<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 31, 1996
REGISTRATION NO. 333-
=============================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------
FORM SB-2
REGISTRATION STATEMENT
Under
The Securities Act of 1933
------
U.S. GOLF AND ENTERTAINMENT INC.
(Name of small business issuer in its charter)
Delaware 7999 11-3320969
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Identification
organization) Number) Number)
4 Henry Street
Commack, New York 11725
(516) 499-7007
(Address and telephone number of principal executive
offices and principal place of business)
----------
Edward Ross, Chairman and President
U.S. Golf and Entertainment Inc.
4 Henry Street
Commack, New York 11725
(516) 499-7007
(Name, address and telephone number of agent for service)
----------
Copies to:
Norman M. Friedland, Esq. Leonard J. Breslow, Esq.
Ruskin, Moscou, Evans & Breslow & Walker
Faltischek, P.C. 875 Third Avenue
170 Old Country Road New York, New York 10022
Mineola, New York 11501 (212) 832-1930
(516) 663-6600 (212) 888-4955 (fax)
(516) 663-6641 (fax)
---------
Approximate Date of Proposed Sale to the Public: As soon as practicable
after the Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, check the following box: /X/
----------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
=============================================================================
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===============================================================================================================
Proposed Maximum Proposed Maximum
Title of Each Class of Securities to be Amount to be Offering Price Per Aggregate Offering Amount of
Registered Registered Unit (1) Price (1) Registration Fee
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.001
per share(2)........................... 1,000,000 $5.60 $ 5,600,000 $ 1,931.03
- ---------------------------------------------------------------------------------------------------------------
Redeemable Class A Warrants, each to
purchase one share of Common Stock(2) 2,000,000 $ .10 $ 200,000 $ 68.97
- ---------------------------------------------------------------------------------------------------------------
Common Stock, par value $.001 per
share(3) ............................. 2,000,000 $6.00 $12,000,000 $ 4,137.93
- ---------------------------------------------------------------------------------------------------------------
Stock Purchase Option(2)(4) ........... 100,000 $ .0005 $ 50 $ 0.02
- ---------------------------------------------------------------------------------------------------------------
Warrant Purchase Option(2)(4) ......... 200,000 $ .00025 $ 50 $ 0.02
- ---------------------------------------------------------------------------------------------------------------
Common Stock, par value $.001 per
share(2)(5) .......................... 100,000 $6.72 $ 672,000 $ 231.72
- ---------------------------------------------------------------------------------------------------------------
Redeemable Class A Warrants, each to
purchase one share of Common
Stock(2)(6) .......................... 200,000 $ .12 $ 24,000 $ 8.28
- ---------------------------------------------------------------------------------------------------------------
Common Stock, par value $.001 per
share(7) ............................. 200,000 $7.20 $ 1,440,000 $ 496.55
- ---------------------------------------------------------------------------------------------------------------
Common Stock, par value $.001 per
share(8) ............................. 1,045,000 $5.60 $ 5,852,000 $ 2,017.93
- ---------------------------------------------------------------------------------------------------------------
Redeemable Class A Warrants, each to
purchase one share of Common Stock(9) 2,020,000 $ .10 $ 202,000 $ 69.66
- ---------------------------------------------------------------------------------------------------------------
Common Stock, par value $.001 per
share(10) ............................ 2,020,000 $6.00 $12,120,000 $ 4,179.31
- ---------------------------------------------------------------------------------------------------------------
Total Registration Fee ...................................................................... $13,141.42
===============================================================================================================
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee.
(2) Based on the maximum offering of 1,000,000 shares of Common Stock and
2,000,000 Class A Warrants.
(3) Represents shares of Common Stock issuable upon the exercise of the
Class A Warrants.
(4) To be issued to the Underwriter; the resale thereof is also covered
hereby.
(5) Represents shares of Common Stock issuable upon the exercise of the
Stock Purchase Option; the resale thereof is also covered hereby.
(6) Represents the Class A Warrants issuable upon the exercise of the
Warrant Purchase Option; the resale thereof is also covered hereby.
(7) Represents shares of Common Stock issuable upon the exercise of the
Class A Warrants underlying the Warrant Purchase Option; the resale
thereof is also covered hereby.
(8) Represents shares of Common Stock held by the Selling Stockholders (the
"Initial Stock").
(9) Represents Class A Warrants held by the Selling Stockholders (the
"Initial Warrants").
(10) Represents shares of Common Stock issuable upon exercise of the Initial
Warrants.
Also registered hereunder are an indeterminable number of shares of Common
Stock which may be issued pursuant to anti-dilution provisions of the Class A
Warrants, the Stock Purchase Option, the Class A Warrants issuable pursuant
to the exercise of the Warrant Purchase Option, the Founders Warrants and the
Placement Warrants.
<PAGE>
U.S. GOLF AND ENTERTAINMENT INC.
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
Item Number Caption in Form SB-2 Location in Prospectus
--------------- --------------------------------------------------- ---------------------------------------------------
<S> <C> <C>
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus...................... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus.......................................... Inside Front and Outside Back Cover Pages
3. Summary Information and Risk Factors................ Prospectus Summary; Risk Factors
4. Use of Proceeds..................................... Use of Proceeds
5. Determination of Offering Price..................... Outside Front Cover Page; Underwriting
6. Dilution............................................ Dilution
7. Selling Security Holders............................ Selling Stockholders
8. Plan of Distribution................................ Outside Front Cover Page; Selling Stockholders;
Underwriting
9. Legal Proceedings................................... Business - Legal Proceedings
10. Directors, Executive Officers, Promoters and
Control Persons..................................... Management
11. Security Ownership of Certain Beneficial Owners and
Management.......................................... Principal Stockholders
12. Description of Securities........................... Description of Securities; Underwriting
13. Interest of Named Experts and Counsel............... Legal Matters
14. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities...... Management; Limitation of Liability and
Indemnification Matters
15. Organization Within Last Five Years................. Certain Transactions
16. Description of Business............................. Prospectus Summary; Capitalization; Management's
Discussion and Analysis of Financial Condition and
Results of Operations; Business; Financial
Statements
17. Management's Discussion and Analysis of Plan of
Operation........................................... Management's Discussion and Analysis of Financial
Condition and Results of Operations
18. Description of Property............................. Business - Properties
19. Certain Relationships and Related Transactions...... Certain Transactions
20. Market for Common Equity and Related Stockholder
Matters............................................. Shares Eligible for Future Sale; Description of
Securities
21. Executive Compensation.............................. Management
22. Financial Statements................................ Financial Statements
23. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosures................ Inapplicable
</TABLE>
<PAGE>
This Preliminary Official Statement and the information contained herein are
tentative and subject to completion, amendment or other change without
notice. Under no circumstances shall this Preliminary Official Statement
constitute an offer to sell or the solicitation of an offer to buy nor shall
there be any sale of the Bonds in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of any jurisdiction.
PROSPECTUS
SUBJECT TO COMPLETION, DATED MAY 31, 1996
U.S. GOLF AND ENTERTAINMENT INC.
MINIMUM: 850,000 SHARES OF COMMON STOCK AND 1,700,000
REDEEMABLE CLASS A WARRANTS
MAXIMUM: 1,000,000 SHARES OF COMMON STOCK AND 2,000,000
REDEEMABLE CLASS A WARRANTS
As described below, the offering of an additional 1,045,000 shares of Common
Stock and 2,020,000 Redeemable Class A Warrants is being registered on behalf
of certain Selling Stockholders; however, such shares of Com- mon Stock and
Class A Warrants will be offered on a delayed basis and not as part of the
underwritten offering.
This Prospectus relates to an offering (the "Offering") of up to 1,000,000
shares of common stock, par value $.001 per share (the "Common Stock"), and
2,000,000 redeemable Class A Warrants (the "Class A Warrants") of U.S. Golf
and Entertainment Inc. (the "Company"). The Common Stock and Class A Warrants
may be purchased separately and shall be separately transferable immediately
after the closing of the Offering. The Common Stock and the Class A Warrants
are collectively sometimes hereinafter referred to as the "Securities." Each
Class A Warrant entitles the registered holder thereof to purchase one share
of Common Stock at a price of $6.00, subject to adjustment, at any time until
five years from the effective date (the "Effective Date") of the registration
statement of which this Prospectus forms a part. The Class A Warrants are
subject to redemption by the Company beginning 18 months after the Effective
Date, at $.10 per Class A Warrant, on 30 days prior written notice provided
that either (i) the last sale price (or highest closing bid price) of the
Common Stock as reported on the National Association of Securities Dealers
Automated Quotation System ("NASDAQ") (or on such exchange on which the
Common Stock is then traded) exceeds $11.00 per share for 20 consecutive
trading days ending within 15 days prior to the date of the notice of
redemption, or (ii) the Company shall have obtained written consent from A.R.
Baron & Co., Inc. (the "Underwriter") to redeem the Class A Warrants. See
"Description of Securities."
This Prospectus also relates to the sale of 1,045,000 shares of Common
Stock (the "Initial Stock"), 2,020,000 Class A Warrants (the "Initial
Warrants") and 2,020,000 shares of Common Stock issuable upon exercise of the
Initial Warrants issued by the Company to certain persons (the "Selling
Stockholders"). See "Certain Transactions" and "Selling Stockholders." The
Initial Stock and the Initial Warrants will be offered on a delayed basis and
not as part of the Offering.
As of March 31, 1996, the Company had accumulated losses of $590,469. The
Company is continuing to incur losses and could incur significant additional
losses for the foreseeable future. Prior to the Offering, there has been no
market for the Securities. The offering price of the shares of Common Stock
and Class A Warrants and the exercise price and other terms of the Class A
Warrants were arbitrarily determined by negotiation between the Company and
the Underwriter and are not necessarily related to the Company's assets, book
value, results of operations, or other established criteria of value, and
should not be regarded as any indication of the future market price of the
Securities. See "Risk Factors," "Description of Securities" and
"Underwriting."
------
THE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND SHOULD BE CONSIDERED ONLY BY
PERSONS WHO CAN AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. IN ADDITION,
PURCHASERS OF THE SECURITIES WILL SUFFER IMMEDIATE SUBSTANTIAL
DILUTION. SEE "RISK FACTORS" AND "DILUTION."
------
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR BY ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE
<TABLE>
<CAPTION>
===============================================================================================================
Underwriter's Discounts Proceeds to the Company
Price to the Public and Commissions (1) (2)(3)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock ............ $5.60 $.56 $5.04
- ---------------------------------------------------------------------------------------------------------------
Class A Warrants.......... $.10 $.01 $.09
- ---------------------------------------------------------------------------------------------------------------
Minimum Offering.......... $4,930,000 $493,000 $4,437,000
- ---------------------------------------------------------------------------------------------------------------
Maximum Offering.......... $5,800,000 $580,000 $5,220,000
===============================================================================================================
</TABLE>
<PAGE>
(1) Does not reflect additional compensation to be received by the
Underwriter in the form of: (i) a non-accountable expense allowance equal
to 3% of the gross proceeds of the Offering ($147,900 if the minimum, and
$174,000 if the maximum number of Securities is sold); (ii) options to
purchase (a) an amount of Common Stock equal to 10% of the Common Stock
sold in the Offering at a purchase price of $6.72 per share of Common
Stock (the "Stock Purchase Option"), and (b) an amount of Class A
Warrants equal to 10% of the Class A Warrants sold in the Offering at a
purchase price of $.12 per Class A Warrant (the "Warrant Purchase
Option"), which Stock Purchase Option and Warrant Purchase Option
(collectively, the "Purchase Options") shall be exercisable over a period
of four years commencing one year from the Effective Date; (iii) an
agreement pursuant to which the Underwriter will receive a finder's fee
in the event that the Company closes a merger or acquisition with a party
to whom the Company was introduced by the Underwriter; (iv) a consulting
agreement pursuant to which the Company shall engage the Underwriter as
its financial consultant for two years at an annual fee of $45,000
(exclusive of any accountable out-of-pocket expenses); (v) a five-year
right of first refusal with respect to future financings; and (vi)
effective on the consummation of the Offering and for a period of five
years thereafter, the right to designate one electee to the Company's
Board of Directors. In addition, the Company has agreed to indemnify the
Underwriter against certain civil liabilities under the Securities Act of
1933, as amended. See "Underwriting."
(2) Before deducting expenses of the Offering payable by the Company
estimated at $990,900 (approximately $1.17 per share of Common Stock) if
the minimum number of shares of Common Stock is sold, or $1,104,000
(approximately $1.10 per share of Common Stock) if the maximum number of
shares of Common Stock is sold, including the Underwriter's
non-accountable expense allowance.
(3) A minimum of 850,000 shares of Common Stock and 1,700,000 Class A
Warrants and a maximum of 1,000,000 shares of Common Stock and 2,000,000
Class A Warrants are offered by the Underwriter as agent for the Company
on a "best efforts" basis for 30 days from the Effective Date (which
period may be extended for an additional 15 days by mutual agreement of
the Company and the Underwriter). An additional five days may be added
solely for purposes of allowing checks to clear. Pending the sale of the
minimum number of Securities, all proceeds will be deposited into an
escrow account with LaSalle National Trust, N.A., escrow agent for the
Offering. In the event the minimum number of Securities is not sold
within the offering period or any extension thereof, the Offering will
terminate and all funds will be returned promptly to subscribers by the
Escrow Agent without any deduction therefrom or interest thereon. See
"Underwriting."
A minimum of 850,000 shares of Common Stock and 1,700,000 Class A Warrants
and a maximum of 1,000,000 shares of Common Stock and 2,000,000 Class A
Warrants are being offered by the Underwriter as agent for the Company on a
"best efforts" basis, subject to prior sale, withdrawal, or cancellation of
the Offering without notice. Any modification to the Offering will be made by
means of an amendment to this Prospectus. The Company reserves the right to
modify, withdraw or cancel the Offering without notice, and to reject any
orders for the Securities offered hereby, in whole or in part. It is expected
that delivery of the certificates representing the Securities will be made at
the offices of A.R. Baron & Co., Inc., 153 East 53rd Street, New York, New
York 10022, at the closing of the Offering (the "Closing").
A.R. BARON & CO., INC.
The date of this Prospectus is _________________, 1996
<PAGE>
A SIGNIFICANT AMOUNT OF THE COMMON STOCK AND CLASS A WARRANTS TO BE SOLD
IN THIS OFFERING MAY BE SOLD TO CUSTOMERS OF THE UNDERWRITER. THIS MAY AFFECT
THE MARKET FOR AND LIQUIDITY OF THE COMPANY'S SECURITIES IN THE EVENT THAT
ADDITIONAL BROKER-DEALERS DO NOT MAKE A MARKET IN THE COMPANY'S SECURITIES,
OF WHICH THERE CAN BE NO ASSURANCE. SUCH CUSTOMERS SUBSEQUENTLY MAY ENGAGE IN
TRANSACTIONS FOR THE SALE OR PURCHASE OF THE COMMON STOCK AND CLASS A
WARRANTS CONTAINED THEREIN THROUGH AND/OR WITH THE UNDERWRITER.
ALTHOUGH THE UNDERWRITER HAS NO OBLIGATION TO DO SO, THE UNDERWRITER MAY
FROM TIME TO TIME ACT AS A MARKET MAKER AND OTHERWISE EFFECT TRANSACTIONS IN
THE COMPANY'S SECURITIES. IF THE UNDERWRITER PARTICIPATES IN THE MARKET, IT
MAY BECOME A DOMINATING INFLUENCE IN THE MARKET FOR THE COMMON STOCK AND
CLASS A WARRANTS. HOWEVER, THERE IS NO ASSURANCE THAT THE UNDERWRITER WILL BE
A DOMINATING INFLUENCE. THE PRICES AND LIQUIDITY OF THE SECURITIES OFFERED
HEREUNDER MAY BE SIGNIFICANTLY AFFECTED BY THE DEGREE OF THE UNDERWRITER'S
PARTICIPATION IN SUCH MARKET. THE UNDERWRITER MAY DISCONTINUE SUCH ACTIVITIES
AT ANY TIME OR FROM TIME TO TIME. SEE "RISK FACTORS" -- "NO PRIOR TRADING
MARKET."
AVAILABLE INFORMATION
The Company has filed with the Securities Exchange Commission (the
"Commission") a Registration Statement on Form SB-2, pursuant to the
Securities Act of 1933, as amended (the "Act"), with respect to the
securities offered by this Prospectus. This Prospectus does not contain all
the information set forth in said Registration Statement and the exhibits
thereto. For further information with respect to the Company and the
securities offered hereby, reference is made to said Registration Statement
and exhibits which may be inspected without charge at the Commission's
principal office at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549.
The Company intends to furnish its stockholders and holders of Class A
Warrants with annual reports containing audited financial statements and such
interim reports as it deems appropriate or as may be required by law. The
Company's fiscal year ends December 31.
The Company will provide without charge to each person who receives this
Prospectus, upon written or oral request of such person, a copy of the
Registration Statement (excluding exhibits) by contacting the Company at 4
Henry Street, Commack, New York 11725, telephone (516) 499-7007, attention:
Chief Financial Officer.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the financial statements appearing elsewhere in this
Prospectus.
In July, 1994, Commack Golf and Family Recreation Center, L.P., a New York
limited partnership (the "Commack Partnership") was organized to construct,
develop and operate the Commack Golf and Family Recreation Center (the
"Commack Facility"), which commenced operations in March, 1995. In November,
1995, United Acquisition I Corp. (whose name was changed to U.S. Golf and
Entertainment Corp. in April, 1996, ("U.S. Golf Corp.")), was incorporated
and received equity investments from its founding stockholders in the amount
of $54,500, $41,200 of which were loaned to the Commack Partnership in
anticipation of the Company's acquisition of the Commack Partnership. In May,
1996, U.S. Golf Corp. raised an additional $500,000 from the sale of common
stock and warrants, which monies were loaned to the Commack Partnership. In
May, 1996, U.S. Golf and Entertainment Inc. (the "Company") was incorporated
and proposed exchange agreements (the "Exchange Agreements") with (i) the
stockholders of U.S. Golf Corp., whereby the stockholders of U.S. Golf Corp.
would exchange their shares of common stock and warrants for 1,045,000 shares
of the Common Stock and 2,020,000 Class A Warrants; and (ii) the general and
limited partners of the Commack Partnership, whereby the partners of the
Commack Partnership would exchange their partnership interests for an
aggregate of 1,045,000 shares of the Common Stock. See "Certain
Transactions."
Unless otherwise indicated, data in this Prospectus: (i) assumes the
transactions set forth in the Exchange Agreements are consummated prior to
the Offering; (ii) assumes the Closing occurs on August 1, 1996; (iii) does
not include the issuance of 2,000,000 shares of Common Stock issuable upon
exercise of the Class A Warrants sold in this Offering; (iv) assumes no
exercise of the Purchase Options; and (v) assumes no exercise of the Initial
Warrants covering an aggregate 2,020,000 shares of Common Stock. See
"Capitalization," "Certain Transactions," "Description of Securities" and
"Underwriting."
THE COMPANY
U.S. Golf and Entertainment Inc. (the "Company") is seeking to become a
national owner/operator of upscale, high-volume, year-round golf driving
ranges and related recreational facilities. The Company currently operates
the Commack Golf and Family Recreation Center, a 19-acre, 120-tee facility
located in Commack, New York (the "Commack Facility"), which it acquired in
May, 1996. The Commack Facility offers year-round opportunities to practice a
wide variety of golf strokes, including driving, pitching, putting, chipping
and sand play, as well as an 18-hole miniature golf course, a snack bar, a
full-service pro shop and a golf learning center. The Company believes the
business experience, marketing skills and contacts of its management will
provide it with opportunities to acquire and/or develop other golf driving
ranges and related recreational facilities, such as in-line rollerskating
rinks and batting cages, in the United States.
Over the past decade, the popularity of golf throughout the United States
and the demand for golf courses and golf driving range facilities has
experienced continued growth. According to the National Golf Foundation, the
number of golfers in the United States increased to approximately 24 million
players in 1995, from approximately 21.2 million players in 1987, and the
total number of rounds played increased by a proportionate amount. The
Company believes that these trends will continue for the foreseeable future
as golf becomes an attractive recreational activity for an aging "baby-boom"
population that has increasing leisure time and disposable income.
Additionally, industry statistics indicate that women are learning and
playing golf in increasing numbers. The Company believes that its strategy of
owning/operating upscale, family-oriented golf practice facilities in prime
suburban locations, in combination with visible marketing and advertising
programs that will take advantage of the Company's access to well-known
golfers and other professional athletes, will enable it to take advantage of
these trends.
The Company's executive offices are located at 4 Henry Street, Commack,
New York 11725. The Company's telephone number is (516) 499-7007.
3
<PAGE>
THE OFFERING
Securities Offered by the
Company ..................... Common Stock -- a minimum of 850,000 shares
of Common Stock and a maximum of 1,000,000
shares of Common Stock.
Class A Warrants -- a minimum of 1,700,000
Class A Warrants and a maximum of 2,000,000
Class A Warrants.
Offering Price ............... $5.60 per share of Common Stock $.10 per
Class A Warrant
Common Stock Outstanding:
Prior to the Offering(1) .... 2,090,000 shares
After the Offering(1)(2) .... 2,940,000 shares of Common Stock if the minimum
number of shares of Common Stock are sold, and
3,090,000 shares of Common Stock if the maximum
number of shares of Common Stock are sold.
Class A Warrants Outstanding:
Prior to the Offering ....... 2,020,000 Warrants
After the Offering(3) ...... 3,720,000 Warrants if the minimum number of
Class A Warrants are sold, and 4,020,000
Warrants if the maximum number of Class A
Warrants are sold.
Exercise Terms .............. Each Class A Warrant is exercisable to
purchase one share of Common Stock at a
price of $6.00, subject to adjustment, until
five years from the effective date (the
"Effective Date") of the registration
statement of which this Prospectus forms a
part, subject, in certain circumstances, to
earlier redemption by the Company. See
"Description of Securities."
Expiration Date ............ Five years from the Effective Date.
Redemption .................. The Warrants are redeemable by the Company,
at a price of $.10 per Warrant, at any time
commencing 18 months after the Effective
Date, on 30 days prior written notice,
provided that the last sale price (or
highest closing bid price) of the Common
Stock as reported on NASDAQ (or on such
exchange on which the Common Stock is then
traded) exceeds $11.00 per share for a
period of 20 consecutive trading days ending
within 15 days prior to the date of the
notice of redemption. See "Underwriting" and
"Description of Securities -- Warrants."
Use of Proceeds ............. Leasing, acquisition and development of golf
centers and related recreational facilities;
development of additional recreational
facilities at the Commack Facility; repayment
of certain short term liabilities; and working
capital. See "Use of Proceeds."
Proposed NASDAQ
Symbols (4) .............. Common Stock -- USGO
Class A Warrants -- USGOW
- ------
(1) Does not include: (i) 400,000 shares of Common Stock reserved for
issuance upon the exercise of options which may be granted under the
Company's 1996 Stock Option Plan, 20,000 shares of Common Stock reserved
for issuance upon the exercise of options granted under the Company's
1996 Non-Employee Director Stock Option Plan, and 80,000 shares of Common
Stock reserved for issuance upon the exercise of options which may be
granted under the Company's 1996 Non-Employee Director Stock Option Plan;
or (ii) an aggregate of 2,020,000 shares of Common Stock issuable upon the
exercise of the Initial Warrants. See "Management -- Stock Option Plans"
and "Certain Transactions."
4
<PAGE>
(2) Does not include: (i) up to 2,000,000 shares of Common Stock issuable
upon exercise of the Class A Warrants offered hereby; (ii) up to 200,000
shares of Common Stock issuable pursuant to the exercise of the Class A
Warrants underlying the Warrant Purchase Option; or (iii) up to 100,000
shares of Common Stock issuable upon the exercise of the Stock Purchase
Option.
(3) Does not include up to 200,000 Class A Warrants issuable pursuant to the
exercise of the Warrant Purchase Option.
(4) A NASDAQ listing provides no assurance that an active, liquid trading
market will develop or, if developed, will be sustained.
RISK FACTORS
The securities offered hereby involve a high degree of risk, including,
without limitation, risks relating to the Company's limited history of
operations, operating losses which are expected to continue, potential need
for additional funds, intense competition, dependence on key personnel,
financial condition, the financial condition of the Underwriter and the good
standing of the Underwriter with the Securities and Exchange Commission and
the NASD. See "Risk Factors."
SUMMARY FINANCIAL DATA
<TABLE>
<CAPTION>
Commencement of Three Months
Operations From Ended March 31,
March 1, 1995 to 1996
Statement of Operations Data December 31, 1995 (Unaudited)
--------------------------------------------- ----------------- ---------------
<S> <C> <C>
Operating Revenue ........................... $ 719,374 $ 123,112
Operating Expenses .......................... $1,021,666 $ 274,910
Selling, General and Administrative Expenses . $ 87,555 $ 6,855
Loss From Operations ........................ $ (389,847) $(158,653)
Interest Expense ............................ $ 33,572 $ 8,397
Net Loss .................................... $ (423,419) $(167,050)
Pro Forma Net Loss(1) ....................... $ (254,419) $(102,744)
Pro Forma Net Loss Per Share(1) ............. $ (.12) $ (.05)
</TABLE>
<TABLE>
<CAPTION>
December 31, March 31, 1996
1995 (unaudited)
-------------- ---------------------------------------------------------------
As Adjusted As Adjusted
Actual Pro Forma (1) Maximum (2) Minimum (3)
-------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents . $ 345 $ 26,016 $ 526,622 $4,911,622 $4,154,722
Working Capital (Deficit) . $ (999,223) $(1,091,656) $ (549,850) $4,146,150 $3,389,250
Total Assets .............. $3,053,334 $ 2,969,262 $3,705,868 $8,090,868 $7,333,968
Current Payables .......... $1,132,493 $ 1,187,496 $1,146,296 $ 835,296 $ 835,296
Total Stockholders' Equity . $1,752,581 $ 1,585,531 $2,363,337 $7,059,337 $6,302,437
</TABLE>
- ------
(1) Reference is made to Note 10 of Notes to Financial Statements
(2) Assumes (i) net proceeds of $4,696,000 from the issuance of 1,000,000
shares of Common Stock and 2,000,000 Class A Warrants and (ii) the
repayment of debt. See "Use of Proceeds."
(3) Assumes (i) net proceeds of $3,939,100 from the issuance of 850,000
shares of Common Stock and 1,700,000 Class A Warrants and (ii) the
repayment of debt. See "Use of Proceeds."
5
<PAGE>
RISK FACTORS
The securities offered hereby are speculative and involve a high degree of
risk, and should not be purchased by persons who cannot afford the loss of
their entire investment. Prospective investors should carefully consider the
following risk factors, in addition to other information set forth in this
Prospectus, prior to purchasing the securities.
Limited History; Operating Losses. The Company's only golf driving
facility (a 120-hitting tee facility located in Commack, Long Island) (the
"Commack Facility") was opened in March, 1995 and, accordingly, has only a
limited history of operations. The Company's prospects must be considered in
light of the risks, expenses and difficulties frequently encountered by a
small business in a highly competitive industry. Operating losses for the
Commack Facility were $389,847 for the period from March 1, 1995 to December
31, 1995 (on revenues of $719,374), and were $158,653 for the three months
ended March 31, 1996 (on revenues of $123,112). The Company's operating
expenses can be expected to continue to increase as a result of the Company's
proposed expansion strategy. See "Possible Difficulties in Implementing
Expansion Strategy" below. Accordingly, the Company will continue to incur
losses until revenues generated by expanded operations are sufficient to
offset operating and expansion costs. There can be no assurance, however,
that the Company will operate profitably in the future or that the Company
will successfully acquire or develop other profitable operating facilities.
See "Business" and "Financial Statements."
Single Location; Lease. The Commack Facility is the only facility
currently operated by the Company. Accordingly, a variety of factors relating
to operating at only one location could affect the ongoing viability of the
Company's business. These factors include local economic conditions, adverse
publicity, accidents that could damage or destroy the Commack Facility and
competition from other Long Island-based facilities. The lease for the
Commack Facility is scheduled to expire in April, 2010, subject to renewals
to April, 2020. It provides the landlord with a variety of remedies,
including termination of the lease and eviction of the tenant, in the event
the Company breaches any one of a number of covenants or promises, including
its obligation to make timely rent payments and maintenance of adequate
insurance coverage. If this lease is terminated, the Company will be
materially adversely affected.
Possible Difficulties in Implementing Expansion Strategy. The Company's
ability to significantly increase revenue and operating cash flow over time
depends in large part upon its success in operating and constructing (or
acquiring) additional golf centers and related recreational facilities. There
can be no assurance that suitable development or acquisition opportunities
will be available, or that the Company will be able to develop or acquire
facilities on satisfactory terms, if at all. The construction of new golf
centers and related recreational facilities is subject to all of the delays
and uncertainties associated with construction projects generally. In
addition, the Company's ability to expand will be dependent on an
availability of additional financing, and there can be no assurance that such
financing will be available. See "Additional Financing Requirements" below.
To successfully implement its expansion strategy, the Company must develop
administrative operating systems and procedures to manage multiple facilities
and there can be no assurance that these systems and procedures can be
developed or implemented in an efficient, cost-effective manner. If new
facilities are opened in the future, they must be integrated into the
Company's existing operations, and there can be no assurance that these
additional facilities can be easily assimilated into the Company's operating
structure. If the Company is not able to efficiently develop appropriate
operating systems and procedures or integrate acquired or newly-opened
centers with its existing operations, the Company's financial condition and
results of operations could be materially adversely affected.
Additional Financing Requirements; Debt Financing. The Company believes
that the proceeds of this Offering and the cash flow from the Commack
Facility's operations will be sufficient to permit the Commack Facility to
conduct its operations as currently contemplated for the foreseeable future.
Although such belief is based on the Company's best judgment, there can be no
assurance that the assumptions underlying this belief will prove accurate.
The Company's expansion strategy is dependent upon the availability of
capital to be raised in this Offering and the availability of debt financing
to cover approximately 50% of the cost of developing each additional
facility. There can be no assurance, however, that such debt financing will
be available or that the funds to be raised in this Offering in combination
6
<PAGE>
with such debt financing will be sufficient to enable the Company to acquire
and/or develop additional golf and related recreational facilities. In
connection with any such debt financing, the Company may be required to pledge
its assets to a lender, may be restricted in its ability to incur additional
obligations or to make capital expenditures, and/or may be required to abide by
certain financial covenants. Moreover, if the Company defaults on any of its
obligations with respect to any such debt financing, the lender could declare
its loan to become immediately due and payable and subject the Company's assets
to foreclosure.
Competition. The golf driving range business is competitive and includes
competition from golf courses as well as other forms of recreation. Certain
of the Company's competitors have considerably greater financial, marketing,
personnel and other resources than the Company, as well as greater experience
and customer recognition than the Company. In the Long Island market, the
Company faces strong competition from approximately 30 freestanding golf
driving ranges and from numerous public and private golf courses which offer
golf practice facilities. While the Company believes that the location of and
the amenities associated with the Commack Facility provide it with certain
competitive advantages, there can be no assurance that the Company will be
able to successfully compete with its competitors.
Dependence on Discretionary Consumer Spending. The amount spent by
consumers on discretionary items, such as golf and family and entertainment
activities, is dependent upon consumers' levels of discretionary income,
which may be adversely affected by general or local economic conditions. A
decrease in consumer spending on such activities will have a material adverse
effect on the Company's financial condition and results of operations.
Seasonal Results. The Company's revenues from the Commack Facility for the
period from April through October (the second and third quarters of the year)
are expected to account for a greater portion of the Company's operating
revenue than do the first and fourth quarters of the year. Similar results
are expected for the other facilities the Company may develop or acquire in
climates similar to that of the northeast United States. Although some
portions of the Commack Facility are protected from inclement weather, other
portions of the Commack Facility, such as the miniature golf course, the
putting green and related recreational amenities, are outdoors and vulnerable
to weather conditions. Moreover, golfers are less inclined to practice when
weather conditions limit their ability to play golf on outdoor courses. This
seasonal pattern is expected to cause the Company's results of operations to
vary significantly from quarter to quarter. Accordingly, period-to-period
comparisons are not necessarily meaningful and should not be relied on as
indicative of future results. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Environmental Regulation. Golf and recreational centers use and store
various hazardous materials such as motor oil, gasoline, pesticides,
herbicides and paint. Under various federal, state and local laws, ordinances
and regulations, an owner or operator of real property is generally liable
for the costs of removal or remediation of hazardous substances that are
released on its property, regardless of whether the owner or operator knew
of, or was responsible for, the release of such hazardous materials. The
Company has not been advised of any non- compliance or violation of any
environmental laws, ordinances or regulations and the Company believes that
it is in substantial compliance with all such laws, ordinances and
regulations applicable to its Commack Facility. The Company, however, has not
performed any environmental studies on the Commack Facility and, as a result,
there may be potential liabilities and/or conditions of which the Company is
not aware. If any such liabilities or conditions arise with respect to the
Commack Facility or any other facility which may be constructed, acquired or
operated by the Company in the future, there could be a material adverse
effect on the Company.
Uninsured Losses. The Company carries property and liability insurance in
amounts it deems adequate. While the Company will make every effort to
maintain adequate insurance by industry standards, the Company could suffer a
loss from a casualty or liability for an event not covered by insurance or in
amounts in excess of coverage. Any such loss could have a material adverse
effect on the Company.
Dependence Upon Key Employees; Recruitment of Additional Personnel. The
Company is heavily dependent on the services of Edward Ross, the Company's
Chairman of the Board and President, and Chuck Workman, the Company's Senior
Vice President. The loss of the services of either Mr. Ross or Mr. Workman
7
<PAGE>
could materially adversely affect the Company. Mr. Ross and Mr. Workman have
entered into employment agreements with the Company which provide that each
will devote approximately 50% of his business time to the affairs of the
Company until such time as a full-time President and other full-time
executive officers are hired. See "Management."
Need for Experienced Executive. Management believes that in order for the
Company to successfully compete in the marketplace, it is in need of a
full-time President with experience in the development, marketing and
management of multi-site recreational and/or entertainment facilities. The
Board of Directors has formed a search committee to conduct a search for such
an executive. The search process could take months (or longer) to complete
and there is no assurance that the proper individual can be identified and
induced to enter the Company's employ. In the event a full- time President is
hired, Mr. Edward Ross, the current President of the Company, has agreed to
provide executive services to the Company on an as-needed basis. See
"Management."
Immediate and Substantial Dilution. Investors in this Offering will
experience immediate and substantial dilution of the net tangible book value
of their shares of Common Stock ($3.78 per share, or 65% if the minimum
number of shares of Common Stock and Class A Warrants is sold, and $3.63 per
share, or 63% if the maximum number of shares of Common Stock and Class A
Warrants is sold). In addition, if the Company obtains additional funds
through private or public equity or debt financings, or if the Company issues
options pursuant to the Company's 1996 Stock Option Plan at prices below fair
market value, the purchasers of the securities offered hereby may experience
substantial dilution as a consequence of such future financings or option
grants. See "Dilution," "Use of Proceeds," "Capitalization," "Management --
Stock Option Plans" and "Underwriting."
Management's Broad Discretion in Application of Proceeds. $3,478,100 of
the net proceeds of the Offering (or 88%) if the minimum amount of shares of
Common Stock and Class A Warrants is sold and the $4,235,000 of the net
proceeds of the Offering (or 90%) if the maximum amount of shares of Common
Stock and Class A Warrants is sold, will be used for working capital and for
the acquisition, development and operation of additional golf and recreation
centers. Accordingly, management will have broad discretion as to the
allocation and use of such proceeds. See "Use of Proceeds."
No Commitment to Purchase Securities; Escrow of Subscription
Proceeds. Under the terms of the Offering, the Underwriter is offering on a
"best efforts" basis a minimum of 850,000 shares of Common Stock and
1,700,000 Class A Warrants and a maximum of 1,000,000 shares of Common Stock
and 2,000,000 Class A Warrants. Unless the minimum number of shares of Common
Stock and Class A Warrants is sold, no securities will be issued and the
Offering will be withdrawn. No person is committed to purchase any of the
Securities. Under the terms of the Offering, subscribers' funds will be
placed in a non-interest-bearing escrow account for up to 50 days. Such funds
will be returned to subscribers, without interest thereon or deduction
therefrom, in the event the minimum number of Securities is not sold during
the 30 day offering period (which period may be extended for an additional 15
days, and an additional 5 days solely for the purpose of allowing checks to
clear). During the offering period, subscribers will have no right to the
return of their subscriptions. See "Underwriting."
Limited Liability of Directors. As permitted by the Delaware Corporation
Law, the Company's Certificate of Incorporation eliminates personal liability
of a director to the Company and its stockholders for monetary damages for
breach of fiduciary duty as a director, except in certain circumstances.
Accordingly, stockholders may have limited rights to recover money damages
against the Company's directors for breach of fiduciary duty.
