UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): October 21, 2005
AGU Entertainment Corp.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware
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(State or Other Jurisdiction of Incorporation)
005-79752 84-1557072
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(Commission File Number) (IRS Employer Identification No.)
3200 West Oakland Park Blvd., Lauderdale Lakes, Florida 33311
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(Address of Principal Executive Offices) (Zip Code)
(954) 714-8100
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(Registrant's Telephone Number, Including Area Code)
N/A
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(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
|_| Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Forward-Looking Statements
This document may include a number of "forward-looking statements" as that
term is defined in Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These statements
reflect management's current views with respect to future events and financial
performance and include statements regarding management's intent, belief or
current expectations, which are based upon assumptions about future conditions
that may prove to be inaccurate. Prospective investors are cautioned that any
such forward-looking statements are not guarantees of future performance,
involve risk and uncertainties, and that as a result, actual results may differ
materially from those contemplated by such forward-looking statements. Such
risks include, among other things, the volatile and competitive markets in which
we operate, our limited operating history, our limited financial resources, our
ability to manage our growth and the lack of an established trading market for
our securities. When considering forward-looking statements, readers are urged
to carefully review and consider the various disclosures, including risk factors
and their cautionary statements, made by us in this document and in our reports
filed with the Securities and Exchange Commission.
Item 1.01 Entry into a Material Definitive Agreement.
Tarragon Bridge Loan
As previously disclosed by AGU Entertainment Corp. (the "Company") on its
Current Report on Form 8-K filed on September 8, 2005, the Company entered into
an agreement for purchase and sale, dated as of August 29, 2005 (the "Agreement
for Purchase and Sale"), with Tarragon South Development Corp. ("Tarragon")
pursuant to which the Company agreed to sell and Tarragon agreed to buy the
Company's property located at 3200 West Oakland Park Boulevard in Lauderdale
Lakes, Florida (the "Lauderdale Property").
In connection with the Agreement for Purchase and Sale, on September 1,
2005, the Company and Tarragon also entered into a side letter, dated August 29,
2005 (the "Side Letter"), pursuant to which Tarragon agreed to loan $2.5 million
(the "Loan") to the Company to be advanced as follows: (i) one tranche in the
aggregate amount of $750,000 to be released from escrow upon satisfaction of the
conditions described below; (ii) a second tranche in the aggregate amount of no
more than $750,000 to be advanced upon satisfaction of the conditions described
below, no later than October 1, 2005; and (iii) a third tranche in the aggregate
amount of no more than $1.0 million to be advanced upon satisfaction of the
conditions described below (including the conditions of the Easement Search
Letter described below), no later than November 1, 2005. The conditions to
advancing each tranche of the Loan are as follows: (i) payment by the Company of
all costs associated with the Loan; (ii) absence of defaults under the Loan;
(iii) Tarragon's receipt of the title insurance insuring the lien of Tarragon's
mortgage on the Lauderdale Property; (iv) receipt of an ALTA survey of the
Lauderdale Property certified to Tarragon; (v) receipt of insurance for the
Lauderdale Property, naming Tarragon as an additional insured, in amounts and
from companies as are reasonably acceptable to Tarragon; (vi) receipt of
documentation evidencing the authority of the Company to execute the documents
evidencing the Loan, including an opinion of counsel as to the enforceability of
the documents evidencing the Loan; and (vii) any other conditions as may be
reasonable and customary, including approval from the holders of the first and
second mortgages on the Lauderdale Property. As of October 21, 2005, the only
remaining condition to advancing monies under the Loan is the condition
contained in the Easement Search Letter described below.
