998.
ATTEST: SAINT ANDREWS GOLF CORPORATION
By: /s/ Ron Boreta By: /s/ Ron Boreta
Ron Boreta, Secretary Ron Boreta, President
STATE OF COLORADO )
) ss.
COUNTY OF DENVER )
I, Virginia M. Anglada, a Notary Public, hereby certify that on the 30th
day of September 1998, personally appeared before me Ron Boreta, who being by
me first duly sworn, declared that he signed the foregoing document as both
President and Secretary of the corporation named therein and that he is above
the age of eighteen years and that the statements contained therein are true
and correct to the best of his knowledge and belief.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
/s/ Virginia M. Anglada
Notary Public
[ S E A L ]
My commission expires: April 21, 2002
5
CERTIFICATE OF AMENDMENT
TO ARTICLES OF INCORPORATION OF
SAINT ANDREWS GOLF CORPORATION
CHANGING ITS NAME TO
ALL-AMERICAN SPORTPARK, INC.
Saint Andrews Golf Corporation, a corporation organized and existing
under the Nevada General Corporation Law, does hereby certify as follows:
FIRST: ARTICLE I of the Articles of Incorporation is hereby amended to
read as follows:
"ARTICLE I
NAME: The name of the Corporation is All-American SportPark, Inc. "
SECOND: The foregoing Amendment was adopted by written unanimous consent
of the Board of Directors of the Corporation on October 26, 1998, in
accordance with the provisions of Section 78.315 of the Nevada General
Corporation Law.
THIRD: The foregoing Amendment was adopted by Stockholders holding at
least a majority of the voting power of the Corporation on December 7, 1998,
in accordance with the provisions of Section 78.390 of the Nevada General
Corporation Law.
IN WITNESS WHEREOF, Saint Andrews Golf Corporation has caused this
Certificate of Amendment to be signed and acknowledged by its President and
Secretary this 7th day of December 1998.
SAINT ANDREWS GOLF CORPORATION
(Changing its name to All-American
SportPark, Inc)
By: /s/ Ronald S. Boreta
ATTEST: Ronald S. Boreta, President
/s/ Ronald S. Boreta
Ronald S. Boreta, Secretary
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STATE OF COLORADO )
) ss.
COUNTY OF DENVER )
I, Virginia M. Anglada, a Notary Public, hereby certify that on the 7th
day of December 1998, personally appeared before me Ronald S. Boreta, who
being by me first duly sworn, declared that he signed the foregoing document
as both President and Secretary of the corporation named therein and that he
is above the age of eighteen years and that the statements contained therein
are true and correct to the best of his knowledge and belief.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
/s/ Virginia M. Anglada
Notary Public
[ S E A L ]
My commission expires: 4/21/2002
PROMISSORY NOTE
$3,000,000.00 March 18, 1998
San Diego, California
FOR VALUE RECEIVED, All-American SportPark, Inc., a Nevada corporation
("Maker"), promises to pay to Callaway Golf Company, a California corporation
("Holder"), or order, at its place of business in San Diego, California, or
such other place as Holder may designate, the principal amount of Three
Million Dollars ($3,000,000.00), or so much thereof as may be advanced, with
interest on such amounts advanced until paid, at the rate set forth below and
payable as follows:
INTEREST RATE. The amount of outstanding principal shall bear interest at a
rate of ten percent (10%) per annum. Interest shall accrue on the principal
balance from the date of and on the amount of each advance made under this
Note, as advances are made pursuant to the paragraph of this Note titled
Disbursement Instruction and Authorization and shall be calculated on the
basis of a 365-day year.
MAXIMUM INTEREST. In no event whatsoever shall the amount paid, or agreed to
be paid, to Holder for the use, forbearance or detention of money to be loaned
hereunder or otherwise, for the performance or payment of any covenant or
obligation contained herein, exceed the maximum amount permissible under
applicable law. If from any circumstance whatsoever fulfillment of any
provision hereof exceeds the limit of validity prescribed by law, then, ipso
facto, the obligation to be fulfilled shall be reduced to the limit of such
validity, and if from any such circumstance Holder shall ever receive as
interest under this Note or otherwise an amount that would exceed the highest
lawful rate, such amount that would be excessive interest shall be applied to
the reduction of the principal amount owing hereunder and not to the payment
of interest, or if such excessive interest exceeds the unpaid balance of
principal, such excess shall be refunded to Maker.
TERM. The term of this Note shall be for a period beginning on the date
hereof and ending on the earlier of the following dates (the "Maturity Date"):
(i) June 18, 1998; or (ii) the date upon which Summit Financial Group, Inc.,
or any affiliate thereof, or any other lender or investor shall make any loan
to or equity investment in Maker, Saint Andrews Golf Corporation ("Saint
Andrews") or any affiliate of either of such entities. All unpaid principal,
together with any and all accrued and unpaid interest, shall be due on the
Maturity Date.
PAYMENT. All principal and interest due hereunder shall be payable on or
before the Maturity Date.
Any payment hereunder shall be applied first to the payment of costs and
charges of collection, if any, then to accrued interest, and the balance, if
any, shall be then applied to reduction of principal. Principal and interest
are payable in lawful money of the United States of America.
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PREPAYMENT. Maker may prepay this Note in full or in part at any time without
prepayment charge. No partial prepayment shall release Maker from thereafter
tendering all regular scheduled payments required herein until this Note is
paid in full. No amount prepaid shall be available for re-borrowing.
GUARANTY AGREEMENT. This Note is guarantied pursuant to a Guaranty executed
contemporaneously herewith by Saint Andrews in favor of Holder (the
"Guaranty"). The Guaranty is secured by a Membership Interest Security
Agreement dated June 13, 1997 by and between Holder and Saint Andrews.
DEFAULT/ACCELERATION. If any one or more of the following events shall occur
(hereinafter called an "Event of Default"), namely: (i) Maker shall fail to
timely make payment of any installment hereunder and such failure is not cured
within ten (10) days of written notice by Holder to Maker; (ii) default or an
event of default shall occur under the Guaranty or the Membership Interest
Security Agreement; (iii) Maker shall have failed to comply with or otherwise
perform any other term, provision, covenant or condition under this Note; (iv)
any failure of this Note to be valid, binding and the enforceable obligation
of Maker; (v) the levying of any attachment, execution or other process
against Maker or against any material portion of its property; (vi) if Maker
(or any successor thereto) shall make a general assignment for the benefit of
creditors; or shall file or have filed against it a petition for relief under
the bankruptcy law of the United States; or in the event that a receiver,
trustee or other court officer is appointed for the purpose of taking
possession of any part of Maker's property; or (vii) any revocation or
purported revocation of the Guaranty; THEN, upon the occurrence of any such
Event of Default, or upon the expiration of the term of this Note, Holder at
its election, and without presentment demand, notice of any kind all of which
are expressly waived by Maker, may declare the entire outstanding balance of
principal and interest thereon immediately due and payable, together with all
costs of collection, including attorneys' fees, or may exercise any of its
rights other rights and remedies, all of which rights and remedies are
cumulative.
NO WAIVER BY HOLDER. The acceptance by Holder of any payment under this Note
after the date such payment is due, or the failure to declare an Event of
Default as herein provided, shall not constitute a waiver of any of the terms
of this Note or the right to require the prompt payment when due of future or
succeeding payments or to declare an Event of Default for any failure to so
pay or for any other default. The acceptance by Holder of a payment of a
portion of any installment at any time that such installment is due in full
shall not cure or excuse the default caused by the failure to pay such
installment in full and shall not constitute a waiver of the right to require
full payment when due of all future or succeeding installments. All remedies
and rights of Holder are cumulative.