Possible Inability to Exercise Class A Warrants; Limited Value of Class A
Warrants; Possible Redemption of Class A Warrants. The Company will not be
able to issue the shares of Common Stock underlying the Class A Warrants
unless, at the time of exercise, a registration statement registering shares
of Common Stock issuable upon exercise of such Class A Warrants is effective
and such shares have been qualified or deemed to be exempt from registration
or qualification under the securities laws of the states of residence of the
holders of such Class A Warrants. The registration statement of which this
Prospectus forms a part (the "Registration Statement") includes the shares of
8
<PAGE>
Common Stock underlying the Class A Warrants. There can be no assurance that the
Company will be able to maintain the effectiveness of the Registration Statement
or any other registration statement covering the shares of Common Stock
underlying the Class A Warrants. The Class A Warrants may be deprived of any
value if a registration statement covering the Common Stock issuable upon the
exercise of the Class A Warrants is not kept effective, or if such Common Stock
is not qualified or exempt from qualification in the particular states in which
the holders of the Class A Warrants reside. In addition, in the absence of a
public market for the Common Stock at a price in excess of the Class A Warrant
exercise price, the Class A Warrants may be deprived of any value. The Class A
Warrants are subject to redemption by the Company on 30 days' prior written
notice, which may be given only under certain conditions. If a written notice of
redemption is given, the warrantholders will lose their right to exercise their
Class A Warrants at the end of the 30-day redemption notice period. See
"Description of Securities -- Class A Warrants."
No Prior Trading Market. Prior to the Offering, there has not been a
public market for the Company's securities. There can be no assurance that
the Common Stock and the Class A Warrants will be quoted on NASDAQ or that an
active trading market will develop or be sustained after the Offering. The
absence of an active trading market would reduce the liquidity of an
investment in the Company's securities. The Underwriter has indicated that it
intends to act as a market maker and otherwise effect transactions in the
Company's securities. To the extent the Underwriter participates, it may be a
dominating influence in any market that might develop, and the degree of
participation by the Underwriter may significantly affect the price and
liquidity of the Company's securities. The Underwriter may discontinue such
activities at any time or from time to time.
Arbitrary Determination of Offering Price; Potential Price Volatility. The
offering price of the Common Stock and the Class A Warrants and the exercise
price and terms of the Class A Warrants have been determined by negotiation
between the Company and the Underwriter and are not necessarily related to
the Company's assets, book value, results of operations, or other established
criteria of value. There has been significant volatility in the market price
of securities of companies with small capitalizations. Period-to-period
fluctuations in the Company's revenues and financial results may have a
significant impact on the Company's business and on the market price of the
Company's securities. See "Underwriting."
Possible Delisting from NASDAQ System and Market Illiquidity. If the
Common Stock and Class A Warrants are initially quoted on NASDAQ (as to which
there can be no assurance), then continued inclusion of such securities on
NASDAQ will require that (i) the Company maintain at least $2,000,000 in
total assets and $1,000,000 in capital and surplus, (ii) the minimum bid
price for the Common Stock be at least $1.00 per share, (iii) the public
float consist of at least 100,000 shares of Common Stock, valued in the
aggregate at more than $200,000, (iv) the Common Stock have at least two
active market makers, and (v) the Common Stock be held by at least 300
holders. If the Company is unable to satisfy NASDAQ's maintenance
requirements, the Company's securities may be delisted from NASDAQ. In such
event, trading, if any, in the Common Stock and Class A Warrants would
thereafter be conducted in the other-the-counter market in the so-called
"pink sheets" or the NASD's "Electronic Bulletin Board," and it would be more
difficult to dispose of the Common Stock or the Class A Warrants or to obtain
as favorable a price for such securities. Consequently, the liquidity of the
Company's securities could be impaired, not only in the number of securities
that could be bought and sold at a given price, but also through delays in
the timing of transactions. In addition, there could be a reduction in
security analysts' and the news media's coverage of the Company, which could
result in lower prices for the Company's securities than might otherwise be
attained and in a larger spread between the bid and asked prices for the
Company's securities.
Adverse Consequences Associated with Substantial Shares of Common Stock
Reserved for Issuance. The Company has reserved 2,000,000 shares of Common
Stock for issuance upon the exercise of the Class A Warrants which are being
offered in connection with this Offering, up to 300,000 shares of Common
Stock for issuance upon the exercise of the Stock Purchase Option and the
Class A Warrants underlying the Warrant Purchase Option, 2,020,000 shares of
Common Stock for issuance upon the exercise of the Initial Warrants, and an
aggregate of 500,000 shares of Common Stock for issuance upon the exercise of
the 20,000 options which have been granted and the 480,000 options which may
be granted in the future under the Company's 1996 Stock Option Plan and the
Company's 1996 Non-Employee Director Stock Option Plan. Holders of such
warrants and options are likely to exercise them when, in all likelihood, the
Company could obtain additional capital on terms more favorable than those
provided thereby. Furthermore, such warrants and options may adversely
9
<PAGE>
affect the terms on which the Company could obtain additional capital. Should
a significant portion of such warrants and options be exercised, the
resulting increase in the amount of Common Stock in the public market may
have the effect of reducing the per share market price thereof. See
"Management -- Stock Option Plans" and "Shares Eligible for Future Sale."
Underwriter's Options May Inhibit Company's Ability to Raise Capital. The
Company has reserved up to 100,000 shares of Common Stock for issuance upon
exercise of the Stock Purchase Option and up to an additional 200,000 shares
of Common Stock for issuance upon the exercise of the Class A Warrants
underlying the Warrant Purchase Option. The Company may find it more
difficult to raise additional equity capital if it should be needed for the
business of the Company while the Purchase Options are outstanding. At any
time when the holder or holders of the Purchase Options might be expected to
exercise them, the Company would probably be able to obtain additional equity
capital on terms more favorable than those provided in the Purchase Options.
Potential Adverse Effect of Issuance of any Authorized Preferred
Stock. The Company has the right to issue shares of preferred stock in the
future without further stockholder approval and upon such terms and
conditions, and having such rights, privileges, and preferences, as the Board
of Directors of the Company may determine. The rights of the holders of
Common Stock will be subject to, and may be adversely affected by, the rights
of holders of any preferred stock that may be issued in the future. In
addition, the issuance of preferred stock could have the effect of making it
more difficult for a third party to acquire control of, or of discouraging
bids for, the Company. This could limit the price that certain investors
might be willing to pay in the future for the securities offered hereby. See
"Description of Securities."
Potential Depressive Effect on Market Price Due to Future Sales of Common
Stock. The Registration Statement relates to 1,045,000 shares of Common Stock
(the "Initial Stock"), 2,020,000 Class A Warrants (the "Initial Warrants")
and 2,020,000 shares of Common Stock issuable upon exercise of the Initial
Warrants which may be sold in the future by the Selling Stockholders. In
addition, 1,045,000 shares of Common Stock outstanding prior to the Offering
will be "restricted securities" as that term is defined in Rule 144
promulgated under the Act (the "Restricted Securities"). All of the
Restricted Securities will be eligible for sale in the public market pursuant
to the provisions of Rule 144 or Rule 701 under the Act at various times
after the Effective Date, subject to the "lock-up" agreements with the
Underwriter described below.
The Company has adopted the 1996 Non-Employee Director Stock Option Plan
pursuant to which it has issued options to purchase 20,000 shares of Common
Stock (the "Directors Option") and may issue options to purchase up to an
additional 80,000 shares of Common Stock.
Holders of the Initial Stock, the Initial Warrants, the Restricted
Securities, and the Directors Options have agreed that they will not, without
the Underwriter's written consent, sell, transfer or assign any of the
Initial Stock, the Initial Warrants, the Restricted Securities or the shares
of Common Stock issuable upon the exercise of the Directors Options or the
Initial Warrants for a period of 24 months after the Closing.
Any substantial sale of the Initial Stock, the Initial Warrants, or the
Restricted Securities pursuant to Rule 144 or otherwise may have an adverse
effect on the market price of the Company's securities. See "Description of
Securities" and "Shares Eligible for Future Sale."
Potential Expense of Registration Rights. Certain demand and/or piggyback
registration rights have been granted to the Underwriter as holder of the
Purchase Options and the underlying securities. The exercise of certain of
these registration rights could involve substantial expense to the Company
and may have an adverse effect on the market price of the Common Stock or the
Class A Warrants. See "Underwriting."
Dividends Not Likely. The Company has not paid any cash dividends on the
Common Stock. For the foreseeable future, it is anticipated that earnings, if
any, which may be generated from the Company's operations will be used to
finance the operations of the Company and that cash dividends will not be
paid to holders of Common Stock. See "Dividend Policy."
Penny Stock Regulation. Broker-dealer practices in connection with
transactions in "penny stocks" are regulated by certain penny stock rules
adopted by the SEC. Penny stocks generally are equity securities with a
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<PAGE>
price of less than $5.00 (other than securities registered on certain
national securities exchanges or quoted on the NASDAQ system, provided that
current price and volume information with respect to transactions in such
securities is provided by the exchange or system). The penny stock rules
require a broker-dealer, prior to a transaction in a penny stock not
otherwise exempt from the rules, to deliver a standardized risk disclosure
document that provides information about penny stocks and the risks in the
penny stock market. The broker-dealer also must provide the customer with
current bid and offer quotations for the penny stock, the compensation of the
broker-dealer and its salesperson in the transaction, and monthly account
statements showing the market value of each penny stock held in the
customer's account. In addition, the penny stock rules generally require that
prior to a transaction in a penny stock the broker-dealer must make a special
written determination that the penny stock is a suitable investment for the
purchaser and receive the purchaser's written agreement to the transaction.
These disclosure requirements may have the effect of reducing the level of
trading activity in the secondary market for a stock that becomes subject to
the penny stock rules. If the Securities become subject to the penny stock
rules, investors in the Offering may find it more difficult to sell their
Securities.
Financial Condition of the Underwriter. On June 25, 1993, the Underwriter
was ordered by the National Association of Securities Dealers, Inc. ("NASD")
to cease the purchase of securities for its own account due to its
capitalization falling below the NASD-prescribed minimum level. The decrease
in the Underwriter's capitalization was precipitated largely by a significant
drop in the prices of the stock of three companies for which the Underwriter
had significant inventory positions. Upon consummation of financing
arrangements with several private investors on July 19, 1993, and an increase
generally in the prices of the aforementioned securities, the Underwriter was
able to achieve the required minimum capitalization level and to resume full
trading activities on July 20, 1993. During 1994 and 1995, substantial
additional capital was raised by the Underwriter on its own behalf.
In February, 1995, Adler Coleman & Co., Inc. ("Adler Coleman"), a Wall
Street clearing firm through which the Underwriter had been clearing its
trades, declared bankruptcy, causing all firms clearing through Adler Coleman
to (a) cease market making activities, and (b) cease doing any principal or
retail trading with or for their customers. In addition, the Securities
Investors Protection Corporation was required to determine which assets of
the "cleared-for brokers" held at Adler Coleman prior to its bankruptcy would
be released to the "cleared-for brokers." This determination resulted in a
decrease in capital for the "cleared-for brokers," including the Underwriter,
but did not jeopardize the Underwriter's ability to maintain compliance with
NASD capitalization requirements or its ability to continue as a going
concern.
The underwriter established a new clearing relationship with Hanifen
Imhoff Clearing Corp. of Denver, Colorado ("Hanifen"). The Underwriter
subsequently terminated its relationship with Hanifen and established a new
clearing relationship with Bear Securities Corp., of New York, New York
("Bear"). In October, 1995, certain of the Underwriter's customers failed to
pay for securities purchases in their account and Bear sold out these
positions in the marketplace at substantial losses. The losses were charged
to the Underwriter's operating account, thereby causing the Underwriter to
suffer a net capital deficiency. In light of the significant losses, Bear
informed the Underwriter that it was precluded from incurring any additional
trade day debits. As a result of its net capital deficiency and the position
of Bear, the Underwriter was forced to discontinue its operations. The
Underwriter reached an agreement with Bear whereby Bear agreed to resume
clearing for the Underwriter once the Underwriter raised the additional
capital needed to put the Underwriter in compliance with the net capital
rules. In November, 1995, the Underwriter raised such additional capital and
resumed its operations.
Investors in the securities offered hereby should be cognizant of the risk
that if the Underwriter's capitalization falls below the NASD-prescribed
minimum level so that it is unable to conduct business, there could be a
limiting of the market for, and a negative impact on the prices of, the
Company's securities. See "Underwriting."
SEC Investigation of Underwriter. The Securities and Exchange Commission
(the "SEC") is conducting a formal investigation, entitled In Re Health
Professionals, Inc., File No. HO-2641, concerning various business activities
of the Underwriter and business activities of certain current and former
employees of the Underwriter, while those individuals were employed at the
Underwriter and at another brokerage firm.
The formal order of investigation issued by the SEC states that the SEC
Staff has reported information to the SEC tending to show that certain
persons may have (i) engaged in fraud or made untrue or misleading state-
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ments in connection with the offer, purchase or sale of securities; or (ii)
effected securities transactions that involved no change of beneficial
ownership or that were intended to raise or depress the price of the
securities of Health Professionals, Inc. ("HPI") or to create false
appearances with respect to the market in HPI's securities. The investigation
has included the possible manipulation of the market for securities of HPI,
possible unauthorized trades by current and former brokers employed by the
Underwriter, possible failures to execute customers' sell orders, possible
false testimony given under oath, and numerous other possible violations of
federal law. The Underwriter has cooperated with the investigation.
Preliminary factual findings of the SEC Staff included, among other findings,
a claim by the SEC Staff that the Underwriter and present or former senior
officers implemented a "no net selling" policy and took other measures
artificially affecting the price of securities of HPI.
On May 23, 1996, the SEC commenced an administrative proceeding against
the Underwriter and two of its principals, entitled In the Matter of A.R.
Baron & Co., Inc., Andrew E. Bressman and Roman Okin, File No. 3-9010 (the
"Proceeding"). In connection with the Proceeding, the SEC's Division of
Enforcement filed an Application for a Temporary Cease and Desist Order and
for Related Relief. Without admitting or denying the allegations of the
Application, the Underwriter and the other respondents consented to the
issuance of a Temporary Cease and Desist Order (the "Order") from violating
certain provisions of the federal securities laws. The Order does not prevent
the Underwriter from continuing its normal brokerage activities.
Additionally, the Underwriter agreed to the hiring of a special compliance
agent to oversee its activities and to the placement of a
monitoring/recording system on the Underwriter's telephone to enhance its
quality performance.
The Underwriter is unable to predict the outcome of the SEC's
investigation. The SEC may seek financial relief against the Underwriter, may
seek to suspend or bar employees of the Underwriter, possibly including key
employees, from the securities industry, and may seek other remedies that
could limit or terminate the Underwriter's business or otherwise adversely
effect the Underwriter and its employees. An unfavorable resolution of the
investigation could prevent the Underwriter from continuing to conduct its
business as a broker-dealer, which would materially and adversely affect the
Underwriter's ability to underwrite an initial public offering or conduct
market-making activities. The Underwriter expects to vigorously defend itself
against any claims that have been or might be asserted by the SEC.
Customer Arbitration. The Underwriter is in arbitration with several of
its customers over losses incurred aggregating in excess of $10 million in
connection with securities for which the Underwriter is a market maker. The
Underwriter will defend its position in these matters, but there can be no
assurance that the Underwriter will be successful. In the event the
Underwriter is not successful in defending its position and, as a consequence
thereof, its capitalization falls below the NASD-prescribed minimum level so
that it is unable to conduct business, there could be a limiting of the
market for, and a negative impact on the prices of, the Company's securities.
NASD Settlement. In June, 1994, the Enforcement Department of the NASD
notified the Underwriter that it had commenced an investigation concerning
certain of the Underwriter's activities relating to the securities of Cypros
Pharmaceutical Corporation ("Cypros") during and shortly after Cypros'
initial public offering in November, 1992. In January, 1995, the NASD
Enforcement Department Staff (the "Staff") informed the Underwriter that it
had obtained authorization from the Market Surveillance Committee for the
issuance of a complaint alleging, among other things, that the Underwriter
charged customers excessive mark-ups on Cypros securities in violation of the
NASD Rules of Fair Practice, engaged in violations of the rules governing the
distribution of securities, and failed to follow adequate supervisory
procedures. In July, 1995, the Underwriter reached a settlement with the NASD
involving the payment by the Underwriter, for itself and certain of its
officers, of approximately $1.5 million in fines and restitution and limited
suspensions of certain officers. The payment by the Underwriter is being made
in installments over an eighteen month period. The payment of such sums may
adversely affect the Underwriter's ability to engage in certain aspects of
its business in the future, including its underwriting and market making
capability. Such an event could limit the market for, and have a negative
impact on the prices of, the Company's securities.
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USE OF PROCEEDS
The net proceeds to the Company from this Offering are estimated at
approximately $3,939,100 in the event the minimum number of shares of Common
Stock and Class A Warrants offered hereby are sold and $4,696,000 in the
event the maximum number of shares of Common Stock and Class A Warrants
offered hereby are sold, after deducting underwriting commissions and
discounts and the estimated expenses of the Offering. Such net proceeds are
expected to be expended approximately as follows:
<TABLE>
<CAPTION>
Minimum Offering Maximum Offering
------------------------- -------------------------
Application of Proceeds: Amount Percent Amount Percent
------------ --------- ------------ ---------
<S> <C> <C> <C> <C>
Leasing, acquiring and development golf centers and
related recreational facilities ................. $2,987,000 76% $3,743,000 80%
Improvements to Commack Facility ................. 150,000 4% 150,000 3%
Repayment of short-term debt(1) .................. 311,000 8% 311,000 7%
Working capital .................................. 491,100 12% 492,000 10%
---------- ----------
Total .................................. $3,939,100 100% $4,696,000 100%
========== === ========== ===
</TABLE>
- ------
(1) Short term debt to be paid consists of (i) a $140,000 note payable to a
bank bearing interest at the rate of 10 1/2% per annum as of March 31,
1996, payable on demand, collateralized by all of the assets of the
Company and guaranteed by certain stockholders of the Company, (ii) an
$85,000 note from another bank bearing interest at 1 1/2% above that
bank's prime interest rate (10% at March 31, 1996), maturing on July 16,
1996, and guaranteed by certain stockholders of the Company, and (iii)
loans made by certain stockholders of the Company in the aggregate amount
of approximately $86,000.
The foregoing represents the Company's best estimate of the allocation of
the net proceeds of this Offering based upon the Company's currently
contemplated operations, the Company's development plans, and current
economic and industry conditions, and is subject to reapportionment of such
proceeds among the categories listed above or to new categories in response
to, among other things, changes in its plans, industry conditions, and future
revenues and expenditures. The amount and timing of expenditures will vary
depending on a number of factors, including the availability and cost of
sites for new golf centers and whether such centers will be owned or leased.
Management believes that the net proceeds of this Offering and income from
operations will be sufficient to permit the Company to conduct its recent
operations for at least the next 18 months. The Company's plan of opening
three additional golf centers over the next 12 to 18 months assumes the
Company will be able to obtain debt financing to cover approximately 50% of
the cost of the new centers. The Company will be required to raise
substantial additional capital in the future in order to meet its goal of
opening at least 12 additional golf and recreation centers over the next
three to five years. There can be no assurance that the Company will be able
to obtain such capital on favorable terms or at all. See "Risk Factors --
Additional Financing Requirements," "Capitalization" and "Business -- Site
Location Strategy and Planned Expansion."
The Company intends to invest the net proceeds of the Offering, until
used, in government securities and insured, short-term, interest-bearing
investments of varying maturities.
13
<PAGE>
DILUTION
At March 31, 1996, the pro forma net tangible book value per share of the
Common Stock was $.96. The "pro forma net tangible book value per share"
represents the amount of the Company's tangible assets, less the amount of
its liabilities, divided by the number of shares of Common Stock outstanding
assuming the Company's acquisition of the Commack Partnership as of March 31,
1996. The calculation of pro forma net tangible book value as of March 31,
1996 reflects the pro forma events as set forth in Note 10 of the Notes to
Financial Statements (the "Pro Forma Events").
After giving effect to the sale of the Common Stock and the Class A
Warrants offered hereby at an offering price of $5.80 per share of Common
Stock and two Class A Warrants (it being recognized that the Common Stock and
the Class A Warrants may be purchased separately and are not required to be
purchased as a unit), and the receipt of the net proceeds therefrom
(estimated to be $3,939,100, for the minimum offering and $4,696,000 for the
maximum offering) and assuming (i) no part of the offering price of the
Common Stock is allocated to the two Class A Warrants, and (ii) no exercise
of the Stock Purchase Option, the Warrant Purchase Option, or any outstanding
stock options or warrants, the pro forma net tangible book value of Common
Stock as of March 31, 1996 would have been $2.02 per share (minimum offering)
and $2.17 per share (maximum offering). This would result in dilution to the
new investors, i.e., the difference between the purchase price of the shares
and the net tangible book value per share after the Offering, of $3.78 per
share (minimum offering) and $3.63 per share (maximum offering). The
following table illustrates the per share dilution:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Minimum Maximum
------------------ ------------------
Public offering price per share of Common Stock and two Class
A Warrants(1) ............................................. $5.80 $5.80
Pro Forma net tangible book value per share as of March 31,
1996 ...................................................... $ .96 $ .96
Increase per share attributable to the sale by the Company
of the Common Stock and two Class A Warrants offered
hereby..................................................... $1.06 $1.21
----- -----
Pro forma net tangible book value per share after Offering(2)... $2.02 $2.17
----- -----
Dilution of net tangible book value per share of Common Stock
to new investors .......................................... $3.78 $3.63
===== =====
</TABLE>
- ------
(1) Before deducting underwriting discounts and commissions and estimated
offering expenses to be paid by the Company.
(2) After deducting underwriting discounts and commissions and estimated
offering expenses to be paid by the Company.
The above tables and calculations assume no exercise of the 2,020,000
Initial Warrants. If the Initial Warrants are exercised, they will not be
dilutive to the Company's stockholders as a whole because their exercise
price ($6.00 per share) exceeds the pro forma net tangible book value per
share after the Offering.
The following table summarizes as of the date of this Prospectus, after
giving effect to the Company's acquisition of the Commack Partnership and
assuming completion of (a) the minimum offering, and (b) the maximum
offering, the differences between existing stockholders and the new investors
with respect to (i) the aggregate cash consideration (before deducting
issuance expenses) paid for Common Stock purchased from the Company, and (ii)
the average price per share paid for Common Stock purchased from the Company.
The tables assumes that the offering price of $5.80 per share of Common Stock
and two Class A Warrants (it being recognized that the Common Stock and Class
A Warrants may be purchased separately and are not required to be purchased
as a unit) is only allocated to the share of Common Stock.
14
<PAGE>
MINIMUM OFFERING
<TABLE>
<CAPTION>
Percentage of Aggregate Cash Percentage of
Shares Equity Consideration Total Cash Average
Purchased Owned Paid Invested Price
----------- --------------- -------------- --------------- ---------
<S> <C> <C> <C> <C> <C>
Existing shareholders . 2,090,000 71.1% $2,764,500 35.9% $1.32
New investors ........ 850,000 28.9% $4,930,000 64.1% $5.80
--------- ----- ---------- -----
Total .............. 2,940,000 100.0% $7,694,500 100.0%
========= ===== ========== =====
</TABLE>
MAXIMUM OFFERING
<TABLE>
<CAPTION>
Percentage of Aggregate Cash Percentage of
Shares Equity Consideration Total Cash Average
Purchased Owned Paid Invested Price
----------- --------------- -------------- --------------- ---------
<S> <C> <C> <C> <C> <C>
Existing shareholders . 2,090,000 67.6% $2,764,500 32.3% $1.32
New investors ........ 1,000,000 32.4% $5,800,000 67.7% $5.80
-------- ---- ---------- -----
Total .............. 3,090,000 100.0% $8,564,500 100.0%
========= ===== ========== =====
</TABLE>
CAPITALIZATION
The following table sets forth the pro forma capitalization of the Company
at March 31, 1996, and as adjusted to reflect the sale of the Common Stock at
an assumed offering price of $5.80 per share. See "Use of Proceeds."
<TABLE>
<CAPTION>
March 31, 1996
------------------------------------------
Pro Forma(1) As Adjusted(2)
------------ ---------------------------
Minimum Maximum
------------ -----------
<S> <C> <C> <C>
Short-term debt(3) .................................. $ 726,075 $ 314,500 $ 314,500
========== ========== ==========
Stockholders' Equity:
Preferred Stock -- $.001 par value, Authorized
-- 1,000,000 shares; Issued and outstanding
-- 0 shares; 0 shares, as adjusted ...... -- -- --
Common Stock -- $.001 par value, Authorized--
20,000,000 shares; issued and outstanding
2,090,000 shares actual; 2,940,000 shares (as
adjusted minimum); 3,090,000 shares (as
adjusted maximum) ............................ $ 2,090 $ 2,940 $ 3,090
Additional paid-in-capital .......................... 2,718,410 6,656,660 7,413,410
Deficit ............................................. (357,163) (357,163) (357,163)
---------- ---------- ---------
Total stockholders' equity ......................... 2,363,337 6,302,437 7,059,337
---------- ---------- ---------
Total Capitalization .............................. $2,363,337 $6,302,437 $7,059,337
========== ========== ==========
</TABLE>
- ------
(1) Assumes the Company's acquisition of Commack Golf and Family Recreation
Center, L.P. as of March 31, 1996.
(2) Adjusted to reflect (i) the sale by the Company of the Common Stock and
Class A Warrants offered hereby and (ii) the repayment of debt. See "Use
of Proceeds."
(3) Inclusive of short-term debt to stockholders.
15
<PAGE>
DIVIDEND POLICY
The Company has not paid cash dividends on the Common Stock since
inception and does not anticipate paying any cash dividends to its
stockholders in the foreseeable future. The Company currently intends to
retain earnings, if any, for the development and expansion of its business.
The declaration of dividends in the future will be at the election of the
Board of Directors and will depend upon the earnings, capital requirements
and financial position of the Company, general economic conditions and other
pertinent factors.
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
the Company's financial statements and related notes thereto and with
Management's Discussion and Analysis of Financial Condition and Results of
Operations, which are included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
From the period July
26, 1994 (date of For the three months
formation) to For the year ended ended March 31, 1996
December 31, 1994 December 31, 1995 (unaudited)
-------------------- ------------------ --------------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues ................................................ $ -- $ 719,374 $ 123,112
------- ---------- -----------
Operating expenses ...................................... -- 1,021,666 274,910
Selling, general and administrative expenses ............ -- 87,555 6,855
------- ---------- -----------
-- 1,109,221 281,765
------- ---------- -----------
Operating loss .......................................... -- (389,847) (158,653)
Other expenses:
Interest .............................................. -- 33,572 8,397
------- ---------- -----------
Net loss ................................................ $ -- $ (423,419) $ (167,050)
------- ---------- -----------
Pro forma net loss (1) .................................. $ (254,419) $ (102,744)
---------- -----------
Pro forma net loss per share (1) ........................ $ (.12) $ (.05)
---------- -----------
Shares used in computing pro forma net loss per share (1). 2,090,000 2,090,000
========== ============
</TABLE>
<TABLE>
<CAPTION>
Pro Forma(1)
December 31, March 31, 1996 March 31, 1996
1995 (unaudited) (unaudited)
-------------- -------------- --------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Current assets .......................................... $ 133,270 $ 95,840 $ 596,446
Current liabilities ..................................... 1,132,493 1,187,496 1,146,296
Working capital (deficiency) ............................. (999,223) (1,091,656) (549,850)
Total assets ............................................ 3,053,334 2,969,262 3,705,868
Shareholders' equity .................................... 1,752,581 1,585,531 2,363,337
</TABLE>
(1) See Note 10 of the financial statements
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In July, 1994, the Commack Partnership was organized to construct, develop
and operate the Commack Facility, which commenced operations in March, 1995.
In November, 1995, United Acquisition I Corp. (whose name was changed to U.S.
Golf and Entertainment Corp. in April, 1996, herein referred to as "U.S. Golf
Corp."), was incorporated and received equity investments from its founding
stockholders in the amount of $54,500, $41,200 of which were loaned to the
Commack Partnership in anticipation of the Company's acquisition of the
Commack Partnership. In May, 1996, U.S. Golf Corp. raised an additional
$500,000 from the sale of common stock and warrants, which monies were loaned
to the Commack Partnership. In May, 1996, the Company proposed exchange
agreements with (i) the stockholders of U.S. Golf Corp., whereby the
stockholders of U.S. Golf Corp. would exchange their shares of common stock
and warrants for 1,045,000 shares of the Common Stock and 2,020,000 Class A
Warrants; and (ii) the general and limited partners of the Commack
Partnership, whereby the partners of the Commack Partnership would exchange
their partnership interests for an aggregate of 1,045,000 shares of the
Common Stock. See "Certain Transactions."
Results of Operations. The following table sets forth selected operations
data of the Company expressed as a percentage of total revenues (except for
operating expenses which is expressed as a percentage of operating revenues)
for the periods indicated below:
<TABLE>
<CAPTION>
Three Months Ended
Fiscal Year Ended March 31, 1996
December 31, 1995 (unaudited)
<S> <C> <C>
Operating revenues ........................... 100.0% 100.0%
Operating expenses ........................... 142.0% 223.3%
Selling, general and administrative expenses .. 12.2% 5.6%
Loss from operations ......................... (54.2)% (128.9)%
Interest expense ............................. 4.7% 6.8%
Net loss ..................................... (58.9)% (135.7)%
Pro forma net loss ........................... (35.4)% (83.5)%
</TABLE>
Year Ended December 31, 1995. During 1995, the Company had total revenues
of $719,374 and a net loss of $423,419.
Results of operations for the year ended December 31, 1995 reflect 10
months of operations of the Commack Facility, but do not reflect any
operations of the Commack Facility's miniature golf facility, children's
party room facility, snack bar or rental payments from the Colbert-Ballard
Golf Learning Center.
Operating revenues consisted of driving range sales, lesson sales and
rental income from the pro shop which was opened for only five months in
1995.
Operating expenses, consisting of land rent, depreciation and amortization
of golf driving range facilities and equipment, operating wages and employee
costs, utilities and all other facility operating costs, aggregated
$1,021,666 for 1995. Although the Commack Facility was opened in March, 1995,
a number of related amenities (i.e., the 18-hole miniature golf course, the
golf teaching center, the pro shop, the children's party room and the snack
bar) were not completed or fully operational until the second quarter of
1996, which negatively impacted the Company's operating revenues in 1995.
Selling, general and administrative expenses were $87,555 (12.2% of total
revenues) for the year ended December 31, 1995. These expenses do not include
the payment of any salaries to the Company's executive officers, the
anticipated costs of recruiting and hiring additional executives and do not
reflect the anticipated expenses associated with the Company's plans to
acquire or develop additional golf and recreational centers, including
marketing and advertising costs relating to the opening of new locations.
Interest expense (net of capitalized interest costs) was $33,572,
reflecting borrowings outstanding as a result of the debt financing related
to the construction of the Commack Facility which was opened in March, 1995.
Three Months Ended March 31, 1996 (Unaudited). During the period ended
March 31, 1996, the Company had total revenues of $123,112 and a net loss of
$167,050. Because the Commack Facility commenced operations in March, 1995,
there can be no meaningful comparison of the results of operations during the
period ended March 31, 1996 and the comparable 1995 period. Due to the severe
weather during this three month period, the Company does not believe the
results for this period will be indicative of the results for the full year
ended December 31, 1996.
17
<PAGE>
Operating revenues consisted of driving range sales and lesson sales. The
Company received no rental revenue from the pro shop during this period.
Operating expenses, consisting of land rent, depreciation and amortization
of golf driving range facilities and equipment, operating wages and employee
costs, utilities and all other facility operating costs, aggregated $274,910
for this period.
Selling, general and administrative expenses were $6,855 for the period
ended March 31, 1996. These expenses do not include the payment of any
salaries to the Company's executive officers, the anticipated costs of
recruiting and hiring additional executives and do not reflect the
anticipated expenses associated with the Company's plans to acquire or
develop additional golf centers, including marketing and advertising costs
relating to the opening of new locations.
Interest expense (net of capitalized interest costs) was $8,397,
reflecting borrowings outstanding as a result of the debt financing related
to the construction of the Commack Facility.
Liquidity and Capital Resources. The Commack Partnership's partners
provided the Commack Partnership's initial capital through subscriptions for
limited partnership interests in the aggregate amount of $2,200,000, general
partner contributions of $10,000 and loans by certain limited partners to the
Commack Partnership in the aggregate amount of $86,575 through March 31,
1996. The Commack Partnership also borrowed an aggregate of $314,500 from its
general partners through March 31, 1996.
The Commack Partnership, at December 31, 1995 and March 31, 1996
(unaudited) has a $215,000 note payable to a bank which bears interest at the
rate of 10 3/4 % and 10 1/2 % per annum, respectively. This note is payable
on demand and is collateralized by all the assets of the Commack Partnership.
The note is guaranteed by certain general and limited partners of the Commack
Partnership.
In addition, the Commack Partnership borrowed $110,000 from another bank.
This note bears interest at the rate of 1 1/2 % above the bank's prime
interest rate per annum (10 1/4 % at December 31, 1995 and 10% at March 31,
1996 (unaudited). This note, as amended, matures on July 16, 1996 and is
guaranteed by certain general and limited partners of the Commack
Partnership.
The Commack Partnership's, outstanding indebtedness to these banks and to
its general and limited partners is being assumed by the Company.
In April, 1996, U.S. Golf Corp. was incorporated and received equity
investments from its founding stockholders in the amount of $54,500, $41,200
of which were loaned to the Commack Partnership in anticipation of the
Company's acquisition of the Commack Partnership. In May, 1996, U.S. Golf
Corp. raised an additional $500,000 from the sale of common stock and
warrants to a limited number of investors in a private financing (the
"Private Financing").
The Company anticipates making substantial additional expenditures in
connection with the opening of new golf and recreational centers. See "Use of
Proceeds." These expenditures primarily relate to projected construction and
opening costs, associated marketing activities and the addition of personnel.
Based on the Company's experience with its existing golf and recreational
center, the Company estimates that the average cost of opening a center will
be approximately $1,000,000 to $3,000,000 depending on size and location;
however, there can be no assurance that opening costs will not exceed
$3,000,000.
The Company anticipates that it will continue to generate negative cash
flows from investing activities for the development of new facilities which
will exceed its operating cash flows until the Company has more golf and
recreational centers in operation. The Company anticipates that its inability
to generate operating cash flow in amounts necessary to offset its
anticipated negative cash flow from investing activities will be addressed by
cash flow from financing activities, including the net proceeds of this
Offering and the 50% debt financing projected to be available for new centers
as discussed below.
The Commack Facility was financed with approximately 85% equity and 15%
debt. The Company believes that the net proceeds of this Offering and the
Company's operating cash flow will be sufficient to provide the Company with
the equity portion of any financing for three additional centers within the
next 12 to 18 months. The Company believes that it can finance future
18
<PAGE>
projects at a 50/50 debt to equity ratio; however, there can be no assurance
that it will be able to do so. The Company will be required to raise additional
capital to meet its goal of opening at least 12 new facilities over the next
three to five years. There can be no assurance that the Company will be able to
raise such additional financing on favorable terms, if at all. See "Risk Factors
- -- Additional Financing Requirements."
The loss of the Commack Facility, which is the Company's only golf and
recreational center, would have a material adverse effect on the Company's
financial condition and results of operations. See "Risk Factors -- Single
Location; Lease."
Trends. The Company plans to open additional golf centers and related
recreational facilities. The Company believes that over time, its revenues
and operating income from the Commack facility and the additional centers it
intends to open in the future should increase due to customer awareness,
programs marketing the golf centers to various special interest groups,
expanding ties to the local business and golfing community, marketing
programs and the growing popularity of golf. The Company expects that it will
experience losses from pre- opening costs and initial operating expenses
associated with new centers.
The Company's interest expenses will likely increase as a result of
borrowings to fund the development/acquisition of new facilities.
Seasonality. The Company's revenues from the Commack Facility for the
period from April through October (the second and third quarters of the year)
are expected to account for a greater portion of the Company's operating
revenue than do the first and fourth quarters of the year. Similar results
are expected for the other facilities the Company may develop or acquire in
climates similar to that of the northeast United States. Although some
portions of the Commack Facility are protected from inclement weather, other
portions of the Commack Facility, such as the miniature golf course, the
putting green and related recreational amenities, are outdoors and vulnerable
to weather conditions. Moreover, golfers are less inclined to practice when
weather conditions limit their ability to play golf on outdoor courses. This
seasonal pattern is expected to cause the Company's results of operations to
vary significantly from quarter to quarter. Accordingly, period-to-period
comparisons are not necessarily meaningful and should not be relied on as
indicative of future results. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
19
<PAGE>
BUSINESS
Introduction. U.S. Golf and Entertainment Inc. (the "Company") is seeking
to become a national owner/operator of upscale, high-volume, year-round golf
driving ranges and related recreational facilities. The Company currently
operates the Commack Golf and Family Recreation Center, a 19-acre, 120-tee
facility located in Commack, New York (the "Commack Facility"), which it
acquired in May, 1996. The Commack Facility offers year-round opportunities
to practice a wide variety of golf strokes, including driving, pitching,
putting, chipping and sand play, as well as an 18-hole miniature golf course,
a snack bar, a full-service pro shop and a golf learning center. The Company
believes the business experience, marketing skills and contacts of its
management will provide it with opportunities to acquire and/or develop other
golf driving ranges and related recreational facilities, such as in-line
rollerskating rinks and batting cages, in the United States.