On October 21, 2005, the Company issued a promissory note, dated October
21, 2005, in the aggregate principal amount of $2.5 million to Tarragon (the
"Promissory Note") and received cash in the amount of $1.5 million from
Tarragon, the first and second tranches of the Loan. Pursuant to the Promissory
Note, the remaining $1.0 million, or third tranche of the Loan, is expected to
be provided to the Company no later than November 1, 2005, subject to the
Company's compliance with the conditions of the Easement Search Letter described
below. Pursuant to the terms of the Promissory Note, the Loan will accrue
interest at a rate per annum of 6.5% with interest due and payable monthly;
provided however, in the event that no event of default exists, the interest
will be deferred and paid upon the maturity of the Loan. The Loan will mature no
later than a date that is earlier to occur of (i) the date of closing of the
purchase and sale of the Lauderdale Property, and (ii) December 15, 2005. In the
event of the continuation of any default in payment for a period of ten days
after such payment is due, the holder may declare the entire unpaid principal
and interest immediately due and payable. In order to compensate the holder of
the Promissory Note for loss and expense occasioned by handling delinquent
payments, the Company must pay, in addition to any interest, a service charge
equal to 5% of the amount of any payment received by the holder ten days or more
after the due date thereof. Upon the occurrence of any default under the
Promissory Note or any default under the loan documents related to the third
mortgage on the Lauderdale Property, the Company must pay the holder, on demand,
interest on all sums outstanding under the Promissory Note at the lessor of (i)
the maximum rate permitted by applicable law or (ii) 18% per annum.
In connection with the Loan, the Company and Tarragon entered into an
Easement Search Letter, dated October 21, 2005 (the "Easement Search Letter"),
pursuant to which Tarragon agreed to close on the Loan without the receipt of
the final search of the public records to determine if a certain beneficial
easement applies to the Lauderdale Property. The Company acknowledged and agreed
that the search would be performed no later than November 4, 2005. Until the
Company complies with the terms of the Easement Search Letter, Tarragon is not
obligated to further the remaining monies under the Loan. In light of the recent
weather conditions in southern Florida, it is unclear weather the Company will
be able to perform the final search within the stated timeframe.
In addition, in connection with the Loan, the Company and Tarragon entered
into a Third Mortgage Deed and Security Agreement and a Third Assignment of
Rents, Leases and Deposits, each dated as of October 21, 2005, pursuant to which
the Company's performance of all conditions in the Promissory Note are secured
by a third mortgage on the Lauderdale Property (including all of the Company's
rights, title and interest as lessor in and to all leases or rental arrangements
of the Lauderdale Property). In addition, on October 21, 2005, Tarragon entered
into a Subordination Agreement, dated as of October 21, 2005, with the holders
of the first and second mortgages on the Lauderdale Property, which was agreed
to, accepted and acknowledged by the Company, pursuant to which the parties
agreed that Tarragon's mortgage on the Lauderdale Property and other obligations
due from the Company to Tarragon will be subordinate to the first and second
mortgages on the Lauderdale Property and other obligations due from the Company
to the holders of the first and second mortgages.
In connection with the Loan, the Company, Tarragon and the City of
Lauderdale Lakes (the "City") entered into a Tri-Party Developer's Agreement,
dated as of October 21, 2005 (the "Tri-Party Agreement"), pursuant to which the
City agreed to subordinate its interest under its notices of violation, which
relates to certain items of non-compliance regarding various regulations that
apply to the Lauderdale Property, if the Company and Tarragon agreed that
$350,000 of the $2.5 million Loan would be held back by Tarragon as security for
the City that the required repairs would be performed. As a condition precedent
to the City's agreement to subordinate its interests, (i) the repairs must be
completed no later than February 15, 2006, or the buildings on the Lauderdale
Property must be completely demolished and the grounds completely planted no
later than March 16, 2006; and (ii) there must be no foreclosure action pending
pertaining to the first or second mortgages on the Lauderdale Property. If the
repairs or the demolition and planting are completed within the required
timeframe, the City's notice of violation will be discharged, and its interest
in the $350,000 will be released, whereupon Tarragon may pay the $350,000 to the
Company. The holders of the first and second mortgages on the Lauderdale
Property each consented to the Tri-City Agreement.