ATTORNEYS' FEES AND COSTS. In the event Holder takes any action to enforce
any provision of this Note, either through legal proceedings or otherwise,
Maker promises to immediately reimburse Holder for reasonable attorneys' fees
and all other costs and expenses so incurred as awarded by a court of law.
Maker shall also reimburse Holder for all attorneys' fees and costs reasonably
incurred in the representation of Holder in any bankruptcy, insolvency,
reorganization or other debtor-relief proceeding of or relating to Maker, or
for any action to enforce any judgment rendered hereon or relating to
enforcement hereof.
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LATE PAYMENT. Maker agrees that if for any reason it fails to make any of the
monthly payments required herein, including the amount due at the Maturity
Date, within five (5) days after the due date, Holder shall be entitled to
damages for the detriment caused thereby, the extent of which damages are
extremely difficult and impractical to ascertain. Maker therefore agrees that
a sum equal to five percent (5%) of such delinquent payment is a reasonable
estimate of such damages and Maker agrees to pay such sum upon demand by
Holder. Acceptance of such late charge by the Holder shall in no event
constitute a waiver of Maker's default with respect to such overdue amount nor
prevent the Holder from exercising any of the other rights and remedies
granted hereunder.
DISBURSEMENT INSTRUCTION AND AUTHORIZATION. Holder is making the loan to
Maker evidenced hereby to facilitate Maker's payment of construction and
related costs of the "All-American SportPark" located in Las Vegas, Nevada
(the "SportPark"). Maker agrees that no portion of any advance made hereunder
shall be used to pay or otherwise be disbursed to Saint Andrews or any insider
or affiliate of Saint Andrews or Maker. Holder shall make advances from time
to time hereunder, in its sole and absolute discretion, directly to Maker
within two (2) business days after receipt of Maker's written request
submitted to Holder in the form as attached hereto as Exhibit "A" (each a
"Borrowing Request"), subject to all terms of this Note; and further provided
that Maker shall not request an advance under this Note more frequently than
once every thirty (30) days and no advances shall be made or available under
this Note after April 30, 1998. Maker represents, warrants, and agrees that
all advances made hereunder shall be utilized to pay the creditors of Maker as
set forth and in the amounts provided in each Borrowing Request. Such
advances shall be subject to the terms of this Note. Holder shall note all
advances, their amounts and the disbursement date, and principal amounts paid,
on the schedule attached hereto, and shall provide a copy of the updated
schedule to Maker after each advance and such notations shall constitute prima
facie evidence of the outstanding principal amount hereof; provided, however,
that Holder's failure to record any such advance or payment shall not alter
Maker's obligation to repay all amounts actually advanced hereunder.
Notwithstanding any other provision of this Note, or any other agreement
executed in connection herewith, Holder shall have no obligation to advance
any amounts to Maker, before, upon or after the occurrence of any Event of
Default hereunder, or upon an event occurring with which the giving of notice
or the passage of time would be an Event of Default.
WAIVERS. The Maker, endorsers, guarantors and sureties of this Note hereby
waive diligence, demand, presentment, notice of nonpayment, protest and notice
of protest, and expressly agree that this Note and any payment hereunder, may
be renewed, modified or extended from time to time and at any time and consent
to the acceptance or release of the security for this Note or a release of any
party or guarantor, all without in any way effecting their liability and waive
the right to plead any and all statutes of limitations as a defense to any
demand on this Note, or on any guaranty thereof, or to any agreement to pay
the same to the full extent permissible by law.
MISCELLANEOUS. The terms of this Note shall inure to the benefit of and bind
the parties hereto and their successors and assigns. Maker represents and
warrants to Holder that the obligations hereunder arise out of or in
connection with business purposes and do not relate to any personal, family or
household purpose. As used herein the term "Maker" shall include the
undersigned Maker and any other person or entity who may subsequently become
eligible for the payment hereof. The term "Holder" shall include the named
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Holder as well as any other person or entity to whom this Note or any interest
in this Note is conveyed, transferred or assigned. This Note or any interest
in this Note, and all rights and security therefore, may be conveyed,
transferred or assigned by the Holder to any other person or entity without
the consent of Maker. Each person signing this Note on behalf of Maker
represents and warrants that he has full authority to do so and that this Note
binds Maker. The terms of this Note may only be modified by a writing signed
by Maker and Holder.
NOTICE. All notices and other communications provided for hereunder shall be
in writing (including telegraphic, telecopied or telex communication) and
mailed or telegraphed or telecopied or delivered to the parties at their
respective addresses as set forth below, or, as to each party, at such other
address as shall be designated by such party in a written notice to the other
parties complying as to delivery with the terms of this Section. All such
notices and communications, if mailed, shall be effective upon deposit in the
United States mail, first-class (or certified) postage prepaid; if telegraphed
or telecopied, shall be effective when transmitted, if sent by telex, shall be
effective when the telex is sent and the appropriate answer back is received,
and if delivered in another way, shall be effective upon receipt.
To All-American SportPark, Inc. at its business office:
5235 South Valley View Boulevard, Suite 4
Las Vegas, Nevada 89118
Attention: Ron Boreta, President
Telephone No.: (702) 798-7777
Facsimile No.: (702) 739-9509
To Callaway Golf at its business office:
Callaway Golf Company
2285 Rutherford Road
Carlsbad, California 92008-8815
Attn: Donald H. Dye, President and Chief
Executive Officer
Telephone: (760) 930-5738
Facsimile: (760) 930-5022
GOVERNING LAW. This Note shall be governed by and construed and enforced in
accordance with the internal laws of the State of California without giving
any effect to principles of conflict of laws. This Note shall be deemed made
and entered into in San Diego County, California.
ALL-AMERICAN SPORTPARK, INC., a Nevada corporation
By: /s/ Ronald S. Boreta
Its: President and Chief Executive Officer
By: /s/ Chuck Martin
Its: Chief Financial Officer
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EXHIBIT A
[FORM OF NOTICE OF BORROWING REQUEST]
Pursuant to that Promissory Note (said Promissory Note, as so amended,
supplemented or otherwise modified, being the "Note") dated as of March 18,
1998 between All-American SportPark, Inc. (the "Maker") and Callaway Golf
Company (the "Holder"), this represents the Maker's request to borrow from
Holder, $_________________, to be utilized for the payment of the following:
Creditor Name, Address and Telephone Number
Contract or Account Number
Amount to be Paid
Brief Description of Nature of Services Rendered or Goods Supplied or Sold
The undersigned officers certify that:
A. The representations and warranties contained in the Note are true and
correct in all material respects on and as of the date hereof;
B. No event has occurred and is continuing or would result from the
consummation of the borrowing contemplated hereby that would constitute an
Event of Default under the Note or would be such an event of default with the
passage of time, the giving of notice or both;
C. No portion of the amount requested above shall be paid to any insider or
affiliate of Maker or Saint Andrews Golf Corporation; and
D. The Note is in full force and effect, and is not subject to offset,
defense or counterclaim.
ALL-AMERICAN SPORTPARK, INC. a Nevada corporation
By: /s/ Ronald S. Boreta
Its: President and Chief Executive Officer
By: /s/ Chuck Martin
Its: Chief Financial Officer
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SCHEDULE OF ADVANCES
Unpaid
Amount of Principal Amount of
Amount of Principal Balance Interest Notation
Date Advance Paid of Note Paid Made by
GUARANTY
THIS GUARANTY ("Guaranty") is executed as of the 18th day of March, 1998,
by Saint Andrews Golf Corporation, a Nevada corporation (the "Guarantor"), in
favor of Callaway Golf Company, a California corporation ("Callaway Golf"),
and its successors and assigns, with reference to the facts set forth below.