In July, 1994, Commack Golf and Family Recreation Center, L.P., a New York
limited partnership (the "Commack Partnership") was organized to construct,
develop and operate the Commack Facility, which commenced operations in
March, 1995.
In November, 1995, United Acquisition I Corp. (whose name was changed to
U.S. Golf and Entertainment Corp. in April, 1996, herein referred to as "U.S.
Golf Corp."), was incorporated and received equity investments from its
founding stockholders in the amount of $54,500, $41,200 of which were loaned
to the Commack Partnership in anticipation of the Company's acquisition of
the Commack Partnership. In May, 1996, U.S. Golf Corp. raised an additional
$500,000 from the sale of common stock and warrants, which monies were loaned
to the Commack Partnership. In May, 1996, the Company was incorporated and
proposed exchange agreements with (i) the stockholders of U.S. Golf Corp.
whereby the stockholders of U.S. Golf Corp. would exchange their shares of
common stock and warrants for 1,045,000 shares of the Common Stock and
2,020,000 Class A Warrants; and (ii) the general and limited partners of the
Commack Partnership, whereby the partners of the Commack Partnership would
exchange their partnership interests for an aggregate of 1,045,000 shares of
the Common Stock.
Industry Overview. Over the past decade, the popularity of golf
throughout the United States and the demand for golf courses and golf driving
range facilities has experienced continued growth. According to the National
Golf Foundation, the number of golfers in the United States increased to
approximately 24 million players in 1995, from approximately 21.2 million
players in 1987, and the total number of rounds played increased by a
proportionate amount. The Company believes that these trends will continue
for the foreseeable future as golf becomes an attractive recreational
activity for an aging "baby-boom" population that has increasing leisure time
and disposable income. Additionally, industry statistics indicate that women
are learning and playing golf in increasing numbers. The Company believes
that its strategy of owning/operating upscale, family-oriented golf practice
facilities in prime suburban locations, in combination with visible marketing
and advertising programs that will take advantage of the Company's access to
well-known golfers and other professional athletes, will enable it to take
advantage of these trends.
There are approximately 2000 freestanding golf driving ranges in the
United States and the ownership and operation of these facilities is highly
fragmented, with no single company owning/operating a significant number of
multiple golf centers. In the typical case, a golf center is owned by an
individual or by a municipal recreational agency that often lacks the
expertise and financial resources to operate or maintain these centers with
the optimum efficiencies, to market these centers with visible advertising or
promotions or improve these centers with state-of-the-art facilities. The
majority of these golf centers also do not offer the type of "brand-name"
golf instruction that the Company can offer or a full-service golf pro-shop.
The Company believes the golf driving industry will experience increasing
consolidation, and that it can take advantage of opportunities that will
exist when single-site golf center owners want to sell their centers to a
professionally managed company, such as the Company, or as opportunities
occur to develop new upscale golf centers (with related recreation and
entertainment amenities) in prime locations.
The Commack Facility. The Commack Facility is a 19-acre facility that
features a double decker range with 120 hitting tees, 60 of which are heated,
and 20 of which are situated on natural grass. The hitting field is tree
lined and covered with sodded grass, sand traps, and water hazards. Golfers
can practice a full array of golf shots by aiming at any one of the five
greens located at varying distances from the hitting tees.
20
<PAGE>
In April, 1996, an 18-hole miniature golf course, lighted for night play,
was opened at the Commack Facility. This course was designed to provide a
challenge to a golfer who is seeking to improve his/her putting skills while
enjoying a relaxing family game. The course features numerous obstacles to
draw fans of traditional miniature golf courses. The course is expected to
attract repeat customers and create additional traffic for the driving range
by offering an attraction for children while parents use the driving range.
The Commack Facility is open year-round, from 8:00 a.m. to midnight during
the spring and summer seasons, and 9:00 a.m. to 8:00 p.m. during the winter
and fall seasons, seven days a week. It is located at Exit 52 of the Long
Island Expressway, and is visible to the thousands of cars per day that
travel that highway.
The Commack Facility's revenues are derived from selling buckets of balls
for use on the driving range, charging for rounds of miniature golf, and
receiving rental payments from the pro shop, rental payments from the
Colbert-Ballard Learning Center, and fees for lessons and a percentage of
revenues from the food and beverages sold at the concession. The Commack
Facility also generates revenue by selling club memberships. For a membership
fee of $1,000 a year, members are entitled to unlimited golf balls and
practice time at the range. Additionally, club members receive a videotaped
golf lesson and are entitled to use the exclusive members lounge, complete
with a satellite television.
The Colbert-Ballard Golf Learning Center. The Commack Facility offers
lessons through Long Island's only branch of the nationally respected
Colbert-Ballard Learning Center, which provides golf instruction for players
at every level -- from beginners to serious club players. The Colbert-Ballard
Learning Center uses the instruction techniques developed over many years by
Jim Colbert and Jim Ballard. The Colbert-Ballard Learning Center is housed in
an all-weather facility that has three eleven foot high doors to allow
golfers the opportunity to drive balls on to the hitting field. This facility
also includes a sand trap and a small putting green. Lesson packages can be
purchased in conjunction with prepaid buckets of range balls. The teaching
center is the ideal spot for touring professionals to conduct clinics or golf
schools.
The Commack Facility also offers individual golf lessons under the
supervision of Chuck Workman and Mike Mangiaracina, two of the most respected
teaching pros on Long Island. Each member of the Commack Facility's teaching
staff is PGA approved.
The Pro Shop. The Commack Facility offers its customers a full range of
golf equipment and clothing at the golf pro shop. This pro shop is popular
with the beginning golfers who are using the Commack Facility to develop
their game.
Location. The Commack Facility is located in Commack, New York. The twelve
square mile town has a population of approximately 36,000 and a median income
of approximately $77,000. The neighboring townships of Huntington and
Smithtown total over 300,000 people with a median income of approximately
$79,000. The Commack Facility is visible from the Long Island Expressway and
is easily accessible at Exit 52.
The Commack Facility is located within a high traffic commercial district
that includes the Commack Multiplex, a 16 screen facility, that is one of the
highest grossing movie theaters in the Northeast. In August of 1995, the
Costco Price Club opened directly across from the Commack Facility and
approximately 5,000 cars per day enter that parking lot.
Site Location Strategy and Planned Expansion. The Company has a general
expansion plan for the development of new centers that includes leasing
undeveloped prime sites and constructing golf and recreational centers
thereon, acquiring existing golf centers, and entering into long-term
management contracts to operate existing golf centers. The Company
anticipates that most of these centers will have between 80-120 hitting tees,
will be lighted to permit night play and will be enclosed and/or heated to
permit all weather play.
The Company will seek to develop or acquire new centers in locations that
have similar characteristics to that of the Commack Facility -- upscale
market demographics, within a high traffic commercial area and easy access
(and visibility) from a major highway. The Company expects (1) to improve the
operations of these facilities with its professional management staff, (2)
upgrade the existing facility with additional amenities, including related
recreational and entertainment facilities, and the establishment of a
professional golf training center, and (3) enhance the facility's advertising
and marketing activities with professionally designed programs that will take
advantage of the Company's access to well known golf professionals and
professional athletes.
21
<PAGE>
The Company believes that the real estate development experience of its
management team and its management team's nationwide contacts throughout the
golf industry will enable it to identify expansion opportunities that might
not otherwise be available to its competitors. Management believes that these
factors, together with the currently fragmented state of the golf center
industry, should provide the Company with a large number of potential
expansion options over the next three to five years, notwithstanding that
competitors also may be seeking to expand their existing multi-site
operations.
The Company believes that the net proceeds of this Offering, debt
financing and cash flow from operations, will be sufficient to permit the
Company to open three additional golf centers over the next 12 to 18 months.
Such belief is based on certain assumptions, including assumptions as to the
availability and cost of suitable locations and the availability of debt
financing to cover at least 50% of the cost of acquiring and developing each
center. See "Risk Factors" and "Use of Proceeds."
Although the Company has had informal and general discussions concerning
the development of golf centers at several prime undeveloped sites or
obtaining long-term management contracts for existing golf facilities, the
Company is not currently involved in negotiations regarding potential
expansion opportunities.
Marketing And Advertising. The Company intends to develop aggressive
marketing and advertising programs that will allow it to take advantage of
the visibility and name recognition of its Senior Vice President, Chuck
Workman, who is regarded as one of the best golf teaching pros in the
country. Through Chuck Workman, the Company expects to attract, on a regular
basis, well known golf professionals for celebrity appearances. The Company
also will seek to promote itself through the marketing and advertising
efforts of the Colbert- Ballard Learning Center, a nationally respected golf
teaching program. The Company will advertise in local and community
newspapers, on radio and local cable television channels, use direct mailings
and have a regular series of promotions, discounts and clinics and equipment
demonstrations to increase awareness of its golf centers. The Company also
will seek to work with professional golf tour organizers when a major golf
event (such as the Long Island Northville Open -- one of the leading Senior
Tour events) occurs near the Commack Facility or one of the other golf
centers the Company intends to open in the future.
Competition. The golf driving range business is competitive and includes
competition from golf courses as well as other forms of recreation. Certain
of the Company's competitors have considerably greater financial, marketing,
personnel and other resources than the Company, as well as greater experience
and customer recognition than the Company. In the Long Island market, the
Company faces strong competition from approximately 30 freestanding golf
driving ranges and from numerous public and private golf courses which offer
golf practice facilities. While the Company believes that the location of and
the amenities associated with the Commack Facility provide it with certain
competitive advantages, there can be no assurance that the Company will be
able to successfully compete with its competitors.
Concessions And Suppliers. The snack bar at the Commack Facility is
currently operated by a third party concession pursuant to a written
operating agreement. Under this agreement, the Company provides built-out
space in its clubhouse and certain cooking equipment and the operator is
responsible for running the entire food operation, including obtaining all
supplies, licenses, permits and insurance relating to such operation. The
Company receives a fixed percentage of the gross revenues generated by the
snack bar. To date, the Company's share of such revenues has represented a
relatively insignificant portion of its overall revenues. The agreement is
terminable by either side on 60 days notice. If the agreement were
terminated, the Company anticipates that it would seek another third party
food management service to run such operation or would operate it
independently.
The Company purchases golf balls from a number of suppliers. The Company
anticipates that it will have no difficulty in obtaining golf balls from such
suppliers.
Properties. The Commack Facility is currently the Company's only property.
The Company occupies the site pursuant to a commercial lease with an initial
term of fifteen (15) years (until April, 2010) with two (2) five (5) year
renewal terms at the option of the Company. The rent for the premises is
$500,000 per year through April, 1998 with increases of approximately 2.75%
per year so that in year fifteen (15), the rental is $665,000 per year. After
year fifteen (15), the lease is renewable at continuing increases of
approximately 2.75% or the fair market value rent at the time of the
increase, whichever is greater.
22
<PAGE>
As additional rent, the Company will pay twenty-five (25%) percent of its
gross revenue from $2,400,000 to $3,000,000 and ten (10%) percent of its
gross revenue over $3,000,000. Additionally, the Company is responsible for
real property taxes and insurance.
Employees. As of May 1, 1996, the Company had eight (8) full-time
employees and six (6) part-time employees. The Company anticipates that the
additional golf centers it intends to open in the future will be staffed in a
manner consistent with the Commack Facility. None of the Company's employees
is represented by a collective bargaining agreement. The Company has never
experienced a strike or work stoppage, and considers its relationship with
its employees to be satisfactory.
Environmental Regulation. Golf and recreational centers use and store
various hazardous materials such as motor oil, gasoline, pesticides,
herbicides and paint. Under various federal, state and local laws, ordinances
and regulations, an owner or operator of real property is generally liable
for the costs of removal or remediation of hazardous substances that are
released on its property, regardless of whether the owner or operator knew
of, or was responsible for, the release of such hazardous materials. The
Company has not been advised of any non-compliance or violation of any
environmental laws, ordinances or regulations and the Company believes that
it is in substantial compliance with all such laws, ordinances and
regulations applicable to its Commack Facility. The Company, however, has not
performed any environmental studies on the Commack Facility and, as a result,
there may be potential liabilities and/or conditions of which the Company is
not aware. If any such liabilities or conditions arise with respect to the
Commack Facility or any other facility which may be constructed, acquired or
operated by the Company in the future, there could be a material adverse
effect on the Company.
The Company is subject to the Fair Labor Standards Act and various state
laws governing such matters as minimum wage requirements, overtime and other
working conditions and citizenship requirements.
Insurance. The Company carries property and liability insurance that it
believes is adequate. While the Company will make every effort to maintain
insurance by industry standards, the Company could suffer a loss from a
casualty or liability for an event not covered by insurance or in amounts in
excess of coverage. Any such loss could have a material adverse effect on the
Company.
Legal Proceedings. The Company does not know of any material litigation
or proceeding pending, threatened or contemplated to which it is or may
become a party.
23
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company, their positions held
with the Company, and their ages are as follows:
<TABLE>
<CAPTION>
Name Age Position
---------------------- ----- ---------------------------------------------
<S> <C> <C>
Edward C. Ross ....... 52 Chairman of the Board, President and Director
Chuck Workman ........ 60 Senior Vice President and Director
Harold Markowitz ..... 54 Director
Garry Howatt ......... 43 Director
Michael L. Faltischek . 49 Director -- nominee
</TABLE>
The following is a brief summary of the background of each director and
executive officer of the Company:
Edward C. Ross has served as the Chairman of the Board, President and a
director of the Company since May, 1996. From March, 1994 to May, 1996, Mr.
Ross was the founding general partner of the Commack Golf and Family
Recreation Center, L.P., the entity that developed the Commack Facility. Mr.
Ross has been a partner in the accounting firm of Finkle, Ross & Rost since
1975. He also has been involved as a principal in various start-up companies
as well as established operating businesses, ranging in type from
manufacturing to real estate to financial consulting. Mr. Ross is a Certified
Public Accountant in New York and New Jersey, and is a member of the American
Institute of Certified Public Accountants. Mr. Ross is a director of Sel-Leb
Marketing, Inc.
Chuck Workman has served as the Senior Vice President and a director of
the Company since May, 1996. Since 1980, Mr. Workman has been the Director of
Golf at Bethpage State Park, one of the largest and most prestigious golf
courses in the United States. As the Director of Golf at this facility, Mr.
Workman owns and manages the Chuck Workman Pro Shop and supervises golf
instruction offered by more than five teaching professionals. Mr. Workman
also organizes various golf tournaments at Bethpage State Park. Since 1985,
Mr. Workman has played in approximately 100 PGA Senior Tour Golf Tournaments.
Harold Markowitz has been a director of the Company since May, 1996 and
has been Chairman of the Board of Sel-Leb Marketing, Inc. since December,
1994. Prior to such time, he served as President and a director of Sel-Leb
Marketing, Inc. from its inception in September 1993 to December 1994. In
1984, Mr. Markowitz co-founded Linette Cosmetics, which was merged into
Sel-Leb Marketing, Inc. in 1995. In 1986, Mr. Markowitz co-founded Beauty
Labs, Inc., a publicly held company which marketed cosmetics and other
accessories to mass merchandisers and served as the Chairman of the Board and
a director of Beauty Labs, Inc. from 1987 to 1991.
Garry Howatt has been a director of the Company since May, 1996. Since
1985, Mr. Howatt has been the Managing Partner and President of Mt. Freedom
Golf (in New Jersey), which operates an upscale driving range, miniature gold
course, batting range and pro shop. From 1972 through 1984, Mr. Howatt was a
professional hockey player with the New York Islanders (1972-1981), the
Hartford Whalers (1981-1982) and the New Jersey Devils (1982-1984).
Michael L. Faltischek is a senior partner at the firm of Ruskin, Moscou,
Evans & Faltischek, P.C., a general practice law firm located in Mineola, New
York, where he has served as managing partner since 1976. Since September,
1995, Mr. Faltischek has served as a trustee on the Board of the Long Island
Power Authority. Mr. Faltischek was admitted to practice law in the State of
New York in 1974, having received his Juris Doctor degree, cum laude, from
Brooklyn Law School in 1973. Mr. Faltischek will be elected to the Company's
Board of Directors after the Closing.
Vacancies and newly-created directorships resulting from any increase in
the number of authorized directors may be filled by a majority vote of the
directors then in office. Officers are elected by, and serve at the pleasure
of, the Board of Directors. The loss of services of Edward Ross or Chuck
Workman could have a material adverse effect on the Company. See "Risk
Factors -- Dependence on Key Employees; Recruitment of Additional Personnel."
The Board of Directors intends to establish Audit and Compensation Committees
following the completion of this Offering.
24
<PAGE>
The Company's employee directors do not receive any additional
compensation for their services as directors. Non-employee directors do not
receive a cash compensation for serving as such, but are reimbursed for
expenses. Pursuant to the Company's 1996 Non-Employee Director Stock Option
Plan, each non-employee director will receive options to purchase 5,000
shares of Common Stock and will receive 5,000 additional options annually.
The Underwriter has a five-year right, effective upon the Closing, to
designate one nominee to the Company's Board of Directors, which shall not
exceed seven persons during such period without the Underwriter's consent. As
of the date of this Prospectus, the Underwriter has no intention to nominate
any person for election as director.
Need for Experienced Executive. Management believes that in order for the
Company to successfully compete in the marketplace, it is in need of a
full-time President with extensive experience in developing, marketing and
managing multi-site recreational and/or entertainment facilities. The Board
of Directors has formed a search committee to conduct a search for such an
executive. The search process could take months (or longer) to complete and
there is no assurance that the proper individual can be identified and
induced to enter the Company's employ. In the event a new President is hired,
Mr. Edward Ross, the current President of the Company, has agreed to provide
executive services to the Company on an as-needed basis.
Employment Agreements. The Company has entered into employment agreements
with Edward Ross and Chuck Workman. Mr. Ross shall serve as Chairman of the
Board of Directors and President and Mr. Workman shall serve as Senior Vice
President -- Development. The term of each such agreement shall be for a
period of five (5) years, commencing as of May 1, 1996. In accordance with
their respective contracts, each of Messrs. Ross and Workman is entitled to
annual compensation of $60,000 and $40,000, respectively. Each of Messrs.
Ross and Workman shall devote approximately 50% of their respective time to
the business of the Company until such time as a full-time President and
other executive officers are hired.
Stock Option Plans. The Company maintains two stock option plans pursuant
to which an aggregate of 500,000 shares of Common Stock may be granted.
1996 Stock Option Plan. The 1996 Stock Option Plan (the "1996 Plan") was
adopted by the Board of Directors of the Company in May, 1996. Under the 1996
Plan, 400,000 shares of Common Stock have been reserved for issuance upon
exercise of options designated as either (i) incentive stock options ("ISOs")
under the Internal Revenue Code (the "Code"), or (ii) non-qualified options.
ISOs may be granted under the 1996 Plan to employees and officers of the
Company. Non-qualified options may be granted to consultants, directors
(whether or not they are employees), employees or officers of the Company.
The purpose of the 1996 Plan is to encourage stock ownership by certain
directors, officers and employees of the Company and certain other persons
instrumental to the success of the Company and to give them a greater
personal interest in the success of the Company. The 1996 Plan is
administered by the Board of Directors or by a stock option committee
selected by the Board. The Board or such committee, within the limitations of
the 1996 Plan, shall determine the persons to whom options will be granted,
the number of shares to be covered by each option, whether the options
granted are intended to be ISOs, the duration and rate of exercise of each
option, the option purchase price per share and the manner of exercise, the
time, manner and form of payment upon exercise of an option, and whether
restrictions such as repurchase rights in the Company are to be imposed on
shares subject to options. ISOs granted under the 1996 Plan may not be
granted at a price less than the fair market value of the Common Stock on the
date of grant (or 110% of fair market value in the case of persons holding
10% or more of the voting stock of the Company). Non-qualified options
granted under the 1996 Plan may not be granted at a price less than 85% of
the fair market value of the Common Stock on the date of grant (or the fair
market value in the case of persons holding 10% or more of the voting stock
of the Company). The aggregate fair market value of shares for which ISOs
granted to any person are exercisable for the first time by such person
during any calendar year (under all stock option plans of the Company and any
related corporation) may not exceed $100,000. The 1996 Plan will terminate in
December, 2006. The term of each option granted under the 1996 Plan will
expire not more than ten years from the date of grant (or five years from the
date of grant in the case of persons holding 10% or more of the voting stock
of the Company). Options granted under the 1996 Plan are not transferable
during an optionee's lifetime but are transferable at death by will or by the
laws of descent and distribution. As of the date hereof, no options have been
granted under the 1996 Plan.
25
<PAGE>
1996 Non-Employee Director Stock Option Plan. The 1996 Non-Employee
Director Stock Option Plan (the "Directors Plan") was adopted and approved by
the Board of Directors of the Company in May, 1996. Options to purchase an
aggregate of 100,000 shares of Common Stock may be issued pursuant to the
Directors Plan. Pursuant to the terms of the Directors Plan, each independent
unaffiliated Director automatically shall be granted, subject to
availability, without any further action by the Board of Directors: (i) a
non-qualified option to purchase 5,000 shares of Common Stock upon their
election to the Board of Directors; and (ii) a non-qualified option to
purchase 5,000 shares of Common Stock on the date of each annual meeting of
stockholders following their election to the Board of Directors. The exercise
price of each option is the fair market value of the Common Stock on the date
of grant. Each option expires five years from the date of grant and vests in
two annual installments of 50% each on the first and second anniversary of
the date of grant. Options granted under the Directors Plan generally are not
transferable during an optionee's lifetime but are transferable at death by
will or by the laws of descent and distribution. In the event an optionee
ceases to be a member of the Board of Directors (other than by reason of
death or disability), then the non-vested portion of the option may be
exercised for a period of 180 days from the date the optionee ceased to be a
member of the Board of Directors. In the event of death or permanent
disability of an optionee, all options accelerate and become immediately
exercisable until the scheduled expiration date of the option. As of the date
hereof, options to acquire 20,000 shares of Common Stock have been granted
under the Directors Plan.
Limitation of Liability and Indemnification Matters. The Company's
Certificate of Incorporation: (i) eliminates the liability of the directors
of the Company for monetary damages to the fullest extent permitted by
Delaware law; and (ii) authorizes the Company to indemnify its officers and
directors to the fullest extent permitted by Delaware law. The By-Laws of the
Company provide broad indemnification for officers and directors against
expenses (including legal fees, judgments and Company-approved settlements)
incurred in connection with any civil or criminal action which arises from
the performance of duties for the Company. The By-Laws of the Company also
provide that the Company will indemnify such persons to the fullest extent
permitted by law. The indemnification provided by the By-Laws applies to any
action taken by the indemnitee while serving as an officer or director of the
Company, any of its subsidiaries (none presently) or at the Company's request
as a director, officer, employee or agent of any of the above, whether
occurring before or after the date of the employment. The By-Laws of the
Company do not provide indemnification for any acts or omissions from which a
director may not be relieved of liability under the Delaware General
Corporation Law.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers or persons controlling the Company pursuant
to the foregoing provisions, the Company has been informed that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is therefore unenforceable.
Key Man Insurance. The Company is the sole beneficiary of a $1,000,000
term life insurance policy covering Edward Ross.
26
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of the date hereof, the ownership of
the Common Stock by (i) each person who is known by the Company to own of
record or beneficially more than 5% of the outstanding Common Stock, (ii)
each of the Company's directors, nominees for directors, and executive
officers, and (iii) all directors, nominees for directors, and executive
officers of the Company as a group. Except as otherwise indicated, the
stockholders listed in the table have the sole voting and investment power
with respect to the shares indicated.
<TABLE>
<CAPTION>
Percentage
Name and Address of Number of Shares Before After After
Beneficial Owner Beneficially Owned Offering Minimum Maximum
----------------------------- ------------------ ---------- ------------ ---------
<S> <C> <C> <C> <C>
Edward C. Ross
c/o the Company
4 Henry Street
Commack, NY 11725 69,350 3.32% 2.36% 2.24%
Chuck Workman
c/o the Company
4 Henry Street
Commack, NY 11725 58,802 2.81% 2.00% 1.90%
Garry Howatt
c/o the Company
4 Henry Street
Commack, NY 11725 48,749 2.33% 1.66% 1.58%
Harold Markowitz
c/o the Company
4 Henry Street
Commack, NY 11725 -- -- -- -- -- -- -- --
Michael L. Faltischek
c/o Ruskin, Moscou, Evans
& Faltischek, P.C.
170 Old Country Road
Mineola, NY 11501 -- -- -- -- -- -- -- --
Lupin Holdings, Inc.(1)
P.O. Box 302
Westaway Chambers
39 Don Street
St. Helier, Jersey, JE4 8JA,
Channel Islands 250,000 11.29% 8.16% 7.78%
Douglas International, S.A.(1)
39 Don Street
St. Helier, Jersey, JE4 8JA,
Channel Islands 250,000 11.29% 8.16% 7.78%
All directors, nominees for
directors, and executive
officers of the Company as a
group (5 persons) 176,901 8.46% 6.02% 5.72%
</TABLE>
(1) Includes 125,000 shares of Common Stock issuable upon the exercise of
Initial Warrants.
27
<PAGE>
CERTAIN TRANSACTIONS
The Commack Partnership was organized in 1994 to construct, develop and
operate the Commack Facility. The Commack Partnership's limited partners
provided the Commack Partnership's with capital of $2,200,000 through a
private placement of limited partnership interests that was exempt from the
registration requirements of the Act pursuant to Regulation D thereunder. The
general partners contributed $10,000 of capital to the Commack Partnership.
In the latter part of 1995 and the first quarter of 1996, the Commack
Partnership borrowed a total of $401,075 from 14 limited partners and two
general partners in connection with the development of the Commack Facility.
The indebtedness from the limited partners will be repaid from the proceeds
of this Offering. The indebtedness to the general partners ($314,500) is due
on November 23, 1997 and bears interest at 7 1/2 % per annum.
In November, 1995, United Acquisition I Corp. (whose name was changed to
U.S. Golf and Entertainment Corp. in April, 1996, herein referred to as "U.S.
Golf Corp."), was incorporated and received equity investments from its
founding stockholders in the amount of $54,500, $41,200 of which were loaned
to the Commack Partnership in anticipation of the Company's acquisition of
the Commack Partnership. In May, 1996, U.S. Golf Corp. raised an additional
$500,000 from the sale of common stock and warrants, which monies were loaned
to the Commack Partnership.
In 1995, Chuck Workman, the Company's Senior Vice President, received
10,000 shares of common stock of U.S. Golf Corp. in exchange for services
rendered.
In May, 1996, the Company proposed exchange agreements with (i) the
stockholders of U.S. Golf Corp., whereby the stockholders of U.S. Golf Corp.
would exchange their 1,045,000 shares of common stock and 2,020,000 warrants
for 1,045,000 shares of Common Stock and 2,020,000 Class A Warrants; and (ii)
the general and limited partners of the Commack Partnership, whereby the
partners of the Commack Partnership would exchange their partnership
interests for an aggregate of 1,045,000 shares of the Common Stock.
As of May 13, 1996, Ruskin, Moscou, Evans & Faltischek, P.C., the law firm
of which Michael L. Faltischek is a senior partner, received legal fees from
the Company in an amount equal to $35,000.
DESCRIPTION OF SECURITIES
The following summary descriptions are qualified in their entirety by
reference to the Company's Certificate of Incorporation, a copy of which has
been filed as an exhibit to the Registration Statement of which this
Prospectus is a part.
Common Stock. The Company is authorized to issue 20,000,000 shares of
common stock, par value $.001 per share (the "Common Stock"). As of the date
of this Prospectus, there were 2,090,000 shares of Common Stock issued and
outstanding and held of record by 72 stockholders. Each stockholder is
entitled to one vote per share of Common Stock owned by him/her on all
matters submitted to a vote of the stockholders.
The Common Stock is not entitled to preemptive rights and is not subject
to redemption. Subject to the dividend rights of holders of any then
outstanding preferred stock, holders of Common Stock are entitled to receive
dividends at such times and in such amounts as the Board of Directors, from
time to time, may determine. Subject to the liquidation preference of any
then outstanding preferred stock, holders of Common Stock are entitled to
receive, on a pro rata basis, all remaining assets of the Company available
for distribution to the holders of Common Stock in the event of the
liquidation, dissolution or winding up of the Company.
All outstanding shares of Common Stock are, and the shares of the Common
Stock issued pursuant to the Offering will be, validly issued, fully paid and
non-assessable.
Class A Warrants. The Class A Warrants sold in this Offering will be
issued pursuant to a warrant agreement (the "Warrant Agreement") among the
Company, the Underwriter and American Stock Transfer and Trust Company (the
"Warrant Agent"), and will be evidenced by warrant certificates in registered
form. The following summary is qualified in its entirety by the text of the
Warrant Agreement, a copy of which has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part.
28
<PAGE>
Each Class A Warrant entitles the registered holder thereof to purchase
one share of Common Stock at a price of $6.00, subject to adjustment, at any
time from the date of this Prospectus until the close of business on the
fifth anniversary date of this Prospectus, unless previously redeemed.
The Class A Warrants are subject to redemption by the Company, beginning
eighteen months after the Effective Date, at $0.10 per Class A Warrant, upon
30 day's prior written notice if either (i) the last sale price (or highest
closing bid price) of the Common Stock as reported by NASDAQ (or on such
exchange on which the Common Stock is then traded), exceeds $11.00 per share
for 20 consecutive trading days ending within 15 days prior to the date of
notice of redemption, or (ii) the Company shall have obtained written consent
of the Underwriter to call the Class A Warrants for redemption.
The exercise price of the Class A Warrants and the number of shares of
Common Stock or other securities issuable upon the exercise thereof are
subject to adjustment in certain circumstances, including, but not limited
to, any stock dividend on the Common Stock, any subdivision, combination or
reclassification of the Common Stock, any distribution to all stockholders of
rights, warrants or options to subscribe for or purchase shares of Common
Stock (or securities convertible into Common Stock), or any distribution to
all stockholders of assets or evidences of indebtedness of the Company. An
adjustment also would be made upon a merger or consolidation where the
Company is not the surviving entity, or the sale of all or substantially all
of the assets of the Company, so as to enable warrantholders to purchase the
kind and number of shares of stock or other securities or property (including
cash) receivable in such event by a holder of the number of shares of Common
Stock that might otherwise have been purchased upon exercise of such Class A
Warrant.
The exercise price of the Class A Warrants bears no relation to any
objective criteria of value and should not be regarded as an indication of
the future market price of the securities offered hereby.
The Class A Warrants do not confer upon the holder any voting or any
rights of a stockholder of the Company. Upon written notice to the
warrantholders, the Company has the right to reduce the exercise price or
extend the expiration date of the Class A Warrants.
The Class A Warrants may be exercised upon surrender of the Class A
Warrant certificate on or prior to the expiration date (unless redeemed prior
thereto) of such Class A Warrants at the offices of the Warrant Agent, with
the Subscription Form on the reverse side of the Warrant certificate
completed as indicated, accompanied by payment of the full exercise price (by
certified check payable to the order of the Warrant Agent, or by wire
transfer) for the number of Class A Warrants being exercised. Upon the
expiration date, the Class A Warrants will become void and of no value. If a
market for the Class A Warrants develops, the holder may sell the Class A
Warrants instead of exercising them. There can be no assurance, however, that
a market for the Class A Warrants will develop or continue. If the Company is
unable to qualify the Common Stock underlying the Class A Warrants for sale
in particular states, holders of Class A Warrants desiring to exercise the
Class A Warrants in those states will have no choice but to either sell such
Class A Warrants or let them expire.
Initial Warrants. Pursuant to the Exchange Agreement with the stockholders
of U.S. Golf Corp., the Company issued an aggregate of 2,020,000 Class A
Warrants (the "Initial Warrants") to such stockholders. The Initial Warrants
are governed by the terms of the Warrant Agreement and, together with the
shares of Common Stock underlying the Initial Warrants, are subject to a
lock-up restriction for a period of 24 months from the Effective Date,
subject to the earlier release by the Underwriter.
Preferred Stock. The Board of Directors has the authority to cause the
Company to issue, without any further vote or action by the stockholders, up
to 1,000,000 shares of preferred stock, par value $.001 per share (the
"Preferred Stock"), in one or more series, to designate the number of shares
constituting any series, and to fix the rights, preferences, privileges and
restrictions thereof, including dividend rights, voting rights, rights and
terms of redemption, redemption price or prices and liquidation preferences
of such series. The issuance of Preferred Stock may have the effect of
delaying, deferring or preventing a change in control of the Company without
further action by the stockholders. The issuance of Preferred Stock with
voting and conversion rights may adversely effect the voting power of the
holders of Common Stock, including the loss of voting control. The Company
has no present plans to issue any shares of Preferred Stock. See "Risk
Factors -- Potential Adverse Effect of Issuance of any Authorized Preferred
Stock."
29
<PAGE>
Delaware Takeover Statute. The Company is subject to Section 203 of the
Delaware Corporation Law ("Section 203"), which, subject to certain
exceptions, prohibits a Delaware corporation from engaging in any business
combination with any interested stockholder for a period of three years
following the date that such stockholder became an interested stockholder,
unless: (i) prior to such date, the Board of Directors of the Company
approved either the business combination or the transaction that resulted in
the stockholder becoming an interested stockholder; (ii) upon consummation of
the transaction that resulted in the stockholder becoming an interested
stockholder, the interested stockholder owned at least 85% of the voting
stock of the Company outstanding at the time the transaction commenced,
excluding for purposes of determining the number of shares outstanding those
shares owned (x) by persons who are directors and also officers and (y) by
employee stock plans in which employee participants do not have the right to
determine confidentially whether shares held subject to the plan will be
tendered in a tender or exchange offer; or (iii) on or subsequent to such
date, the business combination is approved by the Board of directors and
authorized at an annual or special meeting of stockholders, and not by
written consent, by the affirmative vote of at least 66 2/3 % of the
outstanding voting stock that is not owned by the interested stockholder.
Section 203 defines business combination to include, among other things:
(i) any merger or consolidation involving the Company and the interested
stockholder; (ii) any sale, lease, exchange, mortgage, transfer, pledge or
other disposition of 10% or more of the assets of the Company involving the
interested stockholder; (iii) subject to certain exceptions, any transaction
that results in the issuance or transfer by the Company of any stock of the
Company to the interested stockholder; (iv) any transaction involving the
Company that has the effect of increasing the proportionate share of the
stock of any class or series of the Company beneficially owned by the
interested stockholder; or (v) the receipt by the interested stockholder of
the benefit of any loans, advances, guarantees, pledges or other financial
benefits provided by or through the Company. In general, Section 203 defines
an "interested stockholder" as any entity or person beneficially owning 15%
or more of the outstanding voting stock of the Company and any entity or
person affiliated with or controlling or controlled by such entity or person.
Transfer Agent and Warrant Agent. American Stock Transfer and Trust
Company, 40 Wall Street, New York, New York 10005, has been appointed as the
transfer agent and warrant agent for the Common Stock and Class A Warrants.
SHARES ELIGIBLE FOR FUTURE SALE
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including persons who may be deemed to be
"affiliates" of the Company, as that term is defined under Rule 144, is
entitled to sell within any three-month period a number of restricted shares
beneficially owned for at least two years that does not exceed the greater of
(i) one percent of the then outstanding shares of Common Stock, or (ii) the
average weekly trading volume in the Common Stock during the four calendar
weeks preceding the filing of a Form 144 with the Securities and Exchange
Commission with respect to such sale. Sales under Rule 144 also are subject
to certain requirements as to the manner of sale, notice and the availability
of current public information about the Company. A person who is not an
affiliate of the Company any time during the 90-day period preceding such
sale and has beneficially owned such shares for at least three years is
entitled to sell such shares without regard to the volume or other
requirements pursuant to Rule 144(k).
Any employee, officer, or director of, or consultant to, the Company, who
purchased his or her shares pursuant to a written compensatory plan or
contract may be entitled to rely on the resale provisions of Rule 701 under
the Act, which permits non-affiliates to sell their Rule 701 shares of Common
Stock without having to comply with the public information, holding period,
volume limitations, or notice provisions of Rule 144, and which permits
affiliates to sell their Rule 701 shares without having to comply with Rule
144's holding period restrictions, in each case commencing 90 days after the
Company becomes subject to the reporting requirements of Sections 13 or 15(d)
of the Securities Exchange Act of 1934, as amended.
Following the Offering, 1,045,000 shares of Common Stock currently
outstanding will be "restricted securities" as that term is defined in Rule
144 promulgated under the Act (the "Restricted Securities"). All of such
shares of Common Stock will be eligible for sale in the public market
pursuant to the provisions of Rule 144 or Rule 701 under the Act at various
times after the Effective Date, subject to the "lock-up" agreements with the
Underwriter described below.
30
<PAGE>
The Company has adopted the 1996 Non-Employee Director Stock Option Plan
pursuant to which it has issued options to purchase 20,000 shares of Common
Stock (the "Directors Options") and may issue options to purchase up to an
additional 80,000 shares of Common Stock.