Buntrock Promissory Note
On October 21, 2005, the Company issued a promissory note, dated October
21, 2005, in the aggregate principal amount of $250,000 (the "Buntrock Note") to
Charley Zeches, in her capacity as trustee of Lakes Holding Trust ("Zeches"), as
consideration for past defaults by the Company under the first mortgage. The
Company will not receive any additional cash in connection with the Buntrock
Note. Zeches is the holder of the first mortgage on the Lauderdale Property. The
Buntrock Note bears interest at the applicable Internal Revenue Service federal
interest rate per annum, as adjusted from time to time, and matures on the
earlier of (i) the date of closing of the purchase and sale of the Lauderdale
Property or (ii) December 23, 2005. In the event of the continuation of any
default in payment for a period of ten days after such payment is due, Zeches
may declare the entire unpaid principal and interest immediately due and
payable. In order to compensate the holder of the Buntrock Note for loss and
expense occasioned by handling delinquent payments, the Company must pay, in
addition to any interest, a service charge equal to 5% of the amount of any
payment received by the holder ten days or more after the due date thereof. Upon
the occurrence of any default under the Buntrock Note or any default under the
loan documents related to the first mortgage on the Lauderdale Property, the
Company must pay the holder, on demand, interest on all sums outstanding under
the Buntrock Note at the lessor of (i) the maximum rate permitted by applicable
law or (ii) 18% per annum.
In addition, in connection with the Buntrock Note, the Company and Zeches
entered into Amendment No. 3 to Agreement for Purchase and Sale, dated as of
October 21, 2005, pursuant to which Zeches agreed to waive certain defaults
under the first mortgage and the Company agreed to issue 175,000 shares of the
Company's common stock to Elizabeth Buntrock and 125,000 shares to Steve
Adelstein, Ms. Buntrock's counsel.
In connection with the Buntrock Note, the Company and Buntrock entered
into a Receipt for Future Advance and Mortgage Modification Agreement, dated as
of October 21, 2005, pursuant to which the Buntrock Note is deemed to made
pursuant to the terms of the first mortgage on the Lauderdale Property, and is
fully secured by the first mortgage and the loan documents related to the first
mortgage on the Lauderdale Property.
The foregoing brief summaries of the agreements, letters and notes are not
intended to be complete and are qualified in their entirety by reference to the
full and complete text of such documents, which are attached to this Current
Report on Form 8-K as exhibits or incorporated herein by reference. A copy of
the press release is attached hereto as Exhibit 99.1 and incorporated herein by
reference.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
See the disclosure above under Item 1.01.
Item 3.02 Unregistered Sales of Equity Securities.
The Company issued shares of common stock in connection with the Buntrock
Promissory Note described above. See the disclosure in Item 1.01 above. The
Company maintains that the issuance of the securities is exempt under the
Securities Act of 1933, as amended (the "Securities Act"), in reliance upon
Regulation D promulgated thereunder as a transaction by an issuer not involving
a public offering.
No underwriters were employed in the transactions. The securities will be
deemed restricted securities for purposes of the Securities Act.
Item 9.01 Financial Statements and Exhibits.
(c) Exhibits.
10.1 Agreement for Purchase and Sale, dated as of August 29, 2005,
by and between AGU Entertainment Corp. and Tarragon South
Development Corp. (includes the Side Letter) (incorporated by
reference to the Company's Current Report on Form 8-K filed on
September 8, 2005).
10.2 Promissory Note, dated October 21, 2005, issued by AGU
Entertainment Corp. to Tarragon South Development Corp.
10.3 Third Mortgage Deed and Security Agreement, dated as of
October 21, 2005, by and among AGU Entertainment Corp. and
Tarragon South Development Corp. AGU will furnish to the
Securities and Exchange Commission a copy of any omitted
exhibits or schedules upon request.
10.4 Third Assignment of Rents, Leases and Deposits, dated as of
October 21, 2005, by and among AGU Entertainment Corp. and
Tarragon South Development Corp. AGU will furnish to the
Securities and Exchange Commission a copy of any omitted
exhibits or schedules upon request.
10.5 Subordination Agreement, dated as of October 21, 2005, by and
among Charley Zeches, in her capacity as trustee of Lakes
Holdings Trust, Mitchell Entertainment Company, Tarragon South
Development Corp, as agreed to, accepted and acknowledged by
AGU Entertainment Corp. AGU will furnish to the Securities and
Exchange Commission a copy of any omitted exhibits or
schedules upon request.
10.6 Tri-Party Developer's Agreement, dated as of October 21, 2005,
by and among the City of Lauderdale Lakes, AGU Entertainment
Corp. and Tarragon South Development Corp.