RECITALS
A. Callaway Golf has agreed to make a loan, or provide other financial
accommodations to All-American SportPark, Inc. (the "Borrower"). The
Borrower's obligations to Callaway Golf in respect of such loan or other
financial accommodations are evidenced by a Promissory Note, in the original
principal amount of Three Million Dollars ($3,000,000.00), dated March 18,
1998, executed by Borrower (as at any time amended, modified, or supplemented,
and including any replacement notes issued in exchange or substitution
therefor or for any such replacement note, the "Note").
B. The Guarantor owns all of the outstanding capital stock of the
Borrower, or otherwise expects to benefit from the grant by Callaway Golf to
the Borrower of the loan or other financial accommodations.
C. As an essential inducement to Callaway Golf's agreement to make such
loan or to provide such other financial accommodations to the Borrower and in
consideration therefor and at the request of the Borrower, the Guarantor has
agreed to guaranty the payment of all obligations of the Borrower under the
Note, as provided herein.
NOW, THEREFORE, in consideration of the premises, and to induce and in
consideration for the loan or other financial accommodations, the Guarantor
agrees for the benefit of Callaway Golf, its successors and assigns, as set
forth below.
1. Guaranty.
(a) The Guarantor hereby unconditionally and irrevocably guaranties
to Callaway Golf the payment of, and promises to pay to Callaway Golf, or
order, all indebtedness and obligations, of any nature whatsoever, of the
Borrower under the Note and any and all extensions, renewals, substitutions,
replacements, and modifications thereof, whether now in existence or hereafter
created, including, without limitation, (i) all principal of and interest on
the Note and (ii) all fees, charges, costs, and other amounts payable by the
Borrower under the Note (all of the foregoing obligations, the "Guarantied
Obligations").
(b) This is a continuing guaranty relating to the Guarantied
Obligations, including, without limitation, obligations and liabilities
arising under successive and future transactions that either increase,
decrease, or continue the Guarantied Obligations, or, from time to time, renew
Guarantied Obligations that have been satisfied, independent of and in
addition to any guaranty, endorsement, or collateral now or hereafter held by
Callaway Golf, whether or not furnished by the Guarantor. This Guaranty shall
apply and be irrevocable with respect to any indebtedness created or incurred
even after actual receipt by Callaway Golf of any written notice of revocation
by Guarantor which indebtedness arises out of any extension, renewal, advance,
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additional advance, refunding, replacement or modification of any indebtedness
originally created prior to the actual receipt of such written notice
regardless of whether such extension, renewal, advance, additional advance,
refunding replacement or modification occurs prior to such revocation, and
Guarantor waives any right to revoke this Guaranty and the benefits of
California Civil Code Section 2815.
2. Rights of Callaway Golf.
The Guarantor consents that Callaway Golf may, and authorizes Callaway
Golf at any time in its discretion without notice or demand and without
affecting the indebtedness and liabilities of the Guarantor hereunder to: (i)
enter into agreements with the Borrower and renew, extend, amend, waive,
restructure, refinance, release, accelerate, or otherwise change the time for
payment of, or otherwise change the terms of, the indebtedness evidenced
thereby (including, without limitation, the Guarantied Obligations),
including, without limitation, (A) increase or decrease in the Guarantied
Obligations or the rate of interest on the Guarantied Obligations and (B) any
amendment of the Guarantied Obligations to permit Callaway Golf to extend
further or additional accommodations to the Borrower in any form, including
credit by way of loan, lease, sale or purchase of assets, guarantee, or
otherwise, which shall thereupon be Guarantied Obligations; (ii) accept new or
additional documents, instruments, or agreements relative to the Guarantied
Obligations; (iii) consent to the change, restructure or termination of the
individual, partnership, or corporate structure or existence of the Borrower,
the Guarantor or any affiliate of the Borrower or the Guarantor and
correspondingly restructure the Guarantied Obligations; (iv) accept partial
payments on the Guarantied Obligations; (v) take and hold collateral or
additional guaranties for the Guarantied Obligations and amend, alter,
exchange, substitute, transfer, enforce, perfect or fail to perfect, waive,
subordinate, terminate, or release any such collateral or guaranties; (vi)
apply any collateral, and direct the order and manner of sale thereof as
Callaway Golf in its sole discretion may determine; (vii) settle, release on
terms satisfactory to Callaway Golf or by operation of law or otherwise,
compound, compromise, collect, or otherwise liquidate the Guarantied
Obligations and/or the collateral or any guaranty therefor in any manner,
whether in liquidation, reorganization, receivership, bankruptcy, or
otherwise; (viii) release the Borrower or any other party for all or any part
of the Guarantied Obligations; or (ix) assign the Guarantied Obligations or
any rights related thereto in whole or in part.
3. Independent Obligations.
This Guaranty is a guaranty of payment and not of collection. The
Guarantor's obligations under this Guaranty are independent of those of the
Borrower and of the obligations of any other guarantor, and are not
conditioned or contingent upon the genuineness, validity, regularity, or
enforceability of the Note or other Guarantied Obligations or of the
obligations of any other guarantor. Callaway Golf may bring a separate action
against the Guarantor without first proceeding against the Borrower, any other
guarantor, or any other person or entity, or any security held by Callaway
Golf, and without pursuing any other remedy. Callaway Golf's rights under
this Guaranty in respect of the Guarantied Obligations shall not be exhausted
by any action of Callaway Golf until all of the Guarantied Obligations have
been fully and indefeasibly paid.
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4. Waiver of Defenses.