Holders of the Initial Stock, the Initial Warrants, the Restricted
Securities and the Directors Options have agreed that they will not, without
the Underwriter's written consent, sell, transfer or assign any of the
Initial Stock, the Initial Warrants, the Restricted Securities, or the shares
of Common Stock issuable upon exercise of the Directors Options or the
Initial Warrants for a period of 24 months after the Closing.
Following the expiration of the lock-up period (or prior thereto if the
Underwriter should so agree) and/or restrictive periods described above, a
substantial sale of securities pursuant to Rule 144 or otherwise could occur
and might have an adverse effect on the market price of the Company's
securities.
31
<PAGE>
SELLING STOCKHOLDERS
Pursuant to the Exchange Agreement with the stockholders of U.S. Golf
Corp., the Company issued 1,045,000 shares of Common Stock (the "Initial
Stock") and 2,020,000 Class A Warrants (the "Initial Warrants") to such
stockholders. Payment to the Company upon the exercise of all the Initial
Warrants would be $12,120,000. The Company has agreed to include, for the
benefit of the holders of the Initial Stock and the Initial Warrants (the
"Selling Stockholders"), the Initial Stock, the Initial Warrants and the
shares of Common Stock issuable upon exercise of the Initial Warrants, in the
Registration Statement of which this Prospectus is a part.
The following table sets forth the record ownership of the Common Stock
and Class A Warrants by the Selling Stockholders as of the date of this
Prospectus.
<TABLE>
<CAPTION>
Number of
Shares of Number of
Common Class A
Name of Selling Stockholder Stock (1) Percentage(2) Warrants(1) Percentage(2)
-------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
The Tiger Eye Fund L.L.C. ...... 45,000 1.5 95,000 2.4
Gina Salerno ................... 32,500 1.1 57,500 1.4
Alice McCave ................... 62,500 2.0 87,500 2.2
Lewis Weisblum ................. 50,000 1.6 50,000 1.2
United Acquisition III Corp. ... 65,000 2.1 65,000 1.6
Unitek Consultants, Inc. ....... 65,000 2.1 115,000 2.9
Ray Irngy ...................... 75,000 2.4 175,000 4.4
Lupin Holdings, Inc. ........... 125,000 4.0 125,000 3.1
Edward Ford .................... 10,000 * 0 *
William Pattison ............... 5,000 * 0 *
Chuck Workman (3) .............. 10,000 * 0 *
Douglas International, S.A. .... 125,000 4.0 125,000 3.1
Xenon International, Ltd. ...... 25,000 * 75,000 1.9
Carico Inc. .................... 50,000 1.6 150,000 3.7
Richard E. Gerzof .............. 25,000 * 75,000 1.9
Mandelay Corporation, N.V. ..... 50,000 1.6 150,000 3.7
Donald Balbinder ............... 25,000 * 75,000 1.9
Jonathan Halperin .............. 25,000 * 75,000 1.9
Barry Wilder and Frances Wilder . 25,000 * 75,000 1.9
David B. Lever ................. 25,000 * 75,000 1.9
Peter Halperin ................. 25,000 * 75,000 1.9
Craig W. Effron ................ 50,000 1.6 150,000 3.7
Alan Koch ...................... 25,000 * 75,000 1.9
Tusany Invest & Trade S.A. ..... 25,000 * 75,000 1.9
</TABLE>
- ------
(1) The number of shares of Common Stock and Class A Warrants listed
indicates both the amount of securities owned by the Selling Stockholder
prior to the Offering and the amount to be offered for the account of
such Selling Stockholder. The number of shares of Common Stock and Class
A Warrants which will be owned by each of the Selling Stockholders after
the completion of the Offering (assuming that all securities listed are
sold) will be zero.
(2) Assumes that the maximum number of shares of Common Stock and Class A
Warrants are sold in the Offering.
(3) Chuck Workman, the Company's Senior Vice President, is a principal of
Chuck Workman Pro Golf, Ltd., a general partner of the Commack
Partnership.
* indicates a security ownership of less than 1%.
32
<PAGE>
The 1,045,000 shares of Initial Stock and the 2,020,000 Initial Warrants
being offered by the Selling Stockholders pursuant to this Prospectus may be
offered and sold from time to time as market conditions permit in the
over-the-counter market, or otherwise, at prices and terms then prevailing or
at prices related to the then current market price, or in negotiated
transactions. They may be sold by one or more of the following methods,
including, without limitation: (a) a block trade in which a broker or dealer
so engaged will attempt to sell the shares as agent but may position and
resell a portion of the block as principal to facilitate the transaction; (b)
purchases by a broker or dealer as principal and resale by such broker or
dealer for its account pursuant to this Prospectus; and (c) face-to-face
transactions between sellers and purchasers without a broker/dealer. In
effecting sales, brokers or dealers engaged by the Selling Stockholders may
arrange for other brokers or dealers to participate. Such brokers or dealers
may receive commissions or discounts from Selling Stockholders in amounts to
be negotiated. Such brokers and dealers and any other participating brokers
and dealers may be deemed to be "underwriters" within the meaning of the Act
in connection with such sales.
The Company has agreed to indemnify the Selling Stockholders against
certain civil liabilities, including liabilities under the Act.
Each Selling Stockholder will be entitled to receive all of the proceeds
from the future sale of his, her or its respective Initial Stock, Initial
Warrants and the shares of Common Stock issuable upon exercise of the Initial
Warrants. While the Company will receive the proceeds from the exercise of
the Initial Warrants, it will not receive any proceeds from the future sale
of any of the Common Stock issuable upon exercise of the Initial Warrants by
the respective holders. Except for the costs of including the Initial Stock,
the Initial Warrants and the shares of Common Stock underlying the Initial
Warrants within the Registration Statement, which costs are borne by the
Company, the Selling Stockholders will bear all expenses of any offering by
them of such securities, including the costs of their counsel and of any
sales commissions incurred.
Each Selling Stockholder has agreed not to sell, transfer or assign any of
such Selling Stockholder's shares of Initial Stock or Initial Warrants (or
the shares of Common Stock issuable upon the exercise of the Initial
Warrants) for a period of 24 months after the Closing of the Offering,
without the consent of the Underwriter.
33
<PAGE>
UNDERWRITING
The Company has entered into an underwriting agreement (the "Underwriting
Agreement") with A.R. Baron & Co., Inc. (the "Underwriter") pursuant to which
it will serve as the underwriter in connection with the Offering. In
accordance with Underwriting Agreement, the Company has retained the
Underwriter to conduct, as its exclusive agent, an offering of a minimum of
850,000 shares of Common Stock and 1,700,000 Class A Warrants and a maximum
of 1,000,000 shares of Common Stock and 2,000,000 Class A Warrants on a "best
efforts" basis, for a period of 30 days (plus 5 additional days, the sole
purpose of which is to allow checks to clear) from the date this Registration
Statement becomes effective; provided, however, that the period may be
extended for an additional 15 days by the mutual agreement of the Company and
the Underwriter. All funds received by the Underwriter will be deposited no
later than noon on the next business day following their receipt by the
Underwriter in an escrow account with LaSalle National Trust, N.A., Chicago,
Illinois, as escrow agent (the "Escrow Agent"), pursuant to an escrow fund
agreement entered into by the Company, the Underwriter, and the Escrow Agent.
Payments shall be made either by check or by wire transfer. All checks for
subscriptions of the shares of Common Stock and Class A Warrants should be
made payable to "LaSalle National Trust, N.A. -- U.S. Golf Escrow." If at
least 850,000 shares of Common Stock and 1,700,000 Class A Warrants offered
hereby are sold within the initial 30 day period (or any extension thereof),
all funds received, less the Underwriter's commissions and expense allowance,
will be delivered to the Company and certificates representing the Common
Stock and the Class A Warrants purchased will be delivered promptly to or for
the account of the subscribers thereof. If the minimum number of shares of
Common Stock and Class A Warrants offered hereby is not sold within the
designated period, all funds will be returned promptly to the subscribers
thereof without any deduction therefrom or interest thereon. Until such time
as funds have been released from escrow and the Common Stock and Class A
Warrants have been delivered to or for the account of the subscribers
therefor, such subscribers will not be deemed to be holders of Common Stock
or Class A Warrants.
The Company and the Underwriter may have an initial closing once at least
850,000 shares of Common Stock and 1,700,000 Class A Warrants (and up to the
maximum number of 1,000,000 shares of Common Stock and 2,000,000 Class A
Warrants) have been subscribed for in order to disburse proceeds therefrom.
Once at least the minimum number of shares of Common Stock and Class A
Warrants are sold, the Offering shall continue until the earliest to occur
of: (i) up to an additional 150,000 shares of Common Stock and 300,000 Class
A Warrants are sold; (ii) the offering period terminates; or (iii) the
Company and the Underwriter agree to terminate this Offering. If any
additional Common Stock and Class A Warrants are sold after the initial
closing, if any, there shall be a second closing to disburse the additional
funds. Pending such second closing or such termination, additional
subscriptions will continue to be deposited in the escrow account.
The Underwriter has advised the Company that it proposes to offer the
Common Stock and Class A Warrants to the public at the offering price set
forth on the cover page of this Prospectus. In addition, it may allow to
certain dealers who are members of the NASD concessions not in excess of
$0.28 per share of Common Stock and $0.005 per Class A Warrant, of which not
more than $0.14 for each share of Common Stock and $0.0025 per Class A
Warrant may be reallowed to other dealers who are members of the NASD. After
the date of this Prospectus, the offering price, concession, and reallowance
may be changed by the Underwriter.
The initial public offering price of the Common Stock and Class A Warrants
and the exercise price and other terms of the Class A Warrants were
arbitrarily determined by negotiation between the Company and the Underwriter
and are not necessarily related to the Company's assets, book value, results
of operations, or other established criteria of value, and should not be
regarded as an indication of the future market price of the Common Stock or
the Class A Warrants. Factors considered in determining the offering price of
the Common Stock and Class A Warrants and the exercise price of the Class A
Warrants consisted of the present state of the Company's development, the
future prospects of the Company, an assessment of management, the general
condition of the securities markets, the demand for similar securities of
companies comparable in development or markets, and prevailing economic
condition.
No member of management and no one acting at their direction is expected
to recommend, encourage or advise any investor to open brokerage accounts
with any broker-dealer that makes a market in the Common Stock or Class A
Warrants. Management also is not expected to make any recommendation to
existing stockholders with respect to the sale or purchase of the Common
Stock or Class A Warrants. Officers, directors or employees of the Company
will not be permitted to purchase Common Stock or Class A Warrants in the
Offering.
34
<PAGE>
The Underwriting Agreement provides for reciprocal indemnification between
the Company and the Underwriter against certain liabilities, including
liabilities under the Act.
The Company has agreed to pay to the Underwriter, a non-accountable
expense allowance of 3% of the aggregate offering price of the Securities
($147,900 if the minimum offering is completed and approximately $174,000 if
the maximum offering is completed).
The Company has agreed to sell to the Underwriter, for an aggregate of
$100, options to purchase up to ten (10%) percent of: (i) the number of
shares of Common Stock sold in the Offering (the "Stock Purchase Option"), at
a price of $6.72 per share; and (ii) the number of Class A Warrants sold in
the Offering (the "Warrant Purchase Option"), at a price of $.12 per Class A
Warrant. The Share Purchase Option and the Warrant Purchase Option
(collectively, the "Purchase Options") are exercisable over a period of four
years commencing one year from the Effective Date and, may be separately and
independently exercised.
The Class A Warrants issuable pursuant to the terms of the Warrant
Purchase Option are identical to the Class A Warrants offered hereby, except
that: (i) they will only be subject to redemption or cancellation by the
Company if and to the extent that the Warrant Purchase Option has been
exercised; and (ii) they may be exercised for cash, or, at the holder's
option, in whole or in part, for a number of shares of Common Stock and
Warrants, as determined in accordance with a specified formula based on the
fair market value of the Common Stock. The holder(s) of the Warrant Purchase
Option may exercise the Class A Warrants underlying the Warrant Purchase
Option at an exercise price of $7.20 per share. The Purchase Options are not
transferable for one year from the date of issuance, except to officers of
the Underwriter, any member of the NASD participating in the Offering and
officers and partners thereof. For the term of the Purchase Options, the
holder thereof is given the opportunity to profit from a rise in the market
price of the Common Stock with a resulting dilution in the interest of other
stockholders. The Company may find it more difficult to raise additional
equity capital if it should be needed for the business of the Company while
the Purchase Options or either of them is outstanding; at any time when the
holders of either or both of the Purchase Options might be expected to
exercise them, the Company would probably be able to obtain additional equity
capital on terms more favorable than those provided in the Purchase Options.
The Company has agreed, during a period of five years beginning one year from
the effective date of the Registration Statement, to register under the Act
at its expense on the first such occasion and at the expense of the holders
thereof on one other occasion, the Purchase Options and the underlying
securities at the request of holders of at least 50% thereof. The Company
also has agreed to certain piggyback registration rights for the holders of
the Purchase Options and the underlying securities.
The Company has entered into an agreement with the Underwriter providing
for the payment of a fee to the Underwriter in the event the Company closes a
merger, acquisition, financing or other similar transaction during the five
year period beginning on the effective date of the Registration Statement
with a party to whom the Company was introduced by the Underwriter. In such
event, the Company shall pay a finder's fee of 5% of the first $1,000,000 of
consideration realized by the Company, 4% of the second $1,000,000, 3% of the
next $5,000,000, 2% of the next 1,000,000, and 1% of the excess over
$8,000,000. Any such finder's fee will be paid in cash, subject to certain
exceptions, at the closing of such transaction.
The Company has entered into an agreement with the Underwriter as its
financial consultant, for a period of two years commencing on the date of the
Closing, at an annual fee of $45,000 (exclusive of any accountable
out-of-pocket expenses), which fees will be paid at the Closing.
The Underwriter may (or may not) allocate up to an aggregate of 30% of the
Common Stock or Class A Warrants offered hereby to certain persons and
entities, up to 23 in number, who are stockholders of The Baron Group, Inc.
("BGI"), the parent company of the Underwriter. None of such persons or
entities is, or is the immediate relative of, an officer, director or
employee of the Underwriter or BGI, nor does any such person or entity own
more than 2.25% of BGI.
Holders of the Initial Stock, the Initial Warrants, the Restricted
Securities and the Directors Options have agreed that they will not, without
the Underwriter's consent, sell, transfer, or assign any of the Initial
Stock, the Initial Warrants, the Restricted Securities or the shares of
Common Stock issuable upon the exercise of the Directors Options or the
Initial Warrants for a period of 24 months after the Closing.
35
<PAGE>
The Company will pay the Underwriter a fee of 7% of the exercise price of
each Class A Warrant exercised after the first anniversary of the date of
this Prospectus if: (i) the Underwriter solicited such exercise of the Class
A Warrant and was designated in writing to receive the solicitation fee; (ii)
the market price of the Common Stock on the date the Class A Warrant is
exercised is greater than the Class A Warrant exercise price then in effect;
(iii) the Class A Warrant was not held in a discretionary account; (iv)
disclosure of compensation arrangements is made in documents provided at the
time of the Offering and at the time of exercise of the Class A Warrant; and
(v) the solicitation of exercise of the Class A Warrant was not in violation
of Rule 10b-6 promulgated under the Exchange Act.
The Underwriter has a five year right effective upon the Closing, to
designate one nominee to the Company's Board of Directors, which shall not
exceed seven persons during such period, without the Underwriter's consent.
As of the date of this Prospectus, the Underwriter has no intention to
nominate any person for election as a director.
The foregoing is a brief summary of the Underwriting Agreement, a copy of
which has been filed with the Securities and Exchange Commission as an
Exhibit to the Registration Statement.
LEGAL MATTERS
The validity of the Common Stock and Class A Warrants offered hereby will
be passed upon for the Company by Ruskin, Moscou, Evans & Faltischek, P.C.,
Mineola, New York. Michael L. Faltischek, a partner of such law firm, will
become a director of the Company following the completion of this Offering.
Certain legal matters will be passed upon for the Underwriter by Breslow &
Walker, New York, New York.
EXPERTS
The financial statements included in this Prospectus and Registration
Statement for the period ended December 31, 1995 have been audited by Farber,
Blicht & Eyerman, L.L.P., independent certified public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in accounting and
auditing in giving said reports.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission, 450
Fifth Street, N.W., Washington, D.C. 20549, the Registration Statement on
Form SB-2 under the Act for the securities offered hereby. This Prospectus,
which is a part of the Registration Statement, does not contain all of the
information contained in the Registration Statement. For further information
with respect to the Company and the securities offered hereby, reference is
made to the Registration Statement, including the Exhibits thereto, which may
be inspected, without charge, at the Securities and Exchange Commission, or
copies of which may be obtained from the Securities and Exchange Commission
in Washington, D.C., and at the Northeast Regional Office at Seven World
Trade Center, New York, New York 10048, upon payment of the requisite SEC
fees. Statements contained in this Prospectus as to the content of any
contract or other document referenced are qualified by reference to the copy
of such contract or other document filed as an Exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference.
The Company intends to furnish its stockholders and holders of the Class A
Warrants with annual reports containing audited financial statements and such
other periodic reports as management may determine to be appropriate and as
may be required by law.
36
<PAGE>
To the Partners
Commack Golf and Family Recreation Center, L.P.
(A Limited Partnership)
Commack, New York
We have audited the accompanying balance sheet of Commack Golf and Family
Recreation Center, L.P. (A Limited Partnership) as of December 31, 1995, and
the related statements of operations, partners' capital and cash flows for
the year then ended and for the period July 26, 1994 (date of formation) to
December 31, 1994. These financial statements are the responsibility of the
Partnership'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 audits 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 Commack Golf and Family
Recreation Center, L.P. (A Limited Partnership) at December 31, 1995 and the
results of its operations and its cash flows for the year then ended and for
the period July 26, 1994 (date of formation) to December 31, 1994, in
conformity with generally accepted accounting principles.
Plainview, New York
April 30, 1996 (except for Notes 10
and 11, the latest of which is dated
May 30, 1996)
F-1
<PAGE>
COMMACK GOLF AND FAMILY RECREATION CENTER, L.P.
(A LIMITED PARTNERSHIP)
BALANCE SHEETS
ASSETS (NOTE 6)
<TABLE>
<CAPTION>
(Note 10)
Pro forma
December 31, March 31, March 31,
-------------- ------------ -----------
1995 1996 1996
-------------- ------------ -----------
(unaudited) (unaudited)
<S> <C> <C> <C>
Current assets:
Cash ........................................... $ 345 $ 26,016 $ 526,622
Construction bond receivable (Note 2) .......... 65,000 -- --
Due from general partners (Note 3) ............. 15,588 15,588 15,588
Prepaid expenses and other current assets ...... 52,337 54,236 54,236
---------- ---------- ----------
Total current assets ......................... 133,270 95,840 596,446
---------- ---------- ----------
Property and equipment, at cost, less accumulated
depreciation and amortization (Note 4) ............ 2,799,962 2,755,404 2,755,404
---------- ---------- ----------
Other assets:
Deferred costs, net of accumulated amortization
of $6,947; $9,031 in 1996 (Note 5) ........... 118,102 116,018 116,018
Deferred income taxes (Note 10) ................ -- -- 236,000
Deposits ....................................... 2,000 2,000 2,000
---------- ---------- ----------
120,102 118,018 354,018
---------- ---------- ----------
$3,053,334 $2,969,262 $3,705,868
========== ========== ==========
</TABLE>
The accompanying notes are an integral
part of the financial statements.
F-2
<PAGE>
COMMACK GOLF AND FAMILY RECREATION CENTER, L.P.
(A LIMITED PARTNERSHIP)
BALANCE SHEETS
LIABILITIES AND PARTNERS' CAPITAL
<TABLE>
<CAPTION>
(Note 10)
Pro forma
December 31, March 31, March 31,
-------------- ------------ -----------
1995 1996 1996
-------------- ------------ -----------
(unaudited) (unaudited)
<S> <C> <C> <C>
Current liabilities:
Cash overdraft ................................. $ 19,185 $ -- $ --
Notes payable - bank (Note 6) .................. 325,000 325,000 325,000
Accounts payable ............................... 434,427 314,918 314,918
Due to general partners (Note 7) ................ 261,500 314,500 314,500
Due to limited partners (Note 7) ................ 62,950 86,575 86,575
Unearned income (Note 1(e) ..................... 16,908 19,681 19,681
Accrued expenses ............................... 12,523 85,622 85,622
Loan payable - US Golf Corp. (Note 8) ........... -- 41,200 --
---------- ---------- ----------
Total current liabilities .................... 1,132,493 1,187,496 1,146,296
Deferred rent costs (Note 9) ........................ 168,260 196,235 196,235
Commitments and contingencies (Note 9)
Partners' capital ................................... 1,752,581 1,585,531 --
Shareholders' equity ................................ -- -- 2,363,337
---------- ---------- ----------
$3,053,334 $2,969,262 $3,705,868
========== ========== ==========
</TABLE>
The accompanying notes are an integral
part of the financial statements.
F-3
<PAGE>
COMMACK GOLF AND FAMILY RECREATION CENTER, L.P.
(A LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the period
July 26, 1994
(date of For the
formation) For the year three months
to ended ended
December 31, December 31, March 31,
-------------- -------------- --------------
1994 1995 1996
-------------- -------------- --------------
(unaudited)
<S> <C> <C> <C>
Revenues ................................................ $ -- $ 719,374 $ 123,112
---- ---------- ----------
Operating expenses ...................................... -- 1,021,666 274,910
Selling, general and administrative expenses ............ -- 87,555 6,855
---- ---------- ----------
-- 1,109,221 281,765
---- ---------- ----------
Operating loss .......................................... -- (389,847) (158,653)
Other expenses:
Interest ............................................... -- 33,572 8,397
---- ---------- ----------
Net loss ................................................ $ -- $ (423,419) $ (167,050)
==== ========== ===========
Pro forma net loss (*) .................................. $ (254,419) $ (102,744)
========== ===========
Pro forma net loss per share (*) ........................ $ (.12) $ (.05)
========== ===========
Shares used in computing pro forma net loss per share (*). 2,090,000 2,090,000
========== ===========
</TABLE>
(*) See Note 10.
The accompanying notes are an integral
part of the financial statements.
F-4
<PAGE>
COMMACK GOLF AND FAMILY RECREATION CENTER, L.P.
(A LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 1995 AND
FOR THE PERIOD JULY 26, 1994 (DATE OF FORMATION)
TO DECEMBER 31, 1994
<TABLE>
<CAPTION>
<S> <C>
Partners' capital contributions ............................. $2,210,000
Costs associated with capital contributions ................. (34,000)
----------
Partners' capital, December 31, 1994 ........................ 2,176,000
Net loss for the year ended December 31, 1995 ............... (423,419)
----------
Partners' capital, December 31, 1995 ........................ 1,752,581
Net loss for the three months ended March 31, 1996 -- unaudited (167,050)
----------
Partners' capital, March 31, 1996 -- unaudited .............. 1,585,531
Pro forma adjustments (Note 10) ............................. 777,806
----------
Pro forma shareholders' equity, March 31, 1996 (unaudited) .. $2,363,337
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
COMMACK GOLF AND FAMILY RECREATION CENTER, L.P.
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the period
July 26, 1994
(date of For the For the
formation) year three months
to ended ended
December 31, December 31, March 31,
-------------- -------------- --------------
1994 1995 1996
-------------- -------------- --------------
(unaudited)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss .................................... $ -- $ (423,419) $ (167,050)
------------ ---------- ----------
Adjustments to reconcile net loss to net cash
provided by (used in) operations:
Depreciation and amortization ............ -- 169,845 54,060
Deferred rent costs ...................... -- 168,260 27,975
Changes in assets and liabilities:
Construction bond receivable ................ -- (65,000) 65,000
Prepaid expenses and other current assets ... (69,285) 16,948 (1,899)
Accounts payable ............................ 406,310 28,117 (119,509)
Unearned income ............................. -- 16,908 2,773
Accrued expenses ............................ 6,868 5,655 73,099
Deposits .................................... (2,000) -- --
------------ ---------- ----------
Total adjustments ...................... 341,893 340,733 101,499
------------ ---------- ----------
Net cash provided by (used in) operations ..... 341,893 (82,686) (65,551)
------------ ---------- ----------
Cash flows used in investing activities:
Purchase of property and equipment .......... (2,115,233) (747,627) (7,418)
Deferred costs incurred ..................... (108,201) (16,848) --
------------ ---------- ----------
Net cash used in investing activities ....... (2,223,434) (764,475) (7,418)
------------ ---------- ----------
Sub-total ................................... (1,881,541) (847,161) (72,969)
------------ ---------- ----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE>
COMMACK GOLF AND FAMILY RECREATION CENTER, L.P.
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
(CONTINUED)
<TABLE>
<CAPTION>
For the period
July 26, 1994
(date of For the
formation) For the year three months
to ended ended
December 31, December 31, March 31,
-------------- -------------- --------------
1994 1995 1996
-------------- -------------- --------------
(unaudited)
<S> <C> <C> <C>
Balance brought forward ................. $(1,881,541) $(847,161) $ (72,969)
----------- --------- ---------
Cash flows from financing activities:
Capital contributions ................. 1,450,000 653,000 --
Short-term financing, bank ............ 300,000 215,000 --
Payments on short-term financing,
bank ................................ -- (190,000) --
Borrowings from general partners ...... 125,000 136,500 53,000
Borrowings from limited partners ...... -- 62,950 23,625
Loans to general partners ............. -- (8,588) --
Cash overdraft ........................ 40,641 (21,456) (19,185)
Costs associated with capital
contributions........................ (34,000) -- --
Borrowings from US Golf Corp. ......... -- -- 41,200
----------- --------- ---------
Net cash provided by financing
activities ............................. 1,881,641 847,406 98,640
----------- --------- ---------
Net increase in cash .................... 100 245 25,671
Cash, beginning of period ............... -- 100 345
----------- --------- ---------
Cash, end of period ..................... $ 100 $ 345 $ 26,016
=========== ========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-7
<PAGE>
COMMACK GOLF AND FAMILY RECREATION CENTER, L.P.
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
(CONTINUED)
<TABLE>
<CAPTION>
For the period
July 26, 1994
(date of For the
formation) For the year three months
to ended ended
December 31, December 31, March 31,
-------------- -------------- --------------
1994 1995 1996
-------------- -------------- --------------
(unaudited)
<S> <C> <C> <C>
Supplemental disclosure of non-cash financing
activities and cash flow information:
Subscriptions for capital contributions ........ $660,000 $ -- $ --
======== ======== =======
Property and equipment contributed as
capital ....................................... $100,000 $ -- $ --
======== ======== =======
Cash paid during period:
Interest ...................................... $ 1,000 $37,000 $ 8,000
======== ======== =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-8
<PAGE>
COMMACK GOLF AND FAMILY RECREATION CENTER, L.P.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Description of operations
In July, 1994, Commack Golf and Family Recreation Center, L.P., a New York
limited partnership (the "Partnership") was organized to develop the Commack
Golf and Family Recreation Center, which commenced operations in March, 1995.
Revenues are generated from the facility which offers the public the opportunity
to practice on its driving range and to play in its miniature golf course. The
facility also rents space to a pro shop and offers private and group golf
lessons. On May 30, 1996, U.S. Golf and Entertainment Inc. ("US Golf Inc.")
proposed Exchange Agreements with (i) the stockholders of U.S. Golf and
Entertainment Corp. ("US Golf Corp.", Note 10), a Delaware corporation, whereby
the stockholders of US Golf Corp. would exchange their 1,045,000 shares of
common stock and 2,020,000 warrants for 1,045,000 shares of US Golf, Inc's
common stock and 2,020,000 warrants and (ii) the general and limited partners of
the Partnership, whereby the partners would exchange their partnership interests
for an aggregate of 1,045,000 shares of common stock of US Golf Inc.
b. Method of depreciation
Depreciation and amortization of property and equipment has been calculated
on the straight-line method for financial reporting purposes. For tax reporting
purposes, the Partnership uses the straight-line or accelerated methods of
depreciation.
Expenditures for maintenance, repairs, renewal and betterments are reviewed
by the Partnership and only those expenditures representing improvements to
property and equipment are capitalized. At the time property and equipment are
retired or otherwise disposed of, the cost and accumulated depreciation are
eliminated from the asset and accumulated depreciation accounts and the gain or
loss on such disposition is reflected in income.
The Partnership adopted Financial Accounting Standards ("FAS") No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of" for the year ended December 31, 1995. The adoption of FAS 121
had no material effect on the financial statements.
c. Income taxes
The Partnership does not incur any income taxes. Its earnings and losses are
included in the personal returns of the partners and taxed depending on their
personal tax situation. The financial statements of the Partnership do not
reflect a provision for income taxes. Reference is made to Note 10 for pro forma
income tax adjustments.
d. Fair value of financial instruments
Effective for fiscal years ending after December 15, 1995, Statement of
Financial Accounting Standards No. 107 requires entities with total assets less
than $150 million to disclose the fair value of financial instruments recognized
in the balance sheet. At December 31, 1995, the carrying amounts of the
Company's financial instruments, including cash, receivables, accounts payable,
and notes and loans payable approximate fair value because of the short maturity
of those instruments.
e. Revenue recognition
Revenue is recognized by the Partnership when its services are rendered to
its customers. Revenues from annual membership and the sale of gift certificates
are deferred as unearned income at the time of receipt and are credited to
income when earned on a straight-line basis or redeemed.
f. Interim financial information
The accompanying financial statements as of March 31, 1996 and the three
months then ended, are un- audited but, in the opinion of management of the
Partnership, reflects all adjustments (consisting of normal and recurring
adjustments) necessary for a fair presentation.
F-9
<PAGE>
COMMACK GOLF AND FAMILY RECREATION CENTER, L.P.
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - (Continued)
1. Summary of Significant Accounting Policies - (Continued)
The financial position as of March 31, 1996, and the results of operations
and cash flows for the three months then ended are not necessarily indicative of
the results that may be expected for the entire year.
2. CONSTRUCTION BOND RECEIVABLE
In February, 1995, the Partnership was required to post a $65,000
construction bond to insure the completion of various building improvements
necessary to attain its certificate of occupancy. The bond was refunded to the
Partnership in January, 1996.
3. DUE FROM GENERAL PARTNERS
The amounts due from the General Partners, aggregating $15,588, at December
31, 1995 and March 31, 1996 (unaudited) are due on demand and non-interest
bearing.
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31, 1995 and
March 31, 1996 (unaudited):
<TABLE>
<CAPTION>
Estimated
useful
lives 1995 1996
-------------- ------------ ------------
(unaudited)
<S> <C> <C> <C>
Leasehold improvements ................... 15 years (*) $2,873,790 $2,881,208
Furniture and fixtures ................... 7 years 34,798 34,798
Machinery and equipment .................. 5 years 54,272 54,272
---------- ----------
2,962,860 2,970,278
Accumulated depreciation and amortization . 162,898 214,874
---------- ----------
$2,799,962 $2,755,404
========== ==========
</TABLE>
(*) Over life of lease (Note 9).
5. DEFERRED COSTS
Deferred costs consist substantially of costs to acquire the land lease.
These costs are being amortized on a straight-line basis over the life of the
lease (fifteen years).
6. NOTES PAYABLE -- BANK
The Partnership, at December 31, 1995 and March 31, 1996 (unaudited) has a
$215,000 note payable to a bank which bears interest at the rate of 10 3/4 % and
10 1/2 % per annum, respectively. The note is payable on demand and is
collateralized by all the assets of the Partnership. The note is guaranteed by
certain general and limited partners.
In addition, the Partnership borrowed $110,000 from another bank. This note
bears interest at the rate of 1 1/2 % above the bank's prime interest rate per
annum (10.25% at December 31, 1995 and 10% at March 31, 1996 (unaudited). The
note, as amended, matures on July 16, 1996 and is guaranteed by certain general
and limited partners.
7. DUE TO GENERAL AND LIMITED PARTNERS
The loans payable to the general and limited partners as at December 31, 1995
and March 31, 1996 (un- audited) are non-interest bearing and are payable on
demand.
F-10
<PAGE>
COMMACK GOLF AND FAMILY RECREATION CENTER, L.P.
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - (Continued)
8. LOAN PAYABLE -- US GOLF CORP.
In March, 1996, the Partnership borrowed $41,200 from US Golf Corp. The loan
is due on demand and is non-interest bearing. Reference is made to Note 10 in
connection with the proposed acquisition of the Partners' interests in the
Partnership.
9. COMMITMENTS AND CONTINGENCIES
The Partnership leases its land under a ground lease for an initial term of
15 years, with two successive renewal periods of five years each. The lease is
scheduled to expire in April, 2010. Future minimum rentals required as of
December 31, 1995 and March 31, 1996 (unaudited) under the lease are as follows:
1995 1996
------------ -----------
1996 ........ $ 483,000 $ --
1997 ........ 500,000 496,000
1998 ........ 509,000 500,000
1999 ........ 523,000 513,000
2000 ........ 537,000 526,000
2001 ........ -- 540,000
Thereafter .. 5,670,000 5,535,000
---------- ----------
$8,222,000 $8,110,000
========== ==========
The Partnership records a liability for deferred rent costs to the extent
that the rental commitment, amortized on a straight-line basis over the term
of the lease, exceeds actual lease payments.
Rental payments under the lease ranges from $450,000 to $665,000 per
annum. The lease also provides for rent increases based upon various
percentages over stated gross revenue of the Partnership. The Partnership is
responsible for all related rental expenses on the property. Rent expense
approximated $469,000 for the year ended December 31, 1995 and $141,000
(unaudited) for the three months ended March 31, 1996.
A lien was filed on October 3, 1995 on the Partnership's leased property
to which the Partnership may be obligated to indemnify. A bond of $31,000 was
posted pursuant to a court issued order. The Partnership's Management does
not anticipate any future adverse effect on the Partnership's operations and
cash flow.
10. UNAUDITED PRO FORMA BALANCE SHEET
US Golf Corp. was originally incorporated in November, 1995 under the name of
United Acquisition I Corp.. US Golf Corp., since inception through March 31,
1996, basically has had no operations other than a private sale of its common
shares in March, 1996, when it issued 545,000 common shares and 520,000 warrants
for $52,000 in cash and for services rendered valued at $2,500. The warrants are
exercisable at $1.50 and expire in April, 2000. The cost of the private sale
aggregating $10,000 was charged to paid-in-capital.
On May 13, 1996, US Golf Corp. completed a private placement of 500,000 units
for $500,000, each unit consisting of one share of common stock and three
warrants. The warrants are exercisable to purchase one share of common stock at
a price of $2.50 per share.
US Golf Inc. was incorporated in the state of Delaware on May 17, 1996. On
May 30, 1996, US Golf Inc. proposed Exchange Agreements with (i) the
stockholders of US Golf Corp., whereby the stockholders of US Golf Corp. would
exchange their 1,045,000 shares of common stock and 2,020,000 warrants for
1,045,000 shares of US Golf, Inc.'s common stock and 2,020,000 warrants
exercisable at $6.00 per share and (ii) the general and limited partners of the
Partnership, whereby the partners would exchange their partnership interests for
an aggregate of 1,045,000 shares of common stock of US Golf Inc. (Note 11).
F-11
<PAGE>
COMMACK GOLF AND FAMILY RECREATION CENTER, L.P.
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - (Continued)
10. Unaudited Pro Forma Balance Sheet - (Continued)
The pro forma balance sheet has been prepared as of March 31, 1996 to (1)
combine the Partnership, US Golf Corp. and US Golf Inc. (collectively the
"Company") (Note 1a), (2) to give effect to the private placement of 500,000
units on May 13, 1996, and (3) to give effect to the deferred tax benefit
resulting from presenting the financial statements as if the Partnership was a
corporation. The pro forma Balance Sheet assumes the transactions set forth in
the Exchange Agreements will be consummated.
A reconciliation of the Partnership capital at March 31, 1996 and the pro
forma shareholders' equity is as follows:
<TABLE>
<CAPTION>
<S> <C>
Partners capital at March 31, 1996 (unaudited) ........................................ $1,585,531
----------
US Golf Corp. shareholders equity after the issuance of shares and warrants in March,
1996, net of operating losses of $2,694 ............................................... 41,806
Proceeds from issuance of shares and warrants in May, 1996 ............................. 500,000
Pro forma income tax credit resulting from the recording of the deferred income tax asset 236,000
----------
Total adjustment ..................................................................... 777,806
----------
Pro forma shareholders' equity at March 31, 1996 (unaudited) ........................... $2,363,337
==========
</TABLE>
The unaudited details of the proforma shareholders' equity at March 31,
1996 is as follows:
<TABLE>
<CAPTION>
<S> <C>
Preferred stock - $.001 par value:
Authorized - 1,000,000 shares
Issued and outstanding - shares - none
Common stock - par value, $.001 per share:
Authorized - 20,000,000 shares
Issued and outstanding - 2,090,000 shares .................................... $ 2,090
Additional paid-in-capital ........................................................ 2,718,410
Deficit ........................................................................... (357,163)
----------
Pro forma shareholders' equity at March 31, 1996 (unaudited)........................ $2,363,337
==========
</TABLE>
Proforma loss per share is based upon the aggregate number of shares
outstanding at March 31, 1996.