10.7 Mortgage Deed and Security Agreement, effective as of December
20, 2004, by and between AGU Entertainment Corp. and Charley
Zeches, in her capacity as trustee of Lakes Holding Trust U/A
(incorporated by reference to the Company's Current Report on
Form 8-K filed December 29, 2004).
10.8 Promissory Note, dated October 21, 2005, issued by AGU
Entertainment Corp. to Charley Zeches, in her capacity as
trustee of Lakes Holding Trust U/A.
10.9 Receipt for Future Advance and Mortgage Modification
Agreement, dated as of October 21, 2005, by and between AGU
Entertainment Corp. and Charley Zeches, in her capacity as
trustee of Lakes Holding Trust U/A.
10.10 Easement Search Letter, dated October 21, 2005.
10.11 Notice of Limitation on Mortgage Future Advance by AGU
Entertainment Corp. relating to mortgage in favor of Mitchell
Entertainment Company.
10.12 Amendment No. 3 to Agreement for Purchase and Sale, dated as
of October 21, 2005, by and between AGU Entertainment Corp.
and Charley Zeches, in her capacity as trustee of Lakes
Holding Trust U/A (to be filed by amendment).
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: October 27, 2005 AGU ENTERTAINMENT CORP.
By: /s/ John W. Poling
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Name: John W. Poling
Title: Chief Financial Officer
Exhibit Index
Exhibit No. Description
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10.1 Agreement for Purchase and Sale, dated as of August 29, 2005, by
and between AGU Entertainment Corp. and Tarragon South
Development Corp. (includes the Side Letter) (incorporated by
reference to the Company's Current Report on Form 8-K filed on
September 8, 2005).
10.2 Promissory Note, dated October 21, 2005, issued by AGU
Entertainment Corp. to Tarragon South Development Corp.
10.3 Third Mortgage Deed and Security Agreement, dated as of October
21, 2005, by and among AGU Entertainment Corp. and Tarragon South
Development Corp. AGU will furnish to the Securities and Exchange
Commission a copy of any omitted exhibits or schedules upon
request.
10.4 Third Assignment of Rents, Leases and Deposits, dated as of
October 21, 2005, by and among AGU Entertainment Corp. and
Tarragon South Development Corp. AGU will furnish to the
Securities and Exchange Commission a copy of any omitted exhibits
or schedules upon request.
10.5 Subordination Agreement, dated as of October 21, 2005, by and
among Charley Zeches, in her capacity as trustee of Lakes
Holdings Trust, Mitchell Entertainment Company, Tarragon South
Development Corp, as agreed to, accepted and acknowledged by AGU
Entertainment Corp. AGU will furnish to the Securities and
Exchange Commission a copy of any omitted exhibits or schedules
upon request.
10.6 Tri-Party Developer's Agreement, dated as of October 21, 2005, by
and among the City of Lauderdale Lakes, AGU Entertainment Corp.
and Tarragon South Development Corp.
10.7 Mortgage Deed and Security Agreement, effective as of December
20, 2004, by and between AGU Entertainment Corp. and Charley
Zeches, in her capacity as trustee of Lakes Holding Trust U/A
(incorporated by reference to the Company's Current Report on
Form 8-K filed December 29, 2004).
10.8 Promissory Note, dated October 21, 2005, issued by AGU
Entertainment Corp. to Charley Zeches, in her capacity as trustee
of Lakes Holding Trust U/A.
10.9 Receipt for Future Advance and Mortgage Modification Agreement,
dated as of October 21, 2005, by and between AGU Entertainment
Corp. and Charley Zeches, in her capacity as trustee of Lakes
Holding Trust U/A.
10.10 Easement Search Letter, dated October 21, 2005.
10.11 Notice of Limitation on Mortgage Future Advance by AGU
Entertainment Corp. relating to mortgage in favor of Mitchell
Entertainment Company.
10.12 Amendment No. 3 to Agreement for Purchase and Sale, dated as of
October 21, 2005, by and between AGU Entertainment Corp. and
Charley Zeches, in her capacity as trustee of Lakes Holding Trust
U/A (to be filed by amendment).