The Guarantor waives and agrees not to assert or take advantage of (i)
any right to require Callaway Golf to proceed against the Borrower, any other
guarantor, or any other person or entity, or against any security now or
hereafter held by Callaway Golf, or to pursue any other remedy whatsoever;
(ii) any defense based upon any legal disability of the Borrower or of any
other guarantor or any discharge or limitation of the liability of the
Borrower or of any other guarantor to Callaway Golf, or any restraint or stay
applicable to actions against the Borrower or against any other guarantor,
whether such disability, discharge, limitation, restraint, or stay is
consensual, arises by order of a court or other governmental authority, or
arises by operation of law or any liquidation, reorganization, receivership,
bankruptcy, insolvency or debtor-relief proceeding, or from any other cause,
including, without limitation, any defense to the payment of interest,
attorneys' fees and costs, and other charges that otherwise would accrue or
become payable in respect of the Guarantied Obligations after the commencement
of any such proceeding, it being the intent of the parties that the Guarantied
Obligations shall be determined without regard to any rule of law or order
that may relieve the Borrower of any portion of such obligations; (iii)
setoffs, counterclaims, presentment, demand, protest, notice of protest,
notice of non-payment, or other notice of any kind; (iv) any defense based
upon the modification, renewal, extension, or other alteration of the
Guarantied Obligations; (v) any defense based upon the negligence of Callaway
Golf, including, without limitation, the failure to record an interest under a
deed of trust, the failure to perfect any security interest, or the failure to
file a claim in any bankruptcy of the Borrower or of any other guarantor; (vi)
any defense based upon a statute of limitations (to the fullest extent
permitted by law), and any defense based upon Callaway Golf's delay in
enforcing this Guaranty or any other agreement; (vii) any defense based upon
or arising out of any defense that the Borrower may have to the performance of
any part of the Guarantied Obligations; (viii) any defense to recovery by
Callaway Golf of a deficiency after non-judicial sale of real or personal
property; any defense based upon the unavailability to Callaway Golf of
recovery of a deficiency judgment after non-judicial sale of real or personal
property; and any defense based upon or arising out of any of Sections 580a
(which would otherwise limit Guarantor's liability after a nonjudicial
foreclosure sale to the difference between the obligations guarantied hereby
and the fair market value of the property or interest sold at such nonjudicial
foreclosure sale), 580b and 580d (which would otherwise limit Callaway Golf's
right to recover a deficiency judgment with respect to purchase money
obligations and after a nonjudicial foreclosure sale, respectively), or 726
(which, among other things, would otherwise require Callaway Golf to exhaust
all of its security before a personal judgment may be obtained for a
deficiency) of the California Code of Civil Procedure (including but not
limited to any fair value limitations under Section 580a or 726 of such Code)
or based upon or arising out of Division 9 of the California Uniform
Commercial Code; (ix) any defense based upon the death, incapacity, lack of
authority, or termination of existence of, or revocation hereof by, any person
or entity or persons or entities, or the substitution of any party hereto; (x)
any defense based upon or related to the Guarantor's lack of knowledge as to
the Borrower's financial condition; (xi) any defense based upon the impairment
of any subrogation or reimbursement rights that the Guarantor might have,
including any defense or right based upon the acceptance by Callaway Golf or
an affiliate of Callaway Golf of a deed in lieu of foreclosure without
extinguishing the Guarantied Obligations, even if such acceptance destroys,
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alters, or otherwise impairs subrogation rights of the Guarantor, the right of
the Guarantor to proceed against the Borrower for reimbursement, or both;
(xii) any right to designate the application of any sums or property received
by Callaway Golf; and (xiii) any right or defense that is or may become
available to the Guarantor by reason of California Civil Code Sections 2787 to
2855.
5. Borrower's Financial Condition.
The Guarantor acknowledges that the Guarantor is relying upon the
Guarantor's own knowledge and is fully informed with respect to the Borrower's
financial condition. The Guarantor assumes full responsibility for keeping
fully informed of the financial condition of the Borrower and all other
circumstances affecting the Borrower's ability to perform its obligations to
Callaway Golf, and agrees that Callaway Golf will have no duty to report to
the Guarantor any information that Callaway Golf receives about the Borrower's
financial condition or any circumstances bearing on the Borrower's ability to
perform all or any portion of the Guarantied Obligations, regardless of
whether Callaway Golf has reason to believe that any such facts materially
increase the risk beyond that which the Guarantor intends to assume or has
reason to believe that such facts are unknown to the Guarantor or has a
reasonable opportunity to communicate such facts to the Guarantor.
6. Exercise of Subrogation Rights; Subordination.
(a) The Guarantor agrees that (i) the Guarantor shall have no right
of subrogation, reimbursement or indemnity against the Borrower or against any
collateral provided for in the Note unless and until all Guarantied
Obligations have been paid in full; (ii) the Guarantor shall have no right of
contribution against any other guarantor unless and until all Guarantied
Obligations have been paid in full; and (iii) until the Guarantor is permitted
by the terms of this paragraph to exercise any such right of subrogation,
reimbursement, indemnity or contribution, the Guarantor hereby waives any
right to enforce any remedy that the Guarantor might have against the Borrower
or any other guarantor, or to participate in any security held by Callaway
Golf for the Guarantied Obligations, by reason of any one or more payments by
the Guarantor under this Guaranty, including, without limitation, any such
right or any other right set forth in Sections 2845, 2848 or 2849 of the
California Civil Code.
(b) Whether or not any or all of the foregoing waivers of rights in
respect of subrogation, reimbursement, indemnity and contribution are held to
be unenforceable: (i) all existing and future indebtedness of the Borrower to
the Guarantor (including, without limitation, any indebtedness arising by
reason of any payment by the Guarantor hereunder) is hereby subordinated to
all Guarantied Obligations, and, without the prior written consent of Callaway
Golf, such indebtedness shall not be paid, in whole or in part, nor will the
Guarantor accept any payment of or on account of any such indebtedness;
provided, however, that, if Callaway Golf so requests, the Guarantor shall
enforce and/or collect such indebtedness, subject to the following clause
(ii); (ii) each payment by the Borrower, whether received in violation of this
Guaranty or pursuant to the request of Callaway Golf, shall be received by the
Guarantor in trust for Callaway Golf, and the Guarantor shall cause the same
to be paid to Callaway Golf, immediately upon demand by Callaway Golf, on
account of the Guarantied Obligations; and (iii) no such payment shall reduce
or affect in any manner the liability of the Guarantor under this Guaranty.
The Guarantor hereby grants to Callaway Golf a security interest in all
existing and future indebtedness of the Borrower to the Guarantor as security
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for the obligations of the Guarantor hereunder, and upon request of Callaway
Golf shall (1) endorse over, and deliver to, Callaway Golf each promissory
note or other writing, if any, evidencing any such indebtedness; and/or (2)
cause each such promissory note or other writing to be marked with a legend
giving notice of the subordination and security interest in favor of Callaway
Golf provided for herein; and/or (3) execute such further documents, and take
such further acts, as Callaway Golf may request for the purpose of further
perfecting, preserving or protecting its rights hereunder.
7. Impairment of Subrogation and Other Rights/Other Waivers.
(a) Upon the occurrence of any default under the Note or by the
Guarantor hereunder (but without limiting Callaway Golf's right to resort to
any other remedy it may have in respect thereof, under the Note or this
Guaranty or otherwise), Callaway Golf may elect to foreclose non-judicially or
judicially against any real or personal property security it holds for the
Guarantied Obligations or any part thereof, or exercise any other remedy
against the Borrower or against any security. No such action by Callaway Golf
shall release or limit the liability of the Guarantor, even if the effect of
that action is to deprive the Guarantor, or any other guarantor, of the right
or ability to collect reimbursement from or to assert subrogation, indemnity,
or contribution rights against the Borrower or against any other guarantor for
any sums paid to Callaway Golf, or to obtain reimbursement by means of any
security held by Callaway Golf for the Guarantied Obligations.
(b) Guarantor acknowledges that if Callaway Golf selects to
foreclose nonjudicially against any real property security it holds for the
Guarantied Obligations or any part thereof, Guarantor may have subrogation
rights that might be destroyed by virtue of application of Section 580d of the
California Code of Civil Procedure and will or may have a defense to its
liability under this Guaranty. Without in any way limiting any other waiver,
consent or acknowledgment contained in this Guaranty and in addition thereto,
Guarantor hereby waives and agrees not to assert or take advantage of any
defense based upon such Section 580d of the California Code of Civil Procedure
or any loss or impairment of subrogation or other rights against the Borrower
or any other person or entity, and no such nonjudicial foreclosure by Callaway
Golf shall release or limit the liability of Guarantor under this Guaranty.
(c) Guarantor waives all rights and defenses arising out of an
election of remedies by Callaway Golf, even though that election of remedies,
such as nonjudicial foreclosure with respect to security for the Guarantied
Obligations, has destroyed Guarantor's rights of subrogation and/or
reimbursement against the Borrower by the operation of Section 580d of the
California Code of Civil Procedure or otherwise. In addition, Guarantor
waives all rights and defenses arising out of the operation of Section 580a of
the California Code of Civil Procedure, and further waives its right to a fair
value hearing under such Section 580a to determine the size of a deficiency
judgment following any foreclosure sale on encumbered real property.