11. SUBSEQUENT EVENT (UNAUDITED)
On May 23, 1996, the Company, entered into a letter of intent to sell, on a
best efforts basis, a minimum 850,000 shares of common stock and 1,700,000
warrants and a maximum of 1,000,000 shares of common stock and 2,000,000
warrants. The common shares and warrants will be offered to the public at $5.60
per share and $.10 per warrant, respectively.
Each warrant, upon its exercise, will entitle the holder thereof to purchase
one share of common stock and will be exercisable during the period from
issuance up to and including the fifth anniversary of the effective date of the
public offering. The warrant exercise price will be $6.00 per share. The Company
may, in certain circumstances, redeem all, but not less than all, of the
warrants which then are outstanding and unexercised in exchange for the payment
of $0.10 per warrant. Subject to compliance with applicable regulatory
requirements, the Company will pay the underwriter commission of seven percent
upon the exercise of any of the warrants. No such commission is payable in
respect of the exercise of the underwriter warrants. Any costs incurred by the
Company in connection with the redemption or exercise of any of the warrants
will be borne by the Company. The warrants will contain anti-dilution
provisions.
The gross commission to which the underwriter will be entitled to will be a
sum equal to ten percent of the gross proceeds from the public offering. The
Company also will pay to the underwriter a non-accountable expense allowance
equal to three percent of the gross proceeds of the offering.
F-12
<PAGE>
COMMACK GOLF AND FAMILY RECREATION CENTER, L.P.
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - (Continued)
11. Subsequent Event (unaudited) - (Continued)
The Company will sell to the underwriter (a) for $50, an option to purchase
ten percent of the number of shares of common stock sold in the offering at
$6.72 per share; and (b) for $50, an option to purchase ten percent of the
number of warrants sold in the offering at $.12 per warrant, which options shall
be exercisable for a period of four years commencing one year after the
effective date of the public offering.
The Company, prior to the effective date of the public offering, will enter
into employment agreements with the President and the Senior Vice President for
a period of five years, commencing June 1, 1996. The Company will cause at least
$1,000,000 of key person life insurance to be written on the life of the
President, the proceeds of which will be payable to the Company and will be kept
in force for the term of the employment agreement between the Company and the
President.
12. STOCK OPTION PLANS
In May, 1996, the Board of Directors of the Company (Note 10) adopted two
stock option plans pursuant to which an aggregate of 500,000 common shares may
be granted. Under one of the Company's stock option plans, 400,000 common shares
are reserved for issuance under incentive stock or non-qualified options that
may be granted to employees, consultants and directors of the Company. The other
plan, the "Non-Employee Director Stock Option Plan" provides for the reserves
for future issuance of up to 100,000 common shares to the Company's independent
unaffiliated members of the Board of Directors. Options to purchase 20,000
shares have been granted under the Non-Employee Director Stock Option Plan.
F-13
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
============================================================================== ==================================================
No person is authorized in connection with any offering made hereby to
give any information or to make any representation not contained in this
Prospectus, and, if given or made, such information or representation must
not be relied upon as having been authorized by the Company or any U.S. GOLF ENTERTAINMENT INC.
Underwriter. This Prospectus does not constitute an offer to sell or a
solicitation of any offer to buy any of the securities offered hereby to any
person in any jurisdiction in which it is unlawful to make such an offer or
solicitation. Neither the delivery of this Prospectus nor any sale made
hereunder shall under any circumstance create any implication that the
information contained herein is correct as of any date subsequent to the date Minimum - 850,000 Shares of Common Stock
hereof or that there has been no change in the affairs of the Company since and 1,700,000 Class A Warrants
such date.
------ Maximum - 1,000,000 Shares of Common Stock
TABLE OF CONTENTS and 2,000,000 Class A Warrants
Page
--------
Prospectus Summary ........................ 3
Risk Factors .............................. 6
Use of Proceeds ........................... 13
Dilution. ................................. 14
Capitalization. ........................... 15
Dividend Policy ........................... 16
Selected Financial Data ................... 16 --------------
Management's Discussion and Analysis of PROSPECTUS
Financial Condition and Results of Operations 17 --------------
Business .................................. 20
Management ................................ 24
Principal Stockholders .................... 27
Certain Transactions ...................... 28
Description of Securities ................. 28
Shares Eligible for Future Sale ........... 30
Selling Stockholders ...................... 32
Underwriting .............................. 34
Legal Matters ............................. 36 A.R. Baron & Co., Inc.
Experts ................................... 36
Additional Information .................... 36
Financial Statements ...................... F-1
__________, 1996
------
Until 25 days after the announcement of the termination of this Offering,
all dealers effecting transactions in registered securities, whether or not
participating in this distribution, may be required to deliver a prospectus.
This is in addition to the obligation of dealers to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
============================================================================== ==================================================
</TABLE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the "DGCL") gives a
corporation power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually
and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. The same Section also gives a corporation
power to indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action or suit by or in
the right of the corporation to procure a judgment in its favor by reason of
the fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise for expenses (including attorneys'
fees) actually and reasonably incurred by him in connection with the defense
or settlement of such action or suit if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests
of the corporation and except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that
the Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability,
but in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper. Also, the Section states
that, to the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
such action, suit or proceeding, or in defense of any claim, issue or matter
therein, he shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith.
Article 10 of the Registrant's Certificate of Incorporation provides that:
The corporation shall, to the fullest extent permitted by the provisions of
Section 145 of the DGCL, as the same may be amended and supplemented,
indemnify any and all persons whom it shall have power to indemnify under
said section from and against any and all of the expenses, liabilities, or
other matters referred to in or covered by said section, and the
indemnification provided for herein shall not be deemed exclusive of any
other rights to which those indemnified may be entitled under any bylaw,
agreement, vote of stockholders or disinterested directors or otherwise, both
as to action in his official capacity and as to action in another capacity
while holding such office, and shall continue as to a person who has ceased
to be a director, officer, employee, or agent and shall inure to the benefit
of the heirs, executors, and administrators of such a person."
The Registrant's by-laws provide language substantially in the following
form: (a) The Corporation shall, to the maximum extent permitted from time to
time under the law of the State of Delaware, indemnify and upon request shall
advance expenses to any person who is or was a party to any threatened,
pending or completed action, suit, proceeding or claim, whether civil,
criminal, administrative or investigative, by reason of the fact that he or
she is or was or has agreed to be a trustee, director, officer, employee or
agent of the Corporation, or is or was serving at the request of the
Corporation as a trustee, director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees and expenses), judgment, fines, penalties
and amounts paid in settlement incurred in connection with the investigation,
preparation to defend or defense of any such action, suit, proceeding or
claim. Such indemnification shall not be exclusive of other indemnification
rights arising under any by-law, agreement, vote of directors or stockholders
or otherwise and shall inure to the benefit of the heirs and legal
representatives of such person; (b) The Corporation may purchase and maintain
insurance on any person who is or was a trustee, director, officer,
employee or agent of the Corporation or is or was serving at the request of
the Corporation as a trustee, director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
any liability incurred by him in any such position or arising out of his
status as such, whether or not the Corporation would have the power to
indemnify him against such liability.
II-1
<PAGE>
Section 102(b)(7) of the DGCL, enables corporations to adopt provisions in
their certificates of incorporation eliminating or limiting the personal
liability of directors to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director provided that such
provision shall not eliminate or limit the liability of a director: (i) for
any breach of the director's duty of loyalty to the corporation or its
stockholders: (ii) for acts and omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; (iii) under section 174
of the DGCL; or (iv) for any transaction from which the director derived an
improper personal benefit. Such provision does not eliminate or limit the
liability of a director for any act or omission occurring prior to the date
when such provision became effective. Section 102(b)(7) has no effect on the
availability of equitable remedies, such as injunctions or rescission, for
breach of fiduciary duty. The registrant's Certificate of Incorporation
provides that the personal liability of the directors of the corporation is
eliminated to the fullest extent permitted by the provisions of paragraph (7)
of subsection (b) of Section 102 of the DGCL, as the same may be amended or
supplemented.
See [Section __] of the form of the Underwriting Agreement filed as
Exhibit 1 to the Registration Statement for certain provisions relating to
indemnification of the registrant and its officers, directors and controlling
persons.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses payable by the
Registrant, in connection with the sale and distribution of the securities
being registered, other than underwriting discounts and commissions. All of
the amounts shown are estimated except the Securities and Exchange Commission
registration fee, the NASDAQ listing fee, the NASD filing fee and the
Underwriter's non-accountable expense allowance.
Minimum Maximum
---------- -----------
SEC registration fee .......................... $ 13,141 $ 13,141
NASDAQ listing fee ............................ 10,000 10,000
NASD filing fee ............................... 4,311 4,311
Blue Sky fees and expenses .................... 30,000 30,000
Printing and engraving expenses ............... 100,000 100,000
Legal fees and expenses ....................... 140,000 140,000
Accounting fees and expenses .................. 50,000 50,000
Underwriter commissions ....................... 493,000 580,000
Underwriter's non-accountable expense allowance . 147,900 174,000
Miscellaneous ................................. 2,548 2,548
--------- -----------
Total .................................... $990,900 $1,104,000
========= ===========
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
Within the past three years, the Registrant has issued securities without
registration under the Act, as follows:
1. In November, 1995, U.S. Golf Corp. issued and sold 545,000 shares of
common stock and 520,000 common stock purchase warrants to various
founding stockholders for an aggregate purchase price of $54,500.
2. In May, 1996, U.S. Golf Corp. issued and sold 500,000 shares of common
stock and 1,500,000 common stock purchase warrants to various
purchasers in connection with a private financing for an aggregate
purchase price of $500,000.
The issuances described above were deemed to be exempt from registration
under the Securities Act in reliance on Section 4(2) of such Act as transactions
by an issuer not involving any public offering. In addition, the recipients of
securities in each such transaction represented their intentions to acquire the
securities for invest ment only and not with a view to or for sale in connection
with any distribution thereof and appropriate legends were affixed to the
certificates issued in such transactions. All recipients had adequate access,
through their relationships with the Registrant or otherwise to information
about the Registrant.
II-2
<PAGE>
ITEM 27. EXHIBITS
<TABLE>
<CAPTION>
<S> <C>
*1.1 Form of Underwriting Agreement
3.1 Certificate of Incorporation of the Registrant
3.2 By-Laws of the Registrant
*4.1 Form of Common Stock Certificate
*4.2 Form of Stock Purchase Option
*4.3 Form of Warrant Purchase Option
*4.4 Form of Warrant Agreement (including Form of Class A Warrant) among the Registrant, the Underwriter
and the Warrant Agent
*4.5 Form of Escrow Agreement among the Registrant, the Underwriter, and the Escrow Agent
*5.1 Opinion and Consent of Ruskin, Moscou, Evans & Faltischek, P.C.
10.1 1996 Stock Option Plan
10.2 1996 Non-Employee Director Stock Option Plan
*10.3 Form of Merger and Acquisition Agreement between the Registrant and the Underwriter
10.4 Form of Exchange Agreement between Registrant and the partners of the Commack Golf & Family Recreation
Center, L.P.
10.5 Form of Exchange Agreement between Registrant and the shareholders of U.S. Golf and Entertainment Corp.
10.6 Form of Employment Agreement between the Registrant and an Executive Officer
*10.7 Lease between the Registrant and ___________________________
*10.8 Form of Consulting Agreement between the Registrant and the Underwriter
*22.1 List of Significant Subsidiaries of Registrant
24.1 Consent of Farber, Blicht & Eyerman, L.L.P., Independent Certified Public Accountants
*24.2 Consent of Ruskin, Moscou, Evans & Faltischek, P.C. (included in Exhibit 5)
25.1 Power of Attorney (included on signature page)
</TABLE>
- ------
* To be filed by amendment
ITEM 28. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-3
<PAGE>
The undersigned Registrant hereby undertakes to provide to the
Underwriter, at the closing specified in the Underwriting Agreement,
certificates in such denominations and registered in such names as required
by the Underwriter to permit prompt delivery to each purchaser.
The undersigned Registrant hereby undertakes that:
(1) For the purpose of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of this registration
statement as of the time the Commission declared it effective.
(2) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities
offered in the registration statement and that the offering of the
securities at that time shall be deemed to be the initial bona fide
offering thereof.
------
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Act, the Registrant has duly caused
this Registration Statement to be signed on its behalf by the undersigned
thereunto duly authorized, in Commack, New York, on May 30, 1996.
U.S. GOLF AND ENTERTAINMENT INC.
By: /s/ EDWARD C. ROSS
-----------------------------------
Edward C. Ross, President
Dated: May 30, 1996
Pursuant to the requirements of the Act, this Registration Statement has been
signed by the following persons in the capacities and on the dates indicated.
Each person whose signature appears below hereby authorizes each of Edward C.
Ross and Chuck Workman with full power of substitution to execute in the name of
such person and to file any amendment or post-effective amendment to this
Registration Statement (or any Registration Statement filed pursuant to Rule
462) making such changes in this Registration Statement as the Registrant deems
appropriate and appoints each of Edward C. Ross and Chuck Workman with full
power of substitution, attorney-in-fact to sign and to file any amendment and
post-effective amendment to this Registration Statement.
<TABLE>
<CAPTION>
Signature Title Date
----------------------- -------------------------------------- ----------------
<S> <C> <C>
/s/ EDWARD C. ROSS Chairman of the Board, President and
- ------------------------ Director (Principal Operating and
Edward C. Ross Accounting Officer) May 30, 1996
/s/ CHUCK WORKMAN Senior Vice President and Director May 30, 1996
- ------------------------
Chuck Workman
/s/ HAROLD MARKOWITZ Director May 30, 1996
- ------------------------
Harold Markowitz
/s/ GARRY HOWATT Director May 30, 1996
- ------------------------
Garry Howatt
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
<S> <C> <C>
Exhibit Page
------- ----
*1.1 Form of Underwriting Agreement
3.1 Certificate of Incorporation of the Registrant
3.2 By-Laws of the Registrant
*4.1 Form of Common Stock Certificate
*4.2 Form of Stock Purchase Option
*4.3 Form of Warrant Purchase Option
*4.4 Form of Warrant Agreement (including Form of Class A Warrant) among the Registrant, the
Underwriter and the Warrant Agent
*4.5 Form of Escrow Agreement among the Registrant, the Underwriter, and the Escrow Agent
*5.1 Opinion and Consent of Ruskin, Moscou, Evans & Faltischek, P.C.
10.1 1996 Stock Option Plan
10.2 1996 Non-Employee Director Stock Option Plan
*10.3 Form of Merger and Acquisition Agreement between the Registrant and the Underwriter
10.4 Form of Exchange Agreement between Registrant and the partners of the Commack Golf &
Family Recreation Center, L.P.
10.5 Form of Exchange Agreement between Registrant and the shareholders of U.S. Golf and
Entertainment Corp.
10.6 Form of Employment Agreement between the Registrant and an Executive Officer
*10.7 Lease between the Registrant and ___________________________
*10.8 Form of Consulting Agreement between the Registrant and the Underwriter
*22.1 List of Significant Subsidiaries of Registrant
24.1 Consent of Farber, Blicht & Eyerman, L.L.P., Independent Certified Public Accountants
*24.2 Consent of Ruskin, Moscou, Evans & Faltischek, P.C. (included in Exhibit 5)
25.1 Power of Attorney (included on signature page)
</TABLE>
- ------
* To be filed by amendment
<PAGE>
CERTIFICATE OF INCORPORATION
OF
U.S. GOLF AND ENTERTAINMENT INC.
--------------------------------------------
Adopted in accordance with the provisions
of Sections 242 and 245 of the General
Corporation Law of the State of Delaware
--------------------------------------------
The undersigned, a natural person, for the purpose of organizing a
corporation for conducting the business and promoting the purposes hereinafter
stated, under the provisions and subject to the requirements of the laws of the
State of Delaware (particularly Chapter l, Title 8 of the Delaware code and the
acts amendatory thereof and supplemental thereto, and know, identified and
referred to as the "General Corporation Law of the State of Delaware"), hereby
certifies as follows:
ARTICLE FIRST: The name of the corporation (hereinafter called the
"Corporation") is U.S. GOLF AND ENTERTAINMENT INC.
ARTICLE SECOND: The address of its registered office in the State of
Delaware is No. 1209 Orange Street, in the City of Wilmington, County of New
Castle. The name of its registered agent at such address is The Corporation
Trust Company.
ARTICLE THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
ARTICLE FOURTH: The total number of shares which the Corporation shall
have authority to issue is Twenty-One Million (21,000,000), consisting of Twenty
Million (20,000,000) shares of Common Stock, all of a par value of $.001 each,
and One Million (1,000,000) shares of Preferred Stock, all of a par value of
$.001 each.
<PAGE>
A. Preferred Stock
1. The preferred stock of the Corporation may be issued from
time to time in one or more series of any number of shares, provided that the
aggregate number of shares issued and not cancelled in any and all such series
shall not exceed the total number of shares of preferred stock hereinabove
authorized.
2. Authority is hereby vested in the Board of Directors from
time to time to authorize the issuance of one or more series of preferred stock
and, in connection with the creation of such series, to fix by resolution or
resolutions providing for the issuance of shares thereof the characteristics of
each such series including, without limitation, the following:
(a) the maximum number of shares to constitute such
series, which may subsequently be increased or decreased (but
not below the number of shares of that series then
outstanding) by resolution of the Board of Directors, the
distinctive designation thereof and the stated value thereof
if different than the par value thereof;
(b) whether the shares of such series shall have
voting powers, full or limited, or no voting powers, and if
any, the terms of such voting powers;
(c) the dividend rate, if any, on the shares of such
series, the conditions and dates upon which such dividends
shall be payable, the preference or relation which such
dividends shall bear to the dividends payable on any other
class or classes or on any other series of capital stock and
whether such dividend shall be cumulative or noncumulative;
(d) whether the shares of such series shall be
subject to redemption by the Corporation, and, if made subject
to redemption, the times, prices and other terms, limitations,
restrictions or conditions of such redemption;
(e) the relative amounts, and the relative rights or
preferences, if any, of payment in respect of shares of such
series, which the holders of shares of such series shall be
entitled to receive upon the liquidation, dissolution or
winding-up of the Corporation;
(f) whether or not the shares of such series shall be
subject to the operation of a retirement or sinking fund and,
if so, the extent to and manner in which any such retirement
or sinking fund shall be applied to the purchase or redemption
of the shares of such series for retirement or to other
corporate purposes and the terms and provisions relative to
the operation thereof;
-2-
<PAGE>
(g) whether or not the shares of such series shall be
convertible into, or exchangeable for, shares of any other
class, classes or series, or other securities, whether or not
issued by the Corporation, and if so convertible or
exchangeable, the price or prices or the rate or rates of
conversion or exchange and the method, if any, of adjusting
same;
(h) the limitations and restrictions, if any, to be
effective while any shares of such series are outstanding upon
the payment of dividends or the making of other distributions
on, and upon the purchase, redemption or other acquisition by
the Corporation of, the Common Stock (as defined below) or any
other class or classes of stock of the Corporation ranking
junior to the shares of such series either as to dividends or
upon liquidation, dissolution or winding-up;
(i) the conditions or restrictions, if any, upon the
creation of indebtedness of the Corporation or upon the
issuance of any additional stock (including additional shares
of such series or of any other series or of any other class)
ranking on a parity with or prior to the shares of such series
as to dividends or distributions of assets upon liquidation,
dissolution or winding-up; and
(j) any other preference and relative, participating,
optional or other special rights, and the qualifications,
limitations or restrictions thereof, as shall not be
inconsistent with law, this ARTICLE FOURTH or any resolution
of the Board of Directors pursuant hereto.
B. Common Stock
1. The common stock of the Corporation may be issued from time
to time in any number of shares, provided that the aggregate number of shares
issued and not cancelled shall not exceed the total number of shares of common
stock hereinabove authorized ("Common Stock").
2. Unless expressly provided by the Board of Directors of the
Corporation in fixing the voting rights of any series of Preferred Stock, the
holders of the outstanding shares of Common Stock shall exclusively possess all
voting power for the election of directors and for all other purposes, each
holder of record of
-3-
<PAGE>
shares of Common Stock being entitled to one vote for each share of such stock
standing in his name on the books of the Corporation.
3. Subject to the prior rights of the holders of Preferred
Stock now or hereafter granted pursuant to this ARTICLE FOURTH, the holders of
Common Stock shall be entitled to receive, when and as declared by the Board of
Directors, out of funds legally available for that purpose, dividends payable
either in cash, stock or otherwise.
4. In the event of any liquidation, dissolution or winding-up
of the Corporation, either voluntary or involuntary, after payment shall have
been made in full to the holders of Preferred Stock of any amounts to which they
may be entitled, the holders of Common Stock shall be entitled, to the exclusion
of the holders of Preferred Stock of any and all series, to share, ratably
accordingly to the number of shares of Common Stock held by them, in all
remaining assets of the Corporation available for distribution to its
stockholders."
ARTICLE FIFTH: The name and the mailing address of the
incorporator is: David R. Fishkin, Esq., c/o Ruskin, Moscou,
Evans & Faltischek, P.C., 170 Old Country Road, Mineola, New York
11501.
ARTICLE SIXTH: The Corporation shall have perpetual
existence.
ARTICLE SEVENTH: Whenever a compromise or arrangement is proposed
between the Corporation and its creditors or any class of them and/or between
the Corporation and its stockholders or any class of them, any court of
equitable jurisdiction within the State of Delaware may, on the application in a
summary way of the Corporation or of any creditor or stockholder thereof or on
the application of any receiver or receivers appointed for this corporation
under the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for the Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of the Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of the
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of the Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of the Corporation, as the case may be,
and also on the Corporation.
-4-
<PAGE>
ARTICLE EIGHTH: For the management of the business and for the conduct
of the affairs of the Corporation, and in further definition, limitation, and
regulation of the powers of the corporation and of its directors and of its
stockholders or any class thereof, as the case may be, it is further provided:
A. 1. The business and affairs of the Corporation shall be managed by
or under the direction of a Board of Directors consisting of such number of
directors as is determined from time to time by resolution adopted by
affirmative vote of a majority of the entire Board of Directors; provided,
however, that in no event shall the number of directors be less than three (3).
A director shall hold office until the annual meeting for the year in which his
or her term expires and until his or her successor shall be elected and shall
qualify, subject, however, to prior death, resignation, retirement,
disqualification or removal from office. Except as otherwise required by law,
any vacancy on the Board of Directors that results from an increase in the
number of directors and any other vacancy occurring in the Board of Directors
shall be filled by a majority of the directors then in office, even if less than
a quorum, or by a sole remaining director. Any director elected to fill a
vacancy not resulting from an increase in the number of directors shall have the
same remaining term as that of his or her predecessor.
2. Any director, or the entire Board of Directors, may be
removed from office only for cause and only by the affirmative vote of not less
than two-thirds (2/3) of the votes entitled to be cast by the holders of all of
the then outstanding shares of Voting Stock (as defined in ARTICLE NINTH,
Section C), voting together as one class; provided, however, that if a proposal
to remove a director is made by or on behalf of an Interested Person (as defined
in ARTICLE NINTH, Section C) or a director who is not an Independent Director
(as defined in ARTICLE NINTH, Section C), then such removal shall also require
the affirmative vote of not less than a majority of the votes entitled to be
cast by the holders of all of the then outstanding shares of Voting Stock,
voting together as one class, excluding Voting Stock beneficially owned by such
Interested Person.
B. In furtherance and not limitation of the powers conferred by
statute, the Board of Directors is expressly authorized:
-5-
<PAGE>
1. To make, alter, amend or repeal the By-Laws of the
Corporation. The holders of shares of Voting Stock shall, to the extent such
power is at the time conferred on them by applicable law, also have the power to
make, alter, amend or repeal the ByLaws of the Corporation, provided that any
proposal by or on behalf of an Interested Person or a director who is not an
Independent Director to make, alter, amend or repeal the By-Laws shall require
approval by the affirmative vote described in ARTICLE NINTH, Section A, unless
either (a) such action has been approved by a majority of the Board of Directors
prior to such Interested Person first becoming an Interested Person; or (b)
prior to such Interested Person first becoming an Interested Person, a majority
of the Board of Directors has approved such Interested Person becoming an
Interested Person and, subsequently, a majority of the Independent Directors has
approved such action.
2. To authorize and cause to be executed mortgages and
liens upon the real and personal property of the Corporation.
3. To set apart out of any of the funds of the Corporation
available for dividends a reserve or reserves for any proper purpose and to
abolish any such reserve in the manner in which it was created.
4. By a majority of the whole Board of Directors, to designate
one or more committees, each committee to consist of one or more of the
directors of the Corporation. The Board of Directors may designate one or more
directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. The By-Laws may provide
that in the absence or disqualification of a member of a committee, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any such
absent or disqualified member. Any such committee, to the extent provided in the
resolution of the Board of Directors, or in the By-Laws of the Corporation,
shall have and may exercise all the powers and authority of the Board of
Directors in the management of the business and affairs of the Corporation, and
may authorize the seal of the Corporation to be affixed to all papers which may
require it; but no such committee shall have the power or authority in reference
to amending the Certificate of Incorporation (except that a committee may, to
the extent authorized in the resolution or resolutions providing for the
issuance of shares of stock adopted by the Board of Directors as provided in
ARTICLE FOURTH hereof, fix the designations and any of the preferences or rights
of such shares relating to dividends, redemption, dissolution, any distribution
of assets of the Corporation or the conversion into, or the exchange of such
shares for, shares of any other class or classes or any other series of the same
or any other class or classes of stock of the Corporation or fix the number of
shares of any series of stock or authorize the increase or decrease of the
shares of any series), adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all or
-6-
<PAGE>
substantially all of the Corporation's property and assets, recommending to the
stockholders a dissolution of the Corporation or a revocation of a dissolution,
or amending the By-Laws of the Corporation; and, unless the resolution or
By-Laws expressly so provide, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock or to adopt
a certificate of ownership and merger pursuant to Section 253 of the General
Corporation Law of the State of Delaware.
5. When and as authorized by the stockholders in accordance
with statute, to sell, lease or exchange all or substantially all of the
property and assets of the Corporation, including its goodwill and its corporate
franchises, upon such terms and conditions and for such consideration, which may
consist in whole or in part of money or property including shares of stock in,
and/or other securities of, any other corporation or corporations, as the Board
of Directors shall deem expedient and for the best interests of the Corporation.
C. In addition to any other considerations which the Board of Directors
may lawfully take into account, in determining whether to take or to refrain
from taking corporate action on any matter, including proposing any matter to
the stockholders of the Corporation, the Board of Directors may take into
account the long-term as well as the short-term interests of the Corporation and
its stockholders (including the possibility that these interests may be best
served by the continued independence of the Corporation), customers, employees
and other constituencies of the Corporation and its subsidiaries, including the
effect upon communities in which the Corporation and its subsidiaries do
business. In so evaluating any such determination, the Board of Directors shall
be deemed to be performing their duties and acting in good faith and in the best
interests of the Corporation within the meaning of Section 145 of the General
Corporation Law of the State of Delaware, or any successor provision.
D. Subject to the rights of holders of any class or series of stock
having a preference over the Common Stock as to dividends or upon liquidation,
dissolution or winding-up, nominations for the election of directors may be made
by the Board of Directors or by any stockholder entitled to vote in the election
of directors generally. However, any stockholder entitled to vote in the
election of directors generally may nominate one or more persons for election as
directors at an annual meeting only pursuant to the Corporation's notice of such
meeting or if written notice of such stockholder's intent to make such
nomination or nominations has been received by the Secretary of the Corporation
not less than sixty nor more than ninety days prior to the first anniversary of
the preceding year's annual meeting; provided, however, that in the event that
the date of the annual meeting is advanced by more than thirty (30) days or
delayed by more than sixty (60) days from such anniversary, notice by the
-7-
<PAGE>
stockholder to be timely must be so received not earlier than the ninetieth day
prior to such annual meeting and not later than the close of business on the
later of (1) the sixtieth day prior to such annual meeting; or (2) the tenth day
following the day on which notice of the day of the annual meeting was mailed or
public disclosure thereof was made by the Corporation, whichever first occurs.
For purposes of calculating the first such notice period following adoption of
this Certificate of Incorporation, the first anniversary of the 1995 annual
meeting shall be deemed to be the last day of the twelfth month following the
consummation of the initial public offering of the Corporation's Common Stock.
Each such notice shall set forth: (a) the name and address of the stockholder
who intends to make the nomination and of the person or person to be nominated;
(b) a representation that the stockholder is a holder of record of stock of the
Corporation entitled to vote at such meeting and intends to appear in person or
by proxy at the meeting to nominate the person or persons specified in the
notice; (c) a description of all arrangements or understandings between the
stockholder and each nominee and any other person or persons (naming such person
or persons) relating to the nomination or nominations; (d) the class and number
of shares of the Corporation which are beneficially owned by such stockholder
and the person to be nominated as of the date of such stockholder's notice and
by any other stockholders known by such stockholder to be supporting such
nominees as of the date of such stockholder's notice; (e) such other information
regarding each nominee proposed by such stockholder as would be required to be
included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission; and (f) the consent of each nominee to serve
as a director of the Corporation if so elected.
In addition, in the event the Corporation calls a special meeting of
stockholders for the purpose of electing one or more directors, any stockholder
entitled to vote in the election of directors generally may nominate one or more
persons for election as directors at a special meeting only pursuant to the
Corporation's notice of meeting or if written notice of such stockholder's
intent to make such nomination or nominations, setting forth the information and
complying with the form described in the immediately preceding paragraph, has
been received by the Secretary of the Corporation not earlier than the ninetieth
day prior to such special meeting and not later than the close of business on
the later of (i) the sixtieth day prior to such meeting; or (ii) the tenth day
following the day on which notice of the date of the special meeting was mailed
or public disclosure thereof was made by the Corporation, whichever comes first.
-8-
<PAGE>
No person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the procedures set forth in this
ARTICLE SEVENTH, Section D. The presiding officer of the meeting shall, if the
facts warrant, determine and declare to the meeting that nomination was not made
in accordance with the procedures prescribed by this ARTICLE SEVENTH, Section D,
and if he or she should so determine, the defective nomination shall be
disregarded.
Elections of directors need not be by written ballot unless the By-Laws
of the Corporation shall so provide.
ARTICLE NINTH:
A. Meetings of the stockholders may be held within or without the State
of Delaware, as the By-Laws may provide. Commencing with the date of the
consummation of the initial public offering of the Corporation's Common Stock,
any action required or permitted to be taken by the stockholders of the
Corporation must be effected at a duly called annual or special meeting of such
stockholders and may not be effected by a consent in writing by any such
holders. Subject to the rights of holders of any class or series of stock having
preference over the Common Stock as to dividends or upon liquidation,
dissolution or winding-up, special meetings of the stockholders of the
Corporation may be called only by the holders of a majority of the outstanding
shares of Common Stock or by a majority of the Board of Directors. The books of
the Corporation may be kept (subject to any provision contained in the statutes)
outside the State of Delaware at such place or places as may be designated from
time to time by the Board of Directors or in the By-Laws of the Corporation.
Except as otherwise required by law or by this Certificate of
Incorporation, the holders of not less than a majority in voting power of the
shares entitled to vote at any meeting of stockholders, present in person or by
proxy, shall constitute a quorum, and the act of the holders of a majority in
voting power of the shares present in person or by proxy and entitled to vote on
the subject matter shall be deemed the act of the stockholders. If a quorum
shall fail to attend any meeting, the presiding officer may adjourn the meeting
to another place, date or time. If a notice of any adjourned special meeting of
stockholders is sent to all stockholders entitled to vote thereat, stating that
it will be held with one-third (1/3) in voting power of the shares entitled to
vote thereat constituting a quorum, then except as otherwise required by law,
one-third (1/3) in voting power of the shares entitled to vote at such adjourned
meeting, present in person or by proxy, shall constitute a quorum, and, except
as otherwise required by law or this Certificate of Incorporation, all matters
shall be determined by the holders of a majority in voting power of the shares
present in person or by proxy and entitled to vote on the subject matter.
-9-
<PAGE>
B. At any meeting of the stockholders, only such business shall be
conducted as shall have been properly bought before such meeting. To be properly
bought before an annual meeting, business must be (1) specified in the notice of
meeting (or any supplement thereto) given by or at the direction of the Board of
Directors; (2) otherwise properly brought before the meeting by or at the
direction of the Board of Directors; or (3) otherwise properly brought before
the meeting by a stockholder. For business to be properly brought before an
annual meeting by a stockholder, the stockholders must have given timely notice
thereof in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice must be received not less than sixty (60) days nor more
than ninety days prior to the first anniversary of the preceding year's annual
meeting; provided, however, that in the event that the date of the annual
meeting is advanced by more than thirty (30) days or delayed by more than sixty
(60) days from such anniversary, notice by the stockholder to be timely must be
so received not earlier than the ninetieth day prior to such annual meeting and
not later than the close of business on the later of (1) the sixtieth day prior
to such annual meeting; or (2) the tenth day following the date on which notice
of the date of the annual meeting was mailed or public disclosure thereof was
made, whichever first occurs. For purposes of calculating the first such notice
period following adoption of this Certificate of Incorporation, the first
anniversary of the 1995 annual meeting shall be deemed to be the last day of the
twelfth month following the consummation of the initial public offering of the
Corporation's Common Stock. Each such notice shall set forth as to each matter
the stockholder proposes to bring before the annual meeting: (a) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the meeting; (b) the name and
address, as they appear on the Corporation's books, of the stockholder proposing
such business; (c) the class, series and number of shares of the Corporation
which are beneficially owned by the stockholder; and (d) and material interest
of the stockholder in such business. To be properly brought before a special
meeting (or any supplement thereto) given by or at the direction of the Board of
Directors.
No business shall be conducted at any meeting of the stockholders
except in accordance with the procedures set forth in this ARTICLE NINTH,
Section B. The presiding officer of the meeting shall, if the facts warrant,
determine and declare to the meeting that business was not properly bought
before the meeting and in accordance with the provisions of this ARTICLE NINTH,
Section B, and if he or she should so determine, any such business not properly
brought before the meeting shall not be transacted. Nothing herein shall be
deemed to affect the Corporation's proxy statement pursuant to Rule 14a-8 under
the Securities Exchange Act of 1934, as amended (the "Exchange Act").
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ARTICLE TENTH:
A. In addition to any affirmative vote required by law or this
Certificate of Incorporation or the By-laws of the Corporation, and except as
otherwise expressly provided in Section B of this ARTICLE TENTH, a Business
Transaction (as hereinafter defined) with, or proposed by or on behalf of, any
Interested Person (as hereinafter defined) or any Affiliate (as hereinafter
defined) of any Interested Person or any person who thereafter would be an
Affiliate of such Interested Person shall require approval by the affirmative
vote of not less than two-thirds (2/3) of the votes entitled to be cast by
holders of all the then outstanding Voting Stock, voting together as one class,
excluding Voting Stock beneficially owned by such Interested Person. Such
affirmative vote shall be required notwithstanding the fact that no vote may be
required, or that a lesser percentage may be specified, by law or in any
agreement with any national securities exchange or otherwise.
B. The provisions of Section A of this ARTICLE TENTH shall not
be applicable to any particular Business Transaction, and such Business
Transaction shall require only such affirmative vote, if any, as is required by
law or by any other provision of this Certificate of Incorporation or the
By-Laws of the Corporation, or any agreement with any national securities
exchange, if either (1) the Business Transaction shall have been approved by a
majority of the Board of Directors prior to such Interested Person first
becoming an Interested Person or (2) prior to such Interested Person first
becoming an Interested Person, a majority of the Board of Directors shall have
approved such Interested Person becoming an Interested Person and, subsequently,
a majority of the Independent Directors (as hereinafter defined) shall have
approved the Business Transaction.
C. The following definitions shall apply with respect
to this ARTICLE TENTH.
1. The term "Affiliate" shall mean a person that directly, or
indirectly through one or more intermediaries, controls, or is controlled by, or
is under common control with, a specified person.
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2. A person shall be a "beneficial owner" of any Capital Stock
(a) which such person or any of its Affiliates beneficially owns, directly or
indirectly; (b) which such person or any of its Affiliates has, directly or
indirectly, (i) the right to acquire (whether such right is exercisable
immediately or subject only to the passage of time or the occurrence of one or
more events), pursuant to any agreement, arrangement or understanding or upon
the exercise of conversion rights, exchange rights, warrants or options, or
otherwise, or (ii) the right to vote pursuant to any agreement, arrangement or
understanding; provided, however, that a person shall not be deemed the
beneficial owner of any security if the agreement, arrangement or understanding
to vote such security arises solely from a revocable proxy or consent
solicitation made pursuant to and in accordance with the Exchange Act, and is
not also then reportable on Schedule 13D under the Exchange Act (or a comparable
or successor report); or (c) which is beneficially owned, directly or
indirectly, by any other person with which such person or any of its Affiliates
has any agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of Capital Stock (except to the
extent permitted by the proviso of clause (b)(ii) above). For the purposes of
determining whether a person is an Interested Person pursuant to paragraph (7)
of this Section C, the number of shares of Capital Stock deemed to be
outstanding shall include shares deemed beneficially owned by such person
through application of this paragraph (2) of Section C, but shall not include
any other shares of Capital Stock that may be issuable pursuant to any
agreement, arrangement or understanding, or upon exercise of conversion rights,
warrants or options, or otherwise.
