HUNTER Sports Group (HSG) chief executive Troy Palmer may have to put personalities aside and hold face-to-face crisis talks with Newcastle Knights Members Club chairman Nick Dan this week to ensure Nathan Tinkler's $20 million bank guarantee remains intact.
HSG must provide the club with an audited financial statement on Saturday, but is seeking a two-month extension, until February 15.
Dan has indicated the club board will not agree to any such deferral unless HSG signs a legal document that prolongs a $20 million bank guarantee - a key component of Tinkler's takeover offer - until March.
If HSG refuses to sign, or alternatively is unable to provide the audit by the agreed December 15 deadline, the Members Club believes Tinkler will have defaulted on the privatisation contract he signed on August 5 last year and will consider their options.
Both parties intend to organise a summit early this week, but any negotiations could be complicated by Palmer's strained relationship with Dan.
Palmer sacked Dan from the Knights' advisory board in October after accusing him of "serious misconduct", which was never specified.
Tinkler's right-hand man also asked Dan to resign from the Members Club board, but Dan refused and instead replaced Peter Corcoran as chairman in a leadership coup.
Since then, Palmer has not dealt directly with Dan, using advisory board chairman Paul Harragon as an intermediary or communicating by text.
"I haven't spoken to him [Palmer] at all since then," Dan said last night.
Harragon, however, is overseas on holiday, and Knights chief executive Matthew Gidley admits his knowledge of the situation is limited.
A further logistical problem is that Dan, a prominent Newcastle lawyer, will be in Sydney all week representing Mining Minister Ian MacDonald at the ICAC inquiry.
If there is to be any face-to-face meeting, it may be that HSG officials have to travel to Sydney.
"My understanding is HSG and the members' board will meet early this week to try and find a resolution," Gidley said yesterday.
He was unsure if HSG would consider signing the bank guarantee extension Dan has requested.
Palmer declined to comment when contacted by the Newcastle Herald last night.
Dan said he expected there would be negotiations this week, at which he would remind HSG of the consequences of defaulting on the terms and conditions of the Tinkler takeover agreement.
"I think there will be some talks between now and then," Dan said.
"I have got my documents here to set out between now and then what we're going to have to do over the next fortnight.
"I'd tell them what my board think are the alternatives, if any, or if the documents give us none."
Dan said the most straightforward solution was to "get the audit done", but given that process is not expected to start until today, it is unlikely to be completed by Saturday.
Under the terms of the takeover, HSG committed to presenting the Members Club with an audit on December 15 each year as proof that all obligations were being upheld.
The Members Club would then have 20 business days from a January 1 trigger date to access the bank guarantee, or exercise a buy-back option, if HSG had not complied.
The Members Club is concerned about the time line, because the $20 million guarantee reverts to $10.3 million on January 1.
So the Members Club has 9.7 million reasons to insist that, if HSG want to defer the audit, then the maximum value of the bank guarantee is correspondingly extended.
Under the terms of the bank guarantee, HSG committed to ensure sponsorship revenue of $10 million per season and $2.5 million annually for junior development.