(d) Guarantor waives all rights and defenses that the Guarantor may
have because the Guarantied Obligations are secured by real property. This
means, among other things: (1) Callaway Golf may collect from the Guarantor
without first foreclosing on any real or personal property collateral pledged
by Borrower or otherwise; and (2) if Callaway Golf forecloses on any real
property collateral (a) the amount of the Guarantied Obligations may be
reduced only by the price for which that collateral was sold at the
foreclosure sale, even if the collateral is worth more than the sale price;
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and (b) Callaway Golf may collect from Guarantor even if Callaway Golf, by
foreclosing on the real property collateral, has destroyed any right the
Guarantor may have to collect from the Borrower. This is an unconditional and
irrevocable waiver of any rights and defenses the Guarantor may have because
the Guarantied Obligations or portions thereof are secured by real property.
These rights and defenses include, but are not limited to, any rights or
defenses based upon Section 580a, 580b, 580d, or 726 of the California Code of
Civil Procedure.
8. Bankruptcy.
So long as any Guarantied Obligation shall be owing to Callaway Golf, the
Guarantor shall not, without the prior written consent of Callaway Golf,
commence, or join with any other person or entity in commencing, any
bankruptcy, reorganization, or insolvency proceeding against the Borrower or
Guarantor. The obligations of the Guarantor under this Guaranty shall not be
altered, limited, or affected by any proceeding, voluntary or involuntary,
involving the bankruptcy, insolvency, receivership, reorganization,
liquidation, or arrangement of the Borrower, or by any defense the Borrower
may have by reason of any order, decree, or decision of any court or
administrative body resulting from any such proceeding. In furtherance of the
foregoing, the Guarantor agrees that if acceleration of the time for payment
of any amount payable by the Borrower under the Note or in respect of the
other Guarantied Obligations is stayed for any reason, all such amounts
otherwise subject to acceleration shall nonetheless be payable by the
Guarantor hereunder forthwith upon demand.
9. Claims in Bankruptcy.
The Guarantor shall file in any bankruptcy or other proceeding in which
the filing of claims is required or permitted by law all claims that the
Guarantor may have against the Borrower relating to any indebtedness of the
Borrower to the Guarantor, and will assign to Callaway Golf all rights of the
Guarantor thereunder. If the Guarantor does not file any such claim within
twenty (20) days of any deadline to do so, Callaway Golf, as attorney-in-fact
for the Guarantor, is hereby authorized to do so in the name of the Guarantor
or, in Callaway Golf's discretion, and to cause a proof of claim to be filed
in the name of Callaway Golf or its nominee. The foregoing power of attorney
is coupled with an interest and cannot be revoked. Callaway Golf, or its
nominee, shall have the sole right to accept or reject any plan proposed in
such proceedings and to take any other action that a party filing a claim is
entitled to do. In all such cases, whether in administration, bankruptcy, or
otherwise, the person or persons authorized to pay such claim shall pay to
Callaway Golf the amount payable on such claim. The Guarantor hereby assigns
to Callaway Golf all of the Guarantor's rights to any such payments or
distributions to which the Guarantor would otherwise be entitled; provided,
however, that the Guarantor's obligations hereunder shall not be satisfied
except to the extent that Callaway Golf receives cash by reason of any such
payment or distribution. If Callaway Golf receives anything hereunder other
than cash, the same shall be held as collateral for amounts due under this
Guaranty.
10. Reinstatement.
The liability of the Guarantor hereunder shall be reinstated and
continued, and the rights of Callaway Golf shall continue, with respect to any
amount at any time paid on account of the Guarantied Obligations that Callaway
Golf shall thereafter be required to restore or return in connection with the
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bankruptcy, insolvency, or reorganization of the Borrower or the Guarantor, or
otherwise, all as though such amount had not been paid. The determination as
to whether any such payment must be restored or returned shall be made by
Callaway Golf in its sole discretion; provided, however, that if Callaway Golf
chooses to contest any such matter, the Guarantor agrees to indemnify and hold
harmless Callaway Golf from all costs and expenses (including, without
limitation, reasonable legal fees and disbursements) of such litigation.
Callaway Golf shall be under no obligation to return or deliver this Guaranty
to the Guarantor, notwithstanding the payment of the Guarantied Obligations.
If this Guaranty is nevertheless returned to the Guarantor or is otherwise
released, then the provisions of this Section 10 shall survive such return or
release, and the liability of the Guarantor under this Guaranty shall be
reinstated and continued under the circumstances provided in this Section 10
notwithstanding such return or release.
11. Authority, Etc.
The Guarantor represents and warrants that:
(a) it is a corporation duly incorporated, validly existing, and in
good standing under the laws of the jurisdiction of its incorporation;
(b) it has all requisite corporate power and authority to execute,
deliver, and be legally bound by this Guaranty on the terms and conditions
herein stated and to transact any other business with Callaway Golf as
necessary to fulfill the terms of this Guaranty;
(c) the execution and performance by the Guarantor of this Guaranty
have been duly authorized by all necessary corporate or other organizational
action and do not and will not (i) contravene the Guarantor's charter or
bylaws; (ii) violate any provision of any law, rule, or regulation; or (iii)
result in a breach of or constitute a default under any agreement, lease, or
other instrument to which the Guarantor is a party or by which it or its
properties may be bound or affected;
(d) this Guaranty is the legal, valid, and binding obligation of
the Guarantor, enforceable in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency, and other
similar laws affecting creditors' rights generally; and
(e) the Guarantor is not insolvent, and will not be rendered
insolvent by the incurring of its obligations hereunder; the Guarantor is not
engaged, and is not about to engage, in a business or transaction for which
the Guarantor's assets are unreasonably small in relation thereto; and the
Guarantor does not intend to incur, and does not believe that the Guarantor
has incurred or will incur, debts beyond the Guarantor's ability to pay as
they mature.
12. Costs and Expenses.
The Guarantor agrees to pay, upon demand, Callaway Golf's reasonable
out-of-pocket costs and expenses, including (but not limited to) reasonable
legal fees and disbursements and expert witness's fees and disbursements,
incurred in connection with (i) the administration of this Guaranty, (ii) any
effort to collect or enforce any of the Guarantied Obligations or this
Guaranty (including the defense of any claims or counterclaims asserted
against Callaway Golf arising out of this Guaranty or the transactions
contemplated hereby), or (iii) the Guarantor's failure to perform or observe
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any of the provisions hereof, as well as in the representation of Callaway
Golf in any insolvency, bankruptcy, reorganization or similar proceeding
relating to the Borrower, the Guarantor, or any security for the Note or this
Guaranty. Until paid to Callaway Golf, such sums shall bear interest from the
date of demand at the rate of interest set forth in the Note. The obligations
of the Guarantor under this Section 12 shall include payment of Callaway
Golf's costs and expenses of enforcing any judgments, which obligation shall
be severable from the remaining provisions of this Guaranty and shall survive
the entry of judgment.
13. Miscellaneous.
(a) Notice, Etc. All notices and other communications provided for
hereunder shall be in writing (including telegraphic, telecopied, or telex
communication) and mailed or telegraphed, telecopied or delivered to the
parties at their respective addresses as set forth on the signature page
hereto, or, as to each party, at such other address as shall be designated by
such party in a written notice to the other parties complying as to delivery
with the terms of this Section 13(a). All such notices and communications, if
mailed, shall be effective upon deposit in the United States mail, first-class
(or certified) postage prepaid; if telegraphed or telecopied, shall be
effective when transmitted; if sent by telex, shall be effective when the
telex is sent and the appropriate answer back is received; and if delivered in
another way, shall be effective upon receipt.