3. The term "Business Transaction" shall mean any of the following
transactions when entered into by the Corporation or a subsidiary of the
Corporation with, or upon a proposal by or on behalf of, any Interested Person
or any Affiliate of any Interested Person:
(a) any merger or consolidation of the Corporation or any
subsidiary with (i) any Interested Person or (ii) any other corporation
which is, or after such merger or consolidation would be, an Affiliate
of an Interested Person;
(b) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of transactions),
except proportionately as a stockholder of the Corporation, to or with
the Interested Person of assets of the Corporation (other than Capital
Stock (as hereinafter defined)) or of any subsidiary of the Corporation
which assets have an aggregate market value equal to ten percent (10%)
or more of the aggregate market value of all the outstanding stock of
the Corporation;
(c) any transaction that results in the issuance of shares or
the transfer of treasury shares by the Corporation or by any subsidiary
of the Corporation of any Capital Stock or any capital stock of such
subsidiary to the Interested Person, except (i) pursuant to the
exercise, exchange or conversion of securities exercisable for,
exchangeable for or convertible into stock of the Corporation or any
such subsidiary which securities were outstanding prior to the
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time that the Interested Person became such, (ii) pursuant to a
dividend or distribution paid or made, or the exercise, exchange or
conversion of securities exercisable for, exchangeable for or
convertible into stock of the Corporation or any such subsidiary which
security is distributed, pro rata to all holders of a class or series
of stock of the Corporation subsequent to the time the Interested
Person became such, (iii) pursuant to an exchange offer by the
Corporation to purchase stock made on the same terms to all holders of
said stock, (iv) any issuance of shares or transfer of treasury shares
of Capital Stock by the Corporation, provided, however, that in the
case of each of clauses (ii) through (iv) above there shall be no
increase of more than one percent (1%) in the Interested Person's
proportionate share of the Capital Stock of any class or series or of
the Voting Stock or (v) pursuant to a public offering or private
placement by the Corporation to an Institutional Investor;
(d) any reclassification of securities, recapitalization or
other transaction involving the Corporation or any subsidiary of the
Corporation which has the effect, directly or indirectly, of (i)
increasing the proportionate share of the stock of any class or series,
or securities convertible into the stock of any class or series, of the
Corporation or of any such subsidiary which is owned by the Interested
Person, except as a result of immaterial changes due to fractional
share adjustments or as a result of any purchase or redemption of any
shares of stock not caused, directly or indirectly, by the Interested
Person or (ii) increasing the voting power, whether or not then
exercisable, of an Interested Person in any class or series of stock of
the Corporation or any subsidiary of the Corporation;
(e) the adoption of any plan or proposal by or on
behalf of an Interested Person for the liquidation or
dissolution of the Corporation; or
(f) any receipt by the Interested Person of the benefit,
directly or indirectly (except proportionately as a stockholder of the
Corporation), of any loans, advances, guarantees, pledges, tax benefits
or other financial benefits (other than those expressly permitted in
subparagraphs (a) through (e) above) provided by or through the
Corporation or any subsidiary.
4. The term "Capital Stock" shall mean all capital stock of
the Corporation authorized to be issued from time to time under ARTICLE FOURTH
of this Certificate of Incorporation.
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5. The term "Independent Directors" shall mean the members of
the Board of Directors who are not Affiliates or representatives of, or
associated with, an Interested Person and who were either directors of the
Corporation prior to any person becoming an Interested Person or were
recommended for election or elected to succeed such directors by a vote which
includes the affirmative vote of a majority of the Independent Directors.
6. The term "Institutional Investor" shall mean a person that
(a) has acquired, or will acquire, all of its securities of the Corporation in
the ordinary course of its business and not with the purpose nor with the effect
of changing or influencing the control of the Corporation, nor in connection
with or as a participant in any transaction having such purpose or effect,
including any transaction subject to Rule 13d-3(b) under the Exchange Act, and
(b) is a registered broker dealer; a bank as defined in Section 3(a)(6) of the
Exchange Act; an insurance company as defined in, or an investment company
registered under, the Investment Company Act of 1940; an investment advisor
registered under the Investment Advisors Act of 1940; an employee benefit plan
or pension fund subject to the Employee Retirement Income Security Act of 1974
or an endowment fund; a parent holding company, provided that the aggregate
amount held directly by the parent and directly and indirectly by its
subsidiaries which are not persons specified in the foregoing subclauses of this
clause (b) does not exceed one percent (1%) of the securities of the subject
class; or a group, provided that all the members are persons specified in the
foregoing subclauses of this clause (b).
7. The term "Interested Person" shall mean any person (other
than the Corporation, any subsidiary, any profit-sharing, employee stock
ownership or other employee benefit plan of the Corporation or any subsidiary or
any trustee of or fiduciary with respect to any such plan when acting in such
capacity) who (a) is the beneficial owner of Voting Stock representing ten
percent (10%) or more of the votes entitled to be cast by the holders of all of
the then outstanding shares of Voting Stock; (b) has stated in a filing with any
governmental agency or press release or otherwise publicly disclosed a plan or
intention to become or consider becoming the beneficial owner of Voting Stock
representing ten percent (10%) or more of the votes entitled to be cast by the
holders of all then outstanding shares of Voting Stock and has not expressly
abandoned such plan, intention or consideration more than two years prior to the
date in question; or (c) is an Affiliate of the Corporation and at any time
within the two-year period immediately prior to the date in question was the
beneficial owner of Voting Stock representing ten percent (10%) or more of the
votes entitled to be cast by holders of all then outstanding shares of Voting
Stock.
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8. The term "person" shall mean individual, corporation,
partnership, unincorporated association, trust or other entity.
9. The term "subsidiary" means any company of which a majority
of the voting securities are owned, directly or indirectly, by the Corporation.
10. The term "Voting Stock" shall mean Capital Stock of any
class or series entitled to vote in the election of directors generally.
D. A majority of the Independent Directors shall have the power and
duty to determine, on the basis of information known to them after reasonable
inquiry, for the purposes of (1) this ARTICLE TENTH, all questions arising under
this ARTICLE TENTH including, without limitation (a) whether a person is an
Interested Person, (b) the number of shares of Capital Stock or other securities
beneficially owned by any person; and (c) whether a person is an Affiliate of
another; and (2) this Certificate of Incorporation, the question of whether a
person is an Interested Person. Any such determination made in good faith shall
be binding and conclusive on all parties.
E. Nothing contained in this ARTICLE NINTH shall be construed to
relieve any Interested Person from any fiduciary
obligation imposed by law.
ARTICLE ELEVENTH: The personal liability of the directors of the
corporation is hereby eliminated to the fullest extent permitted by the
provisions of paragraph (7) of subsection (b) of ss. 102 of the General
Corporation Law of the State of Delaware, as the same may be amended and
supplemented.
ARTICLE TWELFTH: The Corporation shall, to the fullest extent permitted
by the provisions of ss. 145 of the General Corporation Law of the State of
Delaware, as the same may be amended and supplemented, indemnify any and all
persons whom it shall have power to indemnify under said section from and
against any and all of the expenses, liabilities, or other matters referred to
in or covered by said section, and the indemnification provided for herein shall
not be deemed exclusive of any other rights to which those indemnified may be
entitled under any By-law, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, and shall continue as to a
person who has ceased to be a director, officer, employee, or agent and shall
inure to the benefit of the heirs, executors, and administrators of such a
person.
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ARTICLE THIRTEENTH: From time to time any of the provisions of this
Certificate of Incorporation may be amended, altered, or repealed, and other
provisions authorized by the laws of the State of Delaware at the time in force
may be added or inserted in the manner and at the time prescribed by said laws,
and all rights at any time conferred upon the stockholders of the corporation by
this Certificate of Incorporation are granted subject to the provisions of this
ARTICLE THIRTEENTH.
IN WITNESS WHEREOF, the undersigned has caused this Certificate to be
signed this __ day of May, 1996.
-----------------------------
David R. Fishkin
Incorporator
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BY-LAWS
U.S. GOLF AND ENTERTAINMENT INC.
ARTICLE I
Offices
SECTION 1. Registered Office and Agent. The registered office
and the registered agent of the Corporation shall be located at such place as
the Board of Directors may from time to time designate.
SECTION 2. Other Offices. The Corporation may also have
offices at such other places both within and without the State of Delaware as
the Board of Directors may from time to time determine or the business of the
Corporation may require.
ARTICLE II
Stockholders
SECTION 1. Annual Meeting. The annual meeting of the
stockholders of the Corporation shall be held on such date, at such time and at
such place within or without the State of Delaware as may be designated by the
Board of Directors, for the purpose of electing Directors and for the
transaction of such other business as may be properly bought before the meeting.
SECTION 2. Special Meetings. Special meetings of the
stockholders, for any purpose or purposes, unless otherwise prescribed by
statute or the Certificate of Incorporation, may be called by the President or
the Board of Directors. Any special meeting of the stockholders shall be held on
such date, at such time and at such place within or without the State of
Delaware as the President or Board of Directors may designate.
<PAGE>
SECTION 3. Notice of Meetings. Except as otherwise provided in
these ByLaws or by law, a written notice of each meeting of the stockholders
shall be given, either personally or by mail, not less than ten (10) nor more
than sixty (60) calendar days before the date of the meeting, to each
stockholder of the Corporation entitled to vote at such meeting at such
stockholder's address as it appears on the books and records of the Corporation.
The notice shall state the place, date and hour of the meeting and, in the case
of a special meeting, the purpose for which the meeting is called.
SECTION 4. Adjourned Meetings. When a meeting is adjourned to
another time or place, notice need not be given of the adjourned meeting if the
time and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting, the stockholders, or the holder of any class of
stock entitled to vote separately as a class, as the case may be, may transact
any business which might have been transacted by them at the original meeting.
If the adjournment is for more than thirty (30) calendar days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the adjourned meeting.
SECTION 5. Organization. The President shall act as chairman
of all meetings of the stockholders. In the absence of the President, any Vice
Chairman or Vice President designated by the Board or, in the absence of any
such officer, any person designated by the holders of a majority in number of
the shares of stock of the Corporation present in person or represented by proxy
and entitled to vote at such meeting shall act as chairman of the meeting.
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The Secretary of the Corporation shall act as secretary of all
meetings of the stockholders, but, in the absence of the Secretary, the chairman
of the meeting may appoint any person to act as secretary of the meeting. It
shall be the duty of the Secretary to prepare and make, at least ten (10)
calendar days before every meeting of stockholders, a complete list of
stockholders entitled to vote at such meeting, arranged in alphabetical order
and showing the address of each stockholder and the number of shares registered
in the name of each stockholder. Such list shall be open, either at the offices
of the Corporation or at the place where the meeting is to be held, for the ten
(10) calendar days next preceding the meeting, to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, and shall be produced and kept at the time and place of the meeting
during the whole time thereof and subject to the inspection of any stockholder
who may be present.
SECTION 6. Quorum. The holders of a majority of the shares of
stock issued and outstanding and entitled to vote, represented in person or by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business, except as otherwise provided by statute or by the
Certificate of Incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders present in
person or represented by proxy shall have the power to adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present or represented. At such adjourned meeting at which a
quorum shall be present or represented, any business may be transacted which
might have been transacted at the meeting as originally notified.
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SECTION 7. Voting. Except as otherwise provided in the
Certificate of Incorporation or by law, each stockholder shall be entitled to
one vote for each share of the capital stock of the Corporation registered in
the name of such stockholder upon the books of the Corporation. Each stockholder
entitled to vote at a meeting of stockholders may authorize another person or
persons to act for such stockholder by proxy, but such proxy shall not be voted
or acted upon after three (3) years from its date, unless the proxy provides for
a longer period. When directed by the presiding officer or upon the demand of
any stockholder, the vote upon any matter before a meeting of stockholders shall
be by ballot. Except as otherwise provided by law or by the Certificate of
Incorporation, (a) each Director shall be elected by a plurality of the votes
cast at a meeting of stockholders by the stockholders entitled to vote in the
election; and (b) whenever any corporate action other than the election of
Directors is to be taken, it shall be authorized by a majority of the votes cast
at a meeting of stockholders by the stockholders entitled to vote thereon.
Shares of the capital stock of the Corporation belonging to
the Corporation or to another corporation, if a majority of the shares entitled
to vote in the election of directors of such other corporation is held, directly
or indirectly, by the Corporation, shall neither be entitled to vote nor be
counted for quorum purposes.
SECTION 8. Procedure. At each meeting of stockholders, the
chairman of the meeting shall fix and announce the date and time of the opening
and the closing of the polls for each matter upon which the stockholders will
vote at the meeting and shall determine the order of business and other matters
of procedure. Except to the extent inconsistent with any such rules and
regulations as adopted by the Board of Directors, the
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chairman of the meeting may establish rules, which need not be in writing, to
maintain order and safety and for the conduct of the meeting. Without limiting
the foregoing, he or she may:
(a) restrict attendance at any time to bona fide
stockholders of record and their proxies and other persons in attendance at the
invitation of the chairman;
(b) restrict dissemination of solicitation materials
and use of audio or visual recording devices at the meeting;
(c) establish seating arrangements;
(d) adjourn the meeting without a vote of the
stockholders, whether or not there is a quorum present; and
(e) make rules governing speeches and debate
including time limits and access to microphones.
The chairman of the meeting acts in his or her absolute
discretion and his or her rulings are not subject to appeal.
SECTION 9. Inspectors. The Board of Directors by resolution
shall, in advance of any meeting of stockholders, appoint one or more
inspectors, which inspector or inspectors may include individuals who serve the
Corporation in other capacities, including, without limitation, as officers,
employees, agents or representatives of the Corporation, to act at the meeting
and make a written report thereof. One or more persons may be designated by the
Board of Directors as alternate inspectors to replace any inspector who fails to
act. If an inspector or alternate is not able to act at a meeting of
stockholders, the chairman of the meeting shall, appoint one or more inspectors
to act at the meeting. Each inspector, before discharging his or her duties,
shall take and sign an oath faithfully to execute the duties of inspector with
strict impartiality and according to the best of his or her ability. The
inspectors shall have the duties prescribed by the General Corporation Law of
the State of Delaware.
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ARTICLE III
Directors
SECTION 1. Number. The Board of Directors shall consist of
such number of directors, not less than three nor more than ten, as shall be
fixed by the Board of Directors in accordance with Article Eighth of the
Certificate of Incorporation. A director need not be a stockholder.
SECTION 2. Vacancies. Any vacancy occurring in the Board of
Directors shall be filled by the Board of Directors in accordance with the
provisions of Article Eighth of the Certificate of Incorporation.
SECTION 3. Removal. Directors may only be removed as provided
for in the Corporation's Certificate of Incorporation.
SECTION 4. Powers. The business affairs of the Corporation
shall be managed by its Board of Directors which may exercise all such powers of
the Corporation and do all such lawful acts and things as are not by statute or
by the Certificate of Incorporation or by these By-laws directed or required to
be exercised or done by the stockholders.
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ARTICLE IV
Meetings of the Board of Directors
SECTION 1. Place of Meeting. The Board of Directors may hold
its meetings in such place or places in the State of Delaware or outside the
State of Delaware as the Board of Directors from time to time shall determine.
SECTION 2. Regular Meetings. Regular meetings of the Board of
Directors shall be held at such times and places as the Board of Directors from
time to time by resolution shall determine. No notice shall be required for any
regular meeting of the Board of Directors, but a copy of every resolution fixing
or changing the time or place of regular meetings shall be mailed to every
Director at least five (5) calendar days before the first meeting held in
pursuance thereof.
SECTION 3. Special Meetings. Special Meetings of the Board of
Directors may be called by the President on ten (10) days notice to each
Director; Special Meetings shall be called by the President or Secretary in like
manner and on like notice on the written request of two Directors. Notice need
not be given to any Director who signs a waiver of notice, whether before or
after the meeting.
Notice of the day, hour and place of holding of each special
meeting shall be given (i) by mailing the same at least four (4) calendar days
before the meeting; or (ii) by causing the same to be transmitted by telecopier,
telegraph or cable (A) at least twenty-four (24) hours before the meeting; or
(B) in the case of meeting held in accordance with Section 7 of this Article IV,
at least six (6) hours before the meeting, in each case to each Director. Unless
otherwise indicated in the notice thereof, any and all business, other than an
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amendment of these By-Laws, may be transacted at any special meeting, and an
amendment of these By-Laws may be acted upon if the notice of the meeting shall
have stated that the amendment of these By-Laws is one of the purposes of the
meeting. At any meeting at which every Director shall be present, even though
without any notice, any business may be transacted, including the amendment of
these By-Laws.
SECTION 4. Quorum. A majority of the members of the Board of
Directors in office (but in no case less than two (2) Directors) shall
constitute a quorum for the transaction of business, and, except as otherwise
provided in the Certificate of Incorporation, the vote of the majority of the
Directors present at any meeting of the Board of Directors at which a quorum is
present shall be the act of the Board of Directors. If at any meeting of the
Board of Directors there is less than a quorum present, a majority of those
present may adjourn the meeting from time to time.
SECTION 5. Organization. The President shall act as chairman
and preside at all meetings of the Board of Directors. In the absence of the
President, any Vice Chairman or Vice President shall act as chairman of the
meeting. The Secretary of the Corporation shall act as secretary of all meetings
of the Board of Directors, but, in the absence of the Secretary, the chairman of
the meeting may appoint any person to act as secretary of the meeting.
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SECTION 6. Committees. The Board of Directors, by resolution
adopted by a majority of the number of Directors then in office, may designate
one or more Directors to constitute an executive committee, which committee, to
the extent provided in such resolution, shall have and exercise all of the
authority of the Board of Directors in the management of the Corporation, except
as otherwise required by law. Vacancies in the membership of the committee shall
be filled by the Board of Directors at a regular or special meeting of the Board
of Directors. The executive committee shall keep regular minutes of its
proceeding and report the same to the Board when required.
SECTION 7. Conference Telephone Meetings. Unless otherwise
restricted by the Certificate of Incorporation or by these By-Laws, the members
of the Board of Directors or any committee designated by the Board of Directors
may participate in a meeting of the Board of Directors or such committee, as the
case may be, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation shall constitute being present in person at
such meeting.
SECTION 8. Consent of Directors or Committee in Lieu of
Meeting. Unless otherwise restricted by the Certificate of Incorporation or by
these By-Laws, any action required or permitted to be taken at any meeting of
the Board of Directors, or of any committee thereof, may be taken without a
meeting if all members of the Board of Directors or committee, as the case may
be, consent thereto in writing and the writing or writings are filed with the
minutes of proceedings of the Board of Directors or committee, as the case may
be.
SECTION 9. Compensation. For their services as Directors or as
members of committees, every Director shall receive such compensation,
attendance fees and other allowances as determined by resolution of the Board of
Directors.
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ARTICLE V
Officers
SECTION 1. Officers. The officers of the Corporation shall be
a Chief Executive Officer, President, one or more Vice Presidents who are
specifically designated as officers and who may be designated Executive Vice
Presidents or Senior Vice Presidents, a Secretary, a Treasurer and a Controller,
and such additional officers, if any, as shall be elected by the Board of
Directors pursuant to the provisions of Section 2 of this Article V. The Chief
Executive Officer, the President, one or more Vice Presidents, the Secretary,
the Treasurer and the Controller shall be elected by the Board of Directors at
its first meeting after such annual meeting of the stockholders. The failure to
hold such election shall not of itself terminate the term of office of any
officer. All officers shall hold their offices for such terms and shall exercise
such powers and perform such duties as shall be determined from time to time by
the Board of Directors or as shall be confirmed or required by law or these
By-Laws or as shall be incidental to the office. Any officer may resign at any
time upon written notice to the Corporation. Officers may, but need not, be
Directors. Any number of offices may be held by the same person. Any officer may
be removed with or without cause at any time by the affirmative vote of a
majority of the Board of Directors. Any vacancy caused by the death of any
officer, his or her resignation, his or her removal, or otherwise, may be filled
by the Board of Directors, and any officer so elected shall hold office at the
pleasure of the Board of Directors.
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SECTION 2. Additional Officers. The Board of Directors may
from time to time elect such other officers (who may, but need not, be
Directors), including, but not limited to, Assistant Treasurers, Assistant
Secretaries and Assistant Controllers, as the Board may deem advisable, and such
officers shall have such authority and shall perform such duties as may from
time to time be assigned to them by the Board of Directors, the President or as
shall be conferred or required by law or these By-Laws or as shall be incidental
to the office.
ARTICLE VI
Stock, Seal and Fiscal Year
SECTION 1. Certificates for Shares. The shares of the
Corporation shall be represented by certificates signed by the President or a
Vice President and by the Treasurer or an Assistant Treasurer, or the Secretary
or an Assistant Secretary of the Corporation, and may be sealed with the seal of
the Corporation or a facsimile thereof.
When the Corporation is authorized to issue shares of more
than one class, there shall be set forth upon the face or back of the
certificate, or the certificate shall have a statement that the Corporation will
furnish to any stockholder upon request and without charge, a full statement of
the designations, preferences, limitations and relative rights of the shares of
each class authorized to be issued and, if the Corporation is authorized to
issue any preferred or special class in series, the variations in the relative
rights and preferences between the shares of each such series so far as the same
have been fixed and determined and the authority of the Board of Directors to
fix and determine the relative rights and preferences of subsequent series.
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The signatures of the officers of the Corporation upon a
certificate may be facsimiles if the certificate is countersigned by a transfer
agent, or registered by a registrar, other than the Corporation itself or an
employee of the Corporation. In case any officer who has signed or whose
facsimile signature has been placed upon such certificate shall have ceased to
be such officer before such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such officer at the date of its
issue.
SECTION 2. Lost Certificates. The Board of Directors may
direct a new certificate to be issued in place of any certificate theretofore
issued by the Corporation alleged to have been lost or destroyed. When
authorizing such issue of a new certificate, the Board of Directors, in its
discretion and as a condition precedent to the issuance thereof, may prescribe
such terms and conditions as it deems expedient, and may require such
indemnities as it deems adequate, to protect the Corporation from any claim that
may be made against it with respect to any such certificate alleged to have been
lost or destroyed.
SECTION 3. Transfer of Shares. Shares of stock of the
Corporation shall be transferred on the books of the Corporation by the
recordholder thereof, in person or by such holder's attorney duly authorized in
writing upon surrender to the Corporation or the transfer agent of the
Corporation of a certificate representing shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer. Upon such
surrender, a new certificate shall be issued to the person entitled thereto, and
the old certificate canceled and the transaction recorded upon the books of the
Corporation, except as otherwise required by law.
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SECTION 4. Regulations. The Board of Directors, the President
or the Secretary shall have power and authority to make such rules and
regulations as it or such officer may deem expedient concerning the issue,
transfer, registration or replacement of certificates for shares of stock of the
Corporation.
SECTION 5. Record Date. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversation or exchange of stock
or for the purpose of any other lawful action, as the case may be, the Board of
Directors may fix, in advance, a record date which shall be not more than sixty
(60) calendar days nor less than ten (10) calendar days before the date of such
meeting, nor more than sixty (60) calendar days prior to any other action.
If no record date is fixed, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held, and the record date for
determining stockholders for any other purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
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SECTION 6. Registered Stockholders. The Corporation shall be
entitled to recognize the exclusive right of a person registered on its books as
the owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the owner
of shares, and shall not be bound to recognize any equitable or other claim to
or interest in such shares or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by the laws of the State of Delaware.
SECTION 7. Dividends. Subject to the provisions of the
Certificate of Incorporation, the Board of Directors shall have power to declare
and pay dividends upon shares of stock of the Corporation, but only out of funds
available for the payment of dividends as provided by law.
Subject to the provisions of the Certificate of Incorporation,
any dividends declared upon the stock of the Corporation shall be payable on
such date or dates as the Board of Directors shall determine. If the day fixed
for the payment of any dividend shall in any year fall upon a legal holiday,
then the dividend payable on such date shall be paid on the next day not a legal
holiday.
SECTION 8. Corporate Seal. The Corporation shall have a
suitable seal, containing the name of the Corporation. The Secretary shall have
custody of the seal, but he or she may authorize others to keep and use a
duplicate seal.
SECTION 9. Checks. All checks or demands for money and notes
of the Corporation shall be signed by such officer or officers or such other
person or persons as the Board of Directors may from time to time designate.
SECTION 10. Fiscal Year. The fiscal year of the Corporation
shall be such fiscal year as the Board of Directors from time to time by
resolution shall determine.
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ARTICLE VII
Miscellaneous Provisions
SECTION 1. Waivers of Notice. Whenever any notice whatever is
required to be given by law, by the Certificate of Incorporation or by these
By-Laws to any person or persons, a waiver thereof in writing, signed by the
person or persons entitled to the notice, whether before or after the time
stated therein, shall be deemed equivalent thereto. Attendance of a person at a
meeting shall constitute a waiver of notice of such meeting, except when the
person attends a meeting for the express purpose of objecting at the beginning
of the meeting to the transaction of any business because the meeting is not
lawfully called or convened.
SECTION 2. Indemnification. The Corporation shall, to the
maximum extent permitted from time to time under the law of the State of
Delaware, indemnify and upon request may advance expenses to any person who is
or was a party to any threatened, pending or completed action, suit, proceeding
or claim, whether civil, criminal, administrative or investigative, by reason of
the fact that he or she is or was or has agreed to be a trustee, director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a trustee, director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees and expenses), judgment, fines,
penalties and amounts paid in settlement incurred in connection with the
investigation, preparation to defend or defense of any such action, suit,
proceeding or claim. Such indemnification shall not be exclusive of other
indemnification rights arising under any by-law, agreement, vote of directors or
stockholders or otherwise and shall inure to the benefit of the heirs and legal
representatives of such person.
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The Corporation may purchase and maintain insurance on any
person who is or was a trustee, director, officer, employee or agent of the
Corporation or is or was serving at the request of the Corporation as a trustee,
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against any liability incurred by him in any
such position or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
this Article VII, Section 2.
SECTION 3. Amendments. These By-Laws may be altered, amended,
or repealed or new By-Laws may be adopted by the affirmative vote of a majority
of the Board of Directors at any regular or Special Meeting of the Board of
Directors, subject to any provision in the Certificate of Incorporation
reserving to the stockholders the power to adopt, amend, or repeal By-Laws, but
By-Laws made by the Board of Directors may be altered or repealed and new
By-Laws made by the stockholders. The stockholders may prescribe that any By-Law
made by them shall not be altered or repealed by the Board of Directors.
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U.S. GOLF AND ENTERTAINMENT INC.
1996 STOCK OPTION PLAN
1. Purpose of the Plan. The purposes of this 1996 Stock Option Plan are
to attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business. Options granted under the Plan may be incentive stock options (as
defined under Section 422 of the Code) or nonstatutory stock options, as
determined by the Administrator at the time of grant of an option and subject to
the applicable provisions of Section 422 of the Code, and the regulations
promulgated thereunder.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees
appointed pursuant to Section 4 of the Plan.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as
amended.
(d) "Committee" means the Committee appointed by the Board of
Directors in accordance with Section 4(a) of the Plan.
(e) "Common Stock" means the Common Stock of the Company.
(f) "Company" means U.S. Golf and Entertainment Inc., a
Delaware corporation.
(g) "Consultant" means any person, including an advisor, who
is engaged by the Company or any Parent or Subsidiary to render services and is
compensated for such services, and any director of the Company whether
compensated for such services or not, provided that if and in the event the
Company registers any class of any equity security pursuant to the Exchange Act,
the term Consultant shall thereafter not include directors who are not
compensated for their services or are paid only a director's fee by the Company.
(h) "Continuous Status as an Employee or Consultant" means the
absence of any interruption or termination of service as an Employee or
Consultant. Continuous Status as an Employee or Consultant shall not be
considered interrupted in the case of: (i) sick leave; (ii) military leave;
(iii) any other leave of absence approved by the Administrator, provided that
such leave is for a period of not more than ninety (90) days, unless
reemployment upon the expiration of such leave is guaranteed by contract or
statute, or unless provided otherwise pursuant to Company policy adopted from
time to time; or (iv) in the case of transfers between locations of the Company
or between the Company, its Subsidiaries or their respective successors. For
purposes of this Plan, a change in status from an Employee to a Consultant or
from a Consultant to an Employee will not constitute an interruption of
Continuous Status as an Employee or Consultant.
(i) "Employee" means any person, including officers and
directors, employed by the Company or any Parent or Subsidiary of the Company,
with the status of employment determined based upon such minimum number of hours
or periods worked as shall be determined by the Administrator in its discretion,
subject to any requirements of the Code. The payment of a director's fee by the
Company shall not be sufficient to constitute "employment" by the Company.
<PAGE>
(j) "Exchange Act" means the securities Exchange Act of 1934,
as amended.
(k) "Fair Market Value" means, as of any date, the fair market
value of Common Stock determined as follows:
(i) If the Common Stock is listed on any established
stock exchange or a national market system including, without limitation, the
National Market System of the National Association of Securities Dealers, Inc.
Automated Quotation ("Nasdaq") System, its Fair Market Value shall be the
closing sales price for such stock (or the closing bid, if no sales were
reported), as quoted on such system or exchange, or the exchange with the
greatest volume of trading in Common Stock for the last market trading day prior
to the time of determination, as reported in The Wall Street Journal or such
other source as the Administrator deems reliable;
(ii) If the Common Stock is quoted on the Nasdaq
System (but not on the National Market thereof) or regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean between the high bid and low asked prices for the
Common Stock for the last market trading day prior to the time of determination,
as reported in The Wall Street Journal or such other source as the Administrator
deems reliable; or
(iii) In the absence of an established market for
the Common Stock, the Fair Market Value thereof shall be determined in good
faith by the Administrator.
(l) "Incentive Stock Option"means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code, as designated in the applicable written option agreement.
(m) "Nonstatutory Stock Option"means an Option not intended to
qualify as an Incentive Stock Option, as designated in the applicable written
option agreement.
(n) "Option" means a stock option granted pursuant to the
Plan.
(o) "Optioned Stock" means the Common Stock subject to an
Option.
(p) "Optionee" means an Employee or Consultant who receives an
Option.
(q) "Parent" means a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Code, or any successor
provision.
(r) "Plan" means this 1996 Stock Option Plan.
(s) "Reporting Person" means an officer, director or greater
than ten percent stockholder of the Company within the meaning of Rule 16a-2
under the Exchange Act, who is required to file reports pursuant to Rule 16a-3
under the Exchange Act.
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(t) "Rule 16b-3" means Rule 16b-3 promulgated under the
Exchange Act, as the same may be amended from time to time, or any successor
provision.
(u) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 12 of the Plan.
(v) "Stock Exchange" means any stock exchange or consolidated
stock price reporting system on which prices for the Common Stock are quoted at
any given time.
(w) "Subsidiary" means a "subsidiary corporation," whether now
or hereafter existing, as defined in Section 424(f) of the Code, or any
successor provision.
3. Stock Subject to the Plan. Subject to the provisions of Section 12
of the Plan, the maximum aggregate number of Shares that may be optioned and
sold under the Plan is 400,000 shares of Common Stock. The Shares may be
authorized, but unissued, or reacquired Common Stock. If an Option should expire
or become unexercisable for any reason without having been exercised in full,
the unpurchased Shares that were subject thereto shall, unless the Plan shall
have been terminated, become available for future grant under the Plan. In
addition, any Shares of Common Stock which are retained by the Company upon
exercise of an Option in order to satisfy the exercise or purchase price for
such Option or any withholding taxes due with respect to such exercise shall be
treated as not issued and shall continue to be available under the Plan.
4. Administration of the Plan.
(a) Plan Procedure. The Plan shall be administered by the
Board or a committee appointed by the Board, which committee shall be
constituted in such a manner as to permit the Plan to comply with Rule 16b-3
with respect to a plan intended to qualify thereunder as a discretionary plan.
Once appointed, such committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time to time the Board may
increase the size of the committee and appoint additional members thereof,
remove members (with or without cause) and appoint new members in substitution
therefor, fill vacancies, however caused, and remove all members of the
committee and thereafter directly administer the Plan, all to the extent
permitted by Rule 16b-3 with respect to a plan intended to qualify thereunder as
a discretionary plan.
(b) Powers of the Administrator. Subject to the provisions of
the Plan and in case of a Committee, the specific duties delegated by the Board
to such Committee, and subject to the approval of any relevant authorities,
including the approval, if required, of any Stock Exchange, the Administrator
shall have the authority, in its discretion:
(i) to determine the Fair Market Value of the Common
Stock, in accordance with Section 2(k) of the Plan;
(ii) to select the Consultants and Employees to whom
Options may from time to time be granted hereunder;
(iii) to determine whether and to what extent
Options are granted hereunder;
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<PAGE>
(iv) to determine the number of shares of Common
Stock to be covered by each such award granted hereunder;
(v) to approve forms of agreement for use under the
Plan;
(vi) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any award granted hereunder,
(vii) to determine whether and under what
circumstances an Option may be settled in cash under Section 9(f) instead of
Common Stock;
(viii) to reduce the exercise price of any Option to
the then current Fair Market Value if the Fair Market Value of the Common Stock
covered by such Option shall have declined since the date the Option was
granted;
(ix) to construe and interpret the terms of the Plan
and awards granted pursuant to the Plan;
(x) in order to fulfill the purposes of the Plan and
without amending the Plan, to modify grants of Options to participants who are
foreign nationals or employed outside of the United States in order to recognize
differences in local law, tax policies or customs.
(c) Effect of Administrator's Decision. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all holders of Options.
5. Eligibility.
(a) Recipients of Grants. Nonstatutory Stock Options may be
granted to Employees and Consultants. Incentive Stock Options may be granted
only to Employees. An Employee or Consultant who has been granted an Option may,
if he or she is otherwise eligible, be granted additional Options.
(b) Type of Option. Each Option shall be designated in the
written option agreement as either an Incentive Stock Option or a Nonstatutory
Stock Option. However, notwithstanding such designations, to the extent that the
aggregate Fair Market Value of Shares with respect to which Options designated
as Incentive Stock Options are exercisable for the first time by any Optionee
during any calendar year (under all plans of the Company or any Parent or
Subsidiary) exceeds $100,000, such excess options shall be treated as
Nonstatutory Stock Options. For purposes of this Section 5(b), Incentive Stock
Options shall be taken into account in the order in which they were granted, and
the Fair Market Value of the Shares subject to an Incentive Stock Option shall
be determined as of the date of the grant of such Option.
(c) The Plan shall not confer upon any Optionee any right with
respect to continuation of employment or consulting relationship with the
Company, nor shall it interfere in any way with such Optionee's right or the
Company's right to terminate his or her employment or consulting relationship at
any time, with or without cause.
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6. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
stockholders of the Company as described in Section 19 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 15 of the Plan.
7. Term of Option. The term of each Option shall be the term stated in
the Option Agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof or such shorter term as may be
provided in the Option Agreement and provided further that, in the case of an
Option granted to an Optionee who, at the time the Option is granted, owns stock
representing more than ten percent (10%) of the voting power of all classes of
stock of the Company or any Parent or Subsidiary, the term of the Option shall
be five (5) years from the date of grant thereof or such shorter term as may be
provided in the written option agreement.
8. Option Exercise Price and Consideration.
(a) The per share exercise price for the Shares to be issued
pursuant to exercise of an Option shall be such price as is determined by the
Board and set forth in the applicable agreement, but shall be subject to the
following:
(i) In the case of an Incentive Stock Option that
is:
(A) granted to an Employee who, at the time of
the grant of such Incentive Stock Option, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price shall be no less than 110% of
the Fair Market Value per Share on the date of grant.
(B) granted to any other Employee, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(ii) In the case of a Nonstatutory Stock Option that
is:
(A) granted to a person who, at the time of the
grant of such Option, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or Subsidiary,
the per Share exercise price shall be no less than 100% of the Fair Market Value
per Share on the date of the grant.
(B) granted to any person, the per Share
exercise price shall be no less than 85% of the Fair Market Value per Share on
the date of grant.
(b) The consideration to be paid for the Shares to be issued
upon exercise of an Option, including the method of payment, shall be determined
by the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other Shares that (x) in the case of Shares
acquired upon exercise of an Option, have been owned by the Optionee for more
than six months on the date of surrender or such other period as may be required
to avoid a charge to the Company's earnings, and (y) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which such Option shall be exercised, (5) authorization for the Company to
retain from the total number of Shares as to which the Option is exercised that
number of Shares having a Fair Market Value on the date of exercise equal to the
exercise price for the total number of Shares as to which the Option is
exercised, (6) assignment of the proceeds of a sale or loan with respect to some
or all of the Shares being acquired upon the exercise of the Option (including,
without limitation, through an exercise complying with the provisions of
Regulation T as promulgated from time to time by the Board of Governors of the
Federal Reserve System) (a "Cashless Exercise"), (7) by such other consideration
as may be approved by the Administrator from time to time, or (8) any
combination of the foregoing methods of payment. In making its determinations as
to the type of consideration to accept, the Administrator shall consider if
acceptance of such consideration may be reasonably expected to benefit the
Company.
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9. Exercise of Option.
(a) Procedure for Exercise: Rights as a Stockholder. Any
Option granted hereunder shall be exercisable at such times and under such
conditions as determined by the Administrator, and reflected in the written
option agreement, which may include vesting requirements and/or performance
criteria with respect to the Company and/or the Optionee; provided that such
Option shall become exercisable at the rate of at least twenty percent (20%) per
year over five (5) years from the date of the Option is granted.
An Option may not be exercised for a fraction of a
Share.
An Option shall be deemed to be exercised when
written notice of such exercise has been given to the Company in accordance with
the terms of the Option by the person entitled to exercise the Option and the
Company has received full payment for the Shares with respect to which the
Option is exercised. Full payment may, as authorized by the Board, consist of
any consideration and method of payment allowable under Section 8(b) of the
Plan. Until the issuance (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a stockholder shall exist with respect to the Optioned Stock,
not withstanding the exercise of the Option. The Company shall issue (or cause
to be issued) such stock certificate promptly upon exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 12 of the Plan.
Exercise of an Option in any manner shall result in
a decrease in the number of Shares that thereafter may be available, both for
purposes of the Plan and for sales under the Option, by the number of Shares as
to which the Option is exercised.
(b) Termination of Employment of Consulting Relationship.
Subject to Section 9(c), in the event of termination of an Optionee's Continuous
Status as an Employee or Consultant with the Company, such Optionee may, but
only within three (3) months (or such other period of time not less than thirty
(30) days as is determined by the Administrator, which such determination in the
case of an Incentive Stock Option being made at the time of grant of the Option
and not exceeding three (3) months) after the date of such termination (but in
no event later than the expiration date of the term of such Option as set forth
in the Option Agreement), exercises his or her Option to the extent that the
Optionee was entitled to exercise it at the date of such termination. To the
extent that Optionee was not entitled to exercise the Option at the date of such
termination, or if Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate. No
termination shall be deemed to occur and this Section 9(b) shall not apply if
(i) the Optionee is a Consultant who becomes an Employee; or (ii) the Optionee
is an Employee who becomes a Consultant.
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<PAGE>
(c) Disability of Optionee.
(i) Notwithstanding Section 9(b) above, in the event
of termination of an Optionee's Continuous Status as an Employee or Consultant
as a result of his or her total and permanent disability (within the meaning of
Section 22(e)(3) of the Code), Optionee may, but only within twelve (12) months
from the date of such termination (but in no event later than the expiration
date of the term of such Option as set forth in the Option Agreement), exercise
the Option to the extent otherwise entitled to exercise it at the date of such
termination. To the extent that Optionee was not entitled to exercise the Option
at the date of termination, or if Optionee does not exercise such Option to the
extent so entitled within the time specified herein, the Option shall terminate.
(ii) In the event of termination of an Optionee's
Continuous Status as an Employee or Consultant as a result of a disability which
does not fall within the meaning of total and permanent disability (as set forth
in Section 22(e)(3) of the Code), Optionee may, but only within six (6) months
from the date of such termination (but in no event later than the expiration
date of the term of such Option as set forth in the Option Agreement), exercise
the Option to the extent otherwise entitled to exercise it at the date of such
termination. However, to the extent that such Optionee fails to exercise an
Option which is an Incentive Stock Option ("ISO") (within the meaning of Section
422 of the Code) within three (3) months of the date of such termination, the
Option will not qualify for ISO treatment under the Code. To the extent that
Optionee was not entitled to exercise the Option at the date of termination, or
if Optionee does not exercise such Option to the extent so entitled within six
(6) months from the date of termination, the Option shall terminate.
(d) Death of Optionee. In the event of the death of an
Optionee during the period of Continuous Status as an Employee or Consultant, or
within thirty (30) days following the termination of the Optionee's Continuous
Status as an Employee or Consultant, the Option may be exercised, at any time
within six (6) months following the date of death (but in no event later than
the expiration date of the term of such Option as set forth in the Option
Agreement), by the Optionee's estate or by a person who acquired the right to
exercise the Option by bequest or inheritance, but only to the extent the
Optionee was entitled to exercise the Option at the date of death or, if
earlier, the date of termination of the Continuous Status as an Employee or
Consultant. To the extent that Optionee was not entitled to exercise the Option
at the date of death or termination, as the case may be, or if Optionee does not
exercise such Option to the extent so entitled within the time specified herein,
the Option shall terminate.
(e) Rule 16b-3. Options granted to Reporting Persons shall
comply with Rule 16b-3 and shall contain such additional conditions or
restrictions as may be required thereunder to qualify for the maximum exemption
for Plan transactions.
(f) Buyout Provisions. The Administrator may at any time offer
to buy out for a payment in cash or Shares, an Option previously granted, based
on such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time that such offer is made.
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10. Stock Withholding to Satisfy Withholding Tax Obligations. At the
discretion of the Administrator, Optionees may satisfy withholding obligations
as provided in this paragraph. When an Optionee incurs tax liability in
connection with an Option, which tax liability is subject to tax withholding
under applicable tax laws, and the Optionee is obligated to pay the Company an
amount required to be withheld under applicable tax laws, the Optionee may
satisfy the withholding tax obligation by one or some combination of the
following methods: (a) by cash payment, or (b) out of Optionee's current
compensation, (c) if permitted by the Administrator, in its discretion, by
surrendering to the Company Shares that (i) in the case of Shares previously
acquired from the Company, have been owned by the Optionee for more than six (6)
months on the date of surrender, and (ii) have a fair market value on the date
of surrender equal to or less than Optionee's marginal tax rate times the
ordinary income recognized, or (d) by electing to have the Company withhold from
the Shares to be issued upon exercise of the Option that number of Shares having
a fair market value equal to the amount required to be withheld. For this
purpose, the fair market value of the Shares to be withheld shall be determined
on the date that the amount of tax to be withheld is to be determined (the "Tax
Date").
Any surrender by a Reporting Person of previously owned Shares
to satisfy tax withholding obligations arising upon exercise of this Option must
comply with the applicable provisions of Rule 16b-3 and shall be subject to such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
All elections by an Optionee to have Shares withheld to
satisfy tax withholding obligations shall be made in writing in a form
acceptable to the Administrator and shall be subject to the following
restrictions:
(a) the election must be made on or prior to the applicable
Tax Date;
(b) once made, the election shall be irrevocable as to the
particular Shares of the Option as to which the election is made;
(c) all elections shall be subject to the consent or
disapproval of the Administrator;
(d) if the Optionee is a Reporting Person, the election must
comply with the applicable provisions of Rule 16b-3 and shall be subject to such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
In the event the election to have Shares withheld is
made by an Optionee and the Tax Date is deferred under Section 83 of the Code
because no election is filed under Section 83(b) of the Code, the Optionee shall
receive the full number of Shares with respect to which the Option is exercised
but such Optionee shall be unconditionally obligated to tender back to the
Company the proper number of Shares on the Tax Date.
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11. Adjustments Upon Changes in Capitalization, Merger or Certain Other
Transactions.
(a) Changes in Capitalization. Subject to any required action
by the stockholders of the Company, the number of shares of Common Stock covered
by each outstanding Option and the number of shares of Common Stock that have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or that have been returned to the Plan upon cancellation or
expiration of an Option as well as the price per share of Common Stock covered
by each such outstanding Option shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination,
recapitalization or reclassification of the Common Stock, or any other increase
or decrease in the number of issued shares of Common Stock effected without
receipt of consideration by the Company; provided, however, that conversion of
any convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration." Such adjustment shall be made by
the Board, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Board shall notify the Optionee
at least fifteen (15) days prior to such proposed action. To the extent it has
not been previously exercised, the Option will terminate immediately prior to
the consummation of such proposed action.
(c) Merger or Sale of Assets. In the event of a proposed sale
of all or substantially all of the Company's assets or a merger of the Company
with or into another corporation where the successor corporation issues its
securities to the Company's stockholders, each outstanding Option shall be
assumed or an equivalent option or right shall be substituted by such successor
corporation or a parent or subsidiary of such successor corporation, unless the
successor corporation does not agree to assume the Option or to substitute an
equivalent option, in which case such Option shall terminate upon the
consummation of the merger or sale of assets.
(d) Certain Distributions. In the event of any distribution to
the Company's stockholders of securities of any other entity or other assets
(other than dividends payable in cash or stock of the Company) without receipt
of consideration by the Company, the Administrator may, in its discretion,
appropriately adjust the price per share of Common Stock covered by each
outstanding Option to reflect the effect of such distribution.
12. Non-Transferability of Options. Options may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised or purchased
during the lifetime of the Optionee only by the Optionee.
13. Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date on which the Administrator makes the determination
granting such Option or such other date as is determined by the Board. Notice of
the determination shall be given to each Employee or Consultant to whom an
Option is so granted within a reasonable time after the date of such grant.
9
<PAGE>
14. Amendment and Termination of the Plan.
(a) Authority to Amend or Terminate. The Board may at any time
amend, alter, suspend or discontinue the Plan, but no amendment, alteration,
suspension or discontinuation shall be made that would impair the rights of any
Optionee under any grant theretofore made, without his or her consent. In
addition, to the extent necessary or desirable to comply with Rule 16b-3 or with
Section 422 of the Code (or any other applicable law or regulation, including
the requirements of any Stock Exchange), the Company shall obtain stockholder
approval of any Plan amendment in such a manner and to such a degree as
required.
(b) Effect of Amendment or Termination. No amendment or
termination of the Plan shall adversely affect Options already granted, unless
mutually agreed otherwise between the Optionee and the Board, which agreement
must be in writing and signed by the Optionee and the Company.
15. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any Stock Exchange. As a condition to the
exercise of an Option, the Company may require the person exercising such Option
to represent and warrant at the time of any such exercise that the Shares are
being purchased only for investment and without any present intention to sell or
distribute such Shares if, in the opinion of counsel for the Company, such a
representation is required by law.
16. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan. The inability of the Company
to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.
17. Agreements. Options shall be evidenced by written agreements in
such form as the Administrator shall approve from time to time.
18. Stockholder Approval. Continuance of the Plan shall be subject to
approval by the stockholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such stockholder approval shall be obtained
in the degree and manner required under applicable state and federal law and the
rules of any Stock Exchange upon which the Common Stock is listed. All Options
issued under the Plan shall become void in the event such approval is not
obtained.
19. Information to Optionees and Purchasers. The Company shall provide
financial statements at least annually to each Optionee and to each individual
who acquired Shares Pursuant to the Plan, during the period such Optionee or
purchaser has one or more Options outstanding, and in the case of an individual
who acquired Shares pursuant to the Plan, during the period such individual owns
such Shares. The Company shall not be required to provide such information if
the issuance of Options under the Plan is limited to key employees whose duties
in connection with the Company assure their access to equivalent information.
10
<PAGE>
U.S. GOLF AND ENTERTAINMENT INC.
1996 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
1. PURPOSE.
This Non-Qualified Stock Option Plan, to be known as the 1996
Non-Employee Director Stock Option Plan (the "Plan"), is intended to
promote the interests of U.S. Golf and Entertainment Inc., a Delaware
corporation (the "Company"), by providing an inducement to obtain and
retain the services of qualified persons who are not current or former
employees or officers of the Company (an "Outside Director") to serve
as members of its Board of Directors (the "Board").
2. AVAILABLE SHARES.
The total number of shares of Common Stock, par value $.001 per share,
of the Company (the "Common Stock"), for which options may be granted
under the Plan shall not exceed 100,000 shares, subject to adjustment
in accordance with Paragraph 10 of the Plan. Shares of Common Stock
subject to the Plan are authorized but unissued shares of Common Stock
or shares of Common Stock that were once issued and subsequently
reacquired by the Company. If any options granted under the Plan are
surrendered before exercise or lapse without exercise, in whole or in
part, the shares of Common Stock reserved therefor shall continue to be
available under the Plan.
3. ADMINISTRATION.
The Plan shall be administered by the Board or by a committee appointed
by the Board (the "Committee"). In the event the Board fails to appoint
or refrains from appointing a Committee, the Board shall have all power
and authority to administer the Plan. In such event, the word
"Committee" wherever used shall be deemed to mean the Board. The
Committee shall, subject to the provisions of the Plan, have the power
to construe the Plan, to determine all questions hereunder, and to
adopt and amend such rules and regulations for the administration of
the Plan as it may deem desirable.
4. GRANTING OF OPTIONS.
(a) On the date of adoption of the Plan (the "Effective Date"),
each Outside Director shall automatically be granted, subject
to availability, without any further action by the Board, an
option to purchase 5,000 shares of Common Stock (the "Initial
Grant").
(b) On the date of each annual meeting of stockholders following
the Effective Date, each Outside Director shall automatically
be granted, subject to availability, without any further
action by the Board, an option to purchase 5,000 shares of
Common Stock (the "Annual Grant"). In the event a person
becomes an Outside Director after the Effective Date, such
person shall automatically receive an Initial Grant on the
date such person becomes an Outside Director.
(c) Except for the specific options referred to above, no other
options shall be granted under the Plan. Options granted under
the Plan are not intended to be treated as incentive stock
options as defined in Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code").
<PAGE>
5. EXERCISE PRICE.
The purchase price of the Common Stock covered by an option granted
pursuant to the Plan shall be 100% of the fair market value per share
of a share of Common Stock on the day the option is granted (the
"Exercise Price"). The Exercise Price will be subject to adjustment in
accordance with the provisions of Paragraph 10 of the Plan. For
purposes of the Plan, "fair market value" shall be (i) the closing
price of the Company's Common Stock appearing on a national securities
exchange if the Company's Common Stock is listed on such an exchange,
or if not listed, the closing bid price appearing on the National
Association of Securities Dealers Automated Quotation System
("NASDAQ"); or (ii) if the Shares are not listed on NASDAQ, then the
closing bid price for the Company's Common Stock as listed in the
National Quotation Bureau's pink sheets; or (iii) if there are no
listed bid prices published in the pink sheets, then the market value
shall be based upon the closing bid price as determined following a
polling of all dealers making a market in the Company's Common Stock.
6. PERIOD OF OPTION.
Unless sooner terminated in accordance with the provisions of Paragraph
8 of the Plan, an option granted hereunder shall be for a term of five
(5) years.
7. VESTING OF SHARES AND NON-TRANSFERABILITY OF OPTIONS.
(a) Vesting. Options granted under the Plan shall not be
exercisable until they become vested. Options granted shall
vest in the optionee and become exercisable immediately by the
optionee in two annual installments of 50% each on the first
and second anniversary of the date of grant.
(b) Legend on Certificates. The certificates representing such
shares of Common Stock shall carry such appropriate legends,
and such written instructions shall be given to the Company's
transfer agent, as may be deemed necessary or advisable by
counsel to the Company in order to comply with the
requirements of the Securities Act of 1933 or any state
securities laws.
(c) Non-transferability. Any option granted pursuant to the Plan
shall not be assignable or transferable other than by will or
the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Code, or
Title I of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or the rules thereunder, and shall
be exercisable during the optionee's lifetime only by him or
her.
8. TERMINATION OF OPTION RIGHTS.
(a) In the event an optionee cases to be a member of the Board for
any reason other than death or permanent disability, any then
unexercised portion of options granted to such optionee shall,
to the extent not then vested, immediately terminate and
become void; any portion of an option which is then vested but
has not been exercised at the time the optionee so ceases to
be a member of the Board may be exercised, to the extent it is
then vested, by the optionee within 180 days of the date the
optionee ceased to be a member of the Board; and all options
shall terminate after such 180 days have expired.
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<PAGE>
(b) In the event that an optionee ceases to be a member of the
Board by reason of his or her death or permanent disability,
any option granted to such optionee shall be immediately and
automatically accelerated and become fully vested and all
unexercised options shall be exercisable by the optionee (or
by the optionee's personal representative, heir or legatee, in
the event of death) until the scheduled expiration date of the
option.
9. EXERCISE OF OPTION.
Subject to the terms and conditions of the Plan and the option
agreements, an option granted hereunder shall, to the extent then
exercisable, be exercisable in whole or in part by giving written
notice to the Company by mail or in person addressed to U.S. Golf and
Entertainment, 4 Henry Street, Commack, New York 11725, Attention:
Chief Financial Officer, stating the number of shares of Common Stock
with respect to which the option is being exercised, accompanied by
payment in full for such shares of Common Stock. Payment may be:
(a) in United States dollars in cash or by check; or
(b) in whole or in part of Common Stock of the Company already
owned by the person or persons exercising the option, valued
at fair market value determined in accordance with the
provisions of Paragraph 5; or
(c) by a combination of cash or check and Common Stock as provided
in (a) and (b) above;
or
(d) in the discretion of the Committee, by the issuance by an
Outside Director of a promissory note, which shall be payable
in thirty (30) days and shall bear interest at such rate as
shall be determined by the Committee, which in no event shall
be less than the minimum rate required by the provisions of
Section 483 of the Code to award the imputation of income to
such Outside Director.
The Company's transfer agent shall, on behalf of the Company, prepare a
certificate or certificates representing such shares of Common Stock
acquired pursuant to exercise of the option, shall register the
optionee as the owner of such shares of Common Stock on the books of
the Company and shall cause the fully executed certificate(s)
representing such shares of Common Stock to be delivered to the
optionee as soon as practicably after payment of the option price in
full.
The holder of an option shall not have any rights of a stockholder with
respect to the shares of Common Stock covered by the option, except to
the extent that one or more certificates for such shares of Common
Stock shall be delivered to him or her upon the due exercise of the
option.
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<PAGE>
10. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION AND OTHER MATTERS.
Upon the occurrence of any of the following events, an optionee's
rights with respect to options granted to him or her hereunder shall be
adjusted as hereinafter provided:
(a) Stock Dividends and Stock Splits. If the shares of Common
Stock shall be subdivided or combined into a greater or
smaller number of shares or if the Company shall issue any
shares of Common Stock as a stock dividend on its outstanding
Common Stock, the number of shares of Common Stock deliverable
upon the exercise of options shall be appropriately increased
or decreased proportionately, and appropriate adjustments
shall be made in the purchase price per share to reflect such
subdivision, combination or stock dividend.
(b) Merger; Consolidation; Liquidation; Sale of Assets. In the
event the Company is merged into or consolidated with another
corporation under circumstances where the Company is not the
surviving corporation, or if the Company is liquidated or
sells or otherwise disposes of all or substantially all of its
assets to another corporation while unexercised options remain
outstanding under the Plan:
(i) subject to the provisions of clauses (iii), (iv)
and (v) below, after the effective date of such
merger, consolidation or sale, as the case may be,
each holder of an outstanding option shall be
entitled, upon exercise of such option, to receive
in lieu of shares of Common Stock, shares of such
stock or other securities as the holders of the
shares of Common Stock received pursuant to the
terms of the merger, consolidation or sale; or
(ii) the Committee may waive any discretionary
limitations imposed with respect to the exercise of
the option so that all options from and after a
date prior to the effective date of such merger,
consolidation, liquidation or sale, as the case may
be, specified by the Committee, shall be
exercisable in full; or
(iii) all outstanding options may be cancelled by the
Committee as of the effective date of any such
merger, consolidation, liquidation or sale,
provided that notice of such cancellation shall be
given to each holder of an option, and each holder
thereof shall have the right to exercise such
option in full (without regard to any discretionary
limitations imposed with respect to the option)
during a 30- day period preceding the effective
date of such merger, consolidation, liquidation or
sale; or
(iv) all outstanding options may be cancelled by the
Committee as of the date of any such merger,
consolidation, liquidation or sale, provided that
notice of such cancellation shall be given to each
holder of an option and each such holder thereof
shall have the right to exercise such option but
only to the extent exercisable in accordance with
any discretionary limitations imposed with respect
to the option prior to the effective date of such
merger, consolidation, liquidation or sale; or
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<PAGE>
(v) the Committee may provide for the cancellation of
all outstanding options and for the payment to the
holders of some part or all of the amount by which
the value thereof exceeds the payment, if any,
which the holder would have been required to make
to exercise such option.
(c) Issuance of Securities. Except as expressly provided herein,
no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be
made with respect to, the number or price of shares subject to
options, provided, however, in the event the Company issues or
sells any Common Stock or Common Stock Equivalents without
consideration or for consideration per share less than the
current fair market value per share (as defined in Paragraph 5
below) on the date of such issuance or sale, or fixes a record
date for the issuance of subscription rights, options or
warrants to all holders of Common Stock entitling them to
purchase Common Stock (or Common Stock Equivalents) at a price
per share (or having an exercise or conversion price per
share) less than the then current fair market value per share,
the Exercise Price shall be adjusted so that it will equal the
price determined by multiplying the Exercise Price in effect
immediately prior to the adjustment by a fraction, of which
the numerator shall be (i) the number of shares outstanding on
the record date for such sale or issuance, plus (ii) the
number of additional shares which the aggregate consideration
received by the Company upon such issuance or sale (plus the
aggregate of any additional amount to be received by the
Company upon the exercise of such subscription rights, options
or warrants) would purchase at the fair market value, and of
which the denominator shall be (x) the number of shares
outstanding on the record date for such issuance or sale, plus
(y) the number of additional shares offered for subscription
or purchase (or into which the Common Stock Equivalents so
offered are exercisable or convertible). Each adjustment shall
become effective retroactively immediately after the record
date for the issuance. To the extent that Common Stock (or
Common Stock Equivalents) are not delivered after the
expiration of such subscription rights, options or warrants,
the Exercise Price shall be readjusted to the Exercise Price
which would then be in effect had the adjustments made upon
the issuance of such rights, options or warrants been made
upon the basis of delivery of only the number of shares (or
Common Stock Equivalents) actually delivered. No adjustments
shall be made for dividends paid in cash or in property other
than securities of the Company.
(d) Adjustments. Upon the happening of any of the foregoing
events, the class and aggregate number of shares set forth in
Paragraph 2 of the Plan that are subject to options which
previously have been or subsequently may be granted under the
Plan shall also be appropriately adjusted to reflect such
events. The Committee shall determine the specific adjustments
to be made under this Paragraph 10 and its determination shall
be conclusive.
11. RESTRICTIONS ON ISSUANCE OF SHARES.
Notwithstanding the provisions of Paragraphs 4 and 9 of the Plan, the
Company shall not be obligated to deliver any Common Stock unless and
until, in the opinion of the Company's counsel, all applicable federal
and state laws and regulations have been complied with, nor, if the
outstanding Common Stock is at the time listed on any securities
exchange, unless and until the Common Stock to be delivered has been
listed (or authorized to be added to the list upon official
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<PAGE>
notice of issuance) upon such exchange, nor unless or until all other
legal matters in connection with the issuance and delivery of the
Common Stock have been approved by the Company's counsel.
12. REPRESENTATION OF OPTIONEE.
If requested by the Company, the optionee shall deliver to the Company
written representations and warranties upon exercise of the option that
are necessary to show compliance with Federal and state securities
laws, including representations and warranties to the effect that a
purchase of shares under the option is made for investment and not with
a view to their distribution (as that term is used in Securities Act of
1933).
13. OPTION AGREEMENT.
Each option is granted under the provisions of the Plan shall be
evidenced by an option agreement, which agreement shall be duly
executed and delivered on behalf of the Company and by the optionee to
whom such option is granted. The option agreement shall contain such
terms, provisions and conditions not inconsistent with the Plan as may
be determined by the officer executing it.
14. TERMINATION AND AMENDMENT OF PLAN.
Options may no longer be granted under the Plan after May __, 2006, and
the Plan shall terminate when all options granted or to be granted
hereunder are no longer outstanding. The Committee may at any time
terminate the Plan or make such modification or amendment thereof as it
deems advisable; provided, however, that the Committee may not, without
approval by the affirmative vote of the holders of a majority of the
shares of Common Stock present in person or by proxy and entitled to
vote at the meeting:
(a) increase the maximum number of shares for which options may be
granted under the Plan (except by adjustment pursuant to
Section 10);
(b) materially modify the requirements as to eligibility to
participate in the Plan;
(c) materially increase benefits accruing to option holders under
the Plan; or
(d) amend the Plan in any manner which would cause Rule 16b-3 to
become inapplicable to the Plan;
and provided further that the provisions of the Plan specified in Rule
16b-3(c)(2)(ii)(A) (or any successor or amended provision thereof)
under the Securities Exchange Act of 1934 (including, without
limitation, provisions as to eligibility, amount, price, and timing of
awards) may not be amended more than once every six months, other than
to comport with changes in the Internal Revenue Code, ERISA, or the
rules thereunder. Termination or any modification or amendment of the
Plan shall not, without consent of a participant, affect his or her
rights under an option previously granted to him or her.
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<PAGE>
15. WITHHOLDING OF INCOME TAXES.
Upon the exercise of an option, the Company, in accordance with Section
3402(a) of the Internal Revenue Code, may require the optionee to pay
withholding taxes in respect of amounts considered to be compensation
includible in the optionee's gross income.
16. COMPLIANCE WITH REGULATIONS.
It is the Company's intent that the Plan comply with all respects with
Rule 16b-3 under the Securities Exchange Act of 1934 (or any successor
or amended version thereof) and any applicable Securities and Exchange
Commission interpretations thereof. If any provision of the Plan is
deemed not be in compliance with Rule 16b-3, the provision shall be
null and void.
17. GOVERNING LAW.
The validity and construction of the Plan and the instruments
evidencing options shall be governed by the laws of the State of
Delaware, without giving effect to the principles of conflicts of law
thereof.
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<PAGE>
EXCHANGE AGREEMENT
U.S. Golf & Entertainment Inc.
AGREEMENT dated May 30, 1996 (the "Agreement"), between U.S.
Golf & Entertainment Inc. (the "Corporation"), a Delaware corporation with
offices at 4 Henry Street, Commack, New York 11725, and those persons whose
names are set forth in Exhibit A hereto (collectively the "Partners").
WHEREAS, the Corporation desires to acquire from the Partners
all of the partnership interests ("Partnership Interests") of Commack Golf &
Family Recreation Center, L.P. (the "Partnership"), and the Partners desire to
transfer such Partnership Interests to the Corporation in exchange for common
stock of the Corporation ("Shares"), in a tax-free transfer under Section 351 of
the Internal Revenue Code, and in accordance with and subject to all of the
terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of and in reliance upon the
covenants, agreements, representations and warranties contained herein, the
parties hereto agree as follows:
1. Exchange of Partnership Interests for Shares. The Partners
hereby agree to transfer the Partnership Interests listed beside their
respective names in Exhibit A hereto in exchange for such number of Shares
listed beside their respective names in Exhibit A hereto. Such transfer is being
effected tax free pursuant to Section 351 of the Internal Revenue Code.
2. Closing.
(a) The closing ("Closing") will take place as soon
after execution of this Agreement as practical, at which time the Corporation
shall issue the Shares and the parties shall exchange such other documents as
may be necessary to facilitate and complete the transaction.
<PAGE>
(b) Each Limited Partner hereby irrevocably rests in
the General Partner, as his attorney-in-fact, authority to execute and deliver
any and all documents necessary to effect a transfer of a partnership interest
or any other documents required to effectuate the transaction.
3. Obligations of Partners at Closing; Further
Assurances.
(a) At Closing, the Partners shall deliver or cause
to be delivered to the Corporation the following:
(i) assignment evidencing the transfer of
the Partnership Interests; and
(ii) all other documents and instruments, if
any, required to be delivered by the Partners under the provisions of this
Agreement.
(b) At any time and from time to time after the
Closing, at the Corporation's request and without further consideration, the
Partners will execute and deliver such other instruments of sale, transfer,
assignment and confirmation and take such action as the Corporation may
reasonably deem necessary or desirable in order to more effectively transfer to
the Corporation, and to confirm the Corporation's title to the Partnership
Interests and to assist the Corporation in exercising all rights with respect
thereto.
4. Obligations of the Corporation at Closing. At Closing, the
Corporation shall deliver or cause to be delivered to the Partners certificates
for the Shares registered in their respective names in the amounts set forth in
Exhibit A hereto.
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<PAGE>
5. Representations and Warranties of the Partners. The
Partners, jointly and severally, represent and warrant to the Corporation as
follows:
(a) Organization and Qualification. The Partnership
is duly organized, validly existing and in good standing under the laws of the
State of New York, and has all requisite power and authority to own and operate
the business which it is now operating.
(b) Outstanding Partnership Interests. The
Partnership Interests represent all of the outstanding interests of the
Partnership. The Partners are the beneficial owners of the Partnership Interests
free and clear of all liens and encumbrances. There are no outstanding rights to
purchase or acquire, or any plans, contracts or commitments providing for the
granting of rights to acquire any interests of the Partnership.
(c) Capacity Relative to this Agreement. The
Partners have full power, capacity, and where applicable, authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by the
Partners and (assuming the valid execution and delivery of the Agreement by the
Corporation) constitutes a legal, valid and binding agreement of the Partners,
enforceable against them in accordance with its terms, subject to applicable
bankruptcy, reorganization, insolvency, moratorium, and other laws affecting
creditors' rights, generally, from time to time, in effect and as to
enforceability, general equitable principles.
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<PAGE>
(d) Investment Purposes. The Partners hereby agree
as follows:
(i) Each Partner is acquiring the Shares to
be issued to him by the Corporation pursuant to this Agreement for his own
account, for investment purposes only and not with a view to sale or
distribution thereof;
(ii) The Shares will not be sold, pledged,
transferred or otherwise disposed of except pursuant to an effective
registration statement in compliance with the rules and regulations of the
Securities Act of 1933, as amended, or pursuant to an opinion of counsel of the
Corporation that such registration is not required;
(iii) All certificates representing the
Shares to be issued pursuant to this Agreement shall bear a legend on the face
thereof to the following effect: The shares evidenced by this certificate have
not been registered under the Securities Act of 1933. No transfer, sale or other
disposition of these shares may be made unless a Registration Statement with
respect to these shares has become effective under said Act, or the Corporation
is furnished with an opinion from its counsel that such registration is not
required.
(iv) Each Partner agrees to execute and
deliver such agreements as may be required by the underwriter to complete an
initial public offering of shares by the Corporation (an "IPO"), including but
not limited to an agreement not to sell such shares for such period of time as
the underwriter may require.
6. Representations and Warranties of the Corporation. The
Corporation represents and warrants to the Partners as follows:
(a) Organization. The Corporation is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
own, lease and operate any lawful business as set forth in its Articles of
Incorporation.
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<PAGE>
(b) Authority Relative to this Agreement.
The Corporation has full corporate power and authority to execute and deliver
this Agreement, and the other agreements described herein and to take all other
steps needed to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the Board of
Directors of the Corporation and no other corporate proceedings on the part of
the Corporation are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by the Corporation, and (assuming the valid execution and
delivery of the Agreement by the Partners) constitutes a valid and binding
agreement of the Corporation, enforceable against the Corporation in accordance
with its terms, subject to applicable bankruptcy, reorganization, insolvency,
moratorium, and other laws affecting creditors' rights generally from time to
time in effect, and as to enforceability, general equitable principles.
7. Conditions Precedent to the Corporation's Obligations. All
obligations of the Corporation under this Agreement are subject, at the
Corporation's option, to the fulfillment, prior to or at the Closing, of each of
the following conditions and the Partners shall use their best efforts to cause
each such condition to be fulfilled:
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<PAGE>
(a) all representations and warranties of
the Partners contained in this Agreement shall be true and accurate in all
material respects as of the date when made and shall be deemed to be made again
at and as of the time of the Closing and shall then be true and accurate in all
material respects.
(b) the Partners shall have performed and
complied with all covenants, agreements and conditions required by this
Agreement to be performed or complied with by them in all material respects
prior to or at the Closing.
(c) no suit, action, investigation, inquiry
or proceeding by any governmental body, or other legal or administrative
proceeding shall have been instituted or threatened which questions the validity
or legality of this Agreement or any of the transactions contemplated hereby, or
which seeks to enjoin the consummation thereof.
8. Condition Precedent to the Partners' Obligations. All
obligations of the Partners under this Agreement are subject, at the Partners'
option, to the fulfillment, prior to or at the Closing, of the following
condition and the Corporation shall use its best efforts to cause such condition
to be fulfilled:
(a) all representations and warranties of the
Corporation contained in this Agreement shall be true and accurate as of the
date when made and shall be deemed to be made again at the time of the Closing
and shall then be true and accurate in all respects.
9. Indemnification of Corporation. The Partners, jointly and
severally, shall indemnify, defend and hold harmless the Corporation, its
officers, directors, employees and agents, from and against all losses, fines,
civil penalties, judgments, claims, damages or expenses (including reasonable
attorneys' fees) of every kind payable by the Corporation relating to the breach
by the Partners of any representation, warranty, covenant or agreement, made by
the Partners contained in this Agreement.
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<PAGE>
10. Indemnification of Partners. The Corporation shall
indemnify, defend and hold harmless the Partners from and against all losses,
fines, civil penalties, judgments, claims, damages or expenses (including
reasonable attorneys' fees) of every kind payable by any of them relating to (i)
any claim against the Partners arising out of an IPO (unless such claim arises
due to a material misrepresentation or breach of any of the representations,
warranties, covenants or agreements of the Partners); and (ii) the breach by the
Corporation of any representation or warranty, covenant or agreement made by the
Corporation contained in this Agreement.
11. Miscellaneous Provisions.
(a) Litigation. If there is any litigation or
arbitration concerning or arising out of this Agreement, or the transactions
contemplated by this Agreement, the non-prevailing party shall pay the
reasonable costs, including attorney's fees, of the prevailing party.
(b) Termination. This Agreement may be terminated
only as follows: (i) at any time prior to the Closing upon the mutual written
consent of the parties hereto; (ii) by the Corporation upon notice to the
Partners, if all of the conditions described in Paragraph 7 hereof have not been
fulfilled by the Partners or waived by the Corporation at the Closing; (iii) by
the Partners upon notice to the Corporation, if the condition described in
Paragraph 8 hereof has not been fulfilled by the Corporation or waived by the
Partners at the Closing.
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<PAGE>
(c) Further Assurances. Any party shall, from time
to time hereafter, at any other party's request and without further
consideration, execute and deliver such other instruments of assignment and
transfer and take such other actions as such other party reasonably may require
in order more effectively to consummate the transactions contemplated by this
Agreement.
(d) Parties in Interest. Nothing in this Agreement,
whether express or implied, is intended to confer any rights or remedies under,
or by reason of, this Agreement on any person or entity other than the parties
hereto and their executors, administrators, personal representatives, successors
and permitted assigns.
(e) Arbitration.
(i) Agreement to Arbitrate. It is the
intention of the parties hereto to arbitrate any disputes arising in connection
with this Agreement and, accordingly, any and all disputes arising out of or
related to this Agreement or the subject matter thereof, shall be resolved by
arbitration.
(ii) Site of Arbitration. Any arbitration
pursuant to this Agreement shall be held and conducted exclusively in the State
of New York.
(iii) Arbitration Rules and Procedures. Any
arbitration pursuant to this Agreement shall proceed pursuant to the Rules of
the American Arbitration Association (the "AAA") in effect at the time
arbitration is commenced.
(iv) Commencement of Arbitration. Any
arbitration pursuant to this Agreement shall be commenced by service and filing
of a Demand to Arbitrate, pursuant to the Rules of the AAA then in effect.
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<PAGE>
(v) Selection of Arbitrator. The arbitrator
in any arbitration pursuant to this Agreement shall be a single arbitrator
selected by the Parties pursuant to the Rules of the AAA then in effect.
(vi) Applicable Law. The arbitrator in any
arbitration pursuant to this Agreement shall apply the substantive law of New
York.
(vii) Confirmation of Arbitration Award. Any
arbitration award obtained pursuant to this Agreement may be confirmed pursuant
to Article 75 of the New York Civil Practice Law and Rules in New York State
Supreme Court, or in any other court of competent jurisdiction within or without
the State of New York.
(f) Amendment and Modification. This Agreement may
be amended, modified, supplemented or terminated and any of the terms,
covenants, representations and warranties or conditions hereof may be waived
only by a written instrument duly executed by the parties hereto, or in the case
of a waiver, by the party waiving compliance.
(g) Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered personally,
upon receipt, or if mailed by registered or certified mail (return receipt
requested), postage prepaid upon receipt or refusal. Notice to parties, if
mailed, shall be to the following addresses:
If to the Partners, to:
CJE Equity Management Associates
366 Pearsall Avenue
Cedarhurst, New York 11516
Attention: Edward Ross
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<PAGE>
If to the Corporation, to:
U.S. Golf & Entertainment Inc.
4 Henry Street
Commack, New York 11725
Attention: Chuck Workman
with a copy to:
Ruskin, Moscou, Evans & Faltischek, P.C.
170 Old Country Road
Mineola, NY 11501
Attention: Michael L. Faltischek, Esq.
(h) Binding Agreement. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective executors, administrators, personal representatives,
successors and permitted assigns.
(i) Governing Law. This Agreement shall be governed
by the laws of the State of New York (regardless of the laws that might
otherwise govern under applicable New York principles of conflicts of law) as to
all matters, including, without limitation, matters of validity, construction,
effect, performance and remedies.
(j) Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
(k) Interpretation. The article and section headings
contained in this Agreement are solely for the purpose of reference, are not
part of the Agreement of the parties and shall not in any way affect the meaning
or interpretation of this Agreement.