(b) Agreement Binding. This Guaranty shall be binding upon the
Guarantor and the Guarantor's heirs, executors, personal representatives,
successors, and assigns, and shall inure to the benefit of, and be enforceable
by, Callaway Golf and Callaway Golf's successors and assigns.
(c) Severability. If any provision of this Guaranty shall be
deemed or held to be invalid or unenforceable for any reason, such provision
shall be adjusted, if possible, rather than voided, so as to achieve the
intent of the parties to the fullest extent possible. In any event such
provision shall be severable from, and shall not be construed to have any
effect on, the remaining provisions of this Guaranty, which shall continue in
full force and effect.
(d) Security. This Guaranty and the obligations hereunder are
secured by the Membership Interest Security Agreement made and entered into as
of June 13, 1997 by Guarantor and Callaway Golf ("Membership Interest Security
Agreement") and the property described therein. All recoveries under such
Membership Interest Security Agreement may be applied to the obligations
secured thereby in such order and in such amounts as may be determined by
Callaway Golf in its sole and absolute discretion.
(e) Governing Law; Jurisdiction. This Guaranty shall be governed
by and construed in accordance with the laws of the State of California
applicable to contracts, between residents thereof, to be wholly performed
within the State of California.
(f) Rights Cumulative; No Waiver. Callaway Golf's options, powers,
rights, privileges, and immunities specified herein or arising hereunder are
in addition to, and not exclusive of, those otherwise created or existing now
or at any time, whether by contract, by statute, or by rule of law. Callaway
Golf shall not, by any act, delay, omission or otherwise, be deemed to have
modified, discharged, or waived any of Callaway Golf's options, powers, or
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rights in respect of this Guaranty, and no modification, discharge, or waiver
of any such option, power, or right shall be valid unless set forth in writing
signed by Callaway Golf or Callaway Golf's authorized agent, and then only to
the extent therein set forth. A waiver by Callaway Golf of any right or
remedy hereunder on any one occasion shall be effective only in the specific
instance and for the specific purpose for which given, and shall not be
construed as a bar to any right or remedy that Callaway Golf would otherwise
have on any other occasion.
(g) Default. The occurrence of any one of the following events
shall, at the election of Callaway Golf, be deemed an event of default by
Guarantor under this Guaranty: (a) Guarantor shall fail or neglect to perform,
keep or observe any term, provision, condition or covenant, contained in this
Guaranty, and any monetary failure is not cured within ten (10) days of
written notice by Callaway Golf to Guarantor, and any non-monetary failure is
not cured within thirty (30) days of written notice by Callaway Golf to
Guarantor; (b) if any representation or warranty made in this Guaranty shall
be false in any material respect; (c) if any material portion of Guarantor's
assets are seized, attached, subjected to a writ, or are levied upon, or come
within the possession of any receiver, trustee, custodian or assignee for the
benefit of creditors; or (d) occurrence of a default or event of default under
the Note or Membership Interest Security Agreement. Upon the occurrence of an
event of default, Guarantor's obligations hereunder shall be, at the option of
Callaway Golf, accelerated and shall all be due and payable and enforceable
against Guarantor, whether or not the Guarantied Obligations are then due and
payable and Callaway Golf may, in its sole discretion, in addition to any
other right or remedy provided by law, all of which are cumulative and
non-exclusive, proceed to suit against Guarantor, whether suit has been
commenced against Borrower.
(h) Entire Agreement. This Guaranty and the written agreements
referred to herein contain the entire agreement between the Guarantor and
Callaway Golf with respect to its subject matter, and supersede all prior
communications relating thereto, including, without limitation, all oral
statements or representations. No supplement to or modification of this
Guaranty shall be binding unless executed in writing by the Guarantor and
Callaway Golf.
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IN WITNESS WHEREOF, the Guarantor has executed this Guaranty as of the
date first written above.
GUARANTOR:
SAINT ANDREWS GOLF CORPORATION
By:/s/ Ron Boreta
Ron Boreta
Its: President
By:/s/ Chuck Martin
Chuck Martin
Its: Chief Finanacial Officer
GUARANTOR'S ADDRESS FOR NOTICE:
5235 South Valley View Boulevard, Suite 4
Las Vegas, Nevada 89118
Attention: Ron Boreta, President
Telephone No.: (702) 798-7777
Facsimile No.: (702) 739-9509
CALLAWAY GOLF COMPANY'S ADDRESS FOR NOTICE:
Callaway Golf Company
2285 Rutherford Road
Carlsbad, California 92008-8815
Attention: Donald H. Dye, President and Chief Executive Officer
Telephone No.: (760) 930-5738
Facsimile No.: (760) 930-5022
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FORBEARANCE AGREEMENT
This Forbearance Agreement (the "Agreement") is made and entered into on
March 18, 1998, by and between All-American Golf LLC, a California limited
liability company ("All-American"), Saint Andrews Golf Corporation, a Nevada
corporation ("Saint Andrews"), and Callaway Golf Company, a California
corporation ("Callaway Golf"), and is made with reference to the following
facts:
RECITALS
A. On or about June 13, 1997, All-American 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 "Note").
B. The Note is secured pursuant to a Continuing Security Agreement
dated June 13, 1997 by and between All-American and Callaway Golf (the
"Security Agreement"), a Membership Interest Security Agreement dated June 13,
1997, by and between Callaway Golf and Saint Andrews (the "Membership Interest
Security Agreement"), and a Deed of Trust dated June 13, 1997 executed by
All-American in favor of Callaway Golf securing the Indenture of Lease dated
June 13, 1997 by and between Urban Land of Nevada, a Nevada corporation, and
Callaway Golf (the "Deed of Trust") (the Note, Security Agreement, Membership
Interest Security Agreement and Deed of Trust are collectively referred to as
the "Loan Documents").
C. Callaway Golf and Saint Andrews are also parties to that certain
Operating Agreement for All-American Golf LLC dated June 13, 1997 (the
"Operating Agreement").
D. Under the terms of the Note, All-American 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 Note). All-American has failed to make the
monthly interest installments due on December 21, 1997, January 21, 1998 and
February 21, 1998, and has advised Callaway Golf that it will be unable to
make the payments due on March 21 and April 21, 1998. There is past due and
owing on account of accrued and unpaid interest on the Note $243,921.23 as of
February 21, 1998, and including the payment due on March 21, 1998 of
$43,750.00 and the payment due on April 21, 1998 of $43,750.00, as of April
21, 1998 there will be due and owing under the Note at least $331,421.23 (the
"Arrears").
E. As a result of the failure by All-American to make the payments
referred to herein, the Note is presently in default. Callaway Golf has the
immediate and unconditional right to proceed against All-American under the
Note to collect amounts due under the Note and to exercise upon or enforce its
rights to its collateral as set forth in the Loan Documents.
F. All-American and Saint Andrews have requested Callaway Golf to
forbear from proceeding against All-American and Saint Andrews under the Note
and other Loan Documents and in connection therewith, have agreed to certain
terms and conditions to provide the inducement for such forbearance.
<PAGE>
<PAGE>
G. In addition, Saint Andrews has requested that Callaway Golf extend
certain financial accommodations to All-American SportPark, Inc.
("SportPark"), a wholly-owned subsidiary of Saint Andrews. ACCORDINGLY, in
consideration of Callaway Golf's forbearing from immediately proceeding
against All-American and Saint Andrews under the Note and other Loan
Documents, in consideration of the mutual covenants and agreements contained
herein, and for other good and valuable consideration, receipt of which is
hereby acknowledged, the parties hereby agree as follows:
1. Forbearance. Callaway Golf hereby agrees it will forbear from
proceeding against All-American and Saint Andrews under the Note and other
Loan Documents, subject to the terms and conditions herein below contained:
1.1 Callaway Golf's agreement to forbear is expressly conditioned
upon the following:
(a) All-American shall timely make each payment due under the
Note, commencing with the payment due on May 21, 1998.
(b) In addition to the regularly scheduled Note payments,
simultaneously with the making of each regularly scheduled payment under the
Note, commencing with the payment due on May 21, 1998, All-American shall make
additional monthly payments under the Note of $36,824.81, or more, to cure the
Arrears, and shall continue to make such payments on the same day of each
month thereafter until January 21, 1999, at which time All-American shall make
a payment to Callaway Golf in an amount sufficient to pay in full the
remaining unpaid Arrears.
(c) In addition to the foregoing payments, on the tenth (10th)
day of each month, commencing on June 10, 1998, and on the same day of each
month thereafter until the Arrears shall be paid in full, All-American shall
make an additional payment (each an "Excess Payment") to be applied to the
Arrears in an amount equal to that amount that Cash from Operations (as
defined in the Operating Agreement) for the previous calendar month shall
exceed $300,000.00. The payment of any Excess Payment shall not release
All-American from thereafter tendering all regularly scheduled monthly
payments required as a condition to the forbearance hereunder.
(d) All-American's and Saint Andrews' continued compliance
with the terms of the Loan Documents, subject, however, to the provisions of
paragraphs 1.1(a), (b) and (c) above.
1.2 Callaway Golf's agreement of forbearance shall expire on
January 21, 1999 unless sooner terminated as provided herein or unless
extended by written agreement between the parties.
1.3 Notwithstanding Callaway Golf's agreement to forbear, Callaway
Golf may (but shall not be obligated to) at any time take any action for the
following purposes:
(a) To protect or preserve any of the security for the Note;
(b) To appear in and defend any action affecting any of such
security;
(c) To take any action to effect the purposes and intent of
this Agreement.
2
<PAGE>
<PAGE>
2. Further Covenants. All-American and Saint Andrews further agree as
follows:
2.1 All-American and Saint Andrews shall execute any and all
documents and take any action reasonably requested by Callaway Golf to
effectuate the terms of this Agreement.
2.2 That although Callaway Golf by this document agrees on certain
conditions to forbear from exercising remedies under the Note and other Loan
Documents, Callaway Golf has not waived any default or defaults or claims or
rights that may exist now or may occur in the future except as otherwise
provided herein; Callaway Golf does not waive or acquiesce, and this Agreement
shall not be construed as a waiver or acquiesce in, any default or event of
default under any agreement entered into between Callaway Golf and
All-American or Saint Andrews; no failure to exercise and no delay in
exercising, on the part of Callaway Golf, any right, remedy, power or
privilege hereunder or under any other Loan Documents shall operate as a
waiver thereof, nor shall any single or partial exercise of any right, remedy,
power or privilege hereunder or thereunder preclude any other right, remedy,
power or privilege or constitute an election of remedy; and the rights,
remedies, powers and privileges hereunder and therein are cumulative and not
exclusive of any rights, remedies, powers or privileges provided by law.
2.3 During the time period in which the forbearance under paragraph
1 above shall remain in effect, All-American and Saint Andrews agree that any
applicable statute of limitations to any cause or causes of action which
Callaway Golf may have or hereafter acquire against All-American or Saint
Andrews under or in connection with the Note or other Loan Documents shall be
tolled.
2.4 That each of the terms of the Note and other Loan Documents are
hereby ratified and reaffirmed unconditionally, and shall remain in full force
and effect.
3. Miscellaneous.
3.1 This Agreement is entered into without any party having relied
on any statement or representation of any adverse party. Each party
represents and warrants that the party has been represented by legal counsel
of that party's own free choice and that counsel has explained to that party
the full legal effect of this Agreement and the arrangements referred to
herein.
3.2 The parties hereto confirm the accuracy of the Recitals set
forth above, each of which are incorporated herein by reference.
3.3 All representations, warranties, agreements and covenants made
in this Agreement shall survive the closing and termination of this Agreement
notwithstanding any investigation at the time made by or on behalf of either
party.
3.4 This Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof. Except as otherwise
specifically provided herein, no change, modification, addition or termination
of this Agreement or any part hereof shall be valid unless it is in writing
and signed by or on behalf of the party to be charged therewith.
3
<PAGE>
<PAGE>
3.5 No waiver of any provision of this Agreement shall be effective
unless in writing and signed by the parties to be charged with such waiver,
and no waiver shall be deemed a continuing waiver or a waiver in respect to
any subsequent breach or default either of a similar or of a different nature,
unless expressly stated in writing.
3.6 This Agreement shall be binding upon and shall inure to the
benefit of the respective administrators, representatives, partners,
partnerships, subsidiary organizations, successors, assignees of each of the
parties hereto, and all other persons, firms, corporations, associations,
partnerships or other entities wherever the context requires or admits.
3.7 The parties hereto acknowledge that simultaneously herewith the
Membership Interest Security Agreement is being modified to include as an
additional "Secured Obligation" as defined thereunder Saint Andrews'
obligations under a Guaranty dated March 18, 1998, pursuant to which Saint
Andrews is guarantying all obligations of SportPark to Callaway Golf under a
Promissory Note dated March 18, 1998 in the original stated principal amount
of Three Million Dollars ($3,000,000.00) executed by SportPark in favor of
Callaway Golf. The parties hereto consent to the modification of the
Membership Interest Security Agreement and acknowledge and agree that (a)
references to the Membership Interest Security Agreement in the Loan Documents
shall include such agreement as it may be modified or amended from time to
time, (b) an event of default under the Guaranty is a default under the
Membership Interest Security Agreement (as amended) and that an event of
default under the Membership Interest Security Agreement is a default under
all of the Loan Documents, and (c) Callaway Golf may apply all recoveries
under the Membership Interest Security Agreement to the Secured Obligations
(as defined thereunder) in such order and in such amounts as Callaway Golf may
determine in its sole and absolute discretion.
3.8 This Agreement shall not be construed nor is it intended as an
amendment or modification of the Note or other Loan Documents, but rather it
simply memorializes the terms and conditions under which Callaway Golf is
willing to temporarily forbear from exercising certain of its rights and
remedies under the Note and other Loan Documents.
3.9 Callaway Golf's agreement to forbear shall terminate
immediately on the earlier to occur of (a) January 21, 1999, or (b)
All-American's or Saint Andrews' default in the performance of or failure to
comply with any of the terms or conditions hereof, or (c) the filing of a
petition for relief under Title 11 of the United States Code or any successor
provision by or against All-American or Saint Andrews. Upon such termination,
and at all times thereafter, Callaway Golf may proceed to enforce any and all
of its rights and remedies provided by the Note, this Agreement and the other
Loan Documents or as otherwise provided by law.
3.10 The obligations of each of the parties hereto are joint and
several.
3.11 In the event any litigation or contested proceeding arises
between or among any party or parties to this Agreement relating to this
Agreement, the prevailing party shall be entitled to recover, in addition to
the cost provided by law, all actual costs, expenses and attorney's fees
incurred, including any costs or attorney's fees incurred in connection with
any bankruptcy, liquidation, reorganization or other debtor-relief proceeding
of any party hereto.
4
<PAGE>
<PAGE>
3.12 This Agreement shall be construed and enforced in accordance
with California law.