(l) Partial Invalidity. If any provision of this
Agreement is held by a court of competent jurisdiction, if applicable, after
arbitration to be prohibited, invalid, void or unenforceable, such provision
shall be ineffective only to the extent of such prohibition and shall not affect
the validity of the remaining provisions hereof.
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<PAGE>
(m) Entire Agreement. This Agreement and any other
agreement described herein constitute and contain the entire agreement of the
parties with respect to the subject matter hereof and of said agreement and
supersedes any and all prior negotiations, correspondence, agreements and
understanding between the parties respecting the subject matter hereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be signed as of the date first above written.
U.S. GOLF & ENTERTAINMENT INC.
By:
Chuck Workman, President
PARTNERS:
CJE Equity Management Assoc.
By:
CHUCK WORKMAN PRO GOLF LTD.
By:
MPGH, INC.
By:
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<PAGE>
Steven Aptecker
Pasquale J. Bagnato
Matthew Barbara
Paul E. Barbara
Howard Baron
Robert Brosnan
Eugene Bernstein
Harold Bernstein
Julius A. Binetti
David Brand
Teri R. Costello
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<PAGE>
Joseph Duerr
Kevin Fee
Edward Feinberg
Donald Feinsod
Alan Feldman
David Feldman
Alvin Finkle
Edward Ford
Clark Gillies
Jack Herrick
Raina Herrick
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<PAGE>
Carmine Inserra
Uwe Krupp
Frank Lemieux
Peter Leonard
Gilbert Lerner
Harvey Lerner
Alvin Levine
Phyllis Lido
Marc Locker
Douglas Lopez
Jonathan Lopez
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<PAGE>
Matthew Lopez
Gary Pezza
Joseph D. Posillico
Mario Posillico
Carole Provenzano
Elias Rodriquez
Audrey Reed
Edward Ross
Joanne M. Russell
Eros Sanchez
Daniel Saretto
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<PAGE>
Larry Sussman
Larry H. Weiss
Marcia Zimmerman
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<PAGE>
EXHIBIT "A"
TO
EXCHANGE AGREEMENT
GENERAL PARTNERS PERCENTAGE INTEREST ALLOCATION OF SHARES
- ---------------- ------------------- ---------------------
CJE Equity Management
Assoc. 6.00% 62,700
Chuck Workman Pro
Golf Ltd. 4.67% 48,802
MPGH, Inc. 9.33% 97,498
Small fractional allocations were rounded off.
<PAGE>
LIMITED PARTNERS PERCENTAGE INTEREST ALLOCATION OF SHARES
Steve Aptecker 0.909090% 9,500
Pasquale J. Bagnato 1.363636% 14,250
Matthew Barbara 0.909090% 9,500
Paul E. Barbara 0.909090% 9,500
Howard Baron 0.909090% 9,500
Robert Brosnan 1.818181% 19,000
Eugene Bernstein 0.909090% 9,500
Harold Bernstein 0.909090% 9,500
Julius A. Binetti 0.909090% 9,500
David Brand 0.909090% 9,500
Teri R. Costello 1.818181% 19,000
Joseph Duerr 1.818181% 19,000
Kevin Fee 1.818181% 19,000
Edward Feinberg 0.909090% 9,500
Donald Feinsod 1.818181% 19,000
Alan Feldman 0.909090% 9,500
David Feldman 1.818181% 19,000
Alvin Finkle 3.636366% 38,000
Edward Ford 0.909090% 9,500
Clark Gillies 1.818181% 19,000
Jack Herrick 1.818181% 19,000
Raina Herrick 1.818181% 19,000
Carmine Inserra 1.363653% 14,250
<PAGE>
LIMITED PARTNERS PERCENTAGE INTEREST ALLOCATION OF SHARES
Uwe Krupp 3.636366% 38,000
Frank Lemieux 1.818181% 19,000
Peter Leonard 1.818181% 19,000
Gilbert Lerner 3.636366% 38,000
Harvey Lerner 0.909090% 9,500
Alvin Levine 4.545454% 47,500
Phyllis Lido 0.909090% 9,500
Marc Locker 1.818181% 19,000
Douglas Lopez 1.818181% 19,000
Jonathan Lopez 0.909090% 9,500
Matthew Lopez 0.909090% 9,500
Gary Pezza 3.636366% 38,000
Joseph D. Posillico 1.818181% 19,000
Mario Posillico 1.818181% 19,000
Carole Provenzano/
Elias Rodriquez 1.363636% 14,250
Audrey Reed 3.636366% 38,000
Edward Ross 3.636367% 38,000
Joanne M. Russell 0.909090% 9,500
Eros Sanchez 3.636363% 38,000
Daniel Saretto 1.363636% 14,250
Larry Sussman 0.909090% 9,500
Larry H. Weiss 0.909090% 9,500
Marcia Zimmerman 0.909090% 9,500
<PAGE>
EXHIBIT 10.5
EXCHANGE AGREEMENT
AGREEMENT dated May 30, 1996 (the "Agreement"), between U.S.
Golf and Entertainment Inc. (the "Corporation"), a Delaware corporation with
offices at 4 Henry Street, Commack, New York 11725, and those persons whose
names and addresses are set forth in Exhibit A hereto (collectively the
"Shareholders").
WHEREAS, the Corporation desires to acquire from the
Shareholders all of the common stock ("Subsidiary Shares") of U.S. Golf &
Entertainment Corp. (the "Subsidiary"), and the Shareholders desire to transfer
such Subsidiary Shares to the Corporation in exchange for common stock of the
Corporation ("Parent Shares"), in a tax-free transfer under Section 351 of the
Internal Revenue Code, and in accordance with and subject to all of the terms
and conditions of this Agreement; and
WHEREAS, the Corporation desires to acquire from the
Shareholders and the Shareholders desire to transfer to the Corporation warrants
to acquire shares of common stock of the Subsidiary ("Subsidiary Warrants") in
exchange for warrants to acquire shares of common stock of the Corporation
("Parent Warrants").
NOW, THEREFORE, in consideration of and in reliance upon the
covenants, agreements, representations and warranties contained herein, the
parties hereto agree as follows:
1. Transfer of Shares. The Shareholders hereby agree to
transfer the Subsidiary Shares listed beside their respective names in Exhibit A
hereto in exchange for such number of Parent Shares listed beside their
respective names in Exhibit A hereto. Such transfer is being effected tax free
pursuant to Section 351 of the Internal Revenue Code.
<PAGE>
2. Transfer of Warrants. The Shareholders hereby agree to
transfer the Subsidiary Warrants listed beside their respective names in Exhibit
B hereto in exchange for such number of Parent Warrants listed beside their
respective names in Exhibit B hereto. The Parent Warrants are intended to
contain terms identical to the warrants being issued by the Corporation pursuant
to the Corporation's initial public offering of its equity securities (the
"IPO"). The Parent Warrants and the shares underlying the Parent Warrants will
be registered and freely transferable following the IPO.
3. Closing. The closing ("Closing") will take place as soon
after execution of this Agreement as practical.
4. Obligations of Shareholders at Closing; Further Assurances.
(a) At Closing, the Shareholders shall deliver or
cause to be delivered to Corporation the following:
(i) stock certificates for the Subsidiary
Shares duly executed in blank or accompanied by duly executed instruments of
transfer and transfer taxes, if any;
(ii) the Subsidiary Warrants accompanied by
duly executed instruments of transfer; and
(iii) all other documents and instruments,
if any, required to be delivered by the Shareholders (or any of them) of the
Corporation under the provisions of this Agreement.
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<PAGE>
(b) At any time and from time to time after the
Closing, at the Corporation's request and without further consideration, the
Shareholders will execute and deliver such other instruments of sale, transfer,
assignment and confirmation and take such action as the Corporation may
reasonably deem necessary or desirable in order to more effectively transfer to
the Corporation, and to confirm the Corporation's title to the Subsidiary Shares
and to assist the Corporation in exercising all rights with respect thereto.
5. Obligations of the Corporation at Closing. At Closing, the
Corporation shall deliver or cause to be delivered to the Shareholders:
(a) certificates for the Parent Shares registered in
their respective names in the amounts set forth in Exhibit A hereto; and
(b) the Parent Warrants registered in their
respective names in the amounts set forth in Exhibit B hereto.
6. Representations and Warranties of the Shareholders. The
Shareholders, jointly and severally, represent and warrant to the Corporation as
follows:
(a) Organization and Qualification. The Subsidiary
is duly organized, validly existing and in good standing under the laws of the
State of its incorporation, and has all requisite corporate power and authority
to own and operate the business which it is now operating.
(b) Capital Shares of the Subsidiary, Options, etc.
The Subsidiary Shares represent all of the issued and outstanding shares of
capital stock of the Subsidiary. The Shareholders are the record and beneficial
owners of the Subsidiary Shares free and clear of all liens and encumbrances.
The Subsidiary Shares are fully paid, validly issued and non-assessable. There
are no outstanding options, warrants, calls or other rights to subscribe for,
purchase or acquire, or any plans, contracts or commitments providing for the
issuance of, or granting of rights to acquire: (i) any capital stock of the
Subsidiary, or (ii) any securities convertible into or exchangeable for any
capital stock of the Subsidiary.
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<PAGE>
(c) Capacity Relative to this Agreement. The
Shareholders have full power, capacity, and where applicable, authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by the Shareholders and (assuming the valid execution and delivery of
the Agreement by the Corporation) constitutes a legal, valid and binding
agreement of the Shareholders, enforceable against them in accordance with its
terms, subject to applicable bankruptcy, reorganization, insolvency, moratorium,
and other laws affecting creditors' rights, generally, from time to time, in
effect and as to enforceability, general equitable principles.
(d) Investment Purposes.
(i) Each Shareholder is acquiring the Parent
Shares and Parent Warrants to be issued to him by the Corporation pursuant to
this Agreement for his own account, for investment purposes only and not with a
view to sale or distribution thereof;
(ii) The Parent Shares and the Parent
Warrants will not be sold, pledged, transferred or otherwise disposed of except
pursuant to an effective registration statement in compliance with the rules and
regulations of the Securities Act of 1933, as amended, or pursuant to an opinion
of counsel of the Corporation that such registration is not required;
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<PAGE>
(iii) All certificates representing the
Parent Shares to be issued pursuant to this Agreement shall bear a legend on the
face thereof to the following effect: The shares evidenced by this certificate
have not been registered under the Securities Act of 1933. No transfer, sale or
other disposition of these shares may be made unless a Registration Statement
with respect to these shares has become effective under said Act, or the
Corporation is furnished with an opinion from its counsel that such registration
is not required.
(iv) Each Shareholder agrees to execute and
deliver such agreements as may be required by the underwriter to complete the
IPO, including but not limited to an agreement not to sell such shares for such
period of time as the underwriter may require.
7. Representations and Warranties of the Corporation. The
Corporation represents and warrants to the Shareholders as follows:
(a) Organization. The Corporation is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to own,
lease and operate any lawful business as set forth in its Articles of
Incorporation.
(b) Authority Relative to this Agreement. The
Corporation has full corporate power and authority to execute and deliver this
Agreement, and the other agreements described herein and to take all other steps
needed to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly and validly authorized by the board of directors of the
Corporation and no other corporate proceedings on the part of the Corporation
are necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by the Corporation, and (assuming the valid execution and delivery of
the Agreement by the Shareholders) constitutes a valid and binding agreement of
the Corporation, enforceable against the Corporation in accordance with its
terms, subject to applicable bankruptcy, reorganization, insolvency, moratorium,
and other laws affecting creditors' rights generally from time to time in
effect, and as to enforceability, general equitable principles.
-5-
<PAGE>
8. Conditions Precedent to the Corporation's Obligations. All
obligations of the Corporation under this Agreement are subject, at the
Corporation's option, to the fulfillment, prior to or at the Closing, of each of
the following conditions and the Shareholders shall use their best efforts to
cause each such condition to be fulfilled:
(a) all representations and warranties of the
Shareholders contained in this Agreement shall be true and accurate in all
material respects as of the date when made and shall be deemed to be made again
at and as of the time of the Closing and shall then be true and accurate in all
material respects.
(b) the Shareholders shall have performed and
complied with all covenants, agreements and conditions required by this
Agreement to be performed or complied with by them in all material respects
prior to or at the Closing.
-6-
<PAGE>
(c) no suit, action, investigation, inquiry or
proceeding by any governmental body, or other legal or administrative proceeding
shall have been instituted or threatened which questions the validity or
legality of this Agreement or any of the transactions contemplated hereby, or
which seeks to enjoin the consummation thereof.
9. Condition Precedent to the Shareholders' Obligations. All
obligations of the Shareholders under this Agreement are subject, at the
Shareholders' option, to the fulfillment, prior to or at the Closing, of the
following condition and the Corporation shall use its best efforts to cause each
such condition to be fulfilled:
(a) all representations and warranties of the
Corporation contained in this Agreement shall be true and accurate as of the
date when made and shall be deemed to be made again at the time of the Closing
and shall then be true and accurate in all respects.
10. Indemnification of Corporation. The Shareholders, jointly
and severally, shall indemnify, defend and hold harmless the Corporation, its
officers, directors, employees and agents, from and against all losses, fines,
civil penalties, judgments, claims, damages or expenses (including reasonable
attorneys' fees) of every kind payable by the Corporation relating to the breach
by the Shareholders of any representation, warranty, covenant or agreement, made
by the Shareholders contained in this Agreement.
11. Indemnification of Shareholders. The Corporation shall
indemnify, defend and hold harmless the Shareholders from and against all
losses, fines, civil penalties, judgments, claims, damages or expenses
(including reasonable attorneys' fees) of every kind payable by any of them
relating to (i) any claim against the Shareholders arising out of an IPO (unless
such claim arises due to a material misrepresentation or breach of any of the
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<PAGE>
representations, warranties, covenants or agreements of the Shareholders); and
(ii) the breach by the Corporation of any representation or warranty, covenant
or agreement made by the Corporation contained in this Agreement.
12. Miscellaneous Provisions.
(a) Litigation. If there is any litigation or
arbitration concerning or arising out of this Agreement, or the transactions
contemplated by this Agreement, the non-prevailing party shall pay the
reasonable costs, including attorney's fees, of the prevailing party.
(b) Termination. This Agreement may be terminated
only as follows: (i) at any time prior to the Closing upon the mutual written
consent of the parties hereto; (ii) by the Corporation upon notice to the
Shareholders, if all of the conditions described in Paragraph 8 hereof have not
been fulfilled by the Shareholders or waived by the Corporation at the Closing;
or (iii) by the Shareholders upon notice to the Corporation, if the condition
described in Paragraph 9 hereof has not been fulfilled by the Corporation or
waived by the Shareholders at the Closing.
(c) Further Assurances. Any party shall, from time
to time hereafter, at any other party's request and without further
consideration, execute and deliver such other instruments of assignment and
transfer and take such other actions as such other party reasonably may require
in order more effectively to consummate the transactions contemplated by this
Agreement.
-8-
<PAGE>
(d) Parties in Interest. Nothing in this Agreement,
whether express or implied, is intended to confer any rights or remedies under,
or by reason of, this Agreement on any person or entity other than the parties
hereto and their executors, administrators, personal representatives, successors
and permitted assigns.
(e) Arbitration
(i) Agreement to Arbitrate. It is the
intention of the parties hereto to arbitrate any disputes arising in connection
with this Agreement and, accordingly, any and all disputes arising out of or
related to this Agreement or the subject matter thereof, shall be resolved by
arbitration.
(ii) Site of Arbitration. Any arbitration
pursuant to this Agreement shall be held and conducted exclusively in the State
of New York.
(iii) Arbitration Rules and Procedures. Any
arbitration pursuant to this Agreement shall proceed pursuant to the Rules of
the American Arbitration Association (the "AAA") in effect at the time
arbitration is commenced.
(iv) Commencement of Arbitration. Any
arbitration pursuant to this Agreement shall be commenced by service and filing
of a Demand to Arbitrate, pursuant to the Rules of the AAA then in effect.
(v) Selection of Arbitrator. The arbitrator
in any arbitration pursuant to this Agreement shall be a single arbitrator
selected by the Parties pursuant to the Rules of the AAA then in effect.
(vi) Applicable Law. The arbitrator in any
arbitration pursuant to this Agreement shall apply the substantive law of New
York.
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<PAGE>
(vii) Confirmation of Arbitration Award. Any
arbitration award obtained pursuant to this Agreement may be confirmed pursuant
to Article 75 of the New York Civil Practice Law and Rules in New York State
Supreme Court, or in any other court of competent jurisdiction within or without
the State of New York.
(f) Amendment and Modification. This Agreement may
be amended, modified, supplemented or terminated and any of the terms,
covenants, representations and warranties or conditions hereof may be waived
only by a written instrument duly executed by the parties hereto, or in the case
of a waiver, by the party waiving compliance.
(g) Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered personally,
upon receipt, or if mailed by registered or certified mail (return receipt
requested), postage prepaid upon receipt or refusal. Notice to parties, if
mailed, shall be to the following addresses:
If to the Shareholders, to:
Names and Addresses as set
forth in Exhibit A hereto
If to the Corporation, to:
U.S. Golf and Entertainment Inc.
4 Henry Street
Commack, New York 11725
Attention: Edward Ross, President
with a copy to:
Ruskin, Moscou, Evans & Faltischek, P.C.
170 Old Country Road
Mineola, NY 11501
Attention: Michael L. Faltischek, Esq.
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<PAGE>
(h) Binding Agreement. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective executors, administrators, personal representatives,
successors and permitted assigns.
(i) Governing Law. This Agreement shall be governed
by the laws of the State of New York (regardless of the laws that might
otherwise govern under applicable New York principles of conflicts of law) as to
all matters, including, without limitation, matters of validity, construction,
effect, performance and remedies.
(j) Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
(k) Interpretation. The article and section headings
contained in this Agreement are solely for the purpose of reference, are not
part of the Agreement of the parties and shall not in any way affect the meaning
or interpretation of this Agreement.
(l) Partial Invalidity. If any provision of this
Agreement is held by a court of competent jurisdiction, if applicable, after
arbitration to be prohibited, invalid, void or unenforceable, such provision
shall be ineffective only to the extent of such prohibition and shall not affect
the validity of the remaining provisions hereof.
(m) Entire Agreement. This Agreement and any other
agreement described herein constitute and contain the entire agreement of the
parties with respect to the subject matter hereof and of said agreement and
supersedes any and all prior negotiations, correspondence, agreements and
understanding between the parties respecting the subject matter hereof.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to
be signed as of the date first above written.
U.S. GOLF AND ENTERTAINMENT INC.
By:
GINA SALERNO
LEWIS WEISBLUM
UNITED ACQUISITION III CORP.
By:
UNITEK CONSULTANTS, INC.
By:
RAY IRNGY
LUPIN HOLDINGS, INC.
By:
EDWARD FORD
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<PAGE>
WILLIAM PATTISON
CHUCK WORKMAN
DOUGLAS INTERNATIONAL, S.A.
By:
XENON INTERNATIONAL, LTD.
By:
CARICO INC.
By:
RICHARD E. GERZOF
UNITEK CONSULTANTS, INC.
By:
THE TIGER EYE FUND L.L.C.
By:
ALICE MCCAVE
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<PAGE>
MANDELAY CORPORATION, N.V.
By:
DONALD BALBINDER
JONATHAN HALPERIN
BARRY WILDER
FRANCES WILDER
DAVID B. LEVER
PETER HALPERIN
CRAIG W. EFFRON
ALAN KOCH
TUSANY INVEST & TRADE S.A.
By:
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<PAGE>
EXHIBIT A
Shareholders Subsidiary Shares
The Tiger Eye Fund L.L.C. 20,000 20,000
165 EAB Plaza, West Tower
Suite 628
Uniondale, New York 11556
Gina Salerno 20,000 20,000
One Simonson Court
Old Brookville, NY 11545
Alice McCave 50,000 50,000
260 65th Street
#200
Brooklyn, New York 11220
Lewis Weisblum 50,000 50,000
37 State Street
Oceanside, New York 11572
United Acquisition III Corp. 65,000 65,000
One Wheatley Avenue
East Williston, NY 11576
Unitek Consultants, Inc. 40,000 40,000
52 Cove Road
Huntington, New York 11743
Ray Irngy 25,000 25,000
900-609 Grandville Street
Vancouver, BC V7Y1H4
Lupin Holdings, Inc. 125,000 125,000
P.O. Box 302
Westaway Chambers
39 Don Street
St. Helier, Jersey JE4 8JA
Channel Islands
Edward Ford 10,000 10,000
3750 Galt Ocean Drive
Ft. Lauderdale, FL 33308
<PAGE>
William Pattison 5,000 5,000
3 Middlebury Road
Hauppauge, New York 11788
Chuck Workman 10,000 10,000
70 Sugar Toms Ridge
East Norwich, NY 11732
Douglas International, S.A. 125,000 125,000
39 Don Street
St. Helier, Jersey JE4 8JA
Channel Islands
Xenon International, Ltd. 25,000 25,000
165 EAB Plaza, West Tower
Uniondale, New York 11556
Carico Inc. 50,000 50,000
22 Churchill Road
Englewood Cliffs, NJ 07632
Richard E. Gerzof 25,000 25,000
161 Sportsman Avenue
Freeport, New York 11520
Unitek Consultants, Inc. 25,000 25,000
52 Cove Road
Huntington, New York 11743
The Tiger Eye Fund L.L.C. 25,000 25,000
165 EAB Plaza, West Tower
Suite 628
Uniondale, New York 11556
Alice McCave 12,500 12,500
260 65th Street
#200
Brooklyn, New York 11220
Ray Irngy 50,000 50,000
900-609 Grandville Street
Vancouver, BC V7Y1H4
Mandelay Corporation, N.V. 50,000 50,000
Landhuis Joonchi
Kaya Richard J. Beaujon z/n
<PAGE>
P.O. Box 837
Curacao, Netherlands Antilles
Donald Balbinder 25,000 25,000
2 Spruce Street, Apt. 1E
Great Neck, New York 11021
Jonathan Halperin 25,000 25,000
2 Bay Club Drive
Apt. 17X
Bayside, New York 11360
Gina M. Salerno 12,500 12,500
One Simonson Court
Old Brookville, New York 11545
Barry Wilder and
Frances Wilder 25,000 25,000
7 Danny Court
Dix Hills, New York 11746
David B. Lever 25,000 25,000
36 Rambling Brook Road
Chappaqua, New York 10514
Peter Halperin 25,000 25,000
One Everit Avenue
Hewlett, New York
Craig W. Effron 50,000 50,000
983 Park Avenue
Apt. 14A
New York, New York 10028
Tusany Invest & Trade S.A. 25,000 25,000
c/o Morgan & Morgan Trust Co.
Pasea Estate
P.O. Box 3149
Roadtown, Tortola BVI
Alan Koch 25,000 25,000
8 Smithtown Crescent
Smithtown, New York 11787
<PAGE>
EXHIBIT B
Shareholders Subsidiary Warrants Parent Warrants
The Tiger Eye Fund L.L.C. 20,000 20,000
Gina Salerno 20,000 20,000
Alice McCave 50,000 50,000
Lewis Weisblum 50,000 50,000
United Acquisition III Corp. 65,000 65,000
Unitek Consultants, Inc. 40,000 40,000
Ray Irngy 25,000 25,000
Lupin Holdings, Inc. 125,000 125,000
Douglas International, S.A. 125,000 125,000
Xenon International, Ltd. 75,000 75,000
Carico Inc. 150,000 150,000
Richard E. Gerzof 75,000 75,000
Unitek Consultants, Inc. 75,000 75,000
The Tiger Eye Fund L.L.C. 75,000 75,000
Alice McCave 37,500 37,500
Ray Irngy 150,000 150,000
Mandelay Corporation, N.V. 150,000 150,000
Donald Balbinder 75,000 75,000
Jonathan Halperin 75,000 75,000
Gina M. Salerno 37,500 37,500
<PAGE>
Barry Wilder and
Frances Wilder 75,000 75,000
David B. Lever 75,000 75,000
Peter Halperin 75,000 75,000
Craig W. Effron 150,000 150,000
Tusany Invest & Trade S.A. 75,000 75,000
Alan Koch 75,000 75,000
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<PAGE>
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
AGREEMENT dated as of the ___ day of May, 1996 by and between U.S. Golf
and Entertainment Inc., a Delaware Corporation with its principal office at 4
Henry Street, Commack, New York 11725 (hereinafter the "Company") and Edward
Ross (hereinafter the "Employee").
W I T N E S S E T H
WHEREAS, the Company is engaged in the business of acquiring,
developing and operating up-scale, high volume, year-round golf driving ranges
and related recreational and entertainment facilities; and
WHEREAS, the Company and Employee wish to enter into an employment
agreement in order to assure the employment of the Employee by the Company for
the period provided herein; and
WHEREAS, the Employee is willing to serve in the part-time employ of
the Company for said period, and upon such other terms and conditions
hereinafter provided.
NOW, THEREFORE, the Company and the Employee, intending to be legally
bound, agree as follows:
1. Term. The Employee shall be employed to serve as Chairman and
President of the Company for the term commencing on the date hereof (the
"Commencement Date") and ending May , 2001 or sooner as herein provided (the
"Term").
2. Extent of Services. The Employee shall devote fifty percent (50%) of
his time, attention and energies to his position and may, during the Term
hereof, be engaged in other business activities, provided that such business
activities do not compete with the business of the Company. Except for periodic
travel assignments, Employee shall not, without the Company's consent, be
required to perform services at any place other than on Long Island, New York.
Services required to be performed for the Company hereunder shall also include
any of its subsidiaries.
3. Compensation.
A. Base Salary. As full compensation for all services to be
rendered by the Employee to the Company hereunder (including services on the
Board of Directors of the Company and any subsidiary), the Company will pay, or
cause to be paid, to Employee an annual base salary of $60,000 (the "Base
Salary"). The Base Salary will be paid in equal monthly installments or such
other normal periodic payment schedule as the Company may establish for its
employees. Within ninety (90) days following the end of the Company's fiscal
year, the Board of Directors (or a Compensation Committee thereof) shall review
the Employee's performance hereunder and make any increases in the Employee's
Base Salary as it shall deem appropriate (and such adjusted amount shall be
deemed to be the Base Salary), taking into consideration such factors, without
limitation, as the performance of the Company and the quality and extent of
Employee's services.
<PAGE>
B. Cost of Living Increase. In addition to the increases in
the Base Salary provided for in Section 4.A. above, beginning on and for each
year of the Term thereafter, the Company shall increase the Base Salary then in
effect to reflect increases in the cost of living. The amount thereof shall be
determined by multiplying the Base Salary then in effect by the percentage
increase, if any, of the United States Department of Labor Consumer Price
Index-New York Metropolitan Area-all items (the "CPI") between January 1 of the
year in which the calculation is made and January 1 of the prior year.
C. [Bonus].
D. Benefits. The Employee will be eligible to participate, on
the same basis as other executives of the Company, in its employee benefit
programs, if any, including without limitation, group life, health, accident,
hospitalization and disability insurance programs.
E. Reimbursement of Expenses. The Company shall reimburse or
cause to be reimbursed to the Employee, all reasonable out-of-pocket expenses
incurred by him in the performance of his duties hereunder or in furtherance of
the business and/or interests of the Company; provided that Employee shall
furnish to the Company a satisfactory itemized account thereof.
4. Indemnification. The Company shall, to the extent permitted by law,
indemnify and hold Employee harmless from and against all claims, damages,
losses and expenses, including reasonable attorneys' fees and disbursements
arising out of the performance by the Employee of his duties pursuant to this
Agreement, in furtherance of the Company's business and within the scope of his
employment.
5. Termination.
A. If the Employee becomes disabled during the Term, his Base
Salary and all other rights under this Agreement shall terminate at the end of
the month during which disability occurs. For purposes of this Agreement, the
Employee shall be deemed "disabled" if he has been unable to perform his duties
for six (6) consecutive months or an aggregate of nine (9) months in any
consecutive twelve (12) month period, all as determined in good faith by the
Board of Directors of the Company.
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<PAGE>
B. If the Employee dies during the Term, the Corporation shall
pay to his estate, the Employee's then current Base Salary for a period of one
year from the date of death.
C. The Company shall, in the manner described in the last
paragraph of this Section 5.C, have the right to terminate the employment of the
Employee under this Agreement for "cause" and the Employee shall forfeit the
right to receive any and all further payments hereunder, other than the right to
receive any compensation then due and payable to the Employee pursuant to
Section 3 hereof through the date of termination. "Cause" shall be deemed to be
the commission of any of the following acts by the Employee:
(i) The Employee shall have committed any material
breach of any of the provisions or covenants of this Agreement;
(ii) The Employee shall have committed any act of
gross negligence in the performance of his duties or obligations hereunder, or,
without proper cause, shall have wilfully refused or habitually neglected to
perform his duties or obligations under this Agreement;
(iii) The Employee shall have committed any material
act of willful misconduct, dishonesty or breach of trust which directly or
indirectly causes the Company or any of its subsidiaries to suffer any loss,
fine, civil penalty, judgment, claim, damage or expense; or
(iv) The Employee shall have been convicted of, or
shall have plead guilty or nolo contendere to, a felony or indictable offense
(unless committed in the reasonable, good faith belief that the Employee's
actions were in the best interests of the Company and its stockholders and would
not violate criminal law).
If the Company elects to terminate the Employee's employment
for cause as set forth above, it shall deliver written notice (the "Termination
Notice") thereof to the Employee, describing with reasonable detail the "cause"
giving rise to termination, and thereupon no further payments of any type shall
be made or shall be due or payable to Employee hereunder, except as provided in
the first sentence of this Section 5.C; provided, however, that with respect to
any act of default set forth in clauses (i) and (ii) of this Section 5.C, prior
to termination by the Company, the Employee shall have thirty (30) days
following the Termination Notice to cure or remedy the act of default giving
rise to such termination.
-3-
<PAGE>
D. If the Company terminates the Employee's employment during
the Term hereof without cause (i.e., for reasons other than the acts of default
enumerated in Section 5.C(i) through (iv) hereof), it shall pay to the Employee
an amount equal to the sum of (i) and (ii) below at the rate and on the terms
specified therein: (i) his total Base Salary for the remainder of the existing
Term in the amount and at the times required by Paragraph 3.A hereof and for
purposes of this calculation and payment, increases in the Base Salary to which
the Employee would have been entitled had he remained in the employ of the
Company for the remainder of the Term following termination shall be paid to the
Employee; and (ii) [severance payment?]
6. Restrictive Covenants.
A. Covenant not to Disclose; Confidential Information. The
Employee covenants and agrees that he will not at any time during or after the
termination of his employment hereunder reveal, divulge, or make known to any
person, firm, corporation or other business organization (other than the Company
or its subsidiaries), or use for his own account any customer lists, trade
secrets, or any secret or confidential information of any kind used by the
Company during his employment, and made known (whether or not with the knowledge
and permission of the Company, whether or not developed, devised, or otherwise
created in whole or in part by the efforts of the Employee, and whether or not a
matter of public knowledge unless as a result of authorized disclosure) to the
Employee by reason of his employment by the Company. The Employee further
covenants and agrees that the knowledge and information which he has acquired or
hereafter shall acquire during his employment respecting such customer lists,
trade secrets, and secret or confidential information shall be held by him in
trust for the sole benefit of the Company, its successors and assigns.
B. Covenant Not to Compete. The Employee covenants and agrees
that, during the Term hereof and for two (2) years thereafter, he will not,
without the prior written consent of the Company, directly or indirectly, and
whether as principal, agent, officer, director, employee, consultant, or
otherwise, alone or in association with any other person, firm, corporation, or
other business organization, carry on, or be engaged, concerned, or take part
in, or render services to, or own, share in the earnings of, or invest in the
stock, bonds, or other securities of any person, firm, corporation, or other
business organization (other than the Company) engaged in a business in the
United States which is similar to or in competition with any of the businesses
carried on by the Company (a "Similar Business") except in the course of his
employment hereunder; provided, however, that the Employee may invest in stock,
bonds, or other securities of any Similar Business (but without otherwise
participating in the activities of such Similar Business) if (i) such stock,
bonds, or other securities are listed on any national or regional securities
exchange or have been registered under Section 12(g) of the Securities Exchange
Act of 1934; and (ii) his investment does not exceed, in the case of any class
of the capital stock of any one issuer, 5% of the issued and outstanding shares,
or in the case of bonds or other securities, 5% of the aggregate principal
amount thereof issued and outstanding.
-4-
<PAGE>
C. Covenant of Non-Interference. The Employee covenants and
agrees that during the Term hereof and for two (2) years thereafter he will not,
whether for his own account or for the account of any other person, firm,
corporation or other business organization, interfere with the Company's
relationship with, or endeavor to entice away from the Company, any person,
firm, corporation or other business organization who or which at any time during
the term of the Employee's employment with the Company was an employee,
consultant, agent, supplier, or a customer of, or in the habit of dealing with,
the Company.
D. Covenant Modification. If any provision of this Section 6
is held by any court of competent jurisdiction to be unenforceable because of
the scope, duration or area of applicability, such provision shall be deemed
modified to the extent such court modifies the scope, duration or area of
applicability of such provision to make it enforceable.
E. Documents and Records. All written materials, records and
documents made by the Employee or coming into his possession during the Term
concerning the business or affairs of the Company shall be the sole property of
the Company and, upon expiration of the Term or upon the request of the Company
during the Term, the Employee shall promptly deliver the same to the Company.
The Employee agrees to render to the Company such reports of the activities
undertaken by the Employee or conducted under the Employee's direction pursuant
hereto during the Term as the Company may request.
7. Injunction. It is recognized and hereby acknowledged by the Employee
that a breach or violation by the Employee of any of the covenants or agreements
contained in this Agreement may cause irreparable harm and damage to the
Company, the monetary amount of which may be virtually impossible to ascertain.
As a result, the Employee recognizes and acknowledges that the Company shall be
entitled to an injunction, without posting any bond or security in connection
therewith, from any court of competent jurisdiction enjoining and restraining
any breach or violation of any of the restrictive covenants contained in Section
6 hereof by the Employee or his associates, partners or agents, either directly
or indirectly, and that such right to injunction shall be cumulative and in
addition to whatever other rights or remedies the Company may possess. Nothing
contained in this Section 7 shall be construed to prevent the Company from
seeking and recovering from the Employee damages sustained as a result of any
breach or violation by the Employee of any of the covenants or agreements
contained in this Agreement, and that in the event of any such breach, the
Company shall avail itself of all remedies available both at law and in equity.
-5-
<PAGE>
8. Employee's Representations. Employee represents to the Company that
to the best of his knowledge he is under no obligation to any employer or third
party which would preclude the full, complete and unfettered discharge of his
duties under this Agreement.
9. Notices. Any and all notices or other communications required or
permitted to be given under any of the provisions of this Agreement shall be in
writing and shall be deemed to have been duly given when personally delivered or
mailed by first class certified or registered mail, return receipt requested,
addressed to the parties at the following addresses (or at such other address as
any such person may specify by notice to all other such persons given as
aforesaid):
U.S. Golf and Entertainment Inc.
4 Henry Street
Commack, New York 11725
Attention: Chuck Workman
With a copy to:
Ruskin, Moscou, Evans & Faltischek, P.C.
170 Old Country Road
Mineola, New York 11501
Attention: Michael L. Faltischek, Esq.
If to Employee:
Edward Ross
10. Amendment. This Agreement may be amended only in writing signed by
both parties hereto.
11. Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the Company, its successors and assigns. Employee may not
assign, transfer, pledge or hypothecate any of his rights or obligations
hereunder, or money to which he may be entitled hereunder.
12. Waiver of Breach. The failure of a party to insist on strict
adherence to any term of this Agreement on any occasion shall not be considered
a waiver or deprive that party of the right thereafter to insist upon strict
adherence to that term or any term of this Agreement. Any waiver hereto must be
in a writing signed by both parties.
13. Severability. The invalidity or unenforceability of any other
provision hereof shall in no way affect the validity or enforceability of any
other provision hereof.
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<PAGE>
14. Entire Agreement. This Agreement constitutes the entire Agreement
between the parties, and supersedes all existing agreements between them with
respect to the subject matter hereof. It may only be changed or terminated by an
instrument in writing signed by both parties.
15. Governing Law. This Agreement shall be governed by, construed and
interpreted in accordance with the laws of the State of New York.
16. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
17. Paragraph Headings. Paragraph headings are inserted herein for
convenience only and are not intended to modify, limit or alter the meaning of
any provision of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
U.S. GOLF AND ENTERTAINMENT INC.
By:___________________________
---------------------------
Edward Ross
<PAGE>
EXHIBIT 24.1
INDEPENDENT AUDITOR'S CONSENT
To the Partners
Commack Golf and Family Recreation Center, L.P.
(A Limited Partnership)
We hereby consent to the use in the Prospectus constituting part of the
Registration Statement on Form SB-2 of our report dated April 30, 1996 (except
for Notes 10 and 11, the latest of which is dated May 30, 1996), on the
financial statements of Commack Golf and Family Recreation Center, L.P. (A
Limited Partnership) as of December 31, 1995 and for the year then ended and for
the period July 26, 1994 (date of formation) to December 31, 1994, which appear
in such Prospectus. We also consent to the reference to our firm under the
caption "Experts" in such Prospectus.
Farber, Blicht & Eyerman LLP
Plainview, New York
May 31, 1996