3.13 This Agreement may be executed by one or more of the parties in
any number of separate counterparts, and all of said counterparts taken
together shall be deemed to constitute one and the same instrument. This
Agreement shall not be effective until executed by all parties hereto.
Executed at San Diego, California on the date first above written.
ALL-AMERICAN GOLF LLC,
a California limited liability company
By: SAINT ANDREWS GOLF CORPORATION,
a Nevada corporation, Managing Member
By:/s/ Ron Boreta
Ron Boreta, President
SAINT ANDREWS GOLF CORPORATION,
a Nevada corporation
By:/s/ Ron Boreta
Ron Boreta, President
CALLAWAY GOLF COMPANY,
a California corporation
By:/s/ Donald H. Dye
Donald H. Dye, President and
Chief Executive Officer
5
AMENDMENT NO. 2
TO
LICENSE AGREEMENT
This Amendment No. 2 to that certain License Agreement (the "Agreement") dated
as of August 1, 1995, (the "Agreement Date") by and between the National
Association for Stock Car Auto Racing, Inc., a Florida Corporation
("Licensor") and Saint Andrews Golf Corporation, a Nevada corporation
("Licensee"), is entered into as of May 6, 1997. All references herein to
capitalized terms not otherwise defined herein shall refer to the definitions
of such terms in the Agreement.
BACKGROUND
A. Pursuant to the Agreement, Licensee acquired certain licenses from Licensor
to use certain trademarks and service marks in the development, design,
operation, and promotion of indoor and outdoor go-cart racing facilities
having a NASCAR racing theme, and Licensor granted Licensee such licenses, on
the terms and conditions as set forth in the Agreement and subsequent
Amendment No. 1 entered into by Licensor and Licensee as of August 1, 1995,
(the "Amendment"); and
B. Licensor and Licensee desire to amend the Agreement and the Amendment to
provide for certain further terms and conditions but to otherwise maintain all
other terms and conditions of the Agreement and the Amendment;
NOW THEREFORE, for and in consideration of Ten Dollars ($10.00) in hand and
paid and other good and valuable consideration, the receipt in sufficiency of
which is hereby acknowledged, and the terms and conditions set forth herein,
the parties hereby agree as follows:
TERMS AND CONDITIONS
1. Section 1 of the Agreement is hereby amended to provide that (i) the
scope of the license granted by Licensor to Licensee shall be exclusive to the
Territory as amended herein, provided that Licensee meets the terms and
conditions as set forth herein, and (ii) Licensor shall have the right to
license third parties in connection with the operation and promotion of
SpeedParks outside Las Vegas, Nevada.
2. The definition of Territory is hereby amended to be only Las Vegas,
Nevada, and Southern California under the terms and conditions specifically
set forth herein.
3. Sections 1, 15, 16, and 17 of the Agreement are hereby amended to
provide that Licensee shall have the exclusive right to utilize the NASCAR
Mark only in Las Vegas, Nevada, provided that Licensee opens said SpeedPark no
later than March 1, 1998. If Licensee fails to have the Las Vegas SpeedPark
opened and fully operational by said date, it will be considered an Event of
Default under the Agreement and Licensor shall have the right to terminate the
Agreement immediately upon notice to Licensee without any right to cure. If
Licensee opens said Las Vegas SpeedPark no later than March 1, 1998, Licensee
shall have the right to continue operating said SpeedPark pursuant to this
Agreement and subsequent Amendments through December 31, 2003.
<PAGE>
<PAGE>
4. Subject to the conditions herein, Licensee shall have the right to
choose one site in Southern California ("Site") where Licensee intends to open
a second SpeedPark pursuant to the Agreement. Upon Licensee notification,
Licensee shall have the exclusive right to utilize the NASCAR Mark pursuant to
the Agreement within a One Hundred (100) Mile radius of the Site provided that
Licensee has the Las Vegas SpeedPark opened and fully operational by March 1,
1998. If the SpeedPark at the California Site is not opened and fully
operational by March 1, 1999, Licensee's license shall be revoked with respect
to the California Site and its corresponding One Hundred (100) Mile radius and
Licensor shall have the right to license a third party to utilize the NASCAR
Mark in connection with a SpeedPark in the Southern California market. If
Licensee has the SpeedPark at the Southern California Site opened and fully
operational by March l, 1999, Licensee shall have the right to continue
operating said SpeedPark pursuant to this Agreement and subsequent Amendments
through December 31, 2003.
5. Commencing on July 1, 2002, through August 30, 2002, Licensor and
Licensee agree to enter into good faith negotiations regarding the renewal of
this Agreement.
6. Licensor owns the "NASCAR SpeedPark" trademark and design as seen in
Exhibit 1 and any variations thereof. Licensor shall have the right to license
the said NASCAR SpeedPark trademark and design to third parties at NASCAR's
discretion. Licensee shall have the right to continue using the NASCAR
SpeedPark trademark and design and any variations thereof in any of the
SpeedParks Licensee operates pursuant to this license during the term of this
Agreement.
7. Licensee agrees to allow Jeff Gordon to participate in SpeedPark
facilities developed by third parties outside Las Vegas, Nevada, and the Site
in Southern California if such an opportunity is available.
8. Section l 6(c)(vi) of the Agreement shall be canceled in its entirety
to accommodate the terms and conditions as provided herein.
9. Licensor agrees to continue supporting Licensee's development,
sponsorship, and marketing programs pursuant to the Agreement.
10. Licensor and Licensee hereby agree to negotiate in good faith to
establish minimum performance guidelines. If Licensor and Licensee cannot
mutually agree on such performance guidelines after a reasonable period of
negotiations, Licensor will have the right to establish performance guidelines
in its sole discretion. Licensor hereby reserves its right to exit the
Agreement effective August 1, 1998 (the "Exit Date"), if Licensee does not
meet such performance guidelines provided that Licensor gives at least sixty
(60) days written notice.
11. All other terms of the Agreement not amended herein shall remain in full
force and effect. To the extent that the terms and conditions herein are not
inconsistent with the prior Agreement and Amendment, such terms shall remain
in full force and effect.
2
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment No. 2 to the
Agreement effective as of May 6, 1997.
LICENSOR: LICENSEE:
NATIONAL ASSOCIATION FOR SAINT ANDREWS GOLF CORPORATION
STOCK CAR AUTO RACING. INC.
By: /s/ George Pyre /s/ Ron Boreta
Print Name: George Pyre Print Name: Ron Boreta
Date: 5/12/97 Date: 5/7/97
3
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
balance sheets and statements of operations found on pages F-2 through F-5 of
the Company's Form 10-KSB for the fiscal year ended December 31, 1998, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 2,494,300
<SECURITIES> 0
<RECEIVABLES> 799,200
<ALLOWANCES> 0
<INVENTORY> 99,500
<CURRENT-ASSETS> 3,458,000
<PP&E> 24,804,300
<DEPRECIATION> (290,700)
<TOTAL-ASSETS> 28,693,400
<CURRENT-LIABILITIES> 3,038,500
<BONDS> 0
0
7,240,000
<COMMON> 3,000
<OTHER-SE> 1,891,100
<TOTAL-LIABILITY-AND-EQUITY> 28,693,400
<SALES> 0
<TOTAL-REVENUES> 1,583,800
<CGS> 0
<TOTAL-COSTS> 941,800
<OTHER-EXPENSES> 3,473,100
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (552,000)
<INCOME-PRETAX> (1,744,200)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,744,200)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,487,200)
<EPS-PRIMARY> (.50)
<EPS-DILUTED> 0
</TABLE>